Case Digest (G.R. No. 103338)
Facts:
Federico Serra (Petitioner) entered into a Contract of Lease with Option to Buy with Rizal Commercial Banking Corporation in May 1975 for a 374 sq. m. lot, leasing it for twenty-five years and granting the lessee an option to buy within ten years at a price “not greater than P210.00 per square meter,” with the lessor to register the land under the Torrens System. The lessee constructed a building; petitioner registered the land; the bank exercised the option by letter on September 4, 1984, petitioner refused to sell, the bank sued for specific performance on March 14, 1985, the trial court on reconsideration ordered conveyance for P78,540.00, the Court of Appeals affirmed, and petitioner elevated the case to the Supreme Court.Issues:
- Was the option to buy supported by a consideration distinct from the price and thus enforceable?
- Was the stipulated price “not greater than P210.00 per square meter” sufficiently certain?
- Was the contract one of adhesion that should be voided
Case Digest (G.R. No. 103338)
Facts:
- Parties and capacity
- Federico Serra — owner of a 374-square-meter parcel of land located at Quezon St., Masbate, Masbate.
- Rizal Commercial Banking Corporation — negotiated to occupy and purchase the land to establish a branch in Masbate.
- Formation and essential terms of the contract
- The parties executed a Contract of Lease with Option to Buy dated May 20, 1975, notarized by Romeo F. Natividad (Annex "A" of the Complaint).
- Principal provisions:
- Lease term: twenty-five (25) years from June 1, 1975 to June 1, 2000.
- Option: Lessee had the option to purchase within ten (10) years from signing at a price "not greater than TWO HUNDRED TEN PESOS (P210.00) per square meter."
- Lessor's obligation: to register the parcel under the TORRENS SYSTEM within the ten-year period, expenses for registration to be borne by the lessor.
- Attorney-in-fact clause: Lessee appointed attorney-in-fact to register the parcel if lessor failed to do so; registration expenses chargeable against rentals due.
- Rent: monthly rental of SEVEN HUNDRED PESOS (P700.00), payable in advance.
- Improvements: Lessee authorized to construct at its expense building and improvements; if Lessee failed to exercise option within the ten-year period after registration, such building and improvements would become the property of the Lessor after expiration of the 25-year lease without reimbursement to Lessee.
- Use restricted to banking and office purposes; maintenance and upkeep at Lessee's expense.
- Performance and attempts to effect sale
- Petitioner caused the land to be registered under the Torrens System within three years after signing; Original Certificate of Title No. O-232 issued by Register of Deeds of Masbate.
- Petitioner pursued the branch manager to effect the sale in accordance with the contract.
- Exercise of the option and dispute
- On September 4, 1984, Respondent informed Petitioner by letter of its intention to purchase at the agreed price not greater than P210.00 per square meter (Annex "C").
- Petitioner refused to sell and communicated his refusal (Annex "D").
- On March 14, 1985, Respondent filed a complaint for specific performance and damages in Civil Case No. 10054, seeking sale at P210 per square meter, attorney's fees of P50,000.00, exemplary damages of P100,000.00, and costs.
- Petitioner’s defenses and counterclaim
- Defenses alleged:
- Contract was a contract of adhesion prepared by Respondent and unduly advantageous to it.
- The option lacked consideration distinct from the price and thus was unenforceable.
- The option should have been exercised within a reasonable time after registration; Respondent's delay forfeited its right.
- Alleged extraordinary inflation and supervening decrease in purchasing power rendered enforcement inequitable and unduly enriched Respondent.
- Counterclaim sought:
- Adjustment of rent as P700 had become unrealistic and unreasonable.
- Moral damages P100,000.00; attorney's fees P25,000.00; exemplary damages P100,000.00.
- Trial court and appellate proceedings
- Trial court initially dismissed Respondent's complaint after trial, finding contract valid but the option unenforceable for lack of consideration distinct from price and for unreasonable delay; denied rental readjustment and ...(Subscriber-Only)
Issues:
- Validity and enforceability of the Contract of Lease with Option to Buy
- Whether the contract is valid and binding between the parties.
- Existence of a consideration distinct from the price to support the option
- Whether the option given to Respondent was supported by a consideration separate and distinct from the stipulated purchase price, rendering the option irrevocable upon acceptance.
- Certainty of the stipulated price
- Whether the price provision "not greater than P210.00 per square meter" is sufficiently certain or definite to bind the parties.
- Timeliness of exercise of the option
- Whether Respondent exercised the option within the contractual period or within a reasonable time after fulfillment of conditions precedent (registration under Torrens).
- Contract of adhesion and equity
- Whether the contract is a contract of adhesion so lopsided as to warrant judicial nullification or refusal to enforce.
- Adjustment of rent and alleged extraordinary inflation
- Whether the ...(Subscriber-Only)
Ruling:
- (Subscriber-Only)
Ratio:
- (Subscriber-Only)