Title
De Guzman vs. Guieb
Case
G.R. No. L-28862
Decision Date
Nov 24, 1972
Defendants exercised option to repurchase property after unpaid rentals; plaintiffs waived rights by accepting delayed payments. Second option deemed valid despite lack of notarization.
quieting of title
valid exercise
waiver

Case Summary (G.R. No. L-28862)

Factual Background

On June 17, 1948, defendants acquired, as bona fide tenants of the then Ana Sarmiento Estate, the right to purchase the parcel of land subject of the case. An Agreement to Purchase and Sales was executed between the Bureau of Lands (and, later, entities administering the estate for resale to tenants) and the defendants on that date.

On November 20, 1954, defendants executed a Deed of Sale transferring and conveying all defendants’ rights under the June 17, 1948 Agreement to Sell to Teodoro de Guzman, the son of plaintiffs. The deed recited a consideration of P4,000.00. On November 22, 1954, the Director of Land approved the transfer, and on the same period, Teodoro de Guzman and defendant Francisca Torres Guieb executed an “Option to Purchase Real Property” referring to the same property. The option period was for five (5) years from November 20, 1954, expiring on November 21, 1959.

The Director of Land later executed a Deed of Absolute Sale in favor of Teodoro de Guzman, which was registered with the issuance of Transfer Certificate of Title No. 38058. That title carried an annotated lien and encumbrance stating that the property could not be sold, mortgaged, or encumbered to others within the five (5) year period without the written consent of the Land Tenure Administration. In January 1955, tax declarations were transferred to Teodoro de Guzman. During the five-year option period, defendants paid monthly rentals of P40.00 as shown in multiple receipts, but the parties stipulated that defendants were not up to date in paying rentals in that they failed to pay for more than six (6) successive months during the period June 20, 1955 to June 20, 1959. Despite those arrears, at the end of the option period, the stipulated position was that “all the rentals covering the five (5) year option period were and had been fully paid” as shown by Exhibit 15, at the time of expiration on November 21, 1959.

In June 1959, Francisca Torres Guieb and Teodoro R. de Guzman signed a second “Option to Purchase Real Property” (Exhibit D), matching the tenor and substance of the original option in Exhibit 1, except for the date and the fact that it was not notarized and had no witnesses’ signatures. In October 5, 1959, another Option to Purchase Real Property was signed by Teodoro de Guzman (as Teodoro R. de Guzman) and Francisca Torres Guieb (Exhibit 16), again matching Exhibit 1 in words and figures, except for the date and similar defects of notarization and witnesses’ signatures.

After the execution of Exhibit 16, defendants continued paying rentals of P40.00. Upon Teodoro de Guzman’s death on March 20, 1964, the property became part of plaintiffs’ estate arrangement. Plaintiffs executed an extrajudicial partition on April 25, 1964, and Transfer Certificate of Title No. 75800 was issued in plaintiffs’ names on July 13, 1964, with the same kind of restriction annotated—requiring written consent of the Land Tenure Administration before the property could be sold, transferred, or encumbered to another.

Events Surrounding the Exercise of the Option and Litigation

On July 31, 1964, defendant Francisca T. Guieb visited plaintiffs and, while Leon de Guzman was absent, advised Genoveva Rodriguez that she was exercising the option to purchase by tendering P4,040.00, consisting of P4,000.00 as the purchase price and P40.00 as the rental for the period July 21, 1964 to August 20, 1964. Plaintiffs refused to accept the P4,040.00 and refused to receive the letter dated July 30, 1964 (Exhibit 21). Subsequently, on August 4, 1964, defendant mailed a letter (Exhibit 21) by registered special delivery, received by plaintiffs on August 5, 1964.

On August 5, 1964, defendant filed an Adverse Claim with the Register of Deeds of Manila, which was annotated on the back of Transfer Certificate of Title No. 75800. On September 15, 1964, defendant filed Civil Case No. 126601 in the City Court of Manila against plaintiffs for specific performance with consignation, which was to be held in abeyance pending resolution of the instant case. A Treasurer of Manila receipt showed that defendants consigned P4,040.00 on September 15, 1965 (in relation to the tender refused on July 31, 1964). In parallel, on October 22, 1964, plaintiff Leon de Guzman filed an ejectment case (City Court of Manila, Branch II, Civil Case No. 128123) against defendants for alleged non-payment of rentals from August 1964, also pending final outcome in relation to the instant suit.

The stipulation also stated that plaintiffs (or their predecessors in interest) were never in actual physical possession of the property. Defendants’ third counterclaim was based on a private document entered into with another individual, Antonio Jocson (Exhibit 24), though the instant appeal’s focal issues remained the enforceability of the option instrument and the effect of rental arrears.

Trial Court Proceedings and Core Issues

The case was submitted to the trial court on the documentary evidence and the Stipulation of Facts. The trial court framed the controversy around two questions: (1) whether the option to purchase in Exhibit 1 was renewed by the later option in Exhibit 16; and (2) whether defendants’ failure to pay rentals for forty-five (45) months extinguished their right to exercise the option.

The Trial Court’s Ruling

The trial court held that Exhibit 1 had granted Francisca Guieb an option to purchase for five (5) years from November 20, 1954 for the same sum of P4,000.00. It recognized that, before the end of the option’s original term, defendants had been in arrears for substantial periods. However, the trial court considered Exhibit D (executed in June 1959) as giving Francisca Guieb another option to purchase on the same terms as Exhibit 1. It further treated the October 5, 1959 option (Exhibit 16) as an enforceable agreement matching the tenor of Exhibit 1.

The trial court reasoned that, although Exhibit 16 was not a public document unlike Exhibit 1, its enforceability was supported by the rules on documentary evidence and the Statute of Frauds, relying on Article 1403 of the Civil Code. The court concluded that the requirements of at least a written note or memorandum signed by the party charged were met because Exhibit 16 was genuine and involved the same contracting parties—binding Teodoro de Guzman and, by succession, plaintiffs as successors in interest.

On the forfeiture issue, the trial court interpreted the rental arrearages clause in the option agreement as waivable. It emphasized that neither Teodoro de Guzman nor his successors took steps to eject defendants even though payments were not timely for more than six consecutive months during the stipulated period. Instead, the predecessor and later plaintiffs accepted rental payments, including the eventual completion of past due rentals, and they executed additional option instruments in June and October 1959. It treated plaintiffs’ acceptance of rental payments despite prolonged arrearages, and their delay in initiating ejectment proceedings until after defendants had tendered the purchase price and rental payment in July 1964, as constituting a waiver of the conditions in paragraph 3 of the option agreement. The trial court also noted that an ejectment suit was filed only on October 22, 1964, after defendants had already tendered the required sums on July 31, 1964 and had followed up their tender with the relevant written communication in August 1964.

Appellants’ Contentions on Appeal

Appellants assigned three errors. Their first assignment argued that the option dated October 5, 1959 (Exhibit 16) could not be considered as a renewal of the original option because it was allegedly not duly acknowledged before a notary public and not signed in the presence of witnesses, because the renewal, if any, should have been executed on the expiration date of the first option, and because it purportedly lacked an explicit statement that it was a renewal.

Their second assignment contended that long non-payment of rentals, particularly the period of forty-five (45) months with payment allegedly made only on July 21, 1964, rendered the option null and void under the option agreement’s provision that failure to pay for six (6) consecutive months would require defendants to vacate and nullify the option. They challenged the trial court’s conclusion that they had forfeited the right to invoke that provision due to acceptance of delayed payments.

Their third assignment was treated as a corollary of the first two assignments, aimed at securing rulings that defendants had no right or interest and that plaintiffs’ title should be upheld against the world, along with attorney’s fees and costs.

Appellate Disposition on the First Assignment: Enforceability of Exhibit 16

The Supreme Court held that appellants’ first posture was without merit. The Court emphasized that the October 5, 1959 option did not need to function as a “renewal” of the earlier option in order to be effective. It stated that there was no reason why Exhibit 16 could not be considered as another option by itself. It also noted that the trial court had not appeared to treat Exhibit 16 strictly as a renewal in the appealed decision.

The Court further held that, because Exhibit 16 was genuine, it constituted an enforceable agreement under Article 1403 (2) of the Civil Code as a sufficient note or memorandum in writing of the agreement of the parties signed by the party charged—specifically signed by Teodoro de Guzman, the predecessor in interest of appellants. Accordingly, the lack of notarization and the alleged absence of witnesses did not defeat enforceability under the Statute of Frauds framework adopted by the Court.

Appellate Disposition on the Second Assignment: Waiver of the Forfeiture Clause

On the second assignment, the Supreme Court also found appellants’ argument untenable. It observed that appellants did not deny the central contractual fact that, despite l

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