Case Summary (G.R. No. 127695)
Key Dates and Procedural Events
- June 1, 1984: Lease and option-to-buy executed.
- October 10, 1989: Death of lessor, Luis Bacus.
- March 15, 1990: Durays notify Roque Bacus of willingness and readiness to exercise the option and request documentation (e.g., special power of attorney for absent heirs).
- March 30, 1990: Adverse claim annotated on TCT No. 63269 covering the 2,000 sq. m. portion.
- April 5, 1990: Durays file complaint for specific performance with the Lupon Tagapamayapa, presenting a bank manager’s certification concerning loan arrangements.
- April 27, 1990: Complaint for specific performance with damages filed in the Regional Trial Court (RTC), Civil Case No. CEB-8935.
- October 30, 1990: Durays manifest issuance of a cashier’s check payable to petitioners (amount described variously in the record: P650,000; assigned error states P625,000).
- August 3, 1991: RTC orders petitioners to execute deed of sale upon payment of P675,675 within 30 days.
- November 29, 1996: Court of Appeals affirms RTC, finding timely exercise of option.
- December 3, 2001: Supreme Court decision denying the petition and affirming the Court of Appeals (decision rendered under the 1987 Constitution framework).
Applicable Law and Authorities
- Constitutional framework: 1987 Philippine Constitution (applicable given the decision date).
- Relevant statutory and doctrinal authorities cited: Civil Code principles on reciprocal obligations (last paragraph of Art. 1169), case law including Nietes v. Court of Appeals (46 SCRA 654, 1972), Vermen Realty Development Corp. v. Court of Appeals (224 SCRA 549, 1993), Legaspi v. Court of Appeals (142 SCRA 82, 1986), and procedural distinctions on petitions under Rule 45 vs. Rule 65 (Medel v. People, G.R. No. 137143, Dec. 8, 2000).
Issues Presented for Supreme Court Review
- Whether the lessee (Durays), in exercising the option to buy, was required to deliver the purchase price or consign it in court prior to the execution of a deed of sale by the lessor’s heirs.
- Whether the Durays incurred delay (and thus forfeited their right) by not delivering the purchase price or consigning it on or before the expiration of the lease/option period.
Summary of Facts Relevant to the Issues
The Durays communicated their intention to exercise the option and took preparatory steps (letters, bank arrangements, adverse claim annotation, Lupon proceedings, and filing of suit) before the lease expired on May 31, 1990. Petitioners (heirs) refused to execute a deed of sale unless the purchase price was first delivered. The Durays later procured a banker’s certification regarding loan arrangements and, after the case was submitted for decision but before the trial court judgment, issued a cashier’s check in favor of the petitioners. Petitioners maintained that no valid tender or consignation had been made before the option expired and asserted that failure to deposit or consign the price meant noncompliance.
Court’s Legal Analysis — Reciprocity and Timing of Performance
The Supreme Court analyzed the option-to-buy within the framework of reciprocal obligations. Under Civil Code principles and controlling jurisprudence (Nietes, Vermen Realty), obligations in an option contract are reciprocal and generally require simultaneous performance: the buyer’s obligation to pay and the seller’s obligation to execute and deliver the deed are interdependent. The Court reiterated that notice of intent to exercise an option, together with readiness and preparedness to pay, can suffice as the buyer’s performance of its part at the time of election; actual payment is not required to be made prior to the seller’s execution of the deed where performance is mutually contingent.
Court’s Analysis — Consignation and Tender
The Court observed that consignation is a remedy appropriate when a debt is due and the creditor refuses or is unable to accept payment; consignation presupposes a valid tender. Where an obligation is not yet due because performance is reciprocal and contingent, consignation is not appropriate. The Court therefore rejected petitioners’ contention that failure to consign or actually deliver the purchase price before expiration defeated the Durays’ exercise of the option. The bank manager’s certification alone was not legal tender nor a consignation, but, combined with other acts demonstrating readiness, it was evidence of preparedness to pay.
Court’s Analysis — Evidence of Readiness and Absence of Delay
The Court accepted the factual findings that the Durays had sufficiently manifested readiness to perform prior to the option’s expiration: (a) written notices and correspondence indicating intent; (b) the bank certification regarding loan arrangements prepared before May 31, 1990; (c) annotation of an adverse claim on the TCT; (d) resort to the Lupon Tagapamayapa and filing suit before the expiration of the option. Because petitioners refused to perform their reciprocal obligation (execution of the deed) and conditioned performance on prior payment, the Court held that the Durays could not be deemed in delay. The subsequent issuance of a cashier’s check while the case was already submitted further buttressed the showing of readiness; the trial court appropriately considered the check in assessing preparedness to pay.
Court of Appeals’ Affirmation and Supreme Court’s Conclusion
The Court of Appeals’ factual findings and legal conclusions—that the Dur
Case Syllabus (G.R. No. 127695)
Case Citation and Forum
- Reported at 422 Phil. 630; 99 OG No. 16, 2527 (April 21, 2003).
- Second Division, G.R. No. 127695, December 03, 2001 (petition assails CA decision dated November 29, 1996 in CA-G.R. CV No. 37566, which affirmed RTC decision dated August 3, 1991 in Civil Case No. CEB-8935).
- Decision authored by Justice Quisumbing; concurred in by Bellosillo (Chairman), Mendoza, and De Leon, Jr., JJ.; Buena, J., on official leave.
Parties
- Petitioners: Heirs of Luis Bacus (named heirs listed in full in the caption).
- Private respondents: Spouses Faustino Duray and Victoriana Duray.
- Respondent court: Court of Appeals (as a respondent in the petition for review).
Subject Property and Title Information
- Property: Parcel of agricultural land in Bulacao, Talisay, Cebu, designated Lot No. 3661-A-3-B-2 (3,002 square meters).
- Transfer Certificate of Title covering the whole: TCT No. 48866.
- Segregated 2,000 square meter portion later covered by TCT No. T-63269 (annotation of adverse claim recorded at the back of TCT No. 63269).
Contract of Lease with Option to Buy — Material Terms
- Lease executed June 1, 1984, by lessor Luis Bacus in favor of Faustino Duray.
- Term of lease: six years, ending May 31, 1990.
- Contract contained an option-to-buy clause giving the lessee:
- The exclusive and irrevocable right to buy 2,000 square meters of the property;
- The option exercisable within five years from a year after the effectivity of the contract (interpreted and applied in the case facts);
- Purchase price set at P200.00 per square meter, subject to proportional adjustment depending on peso–US dollar rate (the peso–US dollar rate at execution: P14.00).
Chronology of Key Dates and Acts
- June 1, 1984: Lease executed.
- October 10, 1989: Death of lessor, Luis Bacus.
- March 15, 1990: Faustino Duray informed Roque Bacus (an heir) of willingness and readiness to purchase under the option; requested Roque Bacus to prepare documents (e.g., Special Power of Attorney) for sisters abroad.
- March 30, 1990: Petitioners refused to sell; Duray spouses' adverse claim annotated at the back of TCT No. 63269 as to the segregated 2,000 sq. m.
- April 5, 1990: Duray filed complaint for specific performance with damages before the Lupon Tagapamayapa of Barangay Bulacao seeking to be allowed to purchase.
- April 27, 1990: Private respondents filed complaint for specific performance with damages against petitioners before the Regional Trial Court (RT C).
- October 30, 1990: Private respondents manifested issuance of a cashier’s check in the amount of P650,000 (note: assigned error elsewhere states P625,000).
- August 3, 1991: RTC rendered judgment ordering petitioners to execute deed of sale upon payment by plaintiffs of P675,675.00 within 30 days from finality of the decision.
- November 29, 1996: Court of Appeals denied petitioners’ appeal and affirmed RTC decision.
- Final disposition in the Supreme Court: petition for review denied and Court of Appeals decision affirmed (case decision text concludes with denial and affirmation, with costs against petitioners).
Factual Allegations by the Parties
- Private respondents (Durays):
- Asserted they validly exercised their option to buy within the contractual period and demonstrated readiness and preparedness to pay.
- Presented a certification from the manager of Standard Chartered Bank, Cebu City, stating arrangements to allow Faustino Duray to borrow approximately P700,000 to meet obligations under the contract (certification addressed to Luis Bacus at the request of Mr. Lawrence Glauber).
- Caused annotation of an adverse claim on the TCT and sought Lupon assistance before filing in RTC; later issued a cashier’s check in petitioners’ favor (manifested as P650,000) before judgment was rendered.
- Petitioners (heirs of Bacus):
- Alleged private respondents previously conveyed lack of interest to exercise the option because of insufficiency of funds prior to Luis Bacus’ death.
- Refused to sell and demanded full payment before executing deed of sale; claimed private respondents refused to pay the purchase price in full when requested.
- Argued the bank certification is not legal tender and that private respondents failed to deposit or tender the money as required by the Lupon or in compliance with the option’s conditions.
Procedural History and Lower Court Rulings
- Lupon Tagapamayapa hearing: No settlement; Duray’s complaint unresolved there.
- RTC (Branch 6, Cebu City) Decision (August 3, 1991):
- Found for plaintiffs (private respondents) and ordered defendants (petitioners) to specifically perform and execute deed of sale over property covered by TCT No. T-63269 upon payment of P675,675.00 within 30 days from finality.
- Court of Appeals (November 29, 1996) in CA-G.R. CV No. 37566:
- Affirmed RTC decision.
- Held that plaintiffs-appellees validly and effectively exercised their option to buy before expiration of the lease.
- Noted evidence of readiness and preparedness: cautionary letters, bank certification prepared long before May 31, 1990, annotation of adverse claim two months prior to expiration, and recourse to the Lupon Tagapamayapa.
Issues Presented to the Supreme Court for Review
- Whether the Court of Appeals gravely erred and abused its discretion by upholding the RTC’s ruling ordering petitioners to execute a deed of sale for the property (TCT No. T-63269) for P675,675.00 within thirty days.
- Whether private responde