Carceller v.

CA o To support his request, stated that he had already made a substantial

G.R. No. 124791 | February 10, 1999 investment on the property and had been punctual in paying his
Quisumbing, J. monthly rentals
 February 14, 1986: SIHI notified petitioner that his request was
Topic: Option Contract disapproved but offered to lease the same property for P30,000 per month
for 1 year; also informed petitioner of its decision to offer for sale the leased
Petitioner: JOSE RAMON CARCELLER property to the general public
Respondents: COURT OF APPEALS and STATE INVESTMENT HOUSES, INC.  February 18, 1986: petitioner notified SIHI of his decision to exercise the
option to purchase the property and made arrangements for the payment of
Facts: the downpayment of P360,000
 Private respondent State Investment Houses, Inc. (SIHI): registered owner of  February 20, 1986: SIHI sent another letter to stressing that the period
2 parcels of land (total area of 9,774sqm) and all the improvements thereon, within which the option should have been exercised had already lapsed;
located at Bulacao, Cebu City asked petitioner to vacate the property within 10 days from notice and to pay
 January 10, 1985: petitioner and SIHI entered into a lease contract with rental and penalty due
option to purchase over the two parcels of land at a monthly rental of  February 28, 1986: petitioner filed complaint for specific performance
P10,000 for a period of 18 months, beginning on August 1, 1984 until and damages against SIHI before RTC of Cebu City to compel the latter to
January 30, 1986 honor its commitment and execute the corresponding deed of sale
o Pertinent portion of the lease contract subject of the dispute:  RTC: rule in favor of petitioner, ordered SIHI to execute deed of sale in favor
“4. As part of the consideration of this agreement, the LESSOR of petitioner but purchase price maybe by one shot payment of P1.8M
hereby grants unto the LESSEE the exclusive right, option and o SIHI appealed to CA
privilege to purchase, within the lease period, the leased premises o CA: affirmed appellee’s option to buy the property but added
thereon for the aggregate amount of P1,800,000.00 payable as that the purchase price must be based on the prevailing market
follows: price of real property in Bulacao, Cebu City
a. Upon the signing of the Deed of Sale, the LESSEE shall  Both parties filed MFR and/or clarification
immediately pay P360,000.00.  Petitioner: prevailing market price be the value of the
b. The balance of P1,440,000.00 shall be paid in equal property in February 1986, the time when the sale would
installments of P41,425.87 over sixty (60) consecutive months have been consummated
computed with interest at 24% per annum on the diminishing  SIHI: market price of the property be based on the
balance; Provided, that the LESSEE shall have the right to prevailing price index at least 10 years later (1996)
accelerate payments at anytime in which event the stipulated interest  April 25, 1996: CA denied both motions and directed TC to conduct further
for the remaining installments shall no longer be imposed. hearings to ascertain the prevailing market value of real properties in
x . . The option shall be exercised by a written notice to the Bulacao, Cebu City and fix the value of the property subject of the
LESSOR at anytime within the option period and the document controversy
of sale over the afore-described properties has to be consummated o Thus, this case
within the month immediately following the month when the
LESSEE exercised his option under this contract.” Issue:
 January 7, 1986: (approx. 3 weeks before the expiration of the lease contract) W/N petitioner is allowed to exercise the option to purchase the leased property
SIHI notified petitioner of the impending termination of the lease agreement despite the alleged delay in giving the required notice to private respondent –
and of the short period of time left within which he could still validly exercise YES
the option; also requested petitioner to advise them of his decision on the
option, on or before January 20, 1986 Judgment:
 January 29, 1986: SIHI received letter dated January 15, 1986 where WHEREFORE, the appealed decision of respondent court, insofar as it affirms the
petitioner requested for a six-month extension of the lease contract bc he judgment of the trial court in granting petitioner the opportunity to exercise the
needs ample time to raise sufficient funds to exercise the option option to purchase the subject property, is hereby AFFIRMED. However the
purchase price should be based on the fair market value of real property in
Bulacao, Cebu City, as of February 1986, when the contract would have been
consummated. Further, petitioner is hereby ordered to pay private respondent SIHI contemporaneous and subsequent acts as regards the execution
legal interest on the said purchase price beginning February 1986 up to the time it of the contract; once the intention has been ascertained, such is
is actually paid, as well as the taxes due on said property, considering that petitioner deemed an integral part of the contract as if originally expressed in
have enjoyed the beneficial use of said property. The case is hereby remanded to unequivocal terms
Regional Trial Court of Cebu, Branch 5, for further proceedings to determine  SIHI, prior to its negotiation with petitioner, already had financial
promptly the fair market value of said real property as of February 1986, in Bulacao, problems: difficulty in meeting the claims of its creditors, thus, being a
Cebu City. Costs against private respondent. quasi-banking financial institution, placed under the supervision and control
of the Central Bank; was in dire need of liquidating its assets to stay afloat
Ratio: financially
 Option: preparatory contract in which one party grants to the other, for o Thus, compelled to dispose some of its assets, among which is the
a fixed period and under specified conditions, the power to decide, subject leased property, to generate sufficient funds
whether or not to enter into a principal contract o This brought about the execution of the lease contract with
o Binds the party who has given the option not to enter into the option to purchase between SIHI and the petitioner
principal contract with any other person during the period  Accdg to lease contract, petitioner had to send a letter to SIHI
designated and, within that period, to enter into such contract with manifesting his intent to exercise the option to purchase property within
the one to whom the option was granted, if the latter should decide the lease period ending January 30, 1986
to use the option o However, what petitioner did was to request for a six-month
o Separate agreement distinct from the contract which the parties may extension of the lease contract to raise funds to purchase the
enter into upon the consummation of the option property
 SC: petitioner’s letter to SIHI, dated January 15, 1986, was fair notice to o Only after the request was denied that petitioner notified SIHI of
the latter of the former’s intent to exercise the option, despite the request his desire to exercise the option formally by letter (Feb 18, 1986)
for the extension of the lease contract  SIHI’s view: there was already a delay of 18 days, fatal
o In the letter, petitioner was requesting for an extension of the to petitioners cause BUT CA found the delay neither
contract for six months to generate sufficient funds to exercise the substantial nor fundamental and did not amount to a
option to buy the subject property breach that would defeat the intention of the parties
o Analysis by CA of the evidence on record and the process by which when they executed the lease contract with option to
it arrived at its findings on the basis thereof impel assent to said purchase
findings bc consistent with the parties’ primary intent when they  RTC and CA: allowed petitioner to exercise the option bc contrary ruling
executed the lease contract would cause damage to the petitioner (had the whole place renovated) and
 However, analysis and construction should not be limited judging from subsequent acts of the parties, undeniable that SIHI really
to the words used in the contract; the reasonableness of the intended to dispose of the leased property that petitioner indubitably
result obtained after analysis should also be carefully intended to buy
considered o SIHI’s agreement to enter first into a lease contract with option
 Contracts: law between the contracting parties and should be fulfilled if to purchase with petitioner is clear proof of its intent to
their terms are clear and leave no room for doubt as to the intention of promptly dispose said property although the full financial
the contracting parties returns may materialize only in a year’s time;
o In construing a written agreement, the reason behind and the o also, its letter reminding the petitioner of the short period of time
circumstances surrounding its execution are of paramount left within which to consummate their agreement showed its
importance; sound construction requires one to be placed desire to sell;
mentally in the situation occupied by the parties concerned at o further, February 14, 1986 letter supported the conclusion that it
the time the writing was executed. Thereby, the intention of the was bent on disposing said property bc made mention of the fact
contracting parties could be made to prevail, because their that said property is now for sale to the general public
agreement has the force of law between them  Petitioner’s determination to purchase the property equally indubitable
o To ascertain the intent of the parties in a contractual relationship, o Introduced permanent improvements on the property
imperative that the various stipulations provided for in the demonstrating intent to acquire dominion in a year’s time
contract be construed together, consistent with the parties
 o To increase chances of acquiring the property, he secured P8M loan
from Technology Resources Center (TRC
o Averred that he applied for a loan since he planned to pay the
purchase price in one single payment instead of paying in
installment which would entail additional interest (24% per annum)
compared to 7% per annum interest for the TRC loan
o Letter requesting extension was premised on his need for time
to secure the needed financing through a TRC loan
 Law allows the parties reasonable leeway on the terms of their agreement in
contractual relations
o By contract, SIHI gave petitioner 4 periods: (a) the option to
purchase the property for P1,800,000.00 within the lease period, that
is, until January 30, 1986; (b) the option to be exercised within the
option period by written notice at anytime; (c) the document of
sale...to be consummated within the month immediately following
the month when petitioner exercises the option; and (d) the payment
in equal installments of the purchase price over a period of 60
months
o Petitioner’s January 15, 1986 letter and his formal exercise of
the option on February 18, 1986 were within a reasonable time-
frame consistent with periods given and the known intent of the
parties to the agreement dated January 10, 1985
 Contrary view: harsh and inequituous
 Tuason, Jr., etc. vs. De Asis: in a contract of lease, if the lessor makes an
offer to the lessee to purchase the property on or before the termination
of the lease, and the lessee fails to accept or make the purchase on time,
the lessee losses the right to buy the property later on the terms and
conditions set in the offer
o Thus, petitioner could not insist on buying the said property
based on the price agreed upon in the lease agreement even if his
option to purchase is recognized
o SIHI could not take advantage of the situation to increase the
selling price of said property by nearly 90% of orig price
 Such would show an opportunistic intent to exploit the
situation
 If the courts allow SIHI to take advantage of the situation,
injustice to petitioner bc SIHI would be unjustly enriched
at his expense
 Courts of law are also courts of equity, thus with obligation
to administer fair and equal justice for all