BIBLE BAPTIST CHURCH and PASTOR REUBEN

BELMONTE
Vs.
CA and SPOUSES VILLANUEVA
G.R. No. 126454
November 26, 2004
FACTS:
On June 7, 1985, the Bible Baptist Church entered into a
contract of lease with Spouses Villanueva over a
property located in Malate, Manila. The pertinent
portions of the contract are:
xxx
2. That lease shall take effect on June 7, 1985 and shall
be for a period of 15 years.
xxx
4. That upon signing of the LEASE AGREEMENT, the
Baptist Church shall pay the sum of P 84,000.00. Said
sum shall be paid directly to the Rural Bank of Bulacan
for the purpose of redemption of said property, which
was mortgaged by the Spouses.
xxx
8. That Bible Baptist has the option to buy the leased
property during the 15 years of the lease. If Baptist
Church decides to purchase the premises the terms will
be:
1. A selling price of 1.8 M;
2. A down payment agreed upon by both parties;
3. The balance may be paid at the rate of P 120T per
year.
These stipulations of the lease contract are the subject
of the present controversy for it is now the contention of
Baptist Church that the option contract is founded upon
a separate consideration that is the P 84 T paid by them
upon the signing of the lease agreement.
ISSUE:
Whether or not the option to buy given to the Baptist
Church is founded upon a consideration.
HELD:
No.
Article 1479 of the Civil Code provides:
A promise to buy and sell a determinate thing for a price
certain is reciprocally demandable.
An accepted unilateral promise to buy or to sell a
determinate thing for a price certain is binding upon the
promissor if the promise is supported by a consideration
distinct from the price.

1. Baptist Church cannot insist that the 84 T they

paid in order to release the Spouses property
from the mortgage should be deemed a
separate consideration to support the option
contract. It must be pointed out that the said
amount was in fact apportioned into monthly
rentals spread over a period of one year, at 7 T
per month. Thus for the entire period of June
1985 to May 1986, Baptist Churchs monthly rent
had already been paid for, such that it only
commenced paying rentals in June 1986.
Therefore, the amount of 84 T has been fully
exhausted and utilized by their occupation of the
premises and there is no separate consideration
to speak of which could support the option.
2. Baptist Church insists that a consideration need
not be a separate sum of money. They posit that
their act of advancing the money to rescue the
property from the mortgage and impending
foreclosure should be enough consideration to
support the option. In Villamor vs CA the court
defined consideration as the why of the
contracts, the essential reason which moves the
contracting parties to enter into a contract. This
would illustrate that the consideration need not
be monetary. Actual cash need not be
exchanged for the prion. However, by the very
nature of an option contract the same is an
onerous contract for which the consideration
must be something of value, although its kind
may vary. The Villamor case is distinct from this
case because:
a. The Court cannot find that the Baptist
Church parted with anything of value aside
from the 84 T;
b. There is no document that contains an
agreement between the parties that Baptist
Churchs supposed rescue of the mortgaged
property was the consideration which the
parties contemplated in support of the option
clause in the contract;
To summarize the rules, an option contract needs to be
supported by a separate consideration. The
consideration need not be monetary but could consist of
other things or undertakings. However, if the
consideration is not monetary, these must be things or
undertakings of value, in view of the onerous nature of
the contract of option. Furthermore, when a
consideration for an option contract is not monetary, said
consideration must be clearly specified as such in the
option contract or clause.

NAVOTAS INDUSTRIAL CORPORATION, represented

by DANIEL BAUTISTA
Vs.
GERMAN CRUZ, et. al.
G.R. No. 159212
September 12, 2005
FACTS:
Carmen Vda. De Cruz (Carmen) was the owner of a
parcel of land in Navotas with an area of 13999 square
meters.
On October 5, 1966, Carmen and Navotas Industrial
Corporation (NIC) entered into a contract of lease
covering one half portion of the property. The lease was
for October 1, 1966 to October 1, 1990. The property
was to be used for shipyard slipways and NICs other
allied businesses. The NIC obliged itself to construct two
slipways within the first 10 years of the lease with a total
value of not less than 450 T.
On March 14, 1973 the property was mortgaged to
China Banking Corporation (CBC) as a security for a
loan availed by two of Carmens children, Mariano and
Gabriel. The owners duplicate copy was now with CBC.
On December 31, 1974 Carmen executed a Deed of
Absolute Sale with Assumption of Mortgage in which she
as the vendor conveyed the property to her children
Serafin, Mariano, Rogelio, Carmencita and Mary
Carmela for the purchase price of 350 T. Mariano wrote
a letter to CBC requesting them to conform to the sale
however CBC refused.
On June 27, 1977 Mariano presented the deed to the
ROD for registration purposes. They requested the ROD
to compel CBC to transmit the owners duplicate copy of
the title for annotation. CBC informed them that they
were just following the instruction of Carmen not to
surrender the owners duplicate.
In the meantime the balance of the loan was fully paid
and on June 29, 1977 CBC executed a Cancellation of
Real Estate Mortgage however the deed was not
presented to the ROD for registration. On the same date
Mariano, on behalf of his siblings, executed an Affidavit
of Adverse claim asserting their rights as vendees of the
property.
On June 30, 1977 Carmen and NIC executed a
Supplementary Lease Agreement extending the lease
period to October 2005. NIC was also granted the
option to buy the property for 1.6 M.
Mariano et. al. was able to have the sale registered and
a new title was issued in their name. Thereafter, they
have informed NIC to vacate the property, as they are
now its new owners, however, NIC refused.

Meanwhile, Carmen filed a case against NIC anent the

Supplementary Lease Agreement purportedly executed
by her as lessor and NIC as lessee. She averred that
NIC took advantage of the animosity between her and
her children by inserting therein blatantly unfair
provisions.
On June 30, 1990 Mariano et. al informed NIC that they
will be no longer renew the contract and that as far as
they were concerned the Supplementary Lease
Agreement was null and void.
ISSUE:
Whether or not there is a perfected option contract.
HELD:
No.
Article 1479, paragraph 1, provides that, A promise to
buy and sell a determinate thing for a price certain is
reciprocally demandable. NIC relies on this provision
contending that what was entered between them and
Carmen was a mutual promise to buy and sell. However,
be it noted, that as early as 1977 they were already
informed of the sale made by Carmen in favor of her
children and that by virtue of the annotation made by
Mariano on June 30, 1977 NIC was constructively
notified thereof. There is therefore a presumption of
knowledge of the sale between Carmen and her
children.
Considering that Carmen was no longer the owner when
the Supplementary Lease Agreement was executed
NICs claim that it had the option to buy the property or
to compel the heirs to sell the property to it has no legal
and factual basis.
Paragraphs 4 and o 5 of the Supplementary Lease
Agreement provides:
4. The LESSEE is hereby granted an exclusive option to
buy the property including all improvements already
made by the LESSEE (slipways and camarines) subject
matter of this contract comprising SIX THOUSAND
NINE HUNDRED FORTY-NINE Point FIVE Square
Meters (6,949.5) which is one-half portion of the area
covered by TCT No. 81574 and same property subject
matter of this contract should also be equally divided
with one-half frontage along M. Naval Street and along
the Navotas River Bank shoreline during the period of
the lease. The price of the property is agreed to be
fixed for the duration of the Option to Buy at a flat
sum of ONE MILLION SIX HUNDRED THOUSAND
PESOS
(P1,600,000.00),
Philippine
Currency,
payable over a period to be mutually agreed upon.
Should the LESSEE exercise the option to buy during
the lifetime of the LESSOR, the LESSEE will continue to
pay the monthly rental to the LESSOR during her
lifetime.

5. The LESSEE shall pay to the LESSOR the sum of

FORTY-TWO THOUSAND (P42,000.00) PESOS upon
signing of this contract as consideration thereof, to be
applied as against the rental for the period from October
1, 1990 to September 30, 1991.
It must be stressed that an option contract is a contract
granting a privilege to buy and sell within an agreed time
and at a determined price. Such contract is a separate
and distinct contract from the time the parties may enter
into upon the construction of the option. An option
contract is a preparatory contract in which one party
grants to the other for a fixed period and under specified
conditions the power to decide, whether or not to enter
into a principal contract. Therefore, it is only when the
option is exercised may a sale be perfected. An option
NEEDS TO BE SUPPORTED by a separate
consideration.
In the present case, there was no given period for the
petitioner to exercise its option; it had yet to be
determined and fixed at a future time by the parties,
subsequent to the execution of the Supplementary
Lease Agreement. There was, likewise, no consideration
for the option. The amount of P42,000.00 paid by the
petitioner to Carmen Cruz on July 30, 1977 was
payment for rentals from October 1, 1990 to September
30, 1991, and not as a consideration for the option
granted to the petitioner.
SPOUSES CIPRIANO VASQUEZ and VALERIANA
GAYANELO
Vs.
CA and SPOUSES MARTIN VALLEJERA
G.R. No. 83759
JULY 12, 1991
FACTS:
A certain property in Himamaylan, Negros Occidental
was registered in the name of Spouse Vallejera. On
October 1959, they leased the property to the Spouses
Vasquez. After the execution of the lease, the Vasquez
took possession of the lot and devoted the same to the
cultivation of sugar.
On September 21, 1964, the spouses Vallejera sold the
lot the spouses Vasquez for the amount of 9 T. On the
same day and along with the execution of the Deed of
Sale, a separate instrument, denominated as Right to
Repurchase was executed by the parties granting the
Vallejeras the right to repurchase the lot for 12 T.
By virtue of the Deed of Sale the spouses Vasquez
secured a title in their name. However, on January 2,
1969, the Vallejeras sold the lot to Benito Derrama after
securing the spouse Vasquez title for 12 T. Upon the
protestation of the spouses Vasquez the sale was
cancelled after payment of 12 T to Derrama.
The spouses Vasquez resisted the action for redemption
on the premise that the deed of Right to Repurchase is

just an option to buy since it is not embodied in the same

document of sale but in a separate document and since
such option is not supported by a consideration distinct
from the price, said deed is not binding upon them.
The spouses Vazquez insist that they can not be
compelled to resell the subject property for the nature of
the sale over the said lot between them and the
Vallejeras can only be either an option to buy or a mere
promise on their part to resell the property. Spouses
Vasquez opined that since the Right to Repurchase
was not supported by any consideration distinct from the
purchase price it is not valid and binding upon the
spouses Vasquez pursuant to Article 1479.
ISSUE:
Whether or not the spouse Vallejera has a right to
repurchase under the contract.
HELD:
No.
The Court made reference to the earlier case of
Sanchez vs. Rigos (Sanchez doctrine), stating that an
option contract without a separate consideration from the
purchase price is void, as a contract, but would still
constitute as a valid offer; so that if the option is
exercised prior to its withdrawal, that is equivalent to an
offer being accepted prior to withdrawal and would give
rise to a valid and binding sale.
The Sanchez doctrine also dictates that the burden of
proof to show that the option contract was supported by
a separate consideration is with the party seeking to
show it. No reliance can be placed upon the provisions
of Article 1354 which presumes the existence of a
consideration in every contract, since in the case of an
option contract, Article 1479 being the specific provision,
requires such separate consideration for an option to be
valid.
In an option contract, the offeree has the burden of
proving that the option is supported by a separate
consideration, it also held that the Sanchez doctrine
(That upon the option contract not supported by a
separate consideration; is void as contract, but valid as
an offer), can only apply if the option has been accepted
and such acceptance is communicated to the offeror. It
held that not even the annotation of the option contract
on the title of the property can be considered a proper
acceptance of the option.
Neither can the signature of the spouses Vasquez in the
document called "right to repurchase" signify acceptance
of the right to repurchase. The Vallejeras did not sign the
offer. Acceptance should be made by the promisee, in
this case, the Vallejeras and not the promises, spouses
Vasquez herein. It would be absurd to require the
promisor of an option to buy to accept his own offer

instead of the promisee to whom the option to buy is

given.

lease was only month-to-month and not 10 years since

the rentals are being paid on monthly basis.

POLYTECHNIC UNIVERSITY OF THE PHILIPPINES

Vs.
GOLDEN HORIZON REALTY CORP.
x-----------------------------------------------x
NATIONAL DEVELOPMENT AUTHORITY
Vs.
GOLDEN HORIZON REALTY CORP.
G.R. No. 183612; G.R. No. 184260
MARCH 15, 2010

ISSUE:

(This is case related to the case of PUP vs. CA and

Firestone Ceramics)
FACTS:
National Development Corp. (NDC) had in its disposal a
10-hectare property located at Sta. Mesa, Manila. The
estate was popularly known as NDC Compound.
On September 7, 1977 NDC entered into a Contract of
Lease with Golden Horizon Realty Corp. (GHRC) over a
portion of the property with an area of 2,407 sq. m. for a
period of 10 years, renewable for another 10 years with
mutual consent of the parties.
On May 4, 1978, a second Contract of Lease was
executed by NDC and GHRC covering 3,222 sq. m.,
also renewable upon the mutual consent after the
expiration of the 10-year lease period. In addition, GHRC
was granted the option to purchase the area leased, the
price to be negotiated and determined at the time the
option to purchase is exercised.
On June 13, 1988, before the expiration of the 10-year
period under the second contract, GHRC wrote a letter
to NDC indicating its exercise of the option to renew the
lease for another 10 years. NDC gave no response to
the said letter.
In September of the same year, GHRC discovered that
NDC had decided to secretly dispose the property to a
third party, PUP. This led to the filing of cases before the
trial court.

Whether or not GHRCs right of first refusal was violated.

HELD:
Yes.
The pertinent portion of the second contract of lease
provides that: Lessee shall also have the option to
purchase the area leased, the price to be negotiated and
determined at the time the option to purchase is
exercised.
An option is a contract by which the owner of the
property agrees with another person that the latter shall
have the right to buy the formers property at a fixed
price within a certain time. It is a condition offered or
contract by which the owner stipulates with another that
the latter shall have the right to buy the property at a
fixed price within a certain time, or under, or in
compliance with certain terms and conditions; or which
gives to the owner of the property the right to sell or
demand a sale. It binds the party, who has given the
option, not to enter into the principal contract with any
other person during the period designated, and, within
that period, to enter into such contract with the one to
whom the option was granted, if the latter should decide
to use the option.
Upon the other hand, a right of first refusal is a
contractual grant, not of the sale of a property, but of the
first priority to buy the property in the event the owner
sells the same. As distinguished from an option contract,
in a right of first refusal, while the object might be made
determinate, the exercise of the right of first refusal
would be dependent not only on the owners eventual
intention to enter into a binding juridical relation with
another but also on terms, including the price, that are
yet to be firmed up.

In the meantime President Aquino issued Memo. Order

No. 214 dated January 6, 1989 ordering the transfer of
the whole NDC Compound to the National Government,
which in turn would convey the said property in favor of
PUP at acquisition cost.

When a lease contract contains a right of first refusal,

the lessor has the legal duty to the lessee not to sell the
leased property to anyone at any price until after the
lessor has made an offer to sell the property to the
lessee and the lessee had failed to accept it. Only after
the lessee has failed to exercise his right of first priority
could the lessor sell the property to other buyers under
the same terms and conditions offered to the lessee, or
under terms and conditions more favorable to the lessor.

PUP then contended that GHRCs right to exercise the

option to purchase had expired with the termination of
the original contract of lease and was not carried over to
the subsequent implied new lease between GHRC and
NDC. Moreover, the contracts clearly state that GHRC is
granted the option to renew for another 10 years with
mutual consent of both parties. As regards the
continued receipt of rentals by NDC and possession by
GHRC of the leased premises, the impliedly renewed

NDC contended that the ruling of the Court in PUP vs

CA and Firestone cannot be applied in this case
because the lease contract of firestone had not yet
expired while in this case GHRCs lease contract have
already expired. This is untenable. The reckoning point
of the offer of sale to a third party was not the issuance
of Memorandum Order No. 214 on January 6, 1989 but
the commencement of such negotiations as early as July
1988 when GHRCs right of first refusal was still

subsisting and the lease contracts still in force. NDC did

not bother to respond to GHRCs letter of June 13, 1988
informing it of GHRCs exercise of the option to renew
and requesting to discuss further the matter with NDC,
nor to the subsequent letter of August 12, 1988
reiterating the request for renewing the lease for another
ten (10) years and also the exercise of the option to
purchase under the lease contract. NDC had dismissed
these letters as "mere informative in nature, and a
request at its best."
GHRC is similarly situated with Firestone such that it
was also prejudiced by NDCs sale to PUP. Therefore,
GHRC is entitled to exercise its option to purchase until
October 1988 in as much as the May 4, 1978 contract
embodied the option to renew the lease contract for
another 10 years upon mutual consent and giving GHRC
the option to purchase the leased premises for a price to
be negotiated and determined at the time such option
was exercised by GHRC. It to be noted that MO 214
itself declared that the transfer is subject to such
liens/leases existing on the subject property.