Adelfa Properties Inc v.

CA 240 SCRA 565 (1995)

Facts: Private respondents and their brothers Jose and Dominador Jimenez were
registered owners of a parcel of land in Las Piñas. Jose and Dominador sold their
share (1/2 parcel of land) pursuant to “Kasulatan sa Bilihan ng Lupa” to petitioner,
Adelfa Properties. Eastern portion belonged to them while western portion belonged
to Rosario and Salud. Adelfa Properties (now owners of eastern portion) expressed
interest in buying the western portion by executing “Exclusive Option to Purchase”
with ₱50,000.00 as option money.

Before petitioner could make payment, it received summons that the nephews and
nieces of private respondents filed an annulment of deed of sale. As a result, petitioner
withheld payment of full purchase price. Salud attributed the suspension of payment
to “lack of word of honor.” Francisca Jimenez was sent to see the counsel of
petitioner to inform him that they were cancelling the transactions. Subsequently, a
Deed of Conditional Sale was executed in favor of Emylene Chua. Private
respondents’ counsel sent ₱25,000.00 refund of the option money.

According to the RTC, agreement entered into was merely an option contract and the
suspension of payment by petitioner is a counter-offer which is tantamount to a
rejection of option. Thus, the sale to Chua was valid. CA ruled that failure of
petitioner to pay the purchase price in the period agreed upon was tantamount to
election not to buy such land.

Issue: Whether the agreement between Adelfa Properties and private respondents
strictly an option contract

Held: The contract between the parties is a contract to sell and not an option contract
nor a contract of sale. Two features which convince that parties never intended to
transfer ownership except upon full payment of purchase price: (1) the exclusive
option to purchase does not mention that petitioner is obliged to return possession or
ownership of property as consequence of non-payment; and (2) no delivery, actual or
constructive, was made to petitioner; option to purchase was not included in a public
instrument which would have effect of delivery. Neither did petitioner take actual,
physical possession of the property at any given time. With this regard, there was an
implied agreement that ownership shall not pass to the purchaser until he had fully
paid the price. Also, the alleged option money was actually earnest money since the
amount was not distinct from the cause or consideration for the sale of the property,
but was itself a part thereof.