Facts:

In 1959, Dr. Pablo Garcia and Aquilino Nietes entered into a Contract of
Lease with Option to Buy agreement. Subject of such agreement is the Angeles
Educational Institute located in Pampanga which is owned by Dr. Garcia. The
agreement stated, among others, that the term of lease shall be for five years and
Dr. Garcia shall have the option to buy the leased property within such period.
Further stipulated by therein parties are the conditions that Nietes will help Dr.
Garcia to recover uncollected fees from previous students and that Nietes shall take
full control and responsibilities over all the properties of the school and over all the
supervisions and administrations of the school. They agreed to the terms of
payment of lease as well as the option to buy.

In December of 1962, Dr. Garcia issued receipts to Nietes after the former
received P5,000.00 as partial payment for the purchase of the property as
previously contracted.

However, Dr. Garcia wrote a letter to Nietes, through counsel, on July 31,
1964 rescinding the contract of lease with the option to buy on the ground that
Nietes failed to fulfil the conditions of such agreement. Dr. Garcia avered that
Nietes failed to help him collect from the previous students, did not take good care
of the school, and did not maintain the name of Angeles Educational Institute.
Thus prompting Nietes to reply, also via counsel, that he did not violate any of the
terms of the agreement and he is already exercising the option to buy.

Pursuant to the above exchange of correspondence, Nietes deposited to the

bank several checks for the purchase price. He, however, withdrew the same after
clearance.

On August 2, 1965, Nietes filed in the Court of First Instance of Pampanga

an action for specific performance. After trial, the CFI adjudged in favour of Nietes
and ordered Dr. Garcia to accept the payment and thereafter to execute a deed of
absolute sale in favour of Nietes.

Aggrieved, Dr. Garcia, then, elevated the case to the Court of Appeals. The
appellate court initially sustained the CFI’s decision, but overruled itself upon a
motion for reconsideration.
 CA opined that the agreement is void since there was no separate
consideration. It explained that the act of withdrawing the checks after they were
cleared could not be considered as consideration. Further, the full purchase price
must be paid before the option counsel is exercised. Thus, the offer was
successfully withdrawn before the acceptance was given.

Hence, the present petition for review.

Issues:

1. Whether the option to buy is valid and binding.

Ruling:

The option to buy is valid and, thus, binding. The decision appealed from is
reversed and set aside with modifications on attorney’s fees.

The actual payment of the whole purchase price is unnecessary to exercise

such right. In an option to buy, the seller offers the property for a specific period of
time within which the buyer may exercise such right.

The Court held that the option was successfully exercised when Nietes
informed Dr. Garcia that he was indeed buying the property. Furthermore, even
Nietes did not pay the designated amounts of rentals per dates as specified in the
contract, Dr. Garcia had acknowledged that he paid the rentals in excess. In effect,
the excess in the payment was considered partial payment for the purchase of the
property pursuant to the option to buy.

Thus, Nietes had validly exercised his right under the agreement and is left
with no other obligation but to pay the remaining amount. On the other hand, Dr.
Garcia is ordered to execute the deed of absolute sale upon such payment.