Republic of the Philippines

SUPREME COURT
Manila
SECOND DIVISION

G.R. No. 124791 February 10, 1999
JOSE RAMON CARCELLER, petitioner,
vs.
COURT OF APPEALS a! STATE "N#ESTMENT $OUSES, "NC., respondents.

%U"SUM&"NG, J.:
efore us is a petition for revie! of the Decision
1
dated Septe"ber #$, $%%& of the Court of
'ppeals
2
in C' ( ). R. CV No. *+&#,, as !ell as its Resolution
'
dated 'pril #&, $%%-,
den.in/ both parties0 "otion for partial reconsideration or clarification. 1he assailed decision
affir"ed !ith "odification the 2ud/"ent
4
of the Re/ional 1rial Court of Cebu Cit., ranch &,
in Civil Case No. CE 3+,,, and disposed of the controvers. as follo!s4
5o!ever, 6e do not find it 2ust that the appellee, in e7ercisin/ his option
to bu., should pa. appellant SI5I onl. P$,8,,,,,,.,,. In fairness to
appellant SI5I, the purchase price must be based on the prevailing
market price of real property in Bulacao, Cebu City. 9E"phasis supplied:
1he factual bac;/round of this case is <uite si"ple.
Private respondent State Invest"ent 5ouses, Inc. 9SI5I: is the re/istered o!ner of t!o 9#:
parcels of land !ith a total area of %,++3 s<uare "eters, includin/ all the i"prove"ents
thereon, located at ulacao, Cebu Cit., covered b. 1ransfer Certificate of 1itles Nos. 1=8%$&#
and 1=8%$&* of the Re/istr. of Deeds of Cebu Cit..
On >anuar. $,, $%8&, petitioner and SI5I entered into a lease contract !ith option to
purchase
(
over said t!o parcels of land, at a "onthl. rental of 1en 1housand 9P$,,,,,.,,:
pesos for a period of ei/hteen 9$8: "onths, be/innin/ on 'u/ust $, $%83 until >anuar. *,,
$%8-. 1he pertinent portion of the lease contract sub2ect of the dispute reads in part4
3. 's part of the consideration of this a/ree"ent, the ?ESSOR hereb.
/rants unto the ?ESSEE the e7clusive ri/ht, option and privile/e to
purchase, !ithin the lease period, the leased pre"ises thereon for the
a//re/ate a"ount of P$,8,,,,,,.,, pa.able as follo!s4
a. @pon the si/nin/ of the Deed of Sale, the ?ESSEE
shall i""ediatel. pa. P*-,,,,,.,,.
b. 1he balance of P$,33,,,,,.,, shall be paid in e<ual
install"ents of P3$,3#&.8+ over si7t. 9-,: consecutive
"onths co"puted !ith interest at #3A per annu" on
the di"inishin/ balanceB Provided, that the ?ESSEE
shall have the ri/ht to accelerate pa."ents at an.ti"e
in !hich event the stipulated interest for the re"ainin/
install"ents shall no lon/er be i"posed.
7 . . 1he option shall be e7ercised b. a !ritten notice to the ?ESSOR at
an.ti"e !ithin the option period and the docu"ent of sale over the afore=
described properties has to be consu""ated !ithin the "onth
i""ediatel. follo!in/ the "onth !hen the ?ESSEE e7ercised his option
under this contract. )
On >anuar. +, $%8-, or appro7i"atel. three 9*: !ee;s before the e7piration of the lease
contract, SI5I notified petitioner of the i"pendin/ ter"ination of the lease a/ree"ent, and of
the short period of ti"e left !ithin !hich he could still validl. e7ercise the option. It li;e!ise
re<uested petitioner to advise the" of his decision on the option, on or before >anuar. #,,
$%8-.
7
In a letter dated >anuar. $&, $%8-, !hich !as received b. SI5I on >anuar. #%, $%8-,
petitioner re<uested for a si7="onth e7tension of the lease contract, alle/in/ that he needs
a"ple ti"e to raise sufficient funds in order to e7ercise the option. 1o support his re<uest,
petitioner averred that he had alread. "ade a substantial invest"ent on the propert., and
had been punctual in pa.in/ his "onthl. rentals.
*
On Cebruar. $3, $%8-, SI5I notified petitioner that his re<uest !as disapproved.
Nevertheless, it offered to lease the sa"e propert. to petitioner at the rate of 1hirt. 1housand
9P*,,,,,.,,: pesos a "onth, for a period of one 9$: .ear. It further infor"ed the petitioner of
its decision to offer for sale said leased propert. to the /eneral public.
9
On Cebruar. $8, $%8-, petitioner notified SI5I of his decision to e7ercise the option to
purchase the propert. and at the sa"e ti"e he "ade arran/e"ents for the pa."ent of the
do!npa."ent thereon in the a"ount of 1hree 5undred Si7t. 1housand 9P*-,,,,,.,,:
pesos.
10
On Cebruar. #,, $%8-, SI5I sent another letter to petitioner, reiteratin/ its previous stand on
the latter0s offer, stressin/ that the period !ithin !hich the option should have been e7ercised
had alread. lapsed. SI5I as;ed petitioner to vacate the propert. !ithin ten 9$,: da.s fro"
notice, and to pa. rental and penalt. due.
11
5ence, on Cebruar. #8, $%8-, a co"plaint for specific perfor"ance and da"a/es
12
!as filed
b. petitioner a/ainst SI5I before the Re/ional 1rial Court of Cebu Cit., to co"pel the latter to
honor its co""it"ent and e7ecute the correspondin/ deed of sale.
1
'fter trial, the court a quo pro"ul/ated its decision dated 'pril $, $%%$, the dispositive portion
of !hich reads4
In the li/ht of the fore/oin/ considerations, the Court hereb. renders
2ud/"ent in Civil Case No. CE 3+,,, orderin/ the defendant to e7ecute
a deed of sale in favor of the plaintiff, coverin/ the parcels of land to/ether
!ith all the i"prove"ents thereon, covered b. 1ransfer Certificates of
1itle Nos. 8%$&# and 8%$&* of the Re/istr. of Deeds of Cebu Cit., in
accordance !ith the lease contract e7ecuted on >anuar. $,, $%83
bet!een the plaintiff and the defendant, but the purchase price "a. be b.
Done shot pa."entD of P$,8,,,,,,.,,B and the defendant to pa. attorne.0s
fee of P#,,,,,.,,.
No da"a/es a!arded. 1'
Not satisfied !ith the 2ud/"ent, SI5I elevated the case to the Court of 'ppeals b. !a. of a
petition for revie!.
On Septe"ber #$, $%%&, respondent court rendered its decision, affir"in/ the trial court0s
2ud/"ent, but "odified the basis for assessin/ the purchase price. 6hile respondent court
affir"ed appellee0s option to bu. the propert., it added that, Dthe purchase price "ust be
based on the prevailin/ "ar;et price of real propert. in ulacao, Cebu Cit..D
14
affled b. the "odification "ade b. respondent court, both parties filed a "otion for
reconsideration andEor clarification, !ith petitioner, on one hand, pra.in/ that the prevailin/
"ar;et price be the value of the propert. in Cebruar. $%8-, the ti"e !hen the sale !ould
have been consu""ated. SI5I, on the other hand, pra.ed that the "ar;et price of the
propert. be based on the prevailin/ price inde7 at least $, .ears later, that is, $%%-.
Respondent court conducted further hearin/ to clarif. the "atter, but no a/ree"ent !as
reached b. the parties. 1hus, on 'pril #&, $%%-, respondent court pro"ul/ated the assailed
resolution, !hich denied both parties0 "otions, and directed the trial court to conduct further
hearin/s to ascertain the prevailin/ "ar;et value of real properties in ulacao, Cebu Cit. and
fi7 the value of the propert. sub2ect of the controvers..
14
a
5ence, the instant petition for revie!.
1he funda"ental issue to be resolved is, should petitioner be allo!ed to e7ercise the option
to purchase the leased propert., despite the alle/ed dela. in /ivin/ the re<uired notice to
private respondentF
'n option is a preparator. contract in !hich one part. /rants to the other, for a fi7ed period
and under specified conditions, the po!er to decide, !hether or not to enter into a principal
contract. It binds the part. !ho has /iven the option, not to enter into the principal contract
!ith an. other person durin/ the period desi/nated, and, !ithin that period, to enter into such
contract !ith the one to !ho" the option !as /ranted, if the latter should decide to use the
option. 1( It is a separate a/ree"ent distinct fro" the contract !hich the parties "a. enter
into upon the consu""ation of the option.
1)
Considerin/ the circu"stances in this case, !e find no reason to disturb the findin/s of
respondent court, that petitioner0s letter to SI5I, dated >anuar. $&, $%8-, !as fair notice to
the latter of the for"er0s intent to e7ercise the option, despite the re<uest for the e7tension of
the lease contract. 's stated in said letter to SI5I, petitioner !as re<uestin/ for an e7tension
9of the contract: for si7 "onths Dto allo! us to /enerate sufficient funds in order to e7ercise
our option to bu. the sub2ect propert.D. 17 1he anal.sis b. the Court of 'ppeals of the
evidence on record and the process b. !hich it arrived at its findin/s on the basis thereof,
i"pel this Court0s assent to said findin/s. 1he. are consistent !ith the parties0 pri"ar. intent,
as hereafter discussed, !hen the. e7ecuted the lease contract. 's respondent court ruled4
6e hold that the appellee Gherein petitionerH acted !ith honest. and /ood
faith. Veril., 6e are in accord !ith the trial court that he should be allo!ed
to e7ercise his option to purchase the lease propert.. In fact, SI5I !ill not
be pre2udiced. ' contrar. rulin/, ho!ever, !ill definitel. cause da"a/e to
the appellee, it appearin/ that he has introduced considerable
i"prove"ents on the propert. and has borro!ed hu/e loan fro" the
1echnolo/. Resources Center. 17a
1he contractin/ parties0 pri"ar. intent in enterin/ into said lease contract !ith option to
purchase confir"s, in our vie!, the correctness of respondent court0s rulin/. 'nal.sis and
construction, ho!ever, should not be li"ited to the !ords used in the contract, as the. "a.
not accuratel. reflect the parties0 true intent. 1he reasonableness of the result obtained, after
said anal.sis, ou/ht li;e!ise to be carefull. considered.
It is !ell=settled in both la! and 2urisprudence, that contracts are the la! bet!een the
contractin/ parties and should be fulfilled, if their ter"s are clear and leave no roo" for doubt
as to the intention of the contractin/ parties. 1* Curther, it is !ell=settled that in construin/ a
!ritten a/ree"ent, the reason behind and the circu"stances surroundin/ its e7ecution are of
para"ount i"portance. Sound construction re<uires one to be placed "entall. in the
situation occupied b. the parties concerned at the ti"e the !ritin/ !as e7ecuted. 1hereb.,
the intention of the contractin/ parties could be "ade to prevail, because their a/ree"ent
has the force of la! bet!een the". 19
Moreover, to ascertain the intent of the parties in a contractual relationship, it is i"perative
that the various stipulations provided for in the contract be construed to/ether, consistent !ith
the parties0 conte"poraneous and subse<uent acts as re/ards the e7ecution of the
contract. 20 'nd once the intention of the parties has been ascertained, that ele"ent is
dee"ed as an inte/ral part of the contract as thou/h it has been ori/inall. e7pressed in
une<uivocal ter"s.
's sufficientl. established durin/ the trial, SI5I, prior to its ne/otiation !ith petitioner, !as
alread. beset !ith financial proble"s. SI5I !as e7periencin/ difficult. in "eetin/ the clai"s
of its creditors. 1hus, in order to repro/ra" the co"pan.0s financial invest"ent plan and
facilitate its rehabilitation and viabilit., SI5I, bein/ a <uasi=ban;in/ financial institution, had
been placed under the supervision and control of the Central an; 9C:. It !as in dire need
of li<uidatin/ its assets, so to spea;, in order to sta. afloat financiall..
1hus, SI5I !as co"pelled to dispose so"e of its assets, a"on/ !hich is the sub2ect leased
propert., to /enerate sufficient funds to au/"ent its badl.=depleted financial resources. 1his
2
then brou/ht about the e7ecution of the lease contract !ith option to purchase bet!een SI5I
and the petitioner.
1he lease contract provided that to e7ercise the option, petitioner had to send a letter to SI5I,
"anifestin/ his intent to e7ercise said option !ithin the lease period endin/ >anuar. *,,
$%8-. 5o!ever, !hat petitioner did !as to re<uest on >anuar. $&, $%8-, for a si7="onth
e7tension of the lease contract, for the alle/ed purpose of raisin/ funds intended to purchase
the propert. sub2ect of the option. It !as onl. after the re<uest !as denied on Cebruar. $3,
$%8-, that petitioner notified SI5I of his desire to e7ercise the option for"all.. 1his !as b.
letter dated Cebruar. $8, $%8-. In private respondent0s vie!, there !as alread. a dela. of $8
da.s, fatal to petitioner0s cause. ut respondent court found the dela. neither DsubstantialD
nor Dfunda"entalD and did not a"ount to a breach that !ould defeat the intention of the
parties !hen the. e7ecuted the lease contract !ith option to purchase.
20
a
In allo!in/ petitioner to e7ercise the option, ho!ever, both lo!er courts are in accord in their
decision, rationaliIin/ that a contrar. rulin/ !ould definitel. cause da"a/e to the petitioner,
as he had the !hole place renovated to "a;e the sa"e suitable and conducive for the
business he established there. Moreover, 2ud/in/ fro" the subse<uent acts of the parties, it
is undeniable that SI5I reall. intended to dispose of said leased propert., !hich petitioner
indubitabl. intended to bu..
SI5I0s a/ree"ent to enter first into a lease contract !ith option to purchase !ith herein
petitioner, is a clear proof of its intent to pro"ptl. dispose said propert. althou/h the full
financial returns "a. "aterialiIe onl. in a .ear0s ti"e. Curther"ore, its letter dated >anuar. +,
$%8-, re"indin/ the petitioner of the short period of ti"e left !ithin !hich to consu""ate
their a/ree"ent, clearl. sho!ed its desire to sell that propert.. 'lso, SI5I0s letter dated
Cebruar. $3, $%8- supported the conclusion that it !as bent on disposin/ said propert.. Cor
this letter "ade "ention of the fact that, Dsaid propert. is no! for sale to the /eneral publicD.
Petitioner0s deter"ination to purchase said propert. is e<uall. indubitable. 5e introduced
per"anent i"prove"ents on the leased propert., de"onstratin/ his intent to ac<uire
do"inion in a .ear0s ti"e. 1o increase his chances of ac<uirin/ the propert., he secured an
P8 Million loan fro" the 1echnolo/. Resources Center 91RC:, thereb. au/"entin/ his
capital. 5e averred that he applied for a loan since he planned to pa. the purchase price in
one sin/le pa."ent, instead of pa.in/ in install"ent, !hich !ould entail the pa."ent of
additional interest at the rate of #3A per annum, co"pared to +*E3A per annum interest for
the 1RC loan. 5is letter earlier re<uestin/ e7tension !as pre"ised, in fact, on his need for
ti"e to secure the needed financin/ throu/h a 1RC loan.
In contractual relations, the la! allo!s the parties reasonable lee!a. on the ter"s of their
a/ree"ent, !hich is the la! bet!een the". 21 Note that b. contract SI5I had /iven petitioner
3 periods4 9a: the option to purchase the propert. for P$,8,,,,,,.,, !ithin the lease period,
that is, until >anuar. *,, $%8-B 9b: the option to be e7ercised !ithin the option period b.
!ritten notice at an.ti"eB 9c: the Ddocu"ent of sale . . . to be consu""ated !ithin the "onth
i""ediatel. follo!in/ the "onthD !hen petitioner e7ercises the optionB and 9d: the pa."ent
in e<ual install"ents of the purchase price over a period of -, "onths. In our vie!,
petitioner0s letter of >anuar. $&, $%8- and his for"al e7ercise of the option on Cebruar. $8,
$%8- !ere !ithin a reasonable ti"e=fra"e consistent !ith periods /iven and the ;no!n intent
of the parties to the a/ree"ent dated >anuar. $,, $%8&. ' contrar. vie! !ould be harsh and
ine<uituous indeed.
In Tuason, Jr., etc. vs. De sis, 22 this Court opined that Din a contract of lease, if the lessor
"a;es an offer to the lessee to purchase the propert. on or before the ter"ination of the
lease, and the lessee fails to accept or "a;e the purchase on ti"e, the lessee losses the
ri/ht to bu. the propert. later on the terms and conditions set in the offer.D 1hus, on one
hand, petitioner herein could not insist on bu.in/ the said propert. based on the price a/reed
upon in the lease a/ree"ent, even if his option to purchase it is reco/niIed. On the other
hand, SI5I could not ta;e advanta/e of the situation to increase the sellin/ price of said
propert. b. nearl. %,A of the ori/inal price. Such leap in the price <uoted !ould sho! an
opportunistic intent to e7ploit the situation as SI5I ;ne! for a fact that petitioner badl. needed
the propert. for his business and that he could afford to pa. such hi/her a"ount after havin/
secured an P8 Million loan fro" the 1RC. If the courts !ere to allo! SI5I to ta;e advanta/e
of the situation, the result !ould have been an in2ustice to petitioner, because SI5I !ould be
un2ustl. enriched at his e7pense. Courts of la!, bein/ also courts of e<uit., "a. not
countenance such /rossl. unfair results !ithout doin/ violence to its sole"n obli/ation to
ad"inister fair and e<ual 2ustice for all.
65ERECORE, the appealed decision of respondent court, insofar as it affir"s the 2ud/"ent
of the trial court in /rantin/ petitioner the opportunit. to e7ercise the option to purchase the
sub2ect propert., is hereb. 'CCIRMED. 5o!ever the purchase price should be based on the
fair "ar;et value of real propert. in ulacao, Cebu Cit., as of Cebruar. $%8-, !hen the
contract !ould have been consu""ated. Curther, petitioner is hereb. ordered to pa. private
respondent SI5I le/al interest on the said purchase price be/innin/ Cebruar. $%8- up to the
ti"e it is actuall. paid, as !ell as the ta7es due on said propert., considerin/ that petitioner
have en2o.ed the beneficial use of said propert.. 1he case is hereb. re"anded to Re/ional
1rial Court of Cebu, ranch &, for further proceedin/s to deter"ine pro"ptl. the fair "ar;et
value of said real propert. as of Cebruar. $%8-, in ulacao, Cebu Cit..
Costs a/ainst private respondent.
SO ORDERED.
3