NIETES v CA
G.R. No. L-32873 | August 18, 1972
Concepcion, C.J.
PETITIONER: Aquilino Nietes
RESPONDENTS: Court of Appeals & Dr. Pablo Garcia
Summary:
Dr. Garcia and Nietes enter into a Contract of Lease with
Option to Buy on a school building and lot. The agreement
was that Nietes could choose to buy the property, during the
period of his lease contract, should he choose to do so. Nietes
exercises his option to buy the property, but Dr. Garcia
suddenly wanted to rescind the contract. Court holds in the
end that Nietes validly exercised his option to buy.
Topic under discussion
Option Contract
FACTS
- October 19, 1959: Petitioner and respondent enter
into a “Contract of Lease with Option to Buy”
o Dr. Garcia, owner of Angeles Educational
Institute, agreed to lease said school to Nietes
for 5 years
o Rent is 5,000 per month, payable in three
different dates
o It is agreed that there is an option to buy the
land for P100,000 within the period of the
Contract of Lease
 Unused payment for lease will be
considered as part of payment for the
sale
o Term is from June 1960 to June 1965
- Instead of paying in the manner set, Nietes made
several payments totaling to 8 payments
- Nietes claims that on September 4, 1961 and
December 13, 1962 he paid additional sums of P3,000
and P2,000 which was supposedly for the payment of
the sale
o Acknowledgment receipts issued by Garcia
o Said receipts show that payments were for the
sale
 “As per advance pay for the school”
 “As partial payment on the purchase of
property”
- July 31, 1964, Dr. Garcia’s lawyer wrote to Nietes
wanting to rescind the contract
o Nietes hadn’t maintained the building
o He changed the name of the school
o No inventory was made on the properties of
the school
o Did not help collect back accounts from former
students
- Nietes’ counsel wrote back saying that they are have
not violated any provision in the contract and that they
are exercising the option to buy the land, ready to pay
for the balance of purchase price
- On July 26, 1965, Nietes deposited P84,860.50 worth
of checks, but later withdrew the amount after the
checks were cleared
 - Nietes filed present action in CFI Pampanga for specific
performance that Dr. Garcia execute a deed of
absolute sale, free from any lien/encumbrance
- Dr. Garcia filed answer denying that their agreement
still exists
- CFI rendered decision in favor of Nietes
- CA originally affirmed decision of CFI but later reversed
it, dismissing Nietes’ complaint
ISSUE
W/N Nietes validly exercised his option to buy on time without
violating any of the agreed terms – YES
RATIO
- CA’s decision was based on the theory that under the
contract “the full purchase price must be paid before
the option counsel be exercised”
o That the deposited checks did not constitute a
proper tender of payment because it was made
beyond the stipulated 5-year period
o It wasn’t seriously made
- Dr. Garcia, as witness, claimed that “he did not know”
whether the signatures in the acknowledgment
receipts were his and even said he was “doubtful”
about it
o Court is like “wtf?”
o The testimony is manifestly incredible for Dr.
Garcia is a man of intelligence
o How could he not know whether it was his
signature or not
- Such payment of the sums of 3k and 2.2k were
admitted as payment for the purchase price
- The rentals for the whole period of lease was a total of
P25,000, but the sums of 3k and 2.2k when added to
what was already paid by Nietes was in excess of the
agreed rentals for the entire period of 5 years
- Contract also doesn’t say that Nietes had to pay the
stipulated price of P100,000 before exercising his
option to buy
o The creditor may validly exercise his right by
merely advising the debtor of his decision to
buy and expressing his readiness to pay
stipulated price
o The notice of his decision to exercise his option
to buy need not be coupled with actual
payment of the price, as long as it is delivered
to the owner of the property upon
performance of his part of the agreement
o Nietes’ deposit and immediate withdrawal
cannot affect the result of the present case
- As early as Sept. 4, 1961, he had already paid a total of
P27,757
o Even though he didn’t pay the rentals in the
way agreed upon, he can be said to have
substantially complied with the terms
- By September 4, 1961, Nietes had already chosen to
exercise and did exercise his option to buy
o In his letter, such demand and said readiness to
pay the balance leaves no room for doubt that
it is a formal notice of exercising his option
 o Dr. Garcia was expected to comply with his part
within 15 days

RULING
Decision of CFI is affirmed. Costs against Dr. Garcia.