Serra vs.

Court of Appeals, and RCBC

229 SCRA 60

FACTS:

Petitioner Federico Serra, who is the owner of a 374 square meter parcel of land located at
Masbate, Masbate, and private respondent Rizal Commercial Banking Corporation (RCBC)
entered into a "Contract of Lease with Option to Buy" in May 25, 1975 which provided that
Serra will lease the subject land to RCBC for a period of 25 years from June 1, 1975 to June 1,
2000, that the RCBC has the option to purchase the same at P210.00 per square meter within a
period of 10 years from May 25, 1975, the date of the signing of the Contract, and that Serra
will have to register said land under the Torrens System to the Register of Deeds of Province of
Masbate within the same 10-year option period. Pursuant to said contract, RCBC constructed
improvements on the subject land to house its branch office, while the petitioner had the
property, within 3 years from 1975, duly registered with OCT No. 0-232 under the Torrens
System. Later, petitioner alleged that as soon as he had the property registered, he kept on
pursuing the branch manager for the sale of the lot as per their agreement, but it was not until
September 4, 1984, that RCBC decided to exercise the option.

RCBC informed petitioner, through a letter, of its intention to buy the property at the agreed
price of not greater than P210.00 per square meter or a total of P78,430.00, but petitioner
replied that he is no longer selling the property. RCBC then filed an action for specific
performance and damages against Serra in March 1985 alleging that during the negotiations it
made clear to petitioner that it intends to stay permanently on property once its branch office is
opened unless the exigencies of the business requires otherwise.

Although finding that the contract was valid, the lower court ruled that the option to buy is
unenforceable because it lacked a consideration distinct fro m the price and RCBC did not
exercise its option within the reasonable time. Upon motion for reconsideration, however, the
lower court reversed itself on the 2nd issue, declared the contract as valid, and ordered Serra to
deliver the proper deed of sale to RCBC. The Court of Appeals likewise affirmed said decision.

ISSUE:

Was there a valid contract of lease with option to buy between the parties? Was there a
consideration distinct from the price to support the option given to RCBC?
COURT RULING:

The Supreme Court affirmed the appellate court’s decision. A contract of adhesion is one
wherein a party, usually a corporation, prepares the stipulations in the contract, while the other
party merely affixes his signature or his "adhesion" thereto. These types of contracts are as
binding as ordinary contracts because in reality, the party who adheres to the contract is free to
reject it entirely.

In the case at bar, the Supreme Court did not find the situation to be inequitable because
petitioner is a highly educated man, who, at the time of the trial was already a CPA-Lawyer, and
when he entered into the contract, was already a CPA, holding a respectable position with the
Metropolitan Manila Commission. It is evident that a man of his stature should have been more
cautious in transactions he enters into, particularly where it concerns valuable properties. Also,
in the present case, the consideration is even more onerous on the part of the lessee since it
entails transferring of the building and/or improvements on the property to petitioner, should
respondent bank fail to exercise its option within the period stipulated.

LOURDES ONG LIMSON, petitioner,

vs.

COURT OF APPEALS, SPOUSES LORENZO DE VERA and

ASUNCION SANTOS-DE VERA, TOMAS CUENCA, JR. and
SUNVAR REALTY DEVELOPMEN T CORPORATION
FACTS:
Spouses offered to sell to Lourdes Limson the subject land through their agent Marcosa
Sanchez. She agreed to buy the property and gave them 20K as ‗earnest money‘; respondent
signed a receipt and gave her 10-day option period to buy the property. Lorenzo de Vera
informed her that the property was mortgaged to the Ramoses and asked her to pay the
balance of the purchase price to settle the obligation with the latter. She agreed to meet with
respondents and Ramoses to consummate transaction but Asuncion and the Ramoses did not
appear. She claimed that she was willing to pay but transaction did not materialize because of
unpaid back taxes on the property. She gave respondents checks to pay the said taxes which
were considered as part of the purchase price. Limson learned that the property is subject to
negotiation between the spouses and SUNVAR Realty Development Corporation. Limson Filed
an Affidavit of Adverse Claim which was annotated to the title. A Deed of Sale executed between
spouses and SUNVAR and a title was issued to SUNVAR with the annotation of adverse claim.
ISSUE:
Whether or not there was a perfected contract to sell between petitioner and respondents.
HELD:
No. The agreement was a ―contract of option‖ not a ―contract to sell‖. An option is not of itself a
purchase, but merely secures the privilege to buy. It is not a sale of property but a sale of the right to
purchase. It is simply a contract by which the owner of property agrees with another person that he shall
have the right to buy his property at a fixed price within a certain time. He does not sell his land; he does
not then agree to sell it; but he does sell something, i.e., the right or privilege to buy at the election or
option of the other party. Its distinguishing characteristic is that it imposes no binding obligation on the
person holding the option, aside from the consideration for the offer. Until acceptance, it is not, properly
speaking, a contract, and does not vest, transfer, or agree to transfer, any title to, or any interest or right
in the subject matter, but is merely a contract by which the owner of the property gives the optionee the
right or privilege of accepting the offer and buying the property on certain terms

Southern Motors Inc vs. Moscoso

FACTS:

In June 1957, plaintiff-appellee, Southern Motors, Inc. (Southern Motors) sold to defendant-
appellant Angel Moscoso one Chevrolet truck, on installment basis, for P6,445.00. Upon making
a down payment, the defendant executed a promisory note for the sum of P4,915,00,
representing the unpaid balance of the purchase price to secure the payment of which, a chattel
mortgage was constituted on the truck in favor of Southern Motors. Of the P4,915,00,
defendant was only able to pay a total of P550.00, which P110.00 was applied to the interest up
to August 15, and P400.00 to the principal, thus leaving an unpaid balance of P4,475.00. The
defendant failed to pay 3 more installments on the balance of the purchase price.

In November 1957, the Southern Motors filed a complaint against the Moscoso to recover the
unpaid balance of the promissory note, and the lower court issued a writ of attachment on
Moscoso’s properties. The Sheriff of San Jose, Antique, attach the Chevrolet truck, as well as a
house and lot belonging to Moscoso, and said truck was brought to the Southern Motors’
compound in Iloilo City for safe keeping. The Provincial Sheriff of Iloilo sold the said truck on
January 2, 1958 at a public auction in which Southern Motors itself was the only bidder for
P1,000.00. In March 1958, the trial court condemned the defendant Moscoso to pay the
plaintiff Southern Motors the unpaid balance of P4,475.00 with interest at the rate of 12% per
annum from August 16, 1957, until fully paid. While Southern Motors claims that in filing the
complaint, demanding payment of the unpaid balance of the purchase price, it has availed of
the first remedy provided in Article 1484 of the new Civil Code i.e. to exact fulfillment of the
obligation (specific performance), Mosocoso, on the other hand, contends that Southern
Motors had availed itself of the third remedy viz, the foreclosure of the chattel mortgage on the
truck.

ISSUE:

Which remedy under the Civil Code did the vendor Southern Motors avail?

COURT RULING:

The Supreme Court, in affirming the decision of the lower court, found that there is nothing
unlawful or irregular in appellee Southern Motors's act of attaching the mortgaged truck itself.

Since it has chosen to exact the fulfillment of the appellant Moscoso's obligation, Southern
Motors may enforce execution of the judgment that may be favorable to it, on all personal and
real properties of the latter not exempt from execution sufficient to satisfy such judgment. No
one can successfully contest that the attachment of a house and lot at San Jose, Antique was
merelly an incident to all ordinary civil action. (Sections 1 & 11, Rule 59; sec. 16 Rule 39.) The
mortgage creditor may recover judgment on the mortgage debt and cause an execution on the
mortgaged property and may cause an attachment to be issued and levied on such property,
upon beginning his civil action.

Sia Suan and Gaw Chiao

vs.
Ramon Alcantara, March 4, 1950

Facts:

· On August 3, 1931, a deed of sale was executed by Rufino Alcantara and his sons Damaso
Alcantara and Ramon Alcantara conveying to Sia Suan five parcels of land to petitioner Sia Suan
· On August 27, 1931, Gaw Chiao (husband of Sia Suan) received a letter from Francisco
Alfonso, attorney of Ramon Alcantara, informing him that Ramon Alcantara was a minor and
accordingly disavowing the contract.
· After Gaw Chiao responded to the letter, Ramon Alcantara went to the office of Gaw
Chiao’s counsel ratifying the sale.
· Ramon Alcantara received from Gaw Chiao the sum of P500 as payment for the sold parcels
of land.
· On August 8, 1940, an action was instituted by Ramon Alcantara in the Court of First
Instance of Laguna for the annulment of the deed of sale on the ground of his minority at the
time of sale. Action was denied and Sia Suan, Gaw Chiao, Ramon’s father and brother, Nicolas
and Antonio Azores were absolved
· Ramon brought the case to CA; CFI decision reversed.
· Sia Suan and Gaw Chiao filed a petition for certiorari to the Supreme Court.

Issue:

· Whether or not Ramon Alcantara’s execution of the deed of sale is valid despite being a
minor at the time of its execution.

Held:

Ramon Alcantara in his minority may not be allowed to execute the deed of sale but his act of
ratification, the contract was given a binding effect.

Mercado

v.

Espiritu, 37 Phil 215

FACTS:

Margarita Espiritu died leaving a 48-hectare land. The plaintiffs alleged that they are the
children and heirs of Margarita and that defendant Luis Espiritu, brother of Margarita, induced
and fraudulently succeeded in getting the plaintiffs to sell their land for a sum of P400 as
opposed to its original value. Hence, the plaintiffs sought to annul the deed of sale and asserted
that 2 of the 4 parties were minors. These two minors presented themselves to be of legal age
upon signing it and made a manifestation in front of notary public.

ISSUE:

W/N the deed of sale is valid when the minors presented themselves to be of legal age

HELD:

The contract is valid. They will not be permitted to excuse themselves from the fulfillment if the
obligations contracted by them.
 Matabuena
v.
Cervantes
G.R. No. L-28771 (March 31, 1971)
Facts :

Matabuena cohabitated with Respondent. During this period, Felix Matabuena donated to
Respondent a parcel of land. Later the two were married. After the death of Felix Matabuena,
his sister, Petitioner, sought the nullification of the donation citing Art.133 of the Civil Code
“Every donation between the spouses during the marriage shall be void.”
The trial court ruled that this case was not covered by the prohibition because the donation was
made at the time the deceased and Respondent were not yet married and were simply
cohabitating.

ISSUE:

W/N the prohibition applies to donations between live-in partners.

HELD:

Yes. It is a fundamental principle in statutory construction that what is within the spirit of the
law is as much a part of the law as what is written. Since the reason
for the ban on donations between spouses during the marriage is to prevent the possibilit
y of undue influence and improper pressure being exerted by one spouse on the other, there is
no reason why this prohibition shall not apply also to common-law relationships.The court,
however, said that the lack of the donation made by the deceased to
Respondent does not necessarily mean that the Petitioner will have exclusive rights to the
disputed property because the relationship between Felix and Respondent were legitimated by
marriage.