Republic of the Philippines

SUPREME COURT
Manila
EN BANC

G.R. No. L-32873 August 18, 1972
AQUILINO NIETES, petitioner,
vs.
HON. COURT O APPEALS ! "R. PA#LO C. GARCIA, respondents.
Conrado V. del Rosario for petitioner.
Romeo D. Magat for private respondent.

CONCEPCION, C.J.:p
Petitioner Aquilino Nietes seeks a review on certiorari of a decision of the Court of Appeals.
t appears that, on !ctober "#, "#$#, said petitioner and respondent %r. Pablo C. &arcia
entered into a 'Contract of (ease with !ption to Bu),' pursuant to the ter*s and conditions
set forth in the deed E+hibits A and A,", -also, *arked as E+hibit ./ na*el)0
1hat the (E22!R is an owner of the AN&E(E2 E%3CA1!NA(
N21131E situated at An4eles, Pa*pan4a, a school which is dul)
reco4ni5ed b) the &overn*ent6
1hat the lessor a4rees to lease the above stated school to the (E22EE
under the followin4 ter*s and conditions0
". 1hat the ter* will be for a period of five -$/ )ears6
.. 1hat the price of the rent is 78E 19!32AN% PE2!2 -P$,:::/ per
)ear pa)able in the followin4 *anners0
a. 1hat the a*ount of 78E 19!32AN% 78E
93N%RE% PE2!2 -P$,$::/ will be paid upon the
e+ecution of this Contract of (ease6
b. 1hat the a*ount of 7!3R 19!32AN% 78E
93N%RE% PE2!2 -P;,$::/ is pa)able on or before
the <:th da) of !ctober, "#$#6
c. 1hat the re*ainin4 balance of 771EEN
19!32AN% PE2!2 -P"$,:::/ will be paid on or
before March <:, "#=:6
<. 1hat all i*prove*ents *ade durin4 the lease b) the (E22EE will be
owned b) the (E22!R after the e+piration of the ter* of this Contract of
(ease6
;. 1hat the (E22!R a4rees to 4ive the (E22EE an option to bu) the land
and the school buildin4, for a price of !NE 93N%RE% 19!32AN%
PE2!2 -P"::,:::/ within the period of the Contract of (ease6
$. 1hat should the (E22EE bu) the lot, land and the school buildin4 within
the stipulated period, the unused pa)*ent for the Contract of (ease will
be considered as part pa)*ent for the sale of the land and school6
=. 1hat an inventor) of all properties in the school will be *ade on March
<", "#=:6
=A. 1hat the ter* of this Contract will co**ence in >une "#=: and will
ter*inate in >une "#=$6
?. 1hat the (E22EE will be 4iven full control and responsibilities over all
the properties of the school and over all the supervisions and
ad*inistrations of the school6
@. 1hat the (E22EE a4rees to help the (E22!R to collect the back
accounts of students incurred before the e+ecution of this contract.
nstead of pa)in4 the lessor in the *anner set forth in para4raph . of said contract, Nietes
had, as of Au4ust ;, "#=", *ade pa)*ents as follows0
!ctober =,"#=: ....................................... P"@,#$?.:: -E+h. %/
Nove*ber .<, "#=: ................................. <::.:: -E+h. E/
%ece*ber .", "#=: ................................. .::.:: -E+h. 7/
>anuar) ";, "#=" ..................................... $::.:: -E+h. &/
7ebruar) "=, "#=" ................................... <,:::.:: -E+h. 9/
1
March "., "#=" ....................................... ",:::.:: -E+h. /
March "<, "#=" ....................................... ?::.:: -E+h. >/
Au4ust ;, "#=" ........................................ "::.:: -E+h. A/ BBBBBBBBB
1!1A( ..................................... P.;,?$?.::
Moreover, Nietes *aintains that, on 2epte*ber ;, "#=", and %ece*ber "<, "#=., he paid
&arcia the additional su*s of P<,::: and P.,.::, respectivel), for which &arcia issued
receipts E+hibit B and C, readin40
Received the a*ount of -P<,:::.::/ 1hree 1housand Pesos fro* Mrs.
Nietes as per advance pa) for the school, the contract of lease bein4
paid.
-24d./ PAB(! &ARCA -E+h. B/
1o Cho* it Ma) Concern0
1his is to certif) that received the su* of 1wo 1housand 1wo 9undred
Pesos, Philippine Currenc), fro* Mrs. Catherine R. Nietes as the partial
pa)*ent on the purchase of the propert) as specified on the ori4inal
contract of 'Contract of (ease with the 7irst !ption to Bu)' ori4inall)
contracted and dul) si4ned.
-24d./ %R. PAB(! &ARCA -E+h. C/
!n or about >ul) <", "#=;, %r. &arciaDs counsel wrote to Nietes the letter E+hibit " -also
E+hibit 8/ statin40
1he %irector
Philippine nstitute of Electronics
An4eles, Pa*pan4a
2ir0
re4ret to infor* )ou that our client, %r. Pablo &arcia, desires to rescind
)our contract, dated "# !ctober "#$# because of the followin40
". 1hat )ou had not *aintained the buildin4, subEect of the lease contract
in 4ood condition.
.. 1hat )ou had not been usin4 the ori4inal na*e of the school F An4eles
nstitute, thereb) e+tin4uishin4 its e+istence in the e)es of the public and
inEurin4 its presti4e.
<. 1hat throu4h )our fault, no inventor) has been *ade of all properties of
the school.
;. 1hat up to this ti*e, )ou had not collected or *uch less helped in the
collection of back accounts of for*er students.
1his is to re*ind )ou that the fore4oin4 obli4ations had been one, if not,
the principal *ovin4 factors which had induced the lessor in a4reein4 with
the ter*s e*bodied in )our contract of lease, without which fulfill*ent,
said contract could not have co*e into e+istence. t is not si*pl) one of
those re*inders that we *ake *ention, that our client under the
circu*stances, is not onl) entitled to a rescission of the contract. 9e is
likewise entitled to da*a4es F actual, co*pensator) and e+e*plar).
n view of the serious nature of the breach which warrant and sanction
drastic le4al re*edies a4ainst )ou, we earnestl) request )ou to please
see the undersi4ned at the above,na*ed address two da)s fro* receipt
hereof. !therwise, if we shall not hear fro* )ou, the fore4oin4 will serve
notice on )our part to vacate the pre*ises within five -$/ da)s to be
counted fro* date of notice.
8er) trul) )ours,
-24d./ 8C1!R 1. ((AMA2, >R.
to which counsel for Nietes replied in the followin4 lan4ua4e0
Att). 8ictor 1. (la*as, >r.
8ictor (la*as (aw !ffice
Corner Rivera,Ga*ora 2treets
%a4upan Cit)
%ear 2ir0
Hour letter dated >ul) <", "#=; addressed to *) client, the %irector of the
Philippine nstitute of Electronics, An4eles Cit), has been referred to *e
and in repl), please, be infor*ed that *) client has not violated an)
provision of the C!N1RAC1 !7 (EA2E C19 !P1!N 1! B3H,
e+ecuted b) hi* as (E22EE and %r. Pablo &arcia as (E22!R. 7or this
reason, there is no basis for rescission of the contract nor of the de*ands
contained in )our letter.
n this connection, a* also servin4 this for*al notice upon )our client %r.
Pablo &arcia, thru )ou, that *) client Mr. AI3(N! 1. NE1E2 will
e+ercise his !P1!N to bu) the land and buildin4 subEect *atter of the
lease and that *) said client is read) to pa) the balance of the purchase
price in accordance with the contract. Please, infor* %r. Pablo &arcia to
*ake available the land title and e+ecute the correspondin4 %eed of 2ale
pursuant to this notice, and that if he fails to do so within fifteen -"$/ da)s
2
fro* the receipt of this letter, we shall take the correspondin4 action to
enforce the a4ree*ent.
1rul) )ours,
-24d./ C!NRA%! 8. %E( R!2AR!
Counsel for Mr. Aquilino 1. Nietes
An4eles Cit)
!n >ul) .=, "#=$, Nietes deposited with the branch office of the A4ro,ndustrial Bank in
An4eles Cit) checks a*ountin4 to P@;,@=:.$:, as balance of the purchase price of the
propert), but he withdrew said su* of P@;,@=:.$: on Au4ust "., "#=$, after the checks had
been cleared. !n Au4ust ., "#=$, he co**enced the present action, in the Court of 7irst
nstance of Pa*pan4a, for specific perfor*ance of %r. &arciaDs alle4ed obli4ation to e+ecute
in his -NietesD/ favor a deed of absolute sale of the leased propert), free fro* an) lien or
encu*brance whatsoever, he havin4 *eanwhile *ort4a4ed it to the PeopleDs Bank and 1rust
Co*pan), and to co*pel hi* -&arcia/ to accept whatever balance of the purchase price is
due hi*, as well as to recover fro* hi* the a44re4ate su* of P#:,::: b) wa) of da*a4es,
apart fro* attorne)Ds fees and the costs.
%r. &arcia filed an answer ad*ittin4 so*e alle4ations of the co*plaint and den)in4 other
alle4ations thereof, as well as settin4 up a counterclai* for da*a4es in the su* of P"$:,:::.
After due trial, said court rendered its decision, the dispositive part of which reads0
C9ERE7!RE, in view of the preponderance of evidence in favor of the
plaintiff and a4ainst the defendant, Eud4*ent is hereb) rendered orderin4
the latter to e+ecute the %eed of Absolute 2ale of propert) ori4inall)
leased to4ether with the school buildin4 and other i*prove*ents thereon
which are covered b) the contract, Anne+ 'A', upon pa)*ent of the for*er
of the balance -whatever be the a*ount/ of the stipulated purchase price6
to free the said propert) fro* an) *ort4a4e or encu*brance and deliver
the title thereto to the plaintiff free fro* an) lien or encu*brance, and
should said defendant fail to do so, the proceeds fro* the purchase price
be applied to the pa)*ent of the encu*brance so that the title *a) be
conve)ed to the plaintiff6 to pa) the plaintiff the su* of P",:::.:: as
attorne)Ds fees, and the cost of this suit.
Both parties appealed to the Court of Appeals, %r. &arcia insofar as the trial court had neither
dis*issed the co*plaint nor upheld his counterclai* and failed to order Nietes to vacate the
propert) in question, and Nietes insofar as the trial court had 4ranted hi* no *ore than
no*inal da*a4es in the su* of P",:::, as attorne)Ds fees.
After appropriate proceedin4s, a special division of Court of Appeals rendered its decision, on
!ctober "@, "#=#, affir*in4, in effect, that of the trial court, e+cept as re4ards said attorne)Ds
fees, which were eli*inated. 1he dispositive part of said decision of the Court of Appeals
reads0
C9ERE7!RE, with the *odification that the attorne)Ds fees awarded b) the trial court in
favor of the plaintiff is eli*inated, the appealed Eud4*ent is hereb) affir*ed in all other
respects, and the defendant is ordered to e+ecute the correspondin4 deed of sale for the
school buildin4 and lot in question in favor of the plaintiff upon the latterDs full pa)*ent of the
balance of the purchase price. 1he costs of this proceedin4s shall be ta+ed a4ainst the
defendant,appellant.
!n *otion for reconsideration of defendant &arcia, said special division set aside its
afore*entioned decision and rendered another one, pro*ul4ated on March ":, "#?:
reversin4 the appealed decision of the court of first instance, and dis*issin4 the co*plaint of
Nietes, with costs a4ain hi*. 9ence, the present petition of Nietes for review certiorari of the
second decision of the Court of Appeals, dated March ":, "#?:, to which petition Ce 4ave
due course.
2aid decision of the Court of Appeals, reversin4 that of the Court of 7irst nstance, is *ainl)
predicated upon the theor) that, under the contract between the parties, 'the full purchase
price *ust be paid before the option counsel be e+ercised,' because 'there was no need nor
sense providin4 that 'the unused pa)*ent for the Contract (ease will be considered as part
pa)*ent for the sale the land and schoolD' inas*uch as 'otherwise there is substantial
a*ount fro* which such unused rental could be deducted'6 that the state*ent in the letter,
E+hibit (, of Nietes, dated Au4ust ?, "#=;, to the effect that he 'will e+ercise his !P1!N to
bu) the land and buildin4,' indication that he did not consider the receipts, E+hibits B and for
P<,::: and P.,.::, respectivel), 'as an effective e+ercise of his option to bu)'6 that the
checks for P@;,@=:.$: deposited b) Nietes with the A4ro,ndustrial %evelop*ent Bank, did
not constitute a proper tender of pa)*ent, which, at an) rate, was '*ade be)ond the
stipulated $,)ear period'6 that such deposit 'was not seriousl) *ade, because on Au4ust ".,
"#=$, the sa*e was withdrawn fro* the Bank and ostensibl) re*ains in the lesseeDs hand'6
and that 'the fact that such deposit was *ade b) the lessee shows that he hi*self believed
that he should have paid the entire a*ount of the purchase price before he could avail of the
option to bu), otherwise, the deposit was a senseless 4esture ... .'
%r. &arcia, in turn, *aintained in his answer 'that the su*s paid' to hi* 'were part of the
price of the contract of lease between the parties which were paid late and not within the
periods andJor schedules fi+ed b) the contract -Anne+ A./.' Chat is *ore, on the witness
stand, &arcia clai*ed that he did 'not know' whether the si4natures on E+hibits B and C F
the receipt for P<,::: and P.,.::, respectivel) F were his, and even said that he was
'doubtful' about it.
1his testi*on) is *anifestl) incredible, for a *an of his intelli4ence F a %octor of Medicine
and the owner of an educational institution F could not possibl) 'not know' or entertain
doubts as to whether or not the afore*entioned si4natures are his and the pa)*ents therein
acknowled4ed had been received b) hi*. 9is dubious veracit) beco*es even *ore apparent
when we consider the alle4ations in para4raph -;/ of his answer F referrin4 to para4raphs $
and = of the co*plaint alle4in4, inter alia, the afore*entioned partial pa)*ents of P<,::: and
P.,.::, on account of the stipulated sale price F to the effect that said su*s ' paid to the
herein defendant were part of the price of the contract of lease.' n other words, pa)*ent of
said su*s of P<,::: and P.,.:: is admitted in said answer. Besides, the rentals for the
whole period of the lease a44re4ated P.$,::: onl), whereas said su*s of P<,::: and
P.,.::, when added to the pa)*ents previousl) *ade b) Nietes, 4ive a 4rand total of
P.#,#$?.::, or P;,#$? in e+cess of the a4reed rentals for the entire period of five )ears.
1hus, %r. &arcia was less than truthful when he tried to cast doubt upon the fact of pa)*ent
3
of said su*s of P<,::: and P.,.::, as well as when he clai*ed that the sa*e were part of
the rentals collectible b) hi*.
Ce, likewise, find ourselves unable to share the view taken b) the Court of Appeals. Neither
the tenor of the contract E+hibits A and A," -also E+hibit ./ nor the behaviour of %r. &arcia F
as reflected in the receipts E+hibits B and C F Eustifies such view. 1he contract does not sa)
that Nietes had to pa) the stipulated price of P"::,:::before e+ercisin4 his option to bu) the
propert) in question. Accordin4l), said option is 4overned b) the 4eneral principles on
obli4ations, pursuants to which0
n reciprocal obli4ations, neither part) incurs in dela) if the other does not
co*pl) or is not read) to co*pl) in a proper *anner with what is
incu*bent upon hi*. 7ro* the *o*ent one of the parties fulfills his
obli4ation, dela) b) the other be4ins.
1
n the case of an option to bu), the creditor *a) validl) and effectivel) e+ercise his ri4ht b)
*erel) advisin4 the debtor of the for*erDs decision to bu) and e+pressin4 his readiness to
pa) the stipulated price, provided that the sa*e is available and actuall) delivered to the
debtor upon e+ecution and deliver) b) hi* of the correspondin4 deed of sale. 3nless and
until the debtor shall have done this the creditor is not and cannot be in default in the
dischar4e of his obli4ation to pa).
2
n other words, notice of the creditorDs decision to e+ercise
his option to bu) need not be coupled with actual pa)*ent of the price, so lon4 as this is
delivered to the owner of the propert) upon perfor*ance of his part of the a4ree*ent. Nietes
need not have deposited, therefore, with the A4ro,ndustrial Bank checks a*ountin4
alto4ether to P@;,@=:.$: on >ul) .=, "#=$, and the withdrawal thereof soon after does not
and cannot affect his cause of action in the present case. n *akin4 such deposit, he *a)
have had the intent to show his abilit) to pa) the balance of the su* due to %r. &arcia as the
sale price of his propert). n short, said deposit and its subsequent withdrawal cannot affect
the result of the present case.
Nietes was entitled to e+ercise his option to bu) 'within the period of the Contract of (ease,'
which F pursuant to para4raph =,A of said contract F co**enced 'in >une "#=:' and was
to 'ter*inate in >une "#=$.' As earl) as 2epte*ber ;, "#=", or well "within the period of the
Contract of Lease,' Nietes had paid %r. &arcia the followin4 su*s0
!ctober =, "#=: ............................ P"@,#$?.:: -E+h. %/
Nove*ber .<, "#=: ....................... <::.:: -E+h E/
%ece*ber .", "#=: ....................... .::.:: -E+h. 7/
>anuar) ";, "#=" ........................... $::.:: -E+h. &/
7ebruar) "=, "#=" ......................... <,:::.:: -E+h. 9/
March "., "#=" ............................. ",:::.:: -E+h. /
March "<, "#=" ............................. ?::.:: -E+h. >/
Au4ust ;, "#=" ............................... "::.:: -E+h. A/
2epte*ber ;, "#=" ......................... <,:::.:: -E+h. B/
BBBBBBBB
1!1A( ............................... P.?,?$?.::
t is true that Nietes was bound, under the contract, to pa) P$,$:: on !ctober "#, "#$#,
P;,$:: on or before !ctober <:, "#$#, and P"$,::: on or before March <:, "#=:, or the total
su* of P.$,:::, fro* !ctober "#, "#$# to March <:, "#=:, whereas his first pa)*ent was
not *ade until !ctober ":, "#=:, when he delivered the su* of P"@,#$? to %r. &arcia, and
the latter had b) Au4ust ;, "#=", received fro* the for*er the a44re4ate su* of P.;,?$?.
1his is, however, P.;<.:: onl) less than the P.$,::: due as of March <:, "#=:, so that
Nietes *a) be considered as havin4 co*plied substantiall) with the ter*s a4reed upon.
ndeed, %r. &arcia see*s to have either a4reed thereto or not considered that Nietes had
thereb) violated the contract, because the letter of the for*er, dated >ul) <", "#=;,
de*andin4 rescission of the contract, did not *ention said acts or o*issions of Nietes
a*on4 his alle4ed violations thereof enu*erated in said co**unication. n fact, when, on
2epte*ber ;, "#=", Mrs. Nietes turned over the su* of P<,::: to %r. &arcia, he issued the
receipt E+hibit B, statin4 that said pa)*ent had been *ade 'as per advance pa) for the
school, the Contract of (ease bein4 paid' F in other words, in accordance or conformity with
said contract. Besides, when, on %ece*ber "<, "#=., Mrs. Nietes delivered the additional
su* of P.,.::, %r. &arcia issued a receipt acceptin4 said a*ount 'as the partial pa)*ent on
the purchase price of the propert) as specified on the original contract,' thus further
indicatin4 that the pa)*ent, in his opinion, conformedwith said contract, and that,
accordin4l), the sa*e was in full force and effect.
n an) event, it is undisputed that, as of 2epte*ber ;, "#=", %r. &arcia had received the total
su* of P.?,?$?, or P.,?$? in e+cess of the P.$,::: representin4 the rentals for the entire
period of the lease, and over P.",.:: in excess of the rentals for the une+pired portion of the
lease, fro* 2epte*ber ;, "#=" to >une "#=$. 1his circu*stance indicates clearl) that Nietes
had, on 2epte*ber ;, "#=", chosen to e+ercise and did e+ercise then his option to bu). Chat
is *ore, this is borne out b) the receipt issued b) %r. &arcia for the pa)*ent of P.,.::, on
%ece*ber "<, "#=., to which he referred therein as a 'partial pa)*ent on the purchase of
the propert) as specified on the ori4inal contract of DContract of (ease with the 7irst !ption to
Bu)D ... .'
7urther confir*ation is furnished b) the letter of Nietes, E+hibit (, of Au4ust "#=; F also,
within the period of the lease F statin4 that he 'will e+ercise his !P1!N to bu) the land and
buildin4 subEect *atter of the lease.' t is not correct to construe this e+pression F as did the
appealed decision F as i*pl)in4 that the option had not been or was not yet bein4
e+ercised, or as a *ere announce*ent of the intent to avail of it at so*e future ti*e. 1his
interpretation takes said e+pression out of the conte+t of E+hibit (, which positivel) states,
also, that Nietes 'is read) to pa) the balance of the purchase price in accordance with the
contract,' and requests counsel for %r. &arcia to infor* or advise hi* 'to *ake available the
land title and e+ecute the correspondin4 %eed of 2ale pursuant to this notice, and that if he
fails to do so within fifteen -"$/ da)s ... we shall take the correspondin4 action to enforce the
a4ree*ent.' 2uch de*and and said readiness to pa) the balance of the purchase price leave
no roo* for doubt that, as stated in E+hibit (, the sa*e is 'a for*al notice' that Nietes had
e+ercised his option, and e+pected %r. &arcia to co*pl), within fifteen -"$/ da)s, with his part
4
of the bar4ain. 2urel), there would have been no point for said de*and and readiness to pa),
if Nietes had not )et e+ercised his option to bu).
1he provision in para4raph $ of the Contract, to the effect that 'should the (E22EE' choose
to *ake use of his option to bu) 'the unused pa)*ent for the Contract of (ease will be
considered as pa)*ent for the sale of the land and school, 'si*pl) *eans that the rental paid
for the unused portion of the lease shall be applied to and deducted fro* the sale price of
P"::,::: to be paid b) Nietes at the proper time F in other words, simultaneously with the
deliver) to hi* of the correspondin4 deed of sale, dul) e+ecuted b) %r. &arcia.
t is, consequentl), !ur considered opinion that Nietes had validl) and effectivel) e+ercised
his option to bu) the propert) of %r. &arcia, at least, on %ece*ber "<, "#=., when he
acknowled4ed receipt fro* Mrs. Nietes of the su* of P.,.:: then delivered b) her 'in partial
pa)*ent on the purchase of the propert)' described in the 'Contract of (ease with !ption to
Bu)'6 that fro* the a44re4ate su* of P.#,#$?.:: paid to hi* up to that ti*e, the su* of
P".,?:@.<< should be deducted as rental for the period fro* >une "#=: to %ece*ber "<,
"#=., or rou4hl) thirt) -<:/ *onths and a half, thereb) leavin4 a balance of P"?,.;@.=?,
consistin4 of P".,.#".=?, representin4 the rentals for the unused period of the lease, plus
P;,#$?.:: paid in e+cess of said rental and advanced solel) on account of the purchase
price6 that deductin4 said su* of P"?,.;@.=? fro* the a4reed price of P"::,:::.::, there
results a balance of P@.,?$".<< which should be paid b) Nietes to %r. &arcia, upon
e+ecution b) the latter of the correspondin4 deed of absolute sale of the propert) in question,
free fro* an) lien or encu*brance whatsoever, in favor of Nietes, and the deliver) to hi* of
said deed of sale, as well as of the ownerDs duplicate of the certificate of title to said propert)6
and that %r. &arcia should inde*nif) Nietes in the su* of P.,$:: as and for attorne)Ds fees.
1hus *odified, the decision of the Court of 7irst nstance of Pa*pan4a is hereb) affir*ed in
all other respects, and that of the Court of Appeals reversed, with costs a4ainst respondent
herein, %r. Pablo C. &arcia. t is so ordered.
5