OESMER v.
PARAISO DEVELOPMENT CORPORATION (Ram) FACTS:
February 5, 2007 | Chico-Nazario, J. | Earnest Money v. Option Money
PETITIONER: Rizalino, substistuted by his heirs, Josefina Rolando and
Fernando, Ernesto, Leonora, Bibiano, Jr., Librado and Enriqueta, all surnamed
Oesmer
RESPONDENTS: Paraiso Development Corporation
SUMMARY: Oesmers are co-owners of undivided shares of 2 parcels of
agricultural and tenanted land in Carmona Cavite by virtue of right of
succession. Ernesto Oesmer (one of the heirs) met with Lee, President of Paraiso
Development Corp, in Manila for brokering the sale of the properties. A contract
to sell was entered into between Paraiso Dev. Corp and Ernesto as well as
Enriqueta. A check in the amount of P100,000 payable to Ernesto was given as
option money. Eventually, Rizalino, Leonora, Bibiano Jr, and Librado also
signed the Contract to Sell. However, 2 of their brothers, Adolfo and Jesus,
refused to sign the document. A couple of months after, the Oesmers informed
Paraiso (through a letter) that it is rescinding the Contract to Sell and returning
the option money. Petitioners who signed the document are contending that
Ernesto had no written authority to sell the property, that their signatures merely
conferred conditional consent subject to a suspensive condition (approval of the
sale by all the co-owners) and that the document did not bear the signature of the
respondent corporation. Hence, the Contract to Sell was not valid. RTC ruled in
favor of Paraiso, but only as to Ernestos 1/8 share. CA modified and declared
the Contract to Sell as valid and binding to all the signatories of the document.
The issue in this case is WoN the Contract to Sell is valid as to all co-owners and
WoN the P100,000 is considered as option money. The SC held that the Contract
to Sell was valid to all signatories, but not valid to those who did not. The co-
owners who affixed their signatures signify their act of directly selling their
personal shares to Paraiso Dev. Corp. and acceptance of what has been stipulated
in the contract. Moreover, a careful examination of the words used in the
contract indicates that the money is not option money but earnest money. It is
shown by its partial performance of tendering the P100,000 as part of the
purchase price.
ISSUES:
DOCTRINE:
OPTION MONEY EARNEST MONEY
Part of the purchase price The money given as a distinct
consideration for an option contrac
Given only where there is already a Applies to a sale not yet perfected
RULING: Wherefore, petition is DENIED. CA decision is affirmed.
sale
When earnest money is given, the When the would-be buyer gives
RATIO:
buyer is bound to pay the balance option money, he is not required to
Affixing their Signatures
buy, but may even forfeit it
depending on the terms of the option.
1. Oesmers are co-owners of undivided shares of 2 parcels of agricultural and
tenanted land in Carmona Cavite, which are unregistered and originally
owned by their parents. When their parents died, they acquired the lots as
heirs by right of succession.
2. In 1989, Paular, a resident and former Mun. Sec. of Carmona Cavite,
brought Ernesto Oesmer (one of the heirs) to meet with Lee, President of
Paraiso Development Corp, in Manila for the purpose of brokering the sale
of Ernesto's properties to Paraiso Dev. Corp.
3. A contract to sell was entered into between Paraiso Dev. Corp and Ernesto
as well as Enriqueta. A check in the amount of P100,000 payable to Ernesto
was given as option money. Eventually, Rizalino, Leonora, Bibiano Jr,
and Librado also signed the Contract to Sell.
4. However, 2 of their brothers, Adolfo and Jesus, refused to sign the
document.
5. A couple of months after, the Oesmers informed Paraiso (through a letter)
that it is rescinding the Contract to Sell and returning the option money.
6. However, Paraiso did not respond.
7. Oesmers filed a complaint for declaration of nullity of the Contract to Sell
with damages with the RTC, which ruled in favor of Paraiso Dev. Corp.
a. Contract to Sell is valid and binding only to the undivided
proportionate share of Ernesto who signed the document and
received the check.
b. Ernesto was ordered to execute the Contract of Absolute Sale as to
his 1/8 share over the subject two parcels of land.
8. On appeal, CA modified by declaring that the Contract to Sell is valid and
binding as to the undivided shares of the six signatories of the document.
9. Petitioners who signed the document are contending that:
a. Ernesto had no written authority to sell the property
b. Their signatures merely conferred conditional consent subject to a
suspensive condition (approval of the sale by all the co-owners) .
c. Document did not bear the signature of the respondent corporation.
d. Hence, the Contract to Sell was not valid.
1. WON the Contract to Sell is valid as to all co-owners? NO. Valid to all
those who signed it, but not valid to those who did not.
2. ISSUE related to the syllabus: WoN the P100,000 is considered as option
money? NO. It is not option money, but earnest money.
1. It is true that the signatures of the 5 siblings did not confer authority on
Ernesto as agent to sell their respective shares in the properties, because
 such authority to sell an immovable is required to be in writing. 2. The consideration of P100,000.00 paid by respondent to petitioners was
2. However, those signatures signify their act of directly (not through an referred to as option money. However, a careful examination of the
agent) selling their personal shares to Paraiso Dev. Corp. words used in the contract indicates that the money is not option money but
3. The Contract to Sell was perfected when the petitioners consented to the earnest money.
sale to the respondent of their shares in the subject parcels of land by 3. Settled is the rule that in the interpretation of contracts, the ascertainment of
affixing their signatures on the said contract. the intention of the contracting parties is to be discharged by looking to the
4. Such signatures show their acceptance of what has been stipulated in the words they used to project that intention in their contract, all the words, not
Contract to Sell and such acceptance was made known to Paraiso just a particular word or two, and words in context, not words standing
Development Corporation when the duplicate copy of the Contract to Sell alone.
was returned to the it bearing petitioners signatures.
5. It cannot also have been subject to a suspensive condition because the terms
of the Contract to Sell did not mention of any condition. It is a cardinal rule
in the interpretation of contracts that if the terms of a contract are clear and
leave no doubt upon the intention of the contracting parties, the literal
meaning of its stipulation shall control.
6. As to petitioner Enriquetas claim that she merely signed as a witness to the
said contract, the contract itself does not say so.
7. There was no single indication in the said contract that she signed the same
merely as a witness.
8. The fact that her signature appears on the right-hand margin of the Contract
to Sell is insignificant.
9. The contract indisputably referred to the Heirs of Bibiano and Encarnacion
Oesmer, and since there is no showing that Enriqueta signed the document
in some other capacity, it can be safely assumed that she did so as one of the
parties to the sale.

Co-ownership
1. The signatories being owners of their respective undivided shares in the
subject properties, can dispose of their shares even without the consent of
all the co-heirs.
2. Article 493. Each co-owner shall have the full ownership of his part and of
the fruits and benefits pertaining thereto, and he may therefore alienate,
assign or mortgage it, and even substitute another person in its enjoyment,
except when personal rights are involved. But the effect of the alienation or
the mortgage, with respect to the co-owners, shall be limited to the portion
which may be allotted to him in the division upon the termination of the
coownership.
3. Even without the consent of the two co-heirs, Adolfo and Jesus, the
Contract to Sell is still valid and binding with respect to the 6/8
proportionate shares of the petitioners.

Option Money vs. Earnest Money

1. The Contract to Sell is not void merely because it does not bear the
signature of the respondent corporation. The corporations consent to be
bound by the terms of the contract is shown by its partial performance of
tendering the P100,000 as part of the purchase price.