506 Phil. 511
CALLEJO, SR., J.:
WHEREFORE, it is respectfully prayed that judgment be rendered declaring the Supplementary Contract of Lease dated July 30, 1977 as null and void ab initio; ordering the defendant and all persons claiming possession of the premises under it to vacate and turn over the premises to the plaintiffs; ordering the defendant to pay the reasonable monthly rental of P10,000.00 for the occupancy of the premises, beginning October 1, 1990, until it vacates the premises; ordering the defendant to pay the plaintiffs the sum of P30,000.00 as moral damages; the sum of P50,000.00 as attorney's fees, and the sum of P1,000.00 as appearance fee of the undersigned counsel; to pay the sum of P5,000.00 as litigation expenses; plus costs of suit.Mariano Cruz and his siblings filed a complaint-in-intervention in the said case, alleging that they were the co-owners of the property, and praying that judgment be rendered in their favor, as follows:
Plaintiffs further pray for such other relief and remedies they are entitled to in the premises.[17]
WHEREFORE, it is respectfully prayed that judgment be rendered rescinding the Contract of Lease dated October 5, 1966, (Annex "B"), declaring as null and void the Supplementary Lease Agreement (Annex "C"), and the Contract of Lease (Annex "D"), both dated July 30, 1977, for having been entered into by the plaintiff who had long ceased to be the owner of the property in question, awarding the sum of P450,000.00, actual damages, representing the value of the improvements which the defendants bound themselves to introduce in the premises; awarding the plaintiffs-intervenors the sum of P100,000.00 as exemplary damages; the sum of P150,000.00 as moral damages; P50,000.00 as attorney's fees and P10,000.00 as litigation expenses.However, Carmen Cruz filed a motion to dismiss the amended complaint. On February 6, 1984, the trial court issued an Order[19] granting the motion and dismissing the amended complaint and the complaint-in-intervention. The order became final and executory.
Plaintiffs-intervenors further pray for such other relief and remedies they are entitled to in the premises.[18]
WHEREFORE, it is respectfully prayed that, after trial on the merits, judgment be rendered in favor of the plaintiffs as follows:In her answer with cross-claim, Carmen Cruz alleged, inter alia, that she was willing to be made a party-plaintiff, although she was initially reluctant to become one because of the burden of a court hearing; she admitted that the plaintiffs were the co-owners of the property; Bautista was granted an "exclusive option to buy" the leased property at the ridiculously low fixed price of P1,600,000.00, which, according to Carmen Cruz, was an option unsupported by any consideration; hence, null and void.[27]Plaintiffs pray for such other reliefs just and equitable in the premises.[26]
- Under the First Alternative Cause of Action, declaring the Contract of Lease dated 30 July 1977 and the Supplementary Lease Contract dated 30 July 1977, Annex "D" hereof, as null and void ab initio; or, alternatively,
Under the Second Alternative Cause of Action, annulling the said Contract of Lease and Supplementary Lease Contract.
Under the Third Alternative Cause of Action, rescinding and canceling the Contract of Lease and Supplementary Lease Agreement, ordering the defendants to vacate the leased premises and to pay plaintiffs all unpaid rentals from 1 October 1991 until defendants vacate the premises.- Under the Second Cause of Action, ordering defendants NAVOTAS and Bautista to vacate and surrender the possession of the subject property and all improvements thereon to the plaintiffs;
- Under the Third Cause of Action, ordering defendants NAVOTAS and Bautista, jointly and severally, to pay plaintiffs the reasonable compensation for the use of the premises in the amount of at least P10,000.00 a month from October 1990 up to the filing of this Complaint, totalling P500,000.00, as well as P10,000.00 every month thereafter until defendants shall have vacated and surrendered the premises to the plaintiffs.
- Under the Fourth Cause of Action, ordering defendants NAVOTAS and Bautista, jointly and severally, to pay the plaintiffs exemplary damages of at least P50,000.00 or such amount as the Honorable Court may deem just and equitable in the premises; and
- Under the Fifth Cause of Action, ordering defendants NAVOTAS and Bautista to pay plaintiff attorney's fees and expenses of litigation in such amount as may be established during the trial, but not less than P35,000.00.
WHEREFORE, it is most respectfully prayed that the complaint as against answering defendant be dismissed, and that:In its amended answer, NIC alleged that its July 30, 1977 Supplementary Lease Agreement and Contract of Lease were valid, whereas the deed of absolute sale with assumption of mortgage executed by Carmen Cruz in favor of the plaintiffs was null and void for being simulated and fraudulent. NIC and Bautista further alleged that it was exercising its option to buy the subject property now covered by TCT No. 85099;[29] it, likewise, offered P1,600,000.00 as consideration for the sale to be paid upon the execution of a deed of transfer.[30]AS TO THE CROSS-CLAIM
a) The Contract of Lease and the Supplemental Lease Contract be declared null and void due to vitiated consent;
b) In the event that monetary judgment be rendered by this Honorable Court against answering defendant in favor of the plaintiffs, her co-defendants, Navotas Industrial Corporation and Bautista, be made to reimburse her for all or part of the said judgment;
c) Co-defendants be ordered to pay her moral as well as exemplary damages in the amount which this Honorable Court may deem just and proper;
d) Co-defendants, instead of answering defendants, be, likewise, ordered to pay the plaintiffs, the rentals in arrears over the premises which now amounts to P147,000.00.BOTH AS TO COUNTERCLAIM AND CROSS-CLAIM
a) Plaintiffs and co-defendants be ordered, jointly and severally, to reimburse answering defendant the sum of P30,000.00 which the latter paid her counsel as and for attorney's fees for unnecessarily dragging her into this suit including the amount of P1,000.00 which she will pay her lawyer for every appearance;
b) Likewise, the costs of suit and other litigation expenses.
Other reliefs and remedies reasonable under the premises are similarly prayed for.[28]
WHEREFORE, premises considered, herein answering defendants respectfully prayed that the complaint be dismissed for lack of merit.In the meantime, Carmen Cruz died intestate on November 20, 1995 at the age of 97. She was survived by the plaintiffs as her heirs.[32]
On the Counterclaim: (a) that the "Contract of Lease" and the "Supplementary Lease Agreement" be declared valid, legal and binding between Carmen Vda. de Cruz and defendants Navotas and Bautista, as well as their respective heirs, successors or assigns, while the "Deed of Absolute Sale with Assumption of Mortgage" be declared null and void so far as it prejudiced and adversely affected the rights of defendants Navotas and Bautista on the portion of the property leased to it; (b) that the plaintiffs and Carmen Vda. de Cruz be ordered to accept the sum of P1,600,000.00 representing the option money for the purchase of the property subject of the lease contract specifically that which is now covered by TRANSFER CERTIFICATE OF TITLE NO. R-85099 and to execute and sign the necessary deed of conveyance therefore in favor of defendant Navotas and/or Bautista; and (c) that plaintiffs and Carmen Vda. de Cruz be ordered and condemned, jointly and severally, to pay defendants Navotas and Bautista moral and exemplary damages of not less than P80,000.00, attorney's fees and litigation expenses of not less than P50,000.00, and the costs of suit.
Herein answering defendants further pray for such other reliefs and remedies available in the premises.[31]
WHEREFORE, premises considered, judgment is hereby rendered:The trial court declared that when defendant Carmen Cruz executed the July 30, 1977 Supplementary Lease Agreement and Contract of Lease, she was still the owner of the property; as such, NIC was not bound by the deed of sale with assumption of mortgage executed by Carmen Cruz because it was not a party thereto; and that such deed was not registered with the Office of the Register of Deeds. The trial court ruled that the plaintiffs failed to prove fraud and undue influence on Carmen Cruz and/or that NIC took advantage of her mental weakness. The RTC ruled that only Carmen Cruz had the right to rescind the contracts of lease and supplementary lease agreement. The option to buy the property granted to NIC was supported by a consideration, more specifically the P42,000.00 rental payment it made upon the execution of the said contracts.
a) Affirming the validity of the Contract of Lease and the Supplementary Lease Agreement, both dated 30 July 1977, including the provision granting defendants exclusive option to buy the subject property.
b) Affirming the full rental payments made by defendants Navotas and Bautista for the lease of the subject property until the expiration thereof.
c) Denying the claims for actual and compensatory, moral and exemplary damages as well as attorney's fees interposed by plaintiffs against defendants.
d) Denying the claims for moral and exemplary damages interposed by defendants Navotas and Bautista against plaintiffs.
e) The Deed of Absolute Sale with Assumption of Mortgage is hereby declared null and void as far as it prejudiced and is adversely affecting the rights of defendants Navotas and Bautista on the portion thereof leased to them. The plaintiffs, as heirs of defendant Cruz, are hereby ordered to accept the sum of P1,600,000.00 representing the option money for the purchase of the subject property subject of the lease contract specifically that which is now covered by Transfer Certificate of Title No. R-85099 and to execute and sign the necessary deed of conveyance therefor in favor of defendants Navotas and/or Bautista.
f) Ordering plaintiffs to pay defendants Navotas and Bautista P20,000.00 by way of reasonable attorney's fees.
Costs against the plaintiffs.[33]
On July 18, 2003, the CA rendered judgment granting the appeal, and reversing the decision of the RTC. The CA ruled that the appellees had constructive notice of the Deed of Sale with Assumption of Mortgage, which Carmen Cruz executed in favor of the appellants, based on the affidavit of adverse claim annotated on June 29, 1977 at the dorsal portion of TCT No. 81574. The CA declared that the adverse claim annotated at the dorsal portion of the said title continued to be effective and remained a lien until cancelled. The CA held that the option granted to the appellee NIC to purchase the property was not effective because there was no consideration therefor, apart from NIC's rental payments. Besides, the CA emphasized, when Carmen Cruz executed the July 30, 1977 Supplementary Lease Agreement and Contract of Lease, she was no longer the owner of the property.ITHE TRIAL COURT ERRED IN HOLDING THAT APPELLEES WERE NOT BOUND BY THE DEED OF ABSOLUTE SALE OF REALTY WITH ASSUMPTION OF MORTGAGE WHICH APPELLANTS ANNOTATED AS AN ADVERSE CLAIM ON THE CERTIFICATE OF TITLE OF THE PROPERTY AS EARLY AS 30 JUNE 1977 BEFORE APPELLEES REGISTERED THE QUESTIONED LEASE CONTRACTS ON 14 SEPTEMBER 1977.IITHE TRIAL COURT ERRED IN COMPLETELY IGNORING THE OVERWHELMING EVIDENCE ON RECORD SHOWING THAT APPELLEES HAD ACTUAL AND CONSTRUCTIVE NOTICE OF THE SALE OF THE SUBJECT PROPERTY TO THE CRUZ CHILDREN IN 1974, AND THUS KNEW OR OUGHT TO HAVE KNOWN THAT IN EXECUTING THE QUESTIONED LEASE CONTRACTS WITH MRS. CRUZ IN 1977, THEY WERE DEALING WITH ONE WHO WAS NO LONGER THE OWNER OF THE PROPERTY WHO CAN BIND THE SAME UNDER THE QUESTIONED LEASE CONTRACTS.IIITHE TRIAL COURT ERRED IN HOLDING THAT THE CONSENT OF MRS. CRUZ TO THE SUBJECT LEASE CONTRACTS HAD NOT BEEN VITIATED BY UNDUE AND IMPROPER PRESSURE AND INFLUENCE ON THE PART OF APPELLEES CONSIDERING THAT:
- THE UNDISPUTED EVIDENCE ON RECORD READILY BEARS OUT THE UNDUE AND IMPROPER PRESSURE AND INFLUENCE EXERTED BY APPELLEES ON MRS. CRUZ TO OBTAIN HER CONSENT TO THE SUBJECT LEASE CONTRACTS;
- THE VERY TERMS AND CONDITIONS OF THE LEASE CONTRACTS, WHICH ARE GROSSLY DISADVANTAGEOUS TO MRS. CRUZ, POINT TO APPELLEES' USE OF UNDUE PRESSURE AND INFLUENCE ON HER TO OBTAIN HER CONSENT TO THE SUBJECT LEASE CONTRACTS.
IVTHE TRIAL COURT ERRED IN NOT HOLDING, IN THE ALTERNATIVE, THAT THE SUBJECT LEASE CONTRACTS WERE RENDERED RESCINDED BY REASON OF APPELLEES' MATERIAL BREACHES OF THE TERMS AND CONDITIONS CONSIDERING THAT:
- APPELLEES HAD ADMITTEDLY FAILED TO CONSTRUCT THE SLIPWAYS AS REQUIRED UNDER THE LEASE CONTRACT;
- THE EVIDENCE FULLY ESTABLISHES THAT APPELLEES HAVE NOT PAID THE RENTALS DUE ON THE PROPERTY SINCE 1991.
VTHE TRIAL COURT ERRED IN DECLARING THE DEED OF ABSOLUTE SALE WITH ASSUMPTION OF MORTGAGE AS NULL AND VOID AS AGAINST APPELLEES CONSIDERING THAT THE SAME HAS BEEN CONFIRMED AND RECOGNIZED IN SUBJECT TRANSFERS AFFECTING THE SAME PROPERTY.VITHE TRIAL COURT ERRED IN HOLDING THAT THE OPTION CONTRACT FOR APPELLEES' PURCHASE OF THE SUBJECT PROPERTY WAS SUPPORTED BY A SEPARATE CONSIDERATION AND THUS VALID AND BINDING ON APPELLANTS.VIITHE TRIAL COURT ERRED IN NOT HOLDING APPELLEES LIABLE TO APPELLANTS FOR ACTUAL AND COMPENSATORY DAMAGES CONSISTING OF THE REASONABLE RENTALS ON THE PROPERTY FROM 2 OCTOBER 1990 UNTIL THE RETURN THEREOF TO APPELLANTS.VIIITHE TRIAL COURT ERRED IN ABSOLVING APPELLEES OF LIABILITY TO APPELLANTS FOR MORAL AND EXEMPLARY DAMAGES AND ATTORNEY'S FEES.[34]
On the first issue, the petitioner avers that the adverse claim annotated at the dorsal portion of TCT No. 81574 was ineffective because the respondents failed to submit to the Register of Deeds the owner's duplicate of TCT No. 81574, as mandated by Section 110 of Act No. 496. The annotation of the adverse claim in the Office of the Register of Deeds on June 29, 1977 on TCT No. 81574 despite such failure to present the owner's duplicate of the said title rendered such inscription ineffectual, not binding on it and Carmen Cruz. Hence, the petitioner posits, Carmen Cruz remained the lawful owner of the property. Even Carmen Cruz maintained that she was the owner of the property in her complaint in Civil Case No. C-7040 filed after the execution of the deed of absolute sale with assumption of real estate mortgage; she even executed the July 30, 1977 Supplementary Lease Agreement and Contract of Lease in its favor. According to the petitioner, the said deed of sale was fictitious as, in fact, it was rejected by Carmen Cruz.A.THE COURT OF APPEALS COMMITTED A CLEAR AND REVERSIBLE ERROR WHEN IT DECLARED THAT THE QUESTIONED LEASE CONTRACTS WERE NULL AND VOID, IT APPEARING IN AN ADVERSE CLAIM ANNOTATED ON THE CERTIFICATE OF TITLE OF CARMEN VDA. DE CRUZ THAT SHE WAS NO LONGER THE OWNER OF THE PROPERTY SUBJECT MATTER THEREOF WHEN THE LEASE WAS EXECUTED ON JULY 30, 1977.B.THE COURT OF APPEALS COMMITTED A CLEAR AND REVERSIBLE ERROR WHEN IT RULED THAT THE OPTION TO BUY THE LEASED PROPERTY CONTAINED IN THE SUPPLEMENTARY LEASE CONTRACT IS NOT VALID AND BINDING FOR LACK OF CONSIDERATION AND CAPACITY OF CARMEN VDA. DE CRUZ TO CONVEY THE SAME.C.THE COURT OF APPEALS COMMITTED A CLEAR AND REVERSIBLE ERROR WHEN IT FAILED TO RECOGNIZE A PRIOR JUDGMENT BASED ON A COMPROMISE AS A BAR TO THE PROCEEDINGS IN THIS INSTANT CASE.[35]
A review of the facts and circumstances in the case at bar reveals that at the time the Supplementary Lease Agreement and Contract of Lease both dated July 30, 1977 were executed by and between CARMEN and herein appellees, CARMEN was apparently no longer the owner of the land covered by TCT No. 81574 subject of this controversy. Obviously, appellees cannot turn a blind eye on the inscription found on CARMEN's certificate of title at the time the Supplementary Lease Agreement and Contract of Lease were signed on July 30, 1977. Basic is the rule that the annotation of an adverse claim is a measure designed to protect the interest of a person over a piece of real property and serves as a notice and warning to third parties dealing with said property that someone is claiming an interest on the same or a better right than the registered owner thereof. A subsequent transaction involving the property cannot prevail over the adverse claim which was previously annotated in the certificate of title of the property. Here, the records are obvious, the notice of adverse claim executed on June 29, 1977 was annotated on the title on June 30, 1977, that is, one month prior to the signing of the disputed lease contracts on July 30, 1977. Said contracts of lease were belatedly annotated two months after its execution or on September 14, 1977 only, after appellees were allegedly warned by CARMEN that her children are desirous of the property leased in their favor. To say the least, this warning from CARMEN should have aroused appellees' suspicion regarding the status of the prime property they intend to lease for another fifteen (15) years. ...[38]Section 110 of Act No. 496 was the law in force when Carmen Cruz executed the Deed of Sale with Assumption of Mortgage, and when the respondents executed the affidavit of adverse claim and presented it to the Register of Deeds on June 30, 1977. The petitioner's reliance on the said provision is misplaced. Indeed, the Register of Deeds acted in accord with Section 110 of Act No. 496 when he inscribed the affidavit of adverse claim at the dorsal portion of TCT No. 81574, despite the non-production of the owner's duplicate of TCT No. 81574 simultaneously with the presentation of the affidavit of adverse claim. The law reads:
SEC. 110. Whoever claims any part or interest in registered land adverse to the registered owner, arising subsequent to the date of the original registration, may, if no other provision is made in this Act for registering the same, make a statement in writing setting forth fully his alleged right or interest, and how or under whom acquired, and a reference to the volume and page of the certificate of title of the registered owner, and a description of the land in which the right or interest is claimed.Irrefragably, the Deed of Sale with Assumption of Mortgage which Carmen Cruz executed on December 31, 1974 was a voluntary act; and under Section 50 of the law, the act of registration shall be the operative act to convey and affect the land. Indeed, Section 55 of Act No. 496 provides that the presentation of the owner's duplicate certificate of title for the registration of any voluntary instrument is required:
The statement shall be signed and sworn to, and shall state the adverse claimant's residence, and designate a place at which all notices may be served upon him. This statement shall be entitled to registration as an adverse claim, and the court, upon a petition of any party-in-interest, shall grant a speedy hearing upon the question of the validity of such adverse claim and shall enter such decree therein as justice and equity may require. If the claim is adjudged to be invalid, the registration shall be cancelled. If in any case the court, after notice and hearing, shall find that a claim thus registered was frivolous or vexatious, it may tax the adverse claimant double or treble costs in its discretion.
SEC. 55. No new certificate of title shall be entered, no memorandum shall be made upon any certificate of title by the register of deeds, in pursuance of any deed or other voluntary instrument, unless the owner's duplicate certificate is presented for such indorsement, except in cases expressly provided for in this Act, or upon the order of the court for cause shown; and whenever such order is made, a memorandum thereof shall be entered upon the new certificate of title and upon the owner's duplicate: Provided, however, That in case the mortgagee refuses or fails to deliver within a reasonable time to the register of deeds the duplicate or copy of the certificate of title surrendered by the owner, after advice by said officer, in order to enable him to register or annotate thereon another real right acquired by said owner, the record or annotation made on the certificate in the register book shall be valid for all legal purposes.This Court explained the rationale of the requirement in L.P. Leviste & Company, Inc. v. Noblejas:[39]
The production of the owner's duplicate certificate whenever any voluntary instrument is presented for registration shall be conclusive authority from the registered owner to the register of deeds to enter a new certificate or to make a memorandum of registration in accordance with such instrument, and the new certificate or memorandum shall be binding upon the registered owner and upon all persons claiming under him, in favor of every purchaser for value and in good faith: Provided, however, That in all cases of registration procured by fraud the owner may pursue all his legal and equitable remedies against the parties to such fraud, without prejudice, however, to the rights of any innocent holder for value of a certificate of title: And provided, further, That after the transcription of the decree of registration under this Act procured by the presentation of a forged duplicate certificate, or of a forged deed or other instrument, shall be null and void. In case of the loss or theft of an owner's duplicate certificate, notice shall be sent by the owner or by someone in his behalf to the register of deeds of the province in which the land lies as soon as the loss or theft is discovered.
The basis of respondent Villanueva's adverse claim was an agreement to sell executed in her favor by Garcia Realty. An agreement to sell is a voluntary instrument as it is a willful act of the registered owner. As such voluntary instrument, Section 50 of Act No. 496 expressly provides that the act of registration shall be the operative act to convey and affect the land. And Section 55 of the same Act requires the presentation of the owner's duplicate certificate of title for the registration of any deed or voluntary instrument. As the agreement to sell involves an interest less than an estate in fee simple, the same should have been registered by filing it with the Register of Deeds who, in turn, makes a brief memorandum thereof upon the original and owner's duplicate certificate of title. The reason for requiring the production of the owner's duplicate certificate in the registration of a voluntary instrument is that, being a willful act of the registered owner, it is to be presumed that he is interested in registering the instrument and would willingly surrender, present or produce his duplicate certificate of title to the Register of Deeds in order to accomplish such registration. ...[40]However, in this case, Carmen Cruz had ordered the CBC, the mortgagee and custodian of the owner's duplicate of TCT No. 81574, not to surrender the owner's duplicate of the said title to the Register of Deeds. The latter thus acted in accord with law when the affidavit of adverse claim was inscribed at the dorsal portion of TCT No. 81574 on June 30, 1977. Indeed, this Court ruled in L.P. Leviste & Company, Inc. v. Noblejas[41] that:
... However, where the owner refuses to surrender the duplicate certificate for the annotation of the voluntary instrument, the grantee may file with the Register of Deeds a statement setting forth his adverse claim, as provided for in Section 110 of Act No. 496. In such a case, the annotation of the instrument upon the entry book is sufficient to affect the real estate to which it relates, although Section 72 of Act No. 496 imposes upon the Register of Deeds the duty to require the production by the Registered owner of his duplicate certificate for the inscription of the adverse claim. The annotation of an adverse claim is a measure designed to protect the interest of a person over a piece of real property where the registration of such interest or right is not, otherwise, provided for by the Land Registration Act, and serves as a notice and warning to third parties dealing with said property that someone is claiming an interest on the same or a better right than the registered owner thereof.[42]Moreover, on June 29, 1977, the balance of Mariano Cruz and Gabriel Cruz's account with the CBC had already been paid, presumably by Mariano Cruz; and the CBC had executed a cancellation of real estate mortgage. However, the said deed was inexplicably not presented to the Register of Deeds for registration.
In her answer to the respondents' amended complaint in the trial court, Carmen Cruz reiterated that she had sold the property to her children:
- That among the parcels of land which I have sold was that parcel located in Barrio Almacen, Navotas, Rizal, then covered by Transfer Certificate of Title No. 81574 of the Register of Deeds of Rizal in favor of my children Serafin D. Cruz, Mariano D. Cruz, Rogelio D. Cruz, Sr. Carmencita Cruz and Sr. Mary Carmellas as vendees, with the agreement that the then existing mortgage with the China Banking Corporation shall be assumed and settled by said vendees, as embodied in a document entitled "Deed of Absolute Sale of Realty with Assumption of Mortgage," which I executed on December 31, 1974 and entered in the notarial register of Notary Public P. Dario Guevarra, Jr. as Doc. No. 198, Page No. 41, Book No. 198, Series of 1975.[47]
...
- That in view of these developments and considering my advanced age and present physical condition and now realizing that I may have been unduly taken advantage of by some parties to promote their own selfish interests, I now hereby execute this sworn statement and hereby affirm the validity of the sale of said parcel of land covered by TCT No. 81574 of the Register of Deeds of Rizal and hereby state that said sale was entered into by me of my own free will and for valuable consideration.[48]
2.5. On 31 December 1974, she sold the subject property to the plaintiffs for valuable consideration, free from all liens and encumbrances and claim of third parties, except that pertaining to a real estate mortgage with China Banking Corporation as evidenced by a notarized "Deed of Absolute Sale of Realty with Assumption of Mortgage" dated 31 December 1974, a photocopy of which is hereto attached and made an integral part hereof as Annex "B";Carmen Cruz also alleged, in her amended complaint in Civil Case No. C-7040, that the July 30, 1977 Contract of Lease and Supplementary Lease Agreement she executed in favor of the petitioner were fraudulent.[50]
2.6. After she sold the subject lot to the plaintiffs herein, the latter tried to effect the registration and annotation of the said transfer with the Registry of Deeds of Rizal sometime in 28 June 1977 but China Banking Corporation, the mortgagee, through its legal counsel, Atty. Arsenio Sy Santos, refused to release the title thus the delay in the registration of the said "Deed of Sale with Assumption of Mortgage" which she executed in favor of the plaintiffs involving the subject parcel of land with the Registry of Deeds;
2.7. In order to protect their rights and interests over the subject property, the plaintiffs, through their appointed attorney-in-fact, Mariano A. Cruz, annotated an adverse claim on the title which was then still under answering defendant's name, as a cautionary notice to third persons and the whole world that said title has been transferred by answering defendant in favor of the plaintiffs herein and that any voluntary dealing thereon shall be considered subject to the said adverse claim.[49]
On the second issue, we reject the petitioner's contention that the exclusive option granted to it by Carmen Cruz under the Supplementary Lease Agreement is essentially a mutual promise to buy and sell, equivalent to a reciprocal contract under the first paragraph of Article 1479 of the New Civil Code, which reads:
- That the above-quoted provision is not only a foolery, trickery and a product of deception because the exercise of the "option" is not fixed – the same maybe conveniently exercised by the defendant at anytime up to the year 2005. Even the fixing of the sum worded as "flat sum" of One Million Six Hundred Thousand - the valuation fifteen (15) years, hence, (2005) without providing for the "inflation and deflation" of the currency is grossly prejudicial and unfair. Moreover, the provision which states that if and when defendants finally decides to exercise their option during the lifetime of the Lessor, the lessee will continue paying the rentals is not only illogical, untrue and deceptive, the same being used mainly as a ploy to win the sympathy and titillate the ego of the old woman. It is rather unbelievable that being already the owner, defendants will still pay the rentals. This, to our mind, is the height of hyprocracy.[52]
ART. 1479. A promise to buy and sell a determinate thing for a price certain is reciprocally demandable.In the first place, the petitioner insisted in its pleadings in the court a quo that under the Supplementary Lease Agreement and Contract of Lease, it was granted the exclusive option to purchase the property leased. The petitioner maintained its theory of the case in the CA. The petitioner cannot change its theory, and claim this time that it and Carmen Cruz entered into a promise to buy and sell the property leased.[53]
An accepted unilateral promise to buy or to sell a determinate thing for a price certain is binding upon the promissor if the promise is supported by a consideration distinct from the price.
It must be stressed that an option contract is a contract granting a privilege to buy or sell within an agreed time and at a determined price. Such a contract is a separate and distinct contract from the time the parties may enter into upon the construction of the option.[55] In Carceller v. Court of Appeals,[56] the Court held that an option contract is a preparatory contract in which one party grants to the other, for a fixed period and under specified conditions, the power to decide, whether or not to enter into a principal contract. The Court further stated that:
- The LESSEE is hereby granted an exclusive option to buy the property including all improvements already made by the LESSEE (slipways and camarines) subject matter of this contract comprising SIX THOUSAND NINE HUNDRED FORTY-NINE Point FIVE Square Meters (6,949.5) which is one-half portion of the area covered by TCT No. 81574 and same property subject matter of this contract should also be equally divided with one-half frontage along M. Naval Street and along the Navotas River Bank shoreline during the period of the lease. The price of the property is agreed to be fixed for the duration of the Option to Buy at a flat sum of ONE MILLION SIX HUNDRED THOUSAND PESOS (P1,600,000.00), Philippine Currency, payable over a period to be mutually agreed upon. Should the LESSEE exercise the option to buy during the lifetime of the LESSOR, the LESSEE will continue to pay the monthly rental to the LESSOR during her lifetime.
- The LESSEE shall pay to the LESSOR the sum of FORTY-TWO THOUSAND (P42,000.00) PESOS upon signing of this contract as consideration thereof, to be applied as against the rental for the period from October 1, 1990 to September 30, 1991.[54]
... It binds the party who has given the option, not to enter into the principal contract with any other person during the period designated, and, within that period, to enter into such contract with the one to whom the option was granted, if the latter should decide to use the option. It is a separate agreement distinct from the contract which the parties may enter into upon the consummation of the option.[57]It is only when the option is exercised may a sale be perfected.[58] An option contract needs to be supported by a separate consideration. The Court defined consideration for an option in Bible Baptist Church v. Court of Appeals,[59] as follows:
... The consideration need not be monetary but could consist of other things or undertakings. However, if the consideration is not monetary, these must be things or undertakings of value, in view of the onerous nature of the contract of option. Furthermore, when a consideration for an option contract is not monetary, said consideration must be clearly specified as such in the option contract or clause.In the present case, there was no given period for the petitioner to exercise its option; it had yet to be determined and fixed at a future time by the parties, subsequent to the execution of the Supplementary Lease Agreement. There was, likewise, no consideration for the option. The amount of P42,000.00 paid by the petitioner to Carmen Cruz on July 30, 1977 was payment for rentals from October 1, 1990 to September 30, 1991, and not as a consideration for the option granted to the petitioner.