Heirs of Bacus vs. Court of Appeals

In an option to buy creating reciprocal obligations, the option holder validly exercises the option by giving notice of the decision to buy and readiness to pay, without being required to deliver the purchase price or consign it in court prior to the grantor's execution of the deed of sale.

Luis Bacus leased an agricultural land to Faustino Duray under a contract containing an option to buy a portion of the property within a specified period. Upon Bacus's death, his heirs (petitioners) refused to execute the deed of sale despite Duray's timely notice of intent to exercise the option, insisting on prior full payment of the purchase price.

• The Lease and Option Contract: On June 1, 1984, Luis Bacus leased a parcel of agricultural land to Faustino Duray for six years, ending May 31, 1990. The contract included an exclusive and irrevocable option to buy 2,000 square meters of the property within five years from a year after the contract's effectivity, at P200 per square meter, adjustable based on the peso-dollar exchange rate.
• Exercise of the Option: Luis Bacus died on October 10, 1989. On March 15, 1990, before the contract expired, the Duray spouses informed Roque Bacus, one of the heirs, of their intent to purchase the property and requested the preparation of a Special Power of Attorney.
• Refusal to Sell: Petitioners refused to sell the property, demanding that private respondents first deliver the full purchase price. On March 30, 1990, Duray annotated an adverse claim on the title of the segregated 2,000-square meter portion.
• Conciliation and Litigation: On April 5, 1990, Duray filed a complaint for specific performance before the Lupon Tagapamayapa, presenting a bank certification of loan arrangements to demonstrate financial capacity. After failing to settle, Duray filed a complaint for specific performance with damages before the RTC on April 27, 1990. On October 30, 1990, pending trial court decision, Duray issued a cashier's check for P650,000 payable to petitioners to bolster readiness to pay.

• Specific Performance Improper: Petitioners argued that the Court of Appeals erred in ordering specific performance and compelling them to execute a deed of sale.
• Invalid Exercise of Option: Petitioners maintained that private respondents failed to validly exercise the option because they neither delivered the purchase price nor consigned it in court or with the local treasurer before the contract expired. A bank certification of loan arrangements does not constitute legal tender or valid tender of payment.
• Belated Tender: Petitioners contended that the presentation of a cashier's check after the trial on the merits and after the contract's expiration could not be considered valid compliance with the condition for exercising the option.

• Improper Remedy: Respondents countered that petitioners were unclear whether the petition was under Rule 45 or Rule 65 of the Rules of Court, and that a petition for review under Rule 45 only permits questions of law.
• Valid Exercise of Option: Respondents argued that, assuming the petition was under Rule 45, the Court of Appeals correctly determined that the option was validly and effectively exercised before the contract expired, as evidenced by cautionary letters, the bank certification, the annotation of the adverse claim, and the filing of the suit.

• Tender and Consignation: Whether the option holder is required to deliver the purchase price or consign it in court before the grantor executes the deed of transfer.
• Delay: Whether the option holder incurs delay by failing to deliver or consign the purchase price on or before the expiration of the contract.

• Tender and Consignation: Actual delivery or consignation of the purchase price is not required prior to the execution of the deed of sale. Obligations under an option to buy are reciprocal; the buyer's obligation to pay is contingent upon the seller's execution and delivery of the deed of sale. Notice of the decision to exercise the option, coupled with readiness to pay, suffices. Consignation is improper when no debt is yet due and owing, as it requires a prior tender of payment which presupposes a creditor refusing acceptance.
• Delay: The option holder did not incur delay. Under Article 1169 of the Civil Code, in reciprocal obligations, neither party incurs delay if the other does not comply. Because petitioners refused to execute the deed of sale, respondents' obligation to pay was not yet due; thus, respondents were not in delay when they failed to deliver the price before the contract expired.

• Reciprocal Obligations in Option to Buy — The performance of one obligation is conditioned on the simultaneous fulfillment of the other. In an option to buy, payment by the buyer is contingent upon the execution of the deed of sale by the seller. Notice of the option holder's decision to buy need not be coupled with actual payment, so long as the price is delivered upon the seller's performance.
• Consignation — The deposit of the thing due with the court or judicial authorities when the creditor cannot accept or refuses to accept payment. It generally requires a prior tender of payment and is not proper when no debt is due and owing.
• Delay in Reciprocal Obligations — Neither party incurs delay if the other does not comply or is not ready to comply in a proper manner with what is incumbent upon him. Only from the moment one of the parties fulfills their obligation does delay by the other begin.

• "Obligations under an option to buy are reciprocal obligations. The performance of one obligation is conditioned on the simultaneous fulfillment of the other obligation. In other words, in an option to buy, the payment of the purchase price by the creditor is contingent upon the execution and delivery of a deed of sale by the debtor."
• "In reciprocal obligations, neither party incurs in delay if the other does not comply or is not ready to comply in a proper manner with what is incumbent upon him. Only from the moment one of the parties fulfills his obligation, does delay by the other begin."

• Nietes vs. Court of Appeals, 46 SCRA 654 (1972) — Followed. Notice of the creditor's decision to exercise the option to buy need not be coupled with actual payment of the price, so long as it is delivered upon performance by the owner of the property.
• Vermen Realty Development Corporation vs. Court of Appeals, 224 SCRA 549 (1993) — Followed. Performance of one obligation in reciprocal obligations is conditioned on the simultaneous fulfillment of the other.
• Legaspi vs. Court of Appeals, 142 SCRA 82 (1986) — Followed. Consignation is not proper where no debt is due and owing.

• Article 1169, Civil Code of the Philippines — Applied to establish the rule on delay in reciprocal obligations: neither party incurs delay if the other does not comply or is not ready to comply in a proper manner with what is incumbent upon him.

Bellosillo, Mendoza, and De Leon, Jr.