Villamor vs. Court of Appeals

A deed of option supported by a distinct consideration is not void for lack of consideration, but an action to enforce the resulting contract to sell is barred by the ten-year prescriptive period under Article 1144 and by laches where the deed fixed no period and the obligee waited seventeen years before suing.

Macaria Labingisa Reyes owned a 600-square-meter lot located at Baesa, Caloocan City, covered by Transfer Certificate of Title No. (18431) 18938 of the Register of Deeds of Rizal. In July 1971, Macaria sold 300 square meters of the lot to Spouses Julio and Marina Villamor for the total amount of P21,000.00. Earlier, Macaria had borrowed P2,000.00 from the spouses, and that amount was deducted from the total purchase price. The portion sold to the Villamors was later covered by TCT No. 39935, while the remaining 300-square-meter portion remained in Macaria’s name under TCT No. 39934.

On November 11, 1971, Macaria executed a Deed of Option in favor of the Villamors covering the remaining 300-square-meter portion. In the deed, with the conformity of her husband Roberto Reyes, Macaria acknowledged that she had sold one-half of the lot to the Villamors at P70.00 per square meter, “which was greatly higher than the actual reasonable prevailing value of lands in that place at the time,” and stated that the only reason the Villamors agreed to buy at that price was that she and Roberto had agreed to sell and convey the remaining one-half portion whenever the need for such sale arises, either on their part or on the part of the Villamors, at the same price of P70.00 per square meter, excluding improvements. She also expressed willingness to have the contract inscribed on her title as an encumbrance.

According to Macaria, when Roberto retired in 1984, they offered to repurchase the lot sold to the Villamors, but Marina Villamor refused and reminded them that the Deed of Option gave the Villamors the option to purchase the remaining portion. The Villamors, on the other hand, claimed that they had expressed their desire to purchase the remaining 300-square-meter portion but that the Reyeses ignored them. The Villamors also presented evidence that in 1969 they had bought an adjacent lot from Macaria’s brother for P18.00 per square meter, which the Reyeses did not rebut.

On July 13, 1987, after conciliation proceedings at the barangay level failed, the Villamors filed a complaint for specific performance against the Reyeses. The Deed of Option had been executed on November 11, 1971 and did not provide a period within which either party could demand performance. The Villamors alleged that they had demanded enforcement of their rights under the contract as early as 1984.

• Suspensive Condition: Petitioners argued that the CA gravely erred in finding that the phrase “whenever the need of such sale arises, either on our part or on the part of the spouses Julio D. Villamor and Marina V. Villamor” in the Deed of Option denoted a suspensive condition.
• Fulfillment of Condition: Petitioners argued that, assuming the phrase was a condition, the CA erred in not finding that the condition had already been fulfilled.
• Perfection Despite Condition: Petitioners argued that, assuming the phrase was a condition, the CA erred in holding that the imposition of the condition prevented the perfection of the contract of sale despite the express offer and acceptance contained in the Deed of Option.
• Lack of Consideration: Petitioners argued that the CA erred in finding that the Deed of Option was void for lack of consideration.
• Distinct Consideration: Petitioners argued that the CA erred in holding that a distinct consideration was necessary to support the Deed of Option despite the express offer and acceptance contained therein.

• Consideration and Validity of the Deed of Option: Whether the Deed of Option is void for lack of consideration despite the stipulated higher purchase price for the first half of the lot.
• Nature of the Stipulation and Perfection of the Contract: Whether the phrase “whenever the need of such sale arises, either on our part or on the part of the spouses Julio D. Villamor and Marina V. Villamor” is a suspensive condition that prevented the perfection of a contract of sale, or whether the deed embodied a perfected bilateral contract to sell.
• Prescription and Laches: Whether the action for specific performance filed on July 13, 1987 is barred by the ten-year prescriptive period under Article 1144 and by laches, the Deed of Option having been executed on November 11, 1971.

• Consideration and Validity of the Deed of Option: No. The Deed of Option was not void for lack of consideration; the deed itself recites that the Villamors’ agreement to pay P70.00 per square meter, higher than the prevailing value, was the reason for the Reyeses’ promise to sell the remaining half.
• Nature of the Stipulation and Perfection of the Contract: No. The phrase did not prevent perfection; the acceptance of the offer in the same deed created a perfected bilateral contract to sell, with performance demandable by either party.
• Prescription and Laches: Yes. The action filed on July 13, 1987, seventeen years after the November 11, 1971 deed, was barred by the ten-year period under Article 1144 and by laches; even the alleged 1984 demand was beyond ten years.

• Consideration and Validity of the Deed of Option: The SC defined consideration as “the why of the contracts, the essential reason which moves the contracting parties to enter into the contract,” citing Gonzales vs. Trinidad. The cause on the part of Macaria in executing the deed appears in the deed itself: the Villamors agreed to buy the 300-square-meter portion at P70.00 per square meter, “which was greatly higher than the actual reasonable prevailing price,” because the Reyeses agreed to sell the remaining half. The CA failed to consider petitioners’ evidence that in 1969 the Villamors bought an adjacent lot from Macaria’s brother at P18.00 per square meter, which the Reyeses did not rebut. In money terms, the consideration for the deed was the difference between the P70.00 per square meter paid for the first half and the prevailing reasonable price of the same lot in 1971; whether that price was P25.00 or P18.00 per square meter, the amount was ascertainable. The SC rejected the CA’s view that a distinct consideration was needed and that the overprice was improbable; improbability does not invalidate a contract freely entered into.

• Nature of the Stipulation and Perfection of the Contract: The SC noted that the deed had unique features. An ordinary optional contract is a privilege existing in one person, for which he paid a consideration, giving him the right to buy specified property from another at a fixed price within an agreed period, citing Enriquez de la Cavada vs. Diaz. In the deed, the first part covered the sale of the 300-square-meter portion at P70.00 per square meter; the second stated that the only reason the Villamors agreed to buy at that higher price was the Reyeses’ agreement to sell the other half. Had the deed stopped there, it would have been an ordinary deed of option. But the deed added that the sale of the other half would be made “whenever the need of such sale arises, either on our (Reyeses) part or on the part of the Spouses Julio Villamor and Marina V. Villamor.” Thus, while the Villamors were granted an option to buy, the Reyeses were also granted an option to sell. The option offered by the Reyeses was accepted by the Villamors in the same document. The acceptance of an offer to sell for a price certain created a bilateral contract to sell and buy, and upon acceptance the offer ipso facto assumed the obligations of a vendee, citing Atkins, Kroll & Co. vs. Cua Mian Tek. Demandability could be exercised at any time after execution. Under Sanchez vs. Rigos, an accepted promise partakes of the nature of an offer to sell which, if accepted, results in a perfected contract of sale. Under Article 1475, sale is perfected at the moment there is a meeting of minds on the object and the price, and from that moment the parties may reciprocally demand performance. Since there was a meeting of minds on the object and the price, there was already a perfected contract of sale; what remained was for either party to demand the other’s undertaking. The deed, however, did not provide a period for demanding performance, and the parties could not have contemplated indefinite delivery and payment; failure of either party to demand performance for an unreasonable length of time renders the contract ineffective.

• Prescription and Laches: Under Article 1144(1), actions upon a written contract must be brought within ten years. The Deed of Option was executed on November 11, 1971, and the acceptance was in the same instrument. The complaint was filed on July 13, 1987, seventeen years after execution, so the right of action had prescribed. Even the petitioners’ allegation that they demanded enforcement as early as 1984 did not save the action, because that demand was already beyond the ten-year period. The SC cited Santos vs. Ganayo, where failure or abandonment to file an action within ten years from the written agreement barred the claim by laches and prescription. The SC also considered that real estate prices in Metro Manila are continuously rising and that allowing the petitioners to demand delivery thirteen or seventeen years after the deed at P70.00 per square meter would be inequitable, especially since the private respondents had no other decent place to live; in the exercise of equity jurisdiction, the SC was not inclined to grant the prayer.

• Consideration as the “why” of the contract — Consideration is the essential reason that moves the parties to enter into the contract; it need not be a separate cash payment for an option. The SC applied this by treating the overprice paid for the first half of the lot as the consideration for the promise to sell the remaining half.
• Option contract distinguished from a bilateral contract to sell — An option is a privilege for which a person pays consideration, giving the right to buy specified property at a fixed price within an agreed period. Where the option is accepted in the same instrument and there is a meeting of minds on object and price, the accepted promise becomes a perfected bilateral contract to sell, not a mere unenforceable option.
• Perfection of sale under Article 1475 — A contract of sale is perfected upon a meeting of minds on the object and the price; from that moment the parties may reciprocally demand performance. The SC applied this to hold that the deed created a perfected contract to sell, with performance demandable by either party.
• Ten-year prescription for written contracts — Under Article 1144(1), an action upon a written contract must be brought within ten years. The SC applied this to bar a complaint filed seventeen years after the Deed of Option.
• Laches and unreasonable delay — Failure or abandonment to assert a right for an unreasonable length of time bars relief. The SC applied this where the deed fixed no period and the petitioners waited until 1987 to sue, with only an alleged 1984 demand.
• Equity against inequitable enforcement — The SC may decline to grant specific performance where enforcement would be inequitable due to changed circumstances. The SC applied this where real estate prices had risen and the Reyeses had no other decent place to live.

• “the why of the contracts, the essential reason which moves the contracting parties to enter into the contract.” — The SC used this definition of consideration to treat the overprice paid for the first half of the lot as the consideration for the promise to sell the remaining half.
• “The acceptance of an offer to sell for a price certain created a bilateral contract to sell and buy and upon acceptance, the offer, ipso facto assumes obligations of a vendee.” — The SC used this to characterize the Deed of Option as a perfected bilateral contract to sell rather than a mere option.
• “Since there was, between the parties, a meeting of minds upon the object and the price, there was already a perfected contract of sale. What was, however, left to be done was for either party to demand from the other their respective undertakings under the contract.” — The SC applied Article 1475 to hold that the deed had already produced a perfected contract of sale.
• “The failure of either parties to demand performance of the obligation of the other for an unreasonable length of time renders the contract ineffective.” — The SC used this to explain why the absence of a fixed period and the long delay affected enforceability.

• Gonzales vs. Trinidad, 67 Phil. 682 — Cited for the definition of consideration as “the why of the contracts”; relied on to uphold the deed’s consideration.
• Enriquez de la Cavada vs. Diaz, 37 Phil. 982 — Cited for the definition of an ordinary optional contract; used to contrast the unique deed in this case.
• Atkins, Kroll & Co. vs. Cua Mian Tek, 102 Phil. 948 — Cited for the rule that acceptance of an offer to sell for a price certain creates a bilateral contract to sell and buy; followed.
• Sanchez vs. Rigos, No. L-25494, June 14, 1972, 45 SCRA 368, 376 — Cited for the rule that an accepted promise partakes of the nature of an offer to sell which, if accepted, results in a perfected contract of sale; followed.
• Santos vs. Ganayo, L-31854, September 9, 1982, 116 SCRA 431 — Cited for the bar by prescription and laches where the action was not brought within ten years from the written agreement; followed.

• Article 1144(1), Civil Code — Requires actions upon a written contract to be brought within ten years; applied to bar the complaint filed on July 13, 1987, seventeen years after the November 11, 1971 Deed of Option.
• Article 1475, Civil Code — Provides that a contract of sale is perfected at the moment there is a meeting of minds upon the thing and the price, and that from that moment the parties may reciprocally demand performance; applied to hold that the deed created a perfected contract of sale.