Nietes vs.

CA August 18, 1972

Concepcion

PETITIONER: Aquilino Nietes RESPONDENT: Hon. Court of Appeals & Dr. Pablo Garcia Maya: sorry this is a bit long, but I could not shorten it even more without compromising the important details. Please pay attention to the highlighted dates. FACTS: In 1959, Dr. Pablo Garcia who is the owner of the Angeles Educational Institute leased his property to Aquilino Nietes for P5,000 a year for a period 5 years with the option to buy the property from June 1960 to June 1965. Pertinent portion of which states:
4. That the LESSOR agrees to give the LESSEE an option to buy the land and the school building, for a price of ONE HUNDRED THOUSAND PESOS (P100,000) within the period of the Contract of Lease; 5. That should the LESSEE buy the lot, land and the school building within the stipulated period, the unused payment for the Contract of Lease will be considered as part payment for the sale of the land and school; 6. That an inventory of all properties in the school will be made on March 31, 1960;

The terms of the contract also stated that on or before March 30, 1960 that the full balance of P25,000.00 be paid, but Nietes had only paid up P24,757.00 as of August 4, 1961 which was P347.00 short. On September 4, 1961, Nietes paid Garcia the additional sum of P3,000, for which Garcia issued the following receipt:
Received the amount of (P3,000.00) Three Thousand Pesos from Mrs. Nietes as per advance pay for the school, the contract of lease being paid. (Sgd.) PABLO GARCIA (Exh. B)

And on December 13, 1962, Nietes paid Garcia another additional sum of P2,200 for which Garcia issued the following receipt:
To Whom it May Concern: This is to certify that I received the sum of Two Thousand Two Hundred Pesos, Philippine Currency, from Mrs. Catherine R. Nietes as the partial payment on the purchase of the property as specified on the original contract of "Contract of Lease with the First Option to Buy" originally contracted and duly signed. (Sgd.) DR. PABLO GARCIA (Exh. C)

However, on July 1964 before the 5 year-lease has expired, Dr. Garcias counsel wrote to rescind the contract for the following reasons:

1. That you had not maintained the building, subject of the lease contract in good condition. 2. That you had not been using the original name of the school Angeles Institute, thereby extinguishing its existence in the eyes of the public and injuring its prestige. 3. That through your fault, no inventory has been made of all properties of the school. 4. That up to this time, you had not collected or much less helped in the collection of back accounts of former students. the foregoing obligations had been one, if not, the principal moving factors which had induced the lessor in agreeing with the terms embodied in your contract of lease, without which fulfillment, said contract could not have come into existence.

Nietes then responded through his counsel that he will exercise his option to buy the land and building subject matter of the lease and the he is ready to pay the balance of the purchase price in accordance with the contract. On July 26, 1965, Nietes deposited with the branch office of the Agro-Industrial Bank in Angeles City checks amounting to P84,860.50, as balance of the purchase price of the property, but he withdrew said sum of P84,860.50 on August 12, 1965, after the checks had been cleared. On August 2, 1965, he commenced the present action, in the Court of First Instance of Pampanga, for specific performance of Dr. Garcia's alleged obligation to execute in his (Nietes') favor a deed of absolute sale of the leased property, free from any lien or encumbrance whatsoever, he having meanwhile mortgaged it to the People's Bank and Trust Company, and to compel him (Garcia) to accept whatever balance of the purchase price is due him, as well as to recover from him the aggregate sum of P90,000 by way of damages, apart from attorney's fees and the costs. The trial court ruled in favor of Nietes, but the Court of Appeals overturned it.

ISSUES: 1. Must the full purchase price be paid before the option could be exercised? NO. The SC did not agree with the CAs that the full price must be paid before the option could be exercised. The contract does not say that Nietes had to pay the stipulated price of P100,000 before exercising his option to buy the property in question. Accordingly, said option is governed by the general principles on obligations, pursuants to which:
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. From the moment one of the parties fulfills his obligation, delay by the other begins.

In the case of an option to buy, the creditor may validly and effectively exercise his right by merely advising the debtor of the former's decision to buy and expressing his readiness to pay the stipulated price, provided that the same is available and actually delivered to the debtor upon execution and delivery by him of the corresponding deed

of sale. Unless and until the debtor shall have done this the creditor is not and cannot be in default in the discharge of his obligation to pay. Nietes need not have deposited, therefore, with the Agro-Industrial Bank checks amounting altogether to P84,860.50 on July 26, 1965, and the withdrawal thereof soon after does not and cannot affect his cause of action in the present case. In making such deposit, he may have had the intent to show his ability to pay the balance of the sum due to Dr. Garcia as the sale price of his property. In short, said deposit and its subsequent withdrawal cannot affect the result of the present case. 2. When did Nietes INFORM Garcia of exercise his option to buy? On September 4, 1961, which is well within the period of lease Nietes has already informed Dr. Garcia of his intent to exercise the option by paying the sum of P3,000.00 as per advance pay for the school, the contract of lease being paid. 3. When was the option validly EXERCISED? On December 13, 1962, where it was indicated by Dr. Garcia in the receipt as the partial payment on the purchase of the property as specified on the original contract of "Contract of Lease with the First Option to Buy." 4. Did the non-compliance of Nietes of the installment payment affect his option to buy? NO. The SC ruled that there was substantial compliance as Nietes was only P343.00 short. Besides as of September 4, 1961, Nietes had already paid P27,757.00 which was in excess of P25,000.00