"I chose to go to law school because I thought that someday, somehow I'd make a difference." -A.

September 1, 2014

Bible Baptist vs. CA

Facts:
  • June 7, 1985: Petitioner Bible Baptist Church entered into a contract of lease with respondent spouses Villanueva. (Lease period – 15 years)
  • Spouses Villanueva are the registered owners of a property located at Leon Guinto St., Malate, Manila.
  • Pertinent stipulations of the lease contract are as follows:

3. LESSEE (Bible Baptist) shall pay the LESSOR (Spouses Villanueva) within 5 days of each calendar month, beginning 12 months from the date of this agreement, a monthly rental of P10,000, plus 10% escalation clause per year starting on June 7, 1988.
4. That upon signing of the LEASE AGREEMENT, the LESSEE shall pay the sum of P84,000.00. Said sum is to be paid directly to the Rural Bank, Valenzuela, Bulacan for the purpose of redemption of said property which is mortgaged by the LESSOR.
8. That the LESSEE (Bible Baptist) has the option to buy the leased premises during  the 15 years of the lease. If the LESSEE decides to purchase the premises the terms will be: A) A selling P1.8 million. B) A down payment agreed upon by both parties. C) The balance of the selling price may be paid at the rate of P120,000.00 per year.
  • Petitioner Baptist Church seeks to buy the leased premises from the spouses Villanueva, under the option given to them. 
  • Baptist Church argues that the consideration supporting the option was their agreement to pay off the Villanueva's P84,000 loan with the bank, thereby freeing the subject property from the mortgage encumbrance. 
  • Baptist Church states that "it is true that it did not pay a separate and specific sum of money to cover the option alone. But the P84,000 it paid the Villanuevas in advance should be deemed consideration for the one contract they entered into – the lease with option to buy."
  • Spouses Villanueva argued that the amount of P84,000 was paid for the rental payments and there is no separate consideration to speak of which could support the option.
  • RTC and CA ruled in favor of Villanueva.



Issues:
1) WON the option to buy given to the Baptist Church is founded upon a consideration. NO
2) WON by the terms of the lease agreement, a price certain for the purchase of the land had been fixed. NO

Held:

The P84,000 was not paid by Bible Baptist in order to release Spouses Villanueva’s property from the mortgage but rather for the rental dues

It must be pointed out that said amount was in fact apportioned into monthly rentals spread over a period of one year, at P7,000 per month. Thus, for the entire period of June 1985 to May 1986, petitioner Baptist Church's monthly rent had already been paid for, such that it only again commenced paying the rentals in June 1986. This is shown by the testimony of petitioner Pastor Belmonte where he states that the P84,000 was advance rental equivalent to monthly rent of P7,000 for one year, such that for the entire year from 1985 to 1986 the Baptist Church did not pay monthly rent

This Court agrees with spouses Villanueva that the amount of P84,000 has been fully exhausted and utilized by the occupation of Bible Baptist of the premises and there is no separate consideration to speak of which could support the option.

A valid option contract has a separate and distinct consideration that supports it
Art. 1479. A promise to buy and sell a determinate thing for a price certain is reciprocally demandable. 
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. 

The second paragraph of Article 1479 provides for the definition and consequent rights and obligations under an option contract. For an option contract to be valid and enforceable against the promissor, there must be a separate and distinct consideration that supports it.

An option contract needs to be supported by a separate consideration
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 this case, the option was not founded upon a separate and distinct consideration and that, hence, spouses Villanuevas cannot be compelled to sell their property to petitioner Baptist Church.

The option to buy the leased premises was not binding upon the Villanuevas for non-compliance with Article 1479. 
It found that said option was not supported by a consideration as "no money was ever really exchanged for and in consideration of the option." 

In addition, the CA determined that in the instant case, "the price for the object is not yet certain." Having found that the option to buy granted to the petitioner Baptist Church was not founded upon a separate consideration, and hence, not enforceable against respondents, this Court finds no need to discuss whether a price certain had been fixed as the purchase price.

RULING: Having found that the option to buy granted to the petitioner Baptist Church was not founded upon a separate consideration, and hence, not enforceable against respondents, the Court finds no need to discuss whether a price certain had been fixed as the purchase price.

Read the full text:
G.R. No. 126454 November 26, 2004 BIBLE BAPTIST CHURCH and PASTOR REUBEN BELMONTE, petitioners, vs. COURT OF APPEALS and MR. & MRS. ELMER TITO MEDINA VILLANUEVA, respondents.

1 comment:

  1. I've learnt the basic difference between a catholic church and baptist church while working as church loan provider. So it was a great experience at all. If you want my recommendation regarding lenders for church,I'll advice you Griffin's Church Loans.

    ReplyDelete

The Law Chic Bar Exam FREE Downloads Notes Materials
Copyright © 2014 kite | All Rights Reserved. Design By Templateclue - Published By Gooyaabi Templates