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October 1, 2016

Villamor vs. CA

Facts:
  • In 1971, the Reyeses sold a portion of their lot in Caloocan City to the sps Villamor. 
  • Later that year, they executed a Deed of Option wherein they stated that they have offered the remaining portion of the lot for sale, and that the Villamor spouses agreed to buy the same. 
  • The option to buy and sell was to be exercised ‘whenever the need of such sale arises, either on our part or on the part of the spouses (Julio) Villamor and Marina V. Villamor, at the same price of P70.00 per square meter.’
  • The Deed also mentioned that the cause or the impelling reason on the part of Reyes executing the deed of option as appearing in the deed itself is the Villamor's having agreed to buy the 300 square meter portion of private respondents' land at P70.00 per square meter "which was greatly higher than the actual reasonable prevailing price." 
  • In 1984, the Villamors offered to repurchase the portion of the lot they sold to the Villamor spouses in 1971. 
  • However, the Vilamor spouses decided they would rather buy the remaining portion and wanted to exercise their option as provided for in the Deed of Option. In 1984, they filed a case for specific performance against the Reyeses.
  • The RTC ruled in favor of the Villamors and ordered the Reyeses to sell the remaining portion.
  • The CA reversed, declaring the option contract to be void as it lacked a valid and distinct consideration.




Issues: WON there was a valid and distinct consideration for the option contract? YES
WON the option may still be enforced? NO

Held:
The consideration in the contract was the price difference
The CA failed to give due consideration to the Villamors' evidence which shows that in 1969 the Villamor spouses bough an adjacent lot from the brother of Macaria Labing-isa for only P18.00 per square meter which the Reyeses did not rebut. Thus, expressed in terms of money, the consideration for the deed of option is the difference between the purchase price of the 300 square meter portion of the lot in 1971 (P70.00 per sq.m.) and the prevailing reasonable price of the same lot in 1971. 

Whatever it is, (P25.00 or P18.00) though not specifically stated in the deed of option, was ascertainable. The Villamor’s allegedly paying P52.00 per square meter for the option may, as opined by the appellate court, be improbable but improbabilities do not invalidate a contract freely entered into by the parties.

The Reyeses were also given the right to sell
The "deed of option" entered into by the parties in this case had unique features. Ordinarily, an optional contract is a privilege existing in one person, for which he had paid a consideration and which gives him the right to buy, for example, certain merchandise or certain specified property, from another person, if he chooses, at any time within the agreed period at a fixed price.

The "deed of option" went on and stated 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. It appears that while the option to buy was granted to the Villamors, the Reyeses were likewise granted an option to sell. In other words, it was not only the Villamors who were granted an option to buy for which they paid a consideration. The Reyeses as well were granted an option to sell should the need for such sale on their part arise. 

Period to exercise the option not stipulated; deemed prescribed afetr 10 years
However, the Deed of Option did not provide for the period within which the parties may demand the performance of their respective undertakings in the instrument. The parties could not have contemplated that the delivery of the property and the payment thereof could be made indefinitely and render uncertain the status of the land. The failure of either parties to demand performance of the obligation of the other for an unreasonable length of time renders the contract ineffective.
Under Article 1144 (1) of the Civil Code, actions upon written contract must be brought within ten (10) years. The Deed of Option was executed on November 11, 1971. The acceptance, as already mentioned, was also accepted in the same instrument. The complaint in this case was filed by the Villamors on July 13, 1987, seventeen (17) years from the time of the execution of the contract. Hence, the right of action had prescribed.
To allow the Villamors to demand the delivery of the property subject of this case thirteen (13) years or seventeen (17) years after the execution of the deed at the price of only P70.00 per square meter is inequitous, considering the rise of prices of real estate in Manila.

Citation:
  • G.R. No. 97332 
  • October 10, 1991
  • SPOUSES JULIO D. VILLAMOR AND MARINA VILLAMOR, petitioners,  vs. THE HON. COURT OF APPEALS AND SPOUSES MACARIA LABINGISA REYES AND ROBERTO REYES, respondents.

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