CIPRIANO A. FALCON AND CORAZON M. FALCON, PLAINTIFFS-APPELLEES, VS. FELICIANO OROBIA AND ISABEL OROBIA, DEFENDANTS-APPELLANTS.

Falcon versus Orobia

The Case

This is the case of Falcon versus Orobia, a suit for specific performance and recovery of property with an accounting of fruits, brought by the spouses Cipriano and Corazon Falcon against the spouses Feliciano and Isabel Orobia. The Falcons ask to be placed in possession of a lot and two houses that the Orobias sold to them but continued to occupy, while the Orobias resist on the ground that the houses were never part of the sale and that they hold a binding option to repurchase. The case matters because it shows how the Court reads deeds of sale against the parties' later claims, and how an option to sell is perfected only when the parties agree on the price.

Procedural History

The Falcons filed the action in the Court of First Instance. The parties entered into a stipulation of facts, which the court approved, admitting the various deeds and limiting the case to three issues. After trial, the Court of First Instance rendered judgment holding that the deed of sale clearly included the two houses, that the letters exchanged before the transaction did not mention the houses but the deed of sale expressly included them, and that the defendants had not accepted the last option to re-sell, which had in any event been revoked. The Orobias appealed directly to the Supreme Court, raising questions purely of law, and the Court decided the appeal in March 1968.

Facts

The Orobia spouses held a right to purchase a lot belonging to the Land Tenure Administration, with an area of 93.3 square meters, situated on Indiana Street in Manila. On December 15, 1955, they executed in favor of the Falcon spouses a sale with pacto de retro, that is, a sale with a right to repurchase, over that right to purchase, for 1,540 pesos, redeemable within one year. On May 11, 1956, they executed a second deed of sale with pacto de retro over the same right and, in addition, over their two houses on the land, in favor of the same Falcon spouses, for 6,160 pesos, redeemable within two years.

On January 14, 1959, the Orobias executed a deed of absolute sale of their right to the lot and the two houses in favor of the Falcons, for 6,160 pesos. On the same date, the Falcons executed an option to repurchase within three years, which the Orobias accepted. That period was later reduced, and on October 29, 1959, with the conformity of the Orobias, the Falcons executed a new option to repurchase within two years from that date, or up to October 29, 1961. Still later, on September 15, 1960, another deed of absolute sale over the right to the land and the house was executed by Feliciano Orobia, with his wife's consent, in favor of the Falcons, for 6,160 pesos.

In November 1960, the Land Tenure Administration executed a deed of sale over the lot in favor of Corazon Falcon, who paid 2,799 pesos for the land after buying the rights of the Orobias, and a transfer certificate of title was issued in her name on November 25, 1960. On January 5, 1961, Corazon Falcon executed an option to re-sell in favor of Feliciano Orobia, obligating herself to re-sell the lot at a selling price to be determined and fixed on the date of the resale, and promising not to sell to any other person without his knowledge and consent. On January 31, 1962, the Orobias sought to repurchase the land invoking that option, but the parties could not agree on the price. The Falcons then filed this suit, and the Orobias answered with a counterclaim.

Issues

• Whether or not the two houses erected on the property are deemed included in the deeds of sale executed by the Orobias in favor of the Falcons.
• Whether or not the real intention of the parties as regards the sale of the right over the lot included the two houses, considering the documents relied upon by the Orobias.
• Whether or not the Falcons may be compelled to sell the property to the Orobias by virtue of the option to re-sell signed by Corazon Falcon.

Applicable Provisions

The decision turns on the nature of a contract of option, which under the Civil Code is perfected only by the concurrence of offer and acceptance, including agreement on the price. Article 1475 of the Civil Code provides:

The contract of sale is perfected at the moment there is a meeting of minds upon the thing which is the object of the contract and upon the price.

This bears on the case because the option to re-sell left the price to be fixed at the date of resale, and the parties never met on that price.

Article 1326 of the Civil Code provides:

An offer made through an agent is accepted from the time acceptance is communicated to him.

This bears on the case because the Orobias never communicated an acceptance of the option on terms the Falcons proposed, and so no contract of resale arose.

Ruling

On the first issue, the Court held that the deeds of sale clearly include the two houses in the sale. The consideration was increased from 1,540 pesos to 6,160 pesos when the new deed was executed adding the houses to the sale. The Orobias alleged that usurious interest accounted for the increase, but no proof was given and the allegation was specifically denied under oath.

On the second issue, the Court held that the letters exchanged before the transaction do not mention the houses, but that this is not surprising, since the sale of the houses was decided only later on, resulting in the execution of a new deed of sale. The deed of sale expressly includes the houses, and it controls.

On the third issue, the Court held that the option to re-sell could not be availed of. The Orobias offered to buy the land but did not mention in their offer the price therefor, which the option stated must be determined when the resale is made. They later insisted on repurchasing at 6,160 pesos, while the Falcons wanted 10,154.05 pesos. There was thus a failure to agree on the price, and the option could not be availed of. The Court added that the land could not be sold without the consent of the Land Tenure Administration, which was sought but not given.

Doctrine

First, the terms of a deed of sale, being the final expression of the parties' agreement, prevail over prior letters and negotiations that do not mention a disputed item; the later deed including the houses is the best evidence of the parties' intention. Second, an option to sell, like a contract of sale, is perfected only upon a meeting of minds on the thing and the price; where the option leaves the price to be fixed at the date of resale and the parties fail to agree on that price, the option cannot be enforced. Third, a restriction in the title requiring the consent of the Land Tenure Administration for any sale must be respected, and a sale made without that consent cannot be compelled.

Disposition

The Supreme Court affirmed the decision of the Court of First Instance, with costs against the Orobias.

Remember This

The single line to memorize is that an option to sell is perfected only by a meeting of minds on the price, and a deed of sale controls over prior letters that omit the disputed property. Examiners use this case to test the requisites of a perfected contract of sale and the effect of a deed of sale as the final expression of the parties' intent.