CONSUELO VDA. DE QUIRINO, PETITIONER, VS. JOSE PALARCA, RESPONDENT.

Appeal by certiorari, taken by Consuelo Vda.
de Quirino, peti­tioner herein and defendant in the
lower courts, from a decision of the Court of Appeals affirming that of the
Court of First Instance of Manila, the dispositive
part of which reads:

“FOR THE FOREGOING CONSIDERATIONS, the Court hereby renders
judgment ordering the defendant within fifteen (15) days from the date this
judgment be­comes final, to execute a deed of conveyance in favor of the
plaintiff Jose Palarca, of age, Filipino, married to Querubina Cristobal, over lot 30;
block 84 of the Sulu-can Subdivision, covered by TCT
59442 of the Manila Registry, with his postal address at 544 Corner Quezon Blvd., Manila, and directing said defendant to
deliver the certificate of title, and ordering the plaintiff to de­liver to the
defendant at the time of receiving the afore­said deed of sale and title, the
amount of P12,000 in cash.  Costs is charged against the defendant.”

On October 4, 1947, said petitioner – hereinafter referred to as
the lessor – and respondent Jose Palarca
– hereinafter referred to as the lessee – entered into a lease contract whereby
the former leased to the latter a parcel of land known as Lot 30 of block 84 of
the Sulu-can Subdivision, located at Sampaloc, Manila, with an area of about 150 square meters,
and more particularly described in TCT No. 59442 of the office of the Register
of Deeds of Manila. In their written con­tract of lease it was stipulated, inter
alia, that the term thereof would be ten (10)
years, from November 1, 1947 to November 1, 1957; that the monthly rental would
be P250, payable in advance; that the lessee could demolish the lessor’s old building on the leased premises and construct
thereon any building and/or improvements suitable for school purposes, which
new building and/or improvements shall be­long to the lessee; that within one
(1) year after the expiration of the lease, the lessee would have “the
right and option to buy the leased premises” for P12, 000; that, should
the lessee fail to exercise this option, said(new) building and/or improvements
shall be evaluated by a committee organized therefor,
as set forth in the contract; that, after such “valuation”, the lessor shall -“have the option to buy” said
“building and/or improvements within x x x one (1) year, after the ex­piration of the
contract”;’ and that, should neither of the parties exer­cise their
respective options, both “shall be free to look for a buyer for his or her
respective property.”

By a letter, dated September 15, 1958, the lessee informed the lessor that the former (lessee) was exercising “his
right to buy the leased property for the agreed price of P12, 000, ” and
inquired “when” the latter (lessor) would
be “ready to execute the deed of sale,” so that the agreed price
could be delivered to her. Soon thereafter, before the expiration of the term
of his option, or on October 6, 1958, the lessee wrote a follow-up letter to
the lessor, advising her that the former had in his
“possession the amount of P12, 000 with which to pur­chase” the
leased premises, and, asked her, once more, “when” she would be ready
to execute the corresponding deed of sale, in order that he (lessee) could pay
said price. Through her counsel, the lessor replied,
however, on October 10, 1958,
that she “cannot accede” to the lessee’s requests “because the x
x contract of October
4, 1947, has been novated by another
agreement, wherein the rent of P250 a month was reduced to P100.00.”

Thereupon, that same month, the lessee instituted the present
action to compel the lessor to comply with her
obligation to execute the corresponding deed of sale in his (lessee’s) favor,
upon payment by him of said sum of P12, 000. The lessor
filed her answer admitting some allegations of the complaint and denying other
allegations thereof, as well as alleging, as special defense, that the lease
contract had been “modified” by a subsequent agreement of the
parties, which had been observed and carried out by them, and that payment of
the stipu­lated price had not been properly tendered or validly consigned. The lessor, likewise, set up a counterclaim for damages,
attorney’s fees and expenses of litigation. 
After appropriate proceedings, the Court of First Instance rendered the
decision adverted to above, which was affirmed by the Court of Appeals. Hence,
this petition for review on certiorari, in which the lessor
maintains: (1) that the lessee’s option to purchase the leased premises was
null and void for want of consi­deration; (2) that the lessee should have been
sentenced to pay rentals, during the pendency of this
case; and (3) that the lessee should have been sentenced, also, to pay damages,
attorney’s fees and the costs of the suit.

The first contention is clearly without merit. To begin with, it
is based upon the premise that the option of the lessee is devoid of
consideration, which is false. Indeed, in reciprocal contracts, like the one in
question, the obligation or promise of each party is the consideration for that
of the other.^[1]
In the language of Article 1350 of our Civil Code, “(i)
n onerous contracts the cause is understood to be, for each contracting party,
the prestation or promise of a thing or service by
the other x x x.” As a
consequence, “(t) he power to rescind obligations is implied in reciprocal
ones, in case one of the obligors should not comply with what is incumbent upon
him.“^[2]

In the case at bar, the consideration for the lessor’s
obligation to sell the leased premises to the lessee, should he choose to
exercise his option to purchase the same, is the obligation of the lessee to
sell to the lessor the building and/or improvements
constructed and/or made by the former, if he fails to exercise his option to
buy said pre­mises. Then, again, the amount of the rentals agreed upon in the
contract of October 4, 1947 – which amount turned out to be so bur­densome upon
the lessee, that the lessor
agreed, five (5) years later, to reduce it – as well as the building and/or
improvements contemplated to be constructed and/or introduced by the lessee,
were, undoubtedly, part of the consideration for his option to purchase the
leased premises.

Then, again, the alleged lack of consideration therefor was not set up as a defense or otherwise put in
issue, either in the trial court or in the Court of Appeals. The appealed
decisions of the Court of First Instance and the Court of Appeals, and the
records before us show that the defenses mainly pressed in said courts were the
alleged cancellation of the lessee’s option and his failure to make a valid ten­der
and consignation of the stipulated price. The cancellation of the option was
sought to be deduced from a novation made in 1952,
when, upon the lessee’s request, the lessor agreed to
reduce the monthly rental from P250 to P100. Neither defense
was, however, sustained by said courts, and, we think, correctly.

Indeed, not being inconsistent with the lessee’s option to pur­chase
the leased premises, said agreement to reduce the rental did not necessarily
cancel or extinguish the option. Although the lessor would have the Court believe that she consented to
said reduction, on condition that the option be
cancelled, this claim had not been proven.  What is more, it was refuted by her letter to
the lessee, Exhibit D, dated January 29, 1952, stating that “in view of
the fact that you (lessee) find it very difficult to pay the rental of P250, I
am willing to reduce it to P100 from January 1952, on the condition that the
remaining balance (of the rental) will be settled.” The cancellation
of the option was not, therefore, one of the conditions for the aforementioned
reduction of the rental.

Then, too, the consignation referred to in Article 1256 of our
Civil Code is inapplicable to the present case, because said provision refers
to consignation as one of the means for the payment or discharge of a
“debt”, whereas the lessee was not indebted to the lessor for the price of the leased premises.1
The lessee merely exercised a right of option and had no
obligation to pay said price until the execution of the deed of sale in his
favor, which the lessor refused to do.

Said want of consideration not having pleaded or otherwise alleged
as one of her defenses in either one of the lower courts, the lessor may not set it up, for the first time, in her
present second appeal.2

As regards the rentals during the pendency
of this case, suffice it to note that, had the lessor
readily complied with her obligation to execute the corresponding deed of
conveyance to the lessee, upon pay­ment by him of the agreed price of P12, 000,
which he tendered in October, 1958, the premises in question would have become
his pro­perty on or before November 1, 1958, and since then he would have had
no obligation to pay rentals. As a consequence, it is neither just nor fair to
impose such obligation upon him by reason of the lessor’s
illegal breach of their contract. 
Otherwise, she would be rewarded therefor and we
would jeopardize the sanctity of contractual obligations.

The last point raised by the lessor is
a mere corollary to those already disposed of. Hence, it needs no further
discussion.

WHEREFORE, the decision appealed from should be, as it is
hereby affirmed, with costs against the lessor;
petitioner-appellant Consuelo Vda. de
Quirino.

IT IS SO ORDERED.

Dizon, Makalintal,
Sanchez, Castro, Fernando, Capistrano, Teehankee and Barredo, JJ., concur.

Reyes, and Zaldivar, JJ., on official leave abroad.

^[1] Phil. Banking Corp. v. Lui
She, G.R. No. L-17587, Sept. 12, 1967; Rodriguez v. Rodriguez, G.R. No. L-23002,
July 31, 1967; Soriano v. Bautista,
G.R. Nos. L-15752 & L-17457,
Dec. 29, 1962; Phil. Guaranty v. Dinio, 102
Phil. 991; Puato v. Mendoza, 64 Phil. 457; De
la Cavada v. Diaz, 37 Phil. 982.

^[2] Article 1191, Civil Code of the Philippines.

1
Asturias Sugar Central v. Pure Cane
Molasses, 60 Phil. 255; Conejero v. Court of
Appeals, G.R. No. L-21812, April 29, 1966.

2
Quimson v. Hon. Pastor de Guzman, G.R. No. L-18240,
Jan. 31, 1963; Belmi v. Court of Agrarian
Relations, G.R. No. L-19343, April 27, 1963; Board of Assessment Appeals v.
MERALCO, G.R. No. L-15334, Jan. 31, 1964; Tan Tiong
Tick v. Phil. Manufacturing Corp. , G.R. No. L-19152, Feb. 29, 1964;  Hautea v. Magallon, G.R. No. L-20345, Nov. 28, 1964; Republic v. Ven­turanza,
G.R. No. L-20417, May 30, 1966; Tenchavez v. Escafio, G.R. No. L-19671,
July 26, 1966; Pinero v. Hechanova,
G.R. No. L-22562, Oct. 22, 1966; Soriano
v. Compania General de Tabacos
de Filipinas, G.R. No. L-17392, Dec. 17, 1966; “Y” Shipping Corp. v.
Erispe, G.R. No.
L-20627, May 4, 1967; Oliva
v. La­madrid, G.R.
No. L-23196, Oct. 31, 1967; Plaridel Surety & Insurance Co. v. Comm. of
Internal Revenue, G.R. No. L-21520, Dec. 11, 1967; Manila Port Service v.
Court of Appeals, G.R. No. L-21890, March 29, 1968; Insurance Co. of North
America v. Manila Port Service, G.R. No.
L-24887, April 22, 1968; PNB v. De
la Cruz, G.R. No. L-23562, April 25, 1968; PNB v. Osete, G.R. No. L-24997, July 18, 1968; Gutierrez v. Court of
Appeals, G.R. No. L-25972, Nov. 26, 1968; Permanent Concrete
Products, Inc. v. Teodoro, G.R. No. L–­29766, Nov. 29, 1968; Nielson & Co. , Inc. v.
Lepanto Consolidated Mining Co. G.R.
No. L-21601, Dec. 28, 1968.