SPOUSES CIPRIANO VASQUEZ AND VALERIANA GAYANELO, PETITIONERS, VS. HONORABLE COURT OF APPEALS AND SPOUSES MARTIN VALLEJERA AND APOLONIA OLEA, RESPONDENTS.

Vasquez versus Vallejera

The Case

This is a petition for review brought by the spouses Cipriano Vasquez and Valeriana Gayanelo against the spouses Martin Vallejera and Apolonia Olea. The private respondents sued the petitioners for specific performance and damages, asking the court to compel the petitioners to resell a parcel of sugar land that the respondents had earlier sold to them. The case matters because it draws the line between a true sale with a right of repurchase under the Civil Code and a mere unilateral promise to resell, which is an option that binds the promisor only if it is supported by a consideration distinct from the price, or if the promisee accepts it before it is withdrawn.

Procedural History

The respondents filed their complaint for specific performance and damages before the Court of First Instance of Negros Occidental, which later became the Regional Trial Court, Branch 56, Himamaylan, Negros Occidental. After trial, the trial court ruled against the petitioners and ordered them to resell the lot to the respondents for a repurchase price of 24,000 pesos, an amount that combined the price of the first sale and the amount the petitioners had paid to a third party, Benito Derrama, Junior. The petitioners moved for reconsideration, but the motion was denied. They then appealed to the Court of Appeals, which affirmed the trial court's decision and additionally ordered the petitioners to pay 5,000 pesos as necessary and useful expenses under Article 1616 of the Civil Code. The Court of Appeals also denied the petitioners' motion for reconsideration. The petitioners then came to the Supreme Court by petition for review, and the Court gave the petition due course.

Facts

The lot, Lot Number 1860 of the Cadastral Survey of Himamaylan, Negros Occidental, was registered in the name of the respondents. In October 1959, the respondents leased the lot to the petitioners, and the lease ran up to crop year 1966 to 1967, later extended to crop year 1968 to 1969. After the lease was executed, the petitioners took possession of the lot and devoted it to the cultivation of sugar, and they remained in possession.

On September 21, 1964, the respondents sold the lot to the petitioners under a deed of sale for 9,000 pesos, duly ratified and notarized. On the same day, and along with the deed of sale, the parties executed a separate instrument denominated as Right to Repurchase, likewise ratified and notarized, granting the respondents the right to repurchase the lot for 12,000 pesos within ten years from the agricultural year 1969 to 1970 until the agricultural year 1979 to 1980. By virtue of the sale, the petitioners secured a transfer certificate of title in their name.

On January 2, 1969, the respondents sold the same lot to Benito Derrama, Junior, after securing the petitioners' title, for 12,000 pesos. Upon the protestations of the petitioners, assisted by counsel, that second sale was cancelled after the petitioners paid 12,000 pesos to Derrama. The respondents later filed the action to redeem, and the petitioners resisted on the ground that the separate document was only an option to buy, not embodied in the same document of sale, and not supported by a consideration distinct from the price.

Issues

• Whether or not the transaction between the parties was a sale with a right of conventional redemption under Article 1601 of the Civil Code, or a mere option to buy or promise to resell.
• Whether or not the separate instrument granting the right to repurchase was supported by a consideration distinct from the price, as required by Article 1479 of the Civil Code.
• Whether or not the respondents accepted the promise to resell before it was withdrawn, so as to convert it into a binding bilateral contract of sale.

Applicable Provisions

Article 1479 of the Civil Code provides:

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.

This provision governs whether the separate promise to resell binds the petitioners, since the respondents failed to prove any consideration distinct from the price.

Article 1324 of the Civil Code provides:

ART. 1324. When the offerer has allowed the offeree a certain period to accept, the offer may be withdrawn at any time before acceptance by communicating such withdrawal, except when the option is founded upon a consideration, as something paid or promised.

This provision explains why an option without separate consideration remains a mere offer that may be withdrawn before acceptance.

Article 1601 of the Civil Code provides:

Conventional redemption shall take place when the vendor reserves the right to repurchase the thing sold, with the obligation to comply with the provision of Article 1616 and other stipulations which may have been agreed upon.

This provision defines conventional redemption, which requires that the vendor reserve the right to repurchase in the same instrument of sale, a requirement the respondents failed to meet.

Ruling

On the first issue, the Court held that the transaction was not a sale with a right of repurchase. The right of repurchase must be reserved by the vendor in the same instrument of sale; once an absolute sale is executed, the vendor can no longer reserve that right, and any right thereafter granted by the vendee in a separate instrument is some other right, such as an option to buy. Since the right to repurchase here was contained in a separate document executed by the petitioners as vendors, it was a mere promise to resell, and the respondents could not avail of Article 1601.

On the second issue, the Court held that the right to repurchase was not supported by a consideration distinct from the price. The promisee bears the burden of proving such consideration, and the respondents failed to prove it and did not even allege its existence in their complaint.

On the third issue, the Court held that the respondents did not accept the promise before it was withdrawn. The annotation and registration of the right to repurchase at the back of the certificate of title only served as notice to bind purchasers of registered land; it was not acceptance. The petitioners' signatures on the document did not signify acceptance, because acceptance must be made by the promisee, not the promisor. The respondents' filing of the complaint and their demands for resale were not acceptance, and they neither tendered the redemption price nor made a judicial consignation within the period. Their ineffectual acceptance validated the petitioners' refusal to sell, which the Court treated as a withdrawal of the option.

Doctrine

A right of repurchase must be reserved by the vendor in the same instrument of sale; a right granted by the vendee in a separate document is not conventional redemption but a mere option to buy or promise to resell. An accepted unilateral promise to sell is binding upon the promisor only if supported by a consideration distinct from the price, and the promisee bears the burden of proving that consideration. Even without such consideration, the promise becomes a binding bilateral contract of sale if the promisee accepts it before the promisor withdraws it. Acceptance must come from the promisee, and the annotation of the promise on the certificate of title is notice to third persons, not acceptance.

Disposition

The petition was granted; the decision and resolution of the Court of Appeals were reversed and set aside, and the complaint in the civil case was dismissed, with no costs.

Remember This

Memorize this line: a right to repurchase granted in a separate document is not conventional redemption but a mere option to buy, binding only if supported by a consideration distinct from the price or accepted before withdrawal. Examiners use this case to test the distinction between Article 1601 and Article 1479, and the rule that annotation on the title is notice, not acceptance.