G.R. No. 111238 . January 25, 1995.
ADELFA PROPERTIES, INC., petitioner, vs. COURT OF APPEALS, ROSARIO JIMENEZ-CASTAÑEDA and SALUD JIMENEZ, respondents.

FACTS

Private respondents Rosario Jimenez-Castañeda and Salud Jimenez were co-owners of a parcel of land. Petitioner Adelfa Properties, Inc., having already purchased the eastern half from the respondents’ brothers, entered into an “Exclusive Option to Purchase” with the respondents for the western half for P2,856,150. Petitioner paid P50,000 as option money, with the balance due on or before November 30, 1989. The contract stipulated that upon petitioner’s default, the option would be cancelled, 50% of the option money forfeited, and the remaining 50% refunded upon sale to a third party.
Before the payment deadline, petitioner was sued by the respondents’ nephews and nieces for annulment of the prior sale and recovery of the entire property. Consequently, on November 29, 1989, petitioner informed respondents it was suspending payment of the balance until the case was settled. Respondents rejected this suspension. After the civil case was dismissed on February 23, 1990, petitioner attempted to tender payment, but respondents had already executed a conditional sale over the property to a third party on February 28, 1990, and later refunded 50% of the option money.

ISSUE

The primary issues were: (1) whether the “Exclusive Option to Purchase” constituted a valid option contract; and (2) whether petitioner validly suspended payment of the purchase price.

RULING

The Supreme Court affirmed the Court of Appeals, ruling against the petitioner. First, the “Exclusive Option to Purchase” was a valid option contract. It was a separate contract whereby the respondents, for a separate consideration (the P50,000), bound themselves to sell the property to the petitioner if the latter complied with the terms by paying the full price on or before the specified date. An option is a preparatory contract where the offeror is bound while the offeree is not; it becomes a binding contract of sale only upon acceptance by fulfilling the terms.
Second, petitioner’s suspension of payment was not valid and constituted a failure to comply with the condition for acceptance. The filing of the civil case by third parties did not justify the suspension. The option contract contained no provision allowing for suspension of payment under such circumstances. Petitioner’s obligation was clear and demandable: to pay the full balance by November 30, 1989, to perfect the sale. By unilaterally withholding payment based on a perceived cloud on the title—a risk it assumed—petitioner failed to make a timely and effective acceptance of the option. This failure to pay within the stipulated period resulted in the lapse of the option, entitling the respondents to cancel it and forfeit half of the option money as stipulated. The subsequent dismissal of the case did not revive the lapsed option.