GR 124791; (February, 1999) (Digest)
G.R. No. 124791 February 10, 1999
JOSE RAMON CARCELLER, petitioner, vs. COURT OF APPEALS and STATE INVESTMENT HOUSES, INC., respondents.
FACTS
Petitioner Jose Ramon Carceller and respondent State Investment Houses, Inc. (SIHI) entered into an 18-month lease contract with an option to purchase two parcels of land in Cebu City for a fixed price of P1,800,000. The option was exercisable by written notice within the lease period, ending January 30, 1986. On January 7, 1986, SIHI notified Carceller of the impending termination. On January 15, 1986, Carceller requested a six-month lease extension to raise funds, which SIHI received on January 29, 1986. SIHI disapproved the request on February 14, 1986. On February 18, 1986, Carceller notified SIHI of his decision to exercise the option. SIHI refused, claiming the option period had lapsed. Carceller filed a complaint for specific performance.
ISSUE
Whether petitioner validly exercised his option to purchase the leased property despite the alleged delay in giving notice to the respondent.
RULING
Yes. The Supreme Court affirmed the Court of Appeals’ decision allowing the petitioner to exercise the option but modified the purchase price basis. The Court held that the option was validly exercised. While the option period technically ended on January 30, 1986, the respondent’s act of requesting the petitioner to advise his decision by January 20, 1986, and its subsequent disapproval of the extension request on February 14, 1986, created an opportunity for the petitioner to still exercise the option. The petitioner’s letter of February 18, 1986, was a timely response under the circumstances. The fundamental principle is to ascertain the intention of the contracting parties. The respondent’s subsequent offer to lease the property at a higher rate and to sell it to the public indicated an intent to renege on the original agreement and unjustly enrich itself, especially given the petitioner’s substantial investments on the property. Equity dictates against allowing such an unfair result. However, the purchase price must be based on the fair market value of the property in Bulacao, Cebu City, as of February 1986—when the contract would have been consummated—and not the fixed price in the 1985 contract, to ensure fairness to both parties. The case was remanded to the trial court to determine this fair market value.