GR 126454; (November, 2004) (Digest)
G.R. No. 126454 . November 26, 2004.
BIBLE BAPTIST CHURCH and PASTOR REUBEN BELMONTE, petitioners, vs. COURT OF APPEALS and MR. & MRS. ELMER TITO MEDINA VILLANUEVA, respondents.
FACTS
Petitioner Bible Baptist Church entered into a 15-year lease contract with respondent spouses Villanueva, the owners of a property in Manila. The contract stipulated a monthly rental with an escalation clause. Crucially, the Church paid P84,000 directly to a bank to redeem the property from the spouses’ mortgage, and the title was to remain in the Church’s custody until lease expiration or purchase. Paragraph 8 of the contract granted the Church an “option to buy” the leased premises anytime during the lease term for P1.8 million, with a down payment “agreed upon by both parties” and a balance payable at P120,000 per year.
A dispute arose when the Church sought to exercise the option to buy. The spouses refused, leading the Church to file a case for specific performance. The Regional Trial Court ruled against the Church, declaring the option clause unenforceable. The Court of Appeals affirmed this decision, prompting the Church to elevate the case to the Supreme Court via a petition for review on certiorari.
ISSUE
The primary issue is whether the option to buy granted to the lessee under the lease contract is valid, binding, and enforceable against the lessor-spouses.
RULING
The Supreme Court denied the petition and affirmed the appellate court’s decision. The option to buy is not enforceable for lack of a separate consideration, as required under Article 1479 of the Civil Code. The Court explained that an option contract is a distinct agreement—a unilateral promise to sell—which, to be binding upon the promissor, must be supported by a consideration separate from the price of the object. The P84,000 payment was correctly construed by the lower courts as an advance rental payment integral to the lease contract itself, not as a distinct consideration for the option. The Church’s argument that this payment should be deemed consideration for a single “lease with option to buy” contract was rejected. The Court cited jurisprudence establishing that a consideration for the main contract (lease) does not extend to an accessory promise (option) unless a separate consideration is expressly stipulated for the latter. Since no separate consideration was proven, the option remained a mere unaccepted offer, not binding on the spouses. Consequently, the claim for attorney’s fees was also properly denied.