G.R. No. L-15752 & L-17457, December 29, 1962
Ruperto Soriano, et al. vs. Basilio Bautista, et al. / Basilio Bautista, et al. vs. Ruperto Soriano, et al.

FACTS

The spouses Basilio Bautista and Sofia de Rosas, owners of a parcel of land in Teresa, Rizal, executed a “Kasulatan Ng Sanglaan” on May 30, 1956, in favor of Ruperto Soriano and Olimpia de Jesus. The document was a contract of mortgage securing a loan of P1,800.00, with a two-year term. It contained a special stipulation (paragraph 5) granting the mortgagees an option to purchase the land absolutely at any time within the two-year period for the price of P3,900.00. The mortgagees took possession and cultivated the land.
On May 13, 1958, through counsel, Soriano and De Jesus notified the Bautista spouses of their decision to exercise the option to purchase the property pursuant to paragraph 5 of the agreement. The spouses refused to comply. Consequently, Soriano and De Jesus filed an action for specific performance, consigning the balance of the purchase price (P1,650.00 after crediting the loan) with the court. The Bautista spouses, in turn, filed their own action seeking to redeem the property by tendering payment of the loan. The two cases were consolidated for joint trial.

ISSUE

Whether the mortgagees, having seasonably exercised the option to purchase under paragraph 5 of the mortgage contract, are entitled to specific performance, compelling the mortgagors to execute a deed of absolute sale.

RULING

Yes. The Supreme Court affirmed the trial court’s judgment ordering the execution of the deed of sale. The legal logic centers on the nature of the stipulation in paragraph 5. While the contract was primarily an equitable mortgage, it contained a distinct and valid option to buy. This option, supported by the consideration of the mortgage contract itself (which is distinct from the purchase price), constituted a continuing offer by the mortgagors, irrevocable within the two-year period. Upon timely acceptance by the mortgagees through the May 13, 1958 letter, a perfected contract of sale was created.
The Court rejected the appellants’ argument that such a stipulation unlawfully deprives them of their inherent right of redemption. The right of redemption in a mortgage is indeed fundamental, but the parties may validly agree to a defeasible or conditional right. Here, the mortgagors’ right to redeem was expressly made subject to the mortgagees’ superior option to purchase within the stipulated period. The exercise of this option pre-empted the right to redeem. The tender of payment by the mortgagors was ineffective because it was made after the option had been validly exercised, thereby perfecting the contract of sale. The Court distinguished the case from Iñigo vs. Court of Appeals, noting that the action was not to enforce a real right under the mortgage but to seek specific performance of a perfected contractual obligation to sell.