G.R. No. L-28269 August 15, 1969
CONSUELO VDA. DE QUIRINO, petitioner, vs. JOSE PALARCA, respondent.

FACTS

On October 4, 1947, petitioner Consuelo Vda. de Quirino (lessor) and respondent Jose Palarca (lessee) entered into a ten-year lease contract for a parcel of land in Manila. Key stipulations included: a monthly rental of P250; the lessee’s right to demolish the existing building and construct new improvements, which would belong to him; and the lessee’s right and option to buy the leased premises for P12,000 within one year after the lease expiration. In 1952, the lessor agreed to reduce the monthly rental to P100. Upon the lease’s expiration on November 1, 1957, the lessee, by letters dated September 15, 1958, and October 6, 1958, informed the lessor of his exercise of the option to purchase and his readiness to pay the P12,000. The lessor refused, claiming the original contract had been novated by the subsequent rental reduction agreement. The lessee then filed an action to compel the lessor to execute the deed of sale. The Court of First Instance ruled in favor of the lessee, a decision affirmed by the Court of Appeals, prompting the lessor’s appeal to the Supreme Court.

ISSUE

The main issues were: (1) Whether the lessee’s option to purchase was null and void for want of consideration; (2) Whether the lessee should be ordered to pay rentals during the pendency of the case; and (3) Whether the lessee should be ordered to pay damages, attorney’s fees, and costs.

RULING

The Supreme Court affirmed the decision of the Court of Appeals. (1) The option to purchase was not void for lack of consideration. In reciprocal contracts, the obligation of each party is the consideration for the other. The consideration for the lessor’s obligation to sell included the lessee’s corresponding obligation to sell the improvements to the lessor if he did not exercise his option, the agreed rentals, and the improvements constructed by the lessee. Furthermore, the defense of lack of consideration was not raised in the lower courts and could not be raised for the first time on appeal. (2) The lessee was not liable for rentals during the pendency of the case. Had the lessor complied with her obligation upon the lessee’s valid tender in 1958, the property would have been transferred, extinguishing any rental obligation. To impose rentals would reward the lessor’s breach. (3) The claim for damages, attorney’s fees, and costs, being corollary to the other issues, required no further discussion. The lessor was ordered to execute the deed of conveyance and deliver the title upon payment of P12,000. Costs were charged against the lessor.