G.R. No. 124791 (1999)
Topics:
Option contract
Summary:
Petition for Review assailing CA Decision and Resolution affirming the RTC judgment ordering the defendant SIHI to execute a deed of sale in favor of Carceller.
Doctrines:
Facts:
State Investment Houses, Inc. (SIHI) is the registered owner of two (2) parcels of land in Cebu City. In 1985, Jose Ramon Carceller and SIHI entered into a lease contract with option to purchase said two parcels of land.
Approximately three (3) weeks before the expiration of the lease contract, SIHI notified Carceller of the impending termination of the lease agreement as well as the time left to validly exercise the option. SIHI also requested petitioner to advise them of his decision on the option, on or before January 20, 1986.
Carceller then requested for a six-month extension of the lease contract to raise sufficient funds. He also averred that he had already made a substantial investment on the property, and had been punctual in paying his monthly rentals. However, SIHI disapproved but offered to lease the property to Carceller at the rate of Thirty Thousand (P30,000.00) pesos a month, for a period of one (1) year. It further informed the petitioner of its decision to offer for sale said leased property to the general public.
In February 1986, Carceller notified SIHI of his decision to exercise the option to purchase the property and made arrangements for the payment of the downpayment. SIHI replied and reiterated its previous stand on the latter’s offer, stressing that the period within which the option should have been exercised had already lapsed. SIHI asked petitioner to vacate the property within ten (10) days from notice, and to pay rental and penalty due.
Carceller filed a complaint for specific performance and damages against SIHI to compel the latter to honor its commitment and execute the corresponding deed of sale.
Issue:
Whether Carceller should be allowed to exercise the option to purchase the leased property
Ruling:
Yes. The Court provides that an option is a preparatory contract in which one party grants to the other, for a fixed period and under specified conditions, the power to decide, whether or not to enter into a principal contract. It binds the party who has given the option, not to enter into the principal contract with any other person during the period designated, and, within that period, to enter into such contract with the one to whom the option was granted, if the latter should decide to use the option. It is a separate agreement distinct from the contract which the parties may enter into upon the consummation of the option.
In this case, Carceller’s letter to SIHI was fair notice to the latter of the former’s intent to exercise the option, despite the request for the extension of the lease contract. SIHI’s agreement to enter first into a lease contract with option to purchase with Carceller is a clear proof of its intent to dispose said property. Furthermore, when SIHI reminded Carceller of time left to exercise his option, it clearly showed its desire to sell that property. It is also material to note Carceller’s determination to purchase said property. In one of his letters, he adduced that he introduced permanent improvements on the leased property, demonstrating his intent to acquire dominion in a year’s time. He even secured a loan to augment his capital and pay for the property in full.
Thus, the Court rules in favor of Carceller and reiterates that contracts are the law between the contracting parties and should be fulfilled, if their terms are clear and leave no room for doubt as to the intention of the contracting parties.