5. Difference Between Earnest Money and Option Money OESMER VS. PARAISO FACTS Petitioners Rizalino, Ernesto, Leonora, Bibiano, Jr., Jr., Librado, Enriqueta, Adolfo, Adolfo, and Jesus, all surnamed Oesmer together with Adolfo Oesmer (Adolfo and Jesus Oesmer (Jesus, are brothers and sisters, and the !o" owners of undi#ided shares of two $ar!els of agri!ultural and tenanted land. Both lots are unregistered and originall% owned b% their $arents, Bibiano Oesmer and En!arna!ion &urum$ili. 'hen the s$ouses Oesmer died, $etitioners, together with Adolfo and Jesus, a!quired the lots as heirs of the former b% right of su!!ession. Res$ondent Paraiso &e#elo$ment or$oration is engaged in the real estate business. )n *ar!h +-, one Rogelio Paular, brought along $etitioner Ernesto to meet with a !ertain otero Lee, President of res$ondent Paraiso &e#elo$ment or$oration. /he said meeting was for the $ur$ose of bro0ering the sale of $etitioners1 $ro$erties to Res$ondent or$oration. Pursuant to the said meeting, a ontra!t to ell was drafted b% the E2e!uti#e Assistant Assistant of Lee. On + A$ril +-, $etitioners Ernesto and Enriqueta signed the aforesaid ontra!t to ell. A !he!0 in the amount of P+33,333.33, $a%able to Ernesto, was gi#en as o $tion mone%. ometime thereafter, Rizalino, Rizalino, Leonora, Bibiano, Jr., and Librado also signed the said ontra!t to ell. 4owe#er, two of the brothers, Adolfo and Jesus, did not sign the do!ument. Petitioners, through a letter, informed the res$ondent !om$an% of their intention to res!ind the ontra!t to ell and to return the amount of P+33,333.33 gi#en b% res$ondent as o$tion mone%. Res$ondent did not res$ond to the aforesaid letter. ubsequentl%, the $etitioners, together with Adolfo and Jesus, filed a om$laint for &e!laration of 5ullit% or for Annulment of O$tion Agreement Agreement or ontra!t to ell with &amages. ISS!E (+ 'O5 the su$$osed ontra!t to ell is reall% a unilateral $romise to sell without !onsideration distin!t from the $ri!e, and hen!e, #oid. (5O, it is indeed a ontra!t to ell. (6 'O5 the !onsideration of P+337 $aid is an o$tion mone%. ()t is an earnest mone%. "E#D )n the instant !ase, the !onsideration of P+33,333.33 $aid b% res$ondent to $ etitioners was referred to as 8o$tion mone%.8 4owe#er, a !areful e2amination of the words used in the !ontra!t indi!ates that the mone% is not o$tion mone% but earnest mone%. 8Earnest mone%8 and 8o$tion mone%8 are not the same but distinguished thus9 (a earnest mone% is $art of the $ur!hase $ri!e, while o$tion mone% is the mone% gi#en
as a distin!t !onsideration for an o$tion !ontra!t: (b earnest mone% is gi#en onl% where there is alread% a sale, while o$tion mone% a$$lies to a sale not %et $erfe!ted: and, (! when earnest mone% is gi#en, the bu%er is bound to $a% the balan!e, while when the would"be bu%er gi#es o$tion mone%, he is not required to bu%, but ma% e#en forfeit it de$ending on the terms of the o$tion. /he sum of P+33,333.33 was $art of the $ur!hase $ri!e. Although the same was denominated as 8o$tion mone%,8 mone%,8 it is a!tuall% in the nature of earnest mone% or down $a%ment when !onsidered with the other terms of the !ontra!t. &oubtless, the agreement is n ot a mere unilateral $romise to sell, but, indeed, it is a ontra!t to ell as both the trial !ourt and the a$$ellate !ourt de!lared in their &e!isions. FORMA# RE$!IREME%TS OF SA#E &. For' not I'portant for Va(idity of Sa(e %ARA%)A VS. CA FACTS Roque 5aran;a was the registered owner of a $ar!el of land, Ba!olod. Roque was also a !o"owner of an ad;a!ent lot (Lot 5o. 6 whi!h he !o"owned with his brothers,
6 /"+-=>6 in the names of Roque, 6 /"+-=>6 remained e #en after 6"+6. or his $ro$erties, Roque was being $aid P633.33 $er month b% the !om$an%. Roque had no other sour!e of in!ome e2!e$t for the P633.33 monthl% rental of his two $ro$erties. /o /o show his gratitude to Belardo, Roque sold Lot 5o. and his one"third share in Lot 5o. 6 to Belardo on August 6+, +-+, through a &eed of ale of Real Pro$ert% whi!h was dul% notarized b% Att%. Eugenio ani!as. Roque1s !o$ies of // 5o. /"+-=> and // 5o. /" +-=>6 were entrusted to Att%. ani!as for registration of the deed of sale and transfer of the titles to Belardo. But the deed of sale !ould not be registered be!ause Belardo did not ha#e the mone% to $a% for the registration fees. Belardo1s onl% sour!e of in!ome was her store and !offee sho$. ometimes, her !hildren would gi#e her mone% to hel$ with the household e2$enses, in!luding the e2$enses in!urred for Roque1s su$$ort. At times, she would also borrow mone% from *argarita &ema"ala, a neighbor.'hen neighbor. 'hen the amount of her loan rea!hed P+C,333.33, &ema"ala required a se!urit%.
Roque e2e!uted a deed of sale in fa#or of &ema"ala, !o#ering his two $ro$erties in !onsideration of the P+C,333.33 outstanding loan and an additional P+C,333.33, for a total ofP@3,333.33. &ema" ala e2$lained that she wanted Roque to e2e!ute the deed of sale himself sin!e the $ro$erties were still in his name. Belardo merel% a!ted as a witness. /he titles to the $ro$erties were gi#en to &ema"ala for safe0ee$ing. /hree da%s later, Roque died of influenza. /he $ro!eeds of the loan were used for his treatment while the rest was s$ent for his burial. )n +-C, Belardo full% $aid the loan se!ured b% the se!ond deed of sale. &ema"ala returned the !ertifi!ates of title to Belardo, who, in turn, ga#e them ba!0 to Att%. ani!as. Dn0nown to Belardo, $etitioners, the !hildren of Pla!ido and , $etitioner Amelia 5aran;a"Rubinos, a!!om$anied b% Belardo, borrowed the two //s, together with the lease agreement with Esso tandard Eastern, )n!., from Att%. ani!as on a!!ount of the loan being $ro$osed b% Belardo to her. /hereafter, $etitioners had the E2tra;udi!ial ettlement Among 4eirs notarized on ebruar% 6C, +->. ' ith Roque1s !o$% of // 5o. /" +-=> in their $ossession, the% su!!eeded in ha#ing it !an!elled and a new !ertifi!ate of title, // 5o. /" +3+-, issued in their names. )n +-=, Belardo de!ided to register the &eed of ale dated August 6+, +-+. 'ith no title in hand, she was !om$elled to file a $etition with the R/ to dire!t the Register of &eeds to annotate the deed of sale e#en without a !o$% of the //s. )n an Order dated June +-, +-=, the R/ granted the $etition. But she o nl% su!!eeded in registering the deed of sale in // 5o. /" +-=>6 be!ause // 5o. /"+-=> had alread% been !an!elled. On &e!ember ++, +-, Att%. ani!as $re$ared a !ertifi!ate of authorization, gi#ing Belardo1s daughter, Jennel%n P. argas, the authorit% to !olle!t the $a%ments from Esso tandard Eastern, )n!. But it a$$eared from the !om$an%1s Ad#i!e of i2ed Pa%ment that $a%ment of the lease rental had alread% been transferred from Belardo to Amelia 5aran;a"Rubinos be!ause of the E2tra;udi!ial ettlement Among 4eirs. On June 6@, +6, Belardo, through her daughter and attorne%"in"fa!t, Rebe!!a ordero, instituted a suit for re!on#e%an!e with damages. /he !om$laint $ra%ed that ;udgment be rendered de!laring Belardo as the sole legal owner of Lot 5o. , de!laring null and #oid the E2tra;udi!ial ettlement Among 4eirs, and // 5o. /" +3+-, and ordering $etitioners to re!on#e% to her the sub;e!t $ro$ert% and to $a% damages.
ubsequentl%, $etitioners also filed a !ase against res$ondent for annulment of sale and quieting of title with damages, $ra%ing, among others, that ;udgment be rendered nullif%ing the &eed of ale, and ordering the Register of &eeds of Ba!olod it% to !an!el the annotation of the &eed of ale on // 5o. /"+-=>6. /he RTC rendered a &e!ision in the !onsolidated !ases in fa#or of $etitioners. /he trial !ourt noted that the &eed of ale was defe!ti#e in form sin!e it did not !ontain a te!hni!al des!ri$tion of the sub;e!t $ro$erties but merel% indi!ated that the% were Lot 5o. , !o#ered b% // 5o. /"+-=> !onsisting of +@> square meters, and one"third $ortion of Lot 5o. 6 !o#ered b% // 5o. /"+-=>6. /he trial !ourt held that, being defe!ti#e in form, the &eed of ale did not #est title in $ri#ate res$ondent. ull and absolute ownershi$ did not $ass to $ri#ate res$ondent be!ause she failed to register the &eed of ale. he was not a $ur!haser in good faith sin!e she a!ted as a witness to the se!ond sale of the $ro$ert% 0nowing that she had alread% $ur!hased the $ro$ert% from Roque. 'hate#er rights $ri#ate res$ondent had o#er the $ro$erties !ould not be su$erior to the rights of $etitioners, who are now the registered owners of the $ar!els of land /he CA re#ersed the R/ &e!ision. /he A held that the unregisterabilit% of a deed of sale will not undermine its #alidit% and effi!a!% in transferring ownershi$ of the $ro$erties to $ri#ate res$ondent. /he A noted that the re!ords were de#oid of an% $roof e#iden!ing the alleged #itiation of Roque1s !onsent to the sale: hen!e, there is no reason to in#alidate the sale. Registration is onl% ne!essar% to bind third $arties, whi!h $etitioners, being the heirs of Roque 5aran;a, are not. /he trial !ourt erred in a$$l%ing Arti!le +C of the i#il ode to the !ase at bar sin!e $etitioners are not $ur!hasers of the said $ro$erties. 4en!e, it is not signifi!ant that $ri#ate res$ondent failed to register the deed of sale before the e2tra;udi!ial settlement among the heir. ISS!E 'hether or not the deed of sale must !ontain a te!hni!al des!ri$tion of the sub;e!t $ro$ert% in order to be #alid "E#D /he ourt does not agree with $etitioners1 !ontention that a deed of sale must !ontain a te!hni!al des!ri$tion of the sub;e!t $ro$ert% in order to be #alid. Petitioners an!hor their theor% on e!tion +6= of A!t 5o. >, whi!h $ro#ides a sam$le form of a deed of sale that in!ludes, in $arti!ular, a te!hni!al des!ri$tion of the sub;e!t $ro$ert%. /o be #alid, a !ontra!t of sale need not !ontain a te!hni!al des!ri$tion of the sub;e!t $ro$ert%. ontra!ts of sale of real $ro$ert% ha#e no $res!ribed form for their #alidit%: the% follow the general rule on !ontra!ts that the% ma% be entered into in whate#er form, $ro#ided all the essential requisites for their #alidit% are $resent. /he
requisites of a #alid !ontra!t of sale under Arti!le +C- of the i#il ode are9 (+ !onsent or meeting of the minds: (6 determinate sub;e!t matter: and (@ $ri!e !ertain in mone% or its equi#alent. /he failure of the $arties to s$e!if% with absolute !larit% the ob;e!t of a !ontra!t b% in!luding its te!hni!al des!ri$tion is of no moment. ' hat is im$ortant is that there is, in fa!t, an ob;e!t that is determinate or at least determinable, as sub;e!t of the !ontra!t of sale. /he form of a deed of sale $ro#ided in e!tion +6= of A!t 5o. > is onl% a suggested form. )t is not a mandator% form that must be stri!tl% followed b% the $arties to a !ontra!t. )n the instant !ase, the deed of sale !learl% identifies the sub;e!t $ro$erties b% indi!ating their res$e!ti#e lot numbers, lot areas, and the !ertifi!ate of title !o#ering them. Resort !an alwa%s be made to the te!hni!al des!ri$tion as stated in the !ertifi!ates of title !o#ering the two $ro$erties.
DA#IO% VS. CA FACTS /his is a $etition to annul and set aside the de!ision of the ourt of A$$eals rendered on *a% 6>, +-=, u$holding the #alidit% of the sale of a $ar!el of land b% $etitioner egundo &alion (hereafter, 8&alion8 in fa#or of $ri#ate res$ondent Ru$erto abesa;e, Jr. (hereafter, 8abesa;e8.
ISS!E 'hether or not the sale is #alidH "E#D Ies. /he $ro#ision of Art. +@C- on the ne!essit% of a $ubli! do!ument is onl% for !on#enien!e, not for #alidit% or enfor!eabilit%. )t is not a requirement for the #alidit% of a !ontra!t of sale of a $ar!el of land that this be embodied in a $ubli! instrument. A !ontra!t of sale is a !onsensual !ontra!t, whi!h means that the sale is $erfe!ted b% mere !onsent. 5o $arti!ular form is required for its #alidit%. D$on $erfe!tion of the !ontra!t, the $arties ma% re!i$ro!all% demand $erforman!e (Art. +=C, 5, i.e., the #endee ma% !om$el transfer of ownershi$ of the ob;e!t of the sale, and the #endor ma% require the #endee to $a% the thing sold (Art. +C-, 5. /he trial !ourt thus rightl% and legall% ordered &alion to deli#er to abesa;e the $ar!el of land and to e2e!ute !orres$onding formal deed of !on#e%an!e in a $ubli! do!ument. Dnder Art. +-, 5, when the sale is made through a $ubli! instrument, the e2e!ution thereof is equi#alent to the deli#er% of the thing. &eli#er% ma% either be a!tual (real or !onstru!ti#e. /hus deli#er% of a $ar!el of land ma% be done b% $la!ing the #endee in !ontrol and $ossession of the land (real or b% embod%ing the sale in a $ubli! instrument (!onstru!ti#e. "EIRS OF BIO%A VS. CA
On *a% 6-, +=@, abesa;e sued to re!o#er ownershi$ of a $ar!el of land, based on a $ri#ate do!ument of absolute sale, dated Jul% +, + >C, allegedl% e2e!uted b% &alion, who, howe#er denied the fa!t of sale, !ontending that the do!ument sued u$on is fi!titious, his signature thereon, a forger%, and that sub;e!t land is !on;ugal $ro$ert%, whi!h he and his wife a!quired in +>3 from aturnina abesa;e as e#iden!ed b% the 8Es!ritura de enta Absoluta8. /he s$ouses denied !laims of abesa;e that after e2e!uting a deed of sale o#er the $ar!el of land, the% had $leaded with abesa;e, their relati#e, to be allowed to administer the land be!ause &alion did not ha#e an% means of li#elihood. /he% admitted, howe#er, administering sin!e +C-, fi#e (C $ar!els of land in ogod, outhern Le%te, whi!h belonged to Leonardo abesa;e, grandfather of abesa;e, who died in +C>. /he% ne#er re!ei#ed their agreed +3F and +CF !ommission on the sales of !o$ra and aba!a, res$e!ti#el%. abesa;eGs suit, the% !ountered, was intended merel% to harass, $reem$t and forestall &alionGs threat to sue for these un$aid !ommissions. &alion nonetheless still im$ugns the #alidit% of the sale on the ground that the same is embodied in a $ri#ate do!ument, and did not thus !on#e% title or right to the lot in question sin!e 8a!ts and !ontra!ts whi!h ha#e for their ob;e!t the !reation, transmission, modifi!ation or e2tin!tion of real rights o#er immo#able $ro$ert% must a$$ear in a $ubli! instrument.8
FACTS On O!tober 6@, +C@, the late Ernesto Biona, married to $laintiff"a$$ellee oledad Biona, was awarded 4omestead Patent o#er the $ro$ert% sub;e!t of this suit, a $ar!el of agri!ultural land, lo!ated in Bo. @, Banga, otabato, On June @, +C, Ernesto and oledad Biona obtained a loan from the then Rehabilitation inan!e or$oration (now the &e#elo$ment Ban0 of the Phili$$ines and $ut u$ as !ollateral the sub;e!t $ro$ert%. On June +6, +C>, Ernesto Biona died lea#ing as his heirs herein $laintiffs" a$$ellees, namel%, his wife, oledad Estrobillo da. &e Biona, and fi#e daughters, Editha B. Blan!aflor, *arianita B. de Jesus, ilma B. Blan!aflor, Elsie B. Ramos and Perlita B. armen. On *ar!h +, +>3, $laintiff"a$$ellee oledad Biona obtained a loan from defendant"a$$ellant in the amount of P+,333 and as se!urit% therefore, the sub;e!t $ro$ert% was mortgaged. )t was further agreed u$on b% the !ontra!ting $arties that for a $eriod of two %ears until the debt is $aid, defendant"a$$ellant shall o!!u$% the land in dis$ute and en;o% the usufru!t thereof. /he two"%ear $eriod ela$sed but oledad Biona was not able to $a% her indebtedness. &efendant"a$$ellant !ontinued o!!u$%ing and !ulti#ating the sub;e!t $ro$ert% without $rotest from $laintiffs"a$$ellees.
On Jul% @, +>6, defendant"a$$ellant $aid the sum of P+,33.33 to the &e#elo$ment Ban0 of the Phili$$ines to !an!el the mortgage $re#iousl% !onstituted b% the Biona s$ouses on June @, +C@. /hereafter, and for a $eriod of not less than twent%"fi#e %ears, defendant"a$$ellant !ontinued his $ea!eful and $ubli! o!!u$ation of the $ro$ert%, de!laring it in his name for ta2ation $ur$oses, $a%ing real estate $ro$ert% ta2es thereon, and !ausing the same to be tenanted.
"E#D IE but with regard onl% to oledad1s share (=+6. But sin!e the daughters of Biona failed to assert their rights and allowed defendant 4ila;os to o!!u$% the land in $ea!e for more than @3 %ears, the% are now sto$$ed due to la!hes.
On June +, +-C, $laintiffs"a$$ellees, filed a !om$laint for re!o#er% of ownershi$, $ossession, a!!ounting and damages, with a $ra%er for a writ of $reliminar% mandator% in;un!tion and or restraining order against defendant"a$$ellant alleging, among others, that the latter had unlawfull% been de$ri#ing them of the use, $ossession and en;o%ment of the sub;e!t $ro$ert%: that the entire $ar!el of land, whi!h was de#oted and highl% suited to $ala% and !orn, was %ielding three har#ests annuall%, with an a#erage of o ne hundred twent% (+63 sa!0s of !orn and eight% !a#ans of ri!e $er he!tare: that $laintiffs"a$$ellees were de$ri#ed of its total $rodu!e amounting to P+C3,333.33.
All the requisites for a #alid !ontra!t of sale are $resent in the instant !ase. or a #aluable !onsideration of P,C33.33, oledad Biona agreed to sell and a!tuall% !on#e%ed the sub;e!t $ro$ert% to $ri#ate res$ondent. /he fa!t that the deed of sale was not notarized does not render the agreement null and #oid and without an% effe!t. /he $ro#ision of Arti!le +@C- of the i#il ode on the ne!essit% of a $ubli! do!ument is onl% for !on#enien!e, and not for #alidit% or enfor!eabilit%.+3 /he obser#an!e of whi!h is onl% ne!essar% to insure its effi!a!%, so that after the e2isten!e of said !ontra!t had been admitted, the $art% bound ma% be !om$elled to e2e!ute the $ro$er do!ument.++ Dndeniabl%, a !ontra!t has been entered into b% oledad Biona and the $ri#ate res$ondent. Regardless of its form, it was #alid, binding and enfor!eable between the $arties.
One of the !laims of defendant"a$$ellant was that b% #irtue of his !ontinuous and $ea!eful o!!u$ation of the $ro$ert% from the time of its sale and for more than twent%" fi#e %ears thereafter, defendant $ossesses a better right thereto sub;e!t onl% to the rights of the tenants whom he had allowed to !ulti#ate the land under the Land Reform Program of the go#ernment: and that $laintiffs alleged right, if an%, is barred b% the statutes of fraud.
Dnder Art. +@C> of the i#il ode, !ontra!ts shall be obligator% in whate#er form the% ma% ha#e been entered into $ro#ided all the essential requisites for their ne!essar% elements for a #alid !ontra!t of sale were met when oledad Biona agreed to sell and a!tuall% !on#e%ed Lot +== to defendant"a$$ellant who $aid the amount of P,C33.33 therefore. /he deed of sale (E2h. 6 is not made ineffe!ti#e merel% be!ause it is not notarized or does not a$$ear in a $ubli! do!ument.
ISS!E 'hether or not the deed of sale was #alid and if it effe!ti#el% !on#e%ed to the $ri#ate res$ondents the sub;e!t $ro$ert%
