Oesmer v. Paraiso Development Corporation
REITERATIONFacts
The Antecedents: Petitioners, along with Adolfo and Jesus Oesmer, were co-owners of undivided shares of two parcels of agricultural land. In March 1989, a Contract to Sell was drafted for the sale of these properties to respondent Paraiso Development Corporation. Petitioners Ernesto and Enriqueta signed the contract, and respondent gave ₱100,000.00 as option money. Subsequently, Rizalino, Leonora, Bibiano, Jr., and Librado also signed the contract, but Adolfo and Jesus did not. The contract was returned to respondent and later notarized. Procedural History: In November 1989, petitioners sought to rescind the Contract to Sell. In May 1991, petitioners, along with Adolfo and Jesus, filed a Complaint for Declaration of Nullity or Annulment of the Option Agreement or Contract to Sell with Damages before the RTC. During trial, Rizalino died and was substituted by his heirs. The RTC rendered a Decision declaring the Contract to Sell valid and binding only with respect to the undivided proportionate share of petitioner Ernesto Oesmer, ordering him to execute a Deed of Absolute Sale for his 1/8 share and pay attorney's fees. Respondent appealed to the Court of Appeals. The Petition: The Court of Appeals modified the RTC decision, declaring the Contract to Sell valid and binding with respect to the undivided proportionate shares of the six signatories (petitioners Ernesto, Enriqueta, Librado, Rizalino, Bibiano, Jr., and Leonora). It ordered these petitioners to execute a Deed of Absolute Sale for their 6/8 share and pay attorney's fees. The CA also ordered respondent to tender payment for the balance of the purchase price. Petitioners filed a Motion for Reconsideration, which the CA granted in part by modifying its decision to order respondent to tender payment of ₱3,216,560.00. Petitioners then filed a Petition for Review on Certiorari before the Supreme Court, arguing that the Contract to Sell is not binding on the co-owners who did not grant written authority to Ernesto as agent, and that the contract is void because respondent did not sign it and it constitutes a unilateral promise to sell without distinct consideration.
Issue(s)
Whether the Contract to Sell is binding upon the co-owners who did not grant written authority to petitioner Ernesto Oesmer as their agent. Whether the Contract to Sell is void for not being signed by the respondent corporation and for constituting a unilateral promise to sell without distinct consideration. Whether the signatures of the petitioners on the Contract to Sell signify their consent to sell their shares, despite claims of lack of understanding or conditional consent.
Ruling
The Supreme Court denied the petition and affirmed the decision of the Court of Appeals. The Contract to Sell was declared valid and binding with respect to the undivided proportionate shares of the six signatories (petitioners Ernesto, Enriqueta, Librado, Rizalino, Bibiano, Jr., and Leonora). The petitioners were ordered to execute the Deed of Absolute Sale for their 6/8 share, and respondent was ordered to tender payment of the balance of the purchase price. Petitioners were also ordered to pay attorney's fees.
Ratio Decidendi
On the binding effect of the Contract to Sell on co-owners and the necessity of written authority for agency: The Court held that while the signatures of the five petitioners did not confer written authority on petitioner Ernesto to act as their agent to sell their respective shares, this did not render the contract void as to them. This is because the five petitioners personally affixed their signatures on the Contract to Sell, indicating their direct consent to sell their shares, not through an agent. Article 1874 of the Civil Code, requiring written authority for an agent to sell land, was deemed inapplicable because the co-owners were selling their own shares directly. The Court emphasized that each co-owner has the full ownership of their part and may alienate it, with the effect of the alienation limited to their portion upon division, as provided by Article 493 of the Civil Code. Therefore, the contract was valid and binding concerning the 6/8 proportionate shares of the signatories. On the validity of the contract despite respondent's lack of signature and the nature of the promise to sell: The Court ruled that the Contract to Sell is not void simply because the respondent corporation did not sign it. The respondent's consent was demonstrated through partial performance by tendering ₱100,000.00 as option money, which was accepted by the petitioners. This partial performance binds the respondent to fulfill its obligations under the contract. Furthermore, the contract was not a unilateral promise to sell. Although the ₱100,000.00 was denominated as "option money," the Court found it to be in the nature of "earnest money" because it was part of the purchase price and the contract indicated a sale was already perfected, not merely an option. Earnest money signifies a perfected sale and binds the buyer to pay the balance, unlike option money which is a distinct consideration for an option contract. On the petitioners' consent and understanding of the contract: The Court found that the petitioners' signatures on the Contract to Sell signified their acceptance and consent to the sale. The claim that petitioner Enriqueta signed merely as a witness was dismissed, as the contract did not indicate this capacity and her subsequent actions, such as updating tax payments and transferring tax declarations, showed her active participation and intent to comply with the contract. The assertion that other petitioners, due to low education, did not understand the contract was also rejected. The Court found the contract to be written in simple language, with clear indications of the properties, purchase price, and option money. It cited jurisprudence holding that individuals are presumed to know the contents of contracts they sign, and it is their responsibility to have them explained if they cannot comprehend them, especially when substantial amounts are involved. The testimony of Adolfo Oesmer, indicating an agreement among siblings to sell only if all agreed, was also noted but deemed not to invalidate the contract as the agreement was not in writing and co-owners can alienate their shares individually.
Main Doctrine
A contract to sell, even if not signed by all co-owners, is valid and binding with respect to the proportionate shares of the signatories, as co-owners can alienate their respective shares even without the consent of all co-heirs. Furthermore, the denomination of money as 'option money' does not automatically render a contract a unilateral promise to sell if the terms indicate it is part of the purchase price, thus constituting earnest money.