RULINGS:
(1) The findings of respondent court and the court a quo that the contract executed between
the parties is an option contract, for the reason that the parties were already contemplating the
payment of the balance of the purchase price, and were not merely quoting an agreed value for
the property. The term “balance,” connotes a remainder or something remaining from the
original total sum already agreed upon.
In other words, the alleged option money of P50,000.00 was actually earnest money which was
intended to form part of the purchase price. The amount of P50,000.00 was not distinct from
the cause or consideration for the sale of the property, but was itself a part thereof. It is a
statutory rule that whenever earnest money is given in a contract of sale, it shall be considered
as part of the price and as proof of the perfection of the contract. It constitutes an advance
payment and must, therefore, be deducted from the total price. Also, earnest money is given by
the buyer to the seller to bind the bargain.
There are clear distinctions between earnest money and option money, viz.: (a) earnest money
is part of the purchase price, while option money ids the money given as a distinct
consideration for an option contract; (b) earnest money is given only where there is already a
sale, while option money applies to a sale not yet perfected; and (c) when earnest money is
given, the buyer is bound to pay the balance, while when the would-be buyer gives option
money, he is not required to buy.
The afore quoted characteristics of earnest money are apparent In the so-called option contract
under review, even though it was called “option money” by the parties. In addition, private
respondents failed to show that the payment of the balance of the purchase price was only a
condition precedent to the acceptance of the offer or to the exercise of the right to buy. On the
contrary, it has been sufficiently established that such payment was but an element of the
performance of petitioner’s obligation under the contract to sell.
(2) To justify its failure to pay the purchase price within the agreed period, petitioner invokes
Article 1590 of the civil Code which provides:
Art. 1590. Should the vendee be disturbed in the possession or ownership of the thing acquired,
or should he have reasonable grounds to fear such disturbance, by a vindicatory action or a
foreclosure of mortgage, he may suspend the payment of the price until the vendor has caused
the disturbance or danger to cease, unless the latter gives security for the return of the price in
a proper case, or it has been stipulated that, notwithstanding any such contingency, the vendee
shall be bound to make the payment. A mere act of trespass shall not authorize the suspension
of the payment of the price.
Respondent court refused to apply the aforequoted provision of law on the erroneous
assumption that the true agreement between the parties was a contract of option. As we have
hereinbefore discussed, it was not an option contract but a perfected contract to sell. Verily,
therefore, Article 1590 would properly apply. Both lower courts, however, are in accord that
since Civil Case No. 89-5541 filed against the parties herein involved only the eastern half of the
land subject of the deed of sale between petitioner and the Jimenez brothers, it did not,
therefore, have any adverse effect on private respondents’ title and ownership over the western
half of the land which is covered by the contract subject of the present case. At a glance, it is
easily discernible that, although the complaint prayed for the annulment only of the contract of
sale executed between petitioner and the Jimenez brothers, the same likewise prayed for the
recovery of therein plaintiffs’ share in that parcel of land specifically covered by TCT No. 309773.
In other words, the plaintiffs therein were claiming to be co-owners of the entire parcel of land
described in TCT No. 309773, and not only of a portion thereof nor, as incorrectly interpreted by
the lower courts, did their claim pertain exclusively to the eastern half adjudicated to the
Jimenez brothers.
Such being the case, petitioner was justified in suspending payment of the balance of the
purchase price by reason of the aforesaid vindicatory action filed against it. The assurance made
by private respondents that petitioner did not have to worry about the case because it was pure
and simple harassment is not the kind of guaranty 42 contemplated under the exceptive clause
in Article 1590 wherein the vendor is bound to make payment even with the existence of a
vindicatory action if the vendee should give a security for the return of the price.
