PERCELINO DIAMANTE vs. HON.

COURT OF APPEALS and GERARDO DEYPALUBUS

G.R. No. L-51824 February 7, 1992
DAVIDE, JR., J.

FACTS:

 A fishery lot, encompassing an area of 9.4 hectares in Iloilo, previously covered by a Fishpond Permit was issued in the
name of Anecita Dionio.
 Upon Anecita's death, her heirs, petitioner Diamante and Primitivo Dafeliz, inherited the property which they later
divided between themselves; Diamante got 4.4. hectares while Dafeliz got 5 hectares. It is the share of Diamante that is
the subject of the present controversy.
 Primitivo Dafeliz later sold his share to Gerardo Deypalubus (private respondent).
 On 21 May 1959, Diamante sold to Deypalubus his leasehold rights over the property in question for P8,000.00 with the
right to repurchase the same within three (3) years from said date.
 On 16 August 1960, Deypalubus filed an application with the Bureau of Fisheries, dated 12 July 1960, for a fishpond
permit and a fishpond lease agreement over the entire lot, submitting therewith the deeds of sale executed by Dafeliz
and Diamante.
 Pressed by urgent financial needs, Diamante, on 17 October 1960, sold all his remaining rights over the property in
question to Deypalubus for P4,000.00.
 On 25 October 1960, Deypalubus, with his wife's consent, executed in favor of Diamante an Option to Repurchase the
property in question within ten (10) years from said date, with a ten-year grace period.
 Deypalubus submitted to the Bureau of Fisheries the definite deed of sale; he did not, however, submit the Option to
Repurchase.
 Thereafter, on 2 August 1961, the Bureau of Fisheries issued to Deypalubus Fishpond Permit.
 On 11 December 1963, Diamante, contending that he has a valid twenty-year option to repurchase the subject
property, requested the Bureau of Fisheries to nullify Deypalubus’ permit insofar as the said property is concerned.
However his On 18 December 1964, his letter-complaint was dismissed and his motion for reconsideration was also
denied. Subsequently, his appeal to Department of Agriculture and Natural Resources (DANR) was likewise dismissed.
Again, he sought for reconsideration, this time, however, he was successful.

DANR Secretary Ruling:

 The application as originally filed, could not be favorably acted upon by reason of the existing right of a third party over
a portion thereof. The execution of the “option to repurchase” barely a week after the execution of the deed of
absolute sale placed the land again under an encumbrance in favor of a third party.
 There is a ground to believe that the deed of absolute sale was executed merely with the end in view of circumventing
the requirements for the approval of the transfer of leasehold rights of Diamante in favor of Deypalubos; and the
subsequent execution of the "Option to Repurchase" was made to assure the maintenance of a vendor a retro's rights
in favor of Diamante. This misrepresentation is of an essential or material fact which in accordance to Sec. 20 of
Fisheries Administrative Order No. 60 shall ipso facto cause the cancellation of the permit.

CFI Ruling:

 After issuing a temporary restraining order and a writ of preliminary injunction, the lower court tried the case jointly
with the Criminal Case wherein both Diamante and Atty. Agustin Dioquino, the Notary Public who notarized the 25
October 1960 Option to Repurchase, were charged with falsification of a public document.
 The accused was acquitted in the criminal case. CFI ruled in favor of Diamante to wit: (1) the DANR Secretary abused his
discretion in issuing the questioned Orders, (2)Diamante cannot repurchase the property in question as the Option to
Repurchase is of doubtful validity, and (3) FLA No. 1372 in the name of Deypalubos is valid and binding.

CA Ruling:

 On 6 December 1978, CA reversed the decision of the trial court on the ground that no grave abuse of discretion was
committed by respondent Secretary inasmuch as Deyapalubos was given the opportunity to be heard on his claim that
the Option to Repurchase is spurious, and that the trial court merely indulged in conjectures in not upholding its
validity.
 On the motion for reconsideration filed by Deypalubos, CA in its 21 March 1979 resolution set aside its earlier decision
and affirmed, in toto, the ruling of the trial court.

ISSUE:
Whether or not the “Option to Repurchase” executed by Deypalubos granted Diamante the right to repurchase subject lot.

RULING:

No. Article 1601 of the Civil Code provides:

Conventional redemption shall take place when the vendor reserves the right to repurchase the thing sold,
with the obligation to comply with the provisions of article 1616 and other stipulations which may have been
agreed upon.

In Villarica, et al. vs. Court of Appeals, et al., the Court promulgated its interpretation of the above Article and held that “The
right of repurchase is not a right granted the vendor by the vendee in a subsequent instrument, but is a right reserved by the
vendor in the same instrument of sale as one of the stipulations of the contract. Once the instrument of absolute sale is
executed, the vendor can no longer reserve the right to repurchase, and any right thereafter granted the vendor by the vendee
in a separate instrument cannot be a right of repurchase but some other right like the option to buy.”

In an earlier case of Ramos, et al. vs. Icasiano, et al. the Court already held that "an agreement to repurchase becomes a
promise to sell when made after the sale, because when the sale is made without such an agreement, the purchaser acquires
the thing sold absolutely, and if he afterwards grants the vendor the right to repurchase, it is a new contract entered into by the
purchaser, as absolute owner already of the object. In that case the vendor has not reserved to himself the right to repurchase."

Hence, the Option to Repurchase executed by Deypalubos in the present case, was merely a promise to sell, which must be
governed by Article 1479 of the Civil Code. A copy of the so-called Option to Repurchase is neither attached to the records nor
quoted in any of the pleadings of the parties. The Court cannot, therefore, properly rule on whether the promise was accepted
and a consideration distinct from the price, supports the option. Undoubtedly, in the absence of either or both acceptance and
separate consideration, the promise to sell is not binding upon the promissor (Deypalubos). A unilateral promise to buy or sell is
a mere offer, which is not converted into a contract except at the moment it is accepted. Acceptance is the act that gives life to a
juridical obligation, because, before the promise is accepted, the promissor may withdraw it at any time. Upon acceptance,
however, a bilateral contract to sell and to buy is created, and the offeree ipso facto assumes the obligations of a purchaser; the
offeror, on the other hand, would be liable for damages if he fails to deliver the thing he had offered for sale. The contract of
option is a separate and distinct contract from the contract which the parties may enter into upon the consummation of the
option, and a consideration for an optional contract is just as important as the consideration for any other kind of contract.
Thus, a distinction should be drawn between the consideration for the option to repurchase, and the consideration for the
contract of repurchase itself. Even if the promise was accepted, Deypalubos was not bound thereby in the absence of a distinct
consideration.