Serra vs. Court of Appeals, and RCBC
229 SCRA 60
January 1994
FACTS:
Petitioner Federico Serra, who is the owner of a 374 square meter parcel of land located at Masbate, Masbate, and private respondent Rizal Commercial Banking Corporation (RCBC) entered into a "Contract of Lease with Option to Buy" in May 25, 1975 which provided that Serra will lease the subject land to RCBC for a period of 25 years from June 1, 1975 to June 1, 2000, that the RCBC has the option to purchase the same at P210.00 per square meter within a period of 10 years from May 25, 1975, the date of the signing of the Contract, and that Serra will have to register said land under the Torrens System to the Register of Deeds of Province of Masbate within the same 10-year option period. Pursuant to said contract, RCBC constructed improvements on the subject land to house its branch office, while the petitioner had the property, within 3 years from 1975, duly registered with OCT No. 0-232 under the Torrens System. Later, petitioner alleged that as soon as he had the property registered, he kept on pursuing the branch manager for the sale of the lot as per their agreement, but it was not until September 4, 1984, that RCBC decided to exercise the option.
RCBC informed petitioner, through a letter, of its intention to buy the property at the agreed price of not greater than P210.00 per square meter or a total of P78,430.00, but petitioner replied that he is no longer selling the property. RCBC then filed an action for specific performance and damages against Serra in March 1985 alleging that during the negotiations it made clear to petitioner that it intends to stay permanently on property once its branch office is opened unless the exigencies of the business requires otherwise.
Although finding that the contract was valid, the lower court ruled that the option to buy is unenforceable because it lacked a consideration distinct from the price and RCBC did not exercise its option within the reasonable time. Upon motion for reconsideration, however, the lower court reversed itself on the 2nd issue, declared the contract as valid, and ordered Serra to deliver the proper deed of sale to RCBC. The Court of Appeals likewise affirmed said decision.
ISSUE:
Was there a valid contract of lease with option to buy between the parties? Was there a consideration distinct from the price to support the option given to RCBC?
COURT RULING:
The Supreme Court affirmed the appellate court’s decision. A contract of adhesion is one wherein a party, usually a corporation, prepares the stipulations in the contract, while the other party merely affixes his signature or his "adhesion" thereto. These types of contracts are as binding as ordinary contracts because in reality, the party who adheres to the contract is free to reject it entirely.
In the case at bar, the Supreme Court did not find the situation to be inequitable because petitioner is a highly educated man, who, at the time of the trial was already a CPA-Lawyer, and when he entered into the contract, was already a CPA, holding a respectable position with the Metropolitan Manila Commission. It is evident that a man of his stature should have been more cautious in transactions he enters into, particularly where it concerns valuable properties. Also, in the present case, the consideration is even more onerous on the part of the lessee since it entails transferring of the building and/or improvements on the property to petitioner, should respondent bank fail to exercise its option within the period stipulated.
