G.R. No. 155043, 30 September 2004


Armed with a Special Power of Attorney, purportedly issued by his wife, Arturo executed a Receipt and Memorandum of Agreement (RMOA), in favor of respondent, binding himself to sell the subject property and not to offer the same to any other party within 30 days from date. Arturo acknowledged receipt of a check from respondent in the amount of ₱5,000.00, representing earnest money for the subject property, the amount of which would be deducted from the purchase price of ₱1,300,000.00. The RMOA stated that full payment would be effected as soon as possession of the property shall have been turned over to respondent. Subsequently, Ester, Arturo’s wife, executed a Special Power of Attorney appointing her sister to act for and in her behalf relative to the transfer of the property to respondent.

Respondent sent a letter to Arturo and Esther informing them of his readiness and willingness to pay the full amount of the purchase price. The letter contained a demand upon the spouses to comply with their obligation to turn over possession of the property to him. Respondent promised to pay the balance of the purchase price in the amount of ₱1,290,000.00 after being placed in possession of the property. In a letter, respondent informed the spouses that he had set aside the amount of ₱1,290,000.00 as evidenced by a check as full payment of the purchase price. He reiterated his demand upon them to comply with their obligation to turn over possession of the property. Arturo and Esther failed to deliver the property.


Whether the RMOA is an option contract or an earnest money.


The RMOA signifies a unilateral offer of Arturo to sell the property to respondent for a price certain within a period of thirty days. The RMOA does not impose upon respondent an obligation to buy petitioner’s property, as in fact it does not even bear his signature thereon. It is quite clear that after the lapse of the 30-day period, without respondent having exercised his option, Arturo is free to sell the property to another. This shows that the intent of Arturo is merely to grant respondent the privilege to buy the property within the period therein stated. There is nothing in the RMOA which indicates that Arturo agreed therein to transfer ownership of the land which is an essential element in a contract of sale. Unfortunately, the option is not binding upon the promissory since it is not supported by a consideration distinct from the price.

As a rule, the holder of the option, after accepting the promise and before he exercises his option, is not bound to buy. He is free either to buy or not to buy later. In Sanchez v. Rigos, in an accepted unilateral promise to sell, the promissor is not bound by his promise and may, accordingly, withdraw it, since there may be no valid contract without a cause or consideration. Pending notice of its withdrawal, his accepted promise partakes of the nature of an offer to sell which, if acceded or consented to, results in a perfected contract of sale.

The fact that respondent had set aside a check representing the balance of the purchase price could not help his cause. Settled is the rule that tender of payment must be made in legal tender. A check is not legal tender, and therefore cannot constitute a valid tender of payment. Not having made a valid tender of payment, respondent’s action for specific performance must fail.

With regard to the payment of ₱5,000.00, the Court is of the view that the amount is not earnest money as the term is understood in Article 1482 which signifies proof of the perfection of the contract of sale, but merely a guarantee that respondent is really interested to buy the property. It is not the giving of earnest money, but the proof of the concurrence of all the essential elements of the contract of sale which establishes the existence of a perfected sale. No reservation of ownership on the part of Arturo is necessary since, as previously stated, he has never agreed to transfer ownership of the property to respondent.

*Case digest by Teonilo M. Bagalanon Jr., JD – 4, Andres Bonifacio College, SY 2019 – 2020