Cavite Devt Bank V Lim

G.R. No.
131679
February 1, 2000
CAVITE DEVELOPMENT BANK and FAR EAST BANK AND TRUST

COMPANY, petitioners,
vs.
SPOUSES CYRUS LIM and LOLITA CHAN LIM and COURT OF
APPEALS, respondents.
FACTS:
Petitioners Cavite Development Bank and Far East Bank and Trust Company are
banking institutions duly organized and existing under Philippine laws. A certain Rodolfo
Guansing obtained a loan from CDB, to secure which he mortgaged a parcel of land
situated located in La Loma, Quezon City registered in his name. As Guansing
defaulted in the payment of his loan, CDB foreclosed the mortgage. At the foreclosure
sale was held and the mortgaged property was sold to CDB as the highest bidder.
When Guansing failed to redeem, CDB consolidated title to the property in its new name
in favor of CDB.
Subsequently, Lolita Lim offered to buy the subject property from CDB and paid
the option money of 10% of the offered amount. However, after some time following up
the sale, Lim discovered that the subject property has issues, that the father of Rodolfo
Guansing, Perfecto, who is the true owner of the property instituted a civil case for the
cancellation of hes sons title and the trial court which hold the case, grant the said
petition restoring the previous title to Perfecto on the ground that latter was fraudulently
secured by Rodolfo.
Aggrieved by what she considered a serious misrepresentation by CDB on their
ability to sell the subject property, Lim, joined by her husband, filed an action for specific
performance and damages against CDB in the Regional Trial Court of Quezon City and
the petition was decided in favor of the Lim.
CDB brought the matter to the Court of Appeals which affirmed in toto the
decision of the Regional Trial Court.
ISSUE:
WON the amount paid by spouses Lim is an option money or earnest money
HELD:
Lims payment of Php30,000.00 shall be considered as earnest money, thus
there was a perfected contract of sale.
An option contract is a preparatory contract in which one party grants to the
other, for a fixed period and under specified conditions, the power to decide, whether or
not to enter into a principal contract, it binds the party who has given the option not
to enter into the principal contract with any other person during the period; designated,
and within that period, to enter into such contract with the one to whom the option was
granted, if the latter should decide to use the option. It is a separate agreement distinct
from the contract to which the parties may enter upon the consummation of the option.
An option contract is therefore a contract separate from and preparatory to a contract
of sale which, if perfected, does not result in the perfection or consummation of the sale.
Only when the option is exercised may a sale be perfected.
In this case, however, after the payment of the 10% option money, the Offer to
Purchase provides for the payment only of the balance of the purchase price, implying
that the "option money" forms part of the purchase price. This is precisely the result of
paying earnest money under Art. 1482 of the Civil Code. It is clear then that the parties
in this case actually entered into a contract of sale, partially consummated as to
the payment of the price.
Given CDB's acceptance of Lim's offer to purchase, it appears that a contract

of sale was perfected and, indeed, partially executed because of the partial payment of
the purchase price.
There is, however, a serious legal obstacle to such sale, rendering it impossible
for CDB to perform its obligation as seller to deliver and transfer ownership of the
property.
Nemo dat quod non habet, as an ancient Latin maxim says. One cannot give
what one does not have. In applying this precept to a contract of sale, a distinction must
be kept in mind between the "perfection" and "consummation" stages of the contract.
A contract of sale is perfected at the moment there is a meeting of minds upon
the thing which is the object of the contract and upon the price. It is, therefore, not
required that, at the perfection stage, the seller be the owner of the thing sold or even
that such subject matter of the sale exists at that point in time. Thus, under Art. 1434 of
the Civil Code, when a person sells or alienates a thing which, at that time, was not his,
but later acquires title thereto, such title passes by operation of law to the buyer or
grantee. This is the same principle behind the sale of "future goods" under Art. 1462 of
the Civil Code.
However, under Art. 1459, at the time of delivery or consummation stage of the
sale, it is required that the seller be the owner of the thing sold. Otherwise, he will not be
able to comply with his obligation to transfer ownership to the buyer. It is at the
consummation stage where the principle of nemo dat quod non habet applies.

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G.R. No.

CAVITE DEVELOPMENT BANK and FAR EAST BANK AND TRUST

Given CDB's acceptance of Lim's offer to purchase, it appears that a contract

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