[G.R. No. 109125. December 2, 1994.]
Nonetheless, the lower court ruled that should the
ANG YU ASUNCION, ARTHUR GO AND KEH TIONG,
petitioners, vs. THE HON. COURT OF APPEALS and
BUEN REALTY DEVELOPMENT CORPORATION,
respondents.
VITUG, J p:
Assailed, in this petition for review, is the decision of the
Court of Appeals, dated 04 December 1991, in CA-G.R.
SP No. 26345 setting aside and declaring without force
and effect the orders of execution of the trial court, dated
30 August 1991 and 27 September 1991, in Civil Case
No. 87-41058.
The antecedents are recited in good detail by the
appellate court thusly:
"On July 29, 1987 a Second Amended Complaint for
Specific Performance was filed by Ann Yu Asuncion and
Keh Tiong, et al., against Bobby Cu Unjieng, Rose Cu
Unjieng and Jose Tan before the Regional Trial Court,
Branch 31, Manila in Civil Case No. 87-41058, alleging,
among others, that plaintiffs are tenants or lessees of
residential and commercial spaces owned by defendants
described as Nos. 630-638 Ongpin Street, Binondo,
Manila; that they have occupied said spaces since 1935
and have been religiously paying the rental and
complying with all the conditions of the lease contract;
that on several occasions before October 9, 1986,
defendants informed plaintiffs that they are offering to
sell the premises and are giving them priority to acquire
the same; that during the negotiations, Bobby Cu
Unjieng offered a price of P6-million while plaintiffs made
a counter offer of P5-million; that plaintiffs thereafter
asked the defendants to put their offer in writing to
which request defendants acceded; that in reply to
defendant's letter, plaintiffs wrote them on October 24,
1986 asking that they specify the terms and conditions
of the offer to sell; that when plaintiffs did not receive
any reply, they sent another letter dated January 28,
1987 with the same request; that since defendants failed
to specify the terms and conditions of the offer to sell
and because of information received that defendants
were about to sell the property, plaintiffs were compelled
to file the complaint to compel defendants to sell the
property to them.
"Defendants filed their answer denying the material
allegations of the complaint and interposing a special
defense of lack of cause of action.
"After the issues were joined, defendants filed a motion
for summary judgment which was granted by the lower
court. The trial court found that defendants' offer to sell
was never accepted by the plaintiffs for the reason that
the parties did not agree upon the terms and conditions
of the proposed sale, hence, there was no contract of sale
at all.
defendants subsequently offer their property for sale at a
price of P11-million or below, plaintiffs will have the
right of first refusal. Thus the dispositive portion of the
decision states:
"'WHEREFORE, judgment is hereby rendered in favor of
the defendants and against the plaintiffs summarily
dismissing the complaint subject to the aforementioned
condition that if the defendants subsequently decide to
offer their property for sale for a purchase price of Eleven
Million Pesos or lower, then the plaintiffs has the option
to purchase the property or of first refusal, otherwise,
defendants need not offer the property to the plaintiffs if
the purchase price is higher than Eleven Million Pesos.
"'SO ORDERED.'
"Aggrieved by the decision, plaintiffs appealed to this
Court in CA-G.R. CV No. 21123. In a decision
promulgated on September 21, 1990 (penned by Justice
Segundino G. Chua and concurred in by Justices
Vicente V. Mendoza and Fernando A. Santiago), this
Court affirmed with modification the lower court's
judgment, holding:
"'In resume, there was no meeting of the minds between
the parties concerning the sale of the property. Absent
such requirement, the claim for specific performance will
not lie. Appellants' demand for actual, moral and
exemplary damages will likewise fail as there exists no
justifiable ground for its award. Summary judgment for
defendants was properly granted. Courts may render
summary judgment when there is no genuine issue as to
any material fact and the moving party is entitled to a
judgment as a matter of law (Garcia vs. Court of
Appeals, 176 SCRA 815). All requisites obtaining, the
decision of the court a quo is legally justifiable.
'WHEREFORE, finding the appeal unmeritorious, the
judgment appealed from is hereby AFFIRMED, but
subject to the following modification: The court a quo in
the aforestated decision gave the plaintiffs-appellants the
right of first refusal only if the property is sold for a
purchase price of Eleven Million pesos or lower; however,
considering the mercurial and uncertain forces in our
market economy today. We find no reason not to grant
the same right of first refusal to herein appellants in the
event that the subject property is sold for a price in
excess of Eleven Million pesos. No pronouncement as to
costs. 'SO ORDERED.'
"The decision of this Court was brought to the Supreme
Court by petition for review on certiorari. The Supreme
Court denied the appeal on May 6, 1991 'for
insufficiency in form and substances' (Annex H,
Petition).
"On November 15, 1990, while CA-G.R. CV No. 21123
was pending consideration by this Court, the Cu Unjieng
spouses executed a Deed of Sale (Annex D, Petition)
transferring the property in question to herein petitioner
Buen Realty and Development Corporation, subject to
the following terms and conditions:
"'1. That for and in consideration of the sum of
FIFTEEN MILLION PESOS (P15,000,000.00), receipt of
which in full is hereby acknowledged, the VENDORS
hereby sells, transfers and conveys for and in favor of
the VENDEE, his heirs, executors, administrators or
assigns, the above-described property with all the
improvements found therein including all the rights and
interest in the said property free from all liens and
encumbrances of whatever nature, except the pending
ejectment proceeding;
'2. That the VENDEE shall pay the Documentary
Stamp Tax, registration fees for the transfer of title in his
favor and other expenses incidental to the sale of above-
described property including capital gains tax and
accrued real estate taxes.'
"As a consequence of the sale, TCT No. 105254/T-881 in
the name of the Cu Unjieng spouses was cancelled and,
in lieu thereof, TCT No. 195816 was issued in the name
of petitioner on December 3, 1990.
"On July 1, 1991, petitioner as the new owner of the
subject property wrote a letter to the lessees demanding
that the latter vacate the premises.
"On July 16, 1991, the lessees wrote a reply to petitioner
stating that petitioner brought the property subject to
the notice of lis pendens regarding Civil Case No. 87-
41058 annotated on TCT No. 105254/T-881 in the name
of the Cu Unjiengs.
"The lessees filed a Motion for Execution dated August
27, 1991 of the Decision in Civil Case No. 87-41058 as
modified by the Court of Appeals in CA-G.R. CV No.
21123.
"On August 30, 1991, respondent Judge issued an order
(Annex A, Petition) quoted as follows:
"'Presented before the Court is a Motion for Execution
filed by plaintiff represented by Atty. Antonio Albano.
Both defendants Bobby Cu Unjieng and Rose Cu Unjieng
represented by Atty. Vicente Sison and Atty. Anacleto
Magno respectively were duly notified in today's
consideration of the motion as evidenced by the rubber
stamp and signatures upon the copy of the Motion for
Execution.
'The gist of the motion is that the Decision of the Court
dated September 21, 1990 as modified by the Court of
Appeals in its decision in CA G.R. CV-21123, and
elevated to the Supreme Court upon the petition for
review and that the same was denied by the highest
tribunal in its resolution dated May 6, 1991 in G.R. No.
L-97276, had now become final and executory. As a
consequence, there was an Entry of Judgment by the
Supreme Court as of June 6, 1991, stating that the
aforesaid modified decision had already become final and
executory.
'It is the observation of the Court that this property in
dispute was the subject of the Notice of Lis Pendens and
that the modified decision of this Court promulgated by
the Court of Appeals which had become final to the effect
that should the defendants decide to offer the property
for sale for a price of P11 Million or lower, and
considering the mercurial and uncertain forces in our
market economy today, the same right of first refusal to
herein plaintiffs/appellants in the event that the subject
property is sold for a price in excess of Eleven Million
pesos or more.
'WHEREFORE, defendants are hereby ordered to execute
the necessary Deed of Sale of the property in litigation in
favor of plaintiffs Ang Yu Asuncion, Keh Tiong and
Arthur Go for the consideration of P15 Million pesos in
recognition of plaintiffs' right of first refusal and that a
new Transfer Certificate of Title be issued in favor of the
buyer.
'All previous transactions involving the same property
notwithstanding the issuance of another title to Buen
Realty Corporation, is hereby set aside as having been
executed in bad faith. 'SO ORDERED.'
"On September 22, 1991 respondent Judge issue
another order, the dispositive portion of which reads:
"'WHEREFORE, let there be Writ of Execution issue in
the above-entitled case directing the Deputy Sheriff
Ramon Enriquez of this Court to implement said Writ of
Execution ordering the defendants among others to
comply with the aforesaid Order of this Court within a
period of one (1) week from receipt of this Order and for
defendants to execute the necessary Deed of Sale of the
property in litigation in favor of the plaintiffs Ang Yu
Asuncion, Keh Tiong and Arthur Go for the
consideration of P15,000,000.00 and ordering the
Register of Deeds of the City of Manila, to cancel and set
aside the title already issued in favor of Buen Realty
Corporation which was previously executed between the
latter and defendants and to register the new title in
favor of the aforesaid plaintiffs Ang Yu Asuncion, Keh
Tiong and Arthur Go.'SO ORDERED.'
"On the same day, September 27, 1991 the
corresponding writ of execution (Annex C, Petition) was
issued". 1
On 04 December 1991, the appellate court, on appeal to
it by private respondent, set aside and declared without
force and effect the above questioned orders of the court
a quo.
In this petition for review on certiorari, petitioners
contend that Buen Realty can be held bound by the writ
of execution by virtue of the notice of lis pendens,
carried over on TCT No. 195816 issued in the name of
Buen Realty, at the time of the latter's purchase of the
property on 15 November 1991 from the Cu Unjiengs.
prcd
We affirm the decision of the appellate court.
A not too recent development in real estate transactions
is the adoption of such arrangements as the right of first
refusal, a purchase option and a contract to sell. For
ready reference, we might point out some fundamental
precepts that may find some relevance to this
discussion.
An obligation is a juridical necessity to give, to do or not
to do (Art. 1156, Civil Code). The obligation is
constituted upon the concurrence of the essential
elements thereof, viz: (a) The vinculum juris or juridical
tie which is the efficient cause established by the various
sources of obligations (law, contracts, quasi-contracts,
delicts and quasi-delicts); (b) the object which is the
prestation or conduct; required to be observed (to give, to
do or not to do); and (c) the subject-persons who, viewed
from the demandability of the obligation, are the active
(obligee) and the passive (obligor) subjects.
Among the sources of an obligation is a contract (Art.
1157, Civil Code), which is a meeting of minds between
two persons whereby one binds himself, with respect to
the other, to give something or to render some service
(Art. 1305, Civil Code). A contract undergoes various
stages that include its negotiation or preparation, its
perfection and, finally, its consummation. Negotiation
covers the period from the time the prospective
contracting parties indicate interest in the contract to
the time the contract is concluded (perfected). The
perfection of the contract takes place upon the
concurrence of the essential elements thereof. A contract
which is consensual as to perfection is so established
upon a mere meeting of minds, i.e., the concurrence of
offer and acceptance, on the object and on the cause
thereof. A contract which requires, in addition to the
above, the delivery of the object of the agreement, as in a
pledge or commodatum, is commonly referred to as a
real contract. In a solemn contract, compliance with
certain formalities prescribed by law, such as in a
donation of real property, is essential in order to make
the act valid, the prescribed form being thereby an
essential element thereof. The stage of consummation
begins when the parties perform their respective
undertakings under the contract culminating in the
extinguishment thereof. cdrep
Until the contract is perfected, it cannot, as an
independent source of obligation, serve as a binding
juridical relation. In sales, particularly, to which the
topic for discussion about the case at bench belongs, the
contract is perfected when a person, called the seller,
obligates himself, for a price certain, to deliver and to
transfer ownership of a thing or right to another, called
the buyer, over which the latter agrees. Article 1458 of
the Civil Code provides:
"Art. 1458. By the contract of sale one of the
contracting parties obligates himself to transfer the
ownership of and to deliver a determinate thing, and the
other to pay therefor a price certain in money or its
equivalent.
"A contract of sale may be absolute or conditional.
When the sale is not absolute but conditional, such as in
a "Contract to Sell" where invariably the ownership of
the thing sold is retained until the fulfillment of a
positive suspensive condition (normally, the full payment
of the purchase price), the breach of the condition will
prevent the obligation to convey title from acquiring an
obligatory force. 2 In Dignos vs. Court of Appeals (158
SCRA 375), we have said that, although denominated a
"Deed of Conditional Sale," a sale is still absolute where
the contract is devoid of any proviso that title is reserved
or the right to unilaterally rescind is stipulated, e.g.,
until or unless the price is paid. Ownership will then be
transferred to the buyer upon actual or constructive
delivery (e.g., by the execution of a public document) of
the property sold. Where the condition is imposed upon
the perfection of the contract itself, the failure of the
condition would prevent such perfection. 3 If the
condition is imposed on the obligation of a party which is
not fulfilled, the other party may either waive the
condition or refuse to proceed with the sale (Art. 1545,
Civil Code). 4
An unconditional mutual promise to buy and sell, as
long as the object is made determinate and the price is
fixed, can be obligatory on the parties, and compliance
therewith may accordingly be exacted. 5
An accepted unilateral promise which specifies the thing
to be sold and the price to be paid, when coupled with a
valuable consideration distinct and separate from the
price, is what may properly be termed a perfected
contract of option. This contract is legally binding, and
in sales, it conforms with the second paragraph of Article
1479 of the Civil Code, viz:
"ART. 1479. ....
"An accepted unilateral promise to buy or to sell a
determinate thing for a price certain is binding upon the
promissor if the promise is supported by a consideration
distinct from the price. (1451a) 6
Observe, however, that the option is not the contract of
sale itself. 7 The optionee has the right, but not the
obligation, to buy. Once the option is exercised timely,
i.e., the offer is accepted before a breach of the option, a
bilateral promise to sell and to buy ensues and both
parties are then reciprocally bound to comply with their
respective undertakings. 8
Let us elucidate a little. A negotiation is formally
initiated by an offer. An imperfect promise (policitacion)
is merely an offer. Public advertisements or solicitations
and the like are ordinarily construed as mere invitations
to make offers or only as proposals. These relations,
until a contract is perfected, are not considered binding
commitments. Thus, at any time prior to the perfection
of the contract, either negotiating party may stop the
negotiation. The offer, at this stage, may be withdrawn;
the withdrawal is effective immediately after its
manifestation, such as by its mailing and not necessarily
when the offeree learns of the withdrawal (Laudico vs.
Arias, 43 Phil. 270). Where a period is given to the
offeree within which to accept the offer, the following
rules generally govern:
(1) If the period is not itself founded upon or
supported by a consideration, the offeror is still free and
has the right to withdrawal the offer before its
acceptance, or, if an acceptance has been made, before
the offeror's coming to know of such fact, by
communicating that withdrawal to the offeree (see Art.
1324, Civil Code; see also Atkins, Kroll & Co. vs. Cua,
102 Phil. 948, holding that this rule is applicable to a
unilateral promise to sell under Art. 1479, modifying the
previous decision in South Western Sugar vs. Atlantic
Gulf, 97 Phil. 249; see also Art. 1319, Civil Code; Rural
Bank of Parañaque, Inc., vs. Remolado, 135 SCRA 409;
Sanchez vs. Rigos, 45 SCRA 368). The right to withdraw,
however, must not be exercised whimsically or
arbitrarily; otherwise, it could give rise to a damage
claim under Article 19 of the Civil Code which ordains
that "every person must, in the exercise of his rights and
in the performance of his duties, act with justice, give
everyone his due, and observe honesty and good faith."
LLjur
(2) If the period has a separate consideration, a
contract of "option" is deemed perfected, and it would be
a breach of that contract to withdraw the offer during
the agreed period. The option, however, is an
independent contract by itself, and it is to be
distinguished from the projected main agreement
(subject matter of the option) which is obviously yet to be
concluded. If, in fact, the optioner-offeror withdraws the
offer before its acceptance (exercise of the option) by the
optionee-offeree, the latter may not sue for specific
performance on the proposed contract ("object" of the
option) since it has failed to reach its own stage of
perfection. The optioner-offeror, however, renders
himself liable for damages for breach of the option. In
these cases, care should be taken of the real nature of
the consideration given, for if, in fact, it has been
intended to be part of the consideration for the main
contract with a right of withdrawal on the part of the
optionee, the main contract could be deemed perfected; a
similar instance would be an "earnest money" in a
contract of sale that can evidence its perfection (Art.
1482, Civil Code).
In the law on sales, the so-called "right of first refusal" is
an innovative juridical relation. Needless to point out, it
cannot be deemed a perfected contract of sale under
Article 1458 of the Civil Code. Neither can the right of
first refusal, understood in its normal concept, per se be
brought within the purview of an option under the
second paragraph of Article 1479, aforequoted, or
possibly of an offer under Article 1319 9 of the same
Code. An option or an offer would require, among other
things, 10 a clear certainty on both the object and the
cause or consideration of the envisioned contract. In a
right of first refusal, while the object might be made
determinate, the exercise of the right, however, would be
dependent not only on the grantor's eventual intention to
enter into a binding juridical relation with another but
also on terms, including the price, that obviously are yet
to be later firmed up. Prior thereto, it can at best be so
described as merely belonging to a class of preparatory
juridical relations governed not by contracts (since the
essential elements to establish the vinculum juris would
still be indefinite and inconclusive) but by, among other
laws of general application, the pertinent scattered
provisions of the Civil Code on human conduct. LexLib
Even on the premise that such right of first refusal has
been decreed under a final judgment, like here, its
breach cannot justify correspondingly an issuance of a
writ of execution under a judgment that merely
recognizes its existence, nor would it sanction an action
for specific performance without thereby negating the
indispensable element of consensuality in the perfection
of contracts. 11 It is not to say, however, that the right of
first refusal would be inconsequential for, such as
already intimated above, an unjustified disregard
thereof, given, for instance, the circumstances expressed
in Article 19 12 of the Civil Code, can warrant a
recovery for damages.
The final judgment in Civil Case No. 87-41058, it must
be stressed, has merely accorded a "right of first refusal"
in favor of petitioners. The consequence of such a
declaration entails no more than what has heretofore
been said. In fine, if, as it is here so conveyed to us,
petitioners are aggrieved by the failure of private
respondents to honor the right of first refusal, the
remedy is not a writ of execution on the judgment, since
there is none to execute, but an action for damages in a
proper forum for the purpose.
Furthermore, whether private respondent Buen Realty
Development Corporation, the alleged purchaser of the
property, has acted in good faith or bad faith and
whether or not it should, in any case, be considered
bound to respect the registration of the lis pendens in
Civil Case No. 87-41058 are matters that must be
independently addressed in appropriate proceedings.
Buen Realty, not having been impleaded in Civil Case
No. 87-41058, cannot be held subject to the writ of
execution issued by respondent Judge, let alone ousted
from the ownership and possession of the property,
without first being duly afforded its day in court.
We are also unable to agree with petitioners that the
Court of Appeals has erred in holding that the writ of
execution varies the terms of the judgment in Civil Case
No. 87-41058, later affirmed in CA-G.R. CV-21123. The
Court of Appeals, in this regard, has observed: Cdpr
"Finally, the questioned writ of execution is in variance
with the decision of the trial court as modified by this
Court. As already stated, there was nothing in said
decision 13 that decreed the execution of a deed of sale
between the Cu Unjiengs and respondent lessees, or the
fixing of the price of the sale, or the cancellation of title
in the name of petitioner (Limpin vs. IAC, 147 SCRA 516;
Pamantasan ng Lungsod ng Maynila vs. IAC, 143 SCRA
311; De Guzman vs. CA, 137 SCRA 730; Pastor vs. CA,
122 SCRA 885)."
It is likewise quite obvious to us that the decision in Civil
Case No. 87-41058 could not have decreed at the time
the execution of any deed of sale between the Cu
Unjiengs and petitioners.
WHEREFORE, we UPHOLD the Court of Appeals in
ultimately setting aside the questioned Orders, dated 30
August 1991 and 27 September 1991, of the court a
quo. Costs against petitioners.
SO ORDERED.
[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.
Burkley Santiago Sarcida Carriaga Obinario & Jornales
for petitioners.
S. V. Ramos Law Office for private respondents.
SYNOPSIS
When petitioner CDB foreclosed the mortgage
constituted on the land registered in the name of Rodolfo
Guansing, the same was sold to CDB and later
consolidated in its name and a TCT was issued in its
name. Lim offered to purchase the property and paid
CDB P30,000 option money. Later, however, Lim
discovered that the title to the property had been
restored in the name of Perfecto Guansing in a decision
that had since become final and executory.
Here in issue is the nature of the contract entered into
by the parties. Contrary to the allegations of the
petitioners, there was already a perfected contract of sale
between them and private respondent Lim. Although the
P30,000 paid by the Lims were denominated as option
money, it was actually an earnest money and part of the
purchase price as provided in their contract. The sale
was partially consummated. Further, petitioner CDB was
not considered a mortgagee in good faith as there was
failure to exercise due diligence required of banking
institutions in ascertaining the validity of Rodolfo
Guansing's title. Hence, as the sale by CDB to Lim was
void, the latter is entitled to recover the P30,000 it paid
CDB plus interest from the date of the filing of the case.
And considering CDB's negligence, even in the absence
of bad faith, the Lims are entitled to damages. LLphil
SYLLABUS
1. CIVIL LAW; CONTRACTS; OPTION CONTRACT;
ELUCIDATED. — In Carceler v. Court of Appeals, we
explained the nature of an option contract, viz. — "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.
2. ID.; ID.; CONTRACT OF SALE; PERFECTED
WITH PAYMENT OF EARNEST MONEY. — Contracts are
not defined by the parties thereto but by principles of
law. In determining the nature of a contract, the courts
are not bound by the name or title given to it by the
contracting parties. In the case at bar, the sum of
P30,000.00, although denominated in the offer to
purchase as "option money," is actually in the nature of
earnest money or down payment when considered with
the other terms of the offer. That 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. Moreover, it was established that
CDB accepted Lim's offer to purchase. SIDTCa
3. ID.; ID.; ID.; OBJECT OF THE CONTRACT; ON
THE PERFECTION AND CONSUMMATION STAGES OF
THE CONTRACT. — Nemo dat quod non habet, as an
ancient Latin maxim says. One cannot give what 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 the consummation stage
where the principle of nemo dat quod non habet applies.
In Dignos v. Court of Appeals, the subject contract of
sale was held void as the sellers of the subject land were
no longer the owners of the same because of a prior sale.
Again, in Nool v. Court of Appeals, we ruled that a
contract of repurchase, in which the seller does not have
any title to the property sold, is invalid. In this case, the
sale by CDB to Lim of the property mortgaged in 1983 by
Rodolgo Guansing must, therefore, be deemed a nullity
for CDB did not have a valid title to the said property. To
be sure, CDB never acquired a valid title to the property
because the foreclosure sale, by virtue of which the
property had awarded to CDB as highest bidder, is
likewise void since the mortgagor was not the owner of
the property foreclosed.
4. ID.; ID.; ID.; FORECLOSURE SALE. — A
foreclosure sale, though essentially a "forced sale," is still
a sale in accordance with Art. 1458 of the Civil Code,
under which the mortgagor in default, the forced seller,
becomes obliged to transfer the ownership of the thing
sold to the highest bidder who, in turn, is obliged to pay
therefor the bid price in money or its equivalent. Being a
sale, the rule that the seller must be the owner of the
thing sold also applies in a foreclosure sale. This is the
reason Art. 2085 of the Civil Code, in providing for the
essential requisites of the contract of mortgage and
pledge, requires, among other things, that the mortgagor
or pledgor be the absolute owner of the thing pledged or
mortgaged, in anticipation of a possible foreclosure sale
should the mortgagor default in the payment of the loan.
5. ID.; ID.; MORTGAGE; DOCTRINE OF
"MORTGAGEE IN GOOD FAITH." — There is a situation
where, despite the fact that the mortgagor is not the
owner of the mortgaged property, his title being
fraudulent, the mortgage contract and any foreclosure
sale arising therefrom are given effect by reason of public
policy. This is the doctrine of "the mortgagee in good
faith" based on the rule that all persons dealing with
property covered by a Torrens Certificate of Title, as
buyers or mortgagees, are not required to go beyond
what appears on the face of the title. The public interest
in upholding the indefeasibility of a certificate of title, as
evidence of the lawful ownership of the land or of any
encumbrance thereon, protects a buyer or mortgagee
who, in good faith, relied upon what appears on the face
of the certificate of title. AcSHCD
6. ID.; ID.; ID.; ID.; NOT APPLICABLE WHERE
THERE WAS FAILURE TO EXERCISE DUE DILIGENCE
REQUIRED OF BANKING INSTITUTIONS. — Under the
circumstances of the case, CDB cannot be considered a
mortgagee in good faith. While petitioners are not
expected to conduct an exhaustive investigation on the
history of the mortgagor's title, they cannot be excused
from the duty of exercising the due diligence required of
banking institutions. In Tomas v. Tomas, we noted that
it is standard practice for banks, before approving a
loan, to send representatives to the premises of the land
offered as collateral and to investigate who are the real
owners thereof, noting that banks are expected to
exercise more care and prudence than private
individuals in their dealings, even those involving
registered lands, for their business is affected with
public interest. In this case, there is no evidence that
CDB observed its duty of diligence in ascertaining the
validity of Rodolfo Guansing's title. It appears that
Rodolfo Guansing obtained his fraudulent title by
executing an Extra-Judicial Settlement of the Estate
With Waiver where he made it appear that he and
Perfecto Guansing were the only surviving heirs entitled
to the property, and that Perfecto had waived all his
rights thereto. This self-executed deed should have
placed CDB on guard against any possible defect in or
question as to the mortgagor's title. Moreover, the
alleged ocular inspection report by CDB's representative
was never formally offered in evidence. Indeed,
petitioners admit that they are aware that the subject
land was being occupied by persons other than Rodolfo
Guansing and that said persons, who are the heirs of
Perfecto Guansing, contest the title of Rodolfo.
7. REMEDIAL LAW; EVIDENCE; FINDINGS OF
FACT OF THE APPELLATE COURT, RESPECTED. — As
a rule, only questions of law may be raised in a petition
for review, except in circumstances where questions of
fact may be properly raised. Here, while petitioners raise
these factual issues, they have not sufficiently shown
that the instant case falls under any of the exceptions to
the above rule. We are thus bound by the findings of fact
of the appellate court. In any case, we are convinced of
petitioners' negligence in approving the mortgage
application of Rodolfo Guansing.
8. CIVIL LAW; CONTRACTS; VOID CONTRACTS;
NON-GUILTY PARTY HAS RIGHT TO DEMAND THE
RETURN OF WHAT WAS GIVEN. — We now come to the
civil effects of the void contract of sale between the
parties. Article 1412(2) of the Civil Code provides: If the
act in which the unlawful or forbidden cause consists
does not constitute a criminal offense, the following rules
shall be observed: . . . (2) When only one of the
contracting parties is at fault, he cannot recover what he
has given by reason of the contract, or ask for the
fulfillment of what has been promised him. The other,
who is not at fault, may demand the return of what he
has given without any obligation to comply with his
promise. Private respondents are thus entitled to recover
the P30,000.00 option money paid by them. Moreover,
since the filing of the action for damages against
petitioners amounted to a demand by respondents for
the return of their money, interest thereon at the legal
rate should be computed from August 29, 1989, the date
of filing of Civil Case No. Q-89-2863, not June 17, 1988,
when petitioners accepted the payment. This is in accord
with our ruling in Castillo v. Abalayan that in case of a
void sale, the seller has no right whatsoever to keep the
money paid by virtue thereof and should refund it, with
interest at the legal rate, computed from the date of filing
of the complaint until fully paid. Indeed, Art. 1412(2)
which provides that the non-guilty party "may demand
the return of what he has given" clearly implies that
without such prior demand, the obligation to return
what was given does not become legally demandable.
HEDSIc
9. ID.; DAMAGES; DAMAGES PROPER WHEN
THERE IS NEGLIGENCE EVEN IF THE SAME NOT
ATTENDED BY MALICE. — Considering CDB's
negligence, we sustain the award of moral damages on
the basis of Arts. 21 and 2219 of the Civil Code and our
ruling in Tan vs. Court of Appeals that moral damages
may be recovered even if a bank's negligence is not
attended with malice and bad faith. We find, however,
that the sum of P250,000.00 awarded by the trial court
is excessive. Moral damages are only intended to
alleviate the moral suffering undergone by private
respondents, not to enrich them at the expense of the
petitioners. Accordingly, the award of moral damages
must be reduced to P50,000.00. Likewise, the award of
P50,000.00 as exemplary damages, although justified
under Art. 2232 of the Civil Code, is excessive and
should be reduced to P30,000.00. The award of
P30,000.00 attorney's fees based on Art. 2208, pars. 1,
2, 5 and 11 of the Civil Code should similarly be reduced
to P20,000.00.
MENDOZA, J p:
This is a petition for review on certiorari of the decision 1
of the Court of Appeals in C.A. GR CV No. 42315 and the
order dated December 9, 1997 denying petitioners'
motion for reconsideration. prLL
The following facts are not in dispute.
Petitioners Cavite Development Bank (CDB) and Far
East Bank and Trust Company (FEBTC) are banking
institutions duly organized and existing under Philippine
laws. On or about June 15, 1983, a certain Rodolfo
Guansing obtained a loan in the amount of P90,000.00
from CDB, to secure which he mortgaged a parcel of
land situated at No. 63 Calavite Street, La Loma, Quezon
City and covered by TCT No. 300809 registered in his
name. As Guansing defaulted in the payment of his loan,
CDB foreclosed the mortgage. At the foreclosure sale
held on March 15, 1984, the mortgaged property was
sold to CDB as the highest bidder. Guansing failed to
redeem, and on March 2, 1987, CDB consolidated title to
the property in its name. TCT No. 300809 in the name of
Guansing was cancelled and, in lieu thereof, TCT No.
355588 was issued in the name of CDB.
On June 16, 1988, private respondent Lolita Chan Lim,
assisted by a broker named Remedios Gatpandan,
offered to purchase the property from CDB. The written
Offer to Purchase, signed by Lim and Gatpandan, states
in part:
We hereby offer to purchase your property at #63
Calavite and Retiro Sts., La Loma, Quezon City for
P300,000.00 under the following terms and conditions:
(1) 10% Option Money;
(2) Balance payable in cash;
(3) Provided that the property shall be cleared of illegal
occupants or tenants.
Pursuant to the foregoing terms and conditions of the
offer, Lim paid CDB P30,000.00 as Option Money, for
which she was issued Official Receipt No. 3160, dated
June 17, 1988, by CDB. However, after some time
following up the sale, Lim discovered that the subject
property was originally registered in the name of Perfecto
Guansing, father of mortgagor Rodolfo Guansing, under
TCT No. 91148. Rodolfo succeeded in having the
property registered in his name under TCT No. 300809,
the same title he mortgaged to CDB and from which the
latter's title (TCT No. 355588) was derived. It appears,
however, that the father, Perfecto, instituted Civil Case
No. Q-39732 in the Regional Trial Court, Branch 83,
Quezon City, for the cancellation of his son's title. On
March 23, 1984, the trial court rendered a decision 2
restoring Perfecto's previous title (TCT No. 91148) and
cancelling TCT No. 300809 on the ground that the latter
was fraudulently secured by Rodolfo. This decision has
since become final and executory.
Aggrieved by what she considered a serious
misrepresentation by CDB and its mother-company,
FEBTC, on their ability to sell the subject property, Lim,
joined by her husband, filed on August 29, 1989 an
action for specific performance and damages against
petitioners in the Regional Trial Court, Branch 96,
Quezon City, where it was docketed as Civil Case No. Q-
89-2863. On April 20, 1990, the complaint was amended
by impleading the Register of Deeds of Quezon City as an
additional defendant.
On March 10, 1993, the trial court rendered a decision
in favor of the Lim spouses. It ruled that: (1) there was a
perfected contract of sale between Lim and CDB,
contrary to the latter's contention that the written offer
to purchase and the payment of P30,000.00 were merely
pre-conditions to the sale and still subject to the
approval of FEBTC; (2) performance by CDB of its
obligation under the perfected contract of sale had
become impossible on account of the 1984 decision in
Civil Case No. Q-39732 cancelling the title in the name
of mortgagor Rodolfo Guansing; (3) CDB and FEBTC
were not exempt from liability despite the impossibility of
performance, because they could not credibly disclaim
knowledge of the cancellation of Rodolfo Guansing's title
without admitting their failure to discharge their duties
to the public as reputable banking institutions; and (4)
CDB and FEBTC are liable for damages for the prejudice
caused against the Lims. 3 Based on the foregoing
findings, the trial court ordered CDB and FEBTC to pay
private respondents, jointly and severally, the amount of
P30,000.00 plus interest at the legal rate computed from
June 17, 1988 until full payment. It also ordered
petitioners to pay private respondents, jointly and
severally, the amounts of P250,000.00 as moral
damages, P50,000.00 as exemplary damages,
P30,000.00 as attorney's fees, and the costs of the suit.
4 option.
Petitioners brought the matter to the Court of Appeals,
which, on October 14, 1997, affirmed in toto the decision
of the Regional Trial Court. Petitioners moved for
reconsideration, but their motion was denied by the
appellate court on December 9, 1997. Hence, this
petition. Petitioners contend that —
1. The Honorable Court of Appeals erred when it
held that petitioners CDB and FEBTC were aware of the
decision dated March 23, 1984 of the Regional Trial
Court of Quezon City in Civil Case No. Q-39732.
2. The Honorable Court of Appeals erred in
ordering petitioners to pay interest on the deposit of
THIRTY THOUSAND PESOS (P30,000.00) by applying
Article 2209 of the New Civil Code.
3. The Honorable Court of Appeals erred in
ordering petitioners to pay moral damages, exemplary
damages, attorney's fees and costs of suit.
I.
At the outset, it is necessary to determine the legal
relation, if any, of the parties. LibLex
Petitioners deny that a contract of sale was ever
perfected between them and private respondent Lolita
Chan Lim. They contend that Lim's letter-offer clearly
states that the sum of P30,000.00 was given as option
money, not as earnest money. 5 They thus conclude that
the contract between CDB and Lim was merely an option
contract, not a contract of sale.
The contention has no merit. Contracts are not defined
by the parties thereto but by principles of law. 6 In
determining the nature of a contract, the courts are not
bound by the name or title given to it by the contracting
parties. 7 In the case at bar, the sum of P30,000.00,
although denominated in the offer to purchase as "option
money," is actually in the nature of earnest money or
down payment when considered with the other terms of
the offer. In Carceler v. Court of Appeals, 8 we explained
the nature of an option contract, viz. —
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
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. Moreover, the following findings of
the trial court based on the testimony of the witnesses
establish that CDB accepted Lim's offer to purchase:
It is further to be noted that CDB and FEBTC already
considered plaintiffs' offer as good and no longer subject
to a final approval. In his testimony for the defendants
on February 13, 1992, FEBTC's Leomar Guzman stated
that he was then in the Acquired Assets Department of
FEBTC wherein plaintiffs' offer to purchase was
endorsed thereto by Myoresco Abadilla, CDB's senior
vice-president, with a recommendation that the
necessary petition for writ of possession be filed in the
proper court; that the recommendation was in accord
with one of the conditions of the offer, i.e., the clearing of
the property of illegal occupants or tenants (tsn, p. 12);
that, in compliance with the request, a petition for writ
of possession was thereafter filed on July 22, 1988
(Exhs. 1 and 1-A); that the offer met the requirements of
the banks; and that no rejection of the offer was
thereafter relayed to the plaintiffs (p. 17); which was not
a normal procedure, and neither did the banks return
the amount of P30,000.00 to the plaintiffs. 9
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. 10 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. 11 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. LibLex
In Dignos v. Court of Appeals, 12 the subject contract of
sale was held void as the sellers of the subject land were
no longer the owners of the same because of a prior sale.
13 Again, in Nool v. Court of Appeals, 14 we ruled that a
contract of repurchase, in which the seller does not have
any title to the property sold, is invalid:
We cannot sustain petitioners' view. Article 1370 of the
Civil Code is applicable only to valid and enforceable
contracts. The Regional Trial Court and the Court of
Appeals ruled that the principal contract of sale
contained in Exhibit C and the auxiliary contract of
repurchase in Exhibit D are both void. This conclusion
of the two lower courts appears to find support in Dignos
v. Court of Appeals, where the Court held:
"Be that as it may, it is evident that when petitioners
sold said land to the Cabigas spouses, they were no
longer owners of the same and the sale is null and void."
In the present case, it is clear that the sellers no longer
had any title to the parcels of land at the time of sale.
Since Exhibit D, the alleged contract of repurchase, was
dependent on the validity of Exhibit C, it is itself void. A
void contract cannot give rise to a valid one. Verily,
Article 1422 of the Civil Code provides that (a) contract
which is the direct result of a previous illegal contract, is
also void and inexistent."
We should however add that Dignos did not cite its basis
for ruling that a "sale is null and void" where the sellers
"were no longer the owners" of the property. Such a
situation (where the sellers were no longer owners) does
not appear to be one of the void contracts enumerated in
Article 1409 of the Civil Code. Moreover, the Civil Code
itself recognizes a sale where the goods are to be
acquired . . . by the seller after the perfection of the
contract of sale, clearly implying that a sale is possible
even if the seller was not the owner at the time of sale,
provided he acquires title to the property later on.
In the present case, however, it is likewise clear that the
sellers can no longer deliver the object of the sale to the
buyers, as the buyers themselves have already acquired
title and delivery thereof from the rightful owner, the
DBP. Thus, such contract may be deemed to be
inoperative and may thus fall, by analogy, under item
No. 5 of Article 1409 of the Civil Code: Those which
contemplate an impossible service. Article 1459 of the
Civil Code provides that "the vendor must have a right to
transfer the ownership thereof [subject of the sale] at the
time it is delivered." Here, delivery of ownership is no
longer possible. It has become impossible. 15
In this case, the sale by CDB to Lim of the property
mortgaged in 1983 by Rodolfo Guansing must, therefore,
be deemed a nullity for CDB did not have a valid title to
the said property To be sure, CDB never acquired a valid
title to the property because the foreclosure sale, by
virtue of which the property had been awarded to CDB
as highest bidder, is likewise void since the mortgagor
was not the owner of the property foreclosed.
A foreclosure sale, though essentially a "forced sale," is
still a sale in accordance with Art. 1458 of the Civil
Code, under which the mortgagor in default, the forced
seller, becomes obliged to transfer the ownership of the
thing sold to the highest bidder who, in turn, is obliged
to pay therefor the bid price in money or its equivalent.
Being a sale, the rule that the seller must be the owner
of the thing sold also applies in a foreclosure sale. This is
the reason Art. 2085 16 of the Civil Code, in providing
for the essential requisites of the contract of mortgage
and pledge, requires, among other things, that the
mortgagor or pledgor be the absolute owner of the thing
pledged or mortgaged, in anticipation of a possible
foreclosure sale should the mortgagor default in the
payment of the loan.
There is, however, a situation where, despite the fact
that the mortgagor is not the owner of the mortgaged
property, his title being fraudulent, the mortgage
contract and any foreclosure sale arising therefrom are
given effect by reason of public policy. This is the
doctrine of "the mortgagee in good faith" based on the
rule that all persons dealing with property covered by a
Torrens Certificate of Title, as buyers or mortgagees, are
not required to go beyond what appears on the face of
the title. 17 The public interest in upholding the
indefeasibility of a certificate of title, as evidence of the
lawful ownership of the land or of any encumbrance
thereon, protects a buyer or mortgagee who, in good
faith, relied upon what appears on the face of the
certificate of title.
This principle is cited by petitioners in claiming that, as
a mortgagee bank, it is not required to make a detailed
investigation of the history of the title of the property
given as security before accepting a mortgage.
We are not convinced, however, that under the
circumstances of this case, CDB can be considered a
mortgagee in good faith. While petitioners are not
expected to conduct an exhaustive investigation on the
history of the mortgagor's title, they cannot be excused
from the duty of exercising the due diligence required of
banking institutions. In Tomas v. Tomas, 18 we noted
that it is standard practice for banks, before approving a
loan, to send representatives to the premises of the land
offered as collateral and to investigate who are the real
owners thereof, noting that banks are expected to
exercise more care and prudence than private
individuals in their dealings, even those involving
registered lands, for their business is affected with
public interest. We held thus:
We, indeed, find more weight and vigor in a doctrine
which recognizes a better right for the innocent original
registered owner who obtained his certificate of title
through perfectly legal and regular proceedings, than
one who obtains his certificate from a totally void one, as
to prevail over judicial pronouncements to the effect that
one dealing with a registered land, such as a purchaser,
is under no obligation to look beyond the certificate of
title of the vendor, for in the latter case, good faith has
yet to be established by the vendee or transferee, being
the most essential condition, coupled with valuable
consideration, to entitle him to respect for his newly
acquired title even as against the holder of an earlier and
perfectly valid title. There might be circumstances
apparent on the face of the certificate of title which could
excite suspicion as to prompt inquiry, such as when the
transfer is not by virtue of a voluntary act of the original
registered owner, as in the instant case, where it was by
means of a self-executed deed of extra-judicial
settlement, a fact which should be noted on the face of
Eusebia Tomas certificate of title. Failing to make such
inquiry would hardly be consistent with any pretense of
good faith, which the appellant bank invokes to claim
the right to be protected as a mortgagee, and for the
reversal of the judgment rendered against it by the lower
court. 19
In this case, there is no evidence that CDB observed its
duty of diligence in ascertaining the validity of Rodolfo
Guansing's title. It appears that Rodolfo Guansing
obtained his fraudulent title by executing an Extra-
Judicial Settlement of the Estate With Waiver where he
made it appear that he and Perfecto Guansing were the
only surviving heirs entitled to the property, and that
Perfecto had waived all his rights thereto. This self-
executed deed should have placed CDB on guard against
any possible defect in or question as to the mortgagor's
title. Moreover, the alleged ocular inspection report 20 by
CDB's representative was never formally offered in
evidence. Indeed, petitioners admit that they are aware
that the subject land was being occupied by persons
other than Rodolfo Guansing and that said persons, who
are the heirs of Perfecto Guansing, contest the title of
Rodolfo. 21
II.
The sale by CDB to Lim being void, the question now
arises as to who, if any, among the parties was at fault
for the nullity of the contract. Both the trial court and
the appellate court found petitioners guilty of fraud,
because on June 16, 1988, when Lim was asked by CDB
to pay the 10% option money, CDB already knew that it
was no longer the owner of the said property, its title
having been cancelled. 22 Petitioners contend that: (1)
such finding of the appellate court is founded entirely on
speculation and conjecture; (2) neither CDB nor FEBTC
was a party in the case where the mortgagor's title was
cancelled; (3) CDB is not privy to any problem among the
Guansings; and (4) the final decision cancelling the
mortgagor's title was not annotated in the latter's title.
prcd
As a rule, only questions of law may be raised in a
petition for review, except in circumstances where
questions of fact may be properly raised. 23 Here, while
petitioners raise these factual issues, they have not
sufficiently shown that the instant case falls under any
of the exceptions to the above rule. We are thus bound
by the findings of fact of the appellate court. In any case,
we are convinced of petitioners' negligence in approving
the mortgage application of Rodolfo Guansing.
III.
We now come to the civil effects of the void contract of
sale between the parties. Article 1412(2) of the Civil Code
provides:
If the act in which the unlawful or forbidden cause
consists does not constitute a criminal offense, the
following rules shall be observed:
xxx xxx xxx
(2) When only one of the contracting parties is at
fault, he cannot recover what he has given by reason of
the contract, or ask for the fulfillment of what has been
promised him. The other, who is not at fault, may
demand the return of what he has given without any
obligation to comply with his promise.
Private respondents are thus entitled to recover the
P30,000.00 option money paid by them. Moreover, since
the filing of the action for damages against petitioners
amounted to a demand by respondents for the return of
their money, interest thereon at the legal rate should be
computed from August 29, 1989, the date of filing of
Civil Case No. Q-89-2863, not June 17, 1988, when
petitioners accepted the payment. This is in accord with
our ruling in Castillo v. Abalayan 24 that in case of a
void sale, the seller has no right whatsoever to keep the
money paid by virtue thereof and should refund it, with
interest at the legal rate, computed from the date of filing
of the complaint until fully paid. Indeed, Art. 1412(2)
which provides that the non-guilty party "may demand
the return of what he has given" clearly implies that
without such prior demand, the obligation to return
what was given does not become legally demandable.
Considering CDB's negligence, we sustain the award of
moral damages on the basis of Arts. 21 and 2219 of the
Civil Code and our ruling in Tan v. Court of Appeals 25
that moral damages may be recovered even if a bank's
negligence is not attended with malice and bad faith. We
find, however, that the sum of P250,000.00 awarded by
the trial court is excessive. Moral damages are only
intended to alleviate the moral suffering undergone by
private respondents, not to enrich them at the expense
of the petitioners. 26 Accordingly, the award of moral
damages must be reduced to P50,000.00.
Likewise, the award of P50,000.00 as exemplary
damages, although justified under Art. 2232 of the Civil
Code, is excessive and should be reduced to P30,000.00.
The award of P30,000.00 attorney's fees based on Art.
2208, pars. 1, 2, 5 and 11 of the Civil Code should
similarly be reduced to P20,000.00. cdasia
WHEREFORE, the decision of the Court of Appeals is
AFFIRMED with the MODIFICATION as to the award of
damages as above stated. SO ORDERED
1324 (Accepeted Unilateral promise to pay)
[G.R. No. 103338. January 4, 1994.]
FEDERICO SERRA, petitioner, vs. THE HON. COURT
OF APPEALS AND RIZAL COMMERCIAL BANKING
CORPORATION, respondents.
SYLLABUS
1. CIVIL LAW; CONTRACTS; CONTRACT OF
ADHESION; CONSTRUED; CASE AT BAR NOT A CASE
OF. — 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. Although, this Court will not hesitate to
rule out blind adherence to terms where facts and
circumstances will show that it is basically one-sided.
We do not find the situation in the present case to be
inequitable. 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. He is amply equipped to drive a hard bargain
if he would be so minded to.
2. ID.; ID.; PROMISE TO BUY AND SELL A
DETERMINATE THING FOR A PRICE; DISTINGUISHED
FROM ACCEPTED UNILATERAL PROMISE TO BUY OR
SELL A DETERMINATE THING FOR A PRICE. — A
promise to buy and sell a determinate thing for a price
certain is reciprocally demandable. An accepted
unilateral promise to buy or to sell a determinate thing
for a price certain is binding upon the promisor if the
promise is supported by a consideration distinct from
the price. (Article 1479, New Civil Code) The first is a
mutual promise and each has the right to demand from
the other the fulfillment of the obligation. While the
second is merely an offer of one to another, which if
accepted, would create an obligation to the offeror to
make good his promise, provided the acceptance is
supported by a consideration distinct from the price.
Article 1324 of the Civil Code provides that when an
offeror has allowed the offeree a certain period to accept,
the offer may be withdrawn at anytime before acceptance
by communicating such withdrawal, except when the
option is founded upon consideration, as something paid
or promised. On the other hand, Article 1479 of the Code
provides that an accepted unilateral promise to buy and
sell a determinate thing for a price certain is binding
upon the promisor if the promise is supported by a
consideration distinct from the price. In a unilateral
promise to sell, where the debtor fails to withdraw the
promise before the acceptance by the creditor, the
transaction becomes a bilateral contract to sell and to
buy, because upon acceptance by the creditor of the
offer to sell by the debtor, there is already a meeting of
the minds of the parties as to the thing which is
determinate and the price which is certain. In which
case, the parties may then reciprocally demand
performance. Jurisprudence has taught us that an
optional contract is a privilege existing only in one party
— the buyer. For a separate consideration paid, he is
given the right to decide to purchase or not, a certain
merchandise or property, at any time within the agreed
period, at a fixed price. This being his prerogative, he
may not be compelled to exercise the option to buy
before the time expires.
3. ID.; ID.; ID.; ID.; APPLICATION IN CASE AT
BAR; VDA. DE QUIRINO v. PALARCA (29 SCRA 1),
CITED. — What may be regarded as a consideration
separate from the price is discussed in the case of Vda.
de Quirino v. Palarca (29 SCRA 1) wherein the facts are
almost on all fours with the case at bar. The said case
also involved a lease contract with option to buy where
we had occasion to say that "the consideration for the
lessor's obligation to sell the leased premises to the
lessee, should he choose to exercise his option to
purchase the same, is the obligation of the lessee to sell
to the lessor the building and/or improvements
constructed and/or made by the former, if he fails to
exercise his option to buy said premises." 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. The bugging question then is
whether the price "not greater than TWO HUNDRED
PESOS" is certain or definite. A price is considered
certain if it is so with reference to another thing certain
or when the determination thereof is left to the judgment
of a specified person or persons. And generally, gross
inadequacy of price does not affect a contract of sale.
Contracts are to be construed according to the sense
and meaning of the terms which the parties themselves
have used. In the present dispute, there is evidence to
show that the intention of the parties is to peg the price
at P210 per square meter. Moreover, by his subsequent
acts of having the land titled under the Torrens System,
and in pursuing the bank manager to effect the sale
immediately, means that he understood perfectly well
the terms of the contract. He even had the same property
mortgaged to the respondent bank sometime in 1979,
without the slightest hint of wanting to abandon his offer
to sell the property at the agreed price P210 per square
meter.
4. ID.; ID.; EXTRAORDINARY INFLATION; WHEN
CONSIDERED. — We agree with the courts a quo that
there is no basis, legal or factual, in adjusting the
amount of the rent. The contract is the law between the
parties and if there is indeed reason to adjust the rent,
the parties could by themselves negotiate for the
amendment of the contract. Neither could we consider
the decline of the purchasing power of the Philippine
peso from 1983 to the time of the commencement of the
present case in 1985, to be so great as to result in an
extraordinary inflation. Extraordinary inflation exists
when there is an unimaginable increase or decrease of
the purchasing power of the Philippine currency, or
fluctuation in the value of pesos manifestly beyond the
contemplation of the parties at the time of the
establishment of the obligation.
NOCON, J p:
A promise to buy and sell a determinate thing for a price
certain is reciprocally demandable. An accepted
unilateral promise to buy or to sell a determinate thing
for a price certain is binding upon the promisor if the
promise is supported by a consideration distinct from
the price. (Article 1479, New Civil Code) The first is a
mutual promise and each has the right to demand from
the other the fulfillment of the obligation. While the
second is merely an offer of one to another, which if
accepted, would create an obligation to the offeror to
make good his promise, provided the acceptance is
supported by a consideration distinct from the price.
LibLex
Disputed in the present case is the efficacy of a
"Contract of Lease with Option to Buy," entered into
between petitioner Federico Serra and private
respondent Rizal Commercial Banking Corporation.
(RCBC).
Petitioner is the owner of a 374 square meter parcel of
land located at Quezon St., Masbate, Masbate. Sometime
in 1975, respondent bank, in its desire to put up a
branch in Masbate, Masbate, negotiated with petitioner
for the purchase of the then unregistered property. On
May 20, 1975, a contract of LEASE WITH OPTION TO
BUY was instead forged by the parties, the pertinent
portion of which reads:
"1. The LESSOR leases unto the LESSEE, and the
LESSEE hereby accepts in lease, the parcel of land
described in the first WHEREAS clause, to have and to
hold the same for a period of twenty-five (25) years
commencing from June 1, 1975 to June 1, 2000. The
LESSEE, however, shall have the option to purchase
said parcel of land within a period of ten (10) years from
the date of the signing of this Contract at a price not
greater than TWO HUNDRED TEN PESOS (P210.00) per
square meter. For this purpose, the LESSOR
undertakes, within such ten-year period, to register said
parcel of land under the TORRENS SYSTEM and all
expenses appurtenant thereto shall be for his sole
account.
"If, for any reason, said parcel of land is not registered
under the TORRENS SYSTEM within the aforementioned
ten-year period, the LESSEE shall have the right, upon
termination of the lease to be paid by the LESSOR the
market value of the building and improvements
constructed on said parcel of land. cdll
"The LESSEE is hereby appointed attorney-in-fact for the
LESSOR to register said parcel of land under the
TORRENS SYSTEM in case the LESSOR, for any reason,
fails to comply with his obligation to effect said
registration within a reasonable time after the signing of
this Agreement, and all expenses appurtenant to such
registration shall be charged by the LESSEE against the
rentals due to the LESSOR.
"2. During the period of the lease, the LESSEE
covenants to pay the LESSOR, at the latter's residence, a
monthly rental of SEVEN HUNDRED PESOS (P700.00),
Philippine Currency, payable in advance on or before the
fifth (5th) day of every calendar month, provided that the
rentals for the first four (4) months shall be paid by the
LESSEE in advance upon the signing of this Contract.
"3. The LESSEE is hereby authorized to construct
at its sole expense a building and such other
improvements on said parcel of land, which it may need
in the pursuance of its business and/or operations;
provided, that if for any reason the LESSEE shall fail to
exercise its option mentioned in paragraph (1) above in
case the parcel of land is registered under the TORRENS
SYSTEM within the ten-year period mentioned therein,
said building and/or improvements, shall become the
property of the LESSOR after the expiration of the 25-
year lease period without right of reimbursement on the
part of the LESSEE. The authority herein granted does
not, however, extend to the making or allowing any
unlawful, improper or offensive use of the leased
premises, or any use thereof, other than banking and
office purposes. The maintenance and upkeep of such
building, structure and improvements shall likewise be
for the sole account of the LESSEE. 1
The foregoing agreement was subscribed before Notary
Public Romeo F. Natividad. prcd
Pursuant to said contract, a building and other
improvements were constructed on the land which
housed the branch office of RCBC in Masbate, Masbate.
Within three years from the signing of the contract,
petitioner complied with his part of the agreement by
having the property registered and placed under the
TORRENS SYSTEM, for which Original Certificate of Title
No. 0-232 was issued by the Register of Deeds of the
Province of Masbate.
Petitioner alleges that as soon as he had the property
registered, he kept on pursuing the manager of the
branch to effect the sale of the lot as per their
agreement. It was not until September 4, 1984, however,
when the respondent bank decided to exercise its option
and informed petitioner, through a letter, 2 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 much to the surprise of the respondent,
petitioner replied that he is no longer selling the
property. 3
Hence, on March 14, 1985, a complaint for specific
performance and damages was filed by respondent
against petitioner. In the complaint, respondent alleged
that during the negotiations it made clear to petitioner
that it intends to stay permanently on the property once
its branch office is opened unless the exigencies of the
business requires otherwise. Aside from its prayer for
specific performance, it likewise asked for an award of
P50,000.00 for attorney's fees P100,000.00 as exemplary
damages and the cost of the suit. 4
A special and affirmative defenses, petitioner contended:
1. That the contract having been prepared and
drawn by RCBC, it took undue advantage on him when
it set in lopsided terms.
2. That the option was not supported by any
consideration distinct from the price and hence not
binding upon him. cdphil
3. That as a condition for the validity and/or
efficacy of the option, it should have been exercised
within the reasonable time after the registration of the
land under the Torrens System; that its delayed action
on the option has forfeited whatever its claim to the
same.
4. That extraordinary inflation supervened
resulting in the unusual decrease in the purchasing
power of the currency that could not reasonably be
foreseen or was manifestly beyond the contemplation of
the parties at the time of the establishment of the
obligation, thus, rendering the terms of the contract
unenforceable, inequitable and to the undue enrichment
of RCBC. 5
and as counterclaim petitioner alleged that:
1. The rental of P700.00 has become unrealistic
and unreasonable, that justice and equity will require its
adjustment.
2. By the institution of the complaint he suffered
moral damages which may be assessed at P100,000.00;
and award of attorney's fee of P25,000.00 and exemplary
damages at P100,000.00. 6
Initially, after trial on the merits, the court dismissed the
complaint. Although it found the contract to be valid, the
court nonetheless ruled that the option to buy is
unenforceable because it lacked a consideration distinct
from the price and that RCBC did not exercise its option
within reasonable time. The prayer for readjustment of
rental was denied, as well as that for moral and
exemplary damages. 7
Nevertheless, upon motion for reconsideration of
respondent, the court in the order of January 9, 1989,
reversed itself, the dispositive portion reads:
"WHEREFORE, the Court reconsiders its decision dated
June 6, 1988, and hereby renders judgment as follows:
"1. The defendant is hereby ordered to execute and
deliver the proper deed of sale in favor of plaintiff selling,
transferring and conveying the property covered and
described in the Original Certificate of Title 0-232 of the
Registry of Deeds of Masbate for the sum of Seventy
Eight Thousand Five Hundred Forty Pesos (P78,540,00),
Philippine Currency; LLpr
"2. Defendant is ordered to pay plaintiff the sum of
Five Thousand (P5,000.00) Pesos as attorney's fees;
"3. The counter claim of defendant is hereby
dismissed; and
"4. Defendant shall pay the costs of suit." 8
In a decision promulgated on September 19, 1991, 9 the
Court of Appeals affirmed the findings of the trial court
that:
1. The contract is valid and that the parties
perfectly understood the contents thereof;
2. The option is supported by a distinct and
separate consideration as embodied in the agreement;
3. There is no basis in granting an adjustment in
rental.
Assailing the judgment of the appellate court, petitioner
would like us to consider mainly the following:
1. The disputed contract is a contract of adhesion.
2. There was no consideration to support the
option, distinct from the price, hence the option cannot
be exercised.
3. Respondent court gravely abused its discretion
in not granting currency adjustment on the already
eroded value of the stipulated rentals for twenty-five
years.
The petition is devoid of merit.
There is no dispute that the contract is valid and
existing between the parties, as found by both the trial
court and the appellate court. Neither do we find the
terms of the contract unfairly lopsided to have it ignored.
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. Although, this Court will not hesitate to rule out
blind adherence to terms where facts and circumstances
will show that it is basically one-sided. 10
We do not find the situation in the present case to be
inequitable. 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. He is amply equipped to drive a hard bargain
if he would be so minded to.
Petitioner contends that the doctrines laid down in the
cases of Atkins Kroll v. Cua Hian Tek, 11 Sanchez v.
Rigos, 12 and Vda. de Quirino v. Palarca 13 were
misapplied in the present case, because 1) the option
given to the respondent bank was not supported by a
consideration distinct from the price; and 2) that the
stipulated price of "not greater than P210.00 per square
meter" is not certain or definite. cdrep
Article 1324 of the Civil Code provides that when an
offeror has allowed the offeree a certain period to accept,
the offer may be withdrawn at anytime before acceptance
by communicating such withdrawal, except when the
option is founded upon consideration, as something paid
or promised. On the other hand, Article 1479 of the Code
provides that an accepted unilateral promise to buy and
sell a determinate thing for a price certain is binding
upon the promisor if the promise is supported by a
consideration distinct from the price.
In a unilateral promise to sell, where the debtor fails to
withdraw the promise before the acceptance by the
creditor, the transaction becomes a bilateral contract to
sell and to buy, because upon acceptance by the creditor
of the offer to sell by the debtor, there is already a
meeting of the minds of the parties as to the thing which
is determinate and the price which is certain. 14 In
which case, the parties may then reciprocally demand
performance. llcd
Jurisprudence has taught us that an optional contract is
a privilege existing only in one party — the buyer. For a
separate consideration paid, he is given the right to
decide to purchase or not, a certain merchandise or
property, at any time within the agreed period, at a fixed
price. This being his prerogative, he may not be
compelled to exercise the option to buy before the time
expires. 15
On the other hand, what may be regarded as a
consideration separate from the price is discussed in the
case of Vda. de Quirino v. Palarca 16 wherein the facts
are almost on all fours with the case at bar. The said
case also involved a lease contract with option to buy
where we had occasion to say that "the consideration for
the lessor's obligation to sell the leased premises to the
lessee, should he choose to exercise his option to
purchase the same, is the obligation of the lessee to sell
to the lessor the building and/or improvements
constructed and/or made by the former, if he fails to
exercise his option to buy said premises." 17
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. 18
The bugging question then is whether the price "not
greater than TWO HUNDRED PESOS" is certain or
definite. A price is considered certain if it is so with
reference to another thing certain or when the
determination thereof is left to the judgment of a
specified person or persons. 19 And generally, gross
inadequacy of price does not affect a contract of sale. 20
Contracts are to be construed according to the sense
and meaning of the terms which the parties themselves
have used. In the present dispute, there is evidence to
show that the intention of the parties is to peg the price
at P210 per square meter. This was confirmed by
petitioner himself in his testimony, as follows:
Moreover, by his subsequent acts of having the land
titled under the Torrens System, and in pursuing the
bank manager to effect the sale immediately, means that
he understood perfectly well the terms of the contract.
He even had the same property mortgaged to the
respondent bank sometime in 1979, without the
slightest hint of wanting to abandon his offer to sell the
property at the agreed price of P210 per square meter.
22
Finally, we agree with the courts a quo that there is no
basis, legal or factual, in adjusting the amount of the
rent. The contract is the law between the parties and if
there is indeed reason to adjust the rent, the parties
could by themselves negotiate for the amendment of the
contract. Neither could we consider the decline of the
purchasing power of the Philippine peso from 1983 to
the time of the commencement of the present case in
1985, to be so great as to result in an extraordinary
inflation. Extraordinary inflation exists when there in an
unimaginable increase or decrease of the purchasing
power of the Philippine currency, or fluctuation in the
value of pesos manifestly beyond the contemplation of
the parties at the time of the establishment of the
obligation. 23
Premises considered, we find that the contract of "LEASE
WITH OPTION TO BUY" between petitioner and
respondent bank is valid, effective and enforceable, the
price being certain and that there was consideration
distinct from the price to support the option given to the
lessee.
WHEREFORE, this petition is hereby DISMISSED, and
the decision of the appellate court is hereby AFFIRMED.
SO ORDERED
[G.R. No. 106063. November 21, 1996.]
EQUATORIAL REALTY DEVELOPMENT, INC. &
CARMELO & BAUERMANN, INC., petitioners, vs.
MAYFAIR THEATER, INC., respondent.
Romulo, Mabanta, Buenaventura Sayoc & De los
Angeles for Equatorial Realty Development, Inc.
Emiliano S. Samson, E. Balderama for Samson and
Mary Anne B. Samson and Carmelo & Bauermann, Inc.
De Borja, Medialdea, Ata Bello, Guevarra & Serapio for
respondent.
SYLLABUS
1. CIVIL LAW; OBLIGATIONS AND CONTRACTS;
OPTION CONTRACT; PARAGRAPH 8 OF THE LEASE
CONTRACT GRANTS TO MAYFAIR THE RIGHT OF FIRST
REFUSAL, NOT AN OPTION. — We agree with the
respondent Court of Appeals that the aforecited
contractual stipulation provides for a right of first refusal
in favor of Mayfair. It is not an option clause or an option
contract. It is a contract of a right of first refusal.
Respondent Court of Appeals correctly ruled that the
said paragraph 8 grants the right of first refusal to
Mayfair and is not an option contract. It also correctly
reasoned that as such, the requirement of a separate
consideration for the option, has no applicability in the
instant case. There is nothing in the identical
paragraphs "8" of the June 1, 1967 and March 31, 1969
contracts which would bring them into the ambit of the
usual offer or option requiring an independent
consideration. An option is a contract granting a
privilege to buy or sell within an agreed time and at a
determined price. It is a separate and distinct contract
from that which the parties may enter into upon the
consummation of the option. It must be supported by
consideration. In the instant case, the right of first
refusal is an integral part of the contracts of lease. The
consideration is built into the reciprocal obligations of
the parties. To rule that a contractual stipulation such
as that found in paragraph 8 of the contracts is governed
by Article 1324 on withdrawal of the offer or Article 1479
on promise to buy and sell would render ineffectual or
"inutile" the provisions on right of first refusal so
commonly inserted in leases of real estate nowadays.
The Court of Appeals is correct in stating that Paragraph
8 was incorporated into the contracts of lease for the
benefit of Mayfair which wanted to be assured that it
shall be given the first crack or the first option to buy
the property at the price which Carmelo is willing to
accept. It is not also correct to say that there is no
consideration in an agreement of right of first refusal.
The stipulation is part and parcel of the entire contract
of lease. The consideration for the lease includes the
consideration for the right of first refusal. Thus, Mayfair
is in effect stating that it consents to lease the premises
and to pay the price agreed upon provided the lessor
also consents that, should it sell the leased property,
then, Mayfair shall be given the right to match the
offered purchase price and to buy the property at that
price. As stated in Vda. De Quirino vs. Palarca, in
reciprocal contract, the obligation or promise of each
party is the consideration for that of the other. cdasia
2. ID.; ID.; SINCE PETITIONER IS A BUYER IN
BAD FAITH, THE SALE TO IT OF THE PROPERTY IN
QUESTION IS RESCISSIBLE. — Since Equatorial is a
buyer in bad faith, this finding renders the sale to it of
the property in question rescissible. We agree with
respondent Appellate Court that the records bear out the
fact that Equatorial was aware of the lease contracts
because its lawyers had, prior to the sale, studied the
said contracts. As such Equatorial cannot tenably claim
to be a purchaser in good faith, and, therefore,
rescission lies. Petitioners assert the alleged
impossibility of performance because the entire property
is indivisible property. It was petitioner Carmelo which
fixed the limits of the property it was leasing out.
Common sense and fairness dictate that instead of
nullifying the agreement on that basis, the stipulation
should be given effect by including the indivisible
appurtenances in the sale of the dominant portion under
the right of first refusal. A valid and legal contract where
the ascendant or the more important of the two parties
is the landowner should be given effect, if possible,
instead of being nullified on a selfish pretext posited by
the owner. Following the arguments of petitioners and
the participation of the owner in the attempt to strip
Mayfair of its rights, the right of first refusal should
include not only the property specified in the contracts
but also the appurtenant portions sold to Equatorial
which are claimed by petitioners to be indivisible.
Carmelo acted in bad faith when it sold the entire
property to Equatorial without informing Mayfair, a clear
violation of Mayfair's rights. While there was a series of
exchanges of letters evidencing the offer and counter-
offers between the parties, Carmelo abandoned the
negotiations without giving Mayfair full opportunity to
negotiate within the 30-day period.
3. ID.; ID.; THE RIGHT OF FIRST REFUSAL
SHOULD BE ENFORCED ACCORDING TO THE LAW ON
CONTRACTS INSTEAD OF THE CODAL PROVISIONS ON
HUMAN RELATIONS. — Under the Ang Yu Asuncion vs.
Court of Appeals decision, the Court stated that there
was nothing to execute because a contract over the right
of first refusal belongs to a class of preparatory juridical
relations governed not by the law on contracts but by the
codal provisions on human relations. This may apply
here if the contract is limited to the buying and selling of
the real property. However, the obligation of Carmelo to
first offer the property to Mayfair is embodied in a
contract. It is Paragraph 8 on the right of first refusal
which created the obligation. It should be enforced
according to the law on contracts instead of the
panoramic and indefinite rule on human relations. The
latter remedy encourages multiplicity of suits. There is
something to execute and that is for Carmelo to comply
with its obligation to the property under the right of the
first refusal according to the terms at which they should
have been offered then to Mayfair, at the price when that
offer should have been made. Also, Mayfair has to accept
the offer. This juridical relation is not amorphous nor is
it merely preparatory. Paragraph 8 of the two leases can
be executed according to their terms. HATEDC
PADILLA, J., separate opinion:
CIVIL LAW; OBLIGATIONS AND CONTRACTS;
DAMAGES; WHILE MAYFAIR'S RIGHT OF FIRST
REFUSAL SHOULD BE UPHELD, IT SHOULD NOT BE
REQUIRED TO PAY A COMPOUNDED INTEREST OF
12% PER ANNUM UNDER ITS CONTRACT OF LEASE. —
I am of the considered view (like Mr. Justice Jose A. R.
Melo) that the Court in this case should categorically
recognize Mayfair's right of first refusal under its
contract of lease with Carmelo and Bauermann, Inc.
(hereafter, Carmelo) and, because of Carmelo's and
Equatorial's bad faith in riding "roughshod" over
Mayfair's right of first refusal, the Court should order the
rescission of the sale of the Claro M. Recto property by
the latter to Equatorial (Arts. 1380-1381[3], Civil Code). I
do not agree with the proposition that, in addition to the
aforesaid purchase price, Mayfair should be required to
pay a compounded interest of 12% per annum of said
amount computed from 1 August 1978. Under the Civil
Code, a party to a contract may recover interest as
indemnity for damages in the following instances: "Art.
2209. If the obligation consists in the payment of a sum
of money, and the debtor incurs in delay, the indemnity
for damages, there being no stipulation to the contrary,
shall be the payment of the interest agreed upon, and in
the absence of stipulation, the legal interest, which is six
per cent per annum. Art. 2210. Interest may, in the
discretion of the court, be allowed upon damages
awarded for breach of contract." There appears to be no
basis in law for adding 12% per annum compounded
interest to the purchase price of P11,300,000.00 payable
by Mayfair to Carmelo since there was no such
stipulation in writing between the parties (Mayfair and
Carmelo) but, more importantly, because Mayfair neither
incurred in delay in the performance of its obligation nor
committed any breach of contract. Indeed, why should
Mayfair be penalized by way of making it pay 12% per
annum compounded interest when it was Carmelo which
violated Mayfair's right of first refusal under the
contract? HCEcAa
PANGANIBAN, J., separate concurring opinion:
1. CIVIL LAW; OBLIGATIONS AND CONTRACTS;
RESCISSION OF CONTRACT; SALE OF AN IMMOVABLE
IN BREACH OF A RIGHT OF FIRST REFUSAL; MAYFAIR,
NOT BEING A PARTY TO THE SALE OF THE PROPERTY,
HAD NO PERSONALITY TO SUE FOR ITS ANNULMENT;
BUT THE FACTS IN THIS CASE MAKE OUT A CASE FOR
RESCISSION UNDER ART. 1177, IN RELATION TO ART.
1381(3), OF THE CIVIL CODE. — With respect to the
sale of the property, Mayfair was not a party. It therefore
had no personality to sue for its annulment, since Art.
1397 of the Civil Code provides, inter alia, that "(t)he
action for the annulment of contracts may be instituted
by all who are thereby obliged principally or
subsidiarily." But the facts as alleged and proved clearly
in the case at bar make out a case for rescission under
Art. 1177, in relation to Art 1381(3), of the Civil Code,
which pertinently reads as follows: "Art. 1177. The
creditors, after having pursued the property in
possession of the debtor to satisfy their claims, may
exercise all the rights and bring all the actions of the
latter for the same purpose, save those which are
inherent in his person; they may also impugn the acts
which the debtor may have done to defraud them." "Art.
1381. The following contracts are rescissible: . . . (3)
Those undertaken in fraud of creditors when the latter
cannot in any other manner collect the claims due them;
. . . " The term "creditors" as used in these provisions of
the Civil Code is broad enough to include the obligee
under an option contract as well as under a right of first
refusal, sometimes known as a right of first priority.
Thus, in Nietes, the Supreme Court, speaking through
then Mr. Chief Justice Roberto Concepcion, repeatedly
referred to the grantee or optionee as "the creditor" and
to the grantor or optioner as "the debtor." In any case,
the personal elements of an obligation are the active and
passive subjects thereof, the former being known as
creditors or obligees and the latter as debtors or obligors.
Insofar as the right of first refusal is concerned, Mayfair
is the obligee or creditor.
2. ID.; SPECIFIC PERFORMANCE; A PROPER
REMEDY TO ENFORCE A RIGHT OF FIRST REFUSAL;
THE PRINCIPLE OF CONSENSUALITY OF A CONTRACT
OF SALE SHOULD BE DEEMED SATISFIED IN THE
CASE AT BAR; REASON. — The inescapable conclusion
from all of the foregoing is not only that rescission is the
proper remedy but also — and more importantly — that
specific performance was actually used and given free
rein as an effective remedy to enforce a right of first
refusal in the wake of its violation, in the cited case of
Guzman. The consensuality required for a contract of
sale is distinct from, and should not be confused with,
the consensuality attendant to the right of first refusal
itself. While indeed, prior to the actual sale of the
property to Equatorial and the filing of Mayfair's
complaint for specific performance, no perfected contract
of sale involving the property ever existed between
Carmelo as seller and Mayfair as buyer, there already
was, in law and in fact, a perfected contract between
them which established a right of first refusal, or of first
priority. Worth stressing at this juncture is the fact that
Mayfair had the right to require that the offer to sell the
property be sent to it by Carmelo, and not to anybody
else. This was violated when the offer was made to
Equatorial. Under its covenant with Carmelo, Mayfair
had the right, at that point, to sue for either specific
performance or rescission, with damages in either case,
pursuant to Arts. 1165 and 1191, Civil Code. An action
for specific performance and damages seasonably filed,
fortified by a writ of preliminary injunction, would have
enabled Mayfair to prevent the sale to Equatorial from
taking place and to compel Carmelo to sell the property
to Mayfair for the same terms and price, for the reason
that the filing of the action for specific performance may
juridically be considered as a solemn, formal, and
unqualified acceptance by Mayfair of the specific terms
of the offer of sale. Note that by that time, the price and
other terms of the proposed sale by Carmelo had already
been determined, being set forth in the offer of sale that
had wrongfully been directed to Equatorial. The act of
promptly filing this suit, coupled with the fact that it is
one for specific performance, indicates beyond cavil or
doubt Mayfair's unqualified acceptance of the
misdirected offer of sale, giving rise, thereby, to a
demandable obligation on the part of Carmelo to execute
the corresponding document of sale upon the payment of
the price of P11,300,000.00. In other words, the
principle of consensuality of a contract of sale should be
deemed satisfied. The aggrieved party's consent to, or
acceptance of, the misdirected offer of sale should be
legally presumed in the context of the proven facts. To
say, therefore, that the wrongful breach of a right of first
refusal does not sanction an action for specific
performance simply because, factually, there was no
meeting of the minds as to the particulars of the sale
since ostensibly no offer was ever made to, let alone
accepted by, Mayfair, is to ignore the proven fact of
presumed consent. To repeat, that consent was deemed
given by Mayfair when it sued for invalidation of the sale
and for specific performance of Carmelo's obligation to
Mayfair. Nothing in the law as it now stands will be
violated, or even simply emasculated, by this holding.
AEITDH
ROMERO, J., concurring and dissenting opinion:
1. CIVIL LAW; OBLIGATIONS AND CONTRACTS;
LEASE; RIGHT OF FIRST REFUSAL; OPTION; THE
RIGHT OF FIRST REFUSAL IS UNLIKE AN OPTION
WHICH REQUIRES A CERTAINTY AS TO THE OBJECT
AND CONSIDERATION OF THE ANTICIPATED
CONTRACT. — An option is a privilege granted to buy a
determinate thing at a price certain within a specified
time and is usually supported by a consideration which
is why, it may be regarded as a contract in itself. The
option results in a perfected contract of sale once the
person to whom it is granted decides to exercise it. The
right of first refusal is unlike an option which requires a
certainty as to the object and consideration of the
anticipated contract. When the right of the first refusal is
exercised, there is no perfected contract of sale because
the other terms of the sale have yet to be determined.
Hence, in case the offeror reneges on his promise to
negotiate with offeree, the latter may only recover
damages in the belief that a contract could have been
perfected under Article 19 of the New Civil Code.
CTDHSE
2. ID.; RESCISSION OF CONTRACT; THE
CONTRACT OF SALE ENTERED INTO BY CARMELO
AND BAUERMANN, INC. AND EQUATORIAL REALTY,
INC. SHOULD NOT BE RESCINDED; REASON. — I beg
to disagree, however, with the majority opinion that the
contract of sale entered into by Carmelo and
Bauermann, Inc. and Equatorial Realty, Inc., should be
rescinded. Justice Hermosisima, in citing Art. 1381 (3)
as ground for rescission apparently relied on the case of
Guzman, Bocaling and Co. v. Bonnevie (206 SCRA 668
[1992]) where the offeree was likened to the status of a
creditor. The case, in citing Tolentino, stated that
rescission is a remedy granted by law to contracting
parties and even to third persons, to secure reparation
for damages caused to them by a contract, even if this
should be valid, by means of restoration of things to
their condition prior to celebration of the contract. It is
my opinion that "third persons" should be construed to
refer to the wards, creditors, absentees, heirs and others
enumerated under the law who are prejudiced by the
contract sought to be rescinded. It should be borne in
mind that rescission is an extreme remedy which may be
exercised only in the specific instances provided by law.
Article 1381 (3) specifically refers to contracts
undertaken in fraud of creditors when the latter cannot
in any manner collect the claims due them. If rescission
were allowed for analogous cases, the law would have so
stated. While Article 1381 (5) itself says that rescission
may be granted to all other contracts specially declared
by law to be subject to rescission, there is nothing in the
law that states that an offeree who failed to exercise his
right of refusal because of bad faith on the part of the
offeror may rescind the subsequent contract entered into
by the offeror and a third person. Hence, there is no
legal justification to rescind the contract between
Carmelo and Bauermann, Inc. and Equatorial Realty.
DHITcS
VITUG, J., dissenting opinion:
1. CIVIL LAW; OBLIGATIONS AND CONTRACTS;
RESCISSION OF CONTRACT; RIGHT OF FIRST
REFUSAL; A "BREACH" OF THE RIGHT OF FIRST
REFUSAL CAN ONLY GIVE RISE TO AN ACTION FOR
DAMAGES BUT NOT TO AN ACTION FOR SPECIFIC
PERFORMANCE. — The concept of a right of first refusal
as a simple juridical relation, and so governed (basically)
by the Civil Code's title on "Human Relations," is not
altered by the fact alone that it might be among the
stipulated items in a separate document or even in
another contract. A "breach" of the right of first refusal
can only give rise to an action for damages primarily
under Article 19 of the Civil Code, as well as its related
provisions, but not to an action for specific performance
set out under Book IV of the Code on "Obligations and
Contracts." That right, standing by itself, is far distant
from being the obligation referred to in Article 1159 of
the Code which would have the force of law sufficient to
compel compliance per se or to establish a creditor-
debtor or obligee-obligor relation between the parties. If,
as it is rightly so, a right of first refusal cannot even be
properly classed as an offer or as an option, certainly,
and with much greater reason, it cannot be the
equivalent of, nor be given the same legal effect as, a
duly perfected contract. It is not possible to cross out,
such as we have said in Ang Yu Asuncion vs. Court of
Appeals (238 SCRA 602), the indispensable element of
consensuality in the perfection of contracts. It is basic
that without mutual consent on the object and on the
cause, a contract cannot exist (Art. 1305, Civil Code);
corollary to it, no one can be forced, least of all perhaps
by a court, into a contract against his will or compelled
to perform thereunder.
2. ID.; A RIGHT OF FIRST REFUSAL CANNOT BE
DEEMED A PERFECTED CONTRACT OF SALE UNDER
ART. 1458 OF THE CIVIL CODE; REASON. — It would
be perilous a journey, first of all, to try to seek out a
common path for such juridical relations as contracts,
options, and rights of first refusal since they differ,
substantially enough, in their concepts, consequences
and legal implications. Very briefly, in the area on sales
particularly, I borrow from Ang Yu, a unanimous
decision of the Supreme Court En Banc, which held: "In
the law on sales, the so-called 'right of first refusal' is an
innovative juridical relation. Needless to point out, it
cannot be deemed a perfected contract of sale under
Article 1458 of the Civil Code. Neither can the right of
first refusal, understood in its normal concept, per se be
brought within the purview of an option under the
second paragraph of Article 1479, aforequoted, or
possibly of an offer under Article 1319 of the same Code.
An option or an offer would require, among other things,
a clear certainty on both the object and the cause or
consideration of the envisioned contract. In a right of
first refusal, while the object might be made
determinate, the exercise of the right, however, would be
dependent not only on the grantor's eventual intention to
enter into a binding juridical relation with another but
also on terms, including the price, that obviously are yet
to be later firmed up. Prior thereto, it can at best be so
described as merely belonging to a class of preparatory
juridical relations governed not by contracts (since the
essential elements to establish the vinculum juris would
still be indefinite and inconclusive) but by, among other
laws of general application, the pertinent scattered
provisions of the Civil Code on human conduct." An
obligation, and so a conditional obligation as well (albeit
subject to the occurrence of the condition), in its context
under Book IV of the Civil Code, can only be "a juridical
necessity to give, to do or not to do" (Art. 1156, Civil
Code), and one that is constituted by law, contracts,
quasi-contracts, delicts and quasi-delicts (Art. 1157,
Civil Code) which all have their respective legal
significance rather well settled in law. The law certainly
must have meant to provide congruous, albeit
contextual, consequences to its provisions. Interpretare
et concordore legibus est optimus interpretendi. As a
valid source of an obligation, a contract must have the
concurrence of (a) consent of the contracting parties, (b)
object certain (subject matter of the contract) and (c)
cause (Art. 1318, Civil Code). These requirements,
clearly defined, are essential. The consent contemplated
by the law is that which is manifested by the meeting of
the offer and of the acceptance upon the object and the
cause of the obligation. The offer must be certain and
the acceptance absolute (Article 1319 of the Civil Code).
Thus, a right of first refusal cannot have the effect of a
contract because, by its very essence, certain basic
terms would have yet to be determined and fixed. How
its "breach" be also its perfection escapes me. It is only
when the elements concur that the juridical act would
have the force of law between the contracting parties
that must be complied with in good faith (Article 1159 of
the Civil Code; see also Article 1308, of the Civil Code),
and, in case of its breach, would allow the creditor or
obligee (the passive subject) to invoke the remedy that
specifically appertains to it.
[G.R. No. L-7382. June 29, 1955.]
SOUTHWESTERN SUGAR AND MOLASSES COMPANY,
plaintiff-appellee, vs. ATLANTIC GULF & PACIFIC
COMPANY, defendant-appellant.
SYLLABUS
CONTRACTS; OFFER AND ACCEPTANCE; RULE ON
WITHDRAWAL OF OFFER. — While it is true that under
article 1324 of the new Civil Code, the general rule
regarding offer and acceptance is that, when the offer or
gives to the offeree a certain period to accept, "the offer
may be withdrawn at any time before acceptance" except
when the option is founded upon consideration this
general rule must be interpreted as modified by the
provision of article 1479 which applies to "a promise to
buy and sell" specifically. This rule requires that a
promise to sell to be valid must be supported by a
consideration distinct from the price, which means that
the option can still be withdrawn, even if accepted, if the
same is not supported by any consideration.
BAUTISTA ANGELO, J p:
This is an action for specific performance.
On March 24, 1953, the Atlantic Gulf & Pacific Company
of Manila, hereafter called Atlantic Gulf for short,
granted an option to Southwestern Sugar & Molasses
Co. (Far East) Inc., hereafter called Southwestern
Company, to buy its barge No. 10 for the sum of P30,000
to be exercised within a period of ninety days.
On May 11, 1953, the Southwestern Company wrote to
Atlantic Gulf advising the latter that it wanted "to
exercise our option at your earliest convenience" and
requested that it be notified as soon as the barge was
available.
On May 12, 1953, the Atlantic Gulf replied stating that
their understanding was that the "offer of option" is to be
a cash transaction and to be effected "at the time the
lighter is available", and, on June 25, 1953, reiterating
the unavailability of the barge, it further advised the
Southwestern Company that since there is still further
work for it, and as this situation still applies" the barge
could not be turned over to the latter company.
On June 27, 1953, in view if such vacillating attitude,
the Southwestern Company instituted the present action
to compel the Atlantic Gulf to sell the barge in line with
the option, depositing with the court a check covering
the sum of P30,000. This check however was later
withdrawn with the approval of the court.
On June 29, 1953, the Atlantic Gulf withdraw its "offer
of option" with due notices to the Southwestern
Company stating as reason therefor that the option was
granted merely as a favor. The Atlantic Gulf set up as a
defense the option to sell made by it to the Southwestern
Company is null and void because it is not supported by
any consideration.
After due trial, the lower court rendered judgment
granting plaintiff's prayer for specific performance. It
further ordered the defendant to pay damages in an
amount equivalent to 6 per centum per annum on the
sum of P30,000 from the date of the filing of the
complaint, and to pay the sum of P600 as attorney's
fees, plus the costs of action.
The case is before us on the assertion that the only issue
involved is one of law.
The option granted by appellant to appellee is contained
in a letter dated March 24, 1953 which reads as follows:
"March 24, 1953
"Southwestern Sugar & Molasses Co. Far East, Inc.
"145 Muelle de Binondo"
Manila, Philippines
"Gentlemen:
"This is to confirm our conversion of today whereby we
offer you our Barge No. 10, which is 120' 00" long by
44"-0 wide and 9'-0" deep, for the sum of P30,000. Barge
to be cleaned of creosote and fuel oil.
"This option is to be good for ninety (90) days, or until
June 30, 1953.
Yours very truly,
ATLANTIC, GULF & PACIFIC CO. OF MANILA
(Sgd.) W. H. SCHOENING
Marine Department"
The main contention of appellant is that the option
granted to appellee to sell to it barge No. 10 for the sum
of P30,000 under the terms stated above has no legal
effect because it is not supported by any consideration
and in support thereof it invokes article 1479 of the new
Civil Code. This article provides:
"ART. 1479. A promise to buy and sell a determinate
thing for a price certain is reciprocally demandable.
"An accepted unilateral promise to buy or to sell a
determinate thing for a price certain is binding upon the
promisor if the promise is supported by a consideration
distinct from the price."
On the other hand, appellee contends that, even
granting that the "offer of option" is not supported by
any consideration, that option became binding on
appellant when the appellee gave notice to it its
acceptance, and that having accepted it within the
period of option, the offer can no longer be withdrawn
and in any event such withdrawal is ineffective. In
support of this contention, appellee invokes article 1324
of the Civil Code which provides:
"ART. 1324. When the offerer has allowed the offeree
a certain period to accept, the offer may be withdrawn at
any time before acceptance by communicating such
withdrawal, except when the option is founded upon
consideration, as something paid or promised."
There is no question that under article 1479 of the new
Civil Code "an option to sell", or "a promise to buy or to
sell", as used in said article, to be valid must be
"supported by a consideration distinct from the price."
This is clearly inferred from the context of said article
that a unilateral promise to buy or to sell, even if
accepted, is only binding if supported by a consideration.
In other words, "an accepted unilateral promise" can
only have a binding effect if supported by a
consideration, which means that the option can still be
withdrawn, even if accepted, if the same is not supported
by any consideration. Here it is not disputed that the
option is without consideration. It can therefore be
withdrawn notwithstanding the acceptance made of it by
appellee.
It is true that under article 1324 of the new Civil Code,
the general rule regarding offer and acceptance is that,
when the offerer gives to the offeree a certain period to
accept, "the offer may be withdrawn at any time before
acceptance" except when the option is founded upon
consideration, but this general rule must be interpreted
as modified by the provision of article 1479 above
referred to, which applies to "a promise to buy and sell"
specifically. As already stated, this rule requires that a
promise to sell to be valid must be supported by a
consideration distinct from the price.
We are not oblivious of the existence of American
authorities which hold that an offer, once accepted,
cannot be withdrawn, regardless of whether it is
supported or not by a consideration (12 Am. Jur. 528).
These authorities, we note, uphold the general rule
applicable to offer and acceptance as contained in our
new Civil Code. But we are prevented from applying
them in view of the specific provision embodied in article
1479. While under the "offer of option" in question
appellant has assumed a clear obligation to sell its barge
to appellee and the option has been exercised in
accordance with its terms, and there appears to be no
valid or justifiable reason for appellant to withdraw its
offer, this Court cannot adopt a different attitude
because the law on the matter is clear. Our imperative
duty is to apply it unless modified by Congress.
Wherefore, the decision appealed from is reversed, with
out pronouncement as to costs.
[G.R. No. L-25494. June 14, 1972.]
NICOLAS SANCHEZ, plaintiff-appellee, vs. SEVERINA
RIGOS, defendant-appellant.
SYLLABUS
1. CIVIL LAW; CONTRACTS; CONTRACT TO BUY
AND SELL; OPTION WITHOUT CONSIDERATION; CASE
AT BAR. — Where both parties indicated in the
instrument in the caption, as an "Option to Purchase,"
and under the provisions thereof, the defendant "agreed,
promised and committed" herself to sell the land therein
described to the plaintiff for P1,510.00, but there is
nothing in the contract to indicate that her
aforementioned agreement, promise and undertaking is
supported by a consideration "distinct from the price"
stipulated for the sale of the land, it is not a "contract to
buy and sell." It merely granted plaintiff an "option" to
buy.
2. ID.; ID.; ID.; ID.; ARTICLES 1354 AND 1479,
NEW CIVIL CODE; APPLICABILITY. — It should be noted
that: Article 1354 applies to contracts in general,
whereas the second paragraph of Article 1479 refers to
"sales" in particular, and, more specifically, to "an
accepted unilateral promise to buy or to sell."
3. ID.; ID.; REQUISITE OF A UNILATERAL
PROMISE IN ORDER TO BIND PROMISOR; BURDEN OF
PROOF REST UPON PROMISEE. — In order that a
unilateral promise may be "binding" upon the promisor,
Article 1479 requires the concurrence of a condition
namely, that the promise be "supported by a
consideration distinct from the price." Accordingly, the
promisee can not compel the promisor to comply with
the promise, unless the former establishes the existence
of said distinct consideration. In other words, the
promisee has the burden of proving such consideration.
4. ID.; ID.; WHERE A UNILATERAL PROMISE TO
SELL GENERATED TO A BILATERAL CONTRACT OF
PURCHASE AND SALE; ARTICLES 1324 AND 1479,
NCC., NO DISTINCTION. — This Court itself, in the case
of Atkins, Kroll & Co., Inc. vs. Cua Hian Tek (102 Phil.,
948), decided later than Southwestern Sugar & Molasses
Co. vs. Atlantic & Pacific Co., 97 Phil., 249, saw no
distinction between Articles 1324 and 1479 of the Civil
Code and applied the former where a unilateral promise
to sell similar to the one sued upon was involved,
treating such promise as an option which, although not
binding as a contract in itself for lack of a separate
consideration, nevertheless generated a bilateral
contract of purchase and sale upon acceptance. In other
words, since there may be no valid contract without a
cause or consideration promisor is not bound by his
promise and may, accordingly withdraw it. Pending
notice of its withdrawal, his accepted promise partakes,
however, of the nature of an offer to sell which, if
accepted, results in a perfected contract of sale.
5. REMEDIAL LAW; PLEADINGS AND PRACTICE;
JUDGMENT ON THE PLEADINGS; IMPLIED
ADMISSION. — Defendant explicitly averred in her
answer, and pleaded as a special defense, the absence of
said consideration for her promise to sell and, by joining
in the petition for a judgment on the pleadings, plaintiff
has impliedly admitted the truth of said averment in
defendant's answer.
6. STATUTORY CONSTRUCTION;
INTERPRETATION OF PROVISIONS OF SAME LAW;
CARDINAL RULE. — The view that an option to sell can
still be withdrawn, even if accepted, if the same is not
supported by any consideration, has the advantage of
avoiding a conflict between Article 1324 — on the
general principles on contracts — and 1479 — on sales
— of the Civil Code, in line with the cardinal rule of
statutory construction that, in construing different
provisions of one and the same law or code, such
interpretation should be favored as will reconcile or
harmonize said provisions and avoid a conflict between
the same. Indeed, the presumption is that, in the
process of drafting the Code, its author has maintained a
consistent philosophy or position. Moreover, the decision
in Southwestern Sugar & Molasses Co. vs. Atlantic Gulf
& Pacific Co., supra, holding that Article 1324 is
modified by Article 1479 of the Civil Code, in effect,
considers the latter as an exception to the former, and
exceptions are not favored, unless the intention to the
contrary is clear, and it is not so, insofar as said two (2)
articles are concerned. What is more, the reference, in
both the second paragraph of Article 1479 and Article
1324, to an option or promise supported by or founded
upon a consideration, strongly suggests that the two (2)
provisions intended to enforce or implement the same
principle.
ANTONIO, J., concurring opinion:
1. CIVIL LAW; CONTRACTS; OPTION TO SELL;
EFFECT OF ACCEPTANCE. — I fully agree with the
abandonment of the view previously adhered to in
Southwestern Sugar & Molasses Co. vs. Atlantic Gulf
and Pacific Co. (97 Phil., 249), which holds that an
option to sell can still be withdrawn, even if accepted if
the same is not supported by any consideration, and the
reaffirmance of the doctrine in Atkins, Kroll & Co. Inc.
vs. Cua Hian Tech (102 Phil., 948), holding that "an
option implies . . . the legal obligation to keep the offer
(to sell) open for the time specified"; that it could be
withdrawn before acceptance, if there was no
consideration for the option, but once the "offer to sell" is
accepted, a bilateral promise to sell and to buy ensues,
and the offeree ipso facto assumes the obligations of a
purchaser.
2. ID.; ID.; ID.; OPTION WITHOUT
CONSIDERATION IS A MERE OFFER TO SELL, NOT
BINDING UNTIL ACCEPTED. — If the option to sell is
given without a consideration, it is a mere offer to sell,
which is not binding until accepted. If, however,
acceptance is made before a withdrawal, it constitutes a
binding contract of sale. The concurrence of both acts —
the offer and the acceptance — could in such event
generate a contract.
3. ID.; ID.; ID.; WITHDRAWAL OF OFFER BEFORE
ACCEPTANCE, OFFER IMPLIES AN OBLIGATION ON
THE PART OF OFFEROR. — While the law permits the
offeror to withdraw the offer at any time before
acceptance even before the period has expired, some
writers hold the view, that the offeror can not exercise
this right in an arbitrary or capricious manner. This is
upon the principle that an offer implies an obligation on
the part of the offeror to maintain it for such length of
time as to permit the offeree to decide whether to accept
or not, and therefore cannot arbitrarily revoke the offer
without being liable for damages which the offeree may
suffer. A contrary view would remove the stability and
security of business transactions.
4. ID.; ID.; ID.; A BILATERAL RECIPROCAL
CONTRACT; CASE AT BAR. — Where, as in the present
case, the trial court found that the "Plaintiff (Nicolas
Sanchez) had offered the sum of P1,510.00 before any
withdrawal from the contract has been made by the
Defendant (Severina Rigos)," and Rigos' offer to sell was
accepted by Sanchez, before she could withdraw her
offer, a bilateral reciprocal contract — to sell and to buy
— was generated.
CONCEPCION, J p:
Appeal from a decision of the Court of First Instance of
Nueva Ecija to the Court of Appeals, which certified the
case to Us, upon the ground that it involves a question
purely of law.
The record shows that, on April 3, 1961, plaintiff Nicolas
Sanchez and defendant Severina Rigos executed an
instrument, entitled "Option to Purchase," whereby Mrs.
Rigos "agreed, promised and committed . . . to sell" to
Sanchez, for the sum of P1,510.00, a parcel of land
situated in the barrios of Abar and Sibot, municipality of
San Jose, province of Nueva Ecija, and more particularly
described in Transfer Certificate of Title No. NT-12528 of
said province, within two (2) years from said date with
the understanding that said option shall be deemed
"terminated and elapsed," if "Sanchez shall fail to
exercise his right to buy the property" within the
stipulated period. Inasmuch as several tenders of
payment of the sum of P1,510.00, made by Sanchez
within said period, were rejected by Mrs. Rigos, on
March 12, 1963, the former deposited said amount with
the Court of First Instance of Nueva Ecija and
commenced against the latter the present action, for
specific performance and damages.
After the filing of defendant's answer — admitting some
allegations of the complaint, denying other allegations
thereof, and alleging, as special defense, that the
contract between the parties "is a unilateral promise to
sell, and the same being unsupported by any valuable
consideration, by force of the New Civil Code, is null and
void" — on February 11, 1964, both parties, assisted by
their respective counsel, jointly moved for a judgment on
the pleadings. Accordingly, on February 28, 1964, the
lower court rendered judgment for Sanchez, ordering
Mrs. Rigos to accept the sum judicially consigned by him
and to execute, in his favor, the requisite deed of
conveyance. Mrs. Rigos was, likewise, sentenced to pay
P200.00, as attorney's fees, and the costs. Hence, this
appeal by Mrs. Rigos.
This case admittedly hinges on the proper application of
Article 1479 of our Civil Code, which provides:
"ART. 1479. A promise to buy and sell a determinate
thing for a price certain is reciprocally demandable.
"An accepted unilateral promise to buy or to sell a
determinate thing for a price certain is binding upon the
promissor if the promise is supported by a consideration
distinct from the price."
In his complaint plaintiff alleges that, by virtue of the
option under consideration, "defendant agreed and
committed to sell" and "the plaintiff agreed and
committed to buy" the land described in the option, copy
of which was annexed to said pleading as Annex A
thereof and is quoted on the margin. 1 Hence, plaintiff
maintains that the promise contained in the contract is
"reciprocally demandable," pursuant to the first
paragraph of said Article 1479. Although defendant had
really "agreed, promised and committed" herself to sell
the land to the plaintiff, it is not true that the latter had,
in turn, "agreed and committed himself" to buy said
property Said Annex A does not bear out plaintiff's
allegation to this effect. What is more, since Annex A has
bean made "an integral part" of his complaint, the
provisions of said instrument form part "and parcel" 2 of
said pleading.
The option did not impose upon plaintiff the obligation to
purchase defendant's property. Annex A is not a
"contract to buy and sell." It merely granted plaintiff an
"option" to buy. And both parties so understood it, as
indicated by the caption, "Option to Purchase," given by
them to said instrument. Under the provisions thereof,
the defendant "agreed, promised and committed" herself
to sell the land therein described to the plaintiff for
P1,510.00, but there is nothing in the contract to
indicate that her aforementioned agreement, promise
and undertaking is supported by a consideration
"distinct from the price" stipulated for the sale of the
land.
Relying upon Article 1354 of our Civil Code, the lower
court presumed the existence of said consideration, and
this would seem to be the main factor that influenced its
decision in plaintiff's favor. It should be noted, however,
that:
(1) Article 1354 applies to contracts in general,
whereas the second paragraph of Article 1479 refers to
"sales" in particular, and, more specifically, to "an
accepted unilateral promise to buy or to sell." In other
words, Article 1479 is controlling in the case at bar.
(2) In order that said unilateral promise may be
"binding" upon the promisor, Article 1479 requires the
concurrence of a condition, namely, that the promise be
"supported by a consideration distinct from the price."
Accordingly, the promisee can not compel the promisor
to comply with the promise, unless the former
establishes the existence of said distinct consideration.
In other words, the promisee has the burden of proving
such consideration. Plaintiff herein has not even alleged
the existence thereof in his complaint.
(3) Upon the other hand, defendant explicitly
averred in her answer, and pleaded as a special defense,
the absence of said consideration for her promise to sell
and, by joining in the petition for a judgment on the
pleadings, plaintiff has impliedly admitted the truth of
said averment in defendant's answer. Indeed, as early as
March 14, 1908, it had been held, in Bauermann v.
Casas, 3 that:
"One who prays for judgment on the pleadings without
offering proof as to the truth of hie own allegations, and
without giving the opposing party an opportunity to
introduce evidence, must be understood to admit the
truth of all the material and relevant allegations of the
opposing party, and to rest his motion for judgment on
those allegations taken together with such of his own as
are admitted in the pleading. (La Yebana Company vs.
Sevilla, 9 Phil. 210)." (Emphasis supplied.).
This view was reiterated in Evangelista V. De la Rosa 4
and Mercy's Incorporated v. Herminia Verde. 5
Squarely in point is Southwestern Sugar & Molasses Co.
v. Atlantic Gulf & Pacific Co., 6 from which We quote:
"The main contention of appellant is that the option
granted to appellee to sell to it barge No. 10 for the sum
of P30,000 under the terms stated above has no legal
effect because it is not supported by any consideration
and in support thereof it invokes article 1479 of the new
Civil Code, The article provides:.
'ART. 1479. A promise to buy and sell a determinate
thing for a price certain is reciprocally demandable.
'An accepted unilateral promise to buy or sell a
determinate thing for a price certain is binding upon the
promisor if the promise is supported by a consideration
distinct from the price.'
"On the other hand, appellee contends that, even
granting that the 'offer of option' is not supported by any
consideration, that option became binding on appellant
when the appellee gave notice to it of its acceptance, and
that having accepted it within the period of option, the
offer can no longer be withdrawn and in any event such
withdrawal is ineffective. In support of this contention,
appellee invokes article 1324 of the Civil Code which
provides:
'ART. 1324. When the offerer has allowed the offeree
a certain period to accept, the offer may be withdrawn at
any time before acceptance by communicating such
withdrawal, except when the option is founded upon
consideration, as something paid or promised.'
"There is no question that under article 1479 of the new
Civil Code 'an option to sell,' or 'a promise to buy or to
sell,' as used in said article, to be valid must be
'supported by a consideration distinct from the price.'
This is clearly inferred from the context of said article
that a unilateral promise to buy or to sell, even if
accepted, is only binding if supported by a consideration.
In other words, 'an accepted unilateral promise' can only
have a binding effect if supported by a consideration,
which means that the option can still be withdrawn,
even if accepted, if the same is not supported by any
consideration. Here it is not disputed that the option is
without consideration. It can therefore be withdrawn
notwithstanding the acceptance made of it by appellee.
"It is true that under article 1324 of the new Civil Code,
the general rule regarding offer and acceptance is that,
when the offerer gives to the offeree a certain period to
accept, 'the offer may be withdrawn at any time before
acceptance' except when the option is founded upon
consideration, but this general rule must be interpreted
as modified by the provision of article 1479 above
referred to, which applies to 'a promise to buy and sell'
specifically. As already stated, this rule requires that a
promise to sell to be valid must be supported by a
consideration distinct from the price.
"We are net oblivious of the existence of American
authorities which hold that an offer, once accepted,
cannot be withdrawn, regardless of whether it is
supported or not by a consideration (12 Am. Jur. 528).
These authorities, we note, uphold the general rule
applicable to offer and acceptance as contained in our
new Civil Code. But we are prevented from applying
them in view of the specific provision embodied in article
1479. While under the 'offer of option' in question
appellant has assumed a clear obligation to sell its barge
to appellee and the option has been exercised in
accordance with its terms, and there appears to be no
valid or justifiable reason for appellant to withdraw its
offer, this Court cannot adopt a different attitude
because the law on the matter is clear. Our imperative
duty is to apply it unless modified by Congress." 7
However, this Court itself, in the case of Atkins, Kroll
and Co., Inc. v. Cua Hian Tek, 8 decided later than
Southwestern Sugar & Molasses Co. v. Atlantic Gulf &
Pacific Co., 9 saw no distinction between Articles 1324
and 1479 of the Civil Code and applied the former where
a unilateral promise to sell similar to the one sued upon
here was involved, treating such promise as an option
which, although not binding as a contract in itself for
lack of a separate consideration, nevertheless generated
a bilateral contract of purchase and sale upon
acceptance. Speaking through Associate Justice, later
Chief Justice, Cesar Bengzon, this Court said:
"Furthermore, an option is unilateral: a promise to sell
at the price fixed whenever the offeree should decide to
exercise his option within the specified time. After
accepting the promise and before he exercises his option,
the holder of the option is not bound to buy. He is free
either to buy or not to buy later. In this case however,
upon accepting herein petitioner's offer a bilateral
promise to sell and to buy ensued, and the respondent
ipso facto assumed the obligation of a purchaser. He did
not just get the right subsequently to buy or not to buy.
It was not a mere option then; it was bilateral contract of
sale.
"Lastly, even supposing that Exh. A granted an option
which is not binding for lack of consideration, the
authorities hold that.
'If the option is given without a consideration, it is a
mere offer of a contract of sale, which is not binding
until accepted. If, however, acceptance is made before a
withdrawal, it constitutes a binding contract of sale,
even though the option was not supported by a sufficient
consideration. . . . ' (77 Corpus Juris Secundum p. 652.
See also 27 Ruling Case Law 339 and cases cited.')
'It can be taken for granted, as contended by the
defendant, that the option contract was not valid for lack
of consideration. But it was, at least, an offer to sell,
which was accepted by latter, and of the acceptance the
offerer had knowledge before said offer was withdrawn.
The concurrence of both acts — the offer and the
acceptance — could at all events have generated a
contract, if none there was before (arts. 1254 and 1262
of the Civil Code).' (Zayco vs. Serra, 44 Phil. 331.)"
In other words, since there may be no valid contract
without a cause or consideration, the promisor is not
bound by his promise and may, accordingly, withdraw it.
Pending notice of its withdrawal, his accepted promise
partakes, however, of the nature of an offer to sell which,
if accepted, results in a perfected contract of sale.
This view has the advantage of avoiding a conflict
between Articles 1324 — on the general principles on
contracts — and 1479 — on sales — of the Civil Code, in
line with the cardinal rule of statutory construction that,
in construing different provisions of one and the same
law or code, such interpretation should be favored as
will reconcile or harmonize said provisions and avoid a
conflict between the same. Indeed, the presumption is
that, in the process of drafting the Code, its author has
maintained a consistent philosophy or position.
Moreover, the decision in Southwestern Sugar &
Molasses Co. v. Atlantic Gulf & Pacific Co., 10 holding
that Art. 1324 is modified by Art. 1479 of the Civil Code,
in effect, considers the latter as an exception to the
former, and exceptions are not favored, unless the
intention to the contrary is clear, and it is not so, insofar
as said two (2) articles are concerned. What is more, the
reference, in both the second paragraph of Art. 1479 and
Art. 1324, to an option or promise supported by or
founded upon a consideration, strongly suggests that the
two (2) provisions intended to enforce or implement the
same principle.
Upon mature deliberation, the Court is of the considered
opinion that it should, as it hereby reiterates the
doctrine laid down in the Atkins, Kroll & Co. case, and
that, insofar all inconsistent therewith, the view adhered
to in the South western Sugar & Molasses Co. case
should be deemed abandoned or modified.
WHEREFORE, the decision appealed from is hereby
affirmed, with costs against defendant-appellant
Severina Rigos. It is
so ordered.
Reyes, J.B.L., Makalintal, Zaldivar, Fernando,
Teehankee, Barredo and Makasiar, JJ., concur.
Castro, J., did not take part.
Separate Opinions
ANTONIO, J., concurring:
I concur in the opinion of the Chief Justice.
I fully agree with the abandonment of the view previously
adhered to in Southwestern Sugar & Molasses Co. vs.
Atlantic Gulf and Pacific Co. 1 which holds that an
option to sell can still be withdrawn, even if accepted, if
the same is not supported by any consideration, and the
reaffirmance of the doctrine in Atkins, Kroll & Co., Inc.
vs. Cua Hian Tek, 2 holding that "an option implies . . .
the legal obligation to keep the offer (to sell) open for the
time specified;" that it could be withdrawn before
acceptance, if there was no consideration for the option,
but once the "offer to sell" is accepted, a bilateral
promise to sell and to buy ensues, and the offeree ipso
facto assumes the obligations of a purchaser In other
words, if the option is given without a consideration, it is
a mere offer to sell, which is not binding until accepted.
If, however, acceptance is made before a withdrawal, it
constitutes a binding contract of sale. The concurrence
of both acts — the offer and the acceptance — could in
such event generate a contract.
While the law permits the offeror to withdraw the offer at
any time before acceptance even before the period has
expired, some writers hold the view, that the offeror can
not exercise this right in an arbitrary or capricious
manner. This is upon the principle that an offer implies
an obligation on the part of the offeror to maintain it for
such length of time as to permit the offeree to decide
whether to accept or not, and therefore cannot
arbitrarily revoke the offer without being liable for
damages which the offeree may suffer. A contrary view
would remove the stability and security of business
transactions. 3
In the present case the trial court found that the
"Plaintiff (Nicolas Sanchez) had offered the sum of
P1,510.00 before any withdrawal from the contract has
been made by the Defendant (Severina Rigos)." Since
Rigos' offer to sell was accepted by Sanchez, before she
could withdraw her offer, a bilateral reciprocal contract
— to sell and to buy was generated
[G.R. No. 167884. January 20, 2009.]
ENRICO S. EULOGIO, petitioner, vs. SPOUSES
CLEMENTE APELES 1 and LUZ APELES, respondents.
CHICO-NAZARIO, J p:
Petitioner Enrico S. Eulogio (Enrico) filed this instant
Petition for Review on Certiorari under Rule 45 of the
Revised Rules of Court assailing the Decision 2 dated 20
December 2004 of the Court of Appeals in CA-G.R. CV
No. 76933 which reversed the Decision 3 dated 8
October 2002 of the Regional Trial Court (RTC) of
Quezon City, Branch 215, in Civil Case No. Q-99-36834.
The RTC directed respondents, spouses Clemente and
Luz Apeles (spouses Apeles) to execute a Deed of Sale
over a piece of real property in favor of Enrico after the
latter's payment of full consideration therefor. ETDSAc
The factual and procedural antecedents of the present
case are as follows:
The real property in question consists of a house and lot
situated at No. 87 Timog Avenue, Quezon City (subject
property). The lot has an area of 360.60 square meters,
covered by Transfer Certificate of Title No. 253990
issued by the Registry of Deeds of Quezon City in the
names of the spouses Apeles. 4
In 1979, the spouses Apeles leased the subject property
to Arturo Eulogio (Arturo), Enrico's father. Upon Arturo's
death, his son Enrico succeeded as lessor of the subject
property. Enrico used the subject property as his
residence and place of business. Enrico was engaged in
the business of buying and selling imported cars. 5
ITaCEc
On 6 January 1987, the spouses Apeles and Enrico
allegedly entered into a Contract of Lease 6 with Option
to Purchase involving the subject property. According to
the said lease contract, Luz Apeles was authorized to
enter into the same as the attorney-in-fact of her
husband, Clemente, pursuant to a Special Power of
Attorney executed by the latter in favor of the former on
24 January 1979. The contract purportedly afforded
Enrico, before the expiration of the three-year lease
period, the option to purchase the subject property for a
price not exceeding P1.5 Million. The pertinent
provisions of the Contract of Lease are reproduced
below:
3. That this Contract shall be effective commencing
from January 26, 1987 and shall remain valid and
binding for THREE (3) YEARS from the said date. The
LESSOR hereby gives the LESSEE under this Contract of
Lease the right and option to buy the subject house and
lot within the said 3-year lease period. 2009jur
4. That the purchase price or total consideration of
the house and lot subject of this Contract of Lease shall,
should the LESSEE exercise his option to buy it on or
before the expiration of the 3-year lease period, be fixed
or agreed upon by the LESSOR and the LESSEE,
Provided, that the said purchase price, as it is hereby
agreed, shall not be more than ONE MILLION FIVE
HUNDRED THOUSAND PESOS (P1,500,000.00) and,
provided further, that the monthly rentals paid by the
LESSEE to the LESSOR during the 3-year lease period
shall form part of or be deducted from the purchase
price or total consideration as may hereafter be mutually
fixed or agreed upon by the LESSOR and the LESSEE.
DISHEA
5. That if the LESSEE shall give oral or written
notice to the LESSOR on or before the expiry date of the
3-year lease period stipulated herein of his desire to
exercise his option to buy or purchase the house and lot
herein leased, the LESSOR upon receipt of the purchase
price/total consideration as fixed or agreed upon less the
total amount of monthly rentals paid the LESSEE during
the 3-year lease period shall execute the appropriate
Deed to SELL, TRANSFER and CONVEY the house and
lot subject of this Contract in favor of the LESSEE, his
heirs, successors and assigns, together with all the
fixtures and accessories therein, free from all liens and
encumbrances.
Before the expiration of the three-year lease period
provided in the lease contract, Enrico exercised his
option to purchase the subject property by
communicating verbally and in writing to Luz his
willingness to pay the agreed purchase price, but the
spouses Apeles supposedly ignored Enrico's
manifestation. This prompted Enrico to seek recourse
from the barangay for the enforcement of his right to
purchase the subject property, but despite several
notices, the spouses Apeles failed to appear before the
barangay for settlement proceedings. Hence, the
barangay issued to Enrico a Certificate to File Action. 7
AIECSD
In a letter dated 26 January 1997 to Enrico, the spouses
Apeles demanded that he pay his rental arrears from
January 1991 to December 1996 and he vacate the
subject property since it would be needed by the spouses
Apeles themselves.
Without heeding the demand of the spouses Apeles,
Enrico instituted on 23 February 1999 a Complaint for
Specific Performance with Damages against the spouses
Apeles before the RTC, docketed as Civil Case No. Q-99-
36834. Enrico's cause of action is founded on paragraph
5 of the Contract of Lease with Option to Purchase
vesting him with the right to acquire ownership of the
subject property after paying the agreed amount of
consideration.
Following the pre-trial conference, trial on the merits
ensued before the RTC. IAEcaH
Enrico himself testified as the sole witness for his side.
He narrated that he and Luz entered into the Contract of
Lease with Option to Purchase on 26 January 1987, with
Luz signing the said Contract at Enrico's office in Timog
Avenue, Quezon City. The Contract was notarized on the
same day as evidenced by the Certification on the Notary
Public's Report issued by the Clerk of Court of the RTC
of Manila. 8
On the other hand, the spouses Apeles denied that Luz
signed the Contract of Lease with Option to Purchase,
and posited that Luz's signature thereon was a forgery.
To buttress their contention, the spouses Apeles offered
as evidence Luz's Philippine Passport which showed that
on 26 January 1987, the date when Luz allegedly signed
the said Contract, she was in the United States of
America. The spouses Apeles likewise presented several
official documents bearing her genuine signatures to
reveal their remarkable discrepancy from the signature
appearing in the disputed lease contract. The spouses
Apeles maintained that they did not intend to sell the
subject property. 9 aSCDcH
After the spouses Apeles established by documentary
evidence that Luz was not in the country at the time the
Contract of Lease with Option to Purchase was executed,
Enrico, in rebuttal, retracted his prior declaration that
the said Contract was signed by Luz on 26 January
1996. Instead, Enrico averred that Luz signed the
Contract after she arrived in the Philippines on 30 May
1987. Enrico further related that after Luz signed the
lease contract, she took it with her for notarization, and
by the time the document was returned to him, it was
already notarized. 10
On 8 October 2002, the RTC rendered a Decision in Civil
Case No. Q-99-36834 in favor of Enrico. Since none of
the parties presented a handwriting expert, the RTC
relied on its own examination of the specimen signatures
submitted to resolve the issue of forgery. The RTC found
striking similarity between Luz's genuine signatures in
the documents presented by the spouses Apeles
themselves and her purportedly forged signature in the
Contract of Lease with Option to Purchase. Absent any
finding of forgery, the RTC bound the parties to the clear
and unequivocal stipulations they made in the lease
contract. Accordingly, the RTC ordered the spouses
Apeles to execute a Deed of Sale in favor of Enrico upon
the latter's payment of the agreed amount of
consideration. The fallo of the RTC Decision reads:
THADEI
WHEREFORE, this Court finds [Enrico's] complaint to be
substantiated by preponderance of evidence and
accordingly orders —
(1) [The spouses Apeles] to comply with the
provisions of the Contract of Lease with Option to
Purchase; and upon payment of total consideration as
stipulated in the said CONTRACT for [the spouses
Apeles] to execute a Deed of Absolute Sale in favor of
[Enrico], over the parcel of land and the improvements
existing thereon located at No. 87 Timog Avenue, Quezon
City.
(2) [The spouses Apeles] to pay [Enrico] moral and
exemplary damages in the respective amounts of
P100,000.00 and P50,000.00.
(3) [The spouses Apeles] to pay attorney's fees of
P50,000.00 and costs of the suit. 11
The spouses Apeles challenged the adverse RTC Decision
before the Court of Appeals and urged the appellate
court to nullify the assailed Contract of Lease with
Option to Purchase since Luz's signature thereon was
clearly a forgery. The spouses Apeles argued that it was
physically impossible for Luz to sign the said Contract
on 26 January 1987 since she was not in the Philippines
on that date and returned five months thereafter. The
spouses Apeles called attention to Enrico's inconsistent
declarations as to material details involving the
execution of the lease contract, thereby casting doubt on
Enrico's credibility, as well as on the presumed
regularity of the contract as a notarized document.
caCTHI
On 20 December 2004, the Court of Appeals rendered a
Decision in CA-G.R. CV No. 76933 granting the appeal of
the spouses Apeles and overturning the judgment of the
RTC. In arriving at its assailed decision, the appellate
court noted that the Notary Public did not observe
utmost care in certifying the due execution of the
Contract of Lease with Option to Purchase. The Court of
Appeals chose not to accord the disputed Contract full
faith and credence. The Court of Appeals held, thus:
2009jur
WHEREFORE, the foregoing premises considered, the
appealed decision dated October 8, 2002 of the Regional
Trial Court of Quezon City, Branch 215 in Civil Case No.
Q-99-36834 for specific performance with damages is
hereby REVERSED and a new is one entered dismissing
[Enrico's] complaint. 12
Enrico's Motion for Reconsideration was denied by the
Court of Appeals in a Resolution 13 dated 25 April 2005.
cDTACE
Enrico is presently before this Court seeking the reversal
of the unfavorable judgment of the Court of Appeals,
assigning the following errors thereto:
I.
THE COURT OF APPEALS COMMITTED (sic)
REVERSIBLE ERROR WHEN IT BRUSHED ASIDE THE
RULING OF THE COURT A QUO UPHOLDING THE
VALIDITY OF THE CONTRACT OF LEASE WITH OPTION
TO PURCHASE AND IN LIEU THEREOF RULED THAT
THE SAID CONTRACT OF LEASE WAS A FORGERY AND
THUS, NULL AND VOID.
II.
THE COURT OF APPEALS COMMITTED (sic)
REVERSIBLE ERROR WHEN CONTRARY TO THE
FINDINGS OF THE COURT A QUO IT RULED THAT THE
DEFENSE OF FORGERY WAS SUBSTANTIALLY AND
CONVINCINGLY PROVEN BY COMPETENT EVIDENCE.
caTIDE
Simply, Enrico faults the Court of Appeals for disturbing
the factual findings of the RTC in disregard of the legal
aphorism that the factual findings of the trial court
should be accorded great weight and respect on appeal.
We do not agree.
Enrico's insistence on the infallibility of the findings of
the RTC seriously impairs the discretion of the appellate
tribunal to make independent determination of the
merits of the case appealed before it. Certainly, the
Court of Appeals cannot swallow hook, line, and sinker
the factual conclusions of the trial court without
crippling the very office of review. Although we have
indeed held that the factual findings of the trial courts
are to be accorded great weight and respect, they are not
absolutely conclusive upon the appellate court. 14
The reliance of appellate tribunals on the factual
findings of the trial court is based on the postulate that
the latter had firsthand opportunity to hear the
witnesses and to observe their conduct and demeanor
during the proceedings. However, when such findings
are not anchored on their credibility and their
testimonies, but on the assessment of documents that
are available to appellate magistrates and subject to
their scrutiny, reliance on the trial court finds no
application. 15 DcCITS
Moreover, appeal by writ of error to the Court of Appeals
under Rule 41 of the Revised Rules of Court, the parties
may raise both questions of fact and/or of law. In fact, it
is imperative for the Court of Appeals to review the
findings of fact made by the trial court. The Court of
Appeals even has the power to try cases and conduct
hearings, receive evidence and perform any and all acts
necessary to resolve factual issues raised in cases falling
within its original and appellate jurisdiction. 16
Enrico assiduously prays before this Court to sustain
the validity of the Contract of Lease with Option to
Purchase. Enrico asserts that the said Contract was
voluntarily entered into and signed by Luz who had it
notarized herself. The spouses Apeles should be obliged
to respect the terms of the agreement, and not be
allowed to renege on their commitment thereunder and
frustrate the sanctity of contracts. aSIETH
Again, we are not persuaded. We agree with the Court of
Appeals that in ruling out forgery, the RTC heavily relied
on the testimony proffered by Enrico during the trial,
ignoring blatant contradictions that destroy his
credibility and the veracity of his claims. On direct
examination, Enrico testified that Luz signed the
Contract of Lease with Option to Purchase on 26
January 1987 in his presence, 17 but he recanted his
testimony on the matter after the spouses Apeles
established by clear and convincing evidence that Luz
was not in the Philippines on that date. 18 In rebuttal,
Enrico made a complete turnabout and claimed that Luz
signed the Contract in question on 30 May 1987 after
her arrival in the country. 19 The inconsistencies in
Enrico's version of events have seriously impaired the
probative value of his testimony and cast serious doubt
on his credibility. His contradictory statements on
important details simply eroded the integrity of his
testimony. 2009jur
While it is true that a notarized document carries the
evidentiary weight conferred upon it with respect to its
due execution, and has in its favor the presumption of
regularity, this presumption, however, is not absolute. It
may be rebutted by clear and convincing evidence to the
contrary. 20 Enrico himself admitted that Luz took the
document and had it notarized without his presence.
Such fact alone overcomes the presumption of regularity
since a notary public is enjoined not to notarize a
document unless the persons who signed the same are
the very same persons who executed and personally
appeared before the said notary public to attest to the
contents and truth of what are stated therein. SIDEaA
Although there is no direct evidence to prove forgery,
preponderance of evidence inarguably favors the spouses
Apeles. In civil cases, the party having the burden of
proof must establish his case by a preponderance of
evidence. Preponderance of evidence is the weight,
credit, and value of the aggregate evidence on either side
and is usually considered to be synonymous with the
term "greater weight of the evidence" or "greater weight of
the credible evidence". Preponderance of evidence is a
phrase which, in the last analysis, means probability of
the truth. It is evidence which is more convincing to the
court as worthier of belief than that which is offered in
opposition thereto. 21 In the case at bar, the spouses
Apeles were able to overcome the burden of proof and
prove by preponderant evidence in disputing the
authenticity and due execution of the Contract of Lease
with Option to Purchase. In contrast, Enrico seemed to
rely only on his own self-serving declarations, without
asserting any proof of corroborating testimony or
circumstantial evidence to buttress his claim. TaISEH
Even assuming for the sake of argument that we agree
with Enrico that Luz voluntarily entered into the
Contract of Lease with Option to Purchase and
personally affixed her signature to the said document,
the provision on the option to purchase the subject
property incorporated in said Contract still remains
unenforceable. 2009jur
There is no dispute that what Enrico sought to enforce
in Civil Case No. Q-99-36834 was his purported right to
acquire ownership of the subject property in the exercise
of his option to purchase the same under the Contract of
Lease with Option to Purchase. He ultimately wants to
compel the spouses Apeles to already execute the Deed
of Sale over the subject property in his favor.
An option is a contract by which the owner of the
property agrees with another person that the latter shall
have the right to buy the former's property at a fixed
price within a certain time. It is a condition offered or
contract by which the owner stipulates with another that
the latter shall have the right to buy the property at a
fixed price within a certain time, or under, or in
compliance with certain terms and conditions; or which
gives to the owner of the property the right to sell or
demand a sale. 22 An option is not of itself a purchase,
but merely secures the privilege to buy. It is not a sale of
property but a sale of the right to purchase. It is simply
a contract by which the owner of the property agrees
with another person that he shall have the right to buy
his property at a fixed price within a certain time. He
does not sell his land; he does not then agree to sell it;
but he does sell something, i.e., the right or privilege to
buy at the election or option of the other party. Its
distinguishing characteristic is that it imposes no
binding obligation on the person holding the option,
aside from the consideration for the offer. 23 aIAHcE
It is also sometimes called an "unaccepted offer" and is
sanctioned by Article 1479 of the Civil Code:
Art. 1479. A promise to buy and sell a determinate
thing for a price certain is reciprocally demandable.
An accepted unilateral promise to buy or to sell a
determinate thing for a price certain is binding upon the
promissor if the promise is supported by a consideration
distinct from the price.
The second paragraph of Article 1479 provides for the
definition and consequent rights and obligations under
an option contract. For an option contract to be valid
and enforceable against the promissor, there must be a
separate and distinct consideration that supports it. 24
cEAHSC
In the landmark case of Southwestern Sugar and
Molasses Company v. Atlantic Gulf and Pacific Co., 25
we declared that for an option contract to bind the
promissor, it must be supported by consideration:
2009jur
There is no question that under Article 1479 of the new
Civil Code "an option to sell", or "a promise to buy or to
sell", as used in said article, to be valid must be
"supported by a consideration distinct from the price".
This is clearly inferred from the context of said article
that a unilateral promise to buy or to sell, even if
accepted, is only binding if supported by a consideration.
In other words, "an accepted unilateral promise" can
only have a binding effect if supported by a
consideration, which means that the option can still be
withdrawn, even if accepted, if the same is not supported
by any consideration. Here it is not disputed that the
option is without consideration. It can therefore be
withdrawn notwithstanding the acceptance made of it by
appellee. (Emphasis supplied.) HSIDTE
The doctrine requiring the payment of consideration in
an option contract enunciated in Southwestern Sugar is
resonated in subsequent cases and remains controlling
to this day. Without consideration that is separate and
distinct from the purchase price, an option contract
cannot be enforced; that holds true even if the unilateral
promise is already accepted by the optionee.
The consideration is "the why of the contracts, the
essential reason which moves the contracting parties to
enter into the contract". This definition illustrates that
the consideration contemplated to support an option
contract need not be monetary. Actual cash need not be
exchanged for the option. However, by the very nature of
an option contract, as defined in Article 1479, the same
is an onerous contract for which the consideration must
be something of value, although its kind may vary. 26
We have painstakingly examined the Contract of Lease
with Option to Purchase, as well as the pleadings
submitted by the parties, and their testimonies in open
court, for any direct evidence or evidence aliunde to
prove the existence of consideration for the option
contract, but we have found none. The only
consideration agreed upon by the parties in the said
Contract is the supposed purchase price for the subject
property in the amount not exceeding P1.5 Million,
which could not be deemed to be the same consideration
for the option contract since the law and jurisprudence
explicitly dictate that for the option contract to be valid,
it must be supported by a consideration separate and
distinct from the price. EScIAa
In Bible Baptist Church v. Court of Appeals, 27 we
stressed that an option contract needs to be supported
by a separate consideration. The consideration need not
be monetary but could consist of other things or
undertakings. However, if the consideration is not
monetary, these must be things or undertakings of
value, in view of the onerous nature of the option
contract. Furthermore, when a consideration for an
option contract is not monetary, said consideration must
be clearly specified as such in the option contract or
clause. 2009jur
In the present case, it is indubitable that no
consideration was given by Enrico to the spouses Apeles
for the option contract. The absence of monetary or any
material consideration keeps this Court from enforcing
the rights of the parties under said option contract.
WHEREFORE, in view of the foregoing, the instant
Petition is DENIED. The Decision dated 20 December
2004 and Resolution dated 25 April 2005 of the Court of
Appeals in CA-G.R. CV No. 76933 are hereby
AFFIRMED. No costs. cDCaTS
SO ORDERED.
[G.R. No. 168325. December 13, 2010.]
ROBERTO D. TUAZON, petitioner, vs. LOURDES Q.
DEL ROSARIO-SUAREZ, CATALINA R. SUAREZ-DE
LEON, WILFREDO DE LEON, MIGUEL LUIS S. DE
LEON, ROMMEL LEE S. DE LEON, and GUILLERMA L.
SANDICO-SILVA, as attorney-in-fact of the
defendants, except Lourdes Q. del Rosario-Suarez,
respondents.
DEL CASTILLO, J p:
In a situation where the lessor makes an offer to sell to
the lessee a certain property at a fixed price within a
certain period, and the lessee fails to accept the offer or
to purchase on time, then the lessee loses his right to
buy the property and the owner can validly offer it to
another. ATHCDa
This Petition for Review on Certiorari 1 assails the
Decision 2 dated May 30, 2005 of the Court of Appeals
(CA) in CA-G.R. CV No. 78870, which affirmed the
Decision 3 dated November 18, 2002 of the Regional
Trial Court (RTC), Branch 101, Quezon City in Civil Case
No. Q-00-42338.
Factual Antecedents
Respondent Lourdes Q. del Rosario-Suarez (Lourdes)
was the owner of a parcel of land, containing more or
less an area of 1,211 square meters located along
Tandang Sora Street, Barangay Old Balara, Quezon City
and previously covered by Transfer Certificate of Title
(TCT) No. RT-56118 4 issued by the Registry of Deeds of
Quezon City.
On June 24, 1994, petitioner Roberto D. Tuazon
(Roberto) and Lourdes executed a Contract of Lease 5
over the abovementioned parcel of land for a period of
three years. The lease commenced in March 1994 and
ended in February 1997. During the effectivity of the
lease, Lourdes sent a letter 6 dated January 2, 1995 to
Roberto where she offered to sell to the latter subject
parcel of land. She pegged the price at P37,541,000.00
and gave him two years from January 2, 1995 to decide
on the said offer. AEIDTc
On June 19, 1997, or more than four months after the
expiration of the Contract of Lease, Lourdes sold subject
parcel of land to her only child, Catalina Suarez-de Leon,
her son-in-law Wilfredo de Leon, and her two grandsons,
Miguel Luis S. de Leon and Rommel S. de Leon (the de
Leons), for a total consideration of only P2,750,000.00 as
evidenced by a Deed of Absolute Sale 7 executed by the
parties. TCT No. 177986 8 was then issued by the
Registry of Deeds of Quezon City in the name of the de
Leons.
The new owners through their attorney-in-fact,
Guillerma S. Silva, notified Roberto to vacate the
premises. Roberto refused hence, the de Leons filed a
complaint for Unlawful Detainer before the Metropolitan
Trial Court (MeTC) of Quezon City against him. On
August 30, 2000, the MeTC rendered a Decision 9
ordering Roberto to vacate the property for non-payment
of rentals and expiration of the contract.
Ruling of the Regional Trial Court
On November 8, 2000, while the ejectment case was on
appeal, Roberto filed with the RTC of Quezon City a
Complaint 10 for Annulment of Deed of Absolute Sale,
Reconveyance, Damages and Application for Preliminary
Injunction against Lourdes and the De Leons. On
November 13, 2000, Roberto filed a Notice of Lis Pendens
11 with the Registry of Deeds of Quezon City.
On January 8, 2001, respondents filed an Answer with
Counterclaim 12 praying that the Complaint be
dismissed for lack of cause of action. They claimed that
the filing of such case was a mere leverage of Roberto
against them because of the favorable Decision issued by
the MeTC in the ejectment case.
On September 17, 2001, the RTC issued an Order 13
declaring Lourdes and the De Leons in default for their
failure to appear before the court for the second time
despite notice. Upon a Motion for Reconsideration, 14
the trial court in an Order 15 dated October 19, 2001 set
aside its Order of default. TaHDAS
After trial, the court a quo rendered a Decision declaring
the Deed of Absolute Sale made by Lourdes in favor of
the de Leons as valid and binding. The offer made by
Lourdes to Roberto did not ripen into a contract to sell
because the price offered by the former was not
acceptable to the latter. The offer made by Lourdes is no
longer binding and effective at the time she decided to
sell the subject lot to the de Leons because the same was
not accepted by Roberto. Thus, in a Decision dated
November 18, 2002, the trial court dismissed the
complaint. Its dispositive portion reads:
WHEREFORE, premises considered, judgment is hereby
rendered dismissing the above-entitled Complaint for
lack of merit, and ordering the Plaintiff to pay the
Defendants, the following:
1. the amount of P30,000.00 as moral damages;
2. the amount of P30,000.00 as exemplary
damages;
3. the amount of P30,000.00 as attorney's fees;
and
4. cost of the litigation.
SO ORDERED. 16
Ruling of the Court of Appeals
On May 30, 2005, the CA issued its Decision dismissing
Roberto's appeal and affirming the Decision of the RTC.
Hence, this Petition for Review on Certiorari filed by
Roberto advancing the following arguments: CAScIH
I. THE TRIAL COURT AND THE COURT OF APPEALS
HAD DECIDED THAT THE "RIGHT OF FIRST REFUSAL"
EXISTS ONLY WITHIN THE PARAMETERS OF AN
"OPTION TO BUY", AND DID NOT EXIST WHEN THE
PROPERTY WAS SOLD LATER TO A THIRD PERSON,
UNDER FAVORABLE TERMS AND CONDITIONS WHICH
THE FORMER BUYER CAN MEET.
II. WHAT IS THE STATUS OR SANCTIONS OF AN
APPELLEE IN THE COURT OF APPEALS WHO HAS NOT
FILED OR FAILED TO FILE AN APPELLEE'S BRIEF? 17
Petitioner's Arguments
Roberto claims that Lourdes violated his right to buy
subject property under the principle of "right of first
refusal" by not giving him "notice" and the opportunity to
buy the property under the same terms and conditions
or specifically based on the much lower price paid by the
de Leons.
Roberto further contends that he is enforcing his "right
of first refusal" based on Equatorial Realty Development,
Inc. v. Mayfair Theater, Inc. 18 which is the leading case
on the "right of first refusal."
Respondents' Arguments
On the other hand, respondents posit that this case is
not covered by the principle of "right of first refusal" but
an unaccepted unilateral promise to sell or, at best, a
contract of option which was not perfected. The letter of
Lourdes to Roberto clearly embodies an option contract
as it grants the latter only two years to exercise the
option to buy the subject property at a price certain of
P37,541,000.00. As an option contract, the said letter
would have been binding upon Lourdes without need of
any consideration, had Roberto accepted the offer. But
in this case there was no acceptance made neither was
there a distinct consideration for the option contract.
HIcTDE
Our Ruling
The petition is without merit.
This case involves an option contract
and not a contract of a right of first
refusal
In Beaumont v. Prieto, 19 the nature of an option
contract is explained thus:
In his Law Dictionary, edition of 1897, Bouvier defines
an option as a contract, in the following language:
'A contract by virtue of which A, in consideration of the
payment of a certain sum to B, acquires the privilege of
buying from, or selling to, B certain securities or
properties within a limited time at a specified price.
(Story vs. Salamon, 71 N.Y., 420.)'
From Vol. 6, page 5001, of the work "Words and
Phrases," citing the case of Ide vs. Leiser (24 Pac., 695;
10 Mont., 5; 24 Am. St. Rep., 17) the following quotation
has been taken:
'An agreement in writing to give a person the 'option' to
purchase lands within a given time at a named price is
neither a sale nor an agreement to sell. It is simply a
contract by which the owner of property agrees with
another person that he shall have the right to buy his
property at a fixed price within a certain time. He does
not sell his land; he does not then agree to sell it; but he
does sell something; that is, the right or privilege to buy
at the election or option of the other party. The second
party gets in praesenti, not lands, nor an agreement that
he shall have lands, but he does get something of value;
that is, the right to call for and receive lands if he elects.
The owner parts with his right to sell his lands, except to
the second party, for a limited period. The second party
receives this right, or rather, from his point of view, he
receives the right to elect to buy. CHDTIS
But the two definitions above cited refer to the contract
of option, or, what amounts to the same thing, to the
case where there was cause or consideration for the
obligation . . . . (Emphasis supplied.)
On the other hand, in Ang Yu Asuncion v. Court of
Appeals, 20 an elucidation on the "right of first refusal"
was made thus:
In the law on sales, the so-called 'right of first refusal' is
an innovative juridical relation. Needless to point out, it
cannot be deemed a perfected contract of sale under
Article 1458 of the Civil Code. Neither can the right of
first refusal, understood in its normal concept, per se be
brought within the purview of an option under the
second paragraph of Article 1479, aforequoted, or
possibly of an offer under Article 1319 of the same Code.
An option or an offer would require, among other things,
a clear certainty on both the object and the cause or
consideration of the envisioned contract. In a right of
first refusal, while the object might be made
determinate, the exercise of the right, however, would be
dependent not only on the grantor's eventual intention to
enter into a binding juridical relation with another but
also on terms, including the price, that obviously are yet
to be later firmed up. Prior thereto, it can at best be so
described as merely belonging to a class of preparatory
juridical relations governed not by contracts (since the
essential elements to establish the vinculum juris would
still be indefinite and inconclusive) but by, among other
laws of general application, the pertinent scattered
provisions of the Civil Code on human conduct.
Even on the premise that such right of first refusal has
been decreed under a final judgment, like here, its
breach cannot justify correspondingly an issuance of a
writ of execution under a judgment that merely
recognizes its existence, nor would it sanction an action
for specific performance without thereby negating the
indispensable element of consensuality in the perfection
of contracts. It is not to say, however, that the right of
first refusal would be inconsequential for, such as
already intimated above, an unjustified disregard
thereof, given, for instance, the circumstances expressed
in Article 19 of the Civil Code, can warrant a recovery for
damages. (Emphasis supplied.)
From the foregoing, it is thus clear that an option
contract is entirely different and distinct from a right of
first refusal in that in the former, the option granted to
the offeree is for a fixed period and at a determined
price. Lacking these two essential requisites, what is
involved is only a right of first refusal. cDTaSH
In this case, the controversy is whether the letter of
Lourdes to Roberto dated January 2, 1995 involved an
option contract or a contract of a right of first refusal. In
its entirety, the said letter-offer reads:
206 Valdes Street
Josefa Subd. Balibago
Angeles City 2009
January 2, 1995
Tuazon Const. Co.
986 Tandang Sora Quezon City
Dear Mr. Tuazon,
I received with great joy and happiness the big box of
sweet grapes and ham, fit for a king's party. Thanks very
much.
I am getting very old (79 going 80 yrs. old) and wish to
live in the U.S.A. with my only family. I need money to
buy a house and lot and a farm with a little cash to
start.
I am offering you to buy my 1211 square meter at
P37,541,000.00 you can pay me in dollars in the name
of my daughter. I never offered it to anyone. Please
shoulder the expenses for the transfer. I wish the Lord
God will help you buy my lot easily and you will be very
lucky forever in this place. You have all the time to
decide when you can, but not for 2 years or more.
HCEaDI
I wish you long life, happiness, health, wealth and great
fortune always!
I hope the Lord God will help you be the recipient of
multi-billion projects aid from other countries.
Thank you,
Lourdes Q. del Rosario vda. de Suarez
It is clear that the above letter embodies an option
contract as it grants Roberto a fixed period of only two
years to buy the subject property at a price certain of
P37,541,000.00. It being an option contract, the rules
applicable are found in Articles 1324 and 1479 of the
Civil Code which provide:
Art. 1324. When the offerer has allowed the offeree
a certain period to accept, the offer may be withdrawn at
any time before acceptance by communicating such
withdrawal, except when the option is founded upon a
consideration, as something paid or promised.
Art. 1479. A promise to buy and sell a determinate
thing for a price certain is reciprocally demandable.
An accepted unilateral promise to buy or to sell a
determinate thing for a price certain is binding upon the
promissor if the promise is supported by a consideration
distinct from the price.
It is clear from the provision of Article 1324 that there is
a great difference between the effect of an option which
is without a consideration from one which is founded
upon a consideration. If the option is without any
consideration, the offeror may withdraw his offer by
communicating such withdrawal to the offeree at
anytime before acceptance; if it is founded upon a
consideration, the offeror cannot withdraw his offer
before the lapse of the period agreed upon. IASEca
The second paragraph of Article 1479 declares that "an
accepted unilateral promise to buy or to sell a
determinate thing for a price certain is binding upon the
promissor if the promise is supported by a consideration
distinct from the price." Sanchez v. Rigos 21 provided an
interpretation of the said second paragraph of Article
1479 in relation to Article 1324. Thus:
There is no question that under Article 1479 of the new
Civil Code "an option to sell," or "a promise to buy or to
sell," as used in said article, to be valid must be
"supported by a consideration distinct from the price."
This is clearly inferred from the context of said article
that a unilateral promise to buy or to sell, even if
accepted, is only binding if supported by consideration.
In other words, "an accepted unilateral promise can only
have a binding effect if supported by a consideration,
which means that the option can still be withdrawn,
even if accepted, if the same is not supported by any
consideration. Hence, it is not disputed that the option is
without consideration. It can therefore be withdrawn
notwithstanding the acceptance made of it by appellee.
It is true that under Article 1324 of the new Civil Code,
the general rule regarding offer and acceptance is that,
when the offerer gives to the offeree a certain period to
accept, "the offer may be withdrawn at any time before
acceptance" except when the option is founded upon
consideration, but this general rule must be interpreted
as modified by the provision of Article 1479 above
referred to, which applies to "a promise to buy and sell"
specifically. As already stated, this rule requires that a
promise to sell to be valid must be supported by a
consideration distinct from the price.
In Diamante v. Court of Appeals, 22 this Court further
declared that:
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. IEAHca
xxx xxx xxx
Even if the promise was accepted, private respondent
was not bound thereby in the absence of a distinct
consideration. (Emphasis ours.)
In this case, it is undisputed that Roberto did not accept
the terms stated in the letter of Lourdes as he negotiated
for a much lower price. Roberto's act of negotiating for a
much lower price was a counter-offer and is therefore
not an acceptance of the offer of Lourdes. Article 1319 of
the Civil Code provides:
Consent is manifested by the meeting of the offer and
the acceptance upon the thing and the cause which are
to constitute the contract. The offer must be certain and
the acceptance absolute. A qualified acceptance
constitutes a counter-offer. (Emphasis supplied.)
The counter-offer of Roberto for a much lower price was
not accepted by Lourdes. There is therefore no contract
that was perfected between them with regard to the sale
of subject property. Roberto, thus, does not have any
right to demand that the property be sold to him at the
price for which it was sold to the de Leons neither does
he have the right to demand that said sale to the de
Leons be annulled. TDSICH
Equatorial Realty Development, Inc. v.
Mayfair Theater, Inc. is not applicable
here
It is the position of Roberto that the facts of this case
and that of Equatorial are similar in nearly all aspects.
Roberto is a lessee of the property like Mayfair Theater in
Equatorial. There was an offer made to Roberto by
Lourdes during the effectivity of the contract of lease
which was also the case in Equatorial. There were
negotiations as to the price which did not bear fruit
because Lourdes sold the property to the de Leons which
was also the case in Equatorial wherein Carmelo and
Bauermann sold the property to Equatorial. The
existence of the lease of the property is known to the de
Leons as they are related to Lourdes while in Equatorial,
the lawyers of Equatorial studied the lease contract of
Mayfair over the property. The property in this case was
sold by Lourdes to the de Leons at a much lower price
which is also the case in Equatorial where Carmelo and
Bauermann sold to Equatorial at a lesser price. It is
Roberto's conclusion that as in the case of Equatorial,
there was a violation of his right of first refusal and
hence annulment or rescission of the Deed of Absolute
Sale is the proper remedy. DETcAH
Roberto's reliance in Equatorial is misplaced. Despite his
claims, the facts in Equatorial radically differ from the
facts of this case. Roberto overlooked the fact that in
Equatorial, there was an express provision in the
Contract of Lease that —
(i)f the LESSOR should desire to sell the leased
properties, the LESSEE shall be given 30-days exclusive
option to purchase the same.
There is no such similar provision in the Contract of
Lease between Roberto and Lourdes. What is involved
here is a separate and distinct offer made by Lourdes
through a letter dated January 2, 1995 wherein she is
selling the leased property to Roberto for a definite price
and which gave the latter a definite period for
acceptance. Roberto was not given a right of first refusal.
The letter-offer of Lourdes did not form part of the Lease
Contract because it was made more than six months
after the commencement of the lease.
It is also very clear that in Equatorial, the property was
sold within the lease period. In this case, the subject
property was sold not only after the expiration of the
period provided in the letter-offer of Lourdes but also
after the effectivity of the Contract of Lease.
Moreover, even if the offer of Lourdes was accepted by
Roberto, still the former is not bound thereby because of
the absence of a consideration distinct and separate
from the price. The argument of Roberto that the
separate consideration was the liberality on the part of
Lourdes cannot stand. A perusal of the letter-offer of
Lourdes would show that what drove her to offer the
property to Roberto was her immediate need for funds as
she was already very old. Offering the property to
Roberto was not an act of liberality on the part of
Lourdes but was a simple matter of convenience and
practicality as he was the one most likely to buy the
property at that time as he was then leasing the same.
All told, the facts of the case, as found by the RTC and
the CA, do not support Roberto's claims that the letter of
Lourdes gave him a right of first refusal which is similar
to the one given to Mayfair Theater in the case of
Equatorial. Therefore, there is no justification to annul
the deed of sale validly entered into by Lourdes with the The appeal is therefore considered submitted for decision
de Leons. aEHADT and the CA properly acted on it.

What is the effect of the failure of
Lourdes to file her appellee's brief at the
CA?
Lastly, Roberto argues that Lourdes should be
sanctioned for her failure to file her appellee's brief
before the CA.
WHEREFORE, the instant petition for review on
certiorari is DENIED. The assailed Decision of the Court
of Appeals in CA-G.R. CV No. 78870, which affirmed the
Decision dated November 18, 2002 of the Regional Trial
Court, Branch 101, Quezon City in Civil Case No. Q-00-
42338 is AFFIRMED.
SO ORDERED.

Certainly, the appellee's failure to file her brief would not

mean that the case would be automatically decided
against her. Under the circumstances, the prudent
action on the part of the CA would be to deem Lourdes to
have waived her right to file her appellee's brief. De Leon
v. Court of Appeals, 23 is instructive when this Court
decreed:

On the second issue, we hold that the Court of Appeals

did not commit grave abuse of discretion in considering
the appeal submitted for decision. The proper remedy in
case of denial of the motion to dismiss is to file the
appellee's brief and proceed with the appeal. Instead,
petitioner opted to file a motion for reconsideration
which, unfortunately, was pro forma. All the grounds
raised therein have been discussed in the first resolution
of the respondent Court of Appeals. There is no new
ground raised that might warrant reversal of the
resolution. A cursory perusal of the motion would readily
show that it was a near verbatim repetition of the
grounds stated in the motion to dismiss; hence, the filing
of the motion for reconsideration did not suspend the
period for filing the appellee's brief. Petitioner was
therefore properly deemed to have waived his right to file
appellee's brief. (Emphasis supplied.)

In the above cited case, de Leon was the plaintiff in a

Complaint for a sum of money in the RTC. He obtained a
favorable judgment and so defendant went to the CA.
The appeal of defendant-appellant was taken cognizance
of by the CA but de Leon filed a Motion to Dismiss the
Appeal with Motion to Suspend Period to file Appellee's
Brief. The CA denied the Motion to Dismiss. De Leon
filed a Motion for Reconsideration which actually did not
suspend the period to file the appellee's brief. De Leon
therefore failed to file his brief within the period specified
by the rules and hence he was deemed by the CA to have
waived his right to file appellee's brief. STIcaE

The failure of the appellee to file his brief would not

result to the rendition of a decision favorable to the
appellant. The former is considered only to have waived
his right to file the Appellee's Brief. The CA has the
jurisdiction to resolve the case based on the Appellant's
Brief and the records of the case forwarded by the RTC.