Consolidated Sales Digests.7.30.2013

LAW ON SALES | Atty. Dimayuga | Tullo Ibangga Jamoner Soriano | Arellano University School of Law | 2013-2014

PRICE

Meeting of the Minds as to PriceG.R. No. L-21489 and L-21628; May 19, 1966MIGUEL MAPALO, ET AL. vs. MAXIMO MAPALO, ET AL.

The spouses Miguel Mapalo and Candida Quiba, simple illiterate farmers, were registered owners of a 1,635-square-meter residential land in Manaoag, Pangasinan (O.C.T. 46503).

The spouses-owners, out of love and affection for Maximo Mapalo — a brother of Miguel who was about to get married — decided to donate the eastern half of the land to him.

O.C.T. No. 46503 was delivered. As a result, however, they were deceived into signing (15 October 1936) a deed of absolute sale over the entire land in his favor.

Their signatures thereto were procured by fraud as they were made to believe by Maximo Mapalo and the attorney who acted as notary public who "translated" the document, that the same was a deed of donation in Maximo's favor covering one-half (the eastern half) of their land.

Although the document of sale stated a consideration of P500, no such consideration was paid to the spouses.

Following the execution of the document, the spouses (Mapalo and Quiba) immediately built a fence of permanent structure in the middle of their land segregating the eastern portion from its western portion. The spouses had always been in continued possession over the western half of the land up to the time this case was submitted to the SC.

Meanwhile (and not known to the spouses), Maximo Mapalo registered the deed of sale in his favor and obtained a transfer certificate of title over the ENTIRE land.

Records show that 13years later, Maximo sold for P2,500.00 said property in favor of one Evaristo Petronila Pacifico and Miguel all surnamed Narciso; TCT was issued for the whole land in the names of the buyers.

In 1952, the Narcisos who took possession only of the eastern portion of the land, filed suit in the CFI of Pangasinan and prayed that they be declared owners of the entire land, for possession of its western portion; for damages; and for rentals.

The suit was brought against the Mapalo spouses as well as against Floro Guieb and Rosalia Mapalo Guieb who had a house on the western part of the land with the consent of the spouses Mapalo and Quiba.

The Mapalo spouses filed their answer with a counterclaim (1965) seeking cancellation of the TCT of the Narcisos as to the western half of the land, on the grounds that their (Mapalo spouses) signatures to the deed of sale of 1936 was procured by fraud and that the Narcisos were buyers in bad faith. They asked for reconveyance to them of the western portion of the land and issuance of a TCT in their names as to said portion.

Also, the spouses filed their own complaint in the CFI of Pangasinan against the Narcisos and Maximo Mapalo asking that the deeds of sale of 1936 and of 1951 over the land in question be declared null and void as to the western half of said land.

The CFI ruled in favor of the spouses. The Narcisos appealed to the CA whereby the latter reversed the judgment of the lower court, solely on the ground that the consent of the Mapalo spouses to the deed of sale of 1936 having been obtained by fraud, the same was voidable, not void ab initio, and, therefore, the action to annul the same, within four years from notice of the fraud, had long prescribed.

It reckoned said notice of the fraud from the date of registration of the sale on March 15, 1938.

The CFI and the CA, however, are therefore unanimous that the spouses Mapalo and Quiba were definitely the victims of fraud.

It was only on prescription that they lost in the Court of Appeals. Hence, this petition.

The Mapalo case, concerning the deed of sale of 1936, as regards the western portion of the land in question, had no consideration; the same is void and inexistent. The SC [first] differentiated between a contract that had no consideration from one which merely contained a false consideration. It shall be noted that the deed of sale of 1936 (October 115, 1936) was governed by the Old Civil Code.

ISSUE (1): How is the former distinguished from the latter?

HELD (1): Under the Old Civil Code, if the case is one wherein there is no consideration, the contract is void and inexistent; if it is one with a statement of a false consideration, the contract is only voidable.

The rule under the Civil Code (again be it the old or the new) is that contracts without a cause or consideration produce no effect whatsoever. Nonetheless, the statement of a false consideration renders the contract voidable, unless it is proven that it is supported by another real and licit consideration. And it is further provided by the Old Civil Code that the action for

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annulment of a contract on the ground of falsity of consideration shall last four years, the term to run from the date of the consummation of the contract.

ISSUE (2): Whether a deed which states a consideration that in fact did not exist, is a contract without consideration, and therefore void ab initio and not merely voidable.

HELD (2): YES. The subject deed shall be considered a contract that is void. As provided for in the set of facts, although the deed of sale stated that it had for its consideration of P500, the spouses were never paid for the value of the land in question. In other words, said consideration was totally absent. According to Manresa, what is meant by a contract that states a false consideration is one that has in fact a real consideration but the same is not the one stated in the document. (“The difference between simulation and the contract with fraudulent intention (purpose). This although illicit is real; but the first is false in fact, although it appears to be real.”)

The ruling of the Court in Ocejo, Perez & Co. vs. Flores, 40 Phil. 921, is squarely applicable herein. In that case, it was ruled that a contract of purchase and sale is null and void and produces no effect whatsoever where the same is without cause or consideration in that the purchase price which appears thereon as paid has in fact never been paid by the purchaser to the vendor. Needless to add, the inexistence of a contract is permanent and incurable and cannot be the subject of prescription.

DONATION is effected as regards the eastern portion of the land in question; the finding of the lower court as to its donation is not assailed and thus is final.

As regards the eastern portion of the land, the Mapalo spouses are not claiming the same, it being their stand that they have donated and freely given said half of their land to Maximo Mapalo. And since they did not appeal from the decision of the trial court finding that there was a valid and effective donation of the eastern portion of their land in favor of Maximo Mapalo, the same pronouncement has become final as to them, rendering it no longer proper herein to examine the existence, validity efficacy of said donation as to said eastern portion.1äwphï1.ñët

Clearly, there was NO donation with respect to the western portion

The fact that no donation by the Mapalo spouses was obtained as to said portion is not disputed. Accordingly, the fact that liberality as a cause or consideration does not exist as regards the western portion of the land in relation to the deed of 1936, there was no donation with respect to the same.

The Decision of the Court of Appeals is reversed and set aside; judgment of the CFI is affirmed.

G.R. No. L-67888 October 8, 1985

IMELDA ONG, ET AL., petitioners, vs. ALFREDO ONG, ET AL., respondents.

Facts:

In 1976 Imelda Ong executed in favor of Sandra Maruzzo, then a minor, a Quitclaim Deed whereby she transferred, released, assigned and forever quit-claimed to Sandra Maruzzo in consideration of One (P1.00) Peso and other valuable considerations, all her rights, title, interest and participation in the ONE-HALF (½) undivided portion of a particular parcel of land located in Makati.

She revoked this Quitclaim in 1980 and donated the same to his son Rex Ong-Jimenez. Sandra Maruzzo filed with the RTC of Makati an action against petitioners - through her guardian (ad litem) Alfredo Ong - for the recovery of ownership/possession and nullification of the Deed of Donation over the portion belonging to her and for Accounting.

In their responsive pleading, petitioners claimed that the Quitclaim Deed is null and void because it is equivalent to a Deed of Donation and acceptance of which by the Sandra is necessary for its validity. They also contended that the One (P1.00) Peso consideration is not a consideration at all to sustain the ruling that the Deed of Quitclaim is equivalent to a sale.

Issue: Whether the Quitclaim Deed in the case at bar is a donation or a contract of sale?

Held: It is a sale. A careful perusal of the subject deed reveals that the conveyance of the one- half (½) undivided portion of a property was for and in consideration of the One (P 1.00) Peso and the other valuable considerations. Stated differently, the cause or consideration is not the One (P1.00) Peso alone but also the other valuable considerations.

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One of the disputable presumptions is that there is a sufficient cause of the contract (Section 5, (r), Rule 131, Rules of Court). It is a legal presumption of sufficient cause or consideration supporting a contract even if such cause is not stated therein (Article 1354, New Civil Code of the Philippines.) This presumption cannot be overcome by a simple assertion of lack of consideration especially when the contract itself states that consideration was given, and the same has been reduced into a public instrument with all due formalities and solemnities. To overcome the presumption of consideration the alleged lack of consideration must be shown by preponderance of evidence in a proper action. (Samanilla vs, Cajucom, et al., 107 Phil. 432).

The execution of a deed purporting to convey ownership of a realty is in itself prima facie evidence of the existence of a valuable consideration, the party alleging lack of consideration has the burden of proving such allegation. (Caballero, et al. vs. Caballero, et al., (CA), 45 O.G. 2536).

[G.R. No. 38498. August 10, 1989.]ISAAC BAGNAS, ENCARNACION BAGNAS, SILVESTRE BAGNAS, MAXIMINA BAGNAS, SIXTO BAGNAS, and AGATONA ENCARNACION, petitionersvs. HON. COURT OF APPEALS, ROSA L. RETONIL, TEOFILO ENCARNACION, and JOSE B. NAMBAYAN, respondents.

FACTS: Hilario Mateum of Kawit, Cavite, died on March 11,

196, single, without ascendants or descendants, and survived only by collateral relatives, of whom petitioners herein, his first cousins, were the nearest.

Mateum left no will, no debts, and an estate consisting of twenty-nine parcels of land in Kawit and Imus, Cavite, ten of which are involved in this appeal.

the private respondents, themselves collateral relatives of Mateum though more remote in degree than the petitioners

Private respondents registered with the Registry of Deeds for the Province of Cavite two deeds of sale purportedly executed by Mateum in their (respondents') flavor covering ten parcels of land

Both deeds were in Tagalogo " . . . halagang ISANG PISO (P1.00), salaping Filipino, at

mga naipaglingkod, ipinaglilingkod sa aking kapakanan . . ." ("the sum of ONE PESO(P1.00), Philippine Currency, and services rendered, being rendered and to be rendered for my benefit").

One deed was dated February 6, 1963 and covered five parcels of land,

the other was dated March 4, 1963, covering five other parcels, both, therefore, antedating Mateum's death by more than a year

on the strength of the deeds of sale, the respondents were able to secure title in their favor over three of the ten parcels of land conveyed thereby

Petitioners commenced suit against the respondents in the CFI of Cavite, seeking annulment of the deeds of sale as fictitious, fraudulent or falsified, or, alternatively, as donations void for want of acceptance embodied in a public instrument

o Claiming ownership pro indiviso of the lands subject of the deeds by virtue of being intestate heirs of Hilario Mateum

o at the pre-trial the parties agreed that the controversy be limited to the ten parcels subject of the questioned sales

defendants (respondents here) denied the alleged fictitious or fraudulent character of the sales in their favor, asserting that said sales were made for good and valuable consideration; that while '. . . they may have the effect of donations, yet the formalities and solemnities of donation are not required for their validity and effectivity, . . ." that defendants were collateral relatives of Hilario Mateum and had done many good things for him, nursing him in his last illness, which services constituted the bulk of the consideration of the sales; and (by way of affirmative defense) that the plain-tiffs could not question or seek annulment of the sales because they were mere collateral relatives of the deceased vendor and ware not bound, principally or subsidiarily, thereby

Trial Court granted the motion to dismiss, holding o that the plaintiffs, as mere collateral relatives, not

forced heirs, of Hilario Mateum, could not legally question the disposition made by said deceased during his life time, regardless of whether, as a matter of objective reality, said dispositions were valid or not; and

o that the plaintiff's evidence of alleged fraud was insufficient, the fact that the deeds of sale each stated a consideration of only P1.00 not being in itself evidence of fraud or simulation

ISSUE: WON there was actual consideration

HELD: NONE.

The petitioners here argue on a broad front that the very recitals of the questioned deeds of sale reveal such want or spuriousness of consideration and therefore the void character of said sales.

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OBLIGATIONS AND CONTRACTS; SALE; CONSIDERATION; ONE PESO (P1.00) CONSIDERATION FOR REAL PROPERTY WORTH AT LEAST P10,500. A FALSE AND FICTITIOUS CONSIDERATION, SALE VOID AB INITIO. — Without necessarily according all these assertions its hill concurrence, but upon the consideration alone that the apparent gross, not to say enormous, disproportion between the stipulated price (in each deed) of P1.00 plus unspecified and unquantilled services and the undisputably valuable real estate allegedly sold — worth at least P10,500.00 going only by assessments for tax purposes which, it is wall-known, are notoriously low indicators of actual value — plainly and unquestionably demonstrates that they state a false and fictitious consideration, and no other true and lawful cause having been shown, the Court finds both said deeds, insofar as they purport to be sales, not merely voidable, but void ab initio.

Citing Manresa: advert to a decision of the Court of Appeals in Montinola vs. Herbosa (59 O.G. No. 47, pp. 8101, 8118) holding that a price of P1.00 for the sale of things worth at least P20,000.00 is so insignificant as to amount to no price at all, and does not satisfy the law which, while not requiring for the validity of a sale that the price be adequate, prescribes that it must be real, not fictitious, stressing the obvious parallel between that case and the present one in stated price and actual value of the property sold;

cite Manresa to the same effect: that true price, which is essential to the validity of a sale, means existent, real and effective price, that which does not consist in an insignificant amount as, say, P.20 for a house; that it is not the same as the concept of a just price which entails weighing and measuring, for economic equivalence, the amount of price against all the factors that determine the value of the thing sold; but that there is no need of such a close examination when the immense disproportion between such economic values is patent — a case of insignificant or ridiculous price, the unbelievable amount of which at once points out its inexistence

DONATION; TO BE VALID MUST BE MADE AND ACCEPTED IN A PUBLIC INSTRUMENT. — Neither can the validity of said conveyances be defended on the theory that their true causa is the liberality of the transferor and they may be considered in reality donations, because the law also prescribes that donations of immovable property, to be

valid, must be made and accepted in a public instrument, and it is not denied by the respondents that there has been no such acceptance which they claim is not required.

FERNANDO T. MATE vs. COURT OF APPEALS AND INOCENTIO TAN(GR No. 120274-25;May 21, 1998)

FACTS:

On Oct. 6, 1986 Josefina R. Rey (Josie), cousin of herein petitioner’s wife, sought the help of petitioner Mate and asked him to cede his property in favor of private respondent Tan, for Josie’s failure to make good the rubber checks she, her mother, sister and brother issued to private respondent Tan amounting to P4,432,067.00

On hearing Josie’s proposal, he immediately rejected it as he owed private respondent nothing and he was under no obligation to convey to him his properties. Furthermore, his lots were not for sale.

Josie explained to him that he was in no danger of losing his properties as he will merely execute a simulated document transferring them to private respondent but they will be redeemed by her with her own funds.

After a long discussion, he agreed to execute a fictitious deed of sale with right to repurchase covering his three (3) lots mentioned above subject to the following conditions:

1. The amount to be stated in the document is P1,400,000.00 with interest thereon at 5% a month;

2. The properties will be repurchased within six (6) months or on or before April 4, 1987;

3. Although it would appear in the document that petitioner is the vendor, it is Josie who will provide the money for the redemption of the properties with her own funds;

4. Titles to the properties will be delivered to private respondent but the sale will not be registered in the Register of Deeds and annotated on the titles.

To assure petitioner that Josie will redeem the aforesaid properties, she issued to him two (2) BPI checks both postdated December 15, 1986. One check was for P1,400,000.00 supposedly for the selling price and the other was for P420,000.00 corresponding to the interests for 6 months. Immediately thereafter petitioner prepared the Deed of Sale with Right to Repurchase (Exh. A) and after it has been signed and notarized, it was given

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to private respondent together with the titles of the properties and the latter did not register the transaction in the Register of Deeds as agreed upon.

On January 14, 1987, petitioner deposited the check for P1,400,000.00 in his account at the UCPB and the other check for P420,000.00 in his account at METROBANK preparatory to the redemption of his properties. However, both of them were dishonored by the drawee bank for having been drawn against a closed account.

Realizing that he was swindled, he sent Josie a telegram about her checks and when she failed to respond, he went to Manila to look for her but she could not be found. So he returned to Tacloban City and filed criminal cases against her for violation of BP 22 but the cases were later archived as the accused (Josie) could not be found as she went into hiding.

To protect his interest, he filed the present case at the RTC of Leyte, Branch VII, for Annulment of Contract with Damages.

But during the trial the RTC court asked private respondent to file an action for consolidation of ownership of the properties subject of the sale and pursuant thereto he filed a civil case that was consolidated with the case he filed earlier which were later decided jointly by the trial court in favor of private respondent.

On appeal, the CA affirmed the decision with modification, and likewise denied reconsideration.

ISSUE: WON the Deed of Sale with Right to Repurchase is valid?

HELD: Yes. There was a consideration. The respondent court aptly observed that -

“In preparing and executing the deed of sale with right of repurchase and in delivering to Tan the land titles, appellant actually accommodated Josefina so she would not be charged criminally by Tan. To ensure that he could repurchase his lots, appellant got a check of P1,400,000.00 from her. Also, by allowing his titles to be in possession of Tan for a period of six months, appellant secured from her another check for P420,000.00. With this arrangement, appellant was convinced he had a good bargain. Unfortunately his expectation crumbled. For this tragic incident, not only Josefina, but also Tan, according to appellant must be answerable.

x x x x x x

“It is plain that consideration existed at the time of the execution of the deed of sale with right of repurchase. It is not only appellant’s kindness to Josefina, being his cousin, but also his receipt of P420,000.00 from her which

impelled him to execute such contract.”

Furthermore, while petitioner did not receive the P1.4 Million purchase price from respondent Tan, he had in his possession a postdated check of Josie Rey in an equivalent amount precisely to repurchase the two lots on or before the sixth month.

As admitted by petitioner, by virtue of the sale with pacto de retro, Josie Rey gave him, as vendor-a-retro, a postdated check in the amount of P1.4 Million, which represented the repurchase price of the two (2) lots. Aside from the P1.4 Million check, Josie gave another postdated check to petitioner in the amount of P420,000.00, ostensibly as interest for six (6) months but which apparently was his fee for having executed the pacto de retro document. Josie thus assumed the responsibility of paying the repurchase price on behalf of petitioner to private respondent.

Unfortunately, the two checks issued by Josie Rey were worthless. Both were dishonored upon presentment by petitioner with the drawee banks. However, there is absolutely no basis for petitioner to file a complaint against private respondent Tan and Josie Rey to annul the pacto de retro sale on the ground of lack of consideration, invoking his failure to encash the two checks. Petitioner’s cause of action was to file criminal actions against Josie Rey under B.P. 22, which he did. The filing of the criminal cases was a tacit admission by petitioner that there was a consideration of the pacto de retro sale .

ISSUE2: Petitioner further claims that the pacto de retro sale was subject to the condition that in the event the checks given by Josie Reyes to him for the repurchase of the property were dishonored, then the document shall be declared null and void for lack of consideration.

HELD: We are not persuaded.

Private respondent Tan was already poised to file criminal cases against Josie Rey and her family. It would not be logical for respondent Tan to agree to the conditions allegedly imposed by petitioner. Petitioner knew that he was bound by the deed of sale with right to repurchase, as evidenced by his filing criminal cases against Josie Rey when the two checks bounced.

The respondent court further made the candid but true observation that:

“If there is anybody to blame for his predicament, it is appellant himself. He is a lawyer. He was the one who prepared the contract. He knew what he was entering into. Surely, he must have been aware of the risk involved. When Josefina’s checks bounced, he should have repurchased his lots with his own money. Instead, he sued not only Josefina but also Tan for annulment of contract on the ground of lack of consideration and false pretenses on their part.”

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Petitioner then postulates that “it is not only illegal but immoral to require him to repurchase his own properties with his own money when he did not derive any benefit from the transaction.” Thus, he invokes the case of Singson vs. Isabela Sawmill, 88 SCRA 633, 643, where the Court said that “where one or two innocent persons must suffer, that person who gave occasion for the damages to be caused must bear consequences.” Petitioner’s reliance on this doctrine is misplaced. He is not an innocent person. As a matter of fact, he gave occasion for the damage caused by virtue of the deed of sale with right to repurchase which he prepared and signed. Thus, there is the equitable maxim that between two innocent parties, the one who made it possible for the wrong to be done should be the one to bear the resulting loss.

G.R. No. L-55999; August 24, 1984SPOUSES SALVACION SERRANO LADANGA and AGUSTIN S. LADANGA vs. COURT OF APPEALS and BERNARDO S. ASENETA, as Guardian of the Incompetent CLEMENCIA A. ASENETA FACTS:

Clemencia, a spinster1 who retired as division superintendent of public schools at 65 in 1961, had a nephew named Bernardo S. Aseneta, the child of her sister Gloria, and a niece named Salvacion, the daughter of her sister Flora. She legally adopted Bernardo in 1961.

In 1974 (when Clemencia was about 78 years old), she signed nine (9) deeds of sale in favor of Salvacion for various real properties. One deed of sale concerned the Paco property (166 sq. m lot located at 1238 Sison Street Paco Manila and administered by the Ladanga spouses, Agustin and Salvacion) which purportedly was sold to Salvacion for P26,000). The total price involved in the 9 deeds of sale and in the 10th sale executed in November 1974 was P92,200. The deed of sale for the Paco property was signed in the office of the Quezon City registry of deeds.

In May, 1975, Bernardo as guardian of Clemencia, filed an action for reconveyance of the Paco property, accounting of the rentals and damages. Clemencia was not mentally incompetent but she was placed under guardianship because she was an easy prey for exploitation and deceit.

In the course of the hearing, Clemencia testified and denied having "received even one centavo" of the price of P26,000 much less the P92,000. This testimony was corroborated by Soledad L. Maninang, 69, a dentist with whom Clemencia had lived for more than thirty years in Kamuning, Quezon City. The notary public, also testifying,

1 A "spinster" is not simply a "single" woman, but a woman who has not formed a human pair bond by the time she is approaching or has reached menopause and the end of her reproductive lifespan (age being critical) – "If someone is a spinster, by implication she is not eligible [to marry]; she has had her chance, and been passed by,"

stated that he did not see Salvacion giving any money to Clemencia when the deed was signed in the Registry of Deeds. The trial court declared void the sale of the Paco Property

Clemencia died in 1977 at the age of 80. She allegedly bequeathed her properties in a holographic will2 dated November 23, 1973 to Doctor Maninang. In that will she disinherited Bernardo. The will was presented for probate.

The testate case was consolidated with the intestate proceeding filed by Bernardo in the sala of Judge Ricardo L. Pronove at Pasig, Rizal. He dismissed the testate case and appointed Bernardo as administrator in the intestate case.

On appeal, the CA affirmed the decision of the CFI, ordering the register of deeds to issue a new title to Clemencia and the spouses to pay Clemencia’s estate the amount of P21,00 for damages and attorney’s fees; and to render to Bernardo an accounting of rentals of the property from 6 April 1947.

Hence, the instant petition. .

ISSUE: What is the status of the contract of sale in the absence of price being paid.

HELD: A contract of sale is void and produces no effect whatsoever where the price, which appears therein as paid, has in fact never been paid by the purchaser to the vendor (Meneses Vda. de Catindig vs. Heirs of Catalina Roque, L-25777, November 26, 1976, 74 SCRA 83, 88; Mapalo vs. Mapalo, 123 Phil. 979, 987; Syllabus, Ocejo, Perez & Co. vs. Flores and Bas, 40 Phil. 921). Such a sale is inexistent and cannot be considered consummated.

In the instant case, the Ladanga spouses contend that the CA disregarded the rule on burden of proof. This contention, according to the Court, is devoid of merit because Clemencia herself testified that the price of P26,000 was not paid to her. The burden of the evidence shifted to the Ladanga spouses. They (Ladangas) were not able to prove the payment of that amount. The sale was fictitious.

Also, it shall be noted that the Ladanga spouses argued that the CA erred in not considering that inadequacy of price may indicate a donation or some other contract and in disregarding the presumption that the sale was fair and regular and for a sufficient consideration.

2 A holographic will is a will and testament that has been entirely handwritten and signed by the testator but one which has not been attested to by witnesses – evidence of testator actually creating the will, testator having had the intellectual capacity to write the will and testator’s expression of a wish to direct the distribution of his estate to beneficiaries are the minimal requisites to meet.

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http://en.wikipedia.org/wiki/Menopause

http://en.wikipedia.org/wiki/Pair_bond


It was not shown that Clemencia intended to donate the Paco property to the Ladangas. Her testimony and the notary's testimony destroyed any presumption that the sale was fair and regular and for a true consideration.

As to Bernardo’s capacity to sueThe contention that Bernardo had no right to institute the instant action because he was not a compulsory heir of Clemencia cannot be sustained. Bernardo was Clemencia's adopted son. Moreover, Clemencia, by testifying in this case, tacitly approved the action brought in her behalf.

G.R. No. 109410 August 28, 1996

CLARA M. BALATBAT, petitioner, vs.COURT OF APPEALS and Spouses JOSE REPUYAN and AURORA REPUYAN, respondents.

FACTS:

When her wife Maria Mesina died and left the house and lot as the only conjugal property, husband Aurelio A. Roque filed Civil Case No. 109032 in CFI for partition as one of the pro indiviso owners of the said property against his children Corazon, Alberto, Feliciano, Severa and Osmundo.

The defendants were declared in default and as a consequence, plaintiff Aurelio was allowed to present evidence ex parte. The trial court awarded one-half share of the aforementioned conjugal property to Aurelio while the other half formed the estate of the deceased wife Maria.

The estate was then divided to the abovementioned heirs plus Aurelio being the husband. On June 2, 1979, the decision became final and executory and the corresponding entry of judgment was made.

Consequently, Aurelio sold his share to respondent-spouses Aurora Tuazon-Repuyan and Jose Repuyan. The spouses thereafter caused the title to be annotated in lieu of the sale. Much later, however, the seller Aurelio filed Civil Case No. 134131 for the rescission of the said sale on the ground of the Repuyans’ failure to pay the balance of the purchase price. The Repuyans in turn filed their answer with counterclaim.

Meanwhile, the CFI - in the partition case [Civil Case No. 109032] ordered: “…considering the opportunities given defendants (children) to sign the deed of absolute sale voluntarily, the Court has no alternative but to order, as it hereby orders, the Deputy Clerk of Court to sign the deed of absolute sale for and in behalf of defendants pursuant to Sec. 10, Rule 39 of the Rules of Court, in order to effect the partition of the property involved” in favor of the buyer Clara Balatbat, herein petitioner.

On May 20, 1982, petitioner Balatbat filed a motion to intervene in the rescission case Civil Case No. 134131 (vs. the Repuyans) but never filed her complaint-in-intervention. Be that as it may, the trial court rendered a decision dismissing the complaint of Aurelio for rescission in favor of the Spouses Repuyan.

On December 9, 1988, petitioner Clara Balatbat filed a complaint for delivery of the owners duplicate copy of the transfer certificate of title vs. the Sps. Repuyan. The trial court in that case dismissed the complaint of Balatbat to which the Court of Appeals agreed.

Hence, this Petition for Review.

Issues: 1. WHETHER OR NOT THE ALLEGED SALE TO THE

REPUYANS WAS MERELY EXECUTORY AND NOT A CONSUMMATED TRANSACTION BECAUSE OF NON-DELIVERY & NON-COMPLETION OF PAYMENT?

2. WHETHER OR NOT THERE WAS A DOUBLE SALE AS CONTEMPLATED UNDER ART. 1544?

3. WHETHER OR NOT BALATBAT WAS A BUYER IN GOOD FAITH AND FOR VALUE?

HELD:1. It is consummated sale, valid and enforceable. In the

terms and conditions of the "Deed of Sale" between Aurelio and the Spouses Repuyan, the balance is payable only "after the property has been partitioned and subdivided, and title issued in the name of the BUYER" hence, vendor Aurelio cannot demand payment of the balance unless and until the property has been subdivided and titled in the name of private respondents. There was no mention of any stipulation that "ownership in the thing shall not pass to the purchaser until he has fully paid the price".

Ownership in the thing shall pass from the vendor to the vendee upon actual or constructive delivery of the thing sold even if the purchase price has not yet been fully paid. The failure of the buyer has not yet been fully paid. The failure of the buyer to make good the price does not, in law, cause the ownership to revest to the seller unless the bilateral contract of sale is first rescinded or resolved pursuant to Article 1191 of the New Civil Code. Non-payment only creates a right to demand the fulfillment of the obligation or to rescind the contract.

Article 1498 of the Civil Code provides that — when the sale is made through a public instrument, the execution thereof shall be equivalent to the delivery of the thing which is the object of the contract, if from the deed the contrary does not appear or cannot be inferred. The execution of the public instrument, without actual delivery of the thing, transfers the ownership from the vendor to the vendee, who may thereafter exercise the

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rights of an owner over the same. In the instant case, vendor Aurelio delivered the owner's certificate of title to herein private respondent. It is not necessary that vendee be physically present at every square inch of the land bought by him, possession of the public instrument of the land is sufficient to accord him the rights of ownership.

2. Yes, this is an instance of a double sale of an immovable property hence, the ownership shall vests in the person acquiring it who in good faith first recorded it in the Registry of Property. Evidently, private respondents Repuyan's caused the annotation of an adverse claim on the title of the subject property denominated as Entry No. 5627/T-135671 on July 21, 1980. The annotation of the adverse claim on TCT No. 135671 in the Registry of Property is sufficient compliance as mandated by law and serves notice to the whole world.

Article 1544 of the Civil Code provides that in case of double sale of an immovable property, ownership shall be transferred (1) to the person acquiring it who in good faith first recorded it in the Registry of Property; (2) in default thereof, to the person who in good faith was first in possession; and (3) in default thereof, to the person who presents the oldest title, provided there is good faith.

3. Petitioner Balatbat cannot be considered as a buyer in good faith. If petitioner did investigate before buying the land, she should have known that there was a pending case and an annotation of adverse claim was made in the title of the property before the Register of Deeds and she could have discovered that the subject property was already sold to the private respondents. It is incumbent upon the buyer of the property to ask for the delivery of the owner's duplicate copy of the title from the vendor. A purchaser of a valued piece of property cannot just close his eyes to facts which should put a reasonable man upon his guard and then claim that he acted in good faith and under the belief that there were no defect in the title of the vendor.

One who purchases real estate with knowledge of a defect or lack of title in his vendor cannot claim that he has acquired title thereto in good faith as against the true owner of the land or of an interest therein; and the same rule must be applied to one who has knowledge of facts which should have put him upon such inquiry and investigation as might be necessary to acquaint him with the defects in the title of his vendor.

culpa lata dolo aequiparatur — gross negligence is equivalent to intentional wrong.

[G.R. No. L-10141. January 31, 1958.]REPUBLIC OF THE PHILIPPINES, petitioner

vs. PHILIPPINE RESOURCES DEVELOPMENT CORPORATION and the COURT OF APPEALS, respondents.

FACTS: Republic of the Philippines in representation of the

Bureau of Prisons instituted against Macario Apostol and the Empire Insurance Co. a complaint in the CFI

The complaint alleges as the first cause of action, that defendant Apostol submitted the highest bid in the amount of P450.00 per ton for the purchase of 100 tons of Palawan Almaciga from the Bureau of Prisons;

that a contract therefor was drawn and by virtue of which, Apostol obtained goods from the Bureau of Prisons valued P15,878.59;

that of said account, Apostol paid only P691.10 leaving a balance obligation of P15, 187.49.

The complaint further avers, as second cause of action, that Apostol submitted the best bid with the Bureau of Prisons for the purchase of three million board feet of logs at P88.00 per 1,000 board feet;

that a contract was executed between the Director of Prisons and Apostol pursuant to which contract Apostol obtained deliveries of logs valued at P65,830.00; and that Apostol failed to pay a balance account of P18,827.57.

All told, the total demand set forth in complaint against Apostol is for P34,015.06 with legal interests thereon from January 8, 1952.

The Empire Insurance Company was included in the complaint having executed a performance bond of P10,000.00 in favor of Apostol.

Apostol interposed payment as a defense and sought the dismissal of the complaint.

o On July 19, 1955, the Philippine Resources Development Corporation moved to intervene. The complaint recites that for sometime prior to Apostol's transactions the corporate had some goods deposited in a warehouse at 1201 Herran, Manila; that Apostol, then the president of the corporation but without the knowledge or consent of the stockholders thereof, disposed of said goods by delivering the same to the Bureau of Prisons in an attempt to settle his personal debts with the latter entity; that upon discovery of Apostol's act, the corporation took steps to recover said goods by demanding from the Bureau of Prisons the return thereof; and that upon the refusal of the Bureau to return said goods, the corporation sought leave to intervene

His Honor denied the motion for intervention because the action brought in the CFI against Macario Apostol and the Empire Insurance Company is just for the

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collection from the defendant Apostol of a sum of money (unpaid balance) whereas the intervenor seeks to recover ownership and possession of G.I. sheets, black sheets, M.S. plates, round bars and G.I. pipes intervention which would change a personal action into one ad rem and would unduly delay the disposition of the case

ISSUE: WON the RP can recover the alleged unpaid balance of Apostol

HELD: NO.

OBLIGATION AND CONTRACT; PAYMENT; KINDS OF PAYMENT; IN TERMS OF MONEY OR ITS EQUIVALENT. — Although Article 1458 of the new Civil Code provides that price . . . is always paid in terms of money and the supposed payment being in kind it is no payment at all," yet the same article provides that the purchaser may pay "a price certain in money or its equivalent" which means that payment of the price need not be money.

Whether the G.I. sheets, black sheets, M.S. plates, round bars and G.I. pipes claimed by the respondent corporation to belong to it and delivered to the Bureau of Prisons by Macario Apostol in payment of his account is sufficient payment therefor, is for the Court to pass upon and decide after hearing all the parties in the case. Should the trial court hold that it is as to credit Apostol with the value or price of the materials delivered by him, certainly the herein respondent corporation would be affected adversely if its claim of ownership of such sheets, plates, bars and pipes is true.

As to the intervention: It becomes enormously plain in the event the respondent judge decides to credit Macario Apostol with the value of the goods delivered by the latter to the Bureau of Prisons, the petitioner corporation stands to be adversely affected by such judgment. Petitioner therefore, possesses a legal interest in the matter in litigation and that such interest is of an actual, material, direct and immediate nature as to entitle petitioner to intervene.

ANTONIA TORRES assisted by her husband, ANGELO TORRES; and EMETERIA BARING, petitioners, vs. COURT OF APPEALS and MANUEL TORRES, respondents.

G.R. No. 134559 December 9, 1999

FACTS:

Sisters Antonia Torres and Emeteria Baring, herein petitioners, entered into a "joint venture agreement" with Respondent Manuel Torres for the development of a parcel of land into a subdivision.

They executed a Deed of Sale covering the said land in favor of respondent, who then had it registered in his name.

By mortgaging the property, respondent obtained from Equitable Bank a loan of P40,000 which, under the Joint Venture Agreement, was to be used for the development of the subdivision. All three of them also agreed to share the proceeds from the sale of the subdivided lots.

The project did not push through, and the land was subsequently foreclosed by the bank.

PETITIONERS: Respondent lacked the funds or means and skills and that respondent used the loan not for the development of the subdivision, but in furtherance of his own company, Universal Umbrella Company.

RESPONDENT: The subdivision project failed, however, because petitioners and their relatives had separately caused the annotations of adverse claims on the title to the land, which eventually scared away prospective buyers. Despite his requests, petitioners refused to cause the clearing of the claims, thereby forcing him to give up on the project.

Subsequently, petitioners filed a criminal case for estafa against respondent and his wife, who were however acquitted. Thereafter, they filed the present civil case which, upon respondent's motion, was later dismissed by the trial court.

On appeal, the appellate court remanded the case for further proceedings. Thereafter, the RTC issued its assailed Decision, which was affirmed by the CA declaring the parties to have entered into a partnership and must bear the losses proportionate to their contributions, except the industrial partner who shall not be liable for the losses.

ISSUE: WON the parties did enter into a contract of partnership?

HELD: Yes. A reading of the terms embodied in the Agreement indubitably shows the existence of a partnership pursuant to Article 1767 of the Civil Code.

Under the Agreement, petitioners would contribute property to the partnership in the form of land which was to be developed into a subdivision; while respondent would give, in addition to his industry, the amount needed for general expenses and other costs. Furthermore, the income from the said project would be divided according to the stipulated percentage. Clearly, the contract manifested the intention of the parties to form a partnership.

It should be stressed that the parties implemented the contract. Thus, petitioners transferred the title to the land to facilitate its use in the name of the respondent. On the other hand, respondent caused the subject land to be

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mortgaged, the proceeds of which were used for the survey and the subdivision of the land. As noted earlier, he developed the roads, the curbs and the gutters of the subdivision and entered into a contract to construct low-cost housing units on the property.

Respondent’s actions clearly belie petitioners’ contention that he made no contribution to the partnership. Under Article 1767 of the Civil Code, a partner may contribute not only money or property, but also industry.

ISSUE2: WON the parties are bound by the contract?

HELD: Yes. Under Article 1315 of the Civil Code, contracts bind the parties not only to what has been expressly stipulated, but also to all necessary consequences thereof.

It is undisputed that petitioners are educated and are thus presumed to have understood the terms of the contract they voluntarily signed. If it was not in consonance with their expectations, they should have objected to it and insisted on the provisions they wanted.

Courts are not authorized to extricate parties from the necessary consequences of their acts, and the fact that the contractual stipulations may turn out to be financially disadvantageous will not relieve parties thereto of their obligations. They cannot now disavow the relationship formed from such agreement due to their supposed misunderstanding of its terms.

ISSUE3: WON the deed of sale is valid for being without consideration?

HELD: Yes. The Joint Venture Agreement clearly states that the consideration for the sale was the expectation of profits from the subdivision project. Its first stipulation states that petitioners did not actually receive payment for the parcel of land sold to respondent. Consideration, more properly denominated as cause, can take different forms, such as the prestation or promise of a thing or service by another.

In this case, the cause of the contract of sale consisted not in the stated peso value of the land, but in the expectation of profits from the subdivision project, for which the land was intended to be used. As explained by the trial court, “the land was in effect given to the partnership as [petitioner’s] participation therein. x x x There was therefore a consideration for the sale, the [petitioners] acting in the expectation that, should the venture come into fruition, they [would] get sixty percent of the net profits.”

Definitive price as an essential element in the formation of a binding contract of sale

G.R. No. L-116650 May 23, 1995TOYOTA SHAW, INC. vs. COURT OF APPEALS and LUNA L. SOSA

FACTS

Private respondent Luna L. Sosa wanted to purchase a Toyota Lite Ace. With his his son, Gilbert, he went to the Toyota office at Shaw Boulevard, Pasig and met Popong Bernardo, a sales representative of Toyota.

Sosa emphasized to Bernardo that he needed the Lite Ace not later than 17 June 1989 because he, his family, and a balikbayan guest would use it on 18 June 1989 to go to Marinduque, his home province, where he would celebrate his birthday the following day.

Bernardo assured him that a unit would be ready for pick up at 10:00 a.m. on that date. They contracted an agreement ("Agreements Between Mr. Sosa & Popong Bernardo of Toyota Shaw, Inc.") on the delivery of the unit and that the balance of the purchase price would be paid by credit financing through B.A. Finance.

The next day, Sosa and Gilbert delivered the downpayment and met Bernardo who then accomplished a printed Vehicle Sales Proposal (VSP) in which the amount of the initial cash outlay (P100,000) was indicated with breakdown (downpayment Php53,148) and that the that the "BALANCE TO BE FINANCED" is "P274,137.00." The spaces provided for “Delivery Terms” were not filled-up though. The VSP was checked and approved by Bernardo’s immediate Sales Supervisor (Rodrigo Quirante).

However, on 17 June 1989, at 9:30 am, Bernardo called Gilbert to inform him that the car could not be delivered because “nasulot ang unit ng ibang malakas” (or was acquired by a more influential person).

Toyota contends, on the other hand, that the Lite Ace was not delivered to Sosa because of the disapproval by B.A. Finance of the credit financing application of Sosa and that a particular unit had already been reserved and earmarked for Sosa but could not be released due to the uncertainty of payment of the balance of the purchase price.

Toyota then gave Sosa the option to purchase the unit by paying the full purchase price in cash but Sosa refused. Sosa asked that his down payment be refunded which Toyota did so on the very same day by issuing a Far East Bank check for the full amount (Php100,000), which Sosa signed with the reservation, “without prejudice to our future claims for damages.”

Thereafter, Sosa sent two letters to Toyota: (1) he demanded the refund of the down payment plus interest from the time he paid it; (2) he demanded P1M representing interest and damages, both with a warning that legal action would be taken if payment not paid.

Toyota refused to accede to the demands of Sosa resulting in the event where Sosa filed with RTC a complaint against Toyota for damages under Articles 19 and 21 of the Civil Code in the total amount of Php1,230,000.

In its answer to the complaint, Toyota alleged that no sale was entered into between it and Sosa and that the VSP did not state the date of delivery, among others.

The trial court rendered a decision in favor of Sosa. It ruled the "AGREEMENTS BETWEEN MR. SOSA AND

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POPONG BERNARDO," was a valid perfected contract of sale between Sosa and Toyota which bound the latter to deliver the vehicle to Sosa, and further agreed with Sosa that Toyota acted in bad faith in selling to another the unit already reserved for him. On appeal to the CA, the appellate court affirmed in toto the appealed decision.

Hence, the instant petition.

ISSUE (1): Whether or not there is a perfected contract of sale vis-à-vis the "AGREEMENTS BETWEEN MR. SOSA AND POPONG BERNARDO”

HELD (1): NO. There was no perfected contract of sale. In deciding the instant case, the Court started with the definition and kinds of a contract of sale under Article 1458 and effect of the contract of sale when perfected under Article 1475 of the NCC. The abovementioned agreement signed by Sosa and Gilbert is not a contract of sale. No obligation on the part of Toyota to transfer ownership of a determinate thing to Sosa and no correlative obligation on the part of the latter to pay therefore a price certain appears therein. The provision on the down payment of P1OO,OOO.OO made no specific reference to a sale of a vehicle. If it was intended for a contract of sale, it could only refer to a sale on installment basis, as the VSP executed the following day con finned. Nothing was mentioned about the full purchase price and the manner the installments were to be paid. A definite agreement on the manner of payment of the price is an essential element in the formation of a binding and enforceable contract of sale. This is so because the agreement as to the manner of payment goes, into the price such that a disagreement on the manner of payment is tantamount to a failure to agree on the price. Definiteness as to the price is an essential element of a binding agreement to sell personal property.

Moreover, said agreement shows the absence of a meeting of minds between Toyota and Sosa. For one thing, Sosa did not even sign it. For another, Sosa was well aware from its title, written in bold letters, knew that he was not dealing with Toyota but with Popong Bernardo and that the latter did not misrepresent that he had the authority to sell any Toyota vehicle. He knew that Bernardo was only a sales representative of Toyota and hence a mere agent of the latter. It was incumbent upon Sosa to act with ordinary prudence and reasonable diligence to know the extent of Bernardo's authority as an agent in respect of contracts to sell Toyota's vehicles. A person dealing with an agent is put upon inquiry and must discover upon his peril the authority of the agent.

At the most, the "AGREEMENTS BETWEEN MR. SOSA AND POPONG BERNARDO” may be considered as part of the

initial phase of the generation or negotiation stage of a contract of sale.

ISSUE (2): Whether the VSP may be considered as the true and documented understanding of the parties which would have led to the ultimate contract of sale.

HELD (2): NO. The second phase (perfection or birth of the contract, which is the moment when the parties come to agree on the terms of the contract) of the generation or negotiation stage in this case was the execution of the VSP. It must be emphasized that thereunder, only the amount of downpayment of the purchase price was provided and that the balance to be paid on installment should be financed by B.A. Finance Corporation. It is, of course, to be assumed that B.A. Finance Corp. was acceptable to Toyota, otherwise it should not have mentioned B.A. Finance in the VSP.

In a sale on installment basis which is financed by a financing company, three parties are thus involved: the buyer who executes a note or notes for the unpaid balance of the price of the thing purchased on installment, the seller who assigns the notes or discounts them with a financing company, and the financing company which is subrogated in the place of the seller, as the creditor of the installment buyer. Since B.A. Finance did not approve Sosa's application, there was then no meeting of minds on the sale on installment basis.

FINANCING COMPANIES, DEFINEDFinancing companies are defined in Section 3(a) of R.A. No. 5980, as amended by P.D. No. 1454 and P.D. No. 1793, as "corporations or partnerships, except those regulated by the Central Bank of the Philippines, the Insurance Commission and the Cooperatives Administration Office, which are primarily organized for the purpose of extending credit facilities to consumers and to industrial, commercial, or agricultural enterprises, either by discounting or factoring commercial papers or accounts receivables, or by buying and selling contracts, leases, chattel mortgages, or other evidence of indebtedness, or by leasing of motor vehicles, heavy equipment and industrial machinery, business and office machines and equipment, appliances and other movable property."

Petition granted.

G.R. No. 118509 December 1, 1995

LIMKETKAI SONS MILLING, INC., petitioner, vs. COURT OF APPEALS, BANK OF THE PHILIPPINE ISLANDS and NATIONAL BOOK STORE, respondents.

FACTS:

Philippine Remnants Co., Inc. constituted respondent BPI as its trustee to manage, administer, and sell its real

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estate property located in Barrio Bagong Ilog, Pasig, Metro Manila.

When Alfonso Lim with Albino Limketkai of petitioner Limketkai learned of this announcement, he contacted the authorized broker of BPI, Pedro Revilla, Jr., manifested his intention to buy it.

So, with the permission given by Rolando V. Aromin, BPI Assistant Vice-President, the broker and Limketkai entered and viewed the property the latter is buying.

Wanting to confirm the terms and purchase price of the sale, Alfonso Lim with Albino Limketkai went to BPI office and were entertained by Vice-President Merlin Albano and Asst. Vice-President Aromin.

The parties finally agreed that the lot would be sold at P1,000.00 per square meter to be paid in cash. Since the authority to sell was on a first come, first served and non-exclusive basis, it may be mentioned at this juncture that there is no dispute over Limketkai's being the first comer and the buyer to be first served. They also agreed, upon inquiry of petitioner, that should the term payment be disapproved, then the price shall be paid in cash.

It was VP Albano who dictated the terms under which the installment payment may be approved, and acting thereon, Alfonso Lim, wrote BPI through VP Albano embodying the payment initially of 10% and the remaining 90% within a period of 90 days.

Two or three days later, Alfonso Lim with Albino Limketkai learned that its offer to pay on terms had been frozen. Petitioner went to BPI on and tendered the full payment of P33,056,000.00 to VP Albano. The payment was refused because VP Albano stated that the authority to sell that particular piece of property in Pasig had been withdrawn from his unit. The same check was tendered to BPI Vice-President Nelson Bona who also refused to receive payment.

An action for specific performance with damages was filed on court. The RTC _ Pasig ruled in favor of petioner but on appeal, the Court of Appeals reverse. Hence, this Petition.

Issue: Whether or not there was a perfected contract between petitioner Limketkai Sons Milling, Inc. and respondent Bank of the Philippine Islands (BPI) covering the sale of a parcel of land?

Held: Yes. The negotiation or preparation stage started with the authority given by Philippine Remnants to BPI to sell the lot, followed by (a) the authority given by BPI and confirmed by Philippine Remnants to broker Revilla to sell the property, (b) the offer to sell to Limketkai, (c) the inspection of the property and finally (d) the negotiations with Aromin and Albano at the BPI offices.

The perfection of the contract took place when Aromin and Albano, acting for BPI, agreed to sell and Alfonso Lim with Albino Limketkai, acting for petitioner Limketkai,

agreed to buy the disputed lot at P1,000.00 per square meter. Aside from this there was the earlier agreement between petitioner and the authorized broker. There was a concurrence of offer and acceptance, on the object, and on the cause thereof.

The phases that a contract goes through may be summarized as follows:

a. preparation, conception or generation, which is the period of negotiation and bargaining, ending at the moment of agreement of the parties;

b. perfection or birth of the contract, which is the moment when the parties come to agree on the terms of the contract; and

c. consummation or death, which is the fulfillment or performance of the terms agreed upon in the contract (Toyota Shaw, Inc. vs. Court of Appeals, G.R. No. 116650, May 23, 1995).

The fact that the deed of sale still had to be signed and notarized does not mean that no contract had already been perfected. A sale of land is valid regardless of the form it may have been entered into (Claudel vs. Court of Appeals, 199 SCRA 113, 119 [1991]). The requisite form under Article 1458 of the Civil Code is merely for greater efficacy or convenience and the failure to comply therewith does not affect the validity and binding effect of the act between the parties (Vitug, Compendium of Civil Law and Jurisprudence, 1993 Revised Edition, p. 552). If the law requires a document or other special form, as in the sale of real property, the contracting parties may compel each other to observe that form, once the contract has been perfected. Their right may be exercised simultaneously with action upon the contract (Article 1359, Civil Code).

[G.R. No. 109125. December 2, 1994.]ANG YU ASUNCION, ARTHUR GO AND KEH TIONG, petitionersvs. THE HON. COURT OF APPEALS and BUEN REALTY DEVELOPMENT CORPORATION, respondents.

FACTS: 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 RTC,

o 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;

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o 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;

o that on several occasions, defendants informed plaintiffs that they are offering to sell the premises and are giving them priority to acquire the same;

o that during the negotiations, Bobby Cu Unjieng offered a price of P6-million while plaintiffs made a counter offer of P5-million;

o that plaintiffs thereafter asked the defendants to put their offer in writing to which request defendants acceded;

o that in reply to defendant's letter, plaintiffs wrote them, asking that they specify the terms and conditions of the offer to sell;

o that when plaintiffs did not receive any reply, they sent another letter with the same request;

o 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.

After the issues were joined, defendants filed a motion for summary judgment

Granted by the RTCo 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.

o Nonetheless, the lower court ruled that should the defendants subsequently offer their property for sale at a price of P11-million or below, plaintiffs will have the right of first refusal.

SC (1st appeal) affirmed with modification (there was no meeting of the minds between the parties concerning the sale of the property, 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 11M pesos)

Pending reconsideration by SC, the Cu Unjieng spouses executed a Deed of Sale transferring the property in question to Buen Realty and Development Corporation for 15M

respondent as the new owner of the subject property wrote a letter to the petitioners demanding that the latter vacate the premises.

Ang Yu in return refused and instead filed for a Writ of Execution of the order recognizing its Right of First Refusal, which the RTC granted.

The CA, on appeal to it by private respondent, set aside and declared without force and effect the above questioned orders of the RTC

Hence this petition for review on certiorari ISSUE: WON petitioners can demand specific performance to the respondents to sell to them the propertyWON the writ of execution (to cancel and set aside the title of Buen Realty Corp and to register the new title to the plaintiffs) was valid

(Mahaba lang ang held because I felt the importance of the below theories in sales. Important lang for recit are the ones in bold)

HELD: NO and NO.

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:

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.

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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.

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. 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).

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.

PERFECTED CONTRACT OF OPTION - 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)

OPTION NOT THE CONTRACT OF SALE ITSELF - Observe, however, that the option is not the contract of sale itself. 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.

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.

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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).

OFFER WITH A PERIOD; EFFECTS OF WITHDRAWAL - 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 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

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).

RIGHT OF FIRST REFUSAL INNOVATIVE; NEITHER AN OPTION NOR AN OFFER - 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.

DISTINCTION OF RIGHT OF FIRST REFUSAL TO AN OPTION OR TO AN OFFER - 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.

BREACH OF RIGHT OF FIRST REFUSAL DOES NOT WARRANT ISSUANCE OF A WRIT OF EXECUTION NOR SANCTION AN ACTION FOR SPECIFIC PERFORMANCE; MAY ONLY WARRANT RECOVERY FOR DAMAGES UNDER ARTICLE 19 OF THE CIVILCODE - Even on the premise that such right of first refusal has been decreed under a final

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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.

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.

EQUATORIAL REALTY DEVELOPMENT, INC. & CARMELO & BAUERMANN, INC., petitioners, vs. MAYFAIR THEATER, INC., respondent(GR No. 106063; Nov. 21, 1996)

FACTS:

Carmelo owned a parcel of land, together with two 2-storey buildings constructed thereon located at Claro M. Recto Avenue, Manila.

On June 1, 1967 Carmelo entered into a contract of lease with herein respondent Mayfair for the latter’s lease of a portion of Carmelo’s property for use by Mayfair as a motion picture theater and for a term of twenty (20) years. Mayfair thereafter constructed on the leased property a movie house known as ‘Maxim Theatre.’

Two years later, on March 31, 1969, Mayfair entered into a second contract of lease with Carmelo for the lease of another portion of Carmelo’s property for similar use as a movie theater and for a similar term of twenty (20) years. Mayfair put up another movie house known as ‘Miramar Theatre’ on this leased property.

Both contracts of lease provides (sic) identically worded paragraph 8, which reads:

‘That if the LESSOR should desire to sell the leased premises, the LESSEE shall be given 30-days exclusive option to purchase the same.

In the event, however, that the leased premises is sold to someone other than the LESSEE, the LESSOR is bound and obligated, as it hereby binds and obligates itself, to stipulate in the Deed of Sale thereof that the purchaser shall recognize this lease and be bound by all the terms and conditions thereof.’

Sometime in August 1974, Mr. Henry Pascal of Carmelo informed Mr. Henry Yang, President of Mayfair, through a telephone conversation that Carmelo was desirous of selling the entire Claro M. Recto property. Mr. Pascal told Mr. Yang that a certain Jose Araneta was offering to buy the whole property for US Dollars 1,200,000, and Mr. Pascal asked Mr. Yang if the latter was willing to buy the property for Six to Seven Million Pesos.

Mr. Yang replied that he would let Mr. Pascal know of his decision. On August 23, 1974, Mayfair replied through a letter stating the earlier mentioned conversation and reminding Carmelo of par. 8 of the contract of lease. Carmelo did not reply to this letter.

On September 18, 1974, Mayfair sent another letter to Carmelo purporting to express interest in acquiring not only the leased premises but ‘the entire building and other improvements if the price is reasonable. However, both Carmelo and Equatorial questioned the authenticity of the second letter.

Four years later, on July 30, 1978, Carmelo sold its entire C.M. Recto Avenue land and building, which included the leased premises housing the ‘Maxim’ and ‘Miramar’ theatres, to Equatorial by virtue of a Deed of Absolute Sale, for the total sum of P11,300,000.00.

In September 1978, Mayfair instituted the action for specific performance and annulment of the sale of the leased premises to Equatorial, which was dismissed by the trial court who adjudged the identically worded paragraph 8 found in both aforecited lease contracts to be an option clause which however cannot be deemed to be binding on Carmelo because of lack of distinct consideration therefor.

On appeal the CA reversed the trial court, considering par. 8 as a right of first refusal and not an option contract.

ISSUE: What is the nature of par. 8 of the lease contract?

HELD: RIGHT OF FIRST REFUSAL. As early as 1916, in the case of Beaumont vs. Prieto, unequivocal was our characterization of an option contract as one necessarily involving the choice granted to another for a distinct and separate consideration as to whether or not to purchase a determinate thing at a predetermined fixed price.

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“It is unquestionable that, by means of the document Exhibit E, to wit, the letter of December 4, 1911, quoted at the beginning of this decision, the defendant Valdes granted to the plaintiff Borck the right to purchase the Nagtajan Hacienda belonging to Benito Legarda, during the period of three months and for its assessed valuation, a grant which necessarily implied the offer or obligation on the part of the defendant Valdes to sell to Borck the said hacienda during the period and for the price mentioned, x x x. There was, therefore, a meeting of minds on the part of the one and the other, with regard to the stipulations made in the said document. But it is not shown that there was any cause or consideration for that agreement, and this omission is a bar which precludes our holding that the stipulations contained in Exhibit E is a contract of option, for, x x x there can be no contract without the requisite, among others, of the cause for the obligation to be established.

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.’

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, the subject of the agreement made by the parties; while in the case at bar there was no such cause or consideration.”

The rule so early established in this jurisdiction is that the deed of option or the option clause in a contract, in order to be valid and enforceable, must, among other things, indicate the definite price at which the person granting the option, is willing to sell.

Notably, in one case we held that the lessee loses his right to buy the leased property for a named price per square meter upon failure to make the purchase within the time specified; in one other case we freed the landowner from her promise to sell her land if the prospective buyer could raise P4,500.00 in three weeks because such option was not supported by a distinct consideration; in the same vein in yet one other case, we also invalidated an instrument entitled, “Option to Purchase” a parcel of land for the sum of P1,510.00 because of lack of consideration; and as an exception to the doctrine enumerated in the two preceding cases, in another case, we ruled that the option to buy the leased premises for P12,000.00 as stipulated in the lease contract, is not without consideration for in reciprocal contracts, like lease, the obligation or promise of each party is the consideration for that of the other. In all these cases, the selling price of the object thereof is always predetermined and specified in the option clause in the contract or in the separate deed of option.

In view of the wording of the questioned provision in the two lease contracts involved in the instant case, we so hold that no option to purchase in contemplation of the second paragraph of Article 1479 of the Civil Code, has been granted to Mayfair under the said lease contracts.

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

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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.

The respondent Court of Appeals was correct in ascertaining the true nature of the aforecited paragraph 8 to be that of a contractual grant of the right of first refusal to Mayfair.

ISSUE2: WON the petitioners acted in bad faith to render Paragraph 8 “inutile.”

HELD: Yes. What Carmelo and Mayfair agreed to, by executing the two lease contracts, was that Mayfair will have the right of first refusal in the event Carmelo sells the leased premises. It is undisputed that Carmelo did recognize this right of Mayfair, for it informed the latter of its intention to sell the said property in 1974. There was an exchange of letters evidencing the offer and counter-offers made by both parties. Carmelo, however, did not pursue the exercise to its logical end. While it initially recognized Mayfair’s right of first refusal, Carmelo violated such right when without affording its negotiations with Mayfair the full process to ripen to at least an interface of a definite offer and a possible corresponding acceptance within the “30-day exclusive option” time granted Mayfair, Carmelo abandoned negotiations, kept a low profile for some time, and then sold, without prior notice to Mayfair, the entire Claro M. Recto property to Equatorial.

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.

ISSUE3: Assuming that par. 8 was a right of first refusal, WON it would amount to impossibility of performance, considering that it only covers the lot subject to the lease and not the whole property which is indivisible?

HELD: No. 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 of lease 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.

Accordingly, even as it recognizes the right of first refusal, this Court should also order that Mayfair be authorized to exercise its right of first refusal under the contract to include the entirety of the indivisible property. The boundaries of the property sold should be the boundaries of the offer under the right of first refusal.

ISSUE4: WON the sale between petitioners should be rescinded?

HELD: Yes. Since Mayfair has a right of first refusal, it can exercise the right only if the fraudulent sale is first set aside or rescinded. The facts of the case and considerations of justice and equity require that we order rescission here and now. Rescission is a relief allowed for the protection of one of the contracting parties and even third persons from all injury and damage the contract may cause or to protect some incompatible and preferred right by the contract. The sale of the subject real property by Carmelo to Equatorial should now be rescinded considering that Mayfair, which had substantial interest over the subject property, was prejudiced by the sale of the subject property to Equatorial without Carmelo conferring to Mayfair every opportunity to negotiate

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within the 30-day stipulated period.

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. 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.

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Documents

Consolidated Sales Digests.7.30.2013