Baluyot v. CA Facts: This case is about the Deed of Donation that UP executed in favor of Quezon City.

. Quezon City in turn would execute such Deed of Donation in favor of the Home-owners Assoc. Of Ligas-na-Krus. UP for some reason then revoked the donation in favor of QC. Petitioners seek the enforcement of the deed of donation made by UP in favor of the Quezon City government. Issue: W/N there is a stipulation pour autrui in favor of the Home-owners Assoc. Of Ligas-na-Krus. Held: Yes. There is a stipulation pour autrui. We find all the elements of a cause of action contained in the amended complaint of petitioners. While, admittedly, petitioners were not parties to the deed of donation, they anchor their right to seek its enforcement upon their allegation that they are intended beneficiaries of the donation to the Quezon City government. Art. 1311, second paragraph, of the Civil Code provides: If a contract should contain some stipulation in favor of a third person, he may demand its fulfillment provided he communicated his acceptance to the obligor before its revocation. A mere incidental benefit or interest of a person is not sufficient. The contracting parties must have clearly and deliberately conferred a favor upon a third person. Under this provision of the Civil Code, the following requisites must be present in order to have a stipulation pour autrui: (1) there must be a stipulation in favor of a third person; (2) the stipulation must be a part, not the whole of the contract; (3) the contracting parties must have clearly and deliberately conferred a favor upon a third person, not a mere incidental benefit or interest; RTC and CA favored UP and QC.

(4) the third person must have communicated his acceptance to the obligor before its revocation; and (5) neither of the contracting parties bears the legal representation or authorization of the third party. The allegations in the following paragraphs of the amended complaint are sufficient to bring petitioners action within the purview of the second paragraph of Art. 1311 on stipulations pour autrui: 1. Paragraph 17, that the deed of donation contains a stipulation that the Quezon City government, as donee, is required to transfer to qualified residents of Cruz-na-Ligas, by way of donations, the lots occupied by them; 2. The same paragraph, that this stipulation is part of conditions and obligations imposed by UP, as donor, upon the Quezon City government, as donee; 3. Paragraphs 15 and 16, that the intent of the parties to the deed of donation was to confer a favor upon petitioners by transferring to the latter the lots occupied by them; 4. Paragraph 19, that conferences were held between the parties to convince UP to surrender the certificates of title to the city government, implying that the donation had been accepted by petitioners by demanding fulfillment thereof[16] and that private respondents were aware of such acceptance; and 5. All the allegations considered together from which it can be fairly inferred that neither of private respondents acted in representation of the other; each of the private respondents had its own obligations, in view of conferring a favor upon petitioners. The amended complaint further alleges that respondent UP has an obligation to transfer the subject parcel of land to the city government so that the latter can in turn comply with its obligations to make improvements on the land and thereafter transfer the same to petitioners but that, in breach of this obligation, UP failed to deliver the title to the land to the city government and then revoked the deed of donation after the latter failed to fulfill its obligations within the time allowed in the contract. For the purpose of determining the sufficiency of petitioners cause of action, these allegations of the amended complaint must be deemed to be hypothetically true. So assuming the truth of the allegations, we

hold that petitioners have a cause of action against UP. Thus, in Kauffman v. National Bank,[17] where the facts were Stated in bare simplicity the admitted facts show that the defendant bank for a valuable consideration paid by the Philippine Fiber and Produce Company agreed on October 9, 1918, to cause a sum of money to be paid to the plaintiff in New York City; and the question is whether the plaintiff can maintain an action against the bank for the non performance of said undertaking. In other words, is the lack of privity with the contract on the part of the plaintiff fatal to the maintenance of an action by him? [18] it was held: In the light of the conclusions thus stated, the right of the plaintiff to maintain the present action is clear enough; for it is undeniable that the banks promise to cause a definite sum of money to be paid to the plaintiff in New York City is a stipulation in his favor within the meaning of the paragraph above quoted; and the circumstances under which that promise was given disclose an evident intention on the part of the contracting parties that the plaintiff should have that money upon demand in New York City. The recognition of this unqualified right in the plaintiff to receive the money implies in our opinion the right in him to maintain an action to recover it; and indeed if the provision in question were not applicable to the facts now before us, it would be difficult to conceive of a case arising under it. It will be noted that under the paragraph cited a third person seeking to enforce compliance with a stipulation in his favor must signify his acceptance before it has been revoked. In this case the plaintiff clearly signified his acceptance to the bank by demanding payment; and although the Philippine National Bank had already directed its New York agency to withhold payment when this demand was made, the rights of the plaintiff cannot be considered to have been prejudiced by that fact. The word revoked, as there used, must be understood to imply revocation by the mutual consent of the contracting parties, or at least by direction of the party purchasing the exchange.[19] It is hardly necessary to state that our conclusion that petitioners complaint states a cause of action against respondents is in no wise a ruling on the merits. That is for the trial court to determine in light of respondent UPs defense that the donation to the Quezon City government, upon which petitioners rely, has been validly revoked.

Respondents contend, however, that the trial court has already found that the donation (on which petitioners base their action) has already been revoked. This contention has no merit. The trial courts ruling on this point was made in connection with petitioners application for a writ of preliminary injunction to stop respondent UP from ejecting petitioners. The trial court denied injunction on the ground that the donation had already been revoked and therefore petitioners had no clear legal right to be protected. It is evident that the trial courts ruling on this question was only tentative, without prejudice to the final resolution of the question after the presentation by the parties of their evidence. Integrated Packaging v. CA Facts: Integrated Packaging Corp. Entered into a contract w/ Fil-Anchor Paper Corp. In their agreement, it was stipulated that FAPC will deliver to IPC the needed printing papers that it will use as IPC also entered in a contract w/ Philacor for the printing of books. FAPC delivered to IPC the needed printing papers but such was not sufficient and some were even delivered on delay, to the prejudice of IPC. IPC, on the other hand, had lack of funds to pay FAPC for the printing papers that it had ordered. Unfortunately, IPC also failed to fully comply with its contract with Philacor for the printing of books VIII, IX, X and XI. Thus, Philacor demanded compensation from petitioner for the delay and damage it suffered on account of IPCs failure. IPC now imputes to FAPC the damage that it suffered for lack of realization of profits as a result of FAPCs failure to deliver on time the needed printing papers. FAPC on the other hand contends that it was IPCs failure to pay on the stipulated periods of their agre ement that delayed FAPCs delivery of the printing papers. Issue: W/N FAPC should be held liable for IPCs breach of contract w/ Philacor. Held: As correctly held by the appellate court, FAPC cannot be held liable under the contracts entered into by IPC with Philacor. FAPC is not a party to said agreements. It is also not a contract pour autrui. Aforesaid contracts could not affect third persons like private respondent because of the basic civil law principle of relativity of contracts which provides that contracts can only bind the parties who entered into it, and it

cannot favor or prejudice a third person, even if he is aware of such contract and has acted with knowledge thereof. Indeed, the order agreement entered into by IPC and FAPC has not been shown as having a direct bearing on the contracts of petitioner with Philacor. As pointed out by FAPC and not refuted by IPC, the paper specified in the order agreement between petitioner and private respondent are markedly different from the paper involved in the contracts of petitioner with Philacor . Furthermore, the demand made by Philacor upon IPC for the latter to comply with its printing contract is dated February 15, 1984, which is clearly made long after FAPC had filed its complaint on August 14, 1981. This demand relates to contracts with Philacor dated April 12, 1983 and May 13, 1983, which were entered into by IPC after FAPC filed the instant case. To recapitulate, FAPC did not violate the order agreement it had with IPC. Likewise, FAPC could not be held liable for IPCs breach of contract with Philacor. It follows that there is no basis to hold FAPC liable for damages. Accordingly, the appellate court did not err in deleting the damages awarded by the trial court to petitioner. A & C Minimart v. Villareal Facts: Spouses Bonifacio had a lease agreement w/ A&C Minimart in a certain one-storey commercial building located at Paranaque, Metro Manila. However, the ownership of such property was in dispute by virtue of an execution of the subject property by the court against the Sevilla spouses in favor of the Villareals arising from the murder of Jose Villareal, the husband of respondent Patricia Villareal and father of respondents Tricia Ann and Claire Hope Villareal. The Bonifacios on the other hand, are claiming ownership of the subj. property. They contended that they bought the property from the Sevilla spouses. They commenced a complaint for ownership of the subj. property. However, when the complaint reached the SC, the SC denied their complaint. Upon knowledge of the Courts denial of the Bonifacio spouses claim of ownership, A&C stopped paying rentals. This in turn made the Bonifacios (who contends that the subj. property are owned by them) and the

Villareals (who are also claiming as owners of the subj. property) to compel A&C to pay rentals. The Paranaque court then issued a decision ordering A&C to pay rentals, to be deposited meaniwhile in Land Bank, subj. only to the turnover of the possession of the subject property to them. Moreover, it found that petitioner did not act in bad faith when it refused to pay rentals and, thus, should not be liable for damages. Additionally, it also ordered the petitioner to pay 12% interest per annum on the monthly rentals due from its receipt of the respondents' demand letter on 25 June 1999, until full payment; to pay respondents' attorney's fees in the amount of P100,000.00 and the costs of suit; and to vacate the subject property. The Villareals filed a Motion for Recomputation of the amount of rentals as the writ of execution allegedly did not conform to the Decision dated 1 October 2003. Respondents claimed that the computation should include a monthly interest of 3% on the total amount of rental and other charges not paid on time, in accordance with paragraph 6(g) of the Contract of Lease, dated 22 January 1998, between petitioner and Teresita Bonifacio. Issue: W/N A&C is obliged to pay 3% on the total amount of rental and other charges not paid on time. Held: Petitioner argues that respondents are not entitled to the 3% penalty stipulated under the Lease Contract dated 22 January 1998, which becomes payable to the lessor whenever the petitioner incurs delay in the payment of its rentals. This argument is well-taken. It is a well-known rule that a contractual obligation or liability, or an action ex-contractu, must be founded upon a contract, oral or written, either express or implied. If there is no contract, there is no corresponding liability and no cause of action may arise therefrom.22 This is provided for in Article 1311 of the Civil Code: Article 1311. Contracts take effect only between the parties, their assigns and heirs, except in case where the rights and obligations arising from the contract are not transmissible by their nature, or by stipulation or by provision of law. The heir is not liable beyond the value of the property he received from the decedent.

The Lease Contract dated 22 January 1998, was executed between the spouses Bonifacio and petitioner. It is undisputed that none of the respondents had taken part, directly or indirectly, in the contract in question. Respondents also did not enter into contract with either the lessee or the lessor, as to an assignment of any right under the Lease Contract in question. The Lease Contract, including the stipulation for the 3% penalty interest, was bilateral between petitioner and Teresita Bonifacio. Respondents claim ownership over the subject property, but not as a successor-ininterest of the spouses Bonifacios. They purchased the property in an execution sale from the spouses Sevilla. Thus, respondents cannot succeed to any contractual rights which may accrue to the spouses Bonifacio. Contracts produce an effect as between the parties who execute them. A contract cannot be binding upon and cannot be enforced by one who is not party to it. Although the respondents were adjudged to be entitled to rentals accruing from 2 March 1999, until the time the petitioner vacated the premises, the obligation to pay rent was not derived from the Lease Contract dated 22 January 1998, but from a QUASI-CONTRACT. Article 2142 of the Civil Code reads: Art. 2142. Certain lawful, voluntary and unilateral acts give rise to the juridical relation of quasi-contract to the end that no one shall be unjustly enriched or benefited at the expense of another. In the present case, the spouses Bonifacio, who were named as the lessors in the Lease Contracts, dated 3 August 1992 and 22 January 1998, are already adjudged not to be the real owners of the subject property. In Civil Case No. 90-2551, Branch 63 of the Makati RTC declared that the Deed of Sale, executed on 17 June 1986, between the spouses Bonifacio and the spouses Sevilla was a forgery and, hence, did not validly transfer ownership to the spouses Bonifacio. At present, there is a pending appeal before the Supreme Court docketed as G.R. No. 150824, which would determine who between the respondents and the spouses Sevilla are the rightful owners of the property. Since the spouses Bonifacio are not the owners of the subject property, they cannot unjustly benefit from it by collecting rent which should accrue to the rightful owners of the same. Hence, the Makati RTC, Branch 132, had set up a bank account where the rent due on the subject property should be deposited and kept in trust for the real owners thereto. Soler v. CA

Facts: Ms. Soler was a Fine Arts graduate of the University of Sto. Tomas.

C.F. Sharp v. Pioneer Insurance Facts: Respondents Agustin and Minimo applied with C.F. Sharp sometime in August 1990. After passing the interview, they were required to submit their passports, seamans book, National Bureau of Investigation clearance, employment certificates, certificates of seminars attended, and results of medical examination. Upon submission of the requirements, a Contract of Employment was executed between respondents and C.F. Sharp. Thereafter, respondents were required to attend various seminars, open a bank account with the corresponding allotment slips, and attend a pre-departure orientation. They were then advised to prepare for immediate deployment and to report to C.F. Sharp to ascertain the schedule of their deployment.

After a month, respondents were yet to be deployed prompting them to request for the release of the documents they had submitted to C.F. Sharp. C.F. Sharp allegedly refused to surrender the documents which led to the filing of a complaint by respondents before the Philippine Overseas Employment Administration (POEA). C.F. Sharp, as defendant-appellant and Rocha, as third-party defendant-appellant, filed only one brief before the Court of Appeals essentially questioning the declaration of the trial court that nondeployment is tantamount to breach of contract and the award of damages. The Court of Appeals found them both liable for damages. The bases of the lower courts award of damages differ. In upholding the perfection of contract between respondents and C.F. Sharp, the trial court stated that the unjustified failure to deploy and subsequently release the documents of respondents entitled them to compensatory damages, among others. Differently, the appellate court found that no contract was perfected between the parties that will give rise to a breach of contract. Thus, the appellate court deleted the award of actual damages. However, it adjudged other damages against C.F. Sharp for its unlawful withholding of documents from respondents.

Issue: W/N there was a perfection and effectivity of the Contract of Employment between C.F. Sharp and respondents Agustin and Minimo. Held: We sustain the trial courts ruling. The contract of employment entered into by the plaintiffs and the defendant C.F. Sharp is an actionable document, the same contract having the essential requisites for its validity. It is worthy to note that there are three stages of a contract: (1) preparation, conception, or generation which is the period of negotiation and bargaining ending at the moment of agreement of the parties. (2) Perfection or birth of the contract, which is the moment when the parties come to agree on the terms of the contract. (3) Consummation or death, which is the fulfillment or performance of the terms agreed upon in the contract. Hence, it is imperative to know the stage reached by the contract entered into by the plaintiffs and C.F. sharp. Based on the testimonies of the witnesses presented in this Court, there was already a perfected contract between plaintiffs and defendant C.F. Sharp. Under Article 1315 of the New Civil Code of the Philippines, it states that: xxxx Thus, when plaintiffs signed the contract of employment with C.F. Sharp (as agent of the principal WB Slough) consequently, the latter is under obligation to deploy the plaintiffs, which is the natural effect and consequence of the contract agreed by them. [8] We agree. As correctly ruled at the trial, contracts undergo three distinct stages, to wit: negotiation; perfection or birth; and consummation. Negotiation begins from the time the prospective contracting parties manifest their interest in the contract and ends at the moment of agreement of the parties. Perfection or birth of the contract takes place when the parties agree upon the essential elements of the contract. Consummation occurs when the parties fulfill or perform the terms agreed upon in the contract, culminating in the extinguishment thereof.[9]

Under Article 1315 of the Civil Code, a contract is perfected by mere consent and from that moment the parties are bound not only to the fulfillment of what has been expressly stipulated but also to all the consequences which, according to their nature, may be in keeping with good faith, usage and law. [10] An employment contract, like any other contract, is perfected at the moment (1) the parties come to agree upon its terms; and (2) concur in the essential elements thereof: (a) consent of the contracting parties, (b) object certain which is the subject matter of the contract and (c) cause of the obligation. [11] We have scoured through the Contract of Employment and we hold that it is a perfected contract of employment. By the contract, C.F. Sharp, on behalf of its principal, International Shipping Management, Inc., hired respondents as Sandblaster/Painter for a 3-month contract, with a basic monthly salary of US$450.00. Thus, the object of the contract is the service to be rendered by respondents on board the vessel while the cause of the contract is the monthly compensation they expect to receive. These terms were embodied in the Contract of Employment which was executed by the parties. The agreement upon the terms of the contract was manifested by the consent freely given by both parties through their signatures in the contract. Neither parties disavow the consent they both voluntarily gave. Thus, there is a perfected contract of employment. The Court of Appeals agreed with the submission of C.F. Sharp that the perfection and effectivity of the Contract of Employment depend upon the actual deployment of respondents. It based its conclusion that there was no perfected contract based on the following rationale: The commencement of the employer-employee relationship between plaintiffsappellees and the foreign employer, as correctly represented by C.F. Sharp requires that conditions under Sec. D be met. The Contract of Employment was duly Verified and approved by the POEA. Regrettably, We have painfully scrutinized the Records and find no evidence that plaintiffs-appellees were cleared for travel and departure to their port of embarkation overseas by government authorities. Consequently, non-fulfillment of this condition negates the commencement and existence of employer-employee relationship between the plaintiffs-appellees and C.F. Sharp. Accordingly, no contract between them was perfected that will give rise to plaintiffs-appellees right of action. There can be no breach of contract when in the first place, there is no effective contract to speak of. For the

same reason, and finding that the award of actual damages has no basis, the same is hereby deleted.[13] The Court of Appeals erred. The commencement of an employer-employee relationship must be treated separately from the perfection of an employment contract. Santiago v. CF Sharp Crew Management, Inc.,[14] which was promulgated on 10 July 2007, is an instructive precedent on this point. In said case, petitioner was hired by respondent on board MSV Seaspread for US$515.00 per month for nine (9) months, plus overtime pay. Respondent failed to deploy petitioner from the port of Manila to Canada. We made a distinction between the perfection of the employment contract and the commencement of the employer-employee relationship, thus: The perfection of the contract, which in this case coincided with the date of execution thereof, occurred when petitioner and respondent agreed on the object and the cause, as well as the rest of the terms and conditions therein. The commencement of the employer-employee relationship, as earlier discussed, would have taken place had petitioner been actually deployed from the point of hire. Thus, even before the start of any employer-employee relationship, contemporaneous with the perfection of the employment contract was the birth of certain rights and obligations, the breach of which may give rise to a cause of action against the erring party.[15] Despite the fact that the employer-employee relationship has not commenced due to the failure to deploy respondents in this case, respondents are entitled to rights arising from the perfected Contract of Employment, such as the right to demand performance by C.F. Sharp of its obligation under the contract. The right to demand performance was a categorical pronouncement in Santiago which ruled that failure to deploy constitutes breach of contract, thereby entitling the seafarer to damages: Respondents act of preventing petitioner from departing the port of Manila and boarding MSV Seaspread constitutes a breach of contract, giving rise to petitioners cause of action. Respondent unilaterally and unreasonably reneged on its obligation to deploy petitioner and must therefore answer for the actual damages he suffered. We take exception to the Court of Appeals conclusion that damages are not recoverable by a worker who was not deployed by his agency. The fact that the POEA Rules are silent as to the payment of damages to the affected seafarer does not mean that the seafarer is precluded from claiming the same. The sanctions provided for non-

deployment do not end with the suspension or cancellation of license or fine and the return of all documents at no cost to the worker. They do not forfend a seafarer from instituting an action for damages against the employer or agency which has failed to deploy him. [16] The appellate court could not be faulted for its failure to adhere to Santiago considering that the Court of Appeals Decision was promulgated way back in 2003 while Santiago was decided in 2007. We now reiterate Santiago and, accordingly, decide the case at hand. Robern Devt v. Peoples Landless Issue: W/N there was a perfected contract of sale between PELA and Al-Amanah, the resolution of which will decide whether the sale of the lot to Robern should be sustained or not. Held: 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.48 Thus, for a contract of sale to be valid, all of the following essential elements must concur: "a) consent or meeting of the minds; b) determinate subject matter; and c) price certain in money or its equivalent."49chanroblesvirtualawlibrary In the case at bench, there is no controversy anent the determinate subject matter, i.e., the 2,000-square meter lot. This leaves us to resolve whether there was a concurrence of the remaining elements. As for the price, fixing it can never be left to the decision of only one of the contracting parties. 50 "But a price fixed by one of the contracting parties, if accepted by the other, gives rise to a perfected sale."51chanroblesvirtualawlibrary As regards consent, "when there is merely an offer by one party without acceptance of the other, there is no contract."52 The decision to accept a bidder's proposal must be communicated to the bidder.53 However, a binding contract may exist between the parties whose minds have met, although they did not affix their signatures to any written document,54 as acceptance may be expressed or implied.55 It "can be inferred from the contemporaneous and subsequent acts of the contracting parties." 56 Thus, we held:chanroblesvirtualawlibrary x x x The rule is that except where a formal acceptance is so required, although the acceptance must be affirmatively and clearly made and must be evidenced by some acts or conduct communicated to the offeror, it may be made either in a formal or an informal manner, and may be shown by acts, conduct, or words of the accepting party that clearly manifest a present intention or determination to accept the offer to buy or sell. Thus, acceptance may be shown by the acts, conduct, or words of a party recognizing the existence of the contract of sale.57chanroblesvirtualawlibrary

There is no perfected contract of sale between PELA and Al-Amanah for want of consent and agreement on the price. After scrutinizing the testimonial and documentary evidence in the records of the case, we find no proof of a perfected contract of sale between Al-Amanah and PELA. The parties did not agree on the price and no consent was given, whether express or implied. When PELA Secretary Florida Ramos (Ramos) testified, she referred to the March 18, 1993 letter which PELA sent to Al-Amanah as the document supposedly embodying the perfected contract of sale.58 However, we find that the March 18, 1993 letter referred to was merely an offer to buy. Neither can the note written by the bank that "subject offer has been acknowledged/received but processing to take effect upon putting up of the partial amount of P150,000.00 on or before April 15, 1993" be construed as acceptance of PELA's offer to buy. Taken at face value, the annotation simply means that the bank merely acknowledged receipt of PELA's letter-offer. Furthermore, by processing, Al-Amanah only meant that it will act on the offer , i.e., it still has to evaluate whether PELA's offer is acceptable. Until and unless Al-Amanah accepts, there is as yet no perfected contract of sale. Notably here, the bank never signified its approval or acceptance of the offer. We cannot agree with the CA's ratiocination that receipt of the amount, coupled with the phrase written on the four receipts as "deposit on sale of TCT No. 138914," signified a tacit acceptance by Al-Amanah of PELA's offer. For sure, the money PELA gave was not in the concept of an earnest money. Besides, as testified to by then OIC Dalig, it is the usual practice of Al-Amanah to require submission of a bid deposit which is acknowledged by way of bank receipts before it entertains offers. It is thus undisputed, and PELA even acknowledges, that OIC Dalig made it clear that the acceptance of the offer, notwithstanding the deposit, is subject to the approval of the Head Office. Recognizing the corporate nature of the bank and that the power to sell its real properties is lodged in the higher authorities,65 she never falsely represented to the bidders that she has authority to sell the bank's property. And regardless of PELA's insistence that she execute a written agreement of the sale, she refused and told PELA to wait for the decision of the Head Office, making it clear that she has no authority to execute any deed of sale. Contracts undergo three stages: "a) negotiation which begins from the time the prospective contracting parties indicate interest in the contract and ends at the moment of their agreement[; b) perfection or birth, x x x which takes place when the parties agree upon all the essential elements of the contract x x x; and c) consummation, which occurs when the parties fulfill or perform the terms agreed upon, culminating in the extinguishment thereof."66chanroblesvirtualawlibrary

In the case at bench, the transaction between Al-Amanah and PELA remained in the negotiation stage. The offer never materialized into a perfected sale, for no oral or documentary evidence categorically proves that Al-Amanah expressed amenability to the offered P300,000.00 purchase price. Before the lapse of the 1year period PELA had set to pay the remaining balance, Al-Amanah expressly rejected its offered purchase price, although it took the latter around seven months to inform the former and this entitled PELA to award of damages.67 Al-Amanah's act of selling the lot to another buyer is the final nail in the coffin of the negotiation with PELA. Clearly, there is no double sale, thus, we find no reason to disturb the consummated sale between Al-Amanah and Robern. At this juncture, it is well to stress that Al-Amanah's Petition before this Court docketed as G.R. NO. 173437 was already denied with finality on December 4, 2006. Hence, we see no reason to disturb paragraph 6 of the CA's Decision ordering Al-Amanah to pay damages to PELA. WHEREFORE, we PARTIALLY GRANT the Petition. Except for paragraph 6 of the Court of Appeals Decision which had already been long settled,68 the rest of the judgment in the assailed August 16, 2005 Decision and May 30, 2006 Resolution of the Court of Appeals in CA-G.R. NO. CV No. 66071 are hereby ANNULLED and SET ASIDE. The August 10, 1999 Decision of the Regional Trial Court of Davao City, Branch 12, dismissing the Complaint for Annulment and Cancellation of Void Deed of Sale filed by respondent People's Landless Association is REINSTATED and AFFIRMED. The amount of Pesos: Three Hundred Thousand (P300,000.00) consigned with the Regional Trial Court of Davao City may now be withdrawn by People's Landless Association. Garcia v. Thio Facts: Held: The petition is impressed with merit. A loan is a real contract, not consensual, and as such is perfected only upon the delivery of the object of the contract.25 This is evident in Art. 1934 of the Civil Code which provides: An accepted promise to deliver something by way of commodatum or simple loan is binding upon the parties, but the commodatum or simple loan itself shall not be perfected until the delivery of the object of the contract. Upon delivery of the object of the contract of loan (in this case the money received by the debtor when the checks were encashed) the debtor acquires ownership of such money or loan proceeds and is bound to pay the creditor an equal amount.26 It is undisputed that the checks were delivered to respondent. However, these checks were crossed and payable not to the order of respondent but to the order of a certain Marilou Santiago. Thus the main question to be answered is: who borrowed money from petitioner respondent or Santiago?

Petitioner insists that it was upon respondents instruction that both checks were made payable to Santiago.27 She maintains that it was also upon respondents instruction that both checks were delivered to her (respondent) so that she could, in turn, deliver the same to Santiago. 28 Furthermore, she argues that once respondent received the checks, the latter had possession and control of them such that she had the choice to either forward them to Santiago (who was already her debtor), to retain them or to return them to petitioner.29 We agree with petitioner. Delivery is the act by which the res or substance thereof is placed within the actual or constructive possession or control of another. Although respondent did not physically receive the proceeds of the checks, these instruments were placed in her control and possession under an arrangement whereby she actually re-lent the amounts to Santiago. Several factors support this conclusion. First, respondent admitted that petitioner did not personally know Santiago. It was highly improbable that petitioner would grant two loans to a complete stranger without requiring as much as promissory notes or any written acknowledgment of the debt considering that the amounts involved were quite big. Respondent, on the other hand, already had transactions with Santiago at that time. Second, Leticia Ruiz, a friend of both petitioner and respondent (and whose name appeared in both parties list of witnesses) testified that respondents plan was for petitioner to lend her money at a monthly interest rate of 3%, after which respondent would lend the same amount to Santiago at a higher rate of 5% and realize a profit of 2%. This explained why respondent instructed petitioner to make the checks payable to Santiago. Respondent has not shown any reason why Ruiz testimony should not be believed. Third, for the US$100,000 loan, respondent admitted issuing her own checks in the amount of P76,000 each (peso equivalent of US$3,000) for eight months to cover the monthly interest. For the P500,000 loan, she also issued her own checks in the amount of P20,000 each for four months. According to respondent, she merely accommodated petitioners request for her to issue her own checks to cover the interest payments since petitioner was not personally acquainted with Santiago. She claimed, however, that Santiago would replace the checks with cash. Her explanation is simply incredible. It is difficult to believe that respondent would put herself in a position where she would be compelled to pay interest, from her own funds, for loans she allegedly did not contract. We declared in one case that: In the assessment of the testimonies of witnesses, this Court is guided by the rule that for evidence to be believed, it must not only proceed from the mouth of a credible witness, but must be credible in itself such as the common experience of mankind can approve as probable under the circumstances. We have no test of the truth of human testimony except its conformity to our knowledge, observation, and experience. Whatever is repugnant to these belongs to the miraculous, and is outside of juridical cognizance. Fourth, in the petition for insolvency sworn to and filed by Santiago, it was respondent, not petitioner, who was listed as one of her (Santiagos) creditors.

Last, respondent inexplicably never presented Santiago as a witness to corroborate her story. The presumption is that "evidence willfully suppressed would be adverse if produced." Respondent was not able to overturn this presumption.

We hold that the CA committed reversible error when it ruled that respondent did not borrow the amounts of US$100,000 and P500,000 from petitioner. We instead agree with the ruling of the RTC making respondent liable for the principal amounts of the loans. We do not, however, agree that respondent is liable for the 3% and 4% monthly interest for the US$100,000 andP500,000 loans respectively. There was no written proof of the interest payable except for the verbal agreement that the loans would earn 3% and 4% interest per month. Article 1956 of the Civil Code provides that "[n]o interest shall be due unless it has been expressly stipulated in writing." Be that as it may, while there can be no stipulated interest, there can be legal interest pursuant to Article 2209 of the Civil Code. It is well-settled that: When the obligation is breached, and it consists in the payment of a sum of money, i.e., a loan or forbearance of money, the interest due should be that which may have been stipulated in writing. Furthermore, the interest due shall itself earn legal interest from the time it is judicially demanded. In the absence of stipulation, the rate of interest shall be 12% per annum to be computed from default, i.e., from judicial or extrajudicial demand under and subject to the provisions of Article 1169 of the Civil Code. Hence, respondent is liable for the payment of legal interest per annum to be computed from November 21, 1995, the date when she received petitioners demand letter. From the finality of the decision until it is fully paid, the amount due shall earn interest at 12% per annum, the interim period being deemed equivalent to a forbearance of credit. The award of actual damages in the amount of P50,000 and P100,000 attorneys fees is deleted since the RTC decision did not explain the factual bases for these damages. WHEREFORE, the petition is hereby GRANTED and the June 19, 2002 decision and August 20, 2002 resolution of the Court of Appeals in CA-G.R. CV No. 56577 are REVERSED and SET ASIDE. The February 28, 1997 decision of the Regional Trial Court in Civil Case No. 96-266 is AFFIRMED with the MODIFICATION that respondent is directed to pay petitioner the amounts of US$100,000 and P500,000 at 12% per annum interest from November 21, 1995 until the finality of the decision. The total amount due as of the date of finality will earn interest of 12% per annum until fully paid. The award of actual damages and attorneys fees is deleted. Pangan v. Perreras Facts: In this case, spouses Pangan agreed to sell an apartment they owned to spouses Perreras worth P540,000. On the same day, Consuelo received P20,000.00 from the respondents as earnest money, evidenced by a receipt that also included the terms of the parties agreement.

Three days later, or on June 5, 1989, the parties agreed to increase the purchase price from P540,000.00 to P580,000.00. In compliance with the agreement, the respondents issued two Far East Bank and Trust Company checks payable to Consuelo in the amounts of P200,000.00 and P250,000.00 on June 15, 1989. Consuelo, however, refused to accept the checks. She justified her refusal by saying that her children (the petitionersheirs) co-owners of the subject properties did not want to sell the subject properties. For the same reason, Consuelo offered to return the P20,000.00 earnest money she received from the respondents, but the latter rejected it. Thus, Consuelo filed a complaint for consignation against the respondents, before the RTC of Manila, Branch 28. The respondents, who insisted on enforcing the agreement, in turn instituted an action for specific performance against Consuelo before the same court. They sought to compel Consuelo and the petitionersheirs (who were subsequently impleaded as co-defendants) to execute a Deed of Absolute Sale over the subject properties. In her Answer, Consuelo claimed that she was justified in backing out from the agreement on the ground that the sale was subject to the consent of the petitioners-heirs who became co-owners of the property upon the death of her husband, Cayetano. Since the petitioners-heirs disapproved of the sale, Consuelo claimed that the contract became ineffective for lack of the requisite consent. She nevertheless expressed her willingness to return the P20,000.00 earnest money she received from the respondents. The RTC ruled in favor of the respondents as found that Consuelos receipt of theP20,000.00 earnest money was an eloquent manifestation of the perfection of the contract. It also dismissed Consuelos complaint of Consignation. The CA also ruled in favor of the respondents saying and found that the payment and receipt of earnest money was the operative act that gave rise to a perfected contract, and that there was nothing in the parties agreement that would indicate that it was subject to a suspensive condition. Bone of contention of the petitioners: There was lack of consent from the other co-owners (heirs of Pangan) of the sale of the property. Thus, the refusal of the petitioners-heirs to sell the subject properties purportedly amounted to the absence of the requisite element of consent.

The

petitioners-heirs posit

that

the

agreement

involves

contract

to

sell,

and

the

respondents belated payment of part of the purchase price, i.e., one day after the June 14, 1989 due date, amounted to the non-fulfillment of a positive suspensive condition that prevented the contract from acquiring obligatory force In a contract to sell, the payment of the purchase price is a positive suspensive condition, the failure of which is not a breach, casual or serious, but a situation that prevents the obligation of the vendor to convey title from acquiring an obligatory force. Issue: Was there a perfected contract between the parties? Held: There was a perfected contract between the parties since all the essential requisites of a contract were present Article 1318 of the Civil Code declares that no contract exists unless the following requisites concur: (1) consent of the contracting parties; (2) object certain which is the subject matter of the contract; and (3) cause of the obligation established. Since the object of the parties agreement involves properties co owned by Consuelo and her children, the petitioners-heirs insist that their approval of the sale initiated by their mother, Consuelo, was essential to its perfection. Accordingly, their refusal amounted to the absence of the required element of consent. That a thing is sold without the consent of all the co-owners does not invalidate the sale or render it void. Article 493 of the Civil Code recognizes the absolute right of a co-owner to freely dispose of his pro indiviso share as well as the fruits and other benefits arising from that share, independently of the other co-owners. Thus, when Consuelo agreed to sell to the respondents the subject properties, what she in fact sold was her undivided interest that, as quantified by the RTC, consisted of one-half interest, representing her conjugal share, and one-sixth interest, representing her hereditary share. The petitioners-heirs nevertheless argue that Consuelos consent was predicated on their consent to the sale, and that their disapproval resulted in the withdrawal of Consuelos consent. Yet, we find nothing in the parties agreement or even conduct save Consuelos self-serving testimony that would indicate or from which we can infer that Consuelos consent depended on her childrens approval

of the sale. The explicit terms of the June 8, 1989 receipt provide no occasion for any reading that the agreement is subject to the petitioners-heirs favorable consent to the sale. The presence of Consuelos consent and, corollarily, the existence of a perfected contract between the parties are further evidenced by the payment and receipt of P20,000.00, an earnest money by the contracting parties common usage. The law on sales, specifically Article 1482 of the Civil Code, provides that whenever earnest money is given in a contract of sale, it shall be considered as part of the price and proof of the perfection of the contract. Although the presumption is not conclusive, as the parties may treat the earnest money differently, there is nothing alleged in the present case that would give rise to a contrary presumption. In cases where the Court reached a conclusion contrary to the presumption declared in Article 1482, we found that the money initially paid was given to guarantee that the buyer would not back out from the sale, considering that the parties to the sale have yet to arrive at a definite agreement as to its terms that is, a situation where the contract has not yet been perfected. These situations do not obtain in the present case, as neither of the parties claimed that the P20,000.00 was given merely as guarantee by the respondents, as vendees, that they would not back out from the sale. As we have pointed out, the terms of the parties agreement are clear and explicit; indeed, all the essential elements of a perfected contract are present in this case . While the respondents required that the occupants vacate the subject properties prior to the payment of the second installment, the stipulation does not affect the perfection of the contract, but only its execution. In sum, the case contains no element, factual or legal, that negates the existence of a perfected contract between the parties. Jardine Davis v. CA Bone of contention in this case: Was there was an acceptance of the offer, and if so, was it communicated, thereby perfecting the contract? Facts: To remedy and curtail further losses due to the series of power failures, petitioner PURE FOODS CORPORATION (hereafter PUREFOODS) decided to install two (2) 1500 KW generators in its food processing plant in San Roque, Marikina City.

Sometime in November 1992 a bidding for the supply and installation of the generators was held. Out of the eight (8) prospective bidders who attended the pre-bidding conference, only three (3) bidders, namely, respondent FAR EAST MILLS SUPPLY CORPORATION (hereafter FEMSCO), MONARK and ADVANCE POWER submitted bid proposals and gave bid bonds equivalent to 5% of their respective bids, as required. Thereafter, PUREFOODS confirmed the award of the contract to FEMSCO. Immediately, FEMSCO submitted the required performance bond in the amount of P1,841,187.90 and contractors all-risk insurance policy in the amount of P6,137,293.00 which PUREFOODS through its Vice President acknowledged in a letter. FEMSCO also made arrangements with its principal and started the PUREFOODS project by purchasing the necessary materials. PUREFOODS on the other hand returned FEMSCOs Bidders Bond in the amount of P1,000,000.00, as requested. Later, however, PUREFOODS through its Senior Vice President unilaterally canceled the award as "significant factors were uncovered and brought to (their) attention which dictate (the) cancellation and warrant a total review and re-bid of (the) project." Consequently, FEMSCO protested the cancellation of the award and sought a meeting with PUREFOODS. However, before the matter could be resolved, PUREFOODS already awarded the project and entered into a contract with JARDINE NELL, a division of Jardine Davies, Inc. (hereafter JARDINE), which incidentally was not one of the bidders. FEMSCO thus wrote PUREFOODS to honor its contract with the former, and to JARDINE to cease and desist from delivering and installing the two (2) generators at PUREFOODS. Its demand letters unheeded, FEMSCO sued both PUREFOODS and JARDINE: PUREFOODS for reneging on its contract, and JARDINE for its unwarranted interference and inducement. Trial ensued. After FEMSCO presented its evidence, JARDINE filed a Demurrer to Evidence. The RTC granted the Demurrer to Evidence filed by JARDINE resulting in the dismissal of the complaint against it and decided in favor of FEMSCO and against PUREFOODS. It awarded damages to FEMSCO. CA affirmed in toto the decision of the RTC but ordered ordered JARDINE to pay FEMSCO damages for inducing PUREFOODS to violate the latters contract with FEMSCO. PUREFOODS was also directed to pay FEMSCO. Contentions of FEMSCO and JARDINE: its 12 December 1992 letter to FEMSCO was not an acceptance of the latter's bid proposal and award of the project but more of a qualified acceptance constituting a counter-offer which required FEMSCO's express conforme. Since PUREFOODS never received FEMSCOsconforme, PUREFOODS was very well within reason to revoke its qualified acceptance or counter-offer. Hence, no contract was perfected between PUREFOODS and FEMSCO. Corollarily, JARDINE asserts that the records are bereft of any showing that it had prior knowledge of the supposed contract between PUREFOODS and FEMSCO, and that it induced PUREFOODS to violate the latters alleged contract with FEMSCO. Issues:

1.) Whether there existed a perfected contract between PUREFOODS and FEMSCO; and 2.) Granting there existed a perfected contract, whether there is any showing that JARDINE induced or
connived with PUREFOODS to violate the latter's contract with FEMSCO. Held: A contract is defined as "a juridical convention manifested in legal form, by virtue of which one or more persons bind themselves in favor of another or others, or reciprocally, to the fulfillment of a prestation to give, to do, or not to do." There can be no contract unless the following requisites concur: (a) consent of the contracting parties; (b) object certain which is the subject matter of the contract; and, (c) cause of the obligation which is established. A contract binds both contracting parties and has the force of law between them. Contracts are perfected by mere consent, upon the acceptance by the offeree of the offer made by the offeror. From that moment, the parties are bound not only to the fulfillment of what has been expressly stipulated but also to all the consequences which, according to their nature, may be in keeping with good faith, usage and law. To produce a contract, the acceptance must not qualify the terms of the offer. However, the acceptance may be express or implied. For a contract to arise, the acceptance must be made known to the offeror. Accordingly, the acceptance can be withdrawn or revoked before it is made known to the offeror. In the instant case, there is no issue as regards the subject matter of the contract and the cause of the obligation. The controversy lies in the consent - whether there was an acceptance of the offer, and if so, if it was communicated, thereby perfecting the contract. To resolve the dispute, there is a need to determine what constituted the offer and the acceptance. Since petitioner PUREFOODS started the process of entering into the contract by conducting a bidding, Art. 1326 of the Civil Code, which provides that "[a]dvertisements for bidders are simply invitations to make proposals," applies. Accordingly, the Terms and Conditions of the Bidding disseminated by petitioner PUREFOODS constitutes the "advertisement" to bid on the project. The bid proposals or quotations submitted by the prospective suppliers including respondent FEMSCO, are the offers. And, the reply of petitioner PUREFOODS, the acceptance or rejection of the respective offers. Quite obviously, the 12 December 1992 letter of petitioner PUREFOODS to FEMSCO constituted acceptance of respondent FEMSCOs offer as contemplated by law. The tenor of t he letter, i.e., "This will confirm that Pure Foods has awarded to your firm (FEMSCO) the project," could not be more categorical. While the same letter enumerated certain "basic terms and conditions," these conditions were imposed on the performance of the obligation rather than on the perfection of the contract. Thus, the first "condition" was merely a reiteration of the contract price and billing scheme based on the Terms and Conditions of Bidding and the bid or previous offer of respondent FEMSCO. The second and third "conditions" were nothing more than general statements that all items and materials including those excluded in the list but

necessary to complete the project shall be deemed included and should be brand new. The fourth "condition" concerned the completion of the work to be done, i.e., within twenty (20) days from the delivery of the generator set, the purchase of which was part of the contract. The fifth "condition" had to do with the putting up of a performance bond and an all-risk insurance, both of which should be given upon commencement of the project. The sixth "condition" related to the standard warranty of one (1) year. In fine, the enumerated "basic terms and conditions" were prescriptions on how the obligation was to be performed and implemented. They were far from being conditions imposed on the perfection of the contract. In Babasa v. Court of Appeals we distinguished between a CONDITION IMPOSED ON THE PERFECTION OF A CONTRACT and a CONDITION IMPOSED MERELY ON THE PERFORMANCE OF AN OBLIGATION. While failure to comply with the first condition results in the failure of a contract, failure to comply with the second merely gives the other party options and/or remedies to protect his interests. We thus agree with the conclusion of respondent appellate court which affirmed the trial court As can be inferred from the actual phrase used in the first portion of the letter, the decision to award the contract has already been made. The letter only serves as a confirmation of such decision. Hence, to the Courts mind, there is already an acceptance made of the offer received by Purefoods. Notwithstanding the terms and conditions enumerated therein, the offer has been accepted and/or amplified the details of the terms and conditions contained in the Terms and Conditions of Bidding given out by Purefoods to prospective bidders. But even granting arguendo that the 12 December 1992 letter of petitioner PUREFOODS constituted a "conditional counter-offer," respondent FEMCO's submission of the performance bond and contractor's allrisk insurance was an implied acceptance, if not a clear indication of its acquiescence to, the "conditional counter-offer," which expressly stated that the performance bond and the contractor's all-risk insurance should be given upon the commencement of the contract. Corollarily, the acknowledgment thereof by petitioner PUREFOODS, not to mention its return of FEMSCO's bidder's bond, was a concrete manifestation of its knowledge that respondent FEMSCO indeed consented to the "conditional counteroffer." After all, as earlier adverted to, an acceptance may either be express or implied, and this can be inferred from the contemporaneous and subsequent acts of the contracting parties. Accordingly, for all intents and purposes, the contract at that point has been perfected, and respondent FEMSCO's conforme would only be a mere surplusage. The discussion of the price of the project two (2) months after the 12 December 1992 letter can be deemed as nothing more than a pressure being exerted by petitioner PUREFOODS on respondent FEMSCO to lower the price even after the contract had been perfected. Indeed from the facts, it can easily be surmised that petitioner PUREFOODS was haggling for a lower price even after agreeing to the earlier quotation, and was threatening to unilaterally cancel the contract, which it eventually did. Petitioner PUREFOODS also makes an issue out of the absence of a purchase order (PO). Suffice it to say that purchase orders or POs do not make or break a contract. Thus, even the tenor of the subsequent letter of petitioner PUREFOODS, i.e., "Pure Foods Corporation is hereby canceling the award to your company of the project," presupposes that the contract has been perfected. For, there can be no cancellation if the contract was not perfected in the first place.

San Miguel Properties v. Huang Facts: Petitioner San Miguel Properties Philippines, Inc. is a domestic corporation engaged in the purchase and sale of real properties. Part of its inventory are two parcels of land totalling 1, 738 square meters at the corner of Meralco Avenue and General Capinpin Street, Barrio Oranbo, Pasig City. On February 21, 1994, the properties were offered for sale for P52,140,000.00 in cash. The offer was made to Atty. Helena M. Dauz who was acting for respondent spouses as undisclosed principals. In a letter dated March 24, 1994, Atty. Dauz signified her clients interest in purchasing the properties for the amount for which they were offered by petitioner, under the following terms: the sum of P500,000.00 would be given as earnest money and the balance would be paid in eight equal monthly installments from May to December, 1994. However, petitioner refused the counter-offer. On March 29, 1994, Atty. Dauz wrote another letter proposing the following terms for the purchase of the properties, viz: This is to express our interest to buy your-above-mentioned property with an area of 1, 738 sq. meters. For this purpose, we are enclosing herewith the sum of P1,000,000.00 representing earnest-deposit money, subject to the following conditions. 1. We will be given the exclusive option to purchase the property within the 30 days from date of your acceptance of this offer. 2. During said period, we will negotiate on the terms and conditions of the purchase; SMPPI will secure the necessary Management and Board approvals; and we initiate the documentation if there is mutual agreement between us. 3. In the event that we do not come to an agreement on this transaction, the said amount of P1,000,000.00 shall be refundable to us in full upon demand. . . . Isidro A. Sobrecarey, petitioners vice-president and operations manager for corporate real estate, indicated his conformity to the offer by affixing his signature to the letter and accepted the "earnest-deposit" of P1 million. Upon request of respondent spouses, Sobrecarey ordered the removal of the "FOR SALE" sign from the properties. Atty. Dauz and Sobrecarey then commenced negotiations. During their meeting on April 8, 1994, Sobrecarey informed Atty. Dauz that petitioner was willing to sell the subject properties on a 90-day term. Atty. Dauz countered with an offer of six months within which to pay. On April 14, 1994, the parties again met during which Sobrecarey informed Atty. Dauz that petitioner had not yet acted on her counter-offer. This prompted Atty. Dauz to propose a four-month period of amortization.

On April 25, 1994, Atty. Dauz asked for an extension of 45 days from April 29, 1994 to June 13, 1994 within which to exercise her option to purchase the property, adding that within that period, "[we] hope to finalize [our] agreement on the matter." Her request was granted. On July 7, 1994, petitioner, through its president and chief executive officer, Federico Gonzales, wrote Atty. Dauz informing her that because the parties failed to agree on the terms and conditions of the sale despite the extension granted by petitioner, the latter was returning the amount ofP1 million given as "earnest-deposit." On July 20, 1994, respondent spouses, through counsel, wrote petitioner demanding the execution within five days of a deed of sale covering the properties. Respondents attempted to return the "earnestdeposit" but petitioner refused on the ground that respondents option to purchase had already expired. On August 16, 1994, respondent spouses filed a complaint for specific performance against petitioner before the Regional Trial Court of Pasig City. Trial Court granted the petitioners motion and denied respondents motion for reconsideration. CA reversed the decision of the TC. It held that all the requisites of a perfected contract of sale had been complied with as the offer made on March 29, 1994, in connection with which the earnest money in the amount of P1 million was tendered by respondents, had already been accepted by petitioner. The court cited Art. 1482 of the Civil Code which provides that "[w]henever earnest money is given in a contract of sale, it shall be considered as part of the price and as proof of the perfection of the contract." The fact the parties had not agreed on the mode of payment did not affect the contract as such is not an essential element for its validity. In addition, the court found that Sobrecarey had authority to act in behalf of petitioner for the sale of the properties. Petitioner moved for reconsideration but was denied by the CA. Issue: W/N there was a perfected contract of sale. Held: The petition is meritorious. In holding that there is a perfected contract of sale, the Court of Appeals relied on the following findings: (1) earnest money was allegedly given by respondents and accepted by petitioner through its vice-president and operations manager, Isidro A. Sobrecarey; and (2) the documentary evidence in the records show that there was a perfected contract of sale. With regard to the alleged payment and acceptance of earnest money, the Court holds that respondents did not give the P1 million as "earnest money" as provided by Art. 1482 of the Civil Code. They presented the amount merely as a deposit of what would eventually become the earnest money or

downpayment should a contract of sale be made by them. The amount was thus given not as a part of the purchase price and as proof of the perfection of the contract of sale but only as a guarantee that respondents would not back out of the sale. Respondents in fact described the amount as an EARNEST DEPOSIT. In Spouses Doromal, Sr. v. Court of Appeals, it was held: . . . While the P5,000 might have indeed been paid to Carlos in October, 1967, there is nothing to show that the same was in the concept of the earnest money contemplated in Art. 1482 of the Civil Code, invoked by petitioner, as signifying perfection of the sale. Viewed in the backdrop of the factual milieu thereof extant in the record, We are more inclined to believe that the saidP5,000.00 were paid in the concept of earnest money as the term was understood under the Old Civil Code, that is, as a guarantee that the buyer would not back out, considering that it is not clear that there was already a definite agreement as to the price then and that petitioners were decided to buy 6/7 only of the property should respondent Javellana refuse to agree to part with her 1/7 share. In the present case, the P1 million "earnest-deposit" could not have been given as earnest money as contemplated in Art. 1482 because, at the time when petitioner accepted the terms of respondents offer of March 29, 1994, their contract had not yet been perfected. This is evident from the following conditions attached by respondents to their letter, to wit: (1) that they be given the exclusive option to purchase the property within 30 days from acceptance of the offer; (2) that during the option period, the parties would negotiate the terms and conditions of the purchase; and (3) petitioner would secure the necessary approvals while respondents would handle the documentation. The first condition for an option period of 30 days sufficiently shows that a sale was never perfected. As petitioner correctly points out, acceptance of this condition did not give rise to a perfected sale but merely to an option or an accepted unilateral promise on the part of respondents to buy the subject properties within 30 days from the date of acceptance of the offer. Such option giving respondents the exclusive right to buy the properties within the period agreed upon is SEPARATE AND DISTINCT from the contract of sale which the parties may enter. All that respondents had was just the OPTION to buy the properties which privilege was not, however, exercised by them because there was a failure to agree on the terms of payment. No contract of sale may thus be enforced by respondents. Furthermore, even the option secured by respondents from petitioner was fatally defective. Under the second paragraph of Art. 1479, an accepted unilateral promise to buy or sell a determinate thing for a price certain is binding upon the promisor only if the promise is supported by a distinct consideration. Consideration in an option contract may be anything of value, unlike in sale where it must be the price certain in money or its equivalent. There is no showing here of any consideration for the option. Lacking any proof of such consideration, the option is UNENFORCEABLE. Equally compelling as proof of the absence of a perfected sale is the second condition that, during the option period, the parties would negotiate the terms and conditions of the purchase. The stages of a contract of sale are as follows: (1) negotiation, covering the period from the time the prospective contracting parties indicate interest in the contract to the time the contract is perfected; (2) perfection, which takes place upon the concurrence of the essential elements of the sale which are the meeting of the minds of the parties as to the object of the contract and upon the price; and (3) consummation, which begins when the

parties perform their respective undertakings under the contract of sale, culminating in the extinguishment thereof. In the present case, the parties never got past the negotiation stage. The alleged "indubitable evidence" of a perfected sale cited by the appellate court was nothing more than offers and counter-offers which did not amount to any final arrangement containing the essential elements of a contract of sale. While the parties already agreed on the real properties which were the objects of the sale and on the purchase price, the fact remains that they failed to arrive at mutually acceptable terms of payment, despite the 45-day extension given by petitioner. The appellate court opined that the failure to agree on the terms of payment was no bar to the perfection of the sale because Art. 1475 only requires agreement by the parties as to the price of the object. This is error. In Navarro v. Sugar Producers Cooperative Marketing Association, Inc. , we laid down the rule that the MANNER OF PAYMENT of the purchase price is an essential element before a valid and binding contract of sale can exist. Although the Civil Code does not expressly state that the minds of the parties must also meet on the terms or manner of payment of the price, the same is needed, otherwise there is no sale. As held in Toyota Shaw, Inc. v. Court of Appeals, agreement on 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. In Velasco v. Court of Appeals, the parties to a proposed sale had already agreed on the object of sale and on the purchase price. By th e buyers own admission, however, the parties still had to agree on how and when the downpayment and the installments were to be paid. It was held: . . . Such being the situation, it can not, therefore, be said that a definite and firm sales agreement between the parties had been perfected over the lot in question. Indeed, this Court has already ruled before that a definite agreement on the manner of payment of the purchase price is an essential element in the formation of a binding and enforceable contract of sale. The fact, therefore, that the petitioners delivered to the respondent the sum of P10,000 as part of the down-payment that they had to pay cannot be considered as sufficient proof of the perfection of any purchase and sale agreement between the parties herein under Art. 1482 of the new Civil Code, as the petitioners themselves admit that some essential matter - the terms of the payment - still had to be mutually covenanted. Thus, it is not the giving of earnest money, but the proof of the concurrence of all the essential elements of the contract of sale which establishes the existence of a perfected sale. In the absence of a perfected contract of sale, it is immaterial whether Isidro A. Sobrecarey had the authority to enter into a contract of sale in behalf of petitioner. This issue, therefore, needs no further discussion. WHEREFORE, the decision of the Court of Appeals is REVERSED and respondents c omplaint is DISMISSED. Limson v. CA What is the bone of contention in this case?

Was there a perfect contract to sell between Limson and the spouses or just a a perfect option contract as argued by SUNVAR and Cuenca and the respondent spouses? Facts: Issue: Was there a perfected contract to sell? Held: the agreement between the parties was a contract of option and not a contract to sell. An option, as used in the law of sales, is a continuing offer 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 time certain, 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. It is also sometimes called an "unaccepted offer." 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 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. Until acceptance, it is not, properly speaking, a contract, and does not vest, transfer, or agree to transfer, any title to, or any interest or right in the subject matter, but is merely a contract by which the owner of the property gives the optionee the right or privilege of accepting the offer and buying the property on certain terms. On the other hand, a contract, like a CONTRACT TO SELL, involves the meeting of minds between two persons whereby one binds himself, with respect to the other, to give something or to render some service. Contracts, in general, are perfected by mere consent, which 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. The Receipt that contains the contract between petitioner and respondent spouses provides Received from Lourdes Limson the sum of Twenty Thousand Pesos (P20,000.00) under Check No. 22391 dated July 31, 1978 as earnest money with option to purchase a parcel of land owned by Lorenzo de Vera located at Barrio San Dionisio, Municipality of Paraaque, Province of Rizal with an area of forty eight thousand two hundred sixty square meters more or less at the price of Thirty Four Pesos ( P34.00)[16] cash subject to the condition and stipulation that have been agreed upon by the buyer and me which will form part of the receipt. Should the transaction of the property not materialize not on the fault of the buyer, I obligate myself to return the full amount of P20,000.00 earnest money with option to buy or forfeit on the fault of the buyer. I guarantee to notify the buyer Lourdes Limson or her representative and get her conformity should I sell or encumber this property to a third person. This option to buy is good within ten (10) days until the absolute deed of sale is finally signed by the parties or the failure of the buyer to comply with the terms of the option to buy as herein attached.

In the interpretation of contracts, the ascertainment of the intention of the contracting parties is to be discharged by looking to the words they used to project that intention in their contract, all the words, not just a particular word or two, and words in context, not words standing alone. [17] The above Receipt readily shows that respondent spouses and petitioner only entered into a contract of option; a contract by which respondent spouses agreed with petitioner that the latter shall have the right to buy the formers property at a fixed price of P34.00 per square meter within ten (10) days from 31 July 1978. Respondent spouses DID NOT SELL THEIR PROPERTY; they DID NOT ALSO AGREE TO SELL IT; but they sold something, i.e., the privilege to buy at the election or option of petitioner. The agreement imposed no binding obligation on petitioner, aside from the consideration for the offer. The consideration of P20,000.00 paid by petitioner to respondent spouses was referred to as "earnest money." However, a careful examination of the words used indicates that the money is not earnest money but option money. "Earnest money" and "option money" are not the same but distinguished thus: (a) earnest money is part of the purchase price, while option money is the money given as a distinct consideration for an option contract; (b) earnest money is given only where there is already a sale, while option money applies to a sale not yet perfected; and, (c) when earnest money is given, the buyer is bound to pay the balance, while when the would-be buyer gives option money, he is not required to buy,[18] but may even forfeit it depending on the terms of the option. There is nothing in the Receipt which indicates that the P20,000.00 was part of the purchase price. Moreover, it was not shown that there was a perfected sale between the parties where earnest money was given. Finally, when petitioner gave the "earnest money," the Receipt did not reveal that she was bound to pay the balance of the purchase price. In fact, she could even forfeit the money given if the terms of the option were not met. Thus, the P20,000.00 could only be money given as consideration for the option contract. That the contract between the parties is one of option is buttressed by the provision therein that should the transaction of the property not materialize without fault of petitioner as buyer, respondent Lorenzo de Vera obligates himself to return the full amount of P20,000.00 "earnest money" with option to buy or forfeit the same on the fault of petitioner. It is further bolstered by the provision therein that guarantees petitioner that she or her representative would be notified in case the subject property was sold or encumbered to a third person. Finally, the Receipt provided for a period within which the option to buy was to be exercised, i.e., "within ten (10) days" from 31 July 1978. Doubtless, the agreement between respondent spouses and petitioner was an "option contract" or what is sometimes called an "unaccepted offer." During the option period the agreement was not converted into a bilateral promise to sell and to buy where both respondent spouses and petitioner were then reciprocally bound to comply with their respective undertakings as petitioner did not timely, affirmatively and clearly accept the offer of respondent spouses. The rule is that except where a formal acceptance is not required, although the acceptance must be affirmatively and clearly made and evidenced by some acts or conduct communicated to the offeror, it may be made either in a formal or an informal manner, and may be shown by acts, conduct or words by the accepting party that clearly manifest a present intention or determination to accept the offer to buy or sell. But there is nothing in the acts, conduct or words of petitioner that clearly manifest a present intention or determination to accept the offer to buy the property of respondent spouses within the 10-day option period. The only occasion within the option period when petitioner could have demonstrated her acceptance was on 5 August 1978 when, according to her, she agreed to meet respondent spouses and the Ramoses at the Office of the Register of

Deeds of Makati. Petitioners agreement to meet with respondent spouses presupposes an invitation from the latter, which only emphasizes their persistence in offering the property to the former. But whether that showed acceptance by petitioner of the offer is hazy and dubious. On or before 10 August 1978, the last day of the option period, no affirmative or clear manifestation was made by petitioner to accept the offer. Certainly, there was NO CONCURRENCE of private respondent spouses offer and petitioners acceptance thereof within the option period. Consequently, there was no perfected contract to sell between the parties. On 11 August 1978 the option period expired and the exclusive right of petitioner to buy the property of respondent spouses ceased. The subsequent meetings and negotiations, specifically on 11 and 23 August 1978, between the parties only showed the desire of respondent spouses to sell their property to petitioner. Also, on 14 September 1978 when respondent spouses sent a telegram to petitioner demanding full payment of the purchase price on even date simply demonstrated an inclination to give her preference to buy subject property. Collectively, these instances did not indicate that petitioner still had the exclusive right to purchase subject property. Verily, the commencement of negotiations between respondent spouses and respondent SUNVAR clearly manifested that their offer to sell subject property to petitioner was no longer exclusive to her. We cannot subscribe to the argument of petitioner that respondent spouses extended the option period when they extended the authority of their agent until 31 August 1978. The extension of the contract of agency could not operate to extend the option period between the parties in the instant case. The extension must not be implied but categorical and must show the clear intention of the parties. As to whether respondent spouses were at fault for the non-consummation of their contract with petitioner, we agree with the appellate court that they were not to be blamed. First, within the option period, or on 4 August 1978, it was respondent spouses and not petitioner who initiated the meeting at the Office of the Register of Deeds of Makati. Second, that the Ramoses failed to appear on 4 August 1978 was beyond the control of respondent spouses. Third, the succeeding meetings that transpired to consummate the contract were all beyond the option period and, as declared by the Court of Appeals, the question of who was at fault was already immaterial. Fourth, even assuming that the meetings were within the option period, the presence of petitioner was not enough as she was not even prepared to pay the purchase price in cash as agreed upon. Finally, even without the presence of the Ramoses, petitioner could have easily made the necessary payment in cash as the price of the property was already set at P34.00 per square meter and payment of the mortgage could very well be left to respondent spouses. Petitioner further claims that when respondent spouses sent her a telegram demanding full payment of the purchase price on 14 September 1978 it was an acknowledgment of their contract to sell, thus denying them the right to claim otherwise. We do not agree. As explained above, there was no contract to sell between petitioner and respondent spouses to speak of. Verily, the telegram could not operate to estop them from claiming that there was such contract between them and petitioner. Neither could it mean that respondent spouses extended the option period. The telegram only showed that respondent spouses were willing to give petitioner a chance to buy subject property even if it was no longer exclusive. The option period having expired and acceptance was not effectively made by petitioner, the purchase of subject property by respondent SUNVAR was perfectly valid and entered into in good

faith. Petitioner claims that in August 1978 Hermigildo Sanchez, the son of respondent spouses agent, Marcosa Sanchez, informed Marixi Prieto, a member of the Board of Directors of respondent SUNVAR, that the property was already sold to petitioner. Also, petitioner maintains that on 5 September 1978 respondent Cuenca met with her and offered to buy the property from her at P45.00 per square meter. Petitioner contends that these incidents, including the annotation of her Adverse Claim on the title of subject property on 15 September 1978 show that respondent SUNVAR was aware of the perfected sale between her and respondent spouses, thus making respondent SUNVAR a buyer in bad faith. Petitioner is not correct. The dates mentioned, at least 5 and 15 September 1978, are immaterial as they were beyond the option period given to petitioner. On the other hand, the referral to sometime in August 1978 in the testimony of Hermigildo Sanchez as emphasized by petitioner in her petition is very vague. It could be within or beyond the option period. Clearly then, even assuming that the meeting with Marixi Prieto actually transpired, it could not necessarily mean that she knew of the agreement between petitioner and respondent spouses for the purchase of subject property as the meeting could have occurred beyond the option period. In which case, no bad faith could be attributed to respondent SUNVAR. If, on the other hand, the meeting was within the option period, petitioner was remiss in her duty to prove so. Necessarily, we are left with the conclusion that respondent SUNVAR bought subject property from respondent spouses in good faith, for value and without knowledge of any flaw or defect in its title.