Republic of the Philippines

(MCA-MBF), Amable R. Aguiluz V (Aguiluz V), Amable C. Aguiluz IX, Cielo C.

Supreme Court
Manila

Aguiluz, Alberto L. Buenviaje, Vicente Acsay and MCA Holdings and

Management Corporation (MCA Holdings). The complaint alleged that
sometime in the second half of 1993, respondent MBf Card and petitioner

FIRST DIVISION

MCA Holdings, the latter principally acting through petitioner Aguiluz V,

MCA-MBF
COUNTDOWN
CARDS
PHILIPPINES INC., AMABLE R. AGUILUZ V,
AMABLE C. AGUILUZ IX, CIELO C.
AGUILUZ,
ALBERTO
L.
BUENVIAJE,
VICENTE ACSAY and MCA HOLDINGS
AND MANAGEMENT CORPORATION,
Petitioners,
- versus -

G.R. No. 173586

entered into negotiations for the execution of a Joint Venture Agreement

Present:

wherein: (1) they would establish a Joint Venture Company (JVC) in the

CORONA, C.J.,
Chairperson,
LEONARDO-DE CASTRO,
BERSAMIN,
VILLARAMA, JR., and
PERLAS-BERNABE,* JJ.

Philippines with MBf Card owning about 40% and MCA Holdings owning

MBf CARD INTERNATIONAL LIMITED and

MBf DISCOUNT CARD LIMITED,
Respondents.

60% of the capital stock thereof, and (2) said JVC would execute a
Countdown Country License Agreement with respondent MBf Discount
Card, under which the JVC would conduct the business of discount cards in
the Philippines under the Countdown mark, and use the distinctive

Promulgated:

business format and method for the operation of the Countdown Discount
Card.[3]

March 14, 2012

x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x
RESOLUTION
LEONARDO-DE CASTRO, J.:

The Complaint further alleged that even before respondent MBf

Card and petitioner MCA Holdings could agree on drafts of the Joint Venture
and Licensing Agreement, and pending negotiations thereon, petitioner
Aguiluz V, on January 3, 1994, wrote respondent MBf Card that he had
already incorporated on October 18, 1993, a company which would later be

This is a Petition for Review on Certiorari assailing the Resolutions

of the Court of Appeals in CA-G.R. CV No. 84370 dated March 20,
2006[1] and July 6, 2006.[2]

converted into the proposed JVC upon the execution and approval of the
pertinent Agreements. The company incorporated by Aguiluz V with the
Securities and Exchange Commission (SEC) was stated in the letter as
MBF-MCA Discount Card Corp. Philippines, but is actually named MCA-

Herein respondents MBf Card International Limited (MBf Card) and

MBf Discount Card Limited (MBf Discount Card), both foreign corporations
not doing business in the Philippines, filed a complaint for Recovery of
Money, Unfair Competition and Damages, with Application for Preliminary
Injunction against herein petitioners MCA-MBF Countdown Cards Phils., Inc.

MBF Countdown Cards Philippines, Inc.,i.e., petitioner MCA-MBF. Acceding

to a request in the same letter, respondent MBf Card remitted on January
21, 1994 the amount of US$74,074.04 to Account No. 838-06 (Metrobank,
Quezon Avenue Branch), which, as it turned out, belongs to petitioner MCAMBF. The understanding was that such amount was to be applied as MBf
Cards payment of its 40% shareholding in the JVC upon the execution and

approval of the Joint Venture and Licensing Agreements. [4] However,

without the prior authority of the respondents, and while the parties were
still discussing and negotiating on the terms and conditions of the Joint
Venture and Licensing Agreements, petitioners, through the intended JVC
(petitioner MCA-MBF), began to promote, market and sell the Countdown
Discount Cards to the public, using the Countdown name, logo and
trademark.[5]

The Complaint then alleged the facts that led up to respondents

decision to end its negotiations with petitioners:
8. Accordingly, [respondent] MBf card advised
[petitioners] not to promote, market and sell Countdown
Discount Cards to the public until the Joint Venture
Agreement and the License Agreement (for the use of the
tradename Countdown and the format and method for
the operation of the Countdown Discount Card) had been
signed and, thereafter, approved by the appropriate
government agency.
9. In particular, on March 8 and 17, 1994,
[respondent] MBf Card wrote [petitioner] MCA-MBFs Ruby
Pearl M. Shan to freeze all selling activities on the
Countdown Discount Card until after the pertinent
Agreements had been signed and approved. x x x.
10. In reply to [respondent] MBf Cards freeze
advice, [petitioner] Amable R. Aguiluz V promised that they
would comply therewith. This was confirmed by Ruby Pearl
M. Shan, who wrote [respondent] MBf Card on March 19,
1994 to confirm that selling activities of Discount Card
have been ordered [frozen] temporarily, effective
10th March 1994. x x x.
11. On March 30 and April 3, 1994, before any of
the Joint Venture and License Agreements had been signed
and approved, and with malice, bad faith and in breach of
[petitioners] promise to [respondent] MBf Card, the
[petitioners] illegally caused the publication of two
advertisements in the Manila Bulletin, promoting,
marketing and selling the Countdown Discount Card. x x x.

11.1 In the said ads, [petitioners]

fraudulently misrepresented to the public
that they have already been authorized by
[respondents] to promote, market and sell
the Countdown Discount Card and that the
discount cards they offer are valid and
enforceable, and as such would be honored
in various establishments in the Philippines
and elsewhere.
11.2
Moreover,
in
the
said
advertisements, [petitioners] offered to the
public, aside from the regular features of
the Countdown Discount Card, a purchase
protection plan and even personal accident
insurance. This caused great concern for
[respondents] as, to their knowledge, these
have not been firmed up with any
insurance company.
12. What is worse, in his column appearing in the
April 15, 1994 issue of the Philippine Star[,] [petitioner]
Amable R. Aguiluz V misrepresented to the public that he,
representing the MCA Holdings had actually signed a joint
venture agreement with Mr. Gordon Yuen, Chairman, of the
Malaysia Borneo Finance. No such joint venture
agreement has to date been signed and Mr. Gordon Yuen is
president and chief executive officer of [respondent] MBf
Card and not the chairman of Malaysia Borneo Finance.
13. On April 20, 1994, [respondent] MBf Card
wrote [petitioners], advising them that it had decided not
to proceed with the joint venture project on the Countdown
Discount Card, and demanding that [petitioners]
immediately:
(a) refund to [respondent] MBf Card
the US$74,074.04 it had remitted;
(b) cease and desist from using the
MBf and Countdown names, logos and
trademarks; and
(c) delete MBf and Countdown
from MCA-MBFs corporate name as
registered
with
the
Securities
and
Exchange Commission.
xxxx

14. To date, to the damage and prejudice of

[respondents], the [petitioners] continue to promote,
market and sell the Countdown Discount Card, thereby
misrepresenting to the public that they have been
authorized to do so, and that the Countdown Discount Card
they
offer
are
valid
and
binding
against
[respondents]. These acts of [petitioners], including their
continued use of Countdown and MBf in the corporate
name and business of MCA-MBF, are in violation of
[respondents] lawful and exclusive proprietary rights to
such names. Furthermore, they are in fraud of the public
and constitute unfair competition which should be enjoined
and for which [petitioners] are liable to [respondents] in
damages.[6]

undertook the task of marketing the MBf Discount Card in the Philippines;
(2) MBf Card was solely responsible for securing the necessary selling
paraphernalia from the main Licensor, Countdown of London, England; and
(3) Gordon Yuen and T.K. Wong were elected as members of the Board of
Directors of the Joint Venture Corporation. Petitioner MCA-MBF asserted
that MBf Card did not suffer any damage from the introduction and
marketing of the MBf Countdown Discount Card in the Philippines since all
acts pertaining to the business were jointly undertaken by the parties. In
its Counterclaim, petitioner MCA-MBF prayed for damages in the amount

Respondents prayed before the trial court that petitioners be

enjoined from promoting, marketing and selling Countdown Discount Cards
and

from

using

the

MBf

and

Countdown

names,

logos

and

ofP22,500,000.00, and an order directing respondents to execute, sign and

submit the form of the Joint Venture Agreement as allegedly approved and
accepted by petitioners on March 16, 1994.

trademarks. They also prayed that petitioners be ordered to refund to

On August 10, 1994, the trial court issued the Writ of Preliminary

respondent MBf Card the sum of US$74,074.04, and to pay P2,000,000.00

as moral damages, and P500,000.00 as attorneys fees and expenses of
litigation.

On April 22, 1994, the trial court issued a temporary restraining

order enjoining petitioners, particularly MCA-MBF, to refrain and desist from
promoting, marketing and selling Countdown Discount Cards and from
using the MBf and Countdown names, logos and trademarks.

After hearings on April 28 and 29, and March 4, 1994, the trial
court, in an Order dated May 6, 1994, granted respondents prayer for a
preliminary injunction.

Injunction on account of the posting by the respondents of the required

bond.

On October 18, 1996, petitioners Vicente R. Acsay, Amable R.

Aguiluz V, Amable C. Aguiluz IX, Cielo C. Aguiluz, Alberto Buenviaje and
MCA Holdings filed their Answer, alleging practically the same defenses as
those raised by petitioner MCA-MBF.

On June 8, 1998, the law firm of Castillo Laman Tan Pantaleon &
San Jose (CLTPSJ) filed a Motion to Record Attorneys Lien. However, while
CLTPSJ did not withdraw its appearance in the case, the law firm of
Poblador Bautista & Reyes (PBR) entered its appearance in October 1994

On August 8, 1994, petitioner MCA-MBF filed its Answer with

Counterclaim, claiming that the contract between the parties had already
been perfected. The parties allegedly agreed that (1) they jointly

and has since then been the firm representing respondents. On August 27,
1998, the trial court noted the prayer to record attorneys lien and held
that the same shall be considered in the adjudication of the case.

On March 8, 2000, the trial court rendered its Decision in favor of

respondents. The dispositive portion of the Decision reads:

the case suddenly resigned from the law firm in October 2005, shortly after
they received the notice to file the Brief. The other counsels allegedly had
been handling voluminous cases and attending to numerous court

WHEREFORE, premises considered, judgment is

hereby rendered permanently enjoining the [petitioners]
from promoting, marketing and selling Countdown Discount
Cards, and from using MBf and Countdown names,
logos and trademarks; ordering [petitioners] to jointly and
severally refund to [respondent] MBf Card the sum of
US$74,074.04 or its equivalent in Philippine currency, with
legal interest thereon from date of demand until full
payment; and ordering [petitioners] to jointly and severally
pay [respondents] the amount of TWO HUNDRED
THOUSAND (P200,000.00) PESOS as attorneys fees and
expenses of litigation.
As regards CLTPSJs claim, [respondents] are
ordered to pay the amount of FIFTY THOUSAND
(P50,000.00) PESOS, as attorneys fees.[7]

On August 15, 2003, petitioners filed a Notice of Appeal. On

September 28, 2005, petitioners received an Order from the Court of

appearances and out of town hearings.

On July 6, 2006, the Court of Appeals issued the second assailed

Resolution denying petitioners Motion for Reconsideration. According to
the Court of Appeals, the reason given by the counsels is not substantial or
meritorious to merit the relaxation of the rules. The Court of Appeals also
noted that there was no action on the part of the petitioners from the time
they received the notice to file their Brief on September 28, 2005 until the
Resolution of the appellate court on March 20, 2006.[9]

Hence, the present Petition for Review, wherein petitioners rely on

the following grounds:

Appeals requiring them to file their Appellants Brief within 45 days from

A.

receipt of said notice.

The Court of Appeals grievously committed a reversible

error in dismissing the case based on procedural
technicalities without considering at all whether or not
petitioners appeal deserved full consideration on the
merits.

Petitioners failed to file the Brief within the period allotted by the
Court of Appeals. Thus, on March 20, 2006, the Court of Appeals issued
the first assailed Resolution dismissing petitioners appeal on the ground of

B.

abandonment of the same:

In the interest of substantial justice, petitioners appeal

should be reinstated considering that the errors of the trial
court in rendering its appealed decision are evident on the
face of the said decision and more so after an examination
of the evidence on record.

For failure of defendants-appellants to file the

required brief within the prescribed period as per report of
the Judicial Records Division dated March 1, 2006, their
appeal is considered ABANDONED and consequently,
ordered DISMISSED pursuant to Section 1(e), Rule 50 of the
1997 Rules of Civil Procedure.[8]

Petitioners filed a Motion for Reconsideration with Motion to Admit

Appellants Brief, wherein they claimed that the lawyer who was handling

1.

The Trial Court erred in perfunctorily disregarding

corporate
fiction
and
adjudging
individual
petitioners personally liable in its Decision.

2.

The Trial Court erred when it disregarded basic

principles of contract law when it ruled that there
was no joint venture agreement yet between
respondent MBf Card and petitioner MCA because

they have not yet executed

formalizing said contract.
3.

the

documents

full consideration on the merits, and this can only be

determined if a preliminary consideration of the merits is
made.[13] (Emphasis added.)

The Trial Court erred in finding that petitioners

have not proven Tan Sris authority to represent
and bind the respondents to the joint venture
agreement.

4.

This contention, which in effect advances that the appellate court

does not even deserve a valid explanation for the appellants failure to its

The Trial Courts award of attorneys fees is

devoid of legal basis.[10]

Brief, cannot be countenanced. Liberality is given to litigants who are

Petitioners pray before this Court that their appeal before the Court
of Appeals, CA-G.R. CV No. 84370, be reinstated. [11]

worthy of the same, and not to ones who flout the rules, give explanations
to the effect that the counsels are busy with other things, and expect the
court to disregard the procedural lapses on the mere self-serving claim that
their case is meritorious.

We resolve to deny the present petition.

Confronted with the necessity to justify their failure to file their

Appellants Brief before the Court of Appeals, all that the petitioners could

In Rural Bankers Association of the Philippines v. Tanghal-Salvaa,

[14]

this Court held:

offer was that the lawyer who was handling the case resigned from the law

Obedience to the requirements of procedural rules

is needed if the parties are to expect fair results therefrom,
and utter disregard of the rules cannot justly be
rationalized by harking on the policy of liberal
construction. Procedural rules are tools designed to
facilitate the adjudication of cases. Courts and litigants
alike are thus enjoined to abide strictly by the rules. And
while the Court, in some instances, allows a relaxation in
the application of the rules, this was never intended to
forge a bastion for erring litigants to violate the rules with
impunity. The liberality in the interpretation and
application of the rules applies only in proper cases and
under justifiable causes and circumstances. While it is true
that litigation is not a game of technicalities, it is equally
true that every case must be prosecuted in accordance
with the prescribed procedure to insure an orderly and
speedy administration of justice.[15]

firm shortly after they received the notice to file the Brief, while other
counsels

have

been

handling

voluminous

cases,

numerous

court

appearances, and out of town hearings. Petitioners did not allege that the
other lawyers of the firm were not informed of the appellate courts notice
to

file

the

Brief. Petitioners

did

not

even

ask

the

court

for

an

extension. Instead, petitioners claim that the rules concerning the filing of
the

Appellants

Brief

are

mere

insignificant

and

harmless

technicalities[12] and argue that because of the alleged merits of their

case, they do not have to prove that their failure to file the said brief was
excusable:
In light of the merits of petitioners appeal as will be further
discussed below, and in accordance with the jurisprudence
discouraging dismissal of appeals grounded on pure
technicalities,whether
or
not
the
inadvertence
resulting in the late filing of the appellants brief is
excusable is already beside the point. The focus
should have been on whether or not the appeal deserved

Furthermore, petitioners characterization of the rules concerning

the

filing

of

the

Appellants

Brief

as

insignificant

and

harmless

technicalities is downright improper as it is contrary to established

jurisprudence. In Casim v. Flordeliza,[16] this Court particularly held that:

It would be incorrect to perceive the procedural

requirements of the rules on appeal as being merely
harmless and trivial technicalities that can just be
discarded. As this Court so explained in Del Rosario vs.
Court of Appeals

been entered into, provided all the essential requisites for their validity is
present.

It is clear from a reading of the RTC Decision that the above

Petitioners' plea for liberality in

applying
these
rules
in
preparing
Appellants' Brief does not deserve any
sympathy.
Long
ingrained
in
our
jurisprudence is the rule that the right to
appeal is a statutory right and a party who
seeks to avail of the right must faithfully
comply with the rules. In People vs.
Marong, we held that deviations from the
rules cannot be tolerated. The rationale for
this strict attitude is not difficult to
appreciate. These rules are designed to
facilitate
the
orderly
disposition
of
appealed cases. In an age where courts are
bedeviled by clogged dockets, these rules
need to be followed by appellants with
greater fidelity. Their observance cannot be
left to the whims and caprices of
appellants.[17]

principles were not disregarded. On the contrary, the RTC went beyond the
fact that the Joint Venture and Licensing Agreement has yet to be signed,
and carefully weighed the evidence in order to determine whether or not
there was a perfected oral joint venture agreement:

1.

The trial court had to look into whether Tan Sri had the
authority to bind respondents in the alleged oral agreement. In
this regard, the trial court found no evidence proving the
same. The RTC instead considered the admission of Aguiluz V
that he neither knew nor inquired whether Tan Sri was an
officer or director of the plaintiff corporations.[20]

2.
Petitioners claim that the trial court Decision was erroneous on its

Despite the absence of a written contract, the RTC discussed

whether

or

not

the

remittance

of

US$74,074.04

and

face and that even a cursory reading of the same would show prima

conveyance of trade secrets and advice should be considered

facie merit in the appeal is in itself a grave exaggeration. In alleging

partial execution of the Joint Venture Agreement. [21] However,

the prima facie merit of its appeal, petitioners rely on two main grounds:

the

(1) the RTC allegedly disregarded the basic principles of contract law when

respondents witness to be credible and believed that the

it ruled that the joint venture agreement had not yet been perfected; and

respondents were assured that the money will only be applied

(2) the RTC allegedly disregarded corporate fiction in adjudging individual

to its proposed 40% shareholding upon the execution and

petitioners personally liable to respondents.

approval
[22]

trial

court

of

apparently

the

Joint

found

Venture

the

testimony

Licensing

of

the

Agreements.

Furthermore, it appeared to the RTC that the advice and

The basic principles of contract law referred to by petitioners are

suggestions from respondents for the sale, promotion and

those enshrined in Article 1315 [18] of the Civil Code, which provides that

marketing of the discount cards are merely preparatory acts

contracts are perfected by mere consent, and in Article 1356,

and does not necessarily indicate the existence of a perfected

[19]

which

states that contracts shall be obligatory in whatever form they may have

contract.[23]

3.

It was shown that the RTC sought to determine the existence

respondents were assured that the money remitted by them will only be

of a Joint Venture and Licensing Agreement despite the

applied to its proposed 40% shareholding in the JVC upon the execution

absence of a written contract evidencing the same when it

and approval of the Joint Venture and Licensing Agreements. Therefore,

considered therefor the letter of witness Luis Pangulayan in

while the US$74,074.04 was remitted to the account of MCA-MBF as

behalf of petitioner Aguiluz V. The RTC quoted Pangulayans

requested by Aguiluz V, said money was, insofar as respondents are

April 14, 1994 letter wherein it was admitted that (a) the

concerned, with the persons they are negotiating with for the creation of

signing of the Joint Venture Agreement is required to finalize

the JVC. Consequently, respondents cannot be said to be suing the natural

the formation of the JVC since the provisions of the contract

persons among the petitioners as officers of the yet-to-be-created

shall be incorporated in the JVCs By-Laws; and (2) even the

JVC. They were instead held liable for the US$74,074.04 in their individual

formation of the JVC does not necessarily complete the process

capacities as the persons negotiating with respondents for the creation of

since a Licensing Agreement still needs to be executed

the JVC and, thus, there was no need to pierce the corporate fiction of

between the JVC and respondents.[24]

MCA-MBF.

In addition to the above, while we agree with petitioners that the

absence of a written Joint Venture and Licensing Agreement does not

IN VIEW OF THE FOREGOING, the instant Petition for Review

on Certiorari is hereby DISMISSED.

necessarily negate the perfection of a contract, we nevertheless find that

this very lack of a written contract constitutes convincing circumstantial
proof that said parties were indeed in the process of negotiating the
contracts terms. When there is as of yet no meeting of the minds as to
the subject matter or the cause or consideration of the contract being
negotiated, the same cannot be considered to have been perfected.

In ruling in favor of respondents, the RTC made a factual finding

that the Joint Venture and Licensing Agreement being negotiated between
petitioners and respondents was never perfected. Respondents are neither
incorporators nor stockholders of MCA-MBF, the company that was
supposedly intended to be converted into the Joint Venture Company. It
must be stressed that MCA-MBF has not yet been converted into the Joint
Venture Company as no shares of stock have been delivered to
respondents. As alleged by respondents and found by the RTC, the

SO ORDERED.

G.R. No. 154878

March 16, 2007

CAROLYN
M.
vs.
RICA MARIE S. THIO, Respondent.

GARCIA, Petitioner,

DECISION
CORONA, J.:
Assailed in this petition for review on certiorari 1 are the June 19, 2002
decision2 and August 20, 2002 resolution3of the Court of Appeals (CA) in
CA-G.R. CV No. 56577 which set aside the February 28, 1997 decision of
the Regional Trial Court (RTC) of Makati City, Branch 58.
Sometime in February 1995, respondent Rica Marie S. Thio received from
petitioner Carolyn M. Garcia a crossed check 4 dated February 24, 1995 in
the amount of US$100,000 payable to the order of a certain Marilou
Santiago.5 Thereafter, petitioner received from respondent every month
(specifically, on March 24, April 26, June 26 and July 26, all in 1995) the
amount of US$3,0006 and P76,5007 on July 26,8 August 26, September 26
and October 26, 1995.
In June 1995, respondent received from petitioner another crossed
check9 dated June 29, 1995 in the amount ofP500,000, also payable to the
order of Marilou Santiago.10 Consequently, petitioner received from
respondent the amount of P20,000 every month on August 5, September 5,
October 5 and November 5, 1995.11

loan was covered by the second check. For both loans, no promissory note
was executed since petitioner and respondent were close friends at the
time.15 Respondent paid the stipulated monthly interest for both loans but
on their maturity dates, she failed to pay the principal amounts despite
repeated demands.161awphi1.nt
Respondent denied that she contracted the two loans with petitioner and
countered that it was Marilou Santiago to whom petitioner lent the money.
She claimed she was merely asked by petitioner to give the crossed checks
to Santiago.17 She issued the checks for P76,000 and P20,000 not as
payment of interest but to accommodate petitioners request that
respondent use her own checks instead of Santiagos. 18
In a decision dated February 28, 1997, the RTC ruled in favor of
petitioner.19 It found that respondent borrowed from petitioner the amounts
of US$100,000 with monthly interest of 3% and P500,000 at a monthly
interest of 4%:20
WHEREFORE, finding preponderance of evidence to sustain the instant
complaint, judgment is hereby rendered in favor of [petitioner], sentencing
[respondent] to pay the former the amount of:
1. [US$100,000.00] or its peso equivalent with interest thereon at
3% per month from October 26, 1995 until fully paid;
2. P500,000.00 with interest thereon at 4% per month from
November 5, 1995 until fully paid.
3. P100,000.00 as and for attorneys fees; and

According to petitioner, respondent failed to pay the principal amounts of

the loans (US$100,000 and P500,000) when they fell due. Thus, on
February 22, 1996, petitioner filed a complaint for sum of money and
damages in the RTC of Makati City, Branch 58 against respondent, seeking
to collect the sums of US$100,000, with interest thereon at 3% a month
from October 26, 1995 and P500,000, with interest thereon at 4% a month
from November 5, 1995, plus attorneys fees and actual damages. 12
Petitioner alleged that on February 24, 1995, respondent borrowed from
her the amount of US$100,000 with interest thereon at the rate of 3% per
month, which loan would mature on October 26, 1995. 13 The amount of this
loan was covered by the first check. On June 29, 1995, respondent again
borrowed the amount of P500,000 at an agreed monthly interest of 4%, the
maturity date of which was on November 5, 1995. 14 The amount of this

4. P50,000.00 as and for actual damages.

For lack of merit, [respondents] counterclaim is perforce dismissed.
With costs against [respondent].
IT IS SO ORDERED.21
On appeal, the CA reversed the decision of the RTC and ruled that there
was no contract of loan between the parties:
A perusal of the record of the case shows that [petitioner] failed to
substantiate her claim that [respondent] indeed borrowed money from

her. There is nothing in the record that shows that [respondent]

received money from [petitioner]. What is evident is the fact that
[respondent] received a MetroBank [crossed] check dated February 24,
1995 in the sum of US$100,000.00, payable to the order of Marilou
Santiago and a CityTrust [crossed] check dated June 29, 1995 in the
amount of P500,000.00, again payable to the order of Marilou Santiago,
both of which were issued by [petitioner]. The checks received by
[respondent], being crossed, may not be encashed but only
deposited in the bank by the payee thereof, that is, by Marilou
Santiago herself.
It must be noted that crossing a check has the following effects: (a) the
check may not be encashed but only deposited in the bank; (b) the check
may be negotiated only onceto one who has an account with the bank;
(c) and the act of crossing the check serves as warning to the holder that
the check has been issued for a definite purpose so that he must inquire if
he has received the check pursuant to that purpose, otherwise, he is not a
holder in due course.
Consequently, the receipt of the [crossed] check by [respondent] is not the
issuance and delivery to the payee in contemplation of law since the latter
is not the person who could take the checks as a holder, i.e., as a payee or
indorsee thereof, with intent to transfer title thereto. Neither could she be
deemed as an agent of Marilou Santiago with respect to the checks
because she was merely facilitating the transactions between the former
and [petitioner].
With the foregoing circumstances, it may be fairly inferred that there were
really no contracts of loan that existed between the parties. x x x
(emphasis supplied)22
Hence this petition.23
As a rule, only questions of law may be raised in a petition for review on
certiorari under Rule 45 of the Rules of Court. However, this case falls
under one of the exceptions, i.e., when the factual findings of the CA
(which held that there were no contracts of loan between petitioner and
respondent) and the RTC (which held that there werecontracts of loan) are
contradictory.24
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. (Emphasis supplied)
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.27She 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.30 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.31 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.32
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%. 33 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.34 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. 35 She
claimed, however, that Santiago would replace the checks with cash. 36 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.37
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.38
Last, respondent inexplicably never presented Santiago as a witness to
corroborate her story.39 The presumption is that "evidence willfully
suppressed would be adverse if produced."40 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. 41
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.42 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. 43
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.
SO ORDERED.

SECOND DIVISION

THE FACTUAL ANTECEDENTS

HEIRS OF CAYETANO PANGAN and

CONSUELO PANGAN,*
Petitioners,
The spouses Pangan were the owners of the lot and two-door
-

versus

apartment

(subject

Sampaloc, Manila.

SPOUSES ROGELIO PERRERAS and

PRISCILLA PERRERAS,

[5]

properties)

located

at 1142

Casaas

St.,

On June 2, 1989, Consuelo agreed to sell to the

respondents the subject properties for the price of P540,000.00. On the

same day, Consuelo received P20,000.00 from the respondents as earnest

Respondents.

money, evidenced by a receipt (June 2, 1989 receipt)[6] 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 andP250,000.00 on June 15, 1989. Consuelo, however,
refused to accept the checks. She justified her refusal by saying that her
The heirs[1] of spouses Cayetano and Consuelo Pangan (petitioners-heirs)
seek the reversal of the Court of Appeals (CA) decision[2] of June 26, 2002,
as well its resolution of February 20, 2003, in CA-G.R. CV Case

No. 56590

through the present petition for review on certiorari.[3] The CA decision

affirmed the Regional Trial Courts (RTC) ruling[4] which granted the
complaint for specific performance filed by spouses Rogelio and Priscilla

children (the petitioners-heirs) 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 on September 5, 1989, docketed as
Civil Case No. 89-50258, before the RTC of Manila, Branch 28.

Perreras (respondents) against the petitioners-heirs, and dismissed the

complaint for consignation instituted by Consuelo Pangan (Consuelo)
against the respondents.

The respondents, who insisted on enforcing the agreement, in turn

instituted an action for specific performance against Consuelo before the
same court on September 26, 1989. This case was docketed as Civil Case

No. 89-50259. They sought to compel Consuelo and the petitioners-heirs

(who were subsequently impleaded as co-defendants) to execute a Deed of
Absolute Sale over the subject properties.

Consuelo and the petitioners-heirs appealed the RTC decision to the

CA claiming that the trial court erred in not finding that the agreement was
subject to a suspensive condition the consent of the petitioners-heirs to

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

the agreement. The CA, however, resolved to dismiss the appeal and,
therefore, affirmed the RTC decision. As the RTC did, the CA 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. It declared:

her willingness to return the P20,000.00 earnest money she received from
Nowhere in the agreement of the parties, as contained in
the June 2, 1989 receipt issued by [Consuelo] xxx,
indicates that [Consuelo] reserved titled on [sic] the
property, nor does it contain any provision subjecting the
sale to a positive suspensive condition.

the respondents.

The RTC ruled in the respondents favor; it upheld the existence of a

perfected contract of sale, at least insofar as the sale involved Consuelos
conjugal and hereditary shares in the subject properties. The trial court
found that Consuelos receipt of the P20,000.00 earnest money was an

Unconvinced by the correctness of both the RTC and the CA rulings,

eloquent manifestation of the perfection of the contract. Moreover,

the

nothing in the June 2, 1989 receipt showed that the agreement was

reversible errors committed by the appellate court.

petitioners-heirs

filed

the

present

appeal

by certiorari alleging

conditioned on the consent of the petitioners-heirs. Even so, the RTC

declared that the sale is valid and can be enforced against Consuelo; as a
co-owner, she had full-ownership of the part pertaining to her share which

THE PETITION

she can alienate, assign, or mortgage. The petitioners-heirs, however,

could not be compelled to transfer and deliver their shares in the subject
properties, as they were not parties to the agreement between Consuelo
and the respondents. Thus, the trial court ordered Consuelo to convey onehalf (representing Consuelos conjugal share) plus one-sixth (representing
Consuelos

hereditary

share)

of

the

subject

properties,

and

to

pay P10,000.00 as attorneys fees to the respondents. Corollarily, it

dismissed Consuelos consignation complaint.

The petitioners-heirs primarily contest the finding that there was a

perfected contract executed by the parties. They allege that other than
the finding that Consuelo receivedP20,000.00 from the respondents as
earnest money, no other evidence supported the conclusion that there was
a perfected contract between the parties; they insist that Consuelo
specifically informed the respondents that the sale still required the

petitioners-heirs consent as co-owners. The refusal of the petitionersheirs to sell the subject properties purportedly amounted to the absence of

1.

Was there a perfected contract between the parties?

2.

What is the nature of the contract between them? and

3.

What is the effect of the respondents belated payment on

the requisite element of consent.

Even assuming that the agreement amounted to a perfected
contract, the petitioners-heirs posed the question of the agreements

their contract?

proper characterization whether it is acontract of sale or a contract to

sell. The petitioners-heirs posit that the agreement involves a 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 nonfulfillment of a positive suspensive condition that prevented the contract

THE COURTS RULING

from acquiring obligatory force. In support of this contention, the

petitioners-heirs cite the Courts ruling in the case of Adelfa Rivera, et al. v.
Fidela del Rosario, et al.: [7]

In a contract of sale, the title to the property

passes to the vendee upon the delivery of the thing sold;
while in a contract to sell, ownership is, by agreement,
reserved in the vendor and is not to pass to the vendee
until full payment of the purchase price. 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.

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

parties;

requisites

concur:

(1)

consent

of

the

contracting

(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
[Rivera], however, failed to complete payment of
the second installment. The non-fulfillment of the condition
rendered the contract to sell ineffective and without force
and effect. [Emphasis in the original.]

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

From these contentions, we simplify the basic issues for resolution to

three questions:

invalidate
Code

[8]

the

sale

or

render

it

void. Article

493

of

the

Civil

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

arrive at a definite agreement as to its terms that is, a situation where

that share, independently of the other co-owners. Thus, when Consuelo

the contract has not yet been perfected.[10] These situations do not obtain

agreed to sell to the respondents the subject properties, what she in fact

in the present case, as neither of the parties claimed that the P20,000.00

sold was her undivided interest that, as quantified by the RTC, consisted of

was given merely as guarantee by the respondents, as vendees, that they

one-half interest, representing her conjugal share, and one-sixth interest,

would not back out from the sale. As we have pointed out, the terms of

representing her hereditary share.

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

The petitioners-heirs nevertheless argue that Consuelos consent

was predicated on their consent to the sale, and that their disapproval

prior to the payment of the second installment, the stipulation does not
affect the perfection of the contract, but only its execution.

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

In sum, the case contains no element, factual or legal, that negates

the existence of a perfected contract between the parties.

terms of the June 8, 1989 receipt [9] 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 ofP20,000.00, an earnest money by the contracting

The characterization of
the contract can be
considered irrelevant in
this case in light of
Article 1592 and the
Maceda Law, and the
petitioners-heirs
payment

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

The petitioners-heirs posit that the proper characterization of the

proof of the perfection of the contract. Although the presumption is

contract entered into by the parties is significant in order to determine the

not conclusive, as the parties may treat the earnest money differently,

effect of the respondents breach of the contract (which purportedly

there is nothing alleged in the present case that would give rise to a

consisted of a one-day delay in the payment of part of the purchase price)

contrary presumption. In cases where the Court reached a conclusion

and the remedies to which they, as the non-defaulting party, are entitled.

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

The question of characterization of the contract involved here would

Points of law, theories, issues and arguments not brought to the

necessarily call for a thorough analysis of the parties agreement as

attention of the lower court need not be, and ordinarily will not be,

embodied in the June 2, 1989receipt, their contemporaneous acts, and the

considered by the reviewing court, as they cannot be raised for the first

circumstances

time at the appellate review stage. Basic considerations of fairness and

surrounding

the

contracts

perfection

and

execution. Unfortunately, the lower courts factual findings provide

due process require this rule.[12]

insufficient detail for the purpose. A stipulation reserving ownership

in the vendor until full payment of the price is, under case law, typical in a
contract to sell.[11] In this case, the vendor made no reservation on the

At any rate, we do not find the question of characterization

ownership of the subject properties. From this perspective, the parties

significant to fully pass upon the question of default due to the

agreement may be considered a contract of sale. On the other hand,

respondents breach; ultimately, the breach was cured and the contract

jurisprudence has similarly established that the need to execute a deed of

revived by the respondents payment a day after the due date.

absolute sale upon completion of payment of the price generally indicates

that it is a contract to sell, as it implies the reservation of title in the
vendor until the vendee has completed the payment of the price. When

In cases of breach due to nonpayment, the vendor may

the respondents instituted the action for specific performance before the

avail of the remedy of rescission in a contract of sale. Nevertheless,

RTC, they prayed that Consuelo be ordered to execute a Deed of Absolute

the defaulting vendee may defeat the vendors right to rescind the

Sale; this act may be taken to conclude that the parties only entered into

contract of sale if he pays the amount due before he receives a demand for

acontract to sell.

rescission, either judicially or by a notarial act, from the vendor. This right
is provided under Article 1592 of the Civil Code:

Admittedly, the given facts, as found by the lower courts, and in

the absence of additional details, can be interpreted to support two
conflicting conclusions. The failure of the lower courts to pry into these
matters may understandably be explained by the issues raised before
them, which did not require the additional details. Thus, they found the
question of the contracts characterization immaterial in their discussion
of the facts and the law of the case. Besides, the petitioners-heirs raised

Article 1592. In the sale of immovable property,

even though it may have been stipulated that upon failure
to pay the price at the time agreed upon the rescission of
the contract shall of right take place, the vendee may
pay, even after the expiration of the period, as long
as no demand for rescission of the contract has
been made upon him either judicially or by a
notarial act. After the demand, the court may not grant
him a new term. [Emphasis supplied.]

the question of the contracts characterization and the effect of the

breach for the first time through the present Rule 45 petition.
Nonpayment of the purchase price in contracts to sell,
however, does not constitute a breach; rather, nonpayment is a condition

condominium apartments but excluding industrial lots,

commercial buildings and sales to tenants under Republic
Act Numbered Thirty-eight hundred forty-four as amended
by Republic Act Numbered Sixty-three hundred eighty-nine,
where the buyer has paid at least two years of
installments, the buyer is entitled to the following rights in
case he defaults in the payment of succeeding
installments:

that prevents the obligation from acquiring obligatory force and results in
its cancellation. We stated in Ong v. CA[13] that:

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
obligatory force. The non-fulfillment of the condition of
full payment rendered the contract to sell ineffective and
without force and effect. [Emphasis supplied.]

xxxx

As in the rescission of a contract of sale for nonpayment of the

price, the defaulting vendee in a contract to sell may defeat the vendors
right to cancel by invoking the rights granted to him under Republic Act No.
6552 or the Realty Installment Buyer Protection Act (also known as

Section 4. In case where less than two years

of installments were paid, the seller shall give the
buyer a grace period of not less than 60 days from
the date the installment became due. If the buyer
fails to pay the installments due at the expiration of the
grace period, the seller may cancel the contract after thirty
days from the receipt by the buyer of the notice of
cancellation or the demand for rescission of the contract by
notarial act. [Emphasis supplied.]

the Maceda Law); this law provides for a 60-day grace period within which
the defaulting vendee (who has paid less than two years of installments)
may still pay the installments due. Only after the lapse of the grace period
with

continued

nonpayment

of

the

amounts

due

can

the

Significantly, the Court has consistently held that the Maceda Law

actual

covers not only sales on installments of real estate, but also financing of

cancellation of the contract take place. The pertinent provisions of the

such acquisition; its Section 3 is comprehensive enough to include both

Maceda Law provide:

contracts of sale and contracts to sell, provided that the terms on payment

xxxx

of the price require at least two installments. The contract entered into by
the parties herein can very well fall under the Maceda Law.

Section 2. It is hereby declared a public policy to

protect buyers of real estate on installment payments
against onerous and oppressive conditions.

Based on the above discussion, we conclude that the respondents

payment

on June

15,

1989 of

the

installment

due

on June

14,

1989 effectively defeated the petitioners-heirs right to have the contract

Sec. 3. In all transactions or contracts
involving the sale or financing of real estate on
installment
payments,
including
residential

rescinded or cancelled. Whether the parties agreement is characterized

as one of sale or to sell is not relevant in light of the respondents payment

within the grace period provided under Article 1592 of the Civil Code and
Section 4 of the Maceda Law. The petitioners-heirs obligation to accept
the payment of the price and to convey Consuelos conjugal and hereditary
shares in the subject properties subsists.

WHEREFORE, we DENY the petitioners-heirs petition for review

on certiorari, and AFFIRM the decision of the Court of Appeals dated June
24, 2002 and its resolution dated February 20, 2003 in CA-G.R. CV Case No.
56590. Costs against the petitioners-heirs.

Republic
SUPREME
Manila

of

the

Philippines
COURT

SECOND DIVISION
G.R. No. 128066

Thereafter, in a letter dated 12 December 1992 addressed to FEMSCO

President Alfonso Po, PUREFOODS confirmed the award of the contract to
FEMSCO

June 19, 2000

JARDINE
DAVIES
vs.
COURT
OF
APPEALS
and
FAR
CORPORATION, respondents.

INC., petitioner,
EAST

MILLS

SUPPLY

x - - - - - - - - - - - - - - - - - - - - - - -x
G.R. No. 128069
PURE
FOODS
vs.
COURT
OF
APPEALS
and
CORPORATION, respondents.

CORPORATION, petitioner,
FAR

CORPORATION (hereafter FEMSCO), MONARK and ADVANCE POWER

submitted bid proposals and gave bid bonds equivalent to 5% of their
respective bids, as required.

EAST

MILLS

SUPPLY

BELLOSILLO, J.:
This is rather a simple case for specific performance with damages which
could have been resolved through mediation and conciliation during its
infancy stage had the parties been earnest in expediting the disposal of
this case. They opted however to resort to full court proceedings and
denied themselves the benefits of alternative dispute resolution, thus
making the process more arduous and long-drawn.
The controversy started in 1992 at the height of the power crisis which the
country was then experiencing. 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. Several suppliers and dealers were invited to
attend a pre-bidding conference to discuss the conditions, propose scheme
and specifications that would best suit the needs of PUREFOODS. Out of
the eight (8) prospective bidders who attended the pre-bidding conference,
only three (3) bidders, namely, respondent FAR EAST MILLS SUPPLY

Gentlemen:
This will confirm that Pure Foods Corporation has awarded to your firm the
project: Supply and Installation of two (2) units of 1500 KW/unit Generator
Sets at the Processed Meats Plant, Bo. San Roque, Marikina, based on your
proposal number PC 28-92 dated November 20, 1992, subject to the
following basic terms and conditions:
1. Lump sum contract of P6,137,293.00 (VAT included), for the
supply of materials and labor for the local portion and the labor for
the imported materials, payable by progress billing twice a month,
with ten percent (10%) retention. The retained amount shall be
released thirty (30) days after acceptance of the completed project
and upon posting of Guarantee Bond in an amount equivalent to
twenty percent (20%) of the contract price. The Guarantee Bond
shall be valid for one (1) year from completion and acceptance of
project. The contract price includes future increase/s in costs of
materials and labor;
2. The projects shall be undertaken pursuant to the attached
specifications. It is understood that any item required to complete
the project, and those not included in the list of items shall be
deemed included and covered and shall be performed;
3. All materials shall be brand new;
4. The project shall commence immediately and must be
completed within twenty (20) working days after the delivery of
Generator Set to Marikina Plant, penalty equivalent to 1/10 of 1%
of the purchase price for every day of delay;
5. The Contractor shall put up Performance Bond equivalent to
thirty (30%) of the contract price, and shall procure All Risk
Insurance equivalent to the contract price upon commencement of

the project. The All Risk Insurance Policy shall be endorsed in favor
of and shall be delivered to Pure Foods Corporation;

not stand up very well in a court of law."

regards the case against PUREFOODS.

6. Warranty of one (1) year against defective material and/or

workmanship.

On 28 July 1994 the trial court rendered a decision ordering PUREFOODS:

(a) to indemnify FEMSCO the sum of P2,300,000.00 representing the value
of engineering services it rendered; (b) to pay FEMSCO the sum of
US$14,000.00 or its peso equivalent, and P900,000.00 representing
contractor's mark-up on installation work, considering that it would be
impossible to compel PUREFOODS to honor, perform and fulfill its
contractual obligations in view of PUREFOOD's contract with JARDINE and
noting that construction had already started thereon; (c) to pay attorney's
fees in an amount equivalent to 20% of the total amount due; and, (d) to
pay the costs. The trial court dismissed the counterclaim filed by
PUREFOODS for lack of factual and legal basis.

Once finalized, we shall ask you to sign the formal contract embodying the
foregoing terms and conditions.
Immediately, FEMSCO submitted the required performance bond in the
amount of P1,841,187.90 and contractor's all-risk insurance policy in the
amount of P6,137,293.00 which PUREFOODS through its Vice President
Benedicto G. Tope acknowledged in a letter dated 18 December 1992.
FEMSCO also made arrangements with its principal and started the
PUREFOODS project by purchasing the necessary materials. PUREFOODS
on the other hand returned FEMSCO's Bidder's Bond in the amount of
P1,000,000.00, as requested.
Later, however, in a letter dated 22 December 1992, PUREFOODS through
its Senior Vice President Teodoro L. Dimayuga 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, on 26
March 1993, 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.1wphi1.nt
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.
On 27 June 1994 the Regional Trial Court of Pasig, Br. 68, 1 granted
JARDINE's Demurrer to Evidence. The trial court concluded that "[w]hile it
may seem to the plaintiff that by the actions of the two defendants there is
something underhanded going on, this is all a matter of perception, and
unsupported by hard evidence, mere suspicions and suppositions would

Meanwhile trial proceeded as

Both FEMSCO and PUREFOODS appealed to the Court of Appeals. FEMSCO

appealed the 27 June 1994 Resolution of the trial court which granted the
Demurrer to Evidence filed by JARDINE resulting in the dismissal of the
complaint against it, while PUREFOODS appealed the 28 July 1994 Decision
of the same court which ordered it to pay FEMSCO.
On 14 August 1996 the Court of Appeals affirmed in toto the 28 July 1994
Decision of the trial court. 3 It also reversed the 27 June 1994 Resolution of
the lower court and ordered JARDINE to pay FEMSCO damages for inducing
PUREFOODS to violate the latter's contract with FEMSCO. As such, JARDINE
was ordered to pay FEMSCO P2,000,000.00 for moral damages. In addition,
PUREFOODS was also directed to pay FEMSCO P2,000,000.00 as moral
damages and P1,000,000.00 as exemplary damages as well as 20% of the
total amount due as attorney's fees.
On 31 January 1997 the Court of Appeals denied for lack of merit the
separate motions for reconsideration filed by PUREFOODS and JARDINE.
Hence, these two (2) petitions for review filed by PUREFOODS and JARDINE
which were subsequently consolidated.
PUREFOODS maintains that the conclusions of both the trial court and the
appellate court are premised on a misapprehension of facts. It argues that
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 FEMSCO's conforme,
PUREFOODS was very well within reason to revoke its qualified acceptance
or counter-offer. Hence, no contract was perfected between PUREFOODS
and FEMSCO. PUREFOODS also contends that it was never in bad faith

when it dealt with FEMSCO. Hence moral and exemplary damages should
not have been awarded.
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 latter's alleged
contract with FEMSCO. Moreover, JARDINE reasons that FEMSCO, an
artificial
person,
is
not
entitled
to
moral
damages.
But
granting arguendo that the award of moral damages is proper,
P2,000,000.00 is extremely excessive.
In the main, these consolidated cases present two (2) issues: first, whether
there existed a perfected contract between PUREFOODS and FEMSCO; and
second, 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.
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." 4 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.5 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. 6 To produce a contract, the
acceptance must not qualify the terms of the offer. However, the
acceptance may be express or implied. 7 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 FEMSCO's offer as
contemplated by law. The tenor of the 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 8 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 Court's 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. 9
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 all-risk 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 counter-offer."
After all, as earlier adverted to, an acceptance may either be express or
implied, 10 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.
Petitioner PUREFOODS also argues that it was never in bad
faith.1avvphi1 On the contrary, it believed in good faith that no such
contract was perfected. We are not convinced. We subscribe to the factual

findings and conclusions of the trial court which were affirmed by the
appellate court
Hence, by the unilateral cancellation of the contract, the defendant
(petitioner PURE FOODS) has acted with bad faith and this was
further aggravated by the subsequent inking of a contract between
defendant Purefoods and erstwhile co-defendant Jardine. It is very
evident that Purefoods thought that by the expedient means of
merely writing a letter would automatically cancel or nullify the
existing contract entered into by both parties after a process of
bidding. This, to the Court's mind, is a flagrant violation of the
express provisions of the law and is contrary to fair and just
dealings to which every man is due. 11
This Court has awarded in the past moral damages to a corporation whose
reputation has been besmirched. 12In the instant case, respondent FEMSCO
has sufficiently shown that its reputation was tarnished after it immediately
ordered equipment from its suppliers on account of the urgency of the
project, only to be canceled later. We thus sustain respondent appellate
court's award of moral damages. We however reduce the award from
P2,000,000.00 to P1,000,000.00, as moral damages are never intended to
enrich the recipient. Likewise, the award of exemplary damages by way of
example for the public good is excessive and should be reduced to
P100,000.00.
Petitioner JARDINE maintains on the other hand that respondent appellate
court erred in ordering it to pay moral damages to respondent FEMSCO as
it supposedly induced PUREFOODS to violate the contract with FEMSCO.
We agree. While it may seem that petitioners PUREFOODS and JARDINE
connived to deceive respondent FEMSCO, we find no specific evidence on
record to support such perception. Likewise, there is no showing
whatsoever that petitioner JARDINE induced petitioner PUREFOODS. The
similarity in the design submitted to petitioner PUREFOODS by both
petitioner JARDINE and respondent FEMSCO, and the tender of a lower
quotation by petitioner JARDINE are insufficient to show that petitioner
JARDINE indeed induced petitioner PUREFOODS to violate its contract with
respondent FEMSCO.
WHEREFORE, judgment is hereby rendered as follows:
(a) The petition in G.R. No. 128066 is GRANTED. The assailed
Decision of the Court of Appeals reversing the 27 June 1994
resolution of the trial court and ordering petitioner JARDINE DAVIES,
INC., to pay private respondent FAR EAST MILLS SUPPLY

CORPORATION P2,000,000.00 as moral damages is REVERSED and

SET ASIDE for insufficiency of evidence; and
(b) The petition in G.R. No. 128069 is DENIED. The assailed
Decision of the Court of Appeals ordering petitioner PUREFOODS
CORPORATION to pay private respondent FAR EAST MILLS SUPPLY
CORPORATION the sum of P2,300,000.00 representing the value of
engineering services it rendered, US$14,000.00 or its peso
equivalent, and P900,000.00 representing the contractor's mark-up
on installation work, as well as attorney's fees equivalent to twenty
percent (20%) of the total amount due, is AFFIRMED. In addition,
petitioner PURE FOODS CORPORATION is ordered to pay private
respondent FAR EAST MILLS SUPPLY CORPORATION moral damages
in the amount of P1,000,000.00 and exemplary damages in the
amount of P1,000,000.00. Costs against petitioner.
SO ORDERED.

SECOND DIVISION

[G.R. No. 137290. July 31, 2000]

SAN
MIGUEL
PROPERTIES
PHILIPPINES,
INC., petitioner,
vs. SPOUSES ALFREDO HUANG and GRACE HUANG, respondents.

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.

DECISION
MENDOZA, J.:
This is a petition for review of the decision, [1] dated April 8, 1997, of the
Court of Appeals which reversed the decision of the Regional Trial Court,
Branch 153, Pasig City dismissing the complaint brought by respondents
against petitioner for enforcement of a contract of sale.
The facts are not in dispute.
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,
which are covered by TCT Nos. PT-82395 and PT-82396 of the Register of
Deeds of 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[2] 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[3] 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.

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."[4] 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 of P1
million given as "earnest-deposit."[5]
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 "earnest-deposit" 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, Branch 133,
Pasig City where it was docketed as Civil Case No. 64660.
Within the period for filing a responsive pleading, petitioner filed a motion
to dismiss the complaint alleging that (1) the alleged "exclusive option" of
respondent spouses lacked a consideration separate and distinct from the
purchase price and was thus unenforceable and (2) the complaint did not
allege a cause of action because there was no "meeting of the minds"
between the parties and, therefore, no perfected contract of sale. The
motion was opposed by respondents.
On December 12, 1994, the trial court granted petitioners motion and
dismissed the action. Respondents filed a motion for reconsideration, but it
was denied by the trial court. They then appealed to the Court of Appeals
which, on April 8, 1997, rendered a decision [6] reversing the judgment of
the trial court. The appellate court 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.[7]
Petitioner moved for reconsideration of the trial courts decision, but its
motion was denied. Hence, this petition.
Petitioner contends that the Court of Appeals erred in finding that there
was a perfected contract of sale between the parties because the March
29, 1994 letter of respondents, which petitioner accepted, merely resulted
in an option contract, albeit it was unenforceable for lack of a distinct
consideration. Petitioner argues that the absence of agreement as to the
mode of payment was fatal to the perfection of the contract of sale.
Petitioner also disputes the appellate courts ruling that Isidro A.
Sobrecarey had authority to sell the subject real properties.[8]

Respondents were required to comment within ten (10) days from notice.
However, despite 13 extensions totalling 142 days which the Court had
given to them, respondents failed to file their comment. They were thus
considered to have waived the filing of a comment.
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,[9] 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
said P5,000.00 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.[10]
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. [11] 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. [12] In the present case, the
parties never got past the negotiation stage. The alleged "indubitable
evidence"[13] 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.,[14] 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,[15] 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. [16] In Velasco v. Court of
Appeals,[17] the parties to a proposed sale had already agreed on the object
of sale and on the purchase price. By the 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.[18]
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 complaint is DISMISSED.
SO ORDERED.

LOURDES ONG LIMSON, petitioner, vs. COURT OF APPEALS,

SPOUSES LORENZO DE VERA and ASUNCION SANTOS-DE
VERA, TOMAS CUENCA, JR., and SUNVAR REALTY
DEVELOPMENT CORPORATION, respondents.

of P36,170.00 for the settlement of the back taxes of the property and for
the payment of the quitclaims of the three (3) tenants of subject land. The
amount was purportedly considered part of the purchase price and
respondent Lorenzo de Vera signed the receipts therefor.

DECISION

Petitioner alleged that on 5 September 1978 she was surprised to

learn from the agent of respondent spouses that the property was the
subject of a negotiation for the sale to respondent Sunvar Realty
Development Corporation (SUNVAR) represented by respondent Tomas
Cuenca, Jr. On 15 September 1978 petitioner discovered that although
respondent spouses purchased the property from the Ramoses on 20
March 1970 it was only on 15 September 1978 that TCT No. S-72946
covering the property was issued to respondent spouses. As a
consequence, she filed on the same day an Affidavit of Adverse Claim with
the Office of the Registry of Deeds of Makati, Metro Manila, which was
annotated on TCT No. S-72946. She also claimed that on the same day she
informed respondent Cuenca of her "contract" to purchase the property.

BELLOSILLO, J.:
Filed under Rule 45 of the Rules of Court this Petition for Review on
Certiorari seeks to review, reverse and set aside the Decision[1] of the Court
of Appeals dated 18 May 1998 reversing that of the Regional Trial Court
dated 30 June 1993. The petition likewise assails the Resolution[2] of the
appellate court of 19 October 1998 denying petitioners Motion for
Reconsideration.
Petitioner Lourdes Ong Limson, in her 14 May 1979 Complaint filed
before the trial court,[3] alleged that in July 1978 respondent spouses
Lorenzo de Vera and Asuncion Santos-de Vera, through their agent Marcosa
Sanchez, offered to sell to petitioner a parcel of land consisting of 48,260
square meters, more or less, situated in Barrio San Dionisio, Paraaque,
Metro Manila; that respondent spouses informed her that they were the
owners of the subject property; that on 31 July 1978 she agreed to buy the
property at the price of P34.00 per square meter and gave the sum
of P20,000.00 to respondent spouses as "earnest money;" that respondent
spouses signed a receipt therefor and gave her a 10-day option period to
purchase the property; that respondent Lorenzo de Vera then informed her
that the subject property was mortgaged to Emilio Ramos and Isidro
Ramos; that respondent Lorenzo de Vera asked her to pay the balance of
the purchase price to enable him and his wife to settle their obligation with
the Ramoses.
Petitioner also averred that she agreed to meet respondent spouses
and the Ramoses on 5 August 1978 at the Office of the Registry of Deeds
of Makati, Metro Manila, to consummate the transaction but due to the
failure of respondent Asuncion Santos-de Vera and the Ramoses to appear,
no transaction was formalized. In a second meeting scheduled on 11
August 1978 she claimed that she was willing and ready to pay the balance
of the purchase price but the transaction again did not materialize as
respondent spouses failed to pay the back taxes of subject
property. Subsequently, on 23 August 1978 petitioner allegedly gave
respondent Lorenzo de Vera three (3) checks in the total amount

The Deed of Sale between respondent spouses and respondent

SUNVAR was executed on 15 September 1978 and TCT No. S-72377 was
issued in favor of the latter on 26 September 1978 with theAdverse
Claim of petitioner annotated thereon. Petitioner claimed that when
respondent spouses sold the property in dispute to SUNVAR, her valid and
legal right to purchase it was ignored if not violated. Moreover, she
maintained that SUNVAR was in bad faith as it knew of her "contract" to
purchase the subject property from respondent spouses.
Finally, for the alleged unlawful and unjust acts of respondent
spouses, which caused her damage, prejudice and injury, petitioner
claimed that the Deed of Sale, should be annuled and TCT No. S-72377 in
the name of respondent SUNVAR canceled and TCT No. S-72946
restored. She also insisted that a Deed of Sale between her and
respondent spouses be now executed upon her payment of the balance of
the purchase price agreed upon, plus damages and attorneys fees.
In their Answer[4] respondent spouses maintained that petitioner had
no sufficient cause of action against them; that she was not the real party
in interest; that the option to buy the property had long expired; that there
was no perfected contract to sell between them; and, that petitioner had
no legal capacity to sue. Additionally, respondent spouses claimed actual,
moral and exemplary damages, and attorneys fees against petitioner.

On the other hand, respondents SUNVAR and Cuenca, in their Answer,

alleged that petitioner was not the proper party in interest and/or had no
cause of action against them. But, even assuming that petitioner was the
proper party in interest, they claimed that she could only be entitled to the
return of any amount received by respondent spouses. In the alternative,
they argued that petitioner had lost her option to buy the property for
failure to comply with the terms and conditions of the agreement as
embodied in the receipt issued therefor. Moreover, they contended that at
the time of the execution of theDeed of Sale and the payment of
consideration to respondent spouses, they "did not know nor was
informed" of petitioners interest or claim over the subject property. They
claimed furthermore that it was only after the signing of the Deed of
Sale and the payment of the corresponding amounts to respondent
spouses that they came to know of the claim of petitioner as it was only
then that they were furnished copy of the title to the property where
the Adverse Claim of petitioner was annotated. Consequently, they also
instituted a Cross-Claim against respondent spouses for bad faith in
encouraging the negotiations between them without telling them of the
claim of petitioner. The same respondents maintained that had they
known of the claim of petitioner, they would not have initiated negotiations
with respondent spouses for the purchase of the property. Thus, they
prayed for reimbursement of all amounts and monies received from them
by respondent spouses, attorneys fees and expenses for litigation in the
event that the trial court should annul the Deed of Sale and deprive them
of their ownership and possession of the subject land.
[5]

In their Answer to the Cross-Claim [6] of respondents SUNVAR and

Cuenca, respondent spouses insisted that they negotiated with the former
only after the expiration of the option period given to petitioner and her
failure to comply with her commitments thereunder. Respondent spouses
contended that they acted legally and validly, in all honesty and good
faith. According to them, respondent SUNVAR made a verification of the
title with the Office of the Register of Deeds of Metro Manila District IV
before the execution of the Deed of Absolute Sale. Also, they claimed that
the Cross-Claim was barred by a written waiver executed by respondent
SUNVAR in their favor. Thus, respondent spouses prayed for actual
damages for the unjustified filing of the Cross-Claim, moral damages for
the mental anguish and similar injuries they suffered by reason thereof,
exemplary damages "to prevent others from emulating the bad example"
of respondents SUNVAR and Cuenca, plus attorneys fees.
After a protracted trial and reconstitution of the court records due to
the fire that razed the Pasay City Hall on 18 January 1992, the Regional
Trial Court rendered its 30 June 1993 Decision[7] in favor of petitioner. It

ordered (a) the annulment and rescission of the Deed of Absolute

Sale executed on 15 September 1978 by respondent spouses in favor of
respondent SUNVAR; (b) the cancellation and revocation of TCT No. S75377 of the Registry of Deeds, Makati, Metro Manila, issued in the name
of respondent Sunvar Realty Development Corporation, and the restoration
or reinstatement of TCT No. S-72946 of the same Registry issued in the
name of respondent spouses; (c) respondent spouses to execute a deed of
sale conveying ownership of the property covered by TCT No. S-72946 in
favor of petitioner upon her payment of the balance of the purchase price
agreed upon; and, (d) respondent spouses to pay petitioner P50,000.00 as
and for attorneys fees, and to pay the costs.
On appeal, the Court of Appeals completely reversed the decision of
the trial court. It ordered (a) the Register of Deeds of Makati City to lift
the Adverse Claim and such other encumbrances petitioner might have
filed or caused to be annotated on TCT No. S-75377; and, (b) petitioner to
pay (1) respondent SUNVAR P50,000.00 as nominal damages, P30,000.00
as exemplary damages and P20,000 as attorneys fees; (2) respondent
spouses, P15,000.00 as nominal damages, P10,000.00 as exemplary
damages and P10,000.00 as attorneys fees; and, (3) the costs.
Petitioner timely filed a Motion for Reconsideration which was denied
by the Court of Appeals on 19 October 1998. Hence, this petition.
At issue for resolution by the Court is the nature of the contract
entered into between petitioner Lourdes Ong Limson on one hand, and
respondent spouses Lorenzo de Vera and Asuncion Santos-de Vera on the
other.
The main argument of petitioner is that there was a perfected contract
to sell between her and respondent spouses. On the other hand,
respondent spouses and respondents SUNVAR and Cuenca argue that what
was perfected between petitioner and respondent spouses was a mere
option.
A scrutiny of the facts as well as the evidence of the parties
overwhelmingly leads to the conclusion that 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. [8] It is not a sale of
property but a sale of the right to purchase. [9] 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.[10] 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.[11]
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.
[12]
Contracts, in general, are perfected by mere consent, [13] 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.[14]
The Receipt[15] 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 nonconsummation 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 atP34.00 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.
The appellate court awarded nominal and exemplary damages plus
attorneys fees to respondent spouses and respondent SUNVAR. But
nominal damages are adjudicated to vindicate or recognize the right of the
plaintiff that has been violated or invaded by the defendant. [19] In the
instant case, the Court recognizes the rights of all the parties and finds no
violation or invasion of the rights of respondents by petitioner. Petitioner,
in filing her complaint, only seeks relief, in good faith, for what she believes
she was entitled to and should not be made to suffer therefor. Neither
should exemplary damages be awarded to respondents as they are
imposed only by way of example or correction for the public good and
only in addition to the moral, temperate, liquidated or compensatory
damages.[20] No such kinds of damages were awarded by the Court of
Appeals, only nominal, which was not justified in this case. Finally,
attorneys fees could not also be recovered as the Court does not deem it
just and equitable under the circumstances.
WHEREFORE, the petition is DENIED. The Decision of the Court of
Appeals ordering the Register of Deeds of Makati City to lift the adverse
claim and such other encumbrances petitioner Lourdes Ong Limson may
have filed or caused to be annotated on TCT No. S-75377 is AFFIRMED, with

the MODIFICATION that the award of nominal and exemplary damages as

well as attorneys fees is DELETED.
SO ORDERED.

Republic
SUPREME
Manila

of

the

Philippines
COURT

right to buy the property if and when the respondents, with the
concurrence of the defendants-tenants, agreed to sell the property. In the
interim, the petitioner gave varied sums of money to the tenants as partial
payments, and the latter issued receipts for the said amounts.

SECOND DIVISION
G.R. No. 134971

March 25, 2004

HERMINIO
TAYAG, petitioner,
vs.
AMANCIA LACSON, ROSENDO LACSON, ANTONIO LACSON, JUAN
LACSON, TEODISIA LACSON-ESPINOSA and THE COURT OF
APPEALS, respondents.
DECISION
CALLEJO, SR., J.:
Before us is a petition for review on certiorari of the Decision 1 and the
Resolution2 of respondent Court of Appeals in CA-G.R. SP No. 44883.

On July 24, 1996, the petitioner called a meeting of the defendants-tenants

to work out the implementation of the terms of their separate
agreements.7 However, on August 8, 1996, the defendants-tenants,
through Joven Mariano, wrote the petitioner stating that they were not
attending the meeting and instead gave notice of their collective decision
to sell all their rights and interests, as tenants/lessees, over the
landholding to the respondents.8 Explaining their reasons for their
collective decision, they wrote as follows:
Kami ay nagtiwala sa inyo, naging tapat at nanindigan sa lahat ng ating
napagkasunduan, hindi tumanggap ng ibang buyer o ahente, pero sinira
ninyo ang aming pagtitiwala sa pamamagitan ng demanda ninyo at
pagbibigay ng problema sa amin na hindi naman nagbenta ng lupa.
Kaya kami ay nagpulong at nagpasya na ibenta na lang ang aming
karapatan o ang aming lupang sinasaka sa landowner o sa mga pamilyang
Lacson, dahil ayaw naming magkaroon ng problema.

The Case for the Petitioner

Respondents Angelica Tiotuyco Vda. de Lacson, 3 and her children Amancia,
Antonio, Juan, and Teodosia, all surnamed Lacson, were the registered
owners of three parcels of land located in Mabalacat, Pampanga, covered
by Transfer Certificates of Title (TCT) Nos. 35922-R, 35923-R, and 35925-R,
registered in the Register of Deeds of San Fernando, Pampanga. The
properties, which were tenanted agricultural lands, 4 were administered by
Renato Espinosa for the owner.
On March 17, 1996, a group of original farmers/tillers, namely, Julio
Tiamson, Renato Gozun, Rosita Hernandez, Bienvenido Tongol, Alfonso
Flores, Norma Quiambao, Rosita Tolentino, Jose Sosa, Francisco Tolentino,
Sr., Emiliano Laxamana, Ruben Torres, Meliton Allanigue, Dominga
Laxamana, Felicencia de Leon, Emiliano Ramos, and another group,
namely, Felino G. Tolentino, Rica Gozun, Perla Gozun, Benigno Tolentino,
Rodolfo Quiambao, Roman Laxamana, Eddie San Luis, Ricardo Hernandez,
Nicenciana Miranda, Jose Gozun, Alfredo Sosa, Jose Tiamson, Augusto
Tolentino, Sixto Hernandez, Alex Quiambao, Isidro Tolentino, Ceferino de
Leon, Alberto Hernandez, Orlando Flores, and Aurelio Flores, 5 individually
executed in favor of the petitioner separate Deeds of Assignment 6 in which
the assignees assigned to the petitioner their respective rights as
tenants/tillers of the landholdings possessed and tilled by them for and in
consideration of P50.00 per square meter. The said amount was made
payable "when the legal impediments to the sale of the property to the
petitioner no longer existed." The petitioner was also granted the exclusive

Kaya kung ang sasabihin ninyong itoy katangahan, lalo sigurong magiging
katangahan kung ibebenta pa namin sa inyo ang aming lupang sinasaka,
kaya pasensya na lang Mister Tayag. Dahil sinira ninyo ang aming
pagtitiwala at katapatan.9
On August 19, 1996, the petitioner filed a complaint with the Regional Trial
Court of San Fernando, Pampanga, Branch 44, against the defendantstenants, as well as the respondents, for the court to fix a period within
which to pay the agreed purchase price of P50.00 per square meter to the
defendants, as provided for in the Deeds of Assignment. The petitioner also
prayed for a writ of preliminary injunction against the defendants and the
respondents therein.10 The case was docketed as Civil Case No. 10910.
In his complaint, the petitioner alleged, inter alia, the following:
4. That defendants Julio Tiamson, Renato Gozun, Rosita Hernandez,
Bienvenido Tongol, Alfonso Flores, Norma Quiambao, Rosita
Tolentino, Jose Sosa, Francisco Tolentino, Sr., Emiliano Laxamana,
Ruben Torres, Meliton Allanigue, Dominga Laxamana, Felicencia de
Leon, Emiliano Ramos are original farmers or direct tillers of
landholdings over parcels of lands covered by Transfer Certificate
of Title Nos. 35922-R, 35923-R and 35925-R which are registered in
the names of defendants LACSONS; while defendants Felino G.
Tolentino, Rica Gozun, Perla Gozun, Benigno Tolentino, Rodolfo

Quiambao, Roman Laxamana, Eddie San Luis, Alfredo Gozun, Jose

Tiamson, Augusto Tolentino, Sixto Hernandez, Alex Quiambao,
Isidro Tolentino, Ceferino de Leon, Alberto Hernandez, and Aurelio
Flores are sub-tenants over the same parcel of land.
5. That on March 17, 1996 the defendants TIAMSON, et al., entered
into Deeds of Assignment with the plaintiff by which the
defendants assigned all their rights and interests on their
landholdings to the plaintiff and that on the same date (March 17,
1996), the defendants received from the plaintiff partial payments
in the amounts corresponding to their names. Subsequent
payments were also received:
1st
PAYMENT

2nd
PAYMENT

CHECK
NO.

TOTAL

1.Julio Tiamson - - - P 20,000

--

P
10,621.54

231281

P 30,621.54

2. Renato Gozun - - - P 10,000

[son of Felix Gozun
(deceased)]

96,000

3. Rosita Hernandez P 5,000

--4. Bienvenido Tongol P 10,000
[Son
of
Abundio
Tongol (deceased)]

106,000.00

14,374.24

231274

P 19,374.24

14,465.90

231285

24,465.90

5. Alfonso Flores - - P 30,000

---

26,648.40

6. Norma Quiambao P 10,000

---

41,501.10

231279

51,501.10

7. Rosita Tolentino - P 10,000

---

22,126.08

231284

32,126.08

8. Jose Sosa - - - - - - P 10,000

--

14,861.31

231291

24,861.31

9.
Francisco
P 10,000
Tolentino, Sr.

24,237.62

231283

34,237.62

10.
Emiliano
P 10,000
Laxamana - -

------

------

------

P
33,587.31

------

P
43,587.31

11. Ruben Torres - - - P 10,000

[Son
of
Mariano

231271

56,648.40

Torres (deceased)]
12. Meliton Allanigue

P 10,000

12,944.77

231269

P
22,944.77

13.
Laxamana

P 5,000

22,269.02

231275

27,269.02

10,000

------

------

------

15. Emiliano Ramos

5,000

18,869.60

231280

23,869.60

16.
Felino
Tolentino

10,000

------

------

------

17. Rica Gozun

5,000

------

------

------

18. Perla Gozun

10,000

------

------

------

19.
Tolentino

10,000

------

------

------

10,000

------

------

------

10,000

------

------

------

22. Eddie San Luis

10,000

------

------

------

23.
Hernandez

10,000

------

------

------

10,000

------

------

------

25. Jose Gozun

10,000

------

------

------

26. Alfredo Sosa

5,000

------

------

------

27. Jose Tiamson

10,000

------

------

------

28.
Tolentino

5,000

------

------

------

29. Sixto Hernandez

10,000

------

------

------

30. Alex Quiambao

10,000

------

------

------

31. Isidro Tolentino

10,000

------

------

------

32. Ceferino de Leon

------

11,378.70

231270

------

33.
Hernandez

10,000

------

------

------

Dominga

14.
Felicencia
Leon

de

G.

Benigno

20.
Quiambao

Rodolfo

21.
Laxamana

Roman

24.
Miranda

Ricardo

Nicenciana

Augusto

Alberto

34. Orlando Florez

10,000

------

------

------

35. Aurelio Flores

10,000

------

------

------

6. That on July 24, 1996, the plaintiff wrote the defendants

TIAMSON, et al., inviting them for a meeting regarding the
negotiations/implementations of the terms of their Deeds of
Assignment;
7. That on August 8, 1996, the defendants TIAMSON, et al., through
Joven Mariano, replied that they are no longer willing to pursue
with the negotiations, and instead they gave notice to the plaintiff
that they will sell all their rights and interests to the registered
owners (defendants LACSONS).
A copy of the letter is hereto attached as Annex "A" etc.;
8. That the defendants TIAMSON, et. al., have no right to deal with
the defendants LACSON or with any third persons while their
contracts with the plaintiff are subsisting; defendants LACSONS are
inducing or have induced the defendants TIAMSON, et. al., to
violate their contracts with the plaintiff;
9. That by reason of the malicious acts of all the defendants,
plaintiff suffered moral damages in the forms of mental anguish,
mental torture and serious anxiety which in the sum of
P500,000.00 for which defendants should be held liable jointly and
severally.11
In support of his plea for injunctive relief, the petitioner, as plaintiff,
also alleged the following in his complaint:
11. That to maintain the status quo, the defendants TIAMSON, et
al., should be restrained from rescinding their contracts with the
plaintiff, and the defendants LACSONS should also be restrained
from accepting any offer of sale or alienation with the defendants
TIAMSON, et al., in whatever form, the latters rights and interests
in the properties mentioned in paragraph 4 hereof; further, the
LACSONS should be restrained from encumbering/alienating the
subject properties covered by TCT No. 35922-R, 35923-R and TCT
No. 35925-R, Registry of Deeds of San Fernando, Pampanga;
12. That the defendants TIAMSON, et al., threaten to rescind their
contracts with the plaintiff and are also bent on selling/alienating
their rights and interests over the subject properties to their codefendants (LACSONS) or any other persons to the damage and
prejudice of the plaintiff who already invested much money, efforts
and time in the said transactions;

13. That the plaintiff is entitled to the reliefs being demanded in

the complaint;
14. That to prevent irreparable damages and prejudice to the
plaintiff, as the latter has no speedy and adequate remedy under
the ordinary course of law, it is essential that a Writ of Preliminary
Injunction be issued enjoining and restraining the defendants
TIAMSON, et al., from rescinding their contracts with the plaintiff
and from selling/alienating their properties to the LACSONS or
other persons;
15. That the plaintiff is willing and able to put up a reasonable
bond to answer for the damages which the defendants would suffer
should the injunction prayed for and granted be found without
basis.12
The petitioner prayed, that after the proceedings, judgment be rendered as
follows:
1. Pending the hearing, a Writ of Preliminary Injunction be issued
prohibiting, enjoining and restraining defendants Julio Tiamson,
Renato Gozun, Rosita Hernandez, Bienvenido Tongol, Alfonso
Flores, Norma Quiambao, Rosita Tolentino, Jose Sosa, Francisco
Tolentino Sr., Emiliano Laxamana, Ruben Torres, Meliton Allanigue,
Dominga Laxamana, Felicencia de Leon, Emiliano Ramos, Felino G.
Tolentino, Rica Gozun, Perla Gozun, Benigno Tolentino, Rodolfo
Quiambao, Roman Laxamana, Eddie San Luis, Ricardo Hernandez,
Nicenciana Miranda, Jose Gozun, Alfredo Sosa, Jose Tiamson,
Augusto Tolentino, Ceferino de Leon, Alberto Hernandez, Orlando
Flores, and Aurelio Flores from rescinding their contracts with the
plaintiff and from alienating their rights and interest over the
aforementioned properties in favor of defendants LACSONS or any
other third persons; and prohibiting the defendants LACSONS from
encumbering/alienating TCT Nos. 35922-R, 35923-R and 35925-R
of the Registry of Deeds of San Fernando, Pampanga.
2. And pending the hearing of the Prayer for a Writ of Preliminary
Injunction, it is prayed that a restraining order be issued restraining
the aforementioned defendants (TIAMSON, et al.) from rescinding
their contracts with the plaintiff and from alienating the subject
properties to the defendants LACSONS or any third persons;
further, restraining and enjoining the defendants LACSONS from
encumbering/selling the properties covered by TCT Nos. 35922-R,
35923-R, and 35925-R of the Registry of Deeds of San Fernando,
Pampanga.
3. Fixing the period within which plaintiff shall pay the balance of
the purchase price to the defendants TIAMSON, et al., after the
lapse of legal impediment, if any.

4. Making the Writ of Preliminary Injunction permanent;

5. Ordering the defendants to pay the plaintiff the sum of
P500,000.00 as moral damages;
6. Ordering the defendants to pay the plaintiff attorneys fees in
the sum of P100,000.00 plus litigation expenses of P50,000.00;
Plaintiff prays for such other relief as may be just and equitable under the
premises.13
In their answer to the complaint, the respondents as defendants asserted
that (a) the defendant Angelica Vda. de Lacson had died on April 24, 1993;
(b) twelve of the defendants were tenants/lessees of respondents, but the
tenancy status of the rest of the defendants was uncertain; (c) they never
induced the defendants Tiamson to violate their contracts with the
petitioner; and, (d) being merely tenants-tillers, the defendants-tenants
had no right to enter into any transactions involving their properties
without their knowledge and consent. They also averred that the transfers
or assignments of leasehold rights made by the defendants-tenants to the
petitioner is contrary to Presidential Decree (P.D.) No. 27 and Republic Act
No. 6657, the Comprehensive Agrarian Reform Program (CARP). 14 The
respondents interposed counterclaims for damages against the petitioner
as plaintiff.
The defendants-tenants Tiamson, et al., alleged in their answer with
counterclaim for damages, that the money each of them received from the
petitioner were in the form of loans, and that they were deceived into
signing the deeds of assignment:
a) That all the foregoing allegations in the Answer are hereby
repleaded and incorporated in so far as they are material and
relevant herein;
b) That the defendants Tiamson, et al., in so far as the Deeds of
Assignment are concern[ed] never knew that what they did sign is
a Deed of Assignment. What they knew was that they were made
to sign a document that will serve as a receipt for the loan granted
[to] them by the plaintiff;
c) That the Deeds of Assignment were signed through the
employment of fraud, deceit and false pretenses of plaintiff and
made the defendants believe that what they sign[ed] was a mere
receipt for amounts received by way of loans;
d) That the documents signed in blank were filled up and
completed after the defendants Tiamson, et al., signed the
documents and their completion and accomplishment was done in

the absence of said defendants and, worst of all, defendants were

not provided a copy thereof;
e) That as completed, the Deeds of Assignment reflected that the
defendants Tiamson, et al., did assign all their rights and interests
in the properties or landholdings they were tilling in favor of the
plaintiff. That if this is so, assuming arguendo that the documents
were voluntarily executed, the defendants Tiamson, et al., do not
have any right to transfer their interest in the landholdings they
are tilling as they have no right whatsoever in the landholdings,
the landholdings belong to their co-defendants, Lacson, et al., and
therefore, the contract is null and void;
f) That while it is admitted that the defendants Tiamson, et al.,
received sums of money from plaintiffs, the same were received as
approved loans granted by plaintiff to the defendants Tiamson, et
al., and not as part consideration of the alleged Deeds of
Assignment; and by way of:15
At the hearing of the petitioners plea for a writ of preliminary injunction,
the respondents counsel failed to appear. In support of his plea for a writ
of preliminary injunction, the petitioner adduced in evidence the Deeds of
Assignment,16 the receipts17 issued by the defendants-tenants for the
amounts they received from him; and the letter 18 the petitioner received
from the defendants-tenants. The petitioner then rested his case.
The respondents, thereafter, filed a Comment/Motion to dismiss/deny the
petitioners plea for injunctive relief on the following grounds: (a) the
Deeds of Assignment executed by the defendants-tenants were contrary to
public policy and P.D. No. 27 and Rep. Act No. 6657; (b) the petitioner
failed to prove that the respondents induced the defendants-tenants to
renege on their obligations under the "Deeds of Assignment;" (c) not being
privy to the said deeds, the respondents are not bound by the said deeds;
and, (d) the respondents had the absolute right to sell and dispose of their
property and to encumber the same and cannot be enjoined from doing so
by the trial court.
The petitioner opposed the motion, contending that it was premature for
the trial court to resolve his plea for injunctive relief, before the
respondents and the defendants-tenants adduced evidence in opposition
thereto, to afford the petitioner a chance to adduce rebuttal evidence and
prove his entitlement to a writ of preliminary injunction. The respondents
replied that it was the burden of the petitioner to establish the requisites of
a writ of preliminary injunction without any evidence on their part, and that
they were not bound to adduce any evidence in opposition to the
petitioners plea for a writ of preliminary injunction.
On February 13, 1997, the court issued an Order 19 denying the motion of
the respondents for being premature. It directed the hearing to proceed for

the respondents to adduce their evidence. The court ruled that the
petitioner, on the basis of the material allegations of the complaint, was
entitled to injunctive relief. It also held that before the court could resolve
the petitioners plea for injunctive relief, there was need for a hearing to
enable the respondents and the defendants-tenants to adduce evidence to
controvert that of the petitioner. The respondents filed a motion for
reconsideration, which the court denied in its Order dated April 16, 1997.
The trial court ruled that on the face of the averments of the complaint, the
pleadings of the parties and the evidence adduced by the petitioner, the
latter was entitled to injunctive relief unless the respondents and the
defendants-tenants adduced controverting evidence.
The respondents, the petitioners therein, filed a petition for certiorari in the
Court of Appeals for the nullification of the February 13, 1997 and April 16,
1997 Orders of the trial court. The case was docketed as CA-G.R. SP No.
44883. The petitioners therein prayed in their petition that:
1. An order be issued declaring the orders of respondent court
dated February 13, 1997 and April 16, 1997 as null and void;
2. An order be issued directing the respondent court to issue an
order denying the application of respondent Herminio Tayag for the
issuance of a Writ of Preliminary Injunction and/or restraining order.
3. In the meantime, a Writ of Preliminary Injunction be issued
against the respondent court, prohibiting it from issuing its own
writ of injunction against Petitioners, and thereafter making said
injunction to be issued by this Court permanent.
Such other orders as may be deemed just & equitable under the premises
also prayed for.20
The respondents asserted that the Deeds of Assignment executed by the
assignees in favor of the petitioner were contrary to paragraph 13 of P.D.
No. 27 and the second paragraph of Section 70 of Rep. Act No. 6657, and,
as such, could not be enforced by the petitioner for being null and void.
The respondents also claimed that the enforcement of the deeds of
assignment was subject to a supervening condition:
3. That this exclusive and absolute right given to the assignee shall be
exercised only when no legal impediments exist to the lot to effect the
smooth transfer of lawful ownership of the lot/property in the name of the
ASSIGNEE.21
The respondents argued that until such condition took place, the petitioner
would not acquire any right to enforce the deeds by injunctive relief.
Furthermore, the petitioners plea in his complaint before the trial court, to
fix a period within which to pay the balance of the amounts due to the

tenants under said deeds after the "lapse" of any legal impediment,
assumed that the deeds were valid, when, in fact and in law, they were
not. According to the respondents, they were not parties to the deeds of
assignment; hence, they were not bound by the said deeds. The issuance
of a writ of preliminary injunction would restrict and impede the exercise of
their right to dispose of their property, as provided for in Article 428 of the
New Civil Code. They asserted that the petitioner had no cause of action
against them and the defendants-tenants.
On April 17, 1998, the Court of Appeals rendered its decision against the
petitioner, annulling and setting aside the assailed orders of the trial court;
and permanently enjoining the said trial court from proceeding with Civil
Case No. 10901. The decretal portion of the decision reads as follows:
However, even if private respondent is denied of the injunctive relief he
demands in the lower court still he could avail of other course of action in
order to protect his interest such as the institution of a simple civil case of
collection of money against TIAMSON, et al.
For all the foregoing considerations, the orders dated 13 February 1997
and 16 April 1997 are hereby NULLIFIED and ordered SET ASIDE for having
been issued with grave abuse of discretion amounting to lack or excess of
jurisdiction. Accordingly, public respondent is permanently enjoined from
proceeding with the case designated as Civil Case No. 10901. 22
The CA ruled that the respondents could not be enjoined from alienating or
even encumbering their property, especially so since they were not privies
to the deeds of assignment executed by the defendants-tenants. The
defendants-tenants were not yet owners of the portions of the landholdings
respectively tilled by them; as such, they had nothing to assign to the
petitioner. Finally, the CA ruled that the deeds of assignment executed by
the defendants-tenants were contrary to P.D. No. 27 and Rep. Act No. 6657.
On August 4, 1998, the CA issued a Resolution denying the petitioners
motion for reconsideration.23
Hence, the petitioner filed his petition for review on certiorari before this
Court, contending as follows:
I
A MERE ALLEGATION IN THE ANSWER OF THE TENANTS COULD NOT BE
USED AS EVIDENCE OR BASIS FOR ANY CONCLUSION, AS THIS
ALLEGATION, IS STILL THE SUBJECT OF TRIAL IN THE LOWER COURT (RTC). 24
II

THE COURT OF APPEALS CANNOT ENJOIN THE HEARING OF A PETITION FOR

PRELIMINARY INJUNCTION AT A TIME WHEN THE LOWER COURT (RTC) IS
STILL RECEIVING EVIDENCE PRECISELY TO DETERMINE WHETHER OR NOT
THE WRIT OF PRELIMINARY INJUNCTION BEING PRAYED FOR BY TAYAG
SHOULD BE GRANTED OR NOT.25
III
THE COURT OF APPEALS CANNOT USE "FACTS" NOT IN EVIDENCE, TO
SUPPORT ITS CONCLUSION THAT THE TENANTS ARE NOT YET "AWARDEES
OF THE LAND REFORM.26
IV
THE COURT OF APPEALS CANNOT CAUSE THE PERMANENT STOPPAGE OF
THE ENTIRE PROCEEDINGS BELOW INCLUDING THE TRIAL ON THE MERITS
OF THE CASE CONSIDERING THAT THE ISSUE INVOLVED ONLY THE
PROPRIETY OF MAINTAINING THE STATUS QUO. 27
V
THE COURT OF APPEALS CANNOT INCLUDE IN ITS DECISION THE CASE OF
THE OTHER 35 TENANTS WHO DO NOT QUESTION THE JURISDICTION OF
THE LOWER COURT (RTC) OVER THE CASE AND WHO ARE IN FACT STILL
PRESENTING THEIR EVIDENCE TO OPPOSE THE INJUNCTION PRAYED FOR,
AND TO PROVE AT THE SAME TIME THE COUNTER-CLAIMS THEY FILED
AGAINST THE PETITIONER.28
VI
THE LOWER COURT (RTC) HAS JURISDICTION OVER THE CASE FILED BY
TAYAG FOR "FIXING OF PERIOD" UNDER ART. 1197 OF THE NEW CIVIL CODE
AND FOR "DAMAGES" AGAINST THE LACSONS UNDER ART. 1314 OF THE
SAME CODE. THIS CASE CANNOT BE SUPPRESSED OR RENDERED
NUGATORY UNCEREMONIOUSLY.29
The petitioner faults the Court of Appeals for permanently enjoining the
trial court from proceeding with Civil Case No. 10910. He opines that the
same was too drastic, tantamount to a dismissal of the case. He argues
that at that stage, it was premature for the appellate court to determine
the merits of the case since no evidentiary hearing thereon was conducted
by the trial court. This, the Court of Appeals cannot do, since neither party
moved for the dismissal of Civil Case No. 10910. The petitioner points out
that the Court of Appeals, in making its findings, went beyond the issue
raised by the private respondents, namely, whether or not the trial court
committed a grave abuse of discretion amounting to excess or lack of
jurisdiction when it denied the respondents motion for the denial/dismissal
of the petitioners plea for a writ of preliminary injunction. He, likewise,

points out that the appellate court erroneously presumed that the
leaseholders were not DAR awardees and that the deeds of assignment
were contrary to law. He contends that leasehold tenants are not
prohibited from conveying or waiving their leasehold rights in his favor. He
insists that there is nothing illegal with his contracts with the leaseholders,
since the same shall be effected only when there are no more "legal
impediments."
At bottom, the petitioner contends that, at that stage, it was premature for
the appellate court to determine the merits of his case since no evidentiary
hearing on the merits of his complaint had yet been conducted by the trial
court.
The
Comment/Motion
Respondents
to
Petitioners
Plea
of
Preliminary
Was Not Premature.

of
for

the
Dismiss/Deny
a
Writ
Injunction

Contrary to the ruling of the trial court, the motion of the respondents to
dismiss/deny the petitioners plea for a writ of preliminary injunction after
the petitioner had adduced his evidence, testimonial and documentary,
and had rested his case on the incident, was proper and timely. It bears
stressing that the petitioner had the burden to prove his right to a writ of
preliminary injunction. He may rely solely on the material allegations of his
complaint or adduce evidence in support thereof. The petitioner adduced
his evidence to support his plea for a writ of preliminary injunction against
the respondents and the defendants-tenants and rested his case on the
said incident. The respondents then had three options: (a) file a motion to
deny/dismiss the motion on the ground that the petitioner failed to
discharge his burden to prove the factual and legal basis for his plea for a
writ of preliminary injunction and, if the trial court denies his motion, for
them to adduce evidence in opposition to the petitioners plea; (b) forgo
their motion and adduce testimonial and/or documentary evidence in
opposition to the petitioners plea for a writ of preliminary injunction; or, (c)
waive their right to adduce evidence and submit the incident for
consideration on the basis of the pleadings of the parties and the evidence
of the petitioner. The respondents opted not to adduce any evidence, and
instead filed a motion to deny or dismiss the petitioners plea for a writ of
preliminary injunction against them, on their claim that the petitioner failed
to prove his entitlement thereto. The trial court cannot compel the
respondents to adduce evidence in opposition to the petitioners plea if the
respondents opt to waive their right to adduce such evidence. Thus, the
trial court should have resolved the respondents motion even without the
latters opposition and the presentation of evidence thereon.
The
Abuse
to

RTC
of
Excess

Committed
Discretion
or
Lack

a
of

Grave
Amounting
Jurisdiction

in
Issuing
its
and April 16, 1997 Orders

February

13,

1997

In its February 13, 1997 Order, the trial court ruled that the petitioner was
entitled to a writ of preliminary injunction against the respondents on the
basis of the material averments of the complaint. In its April 16, 1997
Order, the trial court denied the respondents motion for reconsideration of
the previous order, on its finding that the petitioner was entitled to a writ
of preliminary injunction based on the material allegations of his complaint,
the evidence on record, the pleadings of the parties, as well as the
applicable laws:
For the record, the Court denied the LACSONS COMMENT/MOTION on
the basis of the facts culled from the evidence presented, the pleadings
and the law applicable unswayed by the partisan or personal interests,
public opinion or fear of criticism (Canon 3, Rule 3.02, Code of Judicial
Ethics).30
Section 3, Rule 58 of the Rules of Court, as amended, enumerates the
grounds for the issuance of a writ of preliminary injunction, thus:
(a) That the applicant is entitled to the relief demanded, and the
whole or part of such relief consists in restraining the commission
or continuance of the act or acts complained of, or in requiring the
performance of an act or acts, either for a limited period or
perpetually;
(b) That the commission, continuance or non-performance of the
act or acts complained of during the litigation would probably work
injustice to the applicant; or
(c) That a party, court, agency or a person is doing, threatening, or
is attempting to do, or is procuring or suffering to be done, some
act or acts probably in violation of the rights of the applicant
respecting the subject of the action or proceeding, and tending to
render the judgment ineffectual.
A preliminary injunction is an extraordinary event calculated to preserve or
maintain the status quo of things ante litem and is generally availed of to
prevent actual or threatened acts, until the merits of the case can be
heard. Injunction is accepted as the strong arm of equity or a transcendent
remedy.31 While generally the grant of a writ of preliminary injunction rests
on the sound discretion of the trial court taking cognizance of the case,
extreme caution must be observed in the exercise of such
discretion.32 Indeed, in Olalia v. Hizon,33 we held:
It has been consistently held that there is no power the exercise of which is
more delicate, which requires greater caution, deliberation and sound

discretion, or more dangerous in a doubtful case, than the issuance of an

injunction. It is the strong arm of equity that should never be extended
unless to cases of great injury, where courts of law cannot afford an
adequate or commensurate remedy in damages.
Every court should remember that an injunction is a limitation upon the
freedom of action of the defendant and should not be granted lightly or
precipitately. It should be granted only when the court is fully satisfied that
the law permits it and the emergency demands it. 34
The very foundation of the jurisdiction to issue writ of injunction rests in
the existence of a cause of action and in the probability of irreparable
injury, inadequacy of pecuniary compensation and the prevention of the
multiplicity of suits. Where facts are not shown to bring the case within
these conditions, the relief of injunction should be refused. 35
For the court to issue a writ of preliminary injunction, the petitioner was
burdened to establish the following: (1) a right in esse or a clear and
unmistakable right to be protected; (2) a violation of that right; (3) that
there is an urgent and permanent act and urgent necessity for the writ to
prevent serious damage.36 Thus, in the absence of a clear legal right, the
issuance of the injunctive writ constitutes a grave abuse of discretion.
Where the complainants right is doubtful or disputed, injunction is not
proper. Injunction is a preservative remedy aimed at protecting substantial
rights and interests. It is not designed to protect contingent or future
rights. The possibility of irreparable damage without proof of adequate
existing rights is not a ground for injunction.37
We have reviewed the pleadings of the parties and found that, as
contended by the respondents, the petitioner failed to establish the
essential requisites for the issuance of a writ of preliminary injunction.
Hence, the trial court committed a grave abuse of its discretion amounting
to excess or lack of jurisdiction in denying the respondents
comment/motion as well as their motion for reconsideration.
First. The trial court cannot enjoin the respondents, at the instance of the
petitioner, from selling, disposing of and encumbering their property. As
the registered owners of the property, the respondents have the right to
enjoy and dispose of their property without any other limitations than
those established by law, in accordance with Article 428 of the Civil Code.
The right to dispose of the property is the power of the owner to sell,
encumber, transfer, and even destroy the property. Ownership also
includes the right to recover the possession of the property from any other
person to whom the owner has not transmitted such property, by the
appropriate action for restitution, with the fruits, and for indemnification for
damages.38 The right of ownership of the respondents is not, of course,
absolute. It is limited by those set forth by law, such as the agrarian reform
laws. Under Article 1306 of the New Civil Code, the respondents may enter
into contracts covering their property with another under such terms and

conditions as they may deem beneficial provided they are not contrary to
law, morals, good conduct, public order or public policy.
The respondents cannot be enjoined from selling or encumbering their
property simply and merely because they had executed Deeds of
Assignment in favor of the petitioner, obliging themselves to assign and
transfer their rights or interests as agricultural farmers/laborers/subtenants over the landholding, and granting the petitioner the exclusive
right to buy the property subject to the occurrence of certain conditions.
The respondents were not parties to the said deeds. There is no evidence
that the respondents agreed, expressly or impliedly, to the said deeds or to
the terms and conditions set forth therein. Indeed, they assailed the
validity of the said deeds on their claim that the same were contrary to the
letter and spirit of P.D. No. 27 and Rep. Act No. 6657. The petitioner even
admitted when he testified that he did not know any of the respondents,
and that he had not met any of them before he filed his complaint in the
RTC. He did not even know that one of those whom he had impleaded as
defendant, Angelica Vda. de Lacson, was already dead.
Q: But you have not met any of these Lacsons?
A: Not yet, sir.
Q: Do you know that two (2) of the defendants are residents of the
United States?
A: I do not know, sir.
Q: You do not know also that Angela Tiotuvie (sic) Vda. de Lacson
had already been dead?
A: I am aware of that, sir.39

Second. A reading the averments of the complaint will show that the
petitioner clearly has no cause of action against the respondents for the
principal relief prayed for therein, for the trial court to fix a period within
which to pay to each of the defendants-tenants the balance of the P50.00
per square meter, the consideration under the Deeds of Assignment
executed by the defendants-tenants. The respondents are not parties or
privies to the deeds of assignment. The matter of the period for the
petitioner to pay the balance of the said amount to each of the defendantstenants is an issue between them, the parties to the deed.
Third. On the face of the complaint, the action of the petitioner against the
respondents and the defendants-tenants has no legal basis. Under the
Deeds of Assignment, the obligation of the petitioner to pay to each of the
defendants-tenants the balance of the purchase price was conditioned on
the occurrence of the following events: (a) the respondents agree to sell
their property to the petitioner; (b) the legal impediments to the sale of the
landholding to the petitioner no longer exist; and, (c) the petitioner decides
to buy the property. When he testified, the petitioner admitted that the
legal impediments referred to in the deeds were (a) the respondents
refusal to sell their property; and, (b) the lack of approval of the
Department of Agrarian Reform:
Q : There is no specific agreement prior to the execution of those
documents as when they will pay?
A : We agreed to that, that I will pay them when there are no legal
impediment, sir.
Q : Many of the documents are unlattered (sic) and you want to
convey to this Honorable Court that prior to the execution of these
documents you have those tentative agreement for instance that
the amount or the cost of the price is to be paid when there are no
legal impediment, you are using the word "legal impediment," do
you know the meaning of that?

We are one with the Court of Appeals in its ruling that:

A : When there are (sic) no more legal impediment exist, sir.
We cannot see our way clear on how or why injunction should lie against
petitioners. As owners of the lands being tilled by TIAMSON, et al.,
petitioners, under the law, have the right to enjoy and dispose of the same.
Thus, they have the right to possess the lands, as well as the right to
encumber or alienate them. This principle of law notwithstanding, private
respondent in the lower court sought to restrain the petitioners from
encumbering and/or alienating the properties covered by TCT No. 35922-R,
35923-R and TCT No. 35925-R of the Registry of Deeds of San Fernando,
Pampanga. This cannot be allowed to prosper since it would constitute a
limitation or restriction, not otherwise established by law on their right of
ownership, more so considering that petitioners were not even privy to the
alleged transaction between private respondent and TIAMSON, et al. 40

Q : Did you make how (sic) to the effect that the meaning of that
phrase that you used the unlettered defendants?
A : We have agreed to that, sir.
ATTY. OCAMPO:
May I ask, Your Honor, that the witness please answer my question
not to answer in the way he wanted it.
COURT:

Just answer the question, Mr. Tayag.

WITNESS:
Yes, Your Honor.
ATTY. OCAMPO:
Q : Did you explain to them?
A : Yes, sir.
Q : What did you tell them?
A : I explain[ed] to them, sir, that the legal impediment then
especially if the Lacsons will not agree to sell their shares to me or
to us it would be hard to (sic) me to pay them in full. And those
covered by DAR. I explain[ed] to them and it was clearly stated in
the title that there is [a] prohibited period of time before you can
sell the property. I explained every detail to them.41
It is only upon the occurrence of the foregoing conditions that the
petitioner would be obliged to pay to the defendants-tenants the balance
of the P50.00 per square meter under the deeds of assignment. Thus:
2. That in case the ASSIGNOR and LANDOWNER will mutually agree
to sell the said lot to the ASSIGNEE, who is given an exclusive and
absolute right to buy the lot, the ASSIGNOR shall receive the sum
of FIFTY PESOS (P50.00) per square meter as consideration of the
total area actually tilled and possessed by the ASSIGNOR, less
whatever amount received by the ASSIGNOR including
commissions, taxes and all allowable deductions relative to the
sale of the subject properties.
3. That this exclusive and absolute right given to the ASSIGNEE
shall be exercised only when no legal impediments exist to the lot
to effect the smooth transfer of lawful ownership of the lot/property
in the name of the ASSIGNEE;
4. That the ASSIGNOR will remain in peaceful possession over the
said property and shall enjoy the fruits/earnings and/or harvest of
the said lot until such time that full payment of the agreed
purchase price had been made by the ASSIGNEE.42
There is no showing in the petitioners complaint that the respondents had
agreed to sell their property, and that the legal impediments to the
agreement no longer existed. The petitioner and the defendants-tenants

had yet to submit the Deeds of Assignment to the Department of Agrarian

Reform which, in turn, had to act on and approve or disapprove the same.
In fact, as alleged by the petitioner in his complaint, he was yet to meet
with the defendants-tenants to discuss the implementation of the deeds of
assignment. Unless and until the Department of Agrarian Reform approved
the said deeds, if at all, the petitioner had no right to enforce the same in a
court of law by asking the trial court to fix a period within which to pay the
balance of the purchase price and praying for injunctive relief.
We do not agree with the contention of the petitioner that the deeds of
assignment executed by the defendants-tenants are perfected option
contracts.43 An option is a contract by which the owner of the property
agrees with another person that he shall have the right to buy his property
at a fixed price within a certain time. It is a condition offered or contract by
which the owner stipulates with another that the latter shall have the right
to buy the property at a fixed price within a certain time, or under, or in
compliance with certain terms and conditions, or which gives to the owner
of the property the right to sell or demand a sale. It imposes no binding
obligation on the person holding the option, aside from the consideration
for the offer. Until accepted, it is not, properly speaking, treated as a
contract.44 The second party gets in praesenti, not lands, not an agreement
that he shall have the lands, but the right to call for and receive lands if he
elects.45 An option contract is a separate and distinct contract from which
the parties may enter into upon the conjunction of the option. 46
In this case, the defendants-tenants-subtenants, under the deeds of
assignment, granted to the petitioner not only an option but the exclusive
right to buy the landholding. But the grantors were merely the defendantstenants, and not the respondents, the registered owners of the property.
Not being the registered owners of the property, the defendants-tenants
could not legally grant to the petitioner the option, much less the
"exclusive right" to buy the property. As the Latin saying goes, "NEMO DAT
QUOD NON HABET."
Fourth. The petitioner impleaded the respondents as parties-defendants
solely on his allegation that the latter induced or are inducing the
defendants-tenants to violate the deeds of assignment, contrary to the
provisions of Article 1314 of the New Civil Code which reads:
Art. 1314. Any third person who induces another to violate his contract
shall be liable for damages to the other contracting party.
In So Ping Bun v. Court of Appeals, 47 we held that for the said law to apply,
the pleader is burdened to prove the following: (1) the existence of a valid
contract; (2) knowledge by the third person of the existence of the
contract; and (3) interference by the third person in the contractual
relation without legal justification.

Where there was no malice in the interference of a contract, and the

impulse behind ones conduct lies in a proper business interest rather than
in wrongful motives, a party cannot be a malicious interferer. Where the
alleged interferer is financially interested, and such interest motivates his
conduct, it cannot be said that he is an officious or malicious
intermeddler.48
In fine, one who is not a party to a contract and who interferes thereon is
not necessarily an officious or malicious intermeddler. The only evidence
adduced by the petitioner to prove his claim is the letter from the
defendants-tenants informing him that they had decided to sell their rights
and interests over the landholding to the respondents, instead of honoring
their obligation under the deeds of assignment because, according to
them, the petitioner harassed those tenants who did not want to execute
deeds of assignment in his favor, and because the said defendants-tenants
did not want to have any problem with the respondents who could cause
their eviction for executing with the petitioner the deeds of assignment as
the said deeds are in violation of P.D. No. 27 and Rep. Act No. 6657. 49 The
defendants-tenants did not allege therein that the respondents induced
them to breach their contracts with the petitioner. The petitioner himself
admitted when he testified that his claim that the respondents induced the
defendants-assignees to violate contracts with him was based merely on
what "he heard," thus:
Q: Going to your last statement that the Lacsons induces (sic) the
defendants, did you see that the Lacsons were inducing the
defendants?
A: I heard and sometime in [the] first week of August, sir, they
went in the barrio (sic). As a matter of fact, that is the reason why
they sent me letter that they will sell it to the Lacsons.
Q: Incidentally, do you knew (sic) these Lacsons individually?
A: No, sir, it was only Mr. Espinosa who I knew (sic) personally, the
alleged negotiator and has the authority to sell the property. 50
Even if the respondents received an offer from the defendants-tenants to
assign and transfer their rights and interests on the landholding, the
respondents cannot be enjoined from entertaining the said offer, or even
negotiating with the defendants-tenants. The respondents could not even
be expected to warn the defendants-tenants for executing the said deeds
in violation of P.D. No. 27 and Rep. Act No. 6657. Under Section 22 of the
latter law, beneficiaries under P.D. No. 27 who have culpably sold, disposed
of, or abandoned their land, are disqualified from becoming beneficiaries.
From the pleadings of the petitioner, it is quite evident that his purpose in
having the defendants-tenants execute the Deeds of Assignment in his
favor was to acquire the landholding without any tenants thereon, in the

event that the respondents agreed to sell the property to him. The
petitioner knew that under Section 11 of Rep. Act No. 3844, if the
respondents agreed to sell the property, the defendants-tenants shall have
preferential right to buy the same under reasonable terms and conditions:
SECTION 11. Lessees Right of Pre-emption. In case the agricultural lessor
desires to sell the landholding, the agricultural lessee shall have the
preferential right to buy the same under reasonable terms and conditions:
Provided, That the entire landholding offered for sale must be pre-empted
by the Land Authority if the landowner so desires, unless the majority of
the lessees object to such acquisition: Provided, further, That where there
are two or more agricultural lessees, each shall be entitled to said
preferential right only to the extent of the area actually cultivated by him.
51
Under Section 12 of the law, if the property was sold to a third person
without the knowledge of the tenants thereon, the latter shall have the
right to redeem the same at a reasonable price and consideration. By
assigning their rights and interests on the landholding under the deeds of
assignment in favor of the petitioner, the defendants-tenants thereby
waived, in favor of the petitioner, who is not a beneficiary under Section 22
of Rep. Act No. 6657, their rights of preemption or redemption under Rep.
Act No. 3844. The defendants-tenants would then have to vacate the
property in favor of the petitioner upon full payment of the purchase price.
Instead of acquiring ownership of the portions of the landholding
respectively tilled by them, the defendants-tenants would again become
landless for a measly sum of P50.00 per square meter. The petitioners
scheme is subversive, not only of public policy, but also of the letter and
spirit of the agrarian laws. That the scheme of the petitioner had yet to
take effect in the future or ten years hence is not a justification. The
respondents may well argue that the agrarian laws had been violated by
the defendants-tenants and the petitioner by the mere execution of the
deeds of assignment. In fact, the petitioner has implemented the deeds by
paying the defendants-tenants amounts of money and even sought their
immediate implementation by setting a meeting with the defendantstenants. In fine, the petitioner would not wait for ten years to evict the
defendants-tenants. For him, time is of the essence.
The
Appellate
In
Permanently
The
Regional
From
Continuing
Proceedings in Civil Case No. 10910.

Court
Trial
with

Erred
Enjoining
Court
the

We agree with the petitioners contention that the appellate court erred
when it permanently enjoined the RTC from continuing with the
proceedings in Civil Case No. 10910. The only issue before the appellate
court was whether or not the trial court committed a grave abuse of
discretion amounting to excess or lack of jurisdiction in denying the
respondents motion to deny or dismiss the petitioners plea for a writ of

preliminary injunction. Not one of the parties prayed to permanently enjoin

the trial court from further proceeding with Civil Case No. 10910 or to
dismiss the complaint. It bears stressing that the petitioner may still
amend his complaint, and the respondents and the defendants-tenants
may file motions to dismiss the complaint. By permanently enjoining the
trial court from proceeding with Civil Case No. 10910, the appellate court
acted arbitrarily and effectively dismissed the complaint motu proprio,
including the counterclaims of the respondents and that of the defendantstenants. The defendants-tenants were even deprived of their right to prove
their special and affirmative defenses.
IN LIGHT OF ALL THE FOREGOING, the petition is PARTIALLY GRANTED. The
Decision of the Court of Appeals nullifying the February 13, 1996 and April
16, 1997 Orders of the RTC is AFFIRMED. The writ of injunction issued by
the Court of Appeals permanently enjoining the RTC from further
proceeding with Civil Case No. 10910 is hereby LIFTED and SET ASIDE. The
Regional Trial Court of Mabalacat, Pampanga, Branch 44, is ORDERED to
continue with the proceedings in Civil Case No. 10910 as provided for by
the Rules of Court, as amended.
SO ORDERED.

[G.R. No. 155043. September 30, 2004]

ARTURO R. ABALOS, petitioner, vs. DR. GALICANO S. MACATANGAY,

JR., respondent.
DECISION
TINGA, J.:
The instant petition seeks a reversal of the Decision of the Court of
Appeals in CA-G.R. CV No. 48355 entitled Dr. Galicano S. Macatangay, Jr.
v. Arturo R. Abalos and Esther Palisoc-Abalos, promulgated on March 14,
2002. The appellate court reversed the trial courts decision which
dismissed the action for specific performance filed by respondent, and
ordered petitioner and his wife to execute in favor of herein respondent a
deed of sale over the subject property.
Spouses Arturo and Esther Abalos are the registered owners of a
parcel of land with improvements located at Azucena St., Makati City
consisting of about three hundred twenty-seven (327) square meters,
covered by Transfer Certificate of Title (TCT) No. 145316 of the Registry of
Deeds of Makati.
Armed with a Special Power of Attorney dated June 2, 1988,
purportedly issued by his wife, Arturo executed a Receipt and
Memorandum of Agreement (RMOA) dated October 17, 1989, in favor of
respondent, binding himself to sell to respondent the subject property and
not to offer the same to any other party within thirty (30) days from
date. Arturo acknowledged receipt of a check from respondent in the
amount of Five Thousand Pesos (P5,000.00), representing earnest money
for the subject property, the amount of which would be deducted from the
purchase price of One Million Three Hundred Three Hundred Thousand
Pesos (P1,300,000.00). Further, the RMOA stated that full payment would
be effected as soon as possession of the property shall have been turned
over to respondent.
Subsequently, Arturos wife, Esther, executed a Special Power of
Attorney dated October 25, 1989, appointing her sister, Bernadette Ramos,
to act for and in her behalf relative to the transfer of the property to
respondent. Ostensibly, a marital squabble was brewing between Arturo
and Esther at the time and to protect his interest, respondent caused the
annotation of his adverse claim on the title of the spouses to the property
on November 14, 1989.
On November 16, 1989, respondent sent a letter to Arturo and Esther
informing them of his readiness and willingness to pay the full amount of
the purchase price. The letter contained a demand upon the spouses to
comply with their obligation to turn over possession of the property to
him. On the same date, Esther, through her attorney-in-fact, executed in

favor of respondent, a Contract to Sell the property to the extent of her

conjugal interest therein for the sum of six hundred fifty thousand pesos
(P650,000.00) less the sum already received by her and Arturo. Esther
agreed to surrender possession of the property to respondent within
twenty (20) days from November 16, 1989, while the latter promised to
pay the balance of the purchase price in the amount of one million two
hundred ninety thousand pesos (P1,290,000.00) after being placed in
possession of the property. Esther also obligated herself to execute and
deliver to respondent a deed of absolute sale upon full payment.
In a letter dated December 7, 1989, respondent informed the spouses
that he had set aside the amount of One Million Two Hundred Ninety
Thousand Pesos (P1,290,000.00) as evidenced by Citibank Check No.
278107 as full payment of the purchase price. He reiterated his demand
upon them to comply with their obligation to turn over possession of the
property. Arturo and Esther failed to deliver the property which prompted
respondent to cause the annotation of another adverse claim on TCT No.
145316. On January 12, 1990, respondent filed a complaint for specific
performance with damages against petitioners. Arturo filed his answer to
the complaint while his wife was declared in default.
The Regional Trial Court (RTC) dismissed the complaint for specific
performance. It ruled that the Special Power of Attorney (SPA) ostensibly
issued by Esther in favor of Arturo was void as it was falsified. Hence, the
court concluded that the SPA could not have authorized Arturo to sell the
property to respondent. The trial court also noted that the check issued by
respondent to cover the earnest money was dishonored due to
insufficiency of funds and while it was replaced with another check by
respondent, there is no showing that the second check was issued as
payment for the earnest money on the property.
On appeal taken by respondent, the Court of Appeals reversed the
decision of the trial court. It ruled that the SPA in favor of Arturo, assuming
that it was void, cannot affect the transaction between Esther and
respondent. The appellate court ratiocinated that it was by virtue of the
SPA executed by Esther, in favor of her sister, that the sale of the property
to respondent was effected. On the other hand, the appellate court
considered the RMOA executed by Arturo in favor of respondent valid to
effect the sale of Arturos conjugal share in the property.
Dissatisfied with the appellate courts disposition of the case,
petitioner seeks a reversal of its decision alleging that:
I.
The Court of Appeals committed serious and manifest error when it
decided on the appeal without affording petitioner his right to due process.
II.
The Court of Appeals committed serious and manifest error in reversing
and setting aside the findings of fact by the trial court.

III.
The Court of Appeals erred in ruling that a contract to sell is a contract of
sale, and in ordering petitioner to execute a registrable form of deed of
sale over the property in favor of respondent.[1]
Petitioner contends that he was not personally served with copies of
summons, pleadings, and processes in the appeal proceedings nor was he
given an opportunity to submit an appellees brief. He alleges that his
counsel was in the United States from 1994 to June 2000, and he never
received any news or communication from him after the proceedings in the
trial court were terminated. Petitioner submits that he was denied due
process because he was not informed of the appeal proceedings, nor given
the chance to have legal representation before the appellate court.
We are not convinced. The essence of due process is an opportunity
to be heard. Petitioners failure to participate in the appeal proceedings is
not due to a cause imputable to the appellate court but because of
petitioners own neglect in ascertaining the status of his case. Petitioners
counsel is equally negligent in failing to inform his client about the recent
developments in the appeal proceedings. Settled is the rule that a party is
bound by the conduct, negligence and mistakes of his counsel. [2] Thus,
petitioners plea of denial of due process is downright baseless.
Petitioner also blames the appellate court for setting aside the factual
findings of the trial court and argues that factual findings of the trial court
are given much weight and respect when supported by substantial
evidence. He asserts that the sale between him and respondent is void for
lack of consent because the SPA purportedly executed by his wife Esther is
a forgery and therefore, he could not have validly sold the subject property
to respondent.
Next, petitioner theorizes that the RMOA he executed in favor of
respondent was not perfected because the check representing the earnest
money was dishonored. He adds that there is no evidence on record that
the second check issued by respondent was intended to replace the first
check representing payment of earnest money.
Respondent admits that the subject property is co-owned by petitioner
and his wife, but he objects to the allegations in the petition bearing a
relation to the supposed date of the marriage of the vendors. He contends
that the alleged date of marriage between petitioner and his wife is a new
factual issue which was not raised nor established in the court a
quo. Respondent claims that there is no basis to annul the sale freely and
voluntarily entered into by the husband and the wife.
The focal issue in the instant petition is whether petitioner may be
compelled to convey the property to respondent under the terms of the
RMOA and the Contract to Sell. At bottom, the resolution of the issue
entails the ascertainment of the contractual nature of the two documents
and the status of the contracts contained therein.

Contracts, in general, require the presence of three essential

elements: (1) consent of the contracting parties; (2) object certain which is
the subject matter of the contract; and (3) cause of the obligation which is
established.[3]
Until the contract is perfected, it cannot, as an independent source of
obligation, serve as a binding juridical relation. [4] In a contract of sale, the
seller must consent to transfer ownership in exchange for the price, the
subject matter must be determinate, and the price must be certain in
money or its equivalent.[5] Being essentially consensual, a contract of sale
is perfected at the moment there is a meeting of the minds upon the thing
which is the object of the contract and upon the price. [6] However,
ownership of the thing sold shall not be transferred to the vendee until
actual or constructive delivery of the property.[7]
On the other hand, 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. [8] An option merely
grants a privilege to buy or sell within an agreed time and at a determined
price. It is separate and distinct from that which the parties may enter into
upon the consummation of the option.[9] A perfected contract of option
does not result in the perfection or consummation of the sale; only when
the option is exercised may a sale be perfected. [10] The option must,
however, be supported by a consideration distinct from the price. [11]
Perusing the RMOA, it signifies a unilateral offer of Arturo to sell the
property to respondent for a price certain within a period of thirty
days. The RMOA does not impose upon respondent an obligation to buy
petitioners property, as in fact it does not even bear his signature
thereon. It is quite clear that after the lapse of the thirty-day period,
without respondent having exercised his option, Arturo is free to sell the
property to another. This shows that the intent of Arturo is merely to grant
respondent the privilege to buy the property within the period therein
stated. There is nothing in the RMOA which indicates that Arturo agreed
therein to transfer ownership of the land which is an essential element in a
contract of sale. Unfortunately, the option is not binding upon the
promissory since it is not supported by a consideration distinct from the
price.[12]
As a rule, the holder of the option, after accepting the promise and
before he exercises his option, is not bound to buy. He is free either to buy
or not to buy later. In Sanchez v. Rigos[13] we ruled that in an accepted
unilateral promise to sell, the promissor is not bound by his promise and
may, accordingly, withdraw it, since there may be no valid contract without
a cause or consideration. Pending notice of its withdrawal, his accepted
promise partakes of the nature of an offer to sell which, if acceded or
consented to, results in a perfected contract of sale.
Even conceding for the nonce that respondent had accepted the offer
within the period stated and, as a consequence, a bilateral contract of
purchase and sale was perfected, the outcome would be the same. To
benefit from such situation, respondent would have to pay or at least make

a valid tender of payment of the price for only then could he exact
compliance with the undertaking of the other party. [14] This respondent
failed to do. By his own admission, he merely informed respondent spouses
of his readiness and willingness to pay. The fact that he had set aside a
check in the amount of One Million Two Hundred Ninety Thousand Pesos
(P1,290,000.00) representing the balance of the purchase price could not
help his cause. Settled is the rule that tender of payment must be made in
legal tender. A check is not legal tender, and therefore cannot constitute a
valid tender of payment.[15] Not having made a valid tender of payment,
respondents action for specific performance must fail.
With regard to the payment of Five Thousand Pesos (P5,000.00), the
Court is of the view that the amount is not earnest money as the term is
understood in Article 1482 which signifies proof of the perfection of the
contract of sale, but merely a guarantee that respondent is really
interested to buy the property. It is not the giving of earnest money, but
the proof of the concurrence of all the essential elements of the contract of
sale which establishes the existence of a perfected sale. [16] No reservation
of ownership on the part of Arturo is necessary since, as previously stated,
he has never agreed to transfer ownership of the property to respondent.
Granting for the sake of argument that the RMOA is a contract of sale,
the same would still be void not only for want of consideration and absence
of respondents signature thereon, but also for lack of Esthers conformity
thereto. Quite glaring is the absence of the signature of Esther in the
RMOA, which proves that she did not give her consent to the transaction
initiated by Arturo. The husband cannot alienate any real property of the
conjugal partnership without the wifes consent.[17]
However, it was the Contract to Sell executed by Esther through her
attorney-in-fact which the Court of Appeals made full use of. Holding that
the contract is valid, the appellate court explained that while Esther did not
authorize Arturo to sell the property, her execution of the SPA authorizing
her sister to sell the land to respondent clearly shows her intention to
convey her interest in favor of respondent. In effect, the court declared
that the lack of Esthers consent to the sale made by Arturo was cured by
her subsequent conveyance of her interest in the property through her
attorney-in-fact.
We do not share the ruling.
The nullity of the RMOA as a contract of sale emanates not only from
lack of Esthers consent thereto but also from want of consideration and
absence of respondents signature thereon. Such nullity cannot be
obliterated by Esthers subsequent confirmation of the putative transaction
as expressed in the Contract to Sell. Under the law, a void contract cannot
be ratified[18] and the action or defense for the declaration of the
inexistence of a contract does not prescribe. [19] A void contract produces no
effect either against or in favor of anyoneit cannot create, modify or
extinguish the juridical relation to which it refers.[20]
True, in the Contract to Sell, Esther made reference to the earlier
RMOA executed by Arturo in favor of respondent. However, the RMOA

which Arturo signed is different from the deed which Esther executed
through her attorney-in-fact. For one, the first is sought to be enforced as
a contract of sale while the second is purportedly a contract to sell
only. For another, the terms and conditions as to the issuance of title and
delivery of possession are divergent.
The congruence of the wills of the spouses is essential for the valid
disposition of conjugal property. Where the conveyance is contained in the
same document which bears the conformity of both husband and wife,
there could be no question on the validity of the transaction. But when
there are two documents on which the signatures of the spouses
separately appear, textual concordance of the documents is indispensable.
Hence, in this case where the wifes putative consent to the sale of
conjugal property appears in a separate document which does not,
however, contain the same terms and conditions as in the first document
signed by the husband, a valid transaction could not have arisen.
Quite a bit of elucidation on the conjugal partnership of gains is in
order.
Arturo and Esther appear to have been married before the effectivity
of the Family Code. There being no indication that they have adopted a
different property regime, their property relations would automatically be
governed by the regime of conjugal partnership of gains. [21]
The subject land which had been admittedly acquired during the
marriage of the spouses forms part of their conjugal partnership. [22]
Under the Civil Code, the husband is the administrator of the conjugal
partnership. This right is clearly granted to him by law. [23] More, the
husband is the sole administrator. The wife is not entitled as of right to
joint administration.[24]
The husband, even if he is statutorily designated as administrator of
the conjugal partnership, cannot validly alienate or encumber any real
property of the conjugal partnership without the wifes consent.
[25]
Similarly, the wife cannot dispose of any property belonging to the
conjugal partnership without the conformity of the husband. The law is
explicit that the wife cannot bind the conjugal partnership without the
husbands consent, except in cases provided by law. [26]

More significantly, it has been held that prior to the liquidation of the
conjugal partnership, the interest of each spouse in the conjugal assets is
inchoate, a mere expectancy, which constitutes neither a legal nor an
equitable estate, and does not ripen into title until it appears that there are
assets in the community as a result of the liquidation and settlement. The
interest of each spouse is limited to the net remainder or remanente
liquido (haber ganancial) resulting from the liquidation of the affairs of the
partnership after its dissolution.[27] Thus, the right of the husband or wife to
one-half of the conjugal assets does not vest until the dissolution and
liquidation of the conjugal partnership, or after dissolution of the marriage,
when it is finally determined that, after settlement of conjugal obligations,
there are net assets left which can be divided between the spouses or their
respective heirs.[28]
In not a few cases, we ruled that the sale by the husband of property
belonging to the conjugal partnership without the consent of the wife when
there is no showing that the latter is incapacitated is void ab initio because
it is in contravention of the mandatory requirements of Article 166 of the
Civil Code.[29] Since Article 166 of the Civil Code requires the consent of
the wife before the husband may alienate or encumber any real property of
the conjugal partnership, it follows that acts or transactions executed
against this mandatory provision are void except when the law itself
authorizes their validity.[30]
Quite recently, in San Juan Structural and Steel Fabricators, Inc. v.
Court of Appeals,[31] we ruled that neither spouse could alienate in favor of
another, his or her interest in the partnership or in any property belonging
to it, or ask for partition of the properties before the partnership itself had
been legally dissolved. Nonetheless, alienation of the share of each
spouse in the conjugal partnership could be had after separation of
property of the spouses during the marriage had been judicially decreed,
upon their petition for any of the causes specified in Article 191 [32] of the
Civil Code in relation to Article 214[33] thereof.
As an exception, the husband may dispose of conjugal property
without the wifes consent if such sale is necessary to answer for conjugal
liabilities mentioned in Articles 161 and 162 of the Civil Code.
[34]
In Tinitigan v. Tinitigan, Sr.,[35] the Court ruled that the husband may sell
property belonging to the conjugal partnership even without the consent of
the wife if the sale is necessary to answer for a big conjugal liability which
might endanger the familys economic standing. This is one instance
where the wifes consent is not required and, impliedly, no judicial
intervention is necessary.
Significantly, the Family Code has introduced some changes
particularly on the aspect of the administration of the conjugal partnership.
The new law provides that the administration of the conjugal partnership is
now a joint undertaking of the husband and the wife. In the event that one
spouse is incapacitated or otherwise unable to participate in the
administration of the conjugal partnership, the other spouse may assume
sole powers of administration. However, the power of administration does
not include the power to dispose or encumber property belonging to the

conjugal partnership.[36] In all instances, the present law specifically

requires the written consent of the other spouse, or authority of the court
for the disposition or encumbrance of conjugal partnership property
without which, the disposition or encumbrance shall be void. [37]
Inescapably, herein petitioners action for specific performance must
fail. Even on the supposition that the parties only disposed of their
respective shares in the property, the sale, assuming that it exists, is still
void for as previously stated, the right of the husband or the wife to onehalf of the conjugal assets does not vest until the liquidation of the
conjugal partnership. Nemo dat qui non habet. No one can give what he
has not.
WHEREFORE, the appealed Decision is hereby REVERSED and SET
ASIDE. The complaint in Civil Case No. 90-106 of the Regional Trial Court of
Makati is ordered DISMISSED. No pronouncement as to costs.
SO ORDERED.