Beruflich Dokumente
Kultur Dokumente
FIRST DIVISION
CRUZ, J.:
The subject of the controversy is a parcel of land measuring six hundred
(600) square meters, more or less, with two buildings constructed thereon,
belonging to the Intestate Estate of Jose L. Reynoso.
This property was leased to Raoul S. Bonnevie and Christopher Bonnevie by
the administratrix, Africa Valdez de Reynoso, for a period of one year
beginning August 8, 1976, at a monthly rental of P4,000.00.
The Contract of lease contained the following stipulation:
20. In case the LESSOR desire or decides to sell the lease
property, the LESSEES shall be given a first priority to purchase the
same, all things and considerations being equal.
On November 3, 1976 according to Reynoso, she notified the private
respondents by registered mail that she was selling the leased premises for
P600.000.00 less a mortgage loan of P100,000.00, and was giving them 30
days from receipt of the letter within which to exercise their right of first
priority to purchase the subject property. She said that in the event that
they did not exercise the said right, she would expect them to vacate the
property not later then March, 1977.
On January 20, 1977, Reynoso sent another letter to private respondents
advising them that in view of their failure to exercise their right of first
priority, she had already sold the property.
2
On April 29, 1980, while the ejectment case was pending in the City Court,
the private respondents filed an action for annulment of the sale between
Reynoso and herein petitioner Guzman, Bocaling & Co. and cancellation of
the transfer certificate of title in the name of the latter. They also asked that
Reynoso be required to sell the property to them under the same terms
ands conditions agreed upon in the Contract of Sale in favor of the
petitioner This complaint was docketed as Civil Case No. 131461 in the then
Court of First Instance of Manila.
On May 5, 1980, the City Court decided the ejectment case, disposing as
follows:
WHEREFORE, judgment is hereby rendered ordering defendants and
all persons holding under them to vacate the premises at No. 658
Gen. Malvar Street, Malate, Manila, subject of this action, and
deliver possession thereof to the plaintiff, and to pay to the latter;
(1) The sum of P4,000.00 a month from April 1, 1977 to August 8,
1977; (2) The sum of P7,000.00 a month, as reasonable
compensation for the continued unlawful use and occupation of
said premises, from August 9, 1977 and every month thereafter
until defendants actually vacate and deliver possession thereof to
the plaintiff; (3) The sum of P1,000.00 as and for attorney's fees;
and (4) The costs of suit.
The decision was appealed to the then Court of First Instance of Manila,
docketed as Civil Case No. 132634 and consolidated with Civil Case No.
131461. In due time, Judge Tomas P. Maddela, Jr., decided the two cases as
follows:
WHEREFORE, premises considered, this Court in Civil Case No.
132634 hereby modifies the decision of the lower court as follows:
1 Ordering defendants Raoul S.V. Bonnevie and Christopher
Bonnevie and all persons holding under them to vacate the
premises at No. 658 Gen. Malvar St., Malate, Manila subject of this
action and deliver possessions thereof to the plaintiff; and
2 To pay the latter the sum of P4,000.00 a month from April 1, 1977
up to September 21, 1980 (when possession of the premises was
turned over to the Sheriff) after deducting whatever payments were
made and accepted by Mrs. Africa Valdez Vda. de Reynoso during
said period, without pronouncement as to costs.
As to Civil Case No. 131461, the Court hereby renders judgment in
favor of the plaintiff Raoul Bonnevie as against the defendants
Africa Valdez Vda. de Reynoso and Guzman and Bocaling & Co.
declaring the deed of sale with mortgage executed by defendant
Africa Valdez Vda. de Reynoso in favor of defendant Guzman and
Bocaling null and void; cancelling the Certificate of Title No. 125914
issued by the Register of Deeds of Manila in the name of Guzman
and Bocaling & Co.,; the name of Guzman and Bocaling & Co.,;
ordering the defendant Africa Valdez Vda. de Reynoso to execute
favor of the plaintiff Raoul Bonnevie a deed of sale with mortgage
over the property leased by him in the amount of P400,000.00
under the same terms and conditions should there be any other
occupants or tenants in the premises; ordering the defendants
jointly and severally to pay the plaintiff Raoul Bonnevie the amount
of P50,000.00 as temperate damages; to pay the plaintiff jointly and
severally the of P2,000.00 per month from the time the property
was sold to defendant Guzman and Bocaling by defendant Africa
Valdez Vda de Reynoso on March 7, 1977, up to the execution of a
deed of sale of the property by defendant Africa Valdez Vda. de
Reynoso in favor of plaintiff Bonnevie; to pay jointly and severally
the plaintiff Bonnevie the amount of P20,000.00 as exemplary
damages, for attorney's fees in the amount of P10,000.00, and to
pay the cost of suit.
Both Reynoso and the petitioner company filed with the Court of Appeals a
petition for review of this decision. The appeal was eventually resolved
against them in a decision promulgated on March 16, 1988, where the
respondent court substantially affirmed the conclusions of the lower court
but reduced the award of damages. 1
Its motion for reconsideration having been denied on December 14, 1986,
the petitioner has come to this Court asserting inter alia that the
3
respondent court erred in ruling that the grant of first priority to purchase
the subject properties by the judicial administratrix needed no authority
from the probate court; holding that the Contract of Sale was not voidable
but rescissible; considering the petitioner as a buyer in bad faith ordering
Reynoso to execute the deed of sale in favor of the Bonnevie; and not
passing upon the counterclaim. Reynoso has not appealed.
The Court has examined the petitioner's contentions and finds them to be
untenable.
Reynoso claimed to have sent the November 3, 1976 letter by registered
mail, but the registry return card was not offered in evidence. What she
presented instead was a copy of the said letter with a photocopy of only the
face of a registry return card claimed to refer to the said letter. A copy of
the other side of the card showing the signature of the person who received
the letter and the data of the receipt was not submitted. There is thus no
satisfactory proof that the letter was received by the Bonnevies.
Even if the letter had indeed been sent to and received by the private
respondent and they did not exercise their right of first priority, Reynoso
would still be guilty of violating Paragraph 20 of the Contract of Lease which
specifically stated that the private respondents could exercise the right of
first priority, "all things and conditions being equal." The Court reads this
mean that there should be identity of the terms and conditions to be
offered to the Bonnevies and all other prospective buyers, with the
Bonnevies to enjoy the right of first priority.
The selling price qouted to the Bonnevies was P600,000.00, to be fully paid
in cash less only the mortgage lien of P100,000.00. 2 On the other hand, the
selling price offered to and accepted by the petitioner was only P400,000.00
and only P137,500.00 was paid in cash while the balance of P272,500.00
was to be paid "when the property (was) cleared of tenants or occupants. 3
The fact that the Bonnevies had financial problems at that time was no
justification for denying them the first option to buy the subject property.
Even if the Bonnevies could not buy it at the price qouted, Reynoso could
not sell it to another for a lower price and under more favorable terms and
conditions. Only if the Bonnevies failed to exercise their right of first priority
could Reynoso lawfully sell the subject property to others, and at that
only under the same terms and conditions offered to the Bonnevies.
The Court agrees with the respondent court that it was not necessary to
secure the approval by the probate court of the Contract of Lease because it
did not involve an alienation of real property of the estate nor did the term
of the lease exceed one year so as top make it fall under Article 1878(8) of
the Civil Code. Only if Paragraph 20 of the Contract of Lease was activated
and the said property was intended to be sold would it be required of the
administratrix to secure the approval of the probate court pursuant to Rule
89 of the Rules of Court.
As a strict legal proposition, no judgment of the probate court was reviewed
and eventually annuled collaterally by the respondent court as contended
by the petitioner. The order authorizing the sale in its favor was duly issued
by the probate court, which thereafter approved the Contract of Sale
resulting in the eventual issuance if title in favor of the petitioner. That
order was valid insofar as it recognized the existence of all the essential
elements of a valid contract of sale, but without regard to the special
provision in the Contract of Lease giving another party the right of first
priority.
Even if the order of the probate court was valid, the private respondents
still had a right to rescind the Contract of Sale because of the failure of
Reynoso to comply with her duty to give them the first opportunity to
purchase the subject property.
The petitioner argues that assuming the Contract of Sale to be voidable,
only the parties thereto could bring an action to annul it pursuant to Article
1397 of the Civil Code. It is stressed that private respondents are strangers
to the agreement and therefore have no personality to seek its annulment.
The respondent court correctly held that the Contract of Sale was not
voidable rescissible. Under Article 1380 to 1381 (3) of the Civil Code, a
contract otherwise valid may nonetheless be subsequently rescinded by
reason of injury to third persons, like creditors. The status of creditors could
be validly accorded the Bonnevies for they had substantial interests that
4
were prejudiced by the sale of the subject property to the petitioner
without recognizing their right of first priority under the Contract of Lease.
According to Tolentino, rescission is a remedy granted by law to the
contracting parties and even to third persons, to secure reparation for
damages caused to them by a contract, even if this should be valid, by
means of the restoration of things to their condition at the moment prior to
the celebration of said contract. 4 It is a relief allowed for the protection of
one of the contracting parties and even third persons from all injury and
damage the contract may cause, or to protect some incompatible and
preferent right created by the contract. 5 Recission implies a contract which,
even if initially valid, produces a lesion or pecuniary damage to someone
that justifies its invalidation for reasons of equity.6
It is true that the acquisition by a third person of the property subject of the
contract is an obstacle to the action for its rescission where it is shown that
such third person is in lawful possession of the subject of the contract and
that he did not act in bad faith. 7 However, this rule is not applicable in the
case before us because the petitioner is not considered a third party in
relation to the Contract of Sale nor may its possession of the subject
property be regarded as acquired lawfully and in good faith.
Indeed, Guzman, Bocaling and Co. was the vendee in the Contract of Sale.
Moreover, the petitioner cannot be deemed a purchaser in good faith for
the record shows that its categorically admitted it was aware of the lease in
favor of the Bonnevies, who were actually occupying the subject property at
the time it was sold to it. Although the Contract of Lease was not annotated
on the transfer certificate of title in the name of the late Jose Reynoso and
Africa Reynoso, the petitioner cannot deny actual knowledge of such lease
which was equivalent to and indeed more binding than presumed notice by
registration.
A purchaser in good faith and for value is one who buys the property of
another without notice that some other person has a right to or interest in
such property and pays a full and fair price for the same at the time of such
purchase or before he has notice of the claim or interest of some other
person in the property. 8 Good faith connotes an honest intention to abstain
from taking unconscientious advantage of another. 9 Tested by these
5
Held:
Guzman, Bocaling & Co. vs. Bonnevie
Facts:
A 600 sqm parcel of land with two buildings belonging to the Intestate
Estate of Jose Reynoso was leased to Raoul and Christopher Bonnevie by the
administratix Africa Valdez for a periodof one year at a rate of 4K a month starting Aug.
1976.In the contract of lease, there is a stipulation that in case the lessor
desires or decides to sell the leased property, the lessees shall be given
a first priority to purchase the same, all things and considerations being
equal.
In Nov. 1976, administratix notified the respondent by registered mail that
she is selling the premises for 600K less a mortgage loan and giving them 30
days from receipt to exercise their right of first priority. If they would not
exercise, she expects them to vacate the prop in March 1977.
In Jan 1977, she sent a letter notifying them that in their failure to exercise
their right, she has already sold the property. This is the only letter that the
Bonnevies received. They informed agent that they are willing to make
negotiations and that they refuse the termination of the lease. In March
1977, property formally sold to Guzman, Bocaling & Corp for 400K and the
balance of this amount shall be paid when the Bonnevies have already
vacated the premises. Administratix demanded that they vacate the
premises and pay the rentals for four months. They had a Compromise
Agreement that the Bonnevies shall vacate the premises not later than Oct.
1979 but this was set aside. The Bonnevies filed an action for annulment of
the sale between Reynoso and the GBC and ancellation of the
transfer certificate. They also asked that Reynoso be required to sell the
property to them under the same terms and conditions agreed upon the
Contract of sale.
Issue:
WON the Bonnevies can file for an action for annulment of the sale between
Reynoso and the GBC considering that they are third parties to the contract.
Yes. The Contract of Sale was not voidable butrescissible.Under Art 1380 to 1381 (3)
of the CC, a contract otherwise valid may nonetheless be subsequently
rescinded by reason of injury to third persons, like creditors. The status of
creditors could be validly accorded the Bonnevies for they had substantial
interest that were prejudiced by the sale of the subject property to
the petitioner without recognizing their right of first priority under the Contract of
Lease.
Tolentino: rescission is a remedy granted by law to the contracting parties
and even to third persons, to secure reparation for damages causedto them by a
contract, even if this shouldbe valid, bymeans of the restoration ofthings to
their condition at the moment prior to the celebration of said contract. It is a
relief allowed for the protection of one of the contracting parties and even
third persons from all injury and damage the contract may cause, or to
protect some incompatible and preferred right created by the contract.
Rescission implies a contract which, even if initially valid, produces a lesion
or pecuniary damage to someone that justifies its invalidation for reasons of
equity. GBC cannot be buyers in good faith because they had knowledge of
the lease of the premise. They were negligent in not inquiring about the
terms of the Lease Contract.
6
SECOND DIVISION
G.R. No. 145483
MINQ-6093
LORENZO SHIPPING LINES
Pier 8, North Harbor
Manila
DE CISION
CHICO-NAZARIO, J.:
This is a petition for review seeking to set aside the Decision1 of the Court of
Appeals in CA-G.R. CV No. 54334 and its Resolution denying petitioner's
motion for reconsideration.
Description
Qty.
Nozzle Tip
6pcs.
P 5,520.00
33,120.00
Plunger &
Barrel
6pcs.
27,630.00
165,780.00
1,035,000.00
2,070,000.00
Unit Price
Total Price
477,000.00
P2,745,900.00
MANILA
___________
DELIVERY: Within 2 months after receipt of firm order.
TERMS: 25% upon delivery, balance payable in 5 bi-monthly equal
Installment[s] not to exceed 90 days.
We trust you find our above offer acceptable and look forward to your most
valued order.
7
Very truly yours,
(SGD) HENRY PAJARILLO
Sales Manager
Petitioner thereafter issued to respondent Purchase Order No.
13839,3 dated 02 November 1989, for the procurement of one set of
cylinder liner, valued at P477,000, to be used for M/V Dadiangas Express.
The purchase order was co-signed by Jose Go, Jr., petitioner's vicepresident, and Henry Pajarillo. Quoted hereunder is the pertinent portion of
the purchase order:
Name of Description Qty.
Amount
P477,000.00
1 SET
NOTHING FOLLOW
INV. #
TERM OF PAYMENT: 25% DOWN PAYMENT
5 BI-MONTHLY INSTALLMENT[S]
Instead of paying the 25% down payment for the first cylinder liner,
petitioner issued in favor of respondent ten postdated checks 4 to be drawn
against the former's account with Allied Banking Corporation. The checks
were supposed to represent the full payment of the aforementioned
cylinder liner.
Subsequently, petitioner issued Purchase Order No. 14011, 5 dated 15
January 1990, for yet another unit of cylinder liner. This purchase order
stated the term of payment to be "25% upon delivery, balance payable in 5
bi-monthly equal installment[s]."6 Like the purchase order of 02 November
1989, the second purchase order did not state the date of the cylinder
liner's delivery.
8
its obligation to respondent together with accrued interest and attorney's
fees.
Due to the failure of the parties to settle the matter, respondent filed an
action for sum of money and damages before the Regional Trial Court (RTC)
of Makati City. In its complaint, 12 respondent (plaintiff below) alleged that
despite its repeated oral and written demands, petitioner obstinately
refused to settle its obligations. Respondent prayed that petitioner be
ordered to pay for the value of the cylinder liners plus accrued interest of
P111,300 as of May 1991 and additional interest of 14% per annum to be
reckoned from June 1991 until the full payment of the principal; attorney's
fees; costs of suits; exemplary damages; actual damages; and compensatory
damages.
On 25 July 1991, and prior to the filing of a responsive pleading, respondent
filed an amended complaint with preliminary attachment pursuant to
Sections 2 and 3, Rule 57 of the then Rules of Court. 13 Aside from the prayer
for the issuance of writ of preliminary attachment, the amendments also
pertained to the issuance by petitioner of the postdated checks and the
amounts of damages claimed.
In an Order dated 25 July 1991, 14 the court a quo granted respondent's
prayer for the issuance of a preliminary attachment. On 09 August 1991,
petitioner filed an Urgent Ex-Parte Motion to Discharge Writ of
Attachment15 attaching thereto a counter-bond as required by the Rules of
Court. On even date, the trial court issued an Order16 lifting the levy on
petitioner's properties and the garnishment of its bank accounts.
Petitioner afterwards filed its Answer17 alleging therein that time was of the
essence in the delivery of the cylinder liners and that the delivery on 20
April 1990 of said items was late as respondent committed to deliver said
items "within two (2) months after receipt of firm order" 18 from petitioner.
Petitioner likewise sought counterclaims for moral damages, exemplary
damages, attorney's fees plus appearance fees, and expenses of litigation.
Subsequently, respondent filed a Second Amended Complaint with
Preliminary Attachment dated 25 October 1991. 19 The amendment
introduced dealt solely with the number of postdated checks issued by
petitioner as full payment for the first cylinder liner it ordered from
respondent. Whereas in the first amended complaint, only nine postdated
checks were involved, in its second amended complaint, respondent
claimed that petitioner actually issued ten postdated checks. Despite the
opposition by petitioner, the trial court admitted respondent's Second
Amended Complaint with Preliminary Attachment.20
Prior to the commencement of trial, petitioner filed a Motion (For Leave To
Sell Cylinder Liners)21 alleging therein that "[w]ith the passage of time and
with no definite end in sight to the present litigation, the cylinder liners run
the risk of obsolescence and deterioration" 22 to the prejudice of the parties
to this case. Thus, petitioner prayed that it be allowed to sell the cylinder
liners at the best possible price and to place the proceeds of said sale in
escrow. This motion, unopposed by respondent, was granted by the trial
court through the Order of 17 March 1991. 23
After trial, the court a quo dismissed the action, the decretal portion of the
Decision stating:
WHEREFORE, the complaint is hereby dismissed, with costs against the
plaintiff, which is ordered to pay P50,000.00 to the defendant as and by way
of attorney's fees.24
The trial court held respondent bound to the quotation it submitted to
petitioner particularly with respect to the terms of payment and delivery of
the cylinder liners. It also declared that respondent had agreed to the
cancellation of the contract of sale when it returned the postdated checks
issued by petitioner. Respondent's counterclaims for moral, exemplary, and
compensatory damages were dismissed for insufficiency of evidence.
Respondent moved for the reconsideration of the trial court's Decision but
the motion was denied for lack of merit. 25
Aggrieved by the findings of the trial court, respondent filed an appeal with
the Court of Appeals26 which reversed and set aside the Decision of the
court a quo. The appellate court brushed aside petitioner's claim that time
was of the essence in the contract of sale between the parties herein
9
considering the fact that a significant period of time had lapsed between
respondent's offer and the issuance by petitioner of its purchase orders. The
dispositive portion of the Decision of the appellate court states:
WHEREFORE, the decision of the lower court is REVERSED and SET
ASIDE. The appellee is hereby ORDERED to pay the appellant the
amount of P954,000.00, and accrued interest computed at 14% per
annum reckoned from May, 1991. 27
The Court of Appeals also held that respondent could not have incurred
delay in the delivery of cylinder liners as no demand, judicial or extrajudicial,
was made by respondent upon petitioner in contravention of the express
provision of Article 1169 of the Civil Code which provides:
Those obliged to deliver or to do something incur in delay from the
time the obligee judicially or extrajudicially demands from them the
fulfillment of their obligation.
Likewise, the appellate court concluded that there was no evidence of the
alleged cancellation of orders by petitioner and that the delivery of the
cylinder liners on 20 April 1990 was reasonable under the circumstances.
On 22 May 2000, petitioner filed a motion for reconsideration of the
Decision of the Court of Appeals but this was denied through the resolution
of 06 October 2000.28 Hence, this petition for review which basically raises
the issues of whether or not respondent incurred delay in performing its
obligation under the contract of sale and whether or not said contract was
validly rescinded by petitioner.
That a contract of sale was entered into by the parties is not disputed.
Petitioner, however, maintains that its obligation to pay fully the purchase
price was extinguished because the adverted contract was validly
terminated due to respondent's failure to deliver the cylinder liners within
the two-month period stated in the formal quotation dated 31 May 1989.
The threshold question, then, is: Was there late delivery of the subjects of
the contract of sale to justify petitioner to disregard the terms of the
contract considering that time was of the essence thereof?
In determining whether time is of the essence in a contract, the ultimate
criterion is the actual or apparent intention of the parties and before time
may be so regarded by a court, there must be a sufficient manifestation,
either in the contract itself or the surrounding circumstances of that
intention.29 Petitioner insists that although its purchase orders did not
specify the dates when the cylinder liners were supposed to be delivered,
nevertheless, respondent should abide by the term of delivery appearing on
the quotation it submitted to petitioner. 30 Petitioner theorizes that the
quotation embodied the offer from respondent while the purchase order
represented its (petitioner's) acceptance of the proposed terms of the
contract of sale.31 Thus, petitioner is of the view that these two documents
"cannot be taken separately as if there were two distinct contracts." 32 We
do not agree.
It is a cardinal rule in interpretation of contracts that if the terms thereof
are clear and leave no doubt as to the intention of the contracting parties,
the literal meaning shall control. 33 However, in order to ascertain the
intention of the parties, their contemporaneous and subsequent acts should
be considered.34 While this Court recognizes the principle that contracts are
respected as the law between the contracting parties, this principle is
tempered by the rule that the intention of the parties is primordial35 and
"once the intention of the parties has been ascertained, that element is
deemed as an integral part of the contract as though it has been originally
expressed in unequivocal terms."36
In the present case, we cannot subscribe to the position of petitioner that
the documents, by themselves, embody the terms of the sale of the cylinder
liners. One can easily glean the significant differences in the terms as stated
in the formal quotation and Purchase Order No. 13839 with regard to the
due date of the down payment for the first cylinder liner and the date of its
delivery as well as Purchase Order No. 14011 with respect to the date of
delivery of the second cylinder liner. While the quotation provided by
respondent evidently stated that the cylinder liners were supposed to be
delivered within two months from receipt of the firm order of petitioner
10
and that the 25% down payment was due upon the cylinder liners' delivery,
the purchase orders prepared by petitioner clearly omitted these significant
items. The petitioner's Purchase Order No. 13839 made no mention at all of
the due dates of delivery of the first cylinder liner and of the payment of
25% down payment. Its Purchase Order No. 14011 likewise did not indicate
the due date of delivery of the second cylinder liner.
Q: Now, after you made the formal quotation which is Exhibit A how
long a time did the defendant make a confirmation of the order?
A: Yes sir.
11
Q: Why? Will you tell the court why you were not able to confirm
your order with your Japanese supplier?
Q: And it was only on November 2, 1989 when they gave you the
purchase order?
A: Yes sir.
A: 25% down payment
Q: So upon receipt of the purchase order from Lorenzo Shipping
Lines in 1989 did you confirm the order with your Japanese supplier
after receiving the purchase order dated November 2, 1989?
Q: To be paid when?
A: Supposed to be paid upon order. 40
The above declarations remain unassailed. Other than its bare assertion that
the subject contracts of sale did not undergo further renegotiation,
petitioner failed to proffer sufficient evidence to refute the above
testimonies of Pajarillo and Kanaan, Jr.
Notably, petitioner was the one who caused the preparation of Purchase
Orders No. 13839 and No. 14011 yet it utterly failed to adduce any
justification as to why said documents contained terms which are at
variance with those stated in the quotation provided by respondent. The
only plausible reason for such failure on the part of petitioner is that the
parties had, in fact, renegotiated the proposed terms of the contract of sale.
Moreover, as the obscurity in the terms of the contract between
respondent and petitioner was caused by the latter when it omitted the
date of delivery of the cylinder liners in the purchase orders and varied the
term with respect to the due date of the down payment, 41 said obscurity
must be resolved against it.42
Relative to the above discussion, we find the case of Smith, Bell & Co., Ltd.
v. Matti,43 instructive. There, we held that
12
When the time of delivery is not fixed or is stated in general and
indefinite terms, time is not of the essence of the contract. . . .
In such cases, the delivery must be made within a reasonable time.
The law implies, however, that if no time is fixed, delivery shall be made
within a reasonable time, in the absence of anything to show that an
immediate delivery intended. . . .
We also find significant the fact that while petitioner alleges that the
cylinder liners were to be used for dry dock repair and maintenance of its
M/V Dadiangas Express between the later part of December 1989 to early
January 1990, the record is bereft of any indication that respondent was
aware of such fact. The failure of petitioner to notify respondent of said
date is fatal to its claim that time was of the essence in the subject contracts
of sale.
In addition, we quote, with approval, the keen observation of the Court of
Appeals:
. . . It must be noted that in the purchase orders issued by the
appellee, dated November 2, 1989 and January 15, 1990, no specific
date of delivery was indicated therein. If time was really of the
essence as claimed by the appellee, they should have stated the
same in the said purchase orders, and not merely relied on the
quotation issued by the appellant considering the lapse of time
between the quotation issued by the appellant and the purchase
orders of the appellee.
In the instant case, the appellee should have provided for an
allowance of time and made the purchase order earlier if indeed the
said cylinder liner was necessary for the repair of the vessel
scheduled on the first week of January, 1990. In fact, the appellee
should have cancelled the first purchase order when the cylinder
liner was not delivered on the date it now says was necessary.
Instead it issued another purchase order for the second set of
cylinder liner. This fact negates appellee's claim that time was
13
The power to rescind obligations is implied in reciprocal ones, in
case one of the obligors should not comply with what is incumbent
upon him.
The law explicitly gives either party the right to rescind the contract only
upon the failure of the other to perform the obligation assumed
thereunder.48 The right, however, is not an unbridled one. This Court in the
case of University of the Philippines v. De los Angeles, 49 speaking through
the eminent civilist Justice J.B.L. Reyes, exhorts:
Of course, it must be understood that the act of a party in treating a
contract as cancelled or resolved on account of infractions by the other
contracting party must be made known to the other and is always
provisional, being ever subject to scrutiny and review by the proper court. If
the other party denied that rescission is justified, it is free to resort to
judicial action in its own behalf, and bring the matter to court. Then, should
the court, after due hearing, decide that the resolution of the contract was
not warranted, the responsible party will be sentenced to damages; in the
contrary case, the resolution will be affirmed, and the consequent
indemnity awarded to the party prejudiced. (Emphasis supplied)
In other words, the party who deems the contract violated may consider it
resolved or rescinded, and act accordingly, without previous court action,
but it proceeds at its own risk. For it is only the final judgment of the
corresponding court that will conclusively and finally settle whether the
action taken was or was not correct in law. But the law definitely does not
require that the contracting party who believes itself injured must first file
suit and wait for a judgment before taking extrajudicial steps to protect its
interest. Otherwise, the party injured by the other's breach will have to
passively sit and watch its damages accumulate during the pendency of the
suit until the final judgment of rescission is rendered when the law itself
requires that he should exercise due diligence to minimize its own
damages.50
Here, there is no showing that petitioner notified respondent of its intention
to rescind the contract of sale between them. Quite the contrary,
respondent's act of proceeding with the opening of an irrevocable letter of
credit on 23 February 1990 belies petitioner's claim that it notified
14
THIRD DIVISION
xxx
1. Na si MOVIDO ang tunay at ganap na may-ari ng
isang (1) parselang lupa sa Paliparan, Dasmarias, Cavite, na
ang nasabing lupa sakop ng TRANSFER CERTIFICATE OF
TITLE No. T-362995, na ito ay lalong mailalarawan ng tulad
ng sumusunod:
xxx
2. Na ipinagkakasundo ni MOVIDO na ipagbili kay PASTOR ang
21,000 metro cuadrado humigit-kumulang, ng lupang
nakalarawan sa dakong taas sa halagang APAT NA RAANG
PISO (P400.00) bawat metro cuadrado o sa kabuuang
halaga na WALONG MILYON AT APAT NA RAANG LIBONG
PISO (P8,400,000.00), na ang nasabing halaga ay
babayaran ni PASTOR kay MOVIDO ng gaya ng sumusunod:
15
P1,000, 000.00 babayaran sa loob ng tatlong (3)
buwan mula sa petsa ng
ikatlong bayad;
P1,000, 000.00 babayaran sa loob ng tatlong (3)
buwan mula sa petsa ng
ikaapat na bayad;
P1,000, 000.00 babayaran sa loob ng tatlong (3)
buwan mula sa petsa ng
ikalimang bayad;
Napocor power line traversed the subject lot, the purchase price would be
meters on both sides from the center of the power line would not be paid.
16
METRO mula sa kailaliman ng linya ng kuryente ay
pababayaran ni MOVIDO kay PASTOR sa halagang
DALAWANG DAANG PISO bawat metro kwadrado.[3] (italics
supplied)
due and did not pay the 7th installment in the amount of P1 million. This was
allegedly a material breach because they agreed that the survey of the
power line.
property would only be done after respondent would have paid the
7th installment. Due to respondents failure to fulfill his obligations,
the original purchase price of P8.4 million stated in the kasunduan sa bilihan
ng lupa. He was willing and ready to pay the balance of the purchase price
After hearing, the RTC[4] ruled in favor of petitioner and held that
certainty.
the kasunduan preceded the kasunduan sa bilihan ng lupa. Thus, the RTC
dismissed the complaint of respondent for lack of merit and/or cause of
In his answer, petitioner alleged that the original negotiation for the sale of
well as the forfeiture of 50% of the amount already paid by respondent (but
respondent was not sure whether a Napocor power line traversed the
paid). The RTC also directed respondent to pay petitioner P50,000 attorneys
lupawas executed where the area to be sold was 21,000 sq. m. for P400/sq.
m. for a total sum of P8.4 million. The final agreement also listed a schedule
On appeal, the Court of Appeals (CA) [5] reversed the RTC and held that
the kasunduan sa bilihan ng lupa was the first document executed by the
17
parties, not the kasunduan. Thus, the CA ordered respondent to pay the
execution but, taken together, clearly spell out in full the respective rights
Indeed,
reading
of
the kasunduan
sa
bilihan
ng
lupa and
the kasunduan would readily reveal that payment of the purchase price
does not depend on the survey of the property. In other words, the
purchase price should be paid whether or not the property is surveyed. The
Marginito Movidos motion for reconsideration did not have its desired
result.[6] Hence, this petition for review on certiorari, [7] where he insists that
it was the kasunduan, not the kasunduan sa bilihan ng lupa, which was first
executed by the parties. He likewise claims that the failure of respondent to
pay the 7th and 8th installments of the purchase price gave petitioner the
right to rescind the contract.
On the other hand, the survey of the property to determine the metes and
bounds of the 1,731 sq. m. portion that is excluded from the contract as
well as the portions covered by the kasunduan which will be subject to
reduction of the purchase price, is also not conditioned on the payment of
The issue of which of the two contracts was first executed by the parties is
immaterial to the resolution of this case. In the first place, both contracts
installment. Hence, the survey could have been done anytime after the
execution of the agreement.
were executed and notarized on the same day, December 6, 1993. More
first (compared to what he is liable to pay after the survey of the property)
it will not be a problem because the excess of the amount paid can easily be
18
refunded to him. Such would be the plain application of the provisions of
obligated to conduct the survey on or before the due date of the last
Prudence dictates that the second option is better as it will prevent further
installment.
Corollary to this, the CA erred when it proceeded to determine the
parties that petitioner should first cause the survey of the subject property
in order to determine the area excluded from the sale and the portion
There are two options to resolve this impasse. First, respondent may be
ordered to pay his remaining balance in the kasunduan sa bilihan ng
th
It is true that respondent failed to pay the 7th and 8th installments of the
th
19
them. Indeed, taken together, the two agreements actually constitute a
doubtful ones that sense that may result from all of them taken
the subject lot within a period of three months in order to determine the
jointly.[9] Their proper construction must be one that gives effect to all. [10]
excluded portion of the sale and the portion traversed by the Napocor
power line. If he fails to do so, Luis Reyes Pastor is hereby authorized to
have it done with the cost of the survey charged to Marginito Movido.
terms and conditions of the agreement of the parties. On the other hand,
the kasunduan refers to a particular or specific matter, i.e., that portion of
the
land
that
is
traversed
by
Luis Reyes Pastor should thereafter pay the balance of the purchase
As
lupa, particularly on the purchase price for that portion. Specialibus derogat
generalibus.
Under both the kasunduan sa bilihan ng lupa and the kasunduan, petitioner
undertook to cause the survey of the property in order to determine the
portion excluded from the sale, as well as the portion traversed by the
Napocor power line. Despite repeated demands by respondent, however,
petitioner failed to perform his obligation. Thus, considering that there was
a breach on the part of petitioner (and no material breach on the part of
respondent), he cannot properly invoke his right to rescind the contract.
20
FIRST DIVISION
the country club, which entitled them to use park facilities and stay at a
two-bedroom villa for five (5) ordinary weekdays and two (2) weekends
every year for free.[5]
Two years later, in March 1999, respondents filed before the SEC a
Complaint[6] for refund of the P387,300.00 they spent to purchase FRCCI
shares of stock from petitioners. Respondents alleged that they had been
deceived into buying FRCCI shares because of petitioners fraudulent
misrepresentations. Construction of FLP turned out to be still unfinished
and the policies, rules, and regulations of the country club were obscure.
Respondents narrated that they were able to book and avail themselves of
free accommodations at an FLP villa on September 5, 1998, a Saturday. They
requested that an FLP villa again be reserved for their free use on October
17, 1998, another Saturday, for the celebration of their daughters
18th birthday, but were refused by petitioners.Petitioners clarified that
respondents were only entitled to free accommodations at FLP for one
week annually consisting of five (5) ordinary days, one (1) Saturday and one
(1) Sunday[,] and that respondents had already exhausted their free
Saturday pass for the year. According to respondents, they were not
informed of said rule regarding their free accommodations at FLP, and had
they known about it, they would not have availed themselves of the free
accommodations on September 5, 1998. In January 1999, respondents
attempted once more to book and reserve an FLP villa for their free use on
April 1, 1999, a Thursday. Their reservation was confirmed by a certain
Murphy Magtoto. However, on March 3, 1999, another country club
employee named Shaye called respondents to say that their reservation for
April 1, 1999 was cancelled because the FLP was already fully booked.
Petitioners filed their Answer[7] in which they asserted that respondents had
been duly informed of the privileges given to them as shareholders of FRCCI
class D shares of stock since these were all explicitly provided in the
promotional materials for the country club, the Articles of Incorporation,
21
and the By-Laws of FRCCI. Petitioners called attention to the following
paragraph in their ads:
GUEST ROOMS
As a member of the Fontana Resort and Country Club, you
are entitled to 7 days stay consisting of 5 weekdays, one
Saturday and one Sunday. A total of 544 elegantly furnished
villas available in two and three bedroom units. [8]
Petitioners also cited provisions of the FRCCI Articles of
Incorporation and the By-Laws on class D shares of stock, to wit:
Class D shares may be sold to any person, irrespective of
nationality or Citizenship. Every registered owner of a class
D share may be admitted to one (1) Membership in the Club
and subject to the Clubs rules and regulations, shall be
entitled to use a Two (2) Bedroom Multiplex Model Unit in
the residential villas provided by the Club for one week
annually consisting of five (5) ordinary days, one (1)
Saturday and one (1) Sunday. (Article Seventh, Articles of
Incorporation)
Class D shares which may be sold to any person, irrespective
of nationality or Citizenship. Every registered owner of a
class D share may be admitted to one (1) Membership in
the Club and subject to the Clubs rules and regulations, shall
be entitled to use a Two (2) Bedroom Multiplex Model Unit
in the residential villas provided by the Club for one week
annually consisting of five (5) ordinary days, one (1)
Saturday and one (1) Sunday. [Section 2(a), Article II of the
By-Laws.] [9]
Petitioners further denied that they unjustly cancelled respondents
reservation for an FLP villa on April 1, 1999, explaining that:
6. There is also no truth to the claim of [herein respondents]
that they were given and had confirmed reservations for
22
Based on the evidence presented by respondents, Hearing Officer
Bacalla made the following findings in his Decision dated April 28,
2000:
To prove the merits of their case, both [herein respondents]
testified. Ms. Esther U. Lacuna likewise testified in favor of
[respondents].
As established by the testimonies of [respondents]
witnesses, Ms. Esther U. Lacuna, a duly accredited sales
agent of [herein petitioners] who went to see [respondents]
for the purpose of inducing them to buy membership shares
of Fontana Resort and Country Club, Inc. with promises that
the park will provide its shareholders with first class leisure
facilities, showing them brochures (Exhibits V, V-1 and V-2)
of the future development of the park.
Indeed [respondents] bought two (2) class D shares in
Fontana Resort and Country Club, Inc. paying P387,000.00
to [petitioners] as evidenced by provisional and official
receipts (Exhibits A to S), and signing two (2) documents
designated as Agreement to Sell and Purchase Shares of
Stock (Exhibits T to U-2).
It is undisputed that many of the facilities promised were
not completed within the specified date. Ms. Lacuna even
testified that less than 50% of what was promised were
actually delivered.
What was really frustrating on the part of [respondents]
was when they made reservations for the use of the Clubs
facilities on the occasion of their daughters 18th birthday on
October 17, 1998 where they were deprived of the clubs
premises alleging that the two (2) weekend stay which class
D shareholders are entitled should be on a Saturday and on
a Sunday. Since [respondents] have already availed of one
(1) weekend stay which was a Saturday, they could no
longer have the second weekend stay also on a Saturday.
23
Petitioners appealed the above-quoted ruling of Hearing Officer Bacalla
Nonetheless, the Court of Appeals agreed with the SEC that the sale of the
before the SEC en banc. In its Decision dated July 6, 2001, the SEC en
banc held:
year.
The Court of Appeals modified the appealed SEC judgment by ordering
Petitioners filed before the Court of Appeals a Petition for Review under
Rule 43 of the Rules of Court. Petitioners contend that even on the sole
upon the latters refund of the price of said shares since [t]he essence of the
Bacalla and the SEC en banc are contrary to law and jurisprudence.
the sale or transfer of the shares to the respondents. [19]The appellate court
additionally clarified that the sale of the FRCCI shares of stock by petitioners
The Court of Appeals brushed aside the finding of the SEC that petitioners
24
b) the respondent spouses are ordered to surrender to
petitioner Fontana Resort and Country Club their two (2)
Class D shares issued by said petitioner upon receipt of the
full refund with interest as herein ordered. [20]
D shares of stock. Petitioner FRCCI was merely the issuer of the shares sold
legal basis since their obligation does not constitute a loan or forbearance of
money.
b.
Was the order of the Court of Appeals to FRCCI
which was not the seller of the thing sold (the seller was
RNDC) to return the purchase price to the buyers (the
respondents) in accordance with law?
upon the latters refund of the price thereof as the essence of respondents
c.
Was the imposition of 12% interest per annum
from the date of extra-judicial demand on an obligation
which is not a loan or forbearance of money in accordance
with law?[22]
claim for refund is to rescind the sale of said shares. Furthermore, both
petitioners should be held liable since they are the owners and developers
of FLP. Petitioner FRCCI is primarily liable for respondents claim for refund,
petitioner RNDC is a mere agent of petitioner FRCCI. Respondents finally
insist that the imposition of the interest rate at 12% per annum, computed
from the date of the extrajudicial demand, is correct since the obligation of
Petitioners averred that the ruling of the Court of Appeals that the essence
25
We address the preliminary matter of the nature of respondents Complaint
against petitioners. Well-settled is the rule that the allegations in the
complaint determine the nature of the action instituted. [24]
Respondents alleged in their Complaint that:
16. [Herein petitioners] failure to finish the development
works at the Fontana Leisure Park within the time frame
that they promised, and [petitioners] failure/refusal to
accom[m]odate [herein respondents] request for
reservations on 17 October 1998 and 1 April 1999,
constitute gross misrepresentation and a form of deception,
not only to the [respondents], but the general public as
well.
17. [Petitioners]
deliberately
and
maliciously
misrepresented that development works will be completed
when they knew fully well that it was impossible to
complete
the
development
works
by
the
deadline. [Petitioners] also deliberately and maliciously
deceived [respondents] into believing that they have the
privilege to utilize Club facilities, only for [respondents] to
be later on denied such use of Club facilities. All these acts
are part of [petitioners] scheme to attract, induce and
convince [respondents] to buy shares, knowing that had
they told the truth about these matters, [respondents]
would never have bought shares in their project.
18. On 28 August 1998, [respondents] requested their
lawyer to write [petitioner] Fontana Resort and Country
Club, Inc. a letter demanding for the return of their
payment. x x x.
19. [Petitioner] Fontana Resort and Country Club, Inc.
responded to this letter, with a letter of its own dated 10
26
and/or rescission of a reciprocal obligation under Article 1191, in relation to
Article 1385, of the same Code. Said provisions of the Civil Code are
reproduced below:
Article 1390. The following contracts are voidable or
annullable, even though there may have been no damage to
the contracting parties:
1.
Those where one of the parties is incapable of
giving consent to a contract;
2.
Those where the consent is vitiated by mistake,
violence, intimidation, undue influence or fraud.
Now the only issue left for us to determine whether or not petitioners
27
As a general rule, the remedy of appeal by certiorari under Rule 45 of the
clear and convincing evidence such specific acts that vitiated a partys
prevails.[32]
the factual findings of the administrative agency and the Court of Appeals
expected that petitioners presented the FLP and the country club in the
are contradictory.[28] The said exceptions are applicable to the case at bar.
Hearing Officer Bacalla and the SEC en banc found that there is fraud on the
above-average means, who may not be so easily deceived into parting with
There is fraud when one party is induced by the other to enter into a
disappointed with the actual FLP facilities and club membership benefits.
their obligations that would have called for the rescission of the sale of the
consent of the other by using deception, without which such consent would
not have been given. [29] Simply stated, the fraud must be the determining
The right to rescind a contract arises once the other party defaults in the
cause of the contract, or must have caused the consent to be given. [30]
making the agreement. [34] In the same case as fraud, the burden of
ordinary care for his concerns and that private dealings have been entered
[31]
28
Respondents decry the alleged arbitrary and unreasonable denial of their
request for reservation at FLP and the obscure and ever-changing rules of
leisure park and whether there is sufficient reason for us to grant rescission
shareholders.
able to enjoy their stay at FLP despite the still ongoing construction works,
enough for them to wish to return and again reserve accommodations at
the park.
rules, and regulations governing FLP club memberships, why they rejected
respondents request for reservation on October 17, 1998. Respondents do
not dispute that the Articles of Incorporation and the By-Laws of FRCCI, as
Shaye. Petitioners countered that April 1, 1999 was a Holy Thursday and FLP
consisting of five (5) ordinary days, one (1) Saturday and one (1)
Magtoto and Shaye are FLP employees who dealt with respondents. The
Sunday. Thus, respondents cannot claim that they were totally ignorant of
such rule or that petitioners have been changing the rules as they go
along. Respondents
free
there was basis for petitioners to deny respondents subsequent request for
reservation of an FLP villa for their free use onOctober 17, 1998, another
Saturday.
constitute default that would call for rescission of the sale of FRCCI shares
had
already
availed
themselves
of
to nominal damages in accordance with Articles 2221 and 2222 of the Civil
Code.[35]
29
[N]ominal damages may be awarded to a plaintiff whose right has
Decision dated May 30, 2002 and Resolution dated August 12, 2002 of the
Court
plaintiff for any loss suffered by him. Its award is thus not for the
ASIDE. Petitioners
name only and not in fact. When granted by the courts, they are not
the FRCCI class "D shares of stock is concerned, is DISMISSED for lack of
merit.
Appeals
SO ORDERED.
in
CA-G.R.
SP
are ORDERED to
No.
pay
the
amount
30
SECOND DIVISION
D ECIS ION
AUSTRIA-MARTINEZ, J.:
On June 17, 1991, petitioner wrote Fausto informing her of its intention
to renew the lease. [3] However, it was Faustos daughter, respondent
Anunciacion F. Pacunayen, who replied, asking that petitioner remove the
improvements built thereon, as she is now the absolute owner of the
property.[4] It appears that Fausto had earlier sold the property to
Pacunayen on August 8, 1990, for the sum of P10,000.00 under a Kasulatan
ng Bilihan Patuluyan ng Lupa, [5] and title has already been transferred in her
name under Transfer Certificate of Title (TCT) No. M-35468.[6]
Despite efforts, the matter was not resolved. Hence, on September 4,
1991, petitioner filed an Amended Complaint for Annulment of Deed of
Sale, Specific Performance with Damages, and Injunction, docketed as Civil
Case No. 372-M.[7]
Furthermore, we resolved:
1.0. That TRCDC VACATE the leased premises immediately;
2.0. To GRANT the motion of Pacunayen to allow her to withdraw the
amount of P320,000.00, deposited according to records, with this court.
3.0. To order TRCDC to MAKE THE NECESSARY ACCOUNTING regarding the
amounts it had already deposited (for unpaid rentals for the extended
period of seven [7] years of the contract of lease). In case it had not yet
completed its deposit, to immediately pay the remaining balance to
Pacunayen.
4.0. To order TRCDC to PAY the amount of P10,000.00 as monthly rental,
with regard to its continued stay in the leased premises even after the
expiration of the extended period of seven (7) years, computed from August
1, 1998, until it finally vacates therefrom.
SO ORDERED.[11]
31
In arriving at the assailed decision, the CA acknowledged the priority
right of TRCDC to purchase the property in question. However, the CA
interpreted such right to mean that it shall be applicable only in case the
property is sold to strangers and not to Faustos relative. The CA stated that
(T)o interpret it otherwise as to comprehend all sales including those made
to relatives and to the compulsory heirs of the seller at that would be an
absurdity, and her (Faustos) only motive for such transfer was precisely one
of preserving the property within her bloodline and that someone
administer the property. [12] The CA also ruled that petitioner already
acknowledged the transfer of ownership and is deemed to have waived its
right to purchase the property. [13] The CA even further went on to rule that
even if the sale is annulled, petitioner could not achieve anything because
the property will be eventually transferred to Pacunayen after Faustos
death.[14]
Petitioner filed a motion for reconsideration but it was denied per
Resolution dated September 14, 1999. [15]
Dissatisfied, petitioner elevated the case to this Court on petition for
review on certiorari, raising the following grounds:
THE HONORABLE COURT OF APPEALS COMMITTED SERIOUS REVERSIBLE
ERROR IN HOLDING THAT THE CONTRACTUAL STIPULATION GIVING
PETITIONER THE PRIORITY RIGHT TO PURCHASE THE LEASED PREMISES
SHALL ONLY APPLY IF THE LESSOR DECIDES TO SELL THE SAME TO
STRANGERS;
THE HONORABLE COURT OF APPEALS COMMITTED SERIOUS REVERSIBLE
ERROR IN HOLDING THAT PETITIONERS PRIORITY RIGHT TO PURCHASE THE
LEASED PREMISES IS INCONSEQUENTIAL. [16]
The principal bone of contention in this case refers to petitioners
priority right to purchase, also referred to as the right of first refusal.
Petitioners right of first refusal in this case is expressly provided for in
the notarized Contract of Lease dated August 1, 1971, between Fausto and
petitioner, to wit:
7. That should the LESSOR decide to sell the leased premises, the LESSEE
shall have the priority right to purchase the same;[17]
When a lease contract contains a right of first refusal, the lessor is
under a legal duty to the lessee not to sell to anybody at any price until after
he has made an offer to sell to the latter at a certain price and the lessee
has failed to accept it. The lessee has a right that the lessor's first offer shall
be in his favor. [18] Petitioners right of first refusal is an integral and
indivisible part of the contract of lease and is inseparable from the whole
contract. The consideration for the lease includes the consideration for the
right of first refusal [19] and is built into the reciprocal obligations of the
parties.
It was erroneous for the CA to rule that the right of first refusal does
not apply when the property is sold to Faustos relative. [20] When the terms
of an agreement have been reduced to writing, it is considered as
containing all the terms agreed upon. As such, there can be, between the
parties and their successors in interest, no evidence of such terms other
than the contents of the written agreement, except when it fails to express
the true intent and agreement of the parties. [21] In this case, the wording of
the stipulation giving petitioner the right of first refusal is plain and
unambiguous, and leaves no room for interpretation. It simply means that
should Fausto decide to sell the leased property during the term of the
lease, such sale should first be offered to petitioner. The stipulation does
not provide for the qualification that such right may be exercised only when
the sale is made to strangers or persons other than Faustos kin. Thus, under
the terms of petitioners right of first refusal, Fausto has the legal duty to
petitioner not to sell the property to anybody, even her relatives, at any
price until after she has made an offer to sell to petitioner at a certain price
and said offer was rejected by petitioner. Pursuant to their contract, it was
essential that Fausto should have first offered the property to petitioner
before she sold it to respondent. It was only after petitioner failed to
exercise its right of first priority could Fausto then lawfully sell the property
to respondent.
The rule is that a sale made in violation of a right of first refusal is valid.
However, it may be rescinded, or, as in this case, may be the subject of an
action for specific performance.[22]In Riviera Filipina, Inc. vs. Court of
32
Appeals,[23] the Court discussed the concept and interpretation of the right
of first refusal and the consequences of a breach thereof, to wit:
. . . It all started in 1992 with Guzman, Bocaling & Co. v. Bonnevie where
the Court held that a lease with a proviso granting the lessee the right of
first priority all things and conditions being equal meant that there should
be identity of the terms and conditions to be offered to the lessee and all
other prospective buyers, with the lessee to enjoy the right of first priority.
A deed of sale executed in favor of a third party who cannot be deemed a
purchaser in good faith, and which is in violation of a right of first refusal
granted to the lessee is not voidable under the Statute of Frauds but
rescissible under Articles 1380 to 1381 (3) of the New Civil Code.
Subsequently in 1994, in the case of Ang Yu Asuncion v. Court of Appeals,
the Court en banc departed from the doctrine laid down in Guzman,
Bocaling & Co. v. Bonnevie and refused to rescind a contract of sale which
violated the right of first refusal. The Court held that the so-called right of
first refusal cannot be deemed a perfected contract of sale under Article
1458 of the New Civil Code and, as such, a breach thereof decreed under a
final judgment does not entitle the aggrieved party to a writ of execution of
the judgment but to an action for damages in a proper forum for the
purpose.
In the 1996 case of Equatorial Realty Development, Inc. v. Mayfair Theater,
Inc., the Court en banc reverted back to the doctrine in Guzman Bocaling &
Co. v. Bonnevie stating that rescission is a relief allowed for the protection
of one of the contracting parties and even third persons from all injury and
damage the contract may cause or to protect some incompatible and
preferred right by the contract.
Thereafter in 1997, in Paraaque Kings Enterprises, Inc. v. Court of Appeals,
the Court affirmed the nature of and the concomitant rights and obligations
of parties under a right of first refusal. The Court, summarizing the rulings
in Guzman, Bocaling & Co. v. Bonnevie and Equatorial Realty
Development, Inc. v. Mayfair Theater, Inc., held that in order to have full
compliance with the contractual right granting petitioner the first option to
purchase, the sale of the properties for the price for which they were finally
sold to a third person should have likewise been first offered to the former.
33
interest except when the rights and obligations arising therefrom are not
transmissible by (1) their nature, (2) stipulation or (3) provision of law. [27]
In this case, the nature of the rights and obligations are, by their
nature, transmissible. There is also neither contractual stipulation nor
provision of law that makes the rights and obligations under the lease
contract intransmissible. The lease contract between petitioner and Fausto
is a property right, which is a right that passed on to respondent and the
other heirs, if any, upon the death of Fausto.
In DKC Holdings Corporation vs. Court of Appeals,[28] the Court held that
the Contract of Lease with Option to Buy entered into by the late
Encarnacion Bartolome with DKC Holdings Corporation was binding upon
her sole heir, Victor, even after her demise and it subsists even after her
death. The Court ruled that:
. . . Indeed, being an heir of Encarnacion, there is privity of interest between
him and his deceased mother. He only succeeds to what rights his mother
had and what is valid and binding against her is also valid and binding as
against him. This is clear from Paraaque Kings Enterprises vs. Court of
Appeals, where this Court rejected a similar defenseWith respect to the contention of respondent Raymundo that he is
not privy to the lease contract, not being the lessor nor the lessee
referred to therein, he could thus not have violated its provisions,
but he is nevertheless a proper party. Clearly, he stepped into the
shoes of the owner-lessor of the land as, by virtue of his purchase,
he assumed all the obligations of the lessor under the lease
contract. Moreover, he received benefits in the form of rental
payments. Furthermore, the complaint, as well as the petition,
prayed for the annulment of the sale of the properties to him.
Both pleadings also alleged collusion between him and
respondent Santos which defeated the exercise by petitioner of
its right of first refusal.
In order then to accord complete relief to petitioner, respondent
Raymundo was a necessary, if not indispensable, party to the
case. A favorable judgment for the petitioner will necessarily
affect the rights of respondent Raymundo as the buyer of the
property over which petitioner would like to assert its right of first
option to buy.[29] (Emphasis supplied)
Likewise in this case, the contract of lease, with all its concomitant
provisions, continues even after Faustos death and her heirs merely stepped
into her shoes. [30] Respondent, as an heir of Fausto, is therefore bound to
fulfill all its terms and conditions.
There is no personal act required from Fausto such that respondent
cannot perform it. Faustos obligation to deliver possession of the property
to petitioner upon the exercise by the latter of its right of first refusal may
be performed by respondent and the other heirs, if any. Similarly,
nonperformance is not excused by the death of the party when the other
party has a property interest in the subject matter of the contract. [31]
The CA likewise found that petitioner acknowledged the legitimacy of
the sale to respondent and it is now barred from exercising its right of first
refusal. According to the appellate court:
Second, when TRCDC, in a letter to Fausto, signified its intention to renew
the lease contract, it was Pacunayen who answered the letter on June 19,
1991. In that letter Pacunayen demanded that TRCDC vacate the leased
premises within sixty (60) days and informed it of her ownership of the
leased premises. The pertinent portion of the letter reads:
Furtherly, please be advised that the land is no longer under the absolute
ownership of my mother and the undersigned is now the real and absolute
owner of the land.
Instead of raising a howl over the contents of the letter, as would be its
expected and natural reaction under the circumstances, TRCDC surprisingly
kept silent about the whole thing. As we mentioned in the factual
antecedents of this case, it even invited Pacunayen to its special board
meeting particularly to discuss with her the renewal of the lease contract.
Again, during that meeting, TRCDC did not mention anything that could be
construed as challenging Pacunayens ownership of the leased premises.
Neither did TRCDC assert its priority right to purchase the same against
Pacunayen.[32]
34
The essential elements of estoppel are: (1) conduct of a party
amounting to false representation or concealment of material facts or at
least calculated to convey the impression that the facts are otherwise than,
and inconsistent with, those which the party subsequently attempts to
assert; (2) intent, or at least expectation, that this conduct shall be acted
upon by, or at least influence, the other party; and (3) knowledge, actual or
constructive, of the real facts. [33]
The records are bereft of any proposition that petitioner waived its
right of first refusal under the contract such that it is now estopped from
exercising the same. In a letter dated June 17, 1991, petitioner wrote to
Fausto asking for a renewal of the term of lease. [34] Petitioner cannot be
faulted for merely seeking a renewal of the lease contract because
obviously, it was working on the assumption that title to the property is still
in Faustos name and the latter has the sole authority to decide on the fate
of the property. Instead, it was respondent who replied, advising petitioner
to remove all the improvements on the property, as the lease is to expire on
the 1st of August 1991. Respondent also informed petitioner that her
mother has already sold the property to her. [35] In order to resolve the
matter, a meeting was called among petitioners stockholders, including
respondent, on July 27, 1991, where petitioner, again, proposed that the
lease be renewed. Respondent, however, declined. While petitioner may
have sought the renewal of the lease, it cannot be construed as a
relinquishment of its right of first refusal. Estoppel must be intentional and
unequivocal. [36]
Also, in the excerpts from the minutes of the special meeting, it was
further stated that the possibility of a sale was likewise considered. [37] But
respondent also refused to sell the land, while the improvements, if for sale
shall be subject for appraisal. [38] After respondent refused to sell the land, it
was then that petitioner filed the complaint for annulment of sale, specific
performance and damages. [39] Petitioners acts of seeking all possible
avenues for the amenable resolution of the conflict do not amount to an
intentional and unequivocal abandonment of its right of first refusal.
Respondent was well aware of petitioners right to priority of sale, and
that the sale made to her by her mother was merely for her to be able to
take charge of the latters affairs. As admitted by respondent in her
Appellees Brief filed before the CA, viz.:
After June 19, 1991, TRCDC invited Pacunayen to meeting with the officers
of the corporation. . . . In the same meeting, Pacunayens attention was
called to the provision of the Contract of Lease had by her mother with
TRCDC, particularly paragraph 7 thereof, which states:
7. That should the lessor decide to sell the leased premises, the LESSEE shall
have the priority right to purchase the same.
Of course, in the meeting she had with the officers of TRCDC, Pacunayen
explained that the sale made in her favor by her mother was just a formality
so that she may have the proper representation with TRCDC in the absence
of her parents, more so that her father had already passed away, and there
was no malice in her mine (sic) and that of her mother, or any intention on
their part to deceive TRCDC. All these notwithstanding, and for her to show
their good faith in dealing with TRCDC, Pacunayen started the ground work
to reconvey ownership over the whole land, now covered by Transfer
Certificare (sic) of Title No. M-259, to and in the name of her mother
(Fausto), but the latter was becoming sickly, old and weak, and they found
no time to do it as early as they wanted to. [40] (Emphasis supplied)
Given the foregoing, the Kasulatan ng Bilihan Patuluyan ng Lupa dated
August 8, 1990 between Fausto and respondent must be
rescinded. Considering, however, that Fausto already died on March 16,
1996, during the pendency of this case with the CA, her heirs should have
been substituted as respondents in this case. Considering further that the
Court cannot declare respondent Pacunayen as the sole heir, as it is not the
proper forum for that purpose, the right of petitioner may only be enforced
against the heirs of the deceased Catalina Matienzo Fausto, represented by
respondent Pacunayen.
In Paraaque Kings Enterprises, Inc. vs. Court of Appeals,[41] it was ruled
that the basis of the right of the first refusal must be the current offer to sell
of the seller or offer to purchase of any prospective buyer. It is only after
the grantee fails to exercise its right of first priority under the same terms
and within the period contemplated, could the owner validly offer to sell
the property to a third person, again, under the same terms as offered to
the grantee. The circumstances of this case, however, dictate the
application of a different ruling. An offer of the property to petitioner under
35
identical terms and conditions of the offer previously given to respondent
Pacunayen would be inequitable. The subject property was sold in 1990 to
respondent Pacunayen for a measly sum of P10,000.00. Obviously, the value
is in a small amount because the sale was between a mother and daughter.
As admitted by said respondent, the sale made in her favor by her mother
was just a formality so that she may have the proper representation with
TRCDC in the absence of her parents [42] Consequently, the offer to be made
to petitioner in this case should be under reasonable terms and conditions,
taking into account the fair market value of the property at the time it was
sold to respondent.
In its complaint, petitioner prayed for the cancellation of TCT No. M35468 in the name of respondent Pacunayen, [43] which was issued by the
Register of Deeds of Morong on February 7, 1991. [44] Under ordinary
circumstances, this would be the logical effect of the rescission of
the Kasulatan ng Bilihan Patuluyan ng Lupa between the deceased Fausto
and respondent Pacunayen. However, the circumstances in this case are not
ordinary. The buyer of the subject property is the sellers own daughter. If
and when the title (TCT No. M-35468) in respondent Pacunayens name is
cancelled and reinstated in Faustos name, and thereafter negotiations
between petitioner and respondent Pacunayen for the purchase of the
subject property break down, then the subject property will again revert to
respondent Pacunayen as she appears to be one of Faustos heirs. This
would certainly be a winding route to traverse. Sound reason therefore
dictates that title should remain in the name of respondent Pacunayen, for
and in behalf of the other heirs, if any, to be cancelled only when petitioner
successfully exercises its right of first refusal and purchases the subject
property.
the end of September 1991, aside from the expected rentals from the
cockpit space lessees in the amount of P11,000.00.[46]
Under Article 2199 of the Civil Code, it is provided that:
Except as provided by law or by stipulation, one is entitled to an adequate
compensation only for such pecuniary loss suffered by him as he has duly
proved. Such compensation is referred to as actual or compensatory
damages. (Emphasis supplied)
The rule is that actual or compensatory damages cannot be presumed,
but must be proved with reasonable degree of certainty. A court cannot rely
on speculations, conjectures, or guesswork as to the fact and amount of
damages, but must depend upon competent proof that they have been
suffered by the injured party and on the best obtainable evidence of the
actual amount thereof. It must point out specific facts, which could afford a
basis for measuring whatever compensatory or actual damages are
borne.[47]
Such award of damages shall earn interest at the legal rate of six
percent (6%) per annum, which shall be computed from the time of the
filing of the Complaint on August 22, 1991, until the finality of this decision.
36
After the present decision becomes final and executory, the rate of interest
shall increase to twelve percent (12%) per annum from such finality until its
satisfaction, this interim period being deemed to be equivalent to a
forbearance of credit. [52] This is in accord with the guidelines laid down by
the Court in Eastern Shipping Lines, Inc. vs. Court of Appeals,[53] regarding
the manner of computing legal interest, viz.:
II. With regard particularly to an award of interest in the concept of actual
and compensatory damages, the rate of interest, as well as the accrual
thereof, is imposed, as follows:
1. 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.
2. When an obligation, not constituting a loan or forbearance of money, is
breached, an interest on the amount of damages awarded may be imposed
at the discretion of the court at the rate of 6% per annum. No interest,
however, shall be adjudged on unliquidated claims or damages except when
or until the demand can be established with reasonable certainty.
Accordingly, where the demand is established with reasonable certainty,
the interest shall begin to run from the time the claim is made judicially or
extrajudicially (Art. 1169, Civil Code) but when such certainty cannot be so
reasonably established at the time the demand is made, the interest shall
begin to run only from the date the judgment of the court is made (at which
time quantification of damages may be deemed to have been reasonably
ascertained). The actual base for the computation of legal interest shall, in
any case, be on the amount finally adjudged.
3. When the judgment of the court awarding a sum of money becomes final
and executory, the rate of legal interest, whether the case falls under
paragraph 1 or paragraph 2, above, shall be 12% per annum from such
finality until its satisfaction, this interim period being deemed to be by then
an equivalent to a forbearance of credit. [54]
37
therefore, experience physical suffering and mental anguish, which can be
experienced only by one having a nervous system. [58] Petitioner being a
corporation,[59] the claim for moral damages must be denied.
(2) The Heirs of the deceased Catalina Matienzo Fausto who are hereby
deemed substituted as respondents, represented by respondent
Anunciacion Fausto Pacunayen, are ORDEREDto recognize the obligation of
Catalina Matienzo Fausto under the Contract of Lease with respect to the
priority right of petitioner Tanay Recreation Center and Development Corp.
to purchase the subject property under reasonable terms and conditions;
(3) Transfer Certificate of Title No. M-35468 shall remain in the name of
respondent Anunciacion Fausto Pacunayen, which shall be cancelled in the
event petitioner successfully purchases the subject property;
(4) Respondent is ORDERED to pay petitioner Tanay Recreation Center and
Development Corporation the amount of Twenty Thousand Pesos
(P20,000.00) as actual damages, plus interest thereon at the legal rate of six
percent (6%) per annum from the filing of the Complaint until the finality of
this Decision. After this Decision becomes final and executory, the
applicable rate shall be twelve percent (12%) per annum until its
satisfaction; and,
(5) Respondent is ORDERED to pay petitioner the amount of Ten Thousand
Pesos (P10,000.00) as attorneys fees, and to pay the costs of suit.
(6) Let the case be remanded to the Regional Trial Court, Morong, Rizal
(Branch 78) for further proceedings on the determination of the reasonable
terms and conditions of the offer to sell by respondents to petitioner,
without prejudice to possible mediation between the parties.
The rest of the unaffected dispositive portion of the Court of Appeals
Decision is AFFIRMED.
SO ORDERED.