Republic of the Philippines

SUPREME COURT
Manila
EN BANC

G.R. No. 109125 December 2, 1994

ANG YU ASUNCION, ARTHUR GO AND KEH TIONG, petitioners,
vs.
THE HON. COURT OF APPEALS and BUEN REALTY DEVELOPMENT CORPORATION, respondents.
Antonio M. Albano for petitioners.
Umali, Soriano & Associates for private respondent.

VITUG, J.:
Assailed, in this petition for review, is the decision of the Court of Appeals, dated 04 December 1991, in CA-G.R. SP No. 26345 setting
aside and declaring without force and effect the orders of execution of the trial court, dated 30 August 1991 and 27 September 1991, in
Civil Case No. 87-41058.
The antecedents are recited in good detail by the appellate court thusly:
On July 29, 1987 a Second Amended Complaint for Specific Performance was filed by Ang Yu Asuncion and Keh
Tiong, et al., against Bobby Cu Unjieng, Rose Cu Unjieng and Jose Tan before the Regional Trial Court, Branch 31,
Manila in Civil Case No. 87-41058, alleging, among others, that plaintiffs are tenants or lessees of residential and
commercial spaces owned by defendants described as Nos. 630-638 Ongpin Street, Binondo, Manila; that they have
occupied said spaces since 1935 and have been religiously paying the rental and complying with all the conditions of
the lease contract; that on several occasions before October 9, 1986, defendants informed plaintiffs that they are
offering to sell the premises and are giving them priority to acquire the same; that during the negotiations, Bobby Cu
Unjieng offered a price of P6-million while plaintiffs made a counter offer of P5-million; that plaintiffs thereafter asked
the defendants to put their offer in writing to which request defendants acceded; that in reply to defendant's letter,
plaintiffs wrote them on October 24, 1986 asking that they specify the terms and conditions of the offer to sell; that
when plaintiffs did not receive any reply, they sent another letter dated January 28, 1987 with the same request; that
since defendants failed to specify the terms and conditions of the offer to sell and because of information received
that defendants were about to sell the property, plaintiffs were compelled to file the complaint to compel defendants to
sell the property to them.
Defendants filed their answer denying the material allegations of the complaint and interposing a special defense of
lack of cause of action.
After the issues were joined, defendants filed a motion for summary judgment which was granted by the lower court.
The trial court found that defendants' offer to sell was never accepted by the plaintiffs for the reason that the parties
did not agree upon the terms and conditions of the proposed sale, hence, there was no contract of sale at all.
Nonetheless, the lower court ruled that should the defendants subsequently offer their property for sale at a price of
P11-million or below, plaintiffs will have the right of first refusal. Thus the dispositive portion of the decision states:
WHEREFORE, judgment is hereby rendered in favor of the defendants and against the plaintiffs
summarily dismissing the complaint subject to the aforementioned condition that if the defendants
subsequently decide to offer their property for sale for a purchase price of Eleven Million Pesos or
lower, then the plaintiffs has the option to purchase the property or of first refusal, otherwise,
defendants need not offer the property to the plaintiffs if the purchase price is higher than Eleven
Million Pesos.

SO ORDERED.
Aggrieved by the decision, plaintiffs appealed to this Court in
CA-G.R. CV No. 21123. In a decision promulgated on September 21, 1990 (penned by Justice Segundino G. Chua
and concurred in by Justices Vicente V. Mendoza and Fernando A. Santiago), this Court affirmed with modification
the lower court's judgment, holding:
In resume, there was no meeting of the minds between the parties concerning the sale of the
property. Absent such requirement, the claim for specific performance will not lie. Appellants'
demand for actual, moral and exemplary damages will likewise fail as there exists no justifiable
ground for its award. Summary judgment for defendants was properly granted. Courts may render
summary judgment when there is no genuine issue as to any material fact and the moving party is
entitled to a judgment as a matter of law (Garcia vs. Court of Appeals, 176 SCRA 815). All
requisites obtaining, the decision of the court a quo is legally justifiable.
WHEREFORE, finding the appeal unmeritorious, the judgment appealed from is hereby
AFFIRMED, but subject to the following modification: The court a quo in the aforestated decision
gave the plaintiffs-appellants the right of first refusal only if the property is sold for a purchase price
of Eleven Million pesos or lower; however, considering the mercurial and uncertain forces in our
market economy today. We find no reason not to grant the same right of first refusal to herein
appellants in the event that the subject property is sold for a price in excess of Eleven Million
pesos. No pronouncement as to costs.
SO ORDERED.
The decision of this Court was brought to the Supreme Court by petition for review on certiorari. The Supreme Court
denied the appeal on May 6, 1991 "for insufficiency in form and substances" (Annex H, Petition).
On November 15, 1990, while CA-G.R. CV No. 21123 was pending consideration by this Court, the Cu Unjieng
spouses executed a Deed of Sale (Annex D, Petition) transferring the property in question to herein petitioner Buen
Realty and Development Corporation, subject to the following terms and conditions:
1. That for and in consideration of the sum of FIFTEEN MILLION PESOS (P15,000,000.00), receipt
of which in full is hereby acknowledged, the VENDORS hereby sells, transfers and conveys for and
in favor of the VENDEE, his heirs, executors, administrators or assigns, the above-described
property with all the improvements found therein including all the rights and interest in the said
property free from all liens and encumbrances of whatever nature, except the pending ejectment
proceeding;
2. That the VENDEE shall pay the Documentary Stamp Tax, registration fees for the transfer of title
in his favor and other expenses incidental to the sale of above-described property including capital
gains tax and accrued real estate taxes.
As a consequence of the sale, TCT No. 105254/T-881 in the name of the Cu Unjieng spouses was cancelled and, in
lieu thereof, TCT No. 195816 was issued in the name of petitioner on December 3, 1990.
On July 1, 1991, petitioner as the new owner of the subject property wrote a letter to the lessees demanding that the
latter vacate the premises.
On July 16, 1991, the lessees wrote a reply to petitioner stating that petitioner brought the property subject to the
notice of lis pendens regarding Civil Case No. 87-41058 annotated on TCT No. 105254/T-881 in the name of the Cu
Unjiengs.
The lessees filed a Motion for Execution dated August 27, 1991 of the Decision in Civil Case No. 87-41058 as
modified by the Court of Appeals in CA-G.R. CV No. 21123.
On August 30, 1991, respondent Judge issued an order (Annex A, Petition) quoted as follows:

Presented before the Court is a Motion for Execution filed by plaintiff represented by Atty. Antonio
Albano. Both defendants Bobby Cu Unjieng and Rose Cu Unjieng represented by Atty. Vicente
Sison and Atty. Anacleto Magno respectively were duly notified in today's consideration of the
motion as evidenced by the rubber stamp and signatures upon the copy of the Motion for
Execution.
The gist of the motion is that the Decision of the Court dated September 21, 1990 as modified by
the Court of Appeals in its decision in CA G.R. CV-21123, and elevated to the Supreme Court upon
the petition for review and that the same was denied by the highest tribunal in its resolution dated
May 6, 1991 in G.R. No.
L-97276, had now become final and executory. As a consequence, there was an Entry of Judgment
by the Supreme Court as of June 6, 1991, stating that the aforesaid modified decision had already
become final and executory.
It is the observation of the Court that this property in dispute was the subject of theNotice of Lis
Pendens and that the modified decision of this Court promulgated by the Court of Appeals which
had become final to the effect that should the defendants decide to offer the property for sale for a
price of P11 Million or lower, and considering the mercurial and uncertain forces in our market
economy today, the same right of first refusal to herein plaintiffs/appellants in the event that the
subject property is sold for a price in excess of Eleven Million pesos or more.
WHEREFORE, defendants are hereby ordered to execute the necessary Deed of Sale of the
property in litigation in favor of plaintiffs Ang Yu Asuncion, Keh Tiong and Arthur Go for the
consideration of P15 Million pesos in recognition of plaintiffs' right of first refusal and that a new
Transfer Certificate of Title be issued in favor of the buyer.
All previous transactions involving the same property notwithstanding the issuance of another title
to Buen Realty Corporation, is hereby set aside as having been executed in bad faith.
SO ORDERED.
On September 22, 1991 respondent Judge issued another order, the dispositive portion of which reads:
WHEREFORE, let there be Writ of Execution issue in the above-entitled case directing the Deputy
Sheriff Ramon Enriquez of this Court to implement said Writ of Execution ordering the defendants
among others to comply with the aforesaid Order of this Court within a period of one (1) week from
receipt of this Order and for defendants to execute the necessary Deed of Sale of the property in
litigation in favor of the plaintiffs Ang Yu Asuncion, Keh Tiong and Arthur Go for the consideration of
P15,000,000.00 and ordering the Register of Deeds of the City of Manila, to cancel and set aside
the title already issued in favor of Buen Realty Corporation which was previously executed between
the latter and defendants and to register the new title in favor of the aforesaid plaintiffs Ang Yu
Asuncion, Keh Tiong and Arthur Go.
SO ORDERED.
On the same day, September 27, 1991 the corresponding writ of execution (Annex C, Petition) was issued. 1
On 04 December 1991, the appellate court, on appeal to it by private respondent, set aside and declared without force and effect the
above questioned orders of the court a quo.
In this petition for review on certiorari, petitioners contend that Buen Realty can be held bound by the writ of execution by virtue of the
notice of lis pendens, carried over on TCT No. 195816 issued in the name of Buen Realty, at the time of the latter's purchase of the
property on 15 November 1991 from the Cu Unjiengs.
We affirm the decision of the appellate court.

A not too recent development in real estate transactions is the adoption of such arrangements as the right of first refusal, a purchase
option and a contract to sell. For ready reference, we might point out some fundamental precepts that may find some relevance to this
discussion.
An obligation is a juridical necessity to give, to do or not to do (Art. 1156, Civil Code). The obligation is constituted upon the
concurrence of the essential elements thereof, viz: (a) The vinculum juris or juridical tie which is the efficient cause established by the
various sources of obligations (law, contracts, quasi-contracts, delicts and quasi-delicts); (b) the object which is the prestation or
conduct; required to be observed (to give, to do or not to do); and (c) the subject-persons who, viewed from the demandability of the
obligation, are the active (obligee) and the passive (obligor) subjects.
Among the sources of an obligation is a contract (Art. 1157, Civil Code), which is a meeting of minds between two persons whereby one
binds himself, with respect to the other, to give something or to render some service (Art. 1305, Civil Code). A contract undergoes
various stages that include its negotiation or preparation, its perfection and, finally, its consummation. Negotiation covers the
period from the time the prospective contracting parties indicate interest in the contract to the time the contract is concluded (perfected).
The perfection of the contract takes place upon the concurrence of the essential elements thereof. A contract which is consensual as to
perfection is so established upon a mere meeting of minds, i.e., the concurrence of offer and acceptance, on the object and on the
cause thereof. A contract which requires, in addition to the above, the delivery of the object of the agreement, as in a pledge
or commodatum, is commonly referred to as a real contract. In a solemn contract, compliance with certain formalities prescribed by law,
such as in a donation of real property, is essential in order to make the act valid, the prescribed form being thereby an essential element
thereof. The stage of consummationbegins when the parties perform their respective undertakings under the contract culminating in the
extinguishment thereof.
Until the contract is perfected, it cannot, as an independent source of obligation, serve as a binding juridical relation. In sales,
particularly, to which the topic for discussion about the case at bench belongs, the contract is perfected when a person, called the seller,
obligates himself, for a price certain, to deliver and to transfer ownership of a thing or right to another, called the buyer, over which the
latter agrees. Article 1458 of the Civil Code provides:
Art. 1458. By the contract of sale one of the contracting parties obligates himself to transfer the ownership of and to
deliver a determinate thing, and the other to pay therefor a price certain in money or its equivalent.
A contract of sale may be absolute or conditional.
When the sale is not absolute but conditional, such as in a "Contract to Sell" where invariably the ownership of the thing sold is retained
until the fulfillment of a positive suspensive condition (normally, the full payment of the purchase price), the breach of the condition will
prevent the obligation to convey title from acquiring an obligatory force. 2 In Dignos vs. Court of Appeals (158 SCRA 375), we have said
that, although denominated a "Deed of Conditional Sale," a sale is still absolute where the contract is devoid of any proviso that title is
reserved or the right to unilaterally rescind is stipulated, e.g., until or unless the price is paid. Ownership will then be transferred to the
buyer upon actual or constructive delivery (e.g., by the execution of a public document) of the property sold. Where the condition is
imposed upon the perfection of the contract itself, the failure of the condition would prevent such perfection. 3 If the condition is imposed
on the obligation of a party which is not fulfilled, the other party may either waive the condition or refuse to proceed with the sale (Art.
1545, Civil Code). 4
An unconditional mutual promise to buy and sell, as long as the object is made determinate and the price is fixed, can be obligatory on
the parties, and compliance therewith may accordingly be exacted. 5
An accepted unilateral promise which specifies the thing to be sold and the price to be paid, when coupled with a valuable
consideration distinct and separate from the price, is what may properly be termed a perfected contract ofoption. This contract is legally
binding, and in sales, it conforms with the second paragraph of Article 1479 of the Civil Code, viz:
Art. 1479. . . .
An accepted unilateral promise to buy or to sell a determinate thing for a price certain is binding upon the promissor if
the promise is supported by a consideration distinct from the price. (1451a) 6
Observe, however, that the option is not the contract of sale itself. 7 The optionee has the right, but not the obligation, to buy. Once the
option is exercised timely, i.e., the offer is accepted before a breach of the option, a bilateral promise to sell and to buy ensues and both
parties are then reciprocally bound to comply with their respective undertakings. 8

Let us elucidate a little. A negotiation is formally initiated by an offer. An imperfect promise (policitacion) is merely an offer. Public
advertisements or solicitations and the like are ordinarily construed as mere invitations to make offers or only as proposals. These
relations, until a contract is perfected, are not considered binding commitments. Thus, at any time prior to the perfection of the contract,
either negotiating party may stop the negotiation. The offer, at this stage, may be withdrawn; the withdrawal is effective immediately
after its manifestation, such as by its mailing and not necessarily when the offeree learns of the withdrawal (Laudico vs. Arias, 43 Phil.
270). Where a period is given to the offeree within which to accept the offer, the following rules generally govern:
(1) If the period is not itself founded upon or supported by a consideration, the offeror is still free and has the right to withdraw the offer
before its acceptance, or, if an acceptance has been made, before the offeror's coming to know of such fact, by communicating that
withdrawal to the offeree (see Art. 1324, Civil Code; see also Atkins, Kroll & Co. vs. Cua, 102 Phil. 948, holding that this rule is
applicable to a unilateral promise to sell under Art. 1479, modifying the previous decision in South Western Sugar vs. Atlantic Gulf, 97
Phil. 249; see also Art. 1319, Civil Code; Rural Bank of Paraaque, Inc., vs. Remolado, 135 SCRA 409; Sanchez vs. Rigos, 45 SCRA
368). The right to withdraw, however, must not be exercised whimsically or arbitrarily; otherwise, it could give rise to a damage claim
under Article 19 of the Civil Code which ordains that "every person must, in the exercise of his rights and in the performance of his
duties, act with justice, give everyone his due, and observe honesty and good faith."
(2) If the period has a separate consideration, a contract of "option" is deemed perfected, and it would be a breach of that contract to
withdraw the offer during the agreed period. The option, however, is an independent contract by itself, and it is to be distinguished from
the projected main agreement (subject matter of the option) which is obviously yet to be concluded. If, in fact, the optionerofferor withdraws the offer before its acceptance(exercise of the option) by the optionee-offeree, the latter may not sue for specific
performance on the proposed contract ("object" of the option) since it has failed to reach its own stage of perfection. The optionerofferor, however, renders himself liable for damages for breach of the option. In these cases, care should be taken of the real nature of
the consideration given, for if, in fact, it has been intended to be part of the consideration for the main contract with a right of withdrawal
on the part of the optionee, the main contract could be deemed perfected; a similar instance would be an "earnest money" in a contract
of sale that can evidence its perfection (Art. 1482, Civil Code).
In the law on sales, the so-called "right of first refusal" is an innovative juridical relation. Needless to point out, it cannot be deemed a
perfected contract of sale under Article 1458 of the Civil Code. Neither can the right of first refusal, understood in its normal
concept, per se be brought within the purview of an option under the second paragraph of Article 1479, aforequoted, or possibly of an
offer under Article 1319 9 of the same Code. An option or an offer would require, among other things, 10 a clear certainty on both the
object and the cause or consideration of the envisioned contract. In a right of first refusal, while the object might be made determinate,
the exercise of the right, however, would be dependent not only on the grantor's eventual intention to enter into a binding juridical
relation with another but also on terms, including the price, that obviously are yet to be later firmed up. Prior thereto, it can at best be so
described as merely belonging to a class of preparatory juridical relations governed not by contracts (since the essential elements to
establish the vinculum juris would still be indefinite and inconclusive) but by, among other laws of general application, the pertinent
scattered provisions of the Civil Code on human conduct.
Even on the premise that such right of first refusal has been decreed under a final judgment, like here, its breach cannot justify
correspondingly an issuance of a writ of execution under a judgment that merely recognizes its existence, nor would it sanction an
action for specific performance without thereby negating the indispensable element of consensuality in the perfection of contracts. 11 It is
not to say, however, that the right of first refusal would be inconsequential for, such as already intimated above, an unjustified disregard
thereof, given, for instance, the circumstances expressed in Article 19 12 of the Civil Code, can warrant a recovery for damages.
The final judgment in Civil Case No. 87-41058, it must be stressed, has merely accorded a "right of first refusal" in favor of petitioners.
The consequence of such a declaration entails no more than what has heretofore been said. In fine, if, as it is here so conveyed to us,
petitioners are aggrieved by the failure of private respondents to honor the right of first refusal, the remedy is not a writ of execution on
the judgment, since there is none to execute, but an action for damages in a proper forum for the purpose.
Furthermore, whether private respondent Buen Realty Development Corporation, the alleged purchaser of the property, has acted in
good faith or bad faith and whether or not it should, in any case, be considered bound to respect the registration of the lis pendens in
Civil Case No. 87-41058 are matters that must be independently addressed in appropriate proceedings. Buen Realty, not having been
impleaded in Civil Case No. 87-41058, cannot be held subject to the writ of execution issued by respondent Judge, let alone ousted
from the ownership and possession of the property, without first being duly afforded its day in court.
We are also unable to agree with petitioners that the Court of Appeals has erred in holding that the writ of execution varies the terms of
the judgment in Civil Case No. 87-41058, later affirmed in CA-G.R. CV-21123. The Court of Appeals, in this regard, has observed:
Finally, the questioned writ of execution is in variance with the decision of the trial court as modified by this Court. As
already stated, there was nothing in said decision 13 that decreed the execution of a deed of sale between the Cu

Unjiengs and respondent lessees, or the fixing of the price of the sale, or the cancellation of title in the name of
petitioner (Limpin vs. IAC, 147 SCRA 516; Pamantasan ng Lungsod ng Maynila vs. IAC, 143 SCRA 311; De Guzman
vs. CA, 137 SCRA 730; Pastor vs. CA, 122 SCRA 885).
It is likewise quite obvious to us that the decision in Civil Case No. 87-41058 could not have decreed at the time the execution of any
deed of sale between the Cu Unjiengs and petitioners.
WHEREFORE, we UPHOLD the Court of Appeals in ultimately setting aside the questioned Orders, dated 30 August 1991 and 27
September 1991, of the court a quo. Costs against petitioners.
SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila
EN BANC

G.R. No. 106063 November 21, 1996

EQUATORIAL REALTY DEVELOPMENT, INC. & CARMELO & BAUERMANN, INC., petitioners,
vs.
MAYFAIR THEATER, INC., respondent.

HERMOSISIMA, JR., J.:

Before us is a petition for review of the decision 1 of the Court of
Appeals 2 involving questions in the resolution of which the respondent appellate court analyzed and interpreted particular
provisions of our laws on contracts and sales. In its assailed decision, the respondent court reversed the trial court 3 which, in
dismissing the complaint for specific performance with damages and annulment of contract, 4found the option clause in the
lease contracts entered into by private respondent Mayfair Theater, Inc. (hereafter, Mayfair) and petitioner Carmelo &
Bauermann, Inc. (hereafter, Carmelo) to be impossible of performance and unsupported by a consideration and the
subsequent sale of the subject property to petitioner Equatorial Realty Development, Inc. (hereafter, Equatorial) to have been
made without any breach of or prejudice to, the said lease contracts. 5
We reproduce below the facts as narrated by the respondent court, which narration, we note, is almost verbatim the basis of
the statement of facts as rendered by the petitioners in their pleadings:
Carmelo owned a parcel of land, together with two 2-storey buildings constructed thereon located at Claro M Recto
Avenue, Manila, and covered by TCT No. 18529 issued in its name by the Register of Deeds of Manila.
On June 1, 1967 Carmelo entered into a contract of lease with Mayfair for the latter's lease of a portion of Carmelo's
property particularly described, to wit:
A PORTION OF THE SECOND FLOOR of the two-storey building, situated at C.M. Recto Avenue,
Manila, with a floor area of 1,610 square meters.
THE SECOND FLOOR AND MEZZANINE of the two-storey building, situated at C.M. Recto
Avenue, Manila, with a floor area of 150 square meters.

for use by Mayfair as a motion picture theater and for a term of twenty (20) years. Mayfair thereafter constructed on
the leased property a movie house known as "Maxim Theatre."
Two years later, on March 31, 1969, Mayfair entered into a second contract of lease with Carmelo for the lease of
another portion of Carmelo's property, to wit:
A PORTION OF THE SECOND FLOOR of the two-storey building, situated at C.M. Recto Avenue,
Manila, with a floor area of 1,064 square meters.
THE TWO (2) STORE SPACES AT THE GROUND FLOOR and MEZZANINE of the two-storey
building situated at C.M. Recto Avenue, Manila, with a floor area of 300 square meters and bearing
street numbers 1871 and 1875,
for similar use as a movie theater and for a similar term of twenty (20) years. Mayfair put up another movie house
known as "Miramar Theatre" on this leased property.
Both contracts of lease provides (sic) identically worded paragraph 8, which reads:
That if the LESSOR should desire to sell the leased premises, the LESSEE shall be given 30-days
exclusive option to purchase the same.
In the event, however, that the leased premises is sold to someone other than the LESSEE, the
LESSOR is bound and obligated, as it hereby binds and obligates itself, to stipulate in the Deed of
Sale hereof that the purchaser shall recognize this lease and be bound by all the terms and
conditions thereof.
Sometime in August 1974, Mr. Henry Pascal of Carmelo informed Mr. Henry Yang, President of Mayfair, through a
telephone conversation that Carmelo was desirous of selling the entire Claro M. Recto property. Mr. Pascal told Mr.
Yang that a certain Jose Araneta was offering to buy the whole property for US Dollars 1,200,000, and Mr. Pascal
asked Mr. Yang if the latter was willing to buy the property for Six to Seven Million Pesos.
Mr. Yang replied that he would let Mr. Pascal know of his decision. On August 23, 1974, Mayfair replied through a
letter stating as follows:
It appears that on August 19, 1974 your Mr. Henry Pascal informed our client's Mr. Henry Yang
through the telephone that your company desires to sell your above-mentioned C.M. Recto Avenue
property.
Under your company's two lease contracts with our client, it is uniformly provided:
8. That if the LESSOR should desire to sell the leased premises the LESSEE shall be given 30days exclusive option to purchase the same. In the event, however, that the leased premises is
sold to someone other than the LESSEE, the LESSOR is bound and obligated, as it is (sic)
herebinds (sic) and obligates itself, to stipulate in the Deed of Sale thereof that the purchaser shall
recognize this lease and be bound by all the terms and conditions hereof (sic).
Carmelo did not reply to this letter.
On September 18, 1974, Mayfair sent another letter to Carmelo purporting to express interest in acquiring not only
the leased premises but "the entire building and other improvements if the price is reasonable. However, both
Carmelo and Equatorial questioned the authenticity of the second letter.
Four years later, on July 30, 1978, Carmelo sold its entire C.M. Recto Avenue land and building, which included the
leased premises housing the "Maxim" and "Miramar" theatres, to Equatorial by virtue of a Deed of Absolute Sale, for
the total sum of P11,300,000.00.

In September 1978, Mayfair instituted the action a quo for specific performance and annulment of the sale of the
leased premises to Equatorial. In its Answer, Carmelo alleged as special and affirmative defense (a) that it had
informed Mayfair of its desire to sell the entire C.M. Recto Avenue property and offered the same to Mayfair, but the
latter answered that it was interested only in buying the areas under lease, which was impossible since the property
was not a condominium; and (b) that the option to purchase invoked by Mayfair is null and void for lack of
consideration. Equatorial, in its Answer, pleaded as special and affirmative defense that the option is void for lack of
consideration (sic) and is unenforceable by reason of its impossibility of performance because the leased premises
could not be sold separately from the other portions of the land and building. It counterclaimed for cancellation of the
contracts of lease, and for increase of rentals in view of alleged supervening extraordinary devaluation of the
currency. Equatorial likewise cross-claimed against co-defendant Carmelo for indemnification in respect of Mayfair's
claims.
During the pre-trial conference held on January 23, 1979, the parties stipulated on the following:
1. That there was a deed of sale of the contested premises by the defendant Carmelo . . . in favor
of defendant Equatorial . . .;
2. That in both contracts of lease there appear (sic) the stipulation granting the plaintiff exclusive
option to purchase the leased premises should the lessor desire to sell the same (admitted subject
to the contention that the stipulation is null and void);
3. That the two buildings erected on this land are not of the condominium plan;
4. That the amounts stipulated and mentioned in paragraphs 3 (a) and (b) of the contracts of lease
constitute the consideration for the plaintiff's occupancy of the leased premises, subject of the
same contracts of lease, Exhibits A and B;
xxx xxx xxx
6. That there was no consideration specified in the option to buy embodied in the contract;
7. That Carmelo & Bauermann owned the land and the two buildings erected thereon;
8. That the leased premises constitute only the portions actually occupied by the theaters; and
9. That what was sold by Carmelo & Bauermann to defendant Equatorial Realty is the land and the
two buildings erected thereon.
xxx xxx xxx
After assessing the evidence, the court a quo rendered the appealed decision, the decretal portion of which reads as
follows:
WHEREFORE, judgment is hereby rendered:
(1) Dismissing the complaint with costs against the plaintiff;
(2) Ordering plaintiff to pay defendant Carmelo & Bauermann P40,000.00 by way of attorney's fees
on its counterclaim;
(3) Ordering plaintiff to pay defendant Equatorial Realty P35,000.00 per month as reasonable
compensation for the use of areas not covered by the contract (sic) of lease from July 31, 1979
until plaintiff vacates said area (sic) plus legal interest from July 31, 1978; P70,000 00 per month as
reasonable compensation for the use of the premises covered by the contracts (sic) of lease dated
(June 1, 1967 from June 1, 1987 until plaintiff vacates the premises plus legal interest from June 1,
1987; P55,000.00 per month as reasonable compensation for the use of the premises covered by

the contract of lease dated March 31, 1969 from March 30, 1989 until plaintiff vacates the premises
plus legal interest from March 30, 1989; and P40,000.00 as attorney's fees;
(4) Dismissing defendant Equatorial's crossclaim against defendant Carmelo & Bauermann.
The contracts of lease dated June 1, 1967 and March 31, 1969 are declared expired and all
persons claiming rights under these contracts are directed to vacate the premises. 6
The trial court adjudged the identically worded paragraph 8 found in both aforecited lease contracts to be an option clause
which however cannot be deemed to be binding on Carmelo because of lack of distinct consideration therefor.
The court a quo ratiocinated:
Significantly, during the pre-trial, it was admitted by the parties that the option in the contract of lease is not supported
by a separate consideration. Without a consideration, the option is therefore not binding on defendant Carmelo &
Bauermann to sell the C.M. Recto property to the former. The option invoked by the plaintiff appears in the contracts
of lease . . . in effect there is no option, on the ground that there is no consideration. Article 1352 of the Civil Code,
provides:
Contracts without cause or with unlawful cause, produce no effect whatever. The cause is unlawful
if it is contrary to law, morals, good custom, public order or public policy.
Contracts therefore without consideration produce no effect whatsoever. Article 1324 provides:
When the offeror has allowed the offeree a certain period to accept, the offer may be withdrawn at
any time before acceptance by communicating such withdrawal, except when the option is founded
upon consideration, as something paid or promised.
in relation with Article 1479 of the same Code:
A promise to buy and sell a determine thing for a price certain is reciprocally demandable.
An accepted unilateral promise to buy or to sell a determine thing for a price certain is binding upon
the promissor if the promise is supported by a consideration distinct from the price.
The plaintiff cannot compel defendant Carmelo to comply with the promise unless the former establishes the
existence of a distinct consideration. In other words, the promisee has the burden of proving the consideration. The
consideration cannot be presumed as in Article 1354:
Although the cause is not stated in the contract, it is presumed that it exists and is lawful unless the
debtor proves the contrary.
where consideration is legally presumed to exists. Article 1354 applies to contracts in general, whereas when it
comes to an option it is governed particularly and more specifically by Article 1479 whereby the promisee has the
burden of proving the existence of consideration distinct from the price. Thus, in the case of Sanchez vs. Rigor, 45
SCRA 368, 372-373, the Court said:
(1) Article 1354 applies to contracts in general, whereas the second paragraph of Article 1479
refers to sales in particular, and, more specifically, to an accepted unilateral promise to buy or to
sell. In other words, Article 1479 is controlling in the case at bar.
(2) In order that said unilateral promise may be binding upon the promissor, Article 1479 requires
the concurrence of a condition, namely, that the promise be supported by a consideration distinct
from the price.
Accordingly, the promisee cannot compel the promissor to comply with the promise, unless the
former establishes the existence of said distinct consideration. In other words, the promisee has the

burden of proving such consideration. Plaintiff herein has not even alleged the existence thereof in
his complaint. 7
It follows that plaintiff cannot compel defendant Carmelo & Bauermann to sell the C.M. Recto property to the former.
Mayfair taking exception to the decision of the trial court, the battleground shifted to the respondent Court of Appeals.
Respondent appellate court reversed the court a quo and rendered judgment:
1. Reversing and setting aside the appealed Decision;
2. Directing the plaintiff-appellant Mayfair Theater Inc. to pay and return to Equatorial the amount of P11,300,000.00
within fifteen (15) days from notice of this Decision, and ordering Equatorial Realty Development, Inc. to accept such
payment;
3. Upon payment of the sum of P11,300,000, directing Equatorial Realty Development, Inc. to execute the deeds and
documents necessary for the issuance and transfer of ownership to Mayfair of the lot registered under TCT Nos.
17350, 118612, 60936, and 52571; and
4. Should plaintiff-appellant Mayfair Theater, Inc. be unable to pay the amount as adjudged, declaring the Deed of
Absolute Sale between the defendants-appellants Carmelo & Bauermann, Inc. and Equatorial Realty Development,
Inc. as valid and binding upon all the parties. 8
Rereading the law on the matter of sales and option contracts, respondent Court of Appeals differentiated between Article
1324 and Article 1479 of the Civil Code, analyzed their application to the facts of this case, and concluded that since
paragraph 8 of the two lease contracts does not state a fixed price for the purchase of the leased premises, which is an
essential element for a contract of sale to be perfected, what paragraph 8 is, must be a right of first refusal and not an option
contract. It explicated:
Firstly, the court a quo misapplied the provisions of Articles 1324 and 1479, second paragraph, of the Civil Code.
Article 1324 speaks of an "offer" made by an offeror which the offeree may or may not accept within a certain period.
Under this article, the offer may be withdrawn by the offeror before the expiration of the period and while the offeree
has not yet accepted the offer. However, the offer cannot be withdrawn by the offeror within the period if a
consideration has been promised or given by the offeree in exchange for the privilege of being given that period
within which to accept the offer. The consideration is distinct from the price which is part of the offer. The contract that
arises is known as option. In the case of Beaumont vs. Prieto, 41 Phil. 670, the Supreme court, citing Bouvier, defined
an option as follows: "A contract by virtue of which A, in consideration of the payment of a certain sum to B, acquires
the privilege of buying from or selling to B, certain securities or properties within a limited time at a specified price,"
(pp. 686-7).
Article 1479, second paragraph, on the other hand, contemplates of an "accepted unilateral promise to buy or to sell
a determinate thing for a price within (which) is binding upon the promisee if the promise is supported by a
consideration distinct from the price." That "unilateral promise to buy or to sell a determinate thing for a price certain"
is called an offer. An "offer", in laws, is a proposal to enter into a contract (Rosenstock vs. Burke, 46 Phil. 217). To
constitute a legal offer, the proposal must be certain as to the object, the price and other essential terms of the
contract (Art. 1319, Civil Code).
Based on the foregoing discussion, it is evident that the provision granting Mayfair "30-days exclusive option to
purchase" the leased premises is NOT AN OPTION in the context of Arts. 1324 and 1479, second paragraph, of the
Civil Code. Although the provision is certain as to the object (the sale of the leased premises) the price for which the
object is to be sold is not stated in the provision Otherwise stated, the questioned stipulation is not by itself, an
"option" or the "offer to sell" because the clause does not specify the price for the subject property.
Although the provision giving Mayfair "30-days exclusive option to purchase" cannot be legally categorized as an
option, it is, nevertheless, a valid and binding stipulation. What the trial court failed to appreciate was the intention of
the parties behind the questioned proviso.
xxx xxx xxx

The provision in question is not of the pro-forma type customarily found in a contract of lease. Even appellees have
recognized that the stipulation was incorporated in the two Contracts of Lease at the initiative and behest of Mayfair.
Evidently, the stipulation was intended to benefit and protect Mayfair in its rights as lessee in case Carmelo should
decide, during the term of the lease, to sell the leased property. This intention of the parties is achieved in two ways in
accordance with the stipulation. The first is by giving Mayfair "30-days exclusive option to purchase" the leased
property. The second is, in case Mayfair would opt not to purchase the leased property, "that the purchaser (the new
owner of the leased property) shall recognize the lease and be bound by all the terms and conditions thereof."
In other words, paragraph 8 of the two Contracts of lease, particularly the stipulation giving Mayfair "30-days
exclusive option to purchase the (leased premises)," was meant to provide Mayfair the opportunity to purchase and
acquire the leased property in the event that Carmelo should decide to dispose of the property. In order to realize this
intention, the implicit obligation of Carmelo once it had decided to sell the leased property, was not only to notify
Mayfair of such decision to sell the property, but, more importantly, to make an offer to sell the leased premises to
Mayfair, giving the latter a fair and reasonable opportunity to accept or reject the offer, before offering to sell or selling
the leased property to third parties. The right vested in Mayfair is analogous to the right of first refusal, which means
that Carmelo should have offered the sale of the leased premises to Mayfair before offering it to other parties, or, if
Carmelo should receive any offer from third parties to purchase the leased premises, then Carmelo must first give
Mayfair the opportunity to match that offer.
In fact, Mr. Pascal understood the provision as giving Mayfair a right of first refusal when he made the telephone call
to Mr. Yang in 1974. Mr. Pascal thus testified:
Q Can you tell this Honorable Court how you made the offer to Mr. Henry Yang
by telephone?
A I have an offer from another party to buy the property and having the offer we
decided to make an offer to Henry Yang on a first-refusal basis. (TSN November
8, 1983, p. 12.).
and on cross-examination:
Q When you called Mr. Yang on August 1974 can you remember exactly what
you have told him in connection with that matter, Mr. Pascal?
A More or less, I told him that I received an offer from another party to buy the
property and I was offering him first choice of the enter property. (TSN,
November 29, 1983, p. 18).
We rule, therefore, that the foregoing interpretation best renders effectual the intention of the parties.9
Besides the ruling that paragraph 8 vests in Mayfair the right of first refusal as to which the requirement of distinct
consideration indispensable in an option contract, has no application, respondent appellate court also addressed the claim of
Carmelo and Equatorial that assuming arguendo that the option is valid and effective, it is impossible of performance because
it covered only the leased premises and not the entire Claro M. Recto property, while Carmelo's offer to sell pertained to the
entire property in question. The Court of Appeals ruled as to this issue in this wise:
We are not persuaded by the contentions of the defendants-appellees. It is to be noted that the Deed of Absolute
Sale between Carmelo and Equatorial covering the whole Claro M. Recto property, made reference to four titles: TCT
Nos. 17350, 118612, 60936 and 52571. Based on the information submitted by Mayfair in its appellant's Brief (pp. 5
and 46) which has not been controverted by the appellees, and which We, therefore, take judicial notice of the two
theaters stand on the parcels of land covered by TCT No. 17350 with an area of 622.10 sq. m and TCT No. 118612
with an area of 2,100.10 sq. m. The existence of four separate parcels of land covering the whole Recto property
demonstrates the legal and physical possibility that each parcel of land, together with the buildings and improvements
thereof, could have been sold independently of the other parcels.
At the time both parties executed the contracts, they were aware of the physical and structural conditions of the
buildings on which the theaters were to be constructed in relation to the remainder of the whole Recto property. The
peculiar language of the stipulation would tend to limit Mayfair's right under paragraph 8 of the Contract of Lease to

the acquisition of the leased areas only. Indeed, what is being contemplated by the questioned stipulation is a
departure from the customary situation wherein the buildings and improvements are included in and form part of the
sale of the subjacent land. Although this situation is not common, especially considering the non-condominium nature
of the buildings, the sale would be valid and capable of being performed. A sale limited to the leased premises only, if
hypothetically assumed, would have brought into operation the provisions of co-ownership under which Mayfair would
have become the exclusive owner of the leased premises and at the same time a co-owner with Carmelo of the
subjacent land in proportion to Mayfair's interest over the premises sold to it. 10
Carmelo and Equatorial now comes before us questioning the correctness and legal basis for the decision of respondent Court
of Appeals on the basis of the following assigned errors:
I
THE COURT OF APPEALS GRAVELY ERRED IN CONCLUDING THAT THE OPTION CLAUSE IN THE
CONTRACTS OF LEASE IS ACTUALLY A RIGHT OF FIRST REFUSAL PROVISO. IN DOING SO THE COURT OF
APPEALS DISREGARDED THE CONTRACTS OF LEASE WHICH CLEARLY AND UNEQUIVOCALLY PROVIDE
FOR AN OPTION, AND THE ADMISSION OF THE PARTIES OF SUCH OPTION IN THEIR STIPULATION OF
FACTS.
II
WHETHER AN OPTION OR RIGHT OF FIRST REFUSAL, THE COURT OF APPEALS ERRED IN DIRECTING
EQUATORIAL TO EXECUTE A DEED OF SALE EIGHTEEN (18) YEARS AFTER MAYFAIR FAILED TO EXERCISE
ITS OPTION (OR, EVEN ITS RIGHT OF FIRST REFUSAL ASSUMING IT WAS ONE) WHEN THE CONTRACTS
LIMITED THE EXERCISE OF SUCH OPTION TO 30 DAYS FROM NOTICE.
III
THE COURT OF APPEALS GRIEVOUSLY ERRED WHEN IT DIRECTED IMPLEMENTATION OF ITS DECISION
EVEN BEFORE ITS FINALITY, AND WHEN IT GRANTED MAYFAIR A RELIEF THAT WAS NOT EVEN PRAYED
FOR IN THE COMPLAINT.
IV
THE COURT OF APPEALS VIOLATED ITS OWN INTERNAL RULES IN THE ASSIGNMENT OF APPEALED CASES
WHEN IT ALLOWED THE SAME DIVISION XII, PARTICULARLY JUSTICE MANUEL HERRERA, TO RESOLVE ALL
THE MOTIONS IN THE "COMPLETION PROCESS" AND TO STILL RESOLVE THE MERITS OF THE CASE IN THE
"DECISION STAGE". 11

We shall first dispose of the fourth assigned error respecting alleged irregularities in the raffle of this case in the Court of
Appeals. Suffice it to say that in our Resolution, 12 dated December 9, 1992, we already took note of this matter and set out the
proper applicable procedure to be the following:
On September 20, 1992, counsel for petitioner Equatorial Realty Development, Inc. wrote a letter-complaint to this
Court alleging certain irregularities and infractions committed by certain lawyers, and Justices of the Court of Appeals
and of this Court in connection with case CA-G.R. CV No. 32918 (now G.R. No. 106063). This partakes of the nature
of an administrative complaint for misconduct against members of the judiciary. While the letter-complaint arose as an
incident in case CA-G.R. CV No. 32918 (now G.R. No. 106063), the disposition thereof should be separate and
independent from Case G.R. No. 106063. However, for purposes of receiving the requisite pleadings necessary in
disposing of the administrative complaint, this Division shall continue to have control of the case. Upon completion
thereof, the same shall be referred to the Court En Banc for proper disposition. 13
This court having ruled the procedural irregularities raised in the fourth assigned error of Carmelo and Equatorial, to be an
independent and separate subject for an administrative complaint based on misconduct by the lawyers and justices implicated
therein, it is the correct, prudent and consistent course of action not to pre-empt the administrative proceedings to be

undertaken respecting the said irregularities. Certainly, a discussion thereupon by us in this case would entail a finding on the
merits as to the real nature of the questioned procedures and the true intentions and motives of the players therein.
In essence, our task is two-fold: (1) to define the true nature, scope and efficacy of paragraph 8 stipulated in the two contracts
of lease between Carmelo and Mayfair in the face of conflicting findings by the trial court and the Court of Appeals; and (2) to
determine the rights and obligations of Carmelo and Mayfair, as well as Equatorial, in the aftermath of the sale by Carmelo of
the entire Claro M. Recto property to Equatorial.
Both contracts of lease in question provide the identically worded paragraph 8, which reads:
That if the LESSOR should desire to sell the leased premises, the LESSEE shall be given 30-days exclusive option to
purchase the same.
In the event, however, that the leased premises is sold to someone other than the LESSEE, the LESSOR is bound
and obligated, as it hereby binds and obligates itself, to stipulate in the Deed of Sale thereof that the purchaser shall
recognize this lease and be bound by all the terms and conditions thereof. 14
We agree with the respondent Court of Appeals that the aforecited contractual stipulation provides for a right of first refusal in
favor of Mayfair. It is not an option clause or an option contract. It is a contract of a right of first refusal.
As early as 1916, in the case of Beaumont vs. Prieto, 15 unequivocal was our characterization of an option contract as one
necessarily involving the choice granted to another for a distinct and separate consideration as to whether or not to purchase a
determinate thing at a predetermined fixed price.
It is unquestionable that, by means of the document Exhibit E, to wit, the letter of December 4, 1911, quoted at the
beginning of this decision, the defendant Valdes granted to the plaintiff Borck the right to purchase the Nagtajan
Hacienda belonging to Benito Legarda, during the period of three months and for its assessed valuation, a grant
which necessarily implied the offer or obligation on the part of the defendant Valdes to sell to Borck the said hacienda
during the period and for the price mentioned . . . There was, therefore, a meeting of minds on the part of the one and
the other, with regard to the stipulations made in the said document. But it is not shown that there was any cause or
consideration for that agreement, and this omission is a bar which precludes our holding that the stipulations
contained in Exhibit E is a contract of option, for, . . . there can be no contract without the requisite, among others, of
the cause for the obligation to be established.
In his Law Dictionary, edition of 1897, Bouvier defines an option as a contract, in the following language:
A contract by virtue of which A, in consideration of the payment of a certain sum to B, acquires the
privilege of buying from, or selling to B, certain securities or properties within a limited time at a
specified price. (Story vs. Salamon, 71 N.Y., 420.)
From vol. 6, page 5001, of the work "Words and Phrases," citing the case of Ide vs. Leiser (24 Pac., 695; 10 Mont., 5;
24 Am. St. Rep., 17) the following quotation has been taken:
An agreement in writing to give a person the option to purchase lands within a given timeat a
named price is neither a sale nor an agreement to sell. It is simply a contract by which the owner of
property agrees with another person that he shall have the right to buy his property at a fixed
price within a certain time. He does not sell his land; he does not then agree to sell it; but he does
sell something; that is, the right or privilege to buy at the election or option of the other party. The
second party gets in praesenti, not lands, nor an agreement that he shall have lands, but he does
get something of value; that is, the right to call for and receive lands if he elects. The owner parts
with his right to sell his lands, except to the second party, for a limited period. The second party
receives this right, or, rather, from his point of view, he receives the right to elect to buy.
But the two definitions above cited refer to the contract of option, or, what amounts to the same thing, to the case
where there was cause or consideration for the obligation, the subject of the agreement made by the parties; while in
the case at bar there was no such cause or consideration. 16 (Emphasis ours.)

The rule so early established in this jurisdiction is that the deed of option or the option clause in a contract, in order to be valid
and enforceable, must, among other things, indicate the definite price at which the person granting the option, is willing to sell.
Notably, in one case we held that the lessee loses his right to buy the leased property for a named price per square meter upon failure
to make the purchase within the time specified; 17 in one other case we freed the landowner from her promise to sell her land if the
prospective buyer could raise P4,500.00 in three weeks because such option was not supported by a distinct consideration; 18 in the
same vein in yet one other case, we also invalidated an instrument entitled, "Option to Purchase" a parcel of land for the sum of
P1,510.00 because of lack of consideration; 19 and as an exception to the doctrine enumerated in the two preceding cases, in another
case, we ruled that the option to buy the leased premises for P12,000.00 as stipulated in the lease contract, is not without consideration
for in reciprocal contracts, like lease, the obligation or promise of each party is the consideration for that of the other. 20 In all these
cases, the selling price of the object thereof is always predetermined and specified in the option clause in the contract or in the
separate deed of option. We elucidated, thus, in the very recent case of Ang Yu Asuncion vs. Court of Appeals 21 that:
. . . In sales, particularly, to which the topic for discussion about the case at bench belongs, the contract is perfected
when a person, called the seller, obligates himself, for a price certain, to deliver and to transfer ownership of a thing
or right to another, called the buyer, over which the latter agrees. Article 1458 of the Civil Code provides:
Art. 1458. By the contract of sale one of the contracting parties obligates himself to transfer the
ownership of and to deliver a determinate thing, and the other to pay therefor a price certain in
money or its equivalent.
A contract of sale may be absolute or conditional.
When the sale is not absolute but conditional, such as in a "Contract to Sell" where invariably the ownership of the
thing sold in retained until the fulfillment of a positive suspensive condition (normally, the full payment of the purchase
price), the breach of the condition will prevent the obligation to convey title from acquiring an obligatory force. . . .
An unconditional mutual promise to buy and sell, as long as the object is made determinate and the price is fixed, can
be obligatory on the parties, and compliance therewith may accordingly be exacted.
An accepted unilateral promise which specifies the thing to be sold and the price to be paid, when coupled with a
valuable consideration distinct and separate from the price, is what may properly be termed a perfected contract of
option. This contract is legally binding, and in sales, it conforms with the second paragraph of Article 1479 of the Civil
Code, viz:
Art. 1479. . . .
An accepted unilateral promise to buy or to sell a determinate thing for a price certain is binding
upon the promisor if the promise is supported by a consideration distinct from the price. (1451a).
Observe, however, that the option is not the contract of sale itself. The optionee has the right, but not the obligation,
to buy. Once the option is exercised timely, i.e., the offer is accepted before a breach of the option, a bilateral promise
to sell and to buy ensues and both parties are then reciprocally bound to comply with their respective undertakings.
Let us elucidate a little. A negotiation is formally initiated by an offer. An imperfect promise (policitacion) is merely an
offer. Public advertisements or solicitations and the like are ordinarily construed as mere invitations to make offers or
only as proposals. These relations, until a contract is perfected, are not considered binding commitments. Thus, at
any time prior to the perfection of the contract, either negotiating party may stop the negotiation. The offer, at this
stage, may be withdrawn; the withdrawal is effective immediately after its manifestation, such as by its mailing and
not necessarily when the offeree learns of the withdrawal (Laudico vs. Arias, 43 Phil. 270). Where a period is given to
the offeree within which to accept the offer, the following rules generally govern:
(1) If the period is not itself founded upon or supported by a consideration, the offeror is still free and has the right to
withdraw the offer before its acceptance, or if an acceptance has been made, before the offeror's coming to know of
such fact, by communicating that withdrawal to the offeree (see Art. 1324, Civil Code; see also Atkins, Kroll & Co. vs.
Cua, 102 Phil. 948, holding that this rule is applicable to a unilateral promise to sell under Art. 1479, modifying the
previous decision in South Western Sugar vs. Atlantic Gulf, 97 Phil. 249; see also Art. 1319, Civil Code; Rural Bank of
Paraaque, Inc. vs. Remolado, 135 SCRA 409; Sanchez vs. Rigos, 45 SCRA 368). The right to withdraw, however,

must not be exercised whimsically or arbitrarily; otherwise, it could give rise to a damage claim under Article 19 of the
Civil Code which ordains that "every person must, in the exercise of his rights and in the performance of his duties,
act with justice, give everyone his due, and observe honesty and good faith."
(2) If the period has a separate consideration, a contract of "option" deemed perfected, and it would be a breach of
that contract to withdraw the offer during the agreed period. The option, however, is an independent contract by itself;
and it is to be distinguished from the projected main agreement (subject matter of the option) which is obviously yet to
be concluded. If, in fact, the optioner-offeror withdraws the offer before its acceptance (exercise of the option) by the
optionee-offeree, the latter may not sue for specific performance on the proposed contract ("object" of the option)
since it has failed to reach its own stage of perfection. The optioner-offeror, however, renders himself liable for
damages for breach of the opinion. . .
In the light of the foregoing disquisition and in view of the wording of the questioned provision in the two lease contracts
involved in the instant case, we so hold that no option to purchase in contemplation of the second paragraph of Article 1479 of
the Civil Code, has been granted to Mayfair under the said lease contracts.
Respondent Court of Appeals correctly ruled that the said paragraph 8 grants the right of first refusal to Mayfair and is not an
option contract. It also correctly reasoned that as such, the requirement of a separate consideration for the option, has no
applicability in the instant case.
There is nothing in the identical Paragraphs "8" of the June 1, 1967 and March 31, 1969 contracts which would bring them into
the ambit of the usual offer or option requiring an independent consideration.
An option is a contract granting a privilege to buy or sell within an agreed time and at a determined price. It is a separate and
distinct contract from that which the parties may enter into upon the consummation of the option. It must be supported by
consideration. 22 In the instant case, the right of first refusal is an integral part of the contracts of lease. The consideration is
built into the reciprocal obligations of the parties.
To rule that a contractual stipulation such as that found in paragraph 8 of the contracts is governed by Article 1324 on
withdrawal of the offer or Article 1479 on promise to buy and sell would render in effectual or "inutile" the provisions on right of
first refusal so commonly inserted in leases of real estate nowadays. The Court of Appeals is correct in stating that Paragraph
8 was incorporated into the contracts of lease for the benefit of Mayfair which wanted to be assured that it shall be given the
first crack or the first option to buy the property at the price which Carmelo is willing to accept. It is not also correct to say that
there is no consideration in an agreement of right of first refusal. The stipulation is part and parcel of the entire contract of
lease. The consideration for the lease includes the consideration for the right of first refusal. Thus, Mayfair is in effect stating
that it consents to lease the premises and to pay the price agreed upon provided the lessor also consents that, should it sell
the leased property, then, Mayfair shall be given the right to match the offered purchase price and to buy the property at that
price. As stated in Vda. De Quirino vs.Palarca, 23 in reciprocal contract, the obligation or promise of each party is the
consideration for that of the other.
The respondent Court of Appeals was correct in ascertaining the true nature of the aforecited paragraph 8 to be that of a
contractual grant of the right of first refusal to Mayfair.
We shall now determine the consequential rights, obligations and liabilities of Carmelo, Mayfair and Equatorial.
The different facts and circumstances in this case call for an amplification of the precedent in Ang Yu Asuncion vs. Court of
Appeals. 24
First and foremost is that the petitioners acted in bad faith to render Paragraph 8 "inutile".
What Carmelo and Mayfair agreed to, by executing the two lease contracts, was that Mayfair will have the right of first refusal
in the event Carmelo sells the leased premises. It is undisputed that Carmelo did recognize this right of Mayfair, for it informed
the latter of its intention to sell the said property in 1974. There was an exchange of letters evidencing the offer and counteroffers made by both parties. Carmelo, however, did not pursue the exercise to its logical end. While it initially recognized
Mayfair's right of first refusal, Carmelo violated such right when without affording its negotiations with Mayfair the full process
to ripen to at least an interface of a definite offer and a possible corresponding acceptance within the "30-day exclusive option"
time granted Mayfair, Carmelo abandoned negotiations, kept a low profile for some time, and then sold, without prior notice to
Mayfair, the entire Claro M Recto property to Equatorial.

Since Equatorial is a buyer in bad faith, this finding renders the sale to it of the property in question rescissible. We agree with
respondent Appellate Court that the records bear out the fact that Equatorial was aware of the lease contracts because its
lawyers had, prior to the sale, studied the said contracts. As such, Equatorial cannot tenably claim to be a purchaser in good
faith, and, therefore, rescission lies.
. . . Contract of Sale was not voidable but 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 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. 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. 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.
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. 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 it 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. Good faith connotes an honest
intention to abstain from taking unconscientious advantage of another. Tested by these principles, the petitioner
cannot tenably claim to be a buyer in good faith as it had notice of the lease of the property by the Bonnevies and
such knowledge should have cautioned it to look deeper into the agreement to determine if it involved stipulations
that would prejudice its own interests.
The petitioner insists that it was not aware of the right of first priority granted by the Contract of Lease. Assuming this
to be true, we nevertheless agree with the observation of the respondent court that:
If Guzman-Bocaling failed to inquire about the terms of the Lease Contract, which includes Par. 20
on priority right given to the Bonnevies, it had only itself to blame. Having known that the property it
was buying was under lease, it behooved it as a prudent person to have required Reynoso or the
broker to show to it the Contract of Lease in which Par. 20 is contained. 25
Petitioners assert the alleged impossibility of performance because the entire property is indivisible property. It was petitioner
Carmelo which fixed the limits of the property it was leasing out. Common sense and fairness dictate that instead of nullifying
the agreement on that basis, the stipulation should be given effect by including the indivisible appurtenances in the sale of the
dominant portion under the right of first refusal. A valid and legal contract where the ascendant or the more important of the
two parties is the landowner should be given effect, if possible, instead of being nullified on a selfish pretext posited by the
owner. Following the arguments of petitioners and the participation of the owner in the attempt to strip Mayfair of its rights, the
right of first refusal should include not only the property specified in the contracts of lease but also the appurtenant portions
sold to Equatorial which are claimed by petitioners to be indivisible. Carmelo acted in bad faith when it sold the entire property
to Equatorial without informing Mayfair, a clear violation of Mayfair's rights. While there was a series of exchanges of letters
evidencing the offer and counter-offers between the parties, Carmelo abandoned the negotiations without giving Mayfair full
opportunity to negotiate within the 30-day period.

Accordingly, even as it recognizes the right of first refusal, this Court should also order that Mayfair be authorized to exercise
its right of first refusal under the contract to include the entirety of the indivisible property. The boundaries of the property sold
should be the boundaries of the offer under the right of first refusal. As to the remedy to enforce Mayfair's right, the Court
disagrees to a certain extent with the concluding part of the dissenting opinion of Justice Vitug. The doctrine enunciated in Ang
Yu Asuncion vs.Court of Appeals should be modified, if not amplified under the peculiar facts of this case.
As also earlier emphasized, the contract of sale between Equatorial and Carmelo is characterized by bad faith, since it was
knowingly entered into in violation of the rights of and to the prejudice of Mayfair. In fact, as correctly observed by the Court of
Appeals, Equatorial admitted that its lawyers had studied the contract of lease prior to the sale. Equatorial's knowledge of the
stipulations therein should have cautioned it to look further into the agreement to determine if it involved stipulations that would
prejudice its own interests.
Since Mayfair has a right of first refusal, it can exercise the right only if the fraudulent sale is first set aside or rescinded. All of
these matters are now before us and so there should be no piecemeal determination of this case and leave festering sores to
deteriorate into endless litigation. The facts of the case and considerations of justice and equity require that we order
rescission here and now. Rescission is a relief allowed for the protection of one of the contracting parties and even third
persons from all injury and damage the contract may cause or to protect some incompatible and preferred right by the
contract. 26 The sale of the subject real property by Carmelo to Equatorial should now be rescinded considering that Mayfair,
which had substantial interest over the subject property, was prejudiced by the sale of the subject property to Equatorial
without Carmelo conferring to Mayfair every opportunity to negotiate within the 30-day stipulated period. 27
This Court has always been against multiplicity of suits where all remedies according to the facts and the law can be included.
Since Carmelo sold the property for P11,300,000.00 to Equatorial, the price at which Mayfair could have purchased the
property is, therefore, fixed. It can neither be more nor less. There is no dispute over it. The damages which Mayfair suffered
are in terms of actual injury and lost opportunities. The fairest solution would be to allow Mayfair to exercise its right of first
refusal at the price which it was entitled to accept or reject which is P11,300,000.00. This is clear from the records.
To follow an alternative solution that Carmelo and Mayfair may resume negotiations for the sale to the latter of the disputed
property would be unjust and unkind to Mayfair because it is once more compelled to litigate to enforce its right. It is not proper
to give it an empty or vacuous victory in this case. From the viewpoint of Carmelo, it is like asking a fish if it would accept the
choice of being thrown back into the river. Why should Carmelo be rewarded for and allowed to profit from, its wrongdoing?
Prices of real estate have skyrocketed. After having sold the property for P11,300,000.00, why should it be given another
chance to sell it at an increased price?
Under the Ang Yu Asuncion vs. Court of Appeals decision, the Court stated that there was nothing to execute because a
contract over the right of first refusal belongs to a class of preparatory juridical relations governed not by the law on contracts
but by the codal provisions on human relations. This may apply here if the contract is limited to the buying and selling of the
real property. However, the obligation of Carmelo to first offer the property to Mayfair is embodied in a contract. It is Paragraph
8 on the right of first refusal which created the obligation. It should be enforced according to the law on contracts instead of the
panoramic and indefinite rule on human relations. The latter remedy encourages multiplicity of suits. There is something to
execute and that is for Carmelo to comply with its obligation to the property under the right of the first refusal according to the
terms at which they should have been offered then to Mayfair, at the price when that offer should have been made. Also,
Mayfair has to accept the offer. This juridical relation is not amorphous nor is it merely preparatory. Paragraphs 8 of the two
leases can be executed according to their terms.
On the question of interest payments on the principal amount of P11,300,000.00, it must be borne in mind that both Carmelo
and Equatorial acted in bad faith. Carmelo knowingly and deliberately broke a contract entered into with Mayfair. It sold the
property to Equatorial with purpose and intend to withhold any notice or knowledge of the sale coming to the attention of
Mayfair. All the circumstances point to a calculated and contrived plan of non-compliance with the agreement of first refusal.
On the part of Equatorial, it cannot be a buyer in good faith because it bought the property with notice and full knowledge that
Mayfair had a right to or interest in the property superior to its own. Carmelo and Equatorial took unconscientious advantage of
Mayfair.
Neither may Carmelo and Equatorial avail of considerations based on equity which might warrant the grant of interests. The
vendor received as payment from the vendee what, at the time, was a full and fair price for the property. It has used the
P11,300,000.00 all these years earning income or interest from the amount. Equatorial, on the other hand, has received rents
and otherwise profited from the use of the property turned over to it by Carmelo. In fact, during all the years that this

controversy was being litigated, Mayfair paid rentals regularly to the buyer who had an inferior right to purchase the property.
Mayfair is under no obligation to pay any interests arising from this judgment to either Carmelo or Equatorial.
WHEREFORE, the petition for review of the decision of the Court of Appeals, dated June 23, 1992, in CA-G.R. CV No. 32918,
is HEREBY DENIED. The Deed of Absolute Sale between petitioners Equatorial Realty Development, Inc. and Carmelo &
Bauermann, Inc. is hereby deemed rescinded; petitioner Carmelo & Bauermann is ordered to return to petitioner Equatorial
Realty Development the purchase price. The latter is directed to execute the deeds and documents necessary to return
ownership to Carmelo and Bauermann of the disputed lots. Carmelo & Bauermann is ordered to allow Mayfair Theater, Inc. to
buy the aforesaid lots for P11,300,000.00.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
EN BANC

G.R. No. L-26872 July 25, 1975

VILLONCO REALTY COMPANY, plaintiff-appellee and EDITH PEREZ DE TAGLE, intervenor-appellee,
vs.
BORMAHECO, INC., FRANCISCO N. CERVANTES and ROSARIO N. CERVANTES, defendants-appellants. Meer, Meer & Meer
for plaintiff-appellee.
J. Villareal, Navarro and Associates for defendants-appellants.
P. P. Gallardo and Associates for intervenor-appellee.

AQUINO, J.:
This action was instituted by Villonco Realty Company against Bormaheco, Inc. and the spouses Francisco N. Cervantes and Rosario
N. Cervantes for the specific performance of a supposed contract for the sale of land and the improvements thereon for one million four
hundred thousand pesos. Edith Perez de Tagle, as agent, intervened in order to recover her commission. The lower court enforced the
sale. Bormaheco, Inc. and the Cervantes spouses, as supposed vendors, appealed.
This Court took cognizance of the appeal because the amount involved is more than P200,000 and the appeal was perfected before
Republic Act No. 5440 took effect on September 9, 1968. The facts are as follows:
Francisco N. Cervantes and his wife, Rosario P. Navarra-Cervantes, are the owners of lots 3, 15 and 16 located at 245 Buendia
Avenue, Makati, Rizal with a total area of three thousand five hundred square meters (TCT Nos. 43530, 43531 and 43532, Exh. A, A-1
and A-2). The lots were mortgaged to the Development Bank of the Phil (DBP) on April 21, 1959 as security for a loan of P441,000. The
mortgage debt was fully paid on July 10, 1969.
Cervantes is the president of Bormaheco, Inc., a dealer and importer of industrial and agricultural machinery. The entire lots are
occupied by the building, machinery and equipment of Bormaheco, Inc. and are adjacent to the property of Villonco Realty Company
situated at 219 Buendia Avenue.
In the early part of February, 1964 there were negotiations for the sale of the said lots and the improvements thereon between Romeo
Villonco of Villonco Realty Company "and Bormaheco, Inc., represented by its president, Francisco N. Cervantes, through the
intervention of Edith Perez de Tagle, a real estate broker".

In the course of the negotiations, the brothers Romeo Villonco and Teofilo Villonco conferred with Cervantes in his office to discuss the
price and terms of the sale. Later, Cervantes "went to see Villonco for the same reason until some agreement" was arrived at. On a
subsequent occasion, Cervantes, accompanied by Edith Perez de Tagle, discussed again the terms of the sale with Villonco.
During the negotiations, Villonco Realty Company assumed that the lots belonged to Bormaheco, Inc. and that Cervantes was duly
authorized to sell the same. Cervantes did not disclose to the broker and to Villonco Realty Company that the lots were conjugal
properties of himself and his wife and that they were mortgaged to the DBP.
Bormaheco, Inc., through Cervantes, made a written offer dated February 12, 1964, to Romeo Villonco for the sale of the property. The
offer reads (Exh. B):
BORMAHECO, INC.
February 12,1964
Mr. Romeo
Villonco Villonco Building
Buendia Avenue
Makati, Rizal.
Dear Mr. Villonco:
This is with reference to our telephone conversation this noon on the matter of the sale of our property located at
Buendia Avenue, with a total area of 3,500 sq. m., under the following conditions:
(1) That we are offering to sell to you the above property at the price of P400.00 per square meter;
(2) That a deposit of P100,000.00 must be placed as earnest money on the purchase of the above
property which will become part payment of the property in the event that the sale is consummated;
(3) That this sale is to be consummated only after I shall have also consummated my purchase of
another property located at Sta. Ana, Manila;
(4) That if my negotiations with said property will not be consummated by reason beyond my
control, I will return to you your deposit of P100,000 and the sale of my property to you will not also
be consummated; and
(5) That final negotiations on both properties can be definitely known after 45 days.
If the above terms is (are) acceptable to your Board, please issue out the said earnest money in favor of Bormaheco,
Inc., and deliver the same thru the bearer, Miss Edith Perez de Tagle.
Very truly yours,
SGD. FRANCISCO N. CERVANTES
President
The property mentioned in Bormaheco's letter was the land of the National Shipyards & Steel Corporation (Nassco), with an area of
twenty thousand square meters, located at Punta, Sta. Ana, Manila. At the bidding held on January 17, 1964 that land was awarded to
Bormaheco, Inc., the highest bidder, for the price of P552,000. The Nassco Board of Directors in its resolution of February 18, 1964
authorized the General Manager to sign the necessary contract (Exh. H).
On February 28, 1964, the Nassco Acting General Manager wrote a letter to the Economic Coordinator, requesting approval of that
resolution. The Acting Economic Coordinator approved the resolution on March 24, 1964 (Exh. 1).
In the meanwhile, Bormaheco, Inc. and Villonco Realty Company continued their negotiations for the sale of the Buendia Avenue
property. Cervantes and Teofilo Villonco had a final conference on February 27, 1964. As a result of that conference Villonco Realty

Company, through Teofilo Villonco, in its letter of March 4, 1964 made a revised counter- offer (Romeo Villonco's first counter-offer was
dated February 24, 1964, Exh. C) for the purchase of the property. The counter-offer was accepted by Cervantes as shown in Exhibit D,
which is quoted below:
VILLONCO REALTY COMPANY
V. R. C. Building
219 Buendia Avenue, Makati,
Rizal, Philippines
March 4, 1964
Mr. Francisco Cervantes.
Bormaheco, Inc.
245 Buendia Avenue
Makati, Rizal
Dear Mr. Cervantes:
In reference to the letter of Miss E. Perez de Tagle dated February 12th and 26, 1964 in respect to the terms and
conditions on the purchase of your property located at Buendia Ave., Makati, Rizal, with a total area of 3,500 sq.
meters., we hereby revise our offer, as follows:
1. That the price of the property shall be P400.00 per sq. m., including the improvements thereon;
2. That a deposit of P100,000.00 shall be given to you as earnest money which will become as part payment in the
event the sale is consummated;
3. This sale shall be cancelled, only if your deal with another property in Sta. Ana shall not be consummated and in
such case, the P100,000-00 earnest money will be returned to us with a 10% interest p.a. However, if our deal with
you is finalized, said P100,000.00 will become as part payment for the purchase of your property without interest:
4. The manner of payment shall be as follows:
a. P100,000.00 earnest money and
650,000.00 as part of the down payment, or
P750,000.00 as total down payment
b. The balance is payable as follows:
P100,000.00 after 3 months
125,000.00 -do212,500.00 -doP650,000.00 Total
As regards to the other conditions which we have discussed during our last conference on February 27, 1964, the
same shall be finalized upon preparation of the contract to sell.*
If the above terms and conditions are acceptable to you, kindly sign your conformity hereunder. Enclosed is our check
for ONE HUNDRED THOUSAND (P100,000.00) PESOS, MBTC Check No. 448314, as earnest money.
Very truly yours,
VILLONCO REALTY COMPANY
(Sgd.) TEOFILO VILLONCO
CONFORME:

BORMAHECO, INC.
(Sgd.) FRANCISCO CERVANTES
That this sale shall be subject to favorable consummation of a property in Sta. Ana we are negotiating.
(Sgd.) FRANCISCO CERVANTES
The check for P100,000 (Exh. E) mentioned in the foregoing letter-contract was delivered by Edith Perez de Tagle to Bormaheco, Inc.
on March 4, 1964 and was received by Cervantes. In the voucher-receipt evidencing the delivery the broker indicated in her handwriting
that the earnest money was "subject to the terms and conditions embodied in Bormaheco's letter" of February 12 and Villonco Realty
Company's letter of March 4, 1964 (Exh. E-1; 14 tsn).
Then, unexpectedly, in a letter dated March 30, 1964, or twenty-six days after the signing of the contract of sale, Exhibit D, Cervantes
returned the earnest money, with interest amounting to P694.24 (at ten percent per annum). Cervantes cited as an excuse the
circumstance that "despite the lapse of 45 days from February 12, 1964 there is no certainty yet" for the acquisition of the Punta
property (Exh. F; F-I and F-2). Villonco Realty Company refused to accept the letter and the checks of Bormaheco, Inc. Cervantes sent
them by registered mail. When he rescinded the contract, he was already aware that the Punta lot had been awarded to Bormaheco,
Inc. (25-26 tsn).
Edith Perez de Tagle, the broker, in a letter to Cervantes dated March 31, 1964 articulated her shock and surprise at Bormaheco's
turnabout. She reviewed the history of the deal and explained why Romeo Villonco could not agree to the rescission of the sale (Exh.
G).**
Cervantes in his letter of April 6, 1964, a reply to Miss Tagle's letter, alleged that the forty-five day period had already expired and the
sale to Bormaheco, Inc. of the Punta property had not been consummated. Cervantes said that his letter was a "manifestation that we
are no longer interested to sell" the Buendia Avenue property to Villonco Realty Company (Annex I of Stipulation of Facts). The latter
was furnished with a copy of that letter.
In a letter dated April 7, 1964 Villonco Realty Company returned the two checks to Bormaheco, Inc., stating that the condition for the
cancellation of the contract had not arisen and at the same time announcing that an action for breach of contract would be filed against
Bormaheco, Inc. (Annex G of Stipulation of Facts).1wph1.t
On that same date, April 7, 1964 Villonco Realty Company filed the complaint (dated April 6) for specific performance against
Bormaheco, Inc. Also on that same date, April 7, at eight-forty-five in the morning, a notice oflis pendens was annotated on the titles of
the said lots.
Bormaheco, Inc. in its answers dated May 5 and 25, 1964 pleaded the defense that the perfection of the contract of sale was subject to
the conditions (a) "that final acceptance or not shall be made after 45 days" (sic) and (b) that Bormaheco, Inc. "acquires the Sta. Ana
property".
On June 2, 1964 or during the pendency of this case, the Nassco Acting General Manager wrote to Bormaheco, Inc., advising it that the
Board of Directors and the Economic Coordinator had approved the sale of the Punta lot to Bormaheco, Inc. and requesting the latter to
send its duly authorized representative to the Nassco for the signing of the deed of sale (Exh. 1).
The deed of sale for the Punta land was executed on June 26, 1964. Bormaheco, Inc. was represented by Cervantes (Exh. J. See
Bormaheco, Inc. vs. Abanes, L-28087, July 31, 1973, 52 SCRA 73).
In view of the disclosure in Bormaheco's amended answer that the three lots were registered in the names of the Cervantes spouses
and not in the name of Bormaheco, Inc., Villonco Realty Company on July 21, 1964 filed an amended complaint impleading the said
spouses as defendants. Bormaheco, Inc. and the Cervantes spouses filed separate answers.
As of January 15, 1965 Villonco Realty Company had paid to the Manufacturers' Bank & Trust Company the sum of P8,712.25 as
interests on the overdraft line of P100,000 and the sum of P27.39 as interests daily on the same loan since January 16, 1965. (That
overdraft line was later settled by Villonco Realty Company on a date not mentioned in its manifestation of February 19, 1975).
Villonco Realty Company had obligated itself to pay the sum of P20,000 as attorney's fees to its lawyers. It claimed that it was damaged
in the sum of P10,000 a month from March 24, 1964 when the award of the Punta lot to Bormaheco, Inc. was approved. On the other

hand, Bormaheco, Inc. claimed that it had sustained damages of P200,000 annually due to the notice of lis pendens which had
prevented it from constructing a multi-story building on the three lots. (Pars. 18 and 19, Stipulation of Facts).1wph1.t
Miss Tagle testified that for her services Bormaheco, Inc., through Cervantes, obligated itself to pay her a three percent commission on
the price of P1,400,000 or the amount of forty-two thousand pesos (14 tsn).
After trial, the lower court rendered a decision ordering the Cervantes spouses to execute in favor of Bormaheco, Inc. a deed of
conveyance for the three lots in question and directing Bormaheco, Inc. (a) to convey the same lots to Villonco Realty Company, (b) to
pay the latter, as consequential damages, the sum of P10,000 monthly from March 24, 1964 up to the consummation of the sale, (c) to
pay Edith Perez de Tagle the sum of P42,000 as broker's commission and (d) pay P20,000 as to attorney's fees (Civil Case No. 8109).
Bormaheco, Inc. and the Cervantes spouses appealed. Their principal contentions are (a) that no contract of sale was perfected
because Cervantes made a supposedly qualified acceptance of the revised offer contained in Exhibit D, which acceptance amounted to
a counter-offer, and because the condition that Bormaheco, inc. would acquire the Punta land within the forty-five-day period was not
fulfilled; (2) that Bormaheco, Inc. cannot be compelled to sell the land which belongs to the Cervantes spouses and (3) that Francisco
N. Cervantes did not bind the conjugal partnership and his wife when, as president of Bormaheco, Inc., he entered into negotiations
with Villonco Realty Company regarding the said land.
We hold that the appeal, except as to the issue of damages, is devoid of merit.
"By the contract of sale one of the contracting parties obligates himself to transfer the ownership of and to deliver a determining thing,
and the other to pay therefor a price certain in money or its equivalent. A contract of sale may be absolute or conditional" (Art. 1458,
Civil Code).
"The contract of sale is perfected at the moment there is a meeting of minds upon the thing which is the object of the contract and upon
the price. From that moment, the parties may reciprocally demand performance, subject to the provisions of the law governing the form
of contracts" (Art. 1475, Ibid.).
"Contracts are perfected by mere consent, and from that moment the parties are bound not only to the fulfillment of what has been
expressly stipulated but also to all the consequences which, according to their nature, may be in keeping with good faith, usage and
law" (Art. 1315, Civil Code).
"Consent is manifested by the meeting of the offer and the acceptance upon the thing and the cause which are to constitute the
contract. The offer must be certain and the acceptance absolute. A qualified acceptance constitutes a counter-offer" (Art. 1319, Civil
Code). "An acceptance may be express or implied" (Art. 1320, Civil Code).
Bormaheco's acceptance of Villonco Realty Company's offer to purchase the Buendia Avenue property, as shown in Teofilo Villonco's
letter dated March 4, 1964 (Exh. D), indubitably proves that there was a meeting of minds upon the subject matter and consideration of
the sale. Therefore, on that date the sale was perfected. (Compare with McCullough vs. Aenlle & Co., 3 Phil. 285; Goyena vs.
Tambunting, 1 Phil. 490). Not only that Bormaheco's acceptance of the part payment of one hundred ,thousand pesos shows that the
sale was conditionally consummated or partly executed subject to the purchase by Bormaheco, Inc. of the Punta property. The
nonconsummation of that purchase would be a negative resolutory condition (Taylor vs. Uy Tieng Piao, 43 Phil. 873).
On February 18, 1964 Bormaheco's bid for the Punta property was already accepted by the Nassco which had authorized its General
Manager to sign the corresponding deed of sale. What was necessary only was the approval of the sale by the Economic Coordinator
and a request for that approval was already pending in the office of that functionary on March 4, 1964.
Bormaheco, Inc. and the Cervantes spouses contend that the sale was not perfected because Cervantes allegedly qualified his
acceptance of Villonco's revised offer and, therefore, his acceptance amounted to a counter-offer which Villonco Realty Company
should accept but no such acceptance was ever transmitted to Bormaheco, Inc. which, therefore, could withdraw its offer.
That contention is not well-taken. It should be stressed that there is no evidence as to what changes were made by Cervantes in
Villonco's revised offer. And there is no evidence that Villonco Realty Company did not assent to the supposed changes and that such
assent was never made known to Cervantes.
What the record reveals is that the broker, Miss Tagle, acted as intermediary between the parties. It is safe to assume that the alleged
changes or qualifications made by Cervantes were approved by Villonco Realty Company and that such approval was duly
communicated to Cervantes or Bormaheco, Inc. by the broker as shown by the fact that Villonco Realty Company paid, and

Bormaheco, Inc. accepted, the sum of P100,000 as earnest money or down payment. That crucial fact implies that Cervantes was
aware that Villonco Realty Company had accepted the modifications which he had made in Villonco's counter-offer. Had Villonco Realty
Company not assented to those insertions and annotations, then it would have stopped payment on its check for P100,000. The fact
that Villonco Realty Company allowed its check to be cashed by Bormaheco, Inc. signifies that the company was in conformity with the
changes made by Cervantes and that Bormaheco, Inc. was aware of that conformity. Had those insertions not been binding, then
Bormaheco, Inc. would not have paid interest at the rate of ten percent per annum, on the earnest money of P100,000.
The truth is that the alleged changes or qualifications in the revised counter offer (Exh. D) are not material or are mere clarifications
of what the parties had previously agreed upon.
Thus, Cervantes' alleged insertion in his handwriting of the figure and the words "12th and" in Villonco's counter-offer is the same as the
statement found in the voucher-receipt for the earnest money, which reads: "subject to the terms and conditions embodied in
Bormaheco's letter of Feb. 12, 1964 and your letter of March 4, 1964" (Exh. E-1).
Cervantes allegedly crossed out the word "Nassco" in paragraph 3 of Villonco's revised counter-offer and substituted for it the word
"another" so that the original phrase, "Nassco's property in Sta. Ana", was made to read as "another property in Sta. Ana". That change
is trivial. What Cervantes did was merely to adhere to the wording of paragraph 3 of Bormaheco's original offer (Exh. B) which mentions
"another property located at Sta. Ana." His obvious purpose was to avoid jeopardizing his negotiation with the Nassco for the purchase
of its Sta. Ana property by unduly publicizing it.
It is noteworthy that Cervantes, in his letter to the broker dated April 6, 1964 (Annex 1) or after the Nassco property had been awarded
to Bormaheco, Inc., alluded to the "Nassco property". At that time, there was no more need of concealing from the public that
Bormaheco, Inc. was interested in the Nassco property.
Similarly, Cervantes' alleged insertion of the letters "PA" ( per annum) after the word "interest" in that same paragraph 3 of the revised
counter-offer (Exh. D) could not be categorized as a major alteration of that counter-offer that prevented a meeting of the minds of the
parties. It was understood that the parties had contemplated a rate of ten percent per annum since ten percent a month or semiannually would be usurious.
Appellants Bormaheco, Inc. and Cervantes further contend that Cervantes, in clarifying in the voucher for the earnest money of
P100,000 that Bormaheco's acceptance thereof was subject to the terms and conditions embodied in Bormaheco's letter of February
12, 1964 and your (Villonco's) letter of March 4, 1964" made Bormaheco's acceptance "qualified and conditional".
That contention is not correct. There is no incompatibility between Bormaheco's offer of February 12, 1964 (Exh. B) and Villonco's
counter-offer of March 4, 1964 (Exh. D). The revised counter-offer merely amplified Bormaheco's original offer.
The controlling fact is that there was agreement between the parties on the subject matter, the price and the mode of payment and that
part of the price was paid. "Whenever 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" (Art. 1482, Civil Code).
"It is true that an acceptance may contain a request for certain changes in the terms of the offer and yet be a binding acceptance. 'So
long as it is clear that the meaning of the acceptance is positively and unequivocally to accept the offer, whether such request is
granted or not, a contract is formed.' " (Stuart vs. Franklin Life Ins. Co., 165 Fed. 2nd 965, citing Sec. 79, Williston on Contracts).
Thus, it was held that the vendor's change in a phrase of the offer to purchase, which change does not essentially change the terms of
the offer, does not amount to a rejection of the offer and the tender of a counter-offer (Stuart vs. Franklin Life Ins. Co., supra).
The instant case is not governed by the rulings laid down in Beaumont vs. Prieto, 41 Phil. 670, 985, 63 L. Ed. 770, and Zayco vs. Serra,
44 Phil. 326. In those two cases the acceptance radically altered the offer and, consequently, there was no meeting of the minds of the
parties.
Thus, in the Zayco case, Salvador Serra offered to sell to Lorenzo Zayco his sugar central for P1,000,000 on condition that the price be
paid in cash, or, if not paid in cash, the price would be payable within three years provided security is given for the payment of the
balance within three years with interest. Zayco, instead of unconditionally accepting those terms, countered that he was going to make
a down payment of P100,000, that Serra's mortgage obligation to the Philippine National Bank of P600,000 could be transferred to
Zayco's account and that he (plaintiff) would give a bond to secure the payment of the balance of the price. It was held that the
acceptance was conditional or was a counter-offer which had to be accepted by Serra. There was no such acceptance. Serra revoked
his offer. Hence, there was no perfected contract.

In the Beaumont case, Benito Valdes offered to sell to W Borck the Nagtahan Hacienda owned by Benito Legarda, who had
empowered Valdes to sell it. Borck was given three months from December 4, 1911 to buy the hacienda for P307,000. On January 17,
1912 Borck wrote to Valdes, offering to purchase the hacienda for P307,000 payable on May 1, 1912. No reply was made to that letter.
Borck wrote other letters modifying his proposal. Legarda refused to convey the property.
It was held that Borck's January 17th letter plainly departed from the terms of the offer as to the time of payment and was a counteroffer which amounted to a rejection of Valdes' original offer. A subsequent unconditional acceptance could not revive that offer.
The instant case is different from Laudico and Harden vs. Arias Rodriguez, 43 Phil. 270 where the written offer to sell was revoked by
the offer or before the offeree's acceptance came to the offeror's knowledge.
Appellants' next contention is that the contract was not perfected because the condition that Bormaheco, Inc. would acquire the Nassco
land within forty-five days from February 12, 1964 or on or before March 28, 1964 was not fulfilled. This contention is tied up with the
following letter of Bormaheco, Inc. (Exh. F):
BORMAHECO, INC.
March 30, 1964
Villonco Realty Company
V.R.C. Building
219 Buendia Ave.,
Makati, Rizal
Gentlemen:
We are returning herewith your earnest money together with interest thereon at 10% per annum. Please be informed
that despite the lapse of the 45 days from February 12, 1964 there is no certainty yet for us to acquire a substitute
property, hence the return of the earnest money as agreed upon.
Very truly yours,
SGD. FRANCISCO N. CERVANTES
President
Encl.: P.N.B. Check No. 112994 J
P.N.B. Check No. 112996J
That contention is predicated on the erroneous assumption that Bormaheco, Inc. was to acquire the Nassco land within forty-five days
or on or before March 28, 1964.
The trial court ruled that the forty-five-day period was merely an estimate or a forecast of how long it would take Bormaheco, Inc. to
acquire the Nassco property and it was not "a condition or a deadline set for the defendant corporation to decide whether or not to go
through with the sale of its Buendia property".
The record does not support the theory of Bormaheco, Inc. and the Cervantes spouses that the forty-five-day period was the time within
which (a) the Nassco property and two Pasong Tamo lots should be acquired, (b) when Cervantes would secure his wife's consent to
the sale of the three lots and (c) when Bormaheco, Inc. had to decide what to do with the DBP encumbrance.
Cervantes in paragraph 3 of his offer of February 12, 1964 stated that the sale of the Buendia lots would be consummated after he had
consummated the purchase of the Nassco property. Then, in paragraph 5 of the same offer he stated "that final negotiations on both
properties can be definitely known after forty-five days" (See Exh. B).
It is deducible from the tenor of those statements that the consummation of the sale of the Buendia lots to Villonco Realty Company
was conditioned on Bormaheco's acquisition of the Nassco land. But it was not spelled out that such acquisition should be effected
within forty-five days from February 12, 1964. Had it been Cervantes' intention that the forty-five days would be the period within which
the Nassco land should be acquired by Bormaheco, then he would have specified that period in paragraph 3 of his offer so that

paragraph would read in this wise: "That this sale is to be consummated only after I shall have consummated my purchase of another
property located at Sta. Ana, Manila within forty-five days from the date hereof ." He could have also specified that period in his
"conforme" to Villonco's counter-offer of March 4, 1964 (Exh. D) so that instead of merely stating "that this sale shall be subject to
favorable consummation of a property in Sta. Ana we are negotiating" he could have said: "That this sale shall be subject to favorable
consummation within forty-five days from February 12, 1964 of a property in Sta. Ana we are negotiating".
No such specification was made. The term of forty-five days was not a part of the condition that the Nassco property should be
acquired. It is clear that the statement "that final negotiations on both property can be definitely known after 45 days" does not and
cannot mean that Bormaheco, Inc. should acquire the Nassco property withinforty-five days from February 12, 1964 as pretended by
Cervantes. It is simply a surmise that after forty-five days (in fact when the forty-five day period should be computed is not clear) it
would be known whether Bormaheco, Inc. would be able to acquire the Nassco property and whether it would be able to sell the
Buendia property. That aforementioned paragraph 5 does not even specify how long after the forty-five days the outcome of the final
negotiations would be known.
It is interesting to note that in paragraph 6 of Bormaheco's answer to the amended complaint, which answer was verified by Cervantes,
it was alleged that Cervantes accepted Villonco's revised counter-offer of March 4, 1964 subject to the condition that "the final
negotiations (acceptance) will have to be made by defendant within 45 daysfrom said acceptance" (31 Record on Appeal). If that were
so, then the consummation of Bormaheco's purchase of the Nassco property would be made within forty-five days from March 4, 1964.
What makes Bormaheco's stand more confusing and untenable is that in its three answers it invariably articulated the incoherent and
vague affirmative defense that its acceptance of Villonco's revised counter-offer was conditioned on the circumstance "that final
acceptance or not shall be made after 45 days" whatever that means. That affirmative defense is inconsistent with the other
aforequoted incoherent statement in its third answer that "the final negotiations (acceptance) will have to be made by defendant within
45 days from said acceptance" (31 Record on Appeal).1wph1.t
Thus, Bormaheco's three answers and paragraph 5 of his offer of February 12, 1964 do not sustain at all its theory that the Nassco
property should be acquired on or before March 28, 1964. Its rescission or revocation of its acceptance cannot be anchored on that
theory which, as articulated in its pleadings, is quite equivocal and unclear.
It should be underscored that the condition that Bormaheco, Inc. should acquire the Nassco property was fulfilled. As admitted by the
appellants, the Nassco property was conveyed to Bormaheco, Inc. on June 26, 1964. As early as January 17, 1964 the property was
awarded to Bormaheco, Inc. as the highest bidder. On February 18, 1964 the Nassco Board authorized its General Manager to sell the
property to Bormaheco, Inc. (Exh. H). The Economic Coordinator approved the award on March 24, 1964. It is reasonable to assume
that had Cervantes been more assiduous in following up the transaction, the Nassco property could have been transferred to
Bormaheco, Inc. on or before March 28, 1964, the supposed last day of the forty-five-day period.
The appellants, in their fifth assignment of error, argue that Bormaheco, Inc. cannot be required to sell the three lots in question
because they are conjugal properties of the Cervantes spouses. They aver that Cervantes in dealing with the Villonco brothers acted as
president of Bormaheco, Inc. and not in his individual capacity and, therefore, he did not bind the conjugal partnership nor Mrs.
Cervantes who was allegedly opposed to the sale.
Those arguments are not sustainable. It should be remembered that Cervantes, in rescinding the contract of sale and in returning the
earnest money, cited as an excuse the circumstance that there was no certainty in Bormaheco's acquisition of the Nassco property
(Exh. F and Annex 1). He did not say that Mrs. Cervantes was opposed to the sale of the three lots. He did not tell Villonco Realty
Company that he could not bind the conjugal partnership. In truth, he concealed the fact that the three lots were registered "in the name
of FRANCISCO CERVANTES, Filipino, of legal age, married to Rosario P. Navarro, as owner thereof in fee simple". He certainly led the
Villonco brothers to believe that as president of Bormaheco, Inc. he could dispose of the said lots. He inveigled the Villoncos into
believing that he had untrammelled control of Bormaheco, Inc., that Bormaheco, Inc. owned the lots and that he was invested with
adequate authority to sell the same.
Thus, in Bormaheco's offer of February 12, 1964, Cervantes first identified the three lots as "our property" which "we are offering to
sell ..." (Opening paragraph and par. 1 of Exh. B). Whether the prounoun "we" refers to himself and his wife or to Bormaheco, Inc. is not
clear. Then, in paragraphs 3 and 4 of the offer, he used the first person and said: "I shall have consummated my purchase" of the
Nassco property; "... my negotiations with said property" and "I will return to you your deposit". Those expressions conveyed the
impression and generated the belief that the Villoncos did not have to deal with Mrs. Cervantes nor with any other official of
Bormaheco, Inc.
The pleadings disclose that Bormaheco, Inc. and Cervantes deliberately and studiously avoided making the allegation that Cervantes
was not authorized by his wife to sell the three lots or that he acted merely as president of Bormaheco, Inc. That defense was not

interposed so as not to place Cervantes in the ridiculous position of having acted under false pretenses when he negotiated with the
Villoncos for the sale of the three lots.
Villonco Realty Company, in paragraph 2 of its original complaint, alleged that "on February 12, 1964, after some prior negotiations, the
defendant (Bormaheco, Inc.) made a formal offer to sell to the plaintiff the property of the said defendant situated at the abovenamed
address along Buendia Avenue, Makati, Rizal, under the terms of the letter-offer, a copy of which is hereto attached as Annex A hereof",
now Exhibit B (2 Record on Appeal).
That paragraph 2 was not, repeat, was not denied by Bormaheco, Inc. in its answer dated May 5, 1964. It did not traverse that
paragraph 2. Hence, it was deemed admitted. However, it filed an amended answer dated May 25, 1964 wherein it denied that it was
the owner of the three lots. It revealed that the three lots "belong and are registered in the names of the spouses Francisco N.
Cervantes and Rosario N. Cervantes."
The three answers of Bormaheco, Inc. contain the following affirmative defense:
13. That defendant's insistence to finally decide on the proposed sale of the land in question after 45 days had not
only for its purpose the determination of its acquisition of the said Sta. Ana (Nassco) property during the said period,
but also to negotiate with the actual and registered owner of the parcels of land covered by T.C.T. Nos. 43530, 43531
and 43532 in question which plaintiff was fully aware that the same were not in the name of the defendant (sic; Par.
18 of Answer to Amended Complaint, 10, 18 and 34, Record on Appeal).
In that affirmative defense, Bormaheco, Inc. pretended that it needed forty- five days within which to acquire the Nassco property and
"to negotiate" with the registered owner of the three lots. The absurdity of that pretension stands out in bold relief when it is borne in
mind that the answers of Bormaheco, Inc. were verified by Cervantes and that the registered owner of the three lots is Cervantes
himself. That affirmative defense means that Cervantes as president of Bormaheco, Inc. needed forty-five days in order to "negotiate"
with himself (Cervantes).
The incongruous stance of the Cervantes spouses is also patent in their answer to the amended complaint. In that answer they
disclaimed knowledge or information of certain allegations which were well-known to Cervantes as president of Bormaheco, Inc. and
which were admitted in Bormaheco's three answers that were verified by Cervantes.
It is significant to note that Bormaheco, Inc. in its three answers, which were verified by Cervantes, never pleaded as an affirmative
defense that Mrs. Cervantes opposed the sale of the three lots or that she did not authorize her husband to sell those lots. Likewise, it
should be noted that in their separate answer the Cervantes spouses never pleaded as a defense that Mrs. Cervantes was opposed to
the sale of three lots or that Cervantes could not bind the conjugal partnership. The appellants were at first hesitant to make it appear
that Cervantes had committed the skullduggery of trying to sell property which he had no authority to alienate.
It was only during the trial on May 17, 1965 that Cervantes declared on the witness stand that his wife was opposed to the sale of the
three lots, a defense which, as already stated, was never interposed in the three answers of Bormaheco, Inc. and in the separate
answer of the Cervantes spouses. That same viewpoint was adopted in defendants' motion for reconsideration dated November 20,
1965.
But that defense must have been an afterthought or was evolved post litem motam since it was never disclosed in Cervantes' letter of
rescission and in his letter to Miss Tagle (Exh. F and Annex 1). Moreover, Mrs. Cervantes did not testify at the trial to fortify that defense
which had already been waived for not having been pleaded (See sec. 2, Rule 9, Rules of Court).
Taking into account the situation of Cervantes vis-a-vis Bormaheco, Inc. and his wife and the fact that the three lots were entirely
occupied by Bormaheco's building, machinery and equipment and were mortgaged to the DBP as security for its obligation, and
considering that appellants' vague affirmative defenses do not include Mrs. Cervantes' alleged opposition to the sale, the plea that
Cervantes had no authority to sell the lots strains the rivets of credibility (Cf. Papa and Delgado vs. Montenegro, 54 Phil. 331; Riobo vs.
Hontiveros, 21 Phil. 31).
"Obligations arising from contracts have the force of law between the contracting parties and should be complied with in good faith"
(Art. 1159, Civil Code). Inasmuch as the sale was perfected and even partly executed, Bormaheco, Inc., and the Cervantes spouses, as
a matter of justice and good faith, are bound to comply with their contractual commitments.

Parenthetically, it may be observed that much misunderstanding could have been avoided had the broker and the buyer taken the
trouble of making some research in the Registry of Deeds and availing themselves of the services of a competent lawyer in drafting the
contract to sell.
Bormaheco, Inc. and the Cervantes spouses in their sixth assignment of error assail the trial court's award to Villonco Realty Company
of consequential damage amounting to ten thousand pesos monthly from March 24, 1964 (when the Economic Coordinator approved
the award of the Nassco property to Bormaheco, Inc.) up to the consummation of the sale. The award was based on paragraph 18 of
the stipulation of facts wherein Villonco Realty Company "submits that the delay in the consummation of the sale" has caused it to
suffer the aforementioned damages.
The appellants contend that statement in the stipulation of facts simply means that Villonco Realty Company speculates that it has
suffered damages but it does not mean that the parties have agreed that Villonco Realty Company is entitled to those damages.
Appellants' contention is correct. As rightly observed by their counsel, the damages in question were not specifically pleaded and
proven and were "clearly conjectural and speculative".
However, appellants' view in their seventh assignment of error that the trial court erred in ordering Bormaheco, Inc. to pay Villonco
Realty Company the sum of twenty thousand pesos as attorney's fees is not tenable. Under the facts of the case, it is evident that
Bormaheco, Inc. acted in gross and evident bad faith in refusing to satisfy the valid and just demand of Villonco Realty Company for
specific performance. It compelled Villonco Realty Company to incure expenses to protect its interest. Moreover, this is a case where it
is just and equitable that the plaintiff should recover attorney's fees (Art. 2208, Civil Code).
The appellants in their eighth assignment of error impugn the trial court's adjudication of forty-two thousand pesos as three percent
broker's commission to Miss Tagle. They allege that there is no evidence that Bormaheco, Inc. engaged her services as a broker in the
projected sale of the three lots and the improvements thereon. That allegation is refuted by paragraph 3 of the stipulation of facts and
by the documentary evidence. It was stipulated that Miss Tagle intervened in the negotiations for the sale of the three lots. Cervantes in
his original offer of February 12, 1964 apprised Villonco Realty Company that the earnest money should be delivered to Miss Tagle, the
bearer of the letter-offer. See also Exhibit G and Annex I of the stipulation of facts.
We hold that the trial court did not err in adjudging that Bormaheco, Inc. should pay Miss Tagle her three percent commission.
WHEREFORE, the trial court's decision is modified as follows:
1. Within ten (10) days from the date the defendants-appellants receive notice from the clerk of the lower court that the records of this
case have been received from this Court, the spouses Francisco N. Cervantes and Rosario P. Navarra-Cervantes should execute a
deed conveying to Bormaheco, Inc. their three lots covered by Transfer Certificate of Title Nos. 43530, 43531 and 43532 of the Registry
of Deeds of Rizal.
2. Within five (5) days from the execution of such deed of conveyance, Bormaheco, Inc. should execute in favor of Villonco Realty
Company, V. R. C. Building, 219 Buendia Avenue, Makati, Rizal a registerable deed of sale for the said three lots and all the
improvements thereon, free from all lien and encumbrances, at the price of four hundred pesos per square meter, deducting from the
total purchase price the sum of P100,000 previously paid by Villonco Realty Company to Bormaheco, Inc.
3. Upon the execution of such deed of sale, Villonco Realty Company is obligated to pay Bormaheco, Inc. the balance of the price in the
sum of one million three hundred thousand pesos (P1,300,000).
4. Bormaheco, Inc. is ordered (a) to pay Villonco Realty Company twenty thousand pesos (P20,000) as attorney's fees and (b) to pay
Edith Perez de Tagle the sum of forty-two thousand pesos (P42,000) as commission. Costs against the defendants-appellants.
SO ORDERED.
Makalintal, C.J, Castro. Fernando, Makasiar, Antonio, Esguerra, Muoz Palma, Concepcion Jr. and Martin, JJ., concur.
Teehankee, J., is on leave.

Separate Opinions

BARREDO, J., concurring:

The comprehensive and well prepared opinion of Mr. Justice Aquino deserves concurrence and I do not hesitate to accord my assent to
it. The only purpose of the following lines is to express my personal view regarding two basic points which I feel should be thoroughly
emphasized.
1. I am not for giving the letter proposal of appellant Francisco Cervantes to Romeo Villonco of February 12, 1964, Exhibit B, any
decisive importance. To my mind, it has no more legal significance than what is appears to be a mere unaccepted proposal.
Accordingly, to my mind, paragraph (5) thereof to the effect that "final negotiations on both properties can be definitely known after 45
days" has no relevance in the disposition of this case, there being nothing in the record to show that the same was accepted by
appellee.
What to me is the actual contract between appellee and appellant Francisco Cervantes is the counter-offer signed by Teofilo Villonco
and addressed to the latter of March 4, 1964, Exhibit D, which does not even make any reference to the above-mentioned proposal of
Cervantes of February 12, 1964, even as it mentions specifically the letters of the agent, Miss E. Perez de Tagle, of February 12 and
26, 1964. The last paragraph of said Exhibit D reads thus: "If the above terms and conditions are acceptable to you, kindly sign your
conformity hereunder. Enclosed is our check for One Hundred Thousand (P100,000) Pesos, M.B.T.C. Cheek No. 448314, as earnest
money." And it is undisputed that Francisco Cervantes did affix his signature in the place indicated for his conformity, albeit under the
typewritten words, Bormaheco, Inc. It is also a fact that on the same date, the stipulated P100,000 earnest money was received by
Cervantes.
It is true that in the voucher-receipt evidencing the delivery of the earnest money, the agent, Miss Tagle, indicated in her own
handwriting that the same was "subject to the terms and conditions embodied in Bormaheco's letter of February 12, 1974 and Villonco
Realty Company's letter of March 4, 1974," but it is my considered opinion that such reservation cannot be understood as
comprehending reference to the above-quoted paragraph (5) of the proposal of February 12, for the simple reason that since the
parties had in fact continued negotiating after February 12 until the final conference of February 27, Cervantes must be deemed as
having intended his signing of his conformity to the letter of March 4 to be the formalization of the "final negotiations" referred to in said
paragraph (5), thereby rendering said provision of no further consequence. It should be noted that, to be sure, as said paragraph (5)
was worded, the idea it conveyed was that Cervantes was just making a mere tentative offer which he would finalize only after 45 days,
and so, when he signed Villonco's counter-offer of March 4 and accepted the P100,000 earnest money tendered therein, no other
significance could be given to such acts than that they were meant to finalize and perfect the transaction in advance of the 45-day
waiting period originally proposed by him. Indeed, in the addendum written and signed by Cervantes himself (not by the agent) to the
March 4 letter, all that he stated was that "this sale shall be subject to favorable consummation of a property in Sta. Ana we are
negotiating", and this was none other than the Nassco property which the Nassco Board authorized its manager on February 18, 1964
to sell to appellants who had won the award the day before. In other words, when Cervantes signed the space for his conformity to the
terms of that letter of March 4, he already knew or must have known that the acquisition of the Nassco property was already an
impending certainty and must have cared less about what had become an unnecessary waiting period, hence the omission of any
mention thereof by him in his addendum.
My conclusion, therefore, is that said acts of Cervantes of signing his conformity to Villonco's counter-offer of March 4 and accepting the
P100,000 earnest money therein offered resulted in a completely perfected contract of sale between the parties per Article 1482 of the
Civil Code, needing only the execution of the corresponding deed of sale for its consummation and subject solely to the negative
resolutory condition that the "sale shall be cancelled, only if your (Cervantes') deal with another property in Sta. Ana (indisputably the
Nassco transaction) shall not be consummated", without stipulating anymore a period for such consummation, since evidently, with the
sale thereof having been authorized already by the Nassco Board on February 18, 1964, the Villoncos must have been made to
understand or they did understand that such consummation was inexorably forthcoming. In fact, the Nassco Board already approved on
March 3, 1964 not only the award but the actual sale of the property to appellants, and the Economic Coordinator gave his sanction
thereto on March 24 following. Thus, as of March 3, one day before Cervantes accepted Villonco's counter-offer, nothing more was left
to formalize the transaction with Nassco except that approval of the Economic Coordinator.

I cannot believe that Cervantes did not have up-to-date information of the progress of his transactions with Nassco. Actually, from the
legal standpoint, he was under obligation, if only in consequence of his offer of February 12 and his continuous conversations and
negotiations with the Villoncos up to the signing of their agreement on March 4, to keep constant and close tract thereof in order that he
might be able to inform the parties he was dealing with of the real status thereof, the finalization of the same being a material factor in
the accomplishment of their common purpose. Withal, equity would assume that he did what ought to have been done by him in taking
ordinary care of his concerns, which he is presumed to have taken, according to Section 5 (d) of rule 131. Under these circumstances, I
am amply persuaded that he must have been aware of the favorable actuations of the Nassco authorities all the while that he was
dealing with appellee up to March 4, the day after the Nassco Board approved the sale. Accordingly, I hold that when he gave his
conformity to the counter-offer of the Villoncos of March 4, he was already fully confident his transaction with Nassco would eventually
materialize.
What is worse is that assuming that the 45-day period invoked by him could be considered in this discussion, it would be inequitable to
allow him to take advantage thereof in the light of the circumstances extant in the record. It cannot be denied that, as already stated,
the Economic Coordinator approved the Nassco transaction on March 24, 1964. Anyone would know, and much more so Cervantes
who was directly interested therein and must have been anxiously and even excitedly waiting for it, that that was the last requisite for
the inevitable execution of the deed of sale in his favor. One has to be very naive and it would be contrary to the ordinary course of
human experience and business practices for anyone to concede to appellants that when Cervantes wrote his letter to Villonco Realty
Company of March 30, 1964 stating that "despite the lapse of 45 days from February 12, 1964, there is no certainty yet for us to acquire
a substitute property", he did not even have the slightest inkling of the favorable action of the Economic Coordinator of March 24. The
same or more may be said relative to his letter to Miss Tagle of as late as April 6, 1964 wherein he alleged that the forty-five day period
had already expired and the sale to Bormaheco, Inc. of the Punta (Nassco) property had not been consummated as of then and that,
therefore, his letter was a "manifestation that we are no longer interested to sell" the Buendia property to the Villoncos.
I have no doubt whatsoever that the whole trouble here is that after Cervantes had already signed his conformity and received earnest
money on March 4, he had a change of heart, perhaps dictated by reasons of better economic advantage, and banking on the idea,
albeit erroneous, that he could utilize paragraph (5) of his letter of February 12 as a escape door through which he could squeeze out of
the perfected contract with the Villoncos, he opted to actually back out and break with them thru his letters of March 30 to them and of
April 6 to the agent, Miss Tagle. The Court would certainly be sanctioning a deliberate mala fide breach of a contract already definitely
perfected were it to buy the theory of non-perfection appellants are lamely pressing on Us. No amount of rationalization can convince
me that the Villoncos had agreed to any 45-day suspensive condition for the perfection of the agreement, but even on the remote
assumption that they did, I would hold as I do hold that the purchase of the Nassco property by appellants was virtually consummated,
from the viewpoint of the spirit and intent of the contract here in question, on March 24, 1964, when the Economic Coordinator
approved the same and nothing else remained to be done to formalize it except the actual execution of the deed of sale which in fact
took place on June 26, 1964, hence, Cervantes had no more excuse for further delaying compliance with his agreement with the
Villoncos. In other words, for all legal purposes, assuming hypothetically the plausibility of the theory of appellants about a 45-day
waiting period, the negative resolutory condition arising from said theory became inoperative four days before said 45 days expired.
After the approval of the sale by the Economic Coordinator, there was nothing anymore that could impede the formal conveyance of the
Nassco property to appellants, other than their own desistance, and even that might have been legally controversial if Nassco insisted
otherwise. Reading all the communications exchanged between the parties, the conclusion therefrom is inevitable that the 45-day
period stipulation was inextricably tied up with appellants' being able to acquire the Nassco property. In other words, Cervantes merely
wanted to be sure that they would get the Nassco property before proceeding with the sale of the Buendia property. To construe the 45day stipulation as giving Cervantes the absolute right to disregard the Villoncos entirely until after the 45 days had expired is to render
the whole of Cervantes' letter of February 12 as totally meaningless, legally non-existent and as deceitfully farcical. Consequently, the
acquisition of the Nassco property having actually eventualized, it cannot lie in the lips of Cervantes to claim that he may not be
compelled to proceed with the transaction. To view the situation otherwise is to condone resort to ambiguity as a means of deception
and informality in contractual obligations, which in my opinion is contrary to the elementary requirements of candidness and honest
dealing between responsible contracting parties, and in that sense offensive to public policy.
2. The contention of appellants that inasmuch as in actual fact the Buendia property contemplated in the contract is the conjugal
property of Cervantes spouses and that since in dealing with the Villoncos, Cervantes acted as President of Bormaheco, Inc., the
appellee cannot have any right to compel the conveyance to them thereof is in my view definitely puerile. It is predicated on duplicity
and smacks of utter bad faith.
I do not find in the evidence before Us adequate basis for accepting the suggestion that Francisco Cervantes acted for and in behalf of
Bormaheco, Inc. in his dealing with the Villoncos. The mere fact that he signed his letter of February 12, 1964 over the title of President,
there being no showing that he was duly authorized to make the offer therein contained in the name of the corporation, did not convert it
into a corporate act. The language of the letter which is conspicuously sprinkled with the pronoun I used by Cervantes to refer to
himself rather than exclusively the pronoun we does not so indicate. Besides, Cervantes is undisputably the registered owner with his
wife of the property therein mentioned, and being evidently conscious, as he ought to have been of this fact, he knew his act would

be ultra vires and void, if he were to act for the corporation. He was the manager of the conjugal partnership and he knew it was only in
that capacity that he could in good faith give validity to his representation, assuming the conformity of his wife. Unless Cervantes wants
Us to hold that he deliberately negotiated with the Villoncos clothed in dubious garments of authority precisely to afford him the
opportunity to repudiate at his convenience any agreement they may enter into with him. I am for holding as I do hold that Bormaheco,
Inc. had nothing to do with the transaction here in controversy. In any event, if Cervantes may held to have acted for Bormaheco, Inc.,
in spite of the absence of evidence of any authority for him to do so, it must be because Bormaheco, Inc. is Cervantes himself, and
there being no proof to the contrary, the corporate shield of Bormaheco, Inc. may be deemed pierced in order to prevent any further
fraudulent implications in his actuations. Moreover, it may be observed that the March 4 letter of Teofilo Villonco was not addressed to
Bormaheco, Inc. but to Francisco Cervantes and it does not even mention his being President of that corporation.
Anent the requirement of consent of Mrs. Cervantes under Article 166 of the Civil Code, I consider any defense along this line as
unavailing to the appellants in this case. As very ably discussed in the main opinion of Mr. Justice Aquino, the answer of the
defendants, make no reference at all to any lack of such consent. And considering that the subsequent testimony of Cervantes to the
effect that his wife opposed the transaction cannot cure such omission, if only because any husband in the circumstances revealed in
the record is estopped from setting up such a defense (cf Riobo vs. Hontiveros, 21 Phil. 31; Papi vs. Montenegro, 54 Phil. 531; see Civil
Law by Reyes & Puno, 1964 ed. p. 192), and that from her silence in her answer in this respect Mrs. Cervantes may either be
presumed to have given her consent thereto or to have ratified the same (Montederamos vs. Ynonoy, 56 Phil. 457; Castaeda vs.
Samson, 43 Phil. 751), it is obvious that the belated invocation of this defense now should be deemed in fact and in law as an
unacceptable and ineffective afterthought. Besides, it appearing that the sale of the Buendia property was purposely to enable the
spouses to acquire the Nassco property, I have grave doubts as to the application of Article 166 to the sale here in dispute. I believe
that the disposition by a husband prohibited by the Code unless consented to by the wife refers to a transaction outrightly prejudicial to
the partnership and cannot comprehend a sale made precisely for its benefit and causing no loss thereto beyond the ordinary risks of
misjudgment of a manager acting in good faith.
IN VIEW OF THE FOREGOING, I would not even require the formality of the serial execution of instruments by the Cervantes spouses
and Bormaheco, Inc. In the view I have taken above, it would be legally feasible for the sale to the Villonco Realty Property to be made
directly by the spouses. But I would not insist in the modification of the dispositive portion of the judgment, since the result would be the
same anyway.

Republic of the Philippines

SUPREME COURT
Manila
EN BANC

G.R. No. L-36083 September 5, 1975

Spouses RAMON DOROMAL, SR., and ROSARIO SALAS, and Spouses RAMON DOROMAL, JR., and GAUDELIA
VEGA, petitioners,
vs.
HON. COURT OF APPEALS and FILOMENA JAVELLANA, respondents.
Salonga, Ordonez, Yap, Parlade and Associates and Marvin J. Mirasol for petitioners. Arturo H. Villanueva, Jr. for private respondent.

BARREDO, J.:
Petition for review of the decision of the Court of Appeals in CA-G.R. No.
47945-R entitled Filomena Javellana vs. Spouses Ramon Doromal, Sr., et al. which reversed the decision of the Court of First Instance
of Iloilo that had in turn dismissed herein private respondent Filomena Javellana's action for redemption of a certain property sold by
her co-owners to herein petitioners for having been made out of time.

The factual background found by the Court of Appeals and which is binding on this Court, the same not being assailed by petitioners as
being capricious, is as follows:
IT RESULTING: That the facts are quite simple; Lot 3504 of the cadastral survey of Iloilo, situated in the poblacion of
La Paz, one of its districts, with an area of a little more than 2- hectares was originally decreed in the name of the
late Justice Antonio Horilleno, in 1916, under Original Certificate of Title No. 1314, Exh. A; but before he died, on a
date not particularized in the record, he executed a last will and testament attesting to the fact that it was a coownership between himself and his brothers and sisters, Exh. C; so that the truth was that the owners or better
stated, the co-owners were; beside Justice Horilleno,
"Luis, Soledad, Fe, Rosita, Carlos and Esperanza,"
all surnamed Horilleno, and since Esperanza had already died, she was succeeded by her only daughter and heir
herein plaintiff. Filomena Javellana, in the proportion of 1/7 undivided ownership each; now then, even though their
right had not as yet been annotated in the title, the co-owners led by Carlos, and as to deceased Justice Antonio
Horilleno, his daughter Mary, sometime since early 1967, had wanted to sell their shares, or if possible if Filomena
Javellana were agreeable, to sell the entire property, and they hired an acquaintance Cresencia Harder, to look for
buyers, and the latter came to interest defendants, the father and son, named Ramon Doromal, Sr. and Jr., and in
preparation for the execution of the sale, since the brothers and sisters Horilleno were scattered in various parts of
the country, Carlos in Ilocos Sur, Mary in Baguio, Soledad and Fe, in Mandaluyong, Rizal, and Rosita in Basilan City,
they all executed various powers of attorney in favor of their niece, Mary H. Jimenez Exh. 1-8, they also caused
preparation of a power of attorney of identical tenor for signature by plaintiff, Filomena Javellana, Exh. M, and sent it
with a letter of Carlos, Exh. 7 dated 18 January, 1968 unto her thru Mrs. Harder, and here, Carlos informed her that
the price was P4.00 a square meter, although it now turns out according to Exh. 3 that as early as 22 October,
1967, Carlos had received in check as earnest money from defendant Ramon Doromal, Jr., the sum of P5,000.00
and the price therein agreed upon was five (P5.00) pesos a square meter as indeed in another letter also of Carlos to
Plaintiff in 5 November, 1967, Exh. 6, he had told her that the Doromals had given the earnest money of P5,000.00 at
P5.00 a square meter, at any rate, plaintiff not being agreeable, did not sign the power of attorney, and the rest of
the co-owners went ahead with their sale of their 6/7, Carlos first seeing to it that the deed of sale by their common
attorney in fact, Mary H. Jimenez be signed and ratified as it was signed and ratified in Candon, Ilocos Sur, on 15
January, 1968, Exh. 2, then brought to Iloilo by Carlos in the same month, and because the Register of Deeds of Iloilo
refused to register right away, since the original registered owner, Justice Antonio Horilleno was already dead, Carlos
had to ask as he did, hire Atty. Teotimo Arandela to file a petition within the cadastral case, on 26 February, 1968, for
the purpose, Exh. C, after which Carlos returned to Luzon, and after compliance with the requisites of publication,
hearing and notice, the petition was approved, and we now see that on 29 April, 1968, Carlos already back in Iloilo
went to the Register of Deeds and caused the registration of the order of the cadastral court approving the issuance
of a new title in the name of the co-owners, as well as of the deed of sale to the Doromals, as a result of which on
that same date, a new title was issued TCT No. 23152, in the name of the Horillenos to 6/7 and plaintiff Filomena
Javellana to 1/7, Exh. D, only to be cancelled on the same day under TCT No. 23153, Exh. 2, already in the names of
the vendees Doromals for 6/7 and to herein plaintiff, Filomena Javellana, 1/7, and the next day 30 April, 1968, the
Doromals paid unto Carlos by check, the sum of P97,000.00 Exh. 1, of Chartered Bank which was later substituted
by check of Phil. National Bank, because there was no Chartered Bank Branch in Ilocos Sur, but besides this amount
paid in check, the Doromals according to their evidence still paid an additional amount in cash of P18,250.00 since
the agreed price was P5.00 a square meter; and thus was consummated the transaction, but it is here where
complications set in,
On 10 June, 1968, there came to the residence of the Doromals in Dumangas, Iloilo, plaintiff's lawyer, Atty. Arturo H. Villanueva,
bringing with him her letter of that date, reading,
"P.O. Box 189, Bacolod
City
June 10, 1968
Mr. & Mrs. Ramon Doromal, Sr.
and Mr. and Mrs. Ramon Doromal, Jr.
"Dumangas Iloilo
Dear Mr. and Mrs. Doromal:

The bearer of this letter is my nephew, Atty. Arturo H. Villanueva, Jr., of this City. Through him, I am
making a formal offer to repurchase or redeem from you the 6/7 undivided share in Lot No. 3504, of
the Iloilo Cadastre, which you bought from my erstwhile co-owners, the Horillenos, for the sum of
P30,000.00, Atty. Villanueva has with him the sum of P30,000.00 in cash, which he will deliver to
you as soon as you execute the contract of sale in my favor.
Thank you very much for whatever favorable consideration you can give this request.
Very truly yours,
(SIGNED)
Mrs. FILOMENA
JAVELLANA"
p. 26, Exh. "J", Manual of Exhibits.
and then and there said lawyer manifested to the Doromals that he had the P30,000.00 with him in cash, and
tendered it to them, for the exercise of the legal redemption, the Doromals were aghast, and refused. and the very
next day as has been said. 11 June, 1968, plaintiff filed this case, and in the trial, thru oral and documentary proofs
sought to show that as co-owner, she had the right to redeem at the price stated in the deed of sale, Exh. 2, namely
P30,000.00 of the but defendants in answer, and in their evidence, oral and documentary sought to show that plaintiff
had no more right to redeem and that if ever she should have, that it should be at the true and real price by them
paid, namely, the total sum of P115,250.00, and trial judge, after hearing the evidence, believed defendants, that
plaintiff had no more right, to redeem, because,
"Plaintiff was informed of the intended sale of the 6/7 share belonging to the Horillenos."
and that,
"The plaintiff have every reason to be grateful to Atty. Carlos Horilleno because in the petition for declaration of heirs
of her late uncle Antonio Horilleno in whose name only the Original Certificate of Title covering the Lot in question
was issued, her uncle Atty. Carlos Horilleno included her as one of the heirs of said Antonio Horilleno. Instead, she
filed this case to redeem the 6/7 share sold to the Doromals for the simple reason that the consideration in the deed
of sale is the sum of P30,000.00 only instead of P115,250.00 approximately which was actually paid by the
defendants to her co-owners, thus she wants to enrich herself at the expense of her own blood relatives who are her
aunts, uncles and cousins. The consideration of P30,000.00 only was placed in the deed of sale to minimize the
payment of the registration fees, stamps, and sales tax. pp. 77-78, R.A.,
and dismiss and further condemned plaintiff to pay attorney's fees, and moral and exemplary damages as set forth in
few pages back, it is because of this that plaintiff has come here and contends, that Lower Court erred:
"I. ... in denying plaintiff-appellant, as a co-owner of Lot No. 3504, of the Iloilo Cadastre, the right of legal redemption
under Art. 1620, of the Civil Code:
"II. ... as a consequence of the above error, in refusing to order the defendants-appellees, the vendees of a portion of
the aforesaid Lot No. 3504 which they bought from the co-owners of the plaintiff-appellant, to reconvey the portion
they purchased to the herein plaintiff-appellant..
"III. ... in admitting extrinsic evidence in the determination of the consideration of the sale, instead of simply adhering
to the purchase price of P30,000.00, set forth in the pertinent Deed of Sale executed by the vendors and owners of
the plaintiff-appellant in favor of the defendants-appellees.
"IV. ... in dismissing the complaint filed in this case." pp. 1-3, Appellant's Brief,.
which can be reduced to the simple question of whether or not on tile basis of the evidence and the law, the judgment
appealed from should be maintained; (Pp. 16-22, Record.) .

Upon these facts, the Court of Appeals reversed the trial court's decision and held that although respondent Javellana was informed of
her co-owners' proposal to sell the land in question to petitioners she was, however, "never notified ... least of all, in writing", of the
actual execution and registration of the corresponding deed of sale, hence, said respondent's right to redeem had not yet expired at the
time she made her offer for that purpose thru her letter of June 10, 1968 delivered to petitioners on even date. The intermediate court
further held that the redemption price to be paid by respondent should be that stated in the deed of sale which is P30,000
notwithstanding that the preponderance of the evidence proves that the actual price paid by petitioners was P115,250. Thus, in their
brief, petitioners assign the following alleged errors:
I
IT IS ERROR FOR THE COURT OF APPEALS TO HOLD THAT THE NOTICE IN WRITING OF THE SALE
CONTEMPLATED IN ARTICLE 1623 OF THE CIVIL CODE REFERS TO A NOTICE IN WRITING AFTER THE
EXECUTION AND REGISTRATION OF THE INSTRUMENT OF SALE, HENCE, OF THE DOCUMENT OF SALE.
II
THE COURT OF APPEALS ERRED IN NOT HOLDING THAT THE INSCRIPTION OF THE SALE IN THE REGISTRY
OF PROPERTY TAKES EFFECT AS AGAINST THIRD PERSONS INCLUDING CLAIMS OF POSSIBLE
REDEMPTIONERS.
ASSUMING, ARGUENDO THAT PRIVATE RESPONDENT HAS THE RIGHT TO REDEEM, THE COURT OF
APPEALS ERRED IN HOLDING THAT THE REDEMPTION PRICE SHOULD BE THAT STATED IN THE DEED OF
SALE. (Pp. 1-2, Brief for Petitioner, page 74-Rec.)
We cannot agree with petitioners.
Petitioners do not question respondent's right to redeem, she being admittedly a 1/7 co-owner of the property in dispute. The thrust of
their first assignment of error is that for purposes of Article 1623 of the Civil Code which provides that:
ART. 1623. The right of legal pre-emption or redemption shall not be exercised except within thirty days from the
notice in writing by the prospective vendor, or by the vendor, as the case may be. The deed of sale shall not be
recorded in the Registry of Property, unless accompanied by an affidavit of the vendor that he has given written
notice thereof to all possible redemptioners.
The right of redemption of co-owners excludes that of adjoining owners.
the letters sent by Carlos Horilleno to respondent and dated January 18, 1968, Exhibit 7, and November 5, 1967, Exhibit 6, constituted
the required notice in writing from which the 30-day period fixed in said provision should be computed. But to start with, there is no
showing that said letters were in fact received by respondent and when they were actually received. Besides, petitioners do not pinpoint
which of these two letters, their dates being more than two months apart, is the required notice. In any event, as found by the appellate
court, neither of said letters referred to a consummated sale. As may be observed, it was Carlos Horilleno alone who signed them, and
as of January 18, 1968, powers of attorney from the various co-owners were still to be secured. Indeed, the later letter of January 18,
1968 mentioned that the price was P4.00 per square meter whereas in the earlier letter of November 5, 1967 it was P5.00, as in fact,
on that basis, as early as October 27, 1967, Carlos had already received P5,000 from petitioners supposedly as earnest money, of
which, however, mention was made by him to his niece only in the later letter of January 18, 1968, the explanation being that "at later
negotiation it was increased to P5.00 per square meter." (p. 4 of petitioners' brief as appellees in the Court of Appeals quoting from the
decision of the trial court.) In other words, while the letters relied upon by petitioners could convey the idea that more or less some kind
of consensus had been arrived at among the other co-owners to sell the property in dispute to petitioners, it cannot be said definitely
that such a sale had even been actually perfected. The fact alone that in the later letter of January 18, 1968 the price indicated was
P4.00 per square meter while in that of November 5, 1967, what was stated was P5.00 per square meter negatives the possibility that a
"price definite" had already been agreed upon. While 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 Article 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 were paid in the concept of earnest money as the term was understood under the Old Civil Code, that is,
as a guarantee that the buyer would not back out, considering that it is not clear that there was already a definite agreement as to the
price then and that petitioners were decided to buy 6/7 only of the property should respondent Javellana refuse to agree to part with her
1/7 share.

In the light of these considerations, it cannot be said that the Court of Appeals erred in holding that the letters aforementioned sufficed
to comply with the requirement of notice of a sale by co-owners under Article 1623 of the Civil Code. We are of the considered opinion
and so hold that for purposes of the co-owner's right of redemption granted by Article 1620 of the Civil Code, the notice in writing which
Article 1623 requires to be made to the other co-owners and from receipt of which the 30-day period to redeem should be counted is a
notice not only of a perfected sale but of the actual execution and delivery of the deed of sale. This is implied from the latter portion of
Article 1623 which requires that before a register of deeds can record a sale by a co-owner, there must be presented to him, an affidavit
to the effect that the notice of the sale had been sent in writing to the other co-owners. A sale may not be presented to the register of
deeds for registration unless it be in the form of a duly executed public instrument. Moreover, the law prefers that all the terms and
conditions of the sale should be definite and in writing. As aptly observed by Justice Gatmaitan in the decision under review, Article
1619 of the Civil Code bestows unto a co-owner the right to redeem and "to be subrogated under the same terms and conditions
stipulated in the contract", and to avoid any controversy as to the terms and conditions under which the right to redeem may be
exercised, it is best that the period therefor should not be deemed to have commenced unless the notice of the disposition is made
after the formal deed of disposal has been duly executed. And it being beyond dispute that respondent herein has never been notified
in writing of the execution of the deed of sale by which petitioners acquired the subject property, it necessarily follows that her tender to
redeem the same made on June 10, 1968 was well within the period prescribed by law. Indeed, it is immaterial when she might have
actually come to know about said deed, it appearing she has never been shown a copy thereof through a written communication by
either any of the petitioners-purchasers or any of her co-owners-vendees. (Cornejo et al. vs.CA et al., 16 SCRA 775.)
The only other pivotal issue raised by petitioners relates to the price which respondent offered for the redemption in question. In this
connection, from the decision of the Court of Appeals, We gather that there is "decisive preponderance of evidence" establishing "that
the price paid by defendants was not that stated in the document, Exhibit 2, of P30,000 but much more, at least P97,000, according to
the check, Exhibit 1, if not a total of P115,250.00 because another amount in cash of P18,250 was paid afterwards."
It is, therefore, the contention of petitioners here that considering said finding of fact of the intermediate court, it erred in holding
nevertheless that "the redemption price should be that stated in the deed of sale."
Again, petitioners' contention cannot be sustained. As stated in the decision under review, the trial court found that "the consideration of
P30,000 only was placed in the deed of sale to minimize the payment of the registration fees, stamps and sales tax." With this
undisputed fact in mind, it is impossible for the Supreme Court to sanction petitioners' pragmatic but immoral posture. Being patently
violative of public policy and injurious to public interest, the seemingly wide practice of understating considerations of transactions for
the purpose of evading taxes and fees due to the government must be condemned and all parties guilty thereof must be made to suffer
the consequences of their ill-advised agreement to defraud the state. Verily, the trial court fell short of its devotion and loyalty to the
Republic in officially giving its stamp of approval to the stand of petitioners and even berating respondent Javellana as wanting to enrich
herself "at the expense of her own blood relatives who are her aunts, uncles and cousins." On the contrary, said "blood relatives"
should have been sternly told, as We here hold, that they are in pari-delicto with petitioners in committing tax evasion and should not
receive any consideration from any court in respect to the money paid for the sale in dispute. Their situation is similar to that of parties
to an illegal contract. 1
Of course, the Court of Appeals was also eminently correct in its considerations supporting the conclusion that the redemption in
controversy should be only for the price stipulated in the deed, regardless of what might have been actually paid by petitioners that
style inimitable and all his own, Justice Gatmaitan states those considerations thus:
CONSIDERING: As to this that the evidence has established with decisive preponderance that the price paid by
defendants was not that stated in the document, Exh. 2 of P30,000.00 but much more, at least P97,000.00 according
to the check, Exh. 1 if not a total of P115,250.00 because another amount in cash of P18,250.00 was paid afterwards,
perhaps it would be neither correct nor just that plaintiff should be permitted to redeem at only P30,000.00, that at first
glance would practically enrich her by the difference, on the other hand, after some reflection, this Court can not but
have to bear in mind certain definite points.
1st According to Art. 1619
"Legal redemption is the right to be subrogated, upon the same terms and conditions stipulated in the contract, in the
place of one who acquires a thing by purchase or dation in payment, or by any other transaction whereby ownership
is transmitted by onerous title." pp. 471-472, New Civil Code,
and note that redemptioner right is to be subrogated
"upon the same terms and conditions stipulated in the contract."

and here, the stipulation in the public evidence of the contract, made public by both vendors and vendees is that the
price was P30,000.00;
2nd According to Art. 1620,
"A co-owner of a thing may exercise the right of redemption in case the share of all the other co-owners or any of them, are sold to a
third person. If the price of the alienation is grossly excessive, the redemptioner shall pay only a reasonable one. p. 472, New Civil
Code, .
from which it is seen that if the price paid is 'grossly excessive' redemptioner is required to pay only a reasonable
one; not that actually paid by the vendee, going to show that the law seeks to protect redemptioner and converts his
position into one not that of a contractually but of a legally subrogated creditor as to the right of redemption, if the
price is not 'grossly excessive', what the law had intended redemptioner to pay can be read in Art. 1623.
The right of a legal pre-emption or redemption shall not be exercised except within thirty (30) days
from the notice in writing by the prospective vendor, or by the vendor as the case may be. The
deed of sale shall not be recorded in the Registry of Property, unless accompanied by an affidavit
of the vendor that he has given written notice thereof of all possible redemptioners.' p. 473, New
Civil Code,
if that be so that affidavit must have been intended by the lawmakers for a definite purpose, to argue that this affidavit
has no purpose is to go against all canons of statutory construction, no law mandatory in character and worse,
prohibitive should be understood to have no purpose at all, that would be an absurdity, that purpose could not but
have been to give a clear and unmistakable guide to redemptioner, on how much he should pay and when he should
redeem; from this must follow that that notice must have been intended to state the truth and if vendor and vendee
should have instead, decided to state an untruth therein, it is they who should bear the consequences of having
thereby misled the redemptioner who had the right to rely and act thereon and on nothing else; stated otherwise, all
the elements of equitable estoppel are here since the requirement of the law is to submit the affidavit of notice to all
possible redemptioners, that affidavit to be a condition precedent to registration of the sale therefore, the law must
have intended that it be by the parties understood that they were there asking a solemn representation to all possible
redemptioners, who upon faith of that are thus induced to act, and here worse for the parties to the sale, they sought
to avoid compliance with the law and certainly refusal to comply cannot be rewarded with exception and acceptance
of the plea that they cannot be now estopped by their own representation, and this Court notes that in the trial and to
this appeal, plaintiff earnestly insisted and insists on their estoppel;
3rd If therefore, here vendors had only attempted to comply with the law, they would have been obligated to send
a copy of the deed of sale unto Filomena Javellana and from that copy, Filomena would have been notified that she
should if she had wanted to redeem, offered no more, no less, that P30,000.00, within 30 days, it would have been
impossible for vendors and vendees to have inserted in the affidavit that the price was truly P97,000.00 plus
P18,250.00 or a total of P115,250.00; in other words, if defendants had only complied with the law, they would have
been obligated to accept the redemption money of only P30,000.00;
4th If it be argued that foregoing solution would mean unjust enrichment for plaintiff, it need only be remembered
that plaintiff's right is not contractual, but a mere legal one, the exercise of a right granted by the law, and the law is
definite that she can subrogate herself in place of the buyer,
"upon the same terms and conditions stipulated in the contract,"
in the words of Art. 1619, and here the price
"stipulated in the contract"
was P30,000.00, in other words, if this be possible enrichment on the part of Filomena, it was not unjust but just
enrichment because permitted by the law; if it still be argued that plaintiff would thus be enabled to abuse her right,
the answer simply is that what she is seeking to enforce is not an abuse but a mere exercise of a right; if it be stated
that just the same, the effect of sustaining plaintiff would be to promote not justice but injustice, the answer again
simply is that this solution is not unjust because it only binds the parties to make good their solemn representation to

possible redemptioners on the price of the sale, to what they had solemnly averred in a public document required by
the law to be the only basis for that exercise of redemption; (Pp. 24-27, Record.)
WHEREFORE, the decision of the Court of Appeals is affirmed, with costs against petitioners..
Fernando, Makasiar, Esguerra, Aquino and Martin, JJ., concur.
Makalintal, CJ., took no part.
Muoz Palma, J., took no part.
Antonio and Concepcion Jr., JJ., are on leave.
FIRST DIVISION
[G.R. No. 126812. November 24, 1998]
GOLDENROD, INC., petitioner vs. COURT OF APPEALS, PIO
DEVELOPMENT, INC., and ANTHONY QUE,respondents.

BARRETTO

&

SONS,

INC.,

PIO BARRETTO REALTY

DECISION
BELLOSILLO, J.:
In the absence of a specific stipulation, may the seller of real estate keep the earnest money to answer for damages in the event
the sale fails due to the fault of the prospective buyer?
Pio Barretto and Sons, Inc. (BARRETTO & SONS) owned forty-three (43) parcels of registered land with a total area of 18,500
square meters located at Carlos Palanca St., Quiapo, Manila, which were mortgaged with the United Coconut Planters Bank (UCPB). In
1988, the obligation of the corporation with UCPB remained unpaid making foreclosure of the mortgage imminent.
Goldenrod, Inc. (GOLDENROD), offered to buy the property from BARRETTO & SONS. On 25 May 1988, through its president
Sonya G. Mathay, petitioner wrote respondent Anthony Que, President of respondent BARRETTO & SONS, as follows:
Thank you for your reply to our letter offering to buy your property in Echague (C. Palanca) Quiapo.
We are happy that you have accepted our offer except the two amendments concerning the payment of interest which should be
monthly instead of semi-annually and the period to remove the trusses, steel frames etc. which shall be 180 days instead of 90 days
only. Please be advised that we agree to your amendments.
As to your other query, we prefer that the lots be reconsolidated back to its (sic) mother titles.
Enclosed is the earnest money of P1 million which shall form part of the purchase price.
Payment of the agreed total consideration shall be effected in accordance with our offer as you have accepted and upon execution of
the necessary documents of sale to be implemented after the said reconsolidation of the lots.
Kindly acknowledge receipt of the earnest money.
When the term of existence of BARRETTO & SONS expired, all its assets and liabilities including the property located in Quiapo
were transferred to respondent Pio Barretto Realty Development, Inc. (BARRETTO REALTY). Petitioners offer to buy the property
resulted in its agreement with respondent BARRETTO REALTY that petitioner would pay the following amounts: (a) P24.5 million
representing the outstanding obligations of BARRETTO REALTY with UCPB on 30 June 1988, the deadline set by the bank
for payment; and, (b) P20 million which was the balance of the purchase price of the property to be paid in installments within a 3-year
period with interest at 18% per annum.

Petitioner did not pay UCPB the P24.5 million loan obligation of BARRETTO REALTY on the deadline set for payment; instead, it
asked for an extension of one (1) month or up to 31 July 1988 to settle the obligation, which the bank granted. On 31 July 1988,
petitioner requested another extension of sixty (60) days to pay the loan. This time the bank demurred.
In the meantime BARRETTO REALTY was able to cause the reconsolidation of the forty-three (43) titles covering the property
subject of the purchase into two (2) titles covering Lots 1 and 2, which were issued on 4 August 1988. The reconsolidation of the titles
was made pursuant to the request of petitioner in its letter to private respondents on 25 May 1988. Respondent BARRETTO REALTY
allegedly incurred expenses for the reconsolidation amounting to P250,000.00.
On 25 August 1988 petitioner sought reconsideration of the denial by the bank of its request for extension of sixty (60) days by
asking for a shorter period of thirty (30) days. This was again denied by UCPB.
On 30 August 1988 Alicia P. Logarta, President of Logarta Realty and Development Corporation (LOGARTA REALTY), which
acted as agent and broker of petitioner, wrote private respondent Anthony Que informing him on behalf of petitioner that it could not go
through with the purchase of the property due to circumstances beyond its fault, i.e., the denial by UCPB of its request for extension of
time to pay the obligation.In the same letter, Logarta also demanded the refund of the earnest money of P1 million which petitioner
gave to respondent BARRETTO REALTY.
On 31 August 1988 respondent BARRETTO REALTY sold to Asiaworld Trade Center Phils., Inc. (ASIAWORLD), Lot 2, one of the
two (2) consolidated lots, for the price of P23 million. On 13 October 1988 respondent BARRETTO REALTY executed a deed
transferring by way of dacion the property reconsolidated as Lot 1 in favor of UCPB, which in turn sold the property to ASIAWORLD
for P24 million.
On 12 December 1988 Logarta again wrote respondent Que demanding the return of the earnest money to GOLDENROD. On 7
February 1989 petitioner through its lawyer reiterated its demand, but the same remained unheeded by private respondents. This
prompted petitioner to file a complaint with the Regional Trial Court of Manila against private respondents for the return of the amount
of P1 million and the payment of damages including lost interests or profits. In their answer, private respondents contended that it was
the agreement of the parties that the earnest money of P1 million would be forfeited to answer for losses and damages that might be
suffered by private respondents in case of failure by petitioner to comply with the terms of their purchase agreement.
On 15 March 1991 the trial court rendered a decision[1] ordering private respondents jointly and severally to pay
petitioner P1,000,000.00 with legal interest from 9 February 1989 until fully paid, P50,000.00 representing unrealized profits
and P10,000.00 as attorneys fees. The trial court found that there was no written agreement between the parties concerning forfeiture
of
the
earnest
money if
the
sale
did
not
push
through.It
further
declared
that
the
earnest money given by petitioner to respondent BARRETTO REALTY was intended to form part of the purchase price; thus, the
refusal of the latter to return the money when the sale was not consummated violated Arts. 22 and 23 of the Civil Code against unjust
enrichment.
Obviously dissatisfied with the decision of the trial court, private respondents appealed to the Court of Appeals which reversed the
trial court and ordered the dismissal of the complaint; hence, this petition.
Petitioner alleges that the Court of Appeals erred in disregarding the finding of the trial court that the earnest money given by
petitioner to respondent BARRETTO REALTY should be returned to the former. The absence of an express stipulation that the same
shall be forfeited in favor of the seller in case the buyer fails to comply with his obligation is compelling. It argues that the forfeiture of
the money in favor of respondent BARRETTO REALTY would amount to unjust enrichment at the expense of petitioner.
We sustain petitioner. Under Art. 1482 of the Civil Code, whenever earnest money is given in a contract of sale, it shall be
considered as part of the purchase price and as proof of the perfection of the contract.Petitioner clearly stated without any objection
from private respondents that the earnest money was intended to form part of the purchase price. It was an advance payment which
must be deducted from the total price.Hence, the parties could not have intended that the earnest money or advance payment would be
forfeited when the buyer should fail to pay the balance of the price, especially in the absence of a clear and express agreement
thereon. By reason of its failure to make payment petitioner, through its agent, informed private respondents that it would no longer
push through with the sale. In other words, petitioner resorted to extrajudicial rescission of its agreement with private respondents.
In University of the Philippines v. de los Angeles, [2] the right to rescind contracts is not absolute and is subject to scrutiny and
review by the proper court. We held further, in the more recent case of Adelfa Properties, Inc. v. Court of Appeals, [3] that rescission of
reciprocal contracts may be extrajudicially rescinded unless successfully impugned in court. If the party does not oppose the declaration

of rescission of the other party, specifying the grounds therefor, and it fails to reply or protest against it, its silence thereon suggests an
admission of the veracity and validity of the rescinding party's claim.
Private respondents did not interpose any objection to the rescission by petitioner of the agreement. As found by the Court of
Appeals, private respondent BARRETTO REALTY even sold Lot 2 of the subject consolidated lots to another buyer, ASIAWORLD, one
day after its President Anthony Que received the broker's letter rescinding the sale. Subsequently, on 13 October 1988 respondent
BARRETTO REALTY also conveyed ownership over Lot 1 to UCPB which, in turn, sold the same to ASIAWORLD.
Article 1385 of the Civil Code provides that rescission creates the obligation to return the things which were the object of the
contract together with their fruits and interest. The vendor is therefore obliged to return the purchase price paid to him by the buyer if
the latter rescinds the sale,[4] or when the transaction was called off and the subject property had already been sold to a third person, as
what obtained in this case.[5]Therefore, by virtue of the extrajudicial rescission of the contract to sell by petitioner without opposition from
private respondents who, in turn, sold the property to other persons, private respondent BARRETTO REALTY, as the vendor, had the
obligation to return the earnest money of P1,000,000.00 plus legal interest from the date it received notice of rescission from petitioner,
i.e., 30 August 1988, up to the date of the return or payment. It would be most inequitable if respondent BARRETTO REALTY would be
allowed to retain petitioners payment of P1,000,000.00 and at the same time appropriate the proceeds of the second sale made to
another.[6]
WHEREFORE, the Petition is GRANTED. The decision of the Court of Appeals is REVERSED and SET ASIDE. Private
respondent Pio Barretto Realty Development, Inc. (BARRETTO REALTY), its successors and assigns are ordered to return to petitioner
Goldenrod, Inc. (GOLDENROD), the amount of P1,000,000.00 with legal interest thereon from 30 August 1988, the date of notice of
extrajudicial rescission, until the amount is fully paid, with costs against private respondents.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 78903 February 28, 1990
SPS. SEGUNDO DALION AND EPIFANIA SABESAJE-DALION, petitioners,
vs.
THE HONORABLE COURT OF APPEALS AND RUPERTO SABESAJE, JR., respondents.
Francisco A. Puray, Sr. for petitioners.
Gabriel N. Duazo for private respondent.

MEDIALDEA, J.:
This is a petition to annul and set aside the decision of the Court of Appeals rendered on May 26, 1987, upholding the validity of the
sale of a parcel of land by petitioner Segundo Dalion (hereafter, "Dalion") in favor of private respondent Ruperto Sabesaje, Jr.
(hereafter, "Sabesaje"), described thus:
A parcel of land located at Panyawan, Sogod, Southern Leyte, declared in the name of Segundo Dalion, under Tax
Declaration No. 11148, with an area of 8947 hectares, assessed at P 180.00, and bounded on the North, by Sergio
Destriza and Titon Veloso, East, by Feliciano Destriza, by Barbara Bonesa (sic); and West, by Catalino Espina. (pp.
36-37, Rollo)
The decision affirms in toto the ruling of the trial court 1 issued on January 17, 1984, the dispositive portion of which provides as follows:
WHEREFORE, IN VIEW OF THE FOREGOING, the Court hereby renders judgment.

(a) Ordering the defendants to deliver to the plaintiff the parcel of land subject of this case, declared in the name of
Segundo Dalion previously under Tax Declaration No. 11148 and lately under Tax Declaration No. 2297 (1974) and to
execute the corresponding formal deed of conveyance in a public document in favor of the plaintiff of the said
property subject of this case, otherwise, should defendants for any reason fail to do so, the deed shall be executed in
their behalf by the Provincial Sheriff or his Deputy;
(b) Ordering the defendants to pay plaintiff the amount of P2,000.00 as attorney's fees and P 500.00 as litigation
expenses, and to pay the costs; and
(c) Dismissing the counter-claim. (p. 38, Rollo)
The facts of the case are as follows:
On May 28, 1973, Sabesaje sued to recover ownership of a parcel of land, based on a private document of absolute sale, dated July 1,
1965 (Exhibit "A"), allegedly executed by Dalion, who, however denied the fact of sale, contending that the document sued upon is
fictitious, his signature thereon, a forgery, and that subject land is conjugal property, which he and his wife acquired in 1960 from
Saturnina Sabesaje as evidenced by the "Escritura de Venta Absoluta" (Exhibit "B"). The spouses denied claims of Sabesaje that after
executing a deed of sale over the parcel of land, they had pleaded with Sabesaje, their relative, to be allowed to administer the land
because Dalion did not have any means of livelihood. They admitted, however, administering since 1958, five (5) parcels of land in
Sogod, Southern Leyte, which belonged to Leonardo Sabesaje, grandfather of Sabesaje, who died in 1956. They never received their
agreed 10% and 15% commission on the sales of copra and abaca, respectively. Sabesaje's suit, they countered, was intended merely
to harass, preempt and forestall Dalion's threat to sue for these unpaid commissions.
From the adverse decision of the trial court, Dalion appealed, assigning errors some of which, however, were disregarded by the
appellate court, not having been raised in the court below. While the Court of Appeals duly recognizes Our authority to review matters
even if not assigned as errors in the appeal, We are not inclined to do so since a review of the case at bar reveals that the lower court
has judicially decided the case on its merits.
As to the controversy regarding the identity of the land, We have no reason to dispute the Court of Appeals' findings as follows:
To be sure, the parcel of land described in Exhibit "A" is the same property deeded out in Exhibit "B". The boundaries
delineating it from adjacent lots are identical. Both documents detail out the following boundaries, to wit:
On the North-property of Sergio Destriza and Titon Veloso;
On the East-property of Feliciano Destriza;
On the South-property of Barbara Boniza and
On the West-Catalino Espina.
(pp. 41-42, Rollo)
The issues in this case may thus be limited to: a) the validity of the contract of sale of a parcel of land and b) the necessity of a public
document for transfer of ownership thereto.
The appellate court upheld the validity of the sale on the basis of Secs. 21 and 23 of Rule 132 of the Revised Rules of Court.
SEC. 21. Private writing, its execution and authenticity, how proved.-Before any private writing may be received in
evidence, its due execution and authenticity must be proved either:
(a) By anyone who saw the writing executed;
(b) By evidence of the genuineness of the handwriting of the maker; or
(c) By a subscribing witness

xxx xxx xxx

SEC. 23. Handwriting, how proved. The handwriting of a person may be proved by any witness who believes it to
be the handwriting of such person, and has seen the person write, or has seen writing purporting to be his upon
which the witness has acted or been charged, and has thus acquired knowledge of the handwriting of such person.
Evidence respecting the handwriting may also be given by a comparison, made by the witness or the court, with
writings admitted or treated as genuine by the party against whom the evidence is offered, or proved to be genuine to
the satisfaction of the judge. (Rule 132, Revised Rules of Court)
And on the basis of the findings of fact of the trial court as follows:
Here, people who witnessed the execution of subject deed positively testified on the authenticity thereof. They
categorically stated that it had been executed and signed by the signatories thereto. In fact, one of such witnesses,
Gerardo M. Ogsoc, declared on the witness stand that he was the one who prepared said deed of sale and had
copied parts thereof from the "Escritura De Venta Absoluta" (Exhibit B) by which one Saturnina Sabesaje sold the
same parcel of land to appellant Segundo Dalion. Ogsoc copied the bounderies thereof and the name of appellant
Segundo Dalion's wife, erroneously written as "Esmenia" in Exhibit "A" and "Esmenia" in Exhibit "B". (p. 41, Rollo)
xxx xxx xxx
Against defendant's mere denial that he signed the document, the positive testimonies of the instrumental Witnesses
Ogsoc and Espina, aside from the testimony of the plaintiff, must prevail. Defendant has affirmatively alleged forgery,
but he never presented any witness or evidence to prove his claim of forgery. Each party must prove his own
affirmative allegations (Section 1, Rule 131, Rules of Court). Furthermore, it is presumed that a person is innocent of
a crime or wrong (Section 5 (a),Idem), and defense should have come forward with clear and convincing evidence to
show that plaintiff committed forgery or caused said forgery to be committed, to overcome the presumption of
innocence. Mere denial of having signed, does not suffice to show forgery.
In addition, a comparison of the questioned signatories or specimens (Exhs. A-2 and A-3) with the admitted
signatures or specimens (Exhs. X and Y or 3-C) convinces the court that Exhs. A-2 or Z and A-3 were written by
defendant Segundo Dalion who admitted that Exhs. X and Y or 3-C are his signatures. The questioned signatures
and the specimens are very similar to each other and appear to be written by one person.
Further comparison of the questioned signatures and the specimens with the signatures Segundo D. Dalion appeared
at the back of the summons (p. 9, Record); on the return card (p. 25, Ibid.); back of the Court Orders dated December
17, 1973 and July 30, 1974 and for October 7, 1974 (p. 54 & p. 56, respectively, Ibid.), and on the open court notice
of April 13, 1983 (p. 235, Ibid.) readily reveal that the questioned signatures are the signatures of defendant Segundo
Dalion.
It may be noted that two signatures of Segundo D. Dalion appear on the face of the questioned document (Exh. A),
one at the right corner bottom of the document (Exh. A-2) and the other at the left hand margin thereof (Exh. A-3).
The second signature is already a surplusage. A forger would not attempt to forge another signature, an unnecessary
one, for fear he may commit a revealing error or an erroneous stroke. (Decision, p. 10) (pp. 42-43, Rollo)
We see no reason for deviating from the appellate court's ruling (p. 44, Rollo) as we reiterate that
Appellate courts have consistently subscribed to the principle that conclusions and findings of fact by the trial courts
are entitled to great weight on appeal and should not be disturbed unless for strong and cogent reasons, since it is
undeniable that the trial court is in a more advantageous position to examine real evidence, as well as to observe the
demeanor of the witnesses while testifying in the case (Chase v. Buencamino, Sr., G.R. No. L-20395, May 13, 1985,
136 SCRA 365; Pring v. Court of Appeals, G.R. No. L-41605, August 19, 1985, 138 SCRA 185)
Assuming authenticity of his signature and the genuineness of the document, Dalion nonetheless still impugns the validity of the sale on
the ground that the same is embodied in a private document, and did not thus convey title or right to the lot in question since "acts and
contracts which have for their object the creation, transmission, modification or extinction of real rights over immovable property must
appear in a public instrument" (Art. 1358, par 1, NCC).

This argument is misplaced. The provision of Art. 1358 on the necessity of a public document is only for convenience, not for validity or
enforceability. It is not a requirement for the validity of a contract of sale of a parcel of land that this be embodied in a public instrument.
A contract of sale is a consensual contract, which means that the sale is perfected by mere consent. No particular form is required for
its validity. Upon perfection of the contract, the parties may reciprocally demand performance (Art. 1475, NCC), i.e., the vendee may
compel transfer of ownership of the object of the sale, and the vendor may require the vendee to pay the thing sold (Art. 1458, NCC).
The trial court thus rightly and legally ordered Dalion to deliver to Sabesaje the parcel of land and to execute corresponding formal
deed of conveyance in a public document. Under Art. 1498, NCC, when the sale is made through a public instrument, the execution
thereof is equivalent to the delivery of the thing. Delivery may either be actual (real) or constructive. Thus delivery of a parcel of land
may be done by placing the vendee in control and possession of the land (real) or by embodying the sale in a public instrument
(constructive).
As regards petitioners' contention that the proper action should have been one for specific performance, We believe that the suit for
recovery of ownership is proper. As earlier stated, Art. 1475 of the Civil Code gives the parties to a perfected contract of sale the right to
reciprocally demand performance, and to observe a particular form, if warranted, (Art. 1357). The trial court, aptly observed that
Sabesaje's complaint sufficiently alleged a cause of action to compel Dalion to execute a formal deed of sale, and the suit for recovery
of ownership, which is premised on the binding effect and validity inter partes of the contract of sale, merely seeks consummation of
said contract.
... . A sale of a real property may be in a private instrument but that contract is valid and binding between the parties
upon its perfection. And a party may compel the other party to execute a public instrument embodying their contract
affecting real rights once the contract appearing in a private instrument hag been perfected (See Art. 1357).
... . (p. 12, Decision, p. 272, Records)
ACCORDINGLY, the petition is DENIED and the decision of the Court of Appeals upholding the ruling of the trial court is hereby
AFFIRMED. No costs.
SO ORDERED.