Adelfa Properties vs CA, January 25 1995 - Digest

ACTS: Private respondents and their brothers Jose and Dominador were the registered
CO-OWNERS of a parcel of land in Las Pinas, covered by a TCT.
Jose and Dominador sold their share (eastern portion of the land) to Adelfa. Thereafter,
Adelfa expressed interest in buying the western portion of the property from private
respondents herein. Accordingly, an exclusive Option to Purchase was executed
between Adelfa and Private respondents and an option money of 50,000 was given to the
latter.
A new owners copy of the certificate of title was issued (as the copy with respondent
Salud was lost) was issued but was kept by Adelfas counsel, Atty. Bernardo.
Before Adelfa could make payments, it received summons as a case was filed (RTC
Makati) against Jose and Dominador and Adelfa, because of a complaint in a civil case
by the nephews and nieces of private respondents herein. As a consequence, Adelfa,
through a letter, informed the private respondents that it would hold payment of the full
purchase price and suggested that they settle the case with their said nephews and nieces.
Salud did not heed the suggestion; respondents informed Atty. Bernardo that they are
canceling the transaction. Atty Bernardo made offers but they were all rejected.
RTC Makati dismissed the civil case. A few days after, private respondents executed a
Deed of Conditional Sale in favor of Chua, over the same parcel of land.
Atty Bernardo wrote private respondents informing them that in view of the dismissal of
the case, Adelfa is willing to pay the purchase price, and requested that the corresponding
deed of Absolute Sale be executed. This was ignored by private respondents.
Private respondents sent a letter to Adelfa enclosing therein a check representing the
refund of half the option money paid under the exclusive option to purchase, and

requested Adelfa to return the owners duplicate copy of Salud. Adelfa failed to surrender
the certificate of title, hence the private respondents filed a civil case before the RTC
Pasay, for annulment of contract with damages. The trial court directed the cancellation
of the exclusive option to purchase. On appeal, respondent CA affirmed in toto the
decision of the RTC hence this petition.
ISSUE:
1.

WON the agreement between Adelfa and Private respondents was strictly an
option contract

2.

WON Article 1590 applies in this case, thereby justifiying the refusal by Adelfa to
pay the balance of the purchase price

3.

WON Private respondents could unilaterraly and prematurely terminate the option
period, if indeed it is a option contract, as the option period has not lapsed yet.

HELD: The judgement of the CA is AFFIRMED

1. NO. The agreement between the parties is a contract to sell, and not an option contract
or a contract of sale.
Atkins Kroll and Co. vs Cua Hian Tek, 102 Phil 948 - Digest
FACTS:
On September 13, 1951, petitioner Atkins Kroll & Co. (Atkins) sent a letter to respondent
B. Cu Hian Tek (Hian Tek) offering (a) 400 cartons of Luneta brand Sardines in Tomato
Sauce 48 / 15-oz. Ovals at $8.25 per carton, (b) 300 cartons of Luneta brand Sardines
Natural 48/15 oz. talls at $6.25 per carton, and (c) 300 cartons of Luneta brand Sardines
in Tomato Sauce 100/5-oz. talls at $7.48 per carton, with all of the offers subject to reply
by September 23, 1951. Hian Tek unconditionally accepted the said offer through a letter
delivered on September 21, 1951, but Atkins failed to deliver the commodities due to the
shortage of catch of sardines by the packers in California.
Hian Tek, therefore, filed an action for damages in the CFI of Manila which granted the
same in his favor. Upon Atkins appeal, the Court of Appeals affirmed said decision but

reduced the damages to P3,240.15 representing unrealized profits. Atkins herein contends
that there was no such contract of sale but only an option to buy, which was not
enforceable for lack of consideration because it is provided under the 2nd paragraph of
Article 1479 of the New Civil Code that "an accepted unilatateral 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. Atkins also insisted that the offer
was a mere offer of option, because the "firm offer" was a continuing offer to sell until
September 23.
Was there a contract of sale between the parties or only a unilateral promise to buy?
COURT RULING:
The Supreme Court held that there was a contract of sale between the parties. Petitioners
argument assumed that only a unilateral promise arose when the respondent accepted the
offer, which is incorrect because a bilateral contract to sell and to buy was created upon
respondents acceptance.
Had B. Cua Hian Tek backed out after accepting, by refusing to get the sardines and / or
to pay for their price, he could also be sued. But his letter-reply to Atkins indicated that
he accepted "the firm offer for the sale" and that "the undersigned buyer has immediately
filed an application for import license. After accepting the promise and before he
exercises his option, the holder of the option is not bound to buy. In this case at bar,
however, upon respondents acceptance of herein petitioner's offer, a bilateral promise to
sell and to buy ensued, and the respondent had immediately assumed the obligations of a
purchaser.

Sanchez vs Rigos, 45 SCRA 368 - Digest

FACTS:
In an instrument entitled "Option to Purchase," executed on April 3, 1961, defendantappellant Severina Rigos "agreed, promised and committed ... to sell" to plaintiff-appellee
Nicolas Sanchez for the sum of P1,510.00 within two (2) years from said date, a parcel of
land situated in the barrios of Abar and Sibot, San Jose, Nueva Ecija. It was agreed that
said option shall be deemed "terminated and elapsed," if Sanchez shall fail to exercise
his right to buy the property" within the stipulated period. On March 12, 1963, Sanchez
deposited the sum of Pl,510.00 with the CFI of Nueva Ecija and filed an action for
specific performance and damages against Rigos for the latters refusal to accept several
tenders of payment that Sanchez made to purchase the subject land.
Defendant Rigos contended that the contract between them was only a unilateral
promise to sell, and the same being unsupported by any valuable consideration, by force
of the New Civil Code, is null and void." Plaintiff Sanchez, on the other hand, alleged in
his compliant that, by virtue of the option under consideration, "defendant agreed and
committed to sell" and "the plaintiff agreed and committed to buy" the land described in
the option. The lower court rendered judgment in favor of Sanchez and ordered Rigos to
accept the sum Sanchez judicially consigned, and to execute in his favor the requisite
deed of conveyance. The Court of Appeals certified the case at bar to the Supreme Court
for it involves a question purely of law.
ISSUE:
Was there a contract to buy and sell between the parties or only a unilateral promise to
sell?
COURT RULING:
The Supreme Court affirmed the lower courts decision. The instrument executed in 1961
is not a "contract to buy and sell," but merely granted plaintiff an "option" to buy, as

indicated by its own title "Option to Purchase." The option did not impose upon plaintiff
Sanchez the obligation to purchase defendant Rigos' property. Rigos "agreed, promised
and committed" herself to sell the land to Sanchez for P1,510.00, but there is nothing in
the contract to indicate that her aforementioned agreement, promise and undertaking is
supported by a consideration "distinct from the price" stipulated for the sale of the land.
The lower court relied upon Article 1354 of the Civil Code when it presumed the
existence of said consideration, but the said Article only applies to contracts in general.
However, it is not Article 1354 but the Article 1479 of the same Code which is
controlling in the case at bar because the latters 2nd paragraph refers to "sales" in
particular, and, more specifically, to "an accepted unilateral promise to buy or to sell."
Since there may be no valid contract without a cause or consideration, the promisor is not
bound by his promise and may, accordingly, withdraw it. Pending notice of its
withdrawal, his accepted promise partakes, however, of the nature of an offer to sell
which, if accepted, results in a perfected contract of sale. Upon mature deliberation, the
Court reiterates the doctrine laid down in the Atkins case and deemed abandoned or
modified the view adhered to in the Southwestern Company case.
Angyu Asuncion vs CA, December 2, 1994 - Digest
Facts:
Petitioners Ang Yu Asuncion et. al. are lessees of residential and commercial spaces
owned by the Unjiengs. They have been leasing the property and possessing it since 1935
and have been paying rentals.
In 1986, the Unjiengs informed Petitioners Ang Yu Asuncion that the property was being
sold and that Petitioners were being given priority to acquire them (Right of First
Refusal). They agreed on a price of P5M but they had not yet agreed on the terms and
conditions. Petitioners wrote to the Unjiengs twice, asking them to specify the terms and
conditions for the sale but received no reply. Later, the petitioners found out that the
property was already about to be sold, thus they instituted this case for Specific
Performance [of the right of first refusal].

The Trial Court dismissed the case. The trial court also held that the Unjiengs offer to
sell was never accepted by the Petitioners for the reason that they 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.
The Court of Appeals affirmed the decision of the Trial Court.
In the meantime, in 1990, the property was sold to De Buen Realty, Private Respondent
in this case. The title to the property was transferred into the name of De Buen and
demanded that the Petitioners vacate the premises.
Because of this, Petitioners filed a motion for execution of the CA judgement. At first,
CA directed the Sheriff to execute an order directing the Unjiengs to issue a Deed of Sale
in the Petitioners favour and nullified the sale to De Buen Realty. But then, the CA
reversed itself when the Private Respondents Appealed.
Issues:
1.

Whether or not the Contract of Sale is perfected by the grant of a Right of First

Refusal.
2.

Whether or not a Right of First Refusal may be enforced in an action for Specific

Performance.
Held:
1.

No. A Right of First Refusal is not a Perfected Contract of Sale under Art. 1458 or

an option under Par. 2 Art 1479 or an offer under Art. 1319. In a Right of First Refusal,
only the object of the contract is determinate. This means that no vinculum juris is
created between the seller-offeror and the buyer-offeree.
2.

No. Since a contractual relationship does not exist between the parties, a Right of

First Refusal may not be enforced through an action for specific performance. Its conduct

is governed by the law on human relations under Art. 19-21 of the Civil Code and not by
contract law.

Therefore, the Supreme Court held that the CA could not have decreed at the time the
execution of any deed of sale between the Unjiengs and Petitioners.
Other Rules, Comments and Discussion:
This case is notable because it lays down the rules on options contracts and right of first
refusal as well as promises to buy and sell. First, the Supreme Court discussed the stages
of the formation of a sales contract, these are:
1.

Negotiation covers the period from the time the prospective contracting parties

indicate interest in the contract to the time the contract is concluded (perfected).
2.

Perfection takes place upon the concurrence of the essential elements thereof. In

a sales contract this is governed by Art. 1458

3.

Consummation begins when the parties perform their respective undertakings

under the contract culminating in the extinguishment thereof

Until the contract is perfected (No. 2), it cannot, as an independent source of obligation,
serve as a binding juridical relation. A sales 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 (Art 1458).
Under Art. 1458, there is no perfection of a sale under a Contract to Sell. A Contract to
Sell is characterized as a conditional sale and the breach of the suspensive condition will
prevent the obligation to transfer title from acquiring obligatory force.
Promises to Buy and Sell
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. The Right of First Refusal falls under this classification.

Accepted unilateral promise If it specifies the thing to be sold and the price to be
paid and 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. (Par. 2 Art. 1458) Note however, that the option is a contract separate and
distinct from the contract of sale. Once the option is exercised before it is withdrawn, a
bilateral promise to sell and to buy ensues and both parties are then reciprocally bound to
comply with their respective undertakings.
Offers with a Period
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 Offeror

may withdraw offer at any time before its acceptance (or knowledge of its acceptance).
However, the right to withdraw must not be exercised whimsically or arbitrarily
otherwise it can give rise to damages under Art. 19 of the New Civil Code
2.

If period is founded on a separate consideration This is a perfected contract of

option. Withdrawal of the offer within the period of the option is deemed a breach of the
contract of option (not the sale). If, in fact, the optioner-offeror withdraws the offer
before its acceptance (exercise of the option) by the optionee-offeree, the latter may not
sue for specific performance on the proposed contract (object of the option) since it has
failed to reach its own stage of perfection. The optioner-offeror, however, renders himself
liable for damages for breach of the option.
3.

Earnest money This is not an offer with a period. Earnest money is

distinguished from the option contract if the consideration given will be considered as a
part of the purchase price of the object of the sale. Earnest money is evidence of a
perfected contract of sale. (Art. 1482)
Right of First Refusal
This is an innovative juridical relation because it is neither a perfected contract of sale
under Art. 1458 nor an option contract under par. 2 Art 1479. The object might be made
determinate, the exercise of the right, however, is dependent on the offerors eventual

intention to enter into a binding juridical relation with another but also on terms and
conditions such as price. There is no juridical tie or vinculum juris.
Breach of the right cannot justify correspondingly an issuance of a writ of execution
under a court judgement that recognizes its existence, such as in Ang Yu Asuncion. An
action for Specific Performance is not allowed under a Right of First Refusal because
doing so would negate the indispensable element of consensuality in the perfection of
contracts.
This right is not inconsequential because it gives right to an action for damages under Art.
19.
Other Acts that Wont Bind
Public advertisements or solicitations Construed as mere invitations to make offers
and/or proposals.
Related Cases
The cases of Equatorial v. Mayfair and Paraaque Kings v. Court of Appeals held that if a
sale happens in violation of a Right of First Refusal where the buyer is aware of the
existence of that right in favor of another (such as when it is written in a lease contract),
the sale may be rescinded and the seller may be forced to offer the property to the party
with the Right of First Refusal.

However, the case of Ang Yu Asuncion may still be good law for cases not involving a
third party buyer in bad faith.

Abalos vs Macatangay Jr. 30 Sept 2004 - Digest

FACTS:

Spouses Arturo and Esther Abalos are the registered owners of a parcel of land with
improvements. Arturo made a Receipt and Memorandum of Agreement in favor of
Macatangay, binding himself to sell to latter the subject property and not to offer the
same to any other party within 30 days from date. Full payment would also be effected as
soon as possession of the property shall have been turned over to Macatangay.
Macatangay gave an earnest money amounting to P5,000.00 to be deducted from the
purchase price of P1,300,000.00 in favor of the spouses.
Subsequently, Arturo and Esther had a marital squabble brewing at that time and
Macatangay, to protect his interest, made an annotation in the title of the property. He
then sent a letter informing them of his readiness to pay the full amount of the purchase
price. Esther, through her SPA, executed in favor of Macatangay, a Contract to sell the
property to the extent of her conjugal interest for the sum of P650,000 less the sum
already received by her and Arturo. She agreed to surrender the property to Macatangay
within 20 days along with the deed of absolute sale upon full payment, while he promised
to pay the balance of the purchase price for P1, 290,000.00 after being placed in
possession of the property. Macatangay informed them that he was ready to pay the
amount in full. The couple failed to deliver the property so he sued the spouses.

RTC dismissed the complaint, because the SPA could not have authorized Arturo to sell
the property to Macatangay as it was falsified. CA reversed the decision, ruling the SPA
in favor of Arturo, assuming it was void, cannot affect the transaction between Esther and
Macatangay. On the other hand, the CA considered the RMOA executed by Arturo valid
to effect the sale of his conjugal share in the property.

ISSUE:
Whether or not the sale of property is valid.

RULING:
No. Arturo and Esther appear to have been married before the effectivity of the Family
Code. There being no indication that they have adopted a different property regime, their
property relations would automatically be governed by the regime of conjugal partnership
of gains. The subject land which had been admittedly acquired during the marriage of the
spouses forms part of their conjugal partnership.
Under the Civil Code, the husband is the administrator of the conjugal partnership. This
right is clearly granted to him by law. More, the husband is the sole administrator. The
wife is not entitled as of right to joint administration.
The husband, even if he is statutorily designated as administrator of the conjugal
partnership, cannot validly alienate or encumber any real property of the conjugal
partnership without the wifes consent. Similarly, the wife cannot dispose of any property
belonging to the conjugal partnership without the conformity of the husband. The law is
explicit that the wife cannot bind the conjugal partnership without the husbands consent,
except in cases provided by law.
More significantly, it has been held that prior to the liquidation of the conjugal
partnership, the interest of each spouse in the conjugal assets is inchoate, a mere
expectancy, which constitutes neither a legal nor an equitable estate, and does not ripen
into title until it appears that there are assets in the community as a result of the
liquidation and settlement. The interest of each spouse is limited to the net remainder or
remanente liquido (haber ganancial) resulting from the liquidation of the affairs of the
partnership after its dissolution. Thus, the right of the husband or wife to one-half of the
conjugal assets does not vest until the dissolution and liquidation of the conjugal
partnership, or after dissolution of the marriage, when it is finally determined that, after
settlement of conjugal obligations, there are net assets left which can be divided between
the spouses or their respective heirs.

The Family Code has introduced some changes particularly on the aspect of the
administration of the conjugal partnership. The new law provides that the administration
of the conjugal partnership is now a joint undertaking of the husband and the wife. In the
event that one spouse is incapacitated or otherwise unable to participate in the
administration of the conjugal partnership, the other spouse may assume sole powers of
administration. However, the power of administration does not include the power to
dispose or encumber property belonging to the conjugal partnership. In all instances, the
present law specifically requires the written consent of the other spouse, or authority of
the court for the disposition or encumbrance of conjugal partnership property without
which, the disposition or encumbrance shall be void.
Inescapably, herein Arturos action for specific performance must fail. Even on the
supposition that the parties only disposed of their respective shares in the property, the
sale, assuming that it exists, is still void for as previously stated, the right of the husband
or the wife to one-half of the conjugal assets does not vest until the liquidation of the
conjugal partnership. Nemo dat qui non habet. No one can give what he has not.

Riviera Filipina Inc vs CA 380 SCRA 245 - Digest

Facts:
Respondent Reyes executed a ten year renewable Contract of Lease with Riviera
involving a 1,018 square meter parcel of land which was a subject of a Real Estate
Mortgage executed by Reyes in favor of Prudential Bank. But the loan with Prudential
Bank remained unpaid upon maturity so the bank foreclosed the mortgage thereon and
emerged as the highest bidder at the public auction sale. Reyes decided to sell the
property offered it to Reviera. After seven months, Riviera offered to buy the property but
Reyes denied it and increased the price of the property. Reyes counsel informed Riviera
that he is selling the property for P6,000 per square meter and to confirm their
conversation, Riviera sent a letter stating his interest in buying the property for the fixed
and final price of P5,000 per square meters but Reyes did not accede to said price.

Then Reyes confided to Traballo and the latter expressed interest in buying the said
property for P5,300 per square meter but he did not have enough amount so he looked for
a partner. Despite of the impending expiration of the redemption period of the foreclosed
mortgaged property and the deal between Reyes and Traballo was not yet formally
concluded, Reyes decided to approach Riviera and requested Atty. Alinea to approach
Angeles and find out if the latter was still interested in buying the subject property and
ask him to raise his offer for the purchase of the said property a little higher but Riviera
said that his offer is P5,000 per square meter so Reyes did not agree.
Cypress and Trading Corporation, were able to come up with the amount sufficient to
cover the redemption money, with which Reyes paid to the Prudential Bank to redeem the
subject property and Reyes executed a Deed of Absolute Sale covering the subject
property. Cypress and Cornhill mortgaged the subject property to Urban Development
Bank. Riviera sought from Reyes, Cypress and Cornhill a resale of the subject property to
it claiming that its right of first refusal under the lease contract was violated but his
attempts were unsuccessful. Riviera filed the suit to compel Reyes, Cypress, Cornhill and
Urban Development Bank to transfer the disputed title to the land in favor of Riviera
upon its payment of the price paid by Cypress and Cornhill.
Issue:
Whether or not petitioner can still exercise his right of first refusal.
Held:
No. The held that in order to have full compliance with the contractual right granting
petitioner the first option to purchase, the sale of the properties for the price for which
they were finally sold to a third person should have likewise been first offered to the
former. Further, there should be identity of terms and conditions to be offered to the
buyer holding a right of first refusal if such right is not to be rendered illusory. Lastly, the
basis of the right of first refusal must be the current offer to sell of the seller or offer to
purchase of any prospective buyer. Thus, the prevailing doctrine is that a right of first

refusal means identity of terms and conditions to be offered to the lessee and all other
prospective buyers and a contract of sale entered into in violation of a right of first refusal
of another person, while valid, is rescissible.
Equatorial Realty Development vs Mayfair Theater Inc. 264 SCRA 438 - Digest

FACTS:
Petitioner Carmelo and Bauermann Inc. leased its parcel of land with 2-storey building to
respondent Mayfair Theater Inc.
They entered a contract which provides that if the LESSOR should desire to sell the
leased premises, the LESSEE shall be given 30-days exclusive option to purchase the
same.
Carmelo informed Mayfair that it will sell the property to Equatorial. Mayfair made
known its interest to buy the property but only to the extent of the leased premises.
Notwithstanding Mayfairs intention, Carmelo sold the property to Equatorial.
ISSUE:
WON the sale of the property to Equatorial is valid.
HELD:
The sale of the property should be rescinded because Mayfair has the right of first refusal.
Both Equatorial and Carmelo are in bad faith because they knew of the stipulation in the
contract regarding the right of first refusal.
The stipulation is a not an option contract but a right of first refusal and as such the
requirement of a separate consideration for the option, has no applicability in the instant
case. The consideration is built in the reciprocal obligation of the parties.
In reciprocal contract, the obligation or promise of each party is the consideration for that
of the other. (Promise to lease in return of the right to first refusal)

With regard to the impossibility of performance, only Carmelo can be blamed for not
including the entire property in the right of first refusal. Court held that Mayfair may not
have the option to buy the property. Not only the leased area but the entire property.

Bible Baptist Church vs CA, November 26 2004 - Digest

Facts:

June 7, 1985: Petitioner Bible Baptist Church entered into a contract of lease with
respondent spouses Villanueva. (Lease period 15 years)

Spouses Villanueva are the registered owners of a property located at Leon Guinto
St., Malate, Manila.

Pertinent stipulations of the lease contract are as follows:

3. LESSEE (Bible Baptist) shall pay the LESSOR (Spouses Villanueva) within 5 days of
each calendar month, beginning 12 months from the date of this agreement, a monthly
rental of P10,000, plus 10% escalation clause per year starting on June 7, 1988.
4. That upon signing of the LEASE AGREEMENT, the LESSEE shall pay the sum of
P84,000.00. Said sum is to be paid directly to the Rural Bank, Valenzuela, Bulacan for
the purpose of redemption of said property which is mortgaged by the LESSOR.
8. That the LESSEE (Bible Baptist) has the option to buy the leased premises during the
15 years of the lease. If the LESSEE decides to purchase the premises the terms will be:
A) A selling P1.8 million. B) A down payment agreed upon by both parties. C) The
balance of the selling price may be paid at the rate of P120,000.00 per year.

Petitioner Baptist Church seeks to buy the leased premises from the spouses
Villanueva, under the option given to them.

Baptist Church argues that the consideration supporting the option was their
agreement to pay off the Villanueva's P84,000 loan with the bank, thereby freeing the
subject property from the mortgage encumbrance.

Baptist Church states that "it is true that it did not pay a separate and specific sum
of money to cover the option alone. But the P84,000 it paid the Villanuevas in advance
should be deemed consideration for the one contract they entered into the lease with
option to buy."

Spouses Villanueva argued that the amount of P84,000 was paid for the rental
payments and there is no separate consideration to speak of which could support the
option.

RTC and CA ruled in favor of Villanueva.

Issues:
1) WON the option to buy given to the Baptist Church is founded upon a consideration.
NO
2) WON by the terms of the lease agreement, a price certain for the purchase of the land
had been fixed. NO
Held:
The P84,000 was not paid by Bible Baptist in order to release Spouses Villanuevas
property from the mortgage but rather for the rental dues
It must be pointed out that said amount was in fact apportioned into monthly rentals
spread over a period of one year, at P7,000 per month. Thus, for the entire period of June
1985 to May 1986, petitioner Baptist Church's monthly rent had already been paid for,
such that it only again commenced paying the rentals in June 1986. This is shown by the
testimony of petitioner Pastor Belmonte where he states that the P84,000 was advance
rental equivalent to monthly rent of P7,000 for one year, such that for the entire year from
1985 to 1986 the Baptist Church did not pay monthly rent

This Court agrees with spouses Villanueva that the amount of P84,000 has been fully
exhausted and utilized by the occupation of Bible Baptist of the premises and there is no
separate consideration to speak of which could support the option.
A valid option contract has a separate and distinct consideration that supports it
Art. 1479. A promise to buy and sell a determinate thing for a price certain is reciprocally
demandable.
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.
The second paragraph of Article 1479 provides for the definition and consequent rights
and obligations under an option contract. For an option contract to be valid and
enforceable against the promissor, there must be a separate and distinct consideration that
supports it.
An option contract needs to be supported by a separate consideration
The consideration need not be monetary but could consist of other things or undertakings.
However, if the consideration is not monetary, these must be things or undertakings of
value, in view of the onerous nature of the contract of option. Furthermore, when a
consideration for an option contract is not monetary, said consideration must be clearly
specified as such in the option contract or clause.
In this case, the option was not founded upon a separate and distinct consideration and
that, hence, spouses Villanuevas cannot be compelled to sell their property to petitioner
Baptist Church.
The option to buy the leased premises was not binding upon the Villanuevas for noncompliance with Article 1479.
It found that said option was not supported by a consideration as "no money was ever
really exchanged for and in consideration of the option."

In addition, the CA determined that in the instant case, "the price for the object is not yet
certain." Having found that the option to buy granted to the petitioner Baptist Church was
not founded upon a separate consideration, and hence, not enforceable against
respondents, this Court finds no need to discuss whether a price certain had been fixed as
the purchase price.
RULING: Having found that the option to buy granted to the petitioner Baptist Church
was not founded upon a separate consideration, and hence, not enforceable against
respondents, the Court finds no need to discuss whether a price certain had been fixed as
the purchase price.

San Miguel Properties vs Huan, 336 SCRA 2000 - Digest

Mendoza, J. delivered the decision of the Court.

Nature of the Case:

A petition for review for a decision of the Court of Appeals which

reversed the decision of the RTC dismissing the complaint brought by the Huangs against
San Miguel Properties for enforcement of a contract of sale.
Facts: San Miguel Properties offered two parcels of land for sale and the offer was made
to an agent of the respondents. An earnest-deposit of P1 million was offered by the
respondents and was accepted by the petitioners authorized officer subject to certain
terms.
Petitioner, through its executive officer, wrote the respondents lawyer that because ethe
parties failed to agree on the terms and conditions of the sale despite the extension
granted by the petitioner, the latter was returning the earnest-deposit.

The respondents demanded execution of a deed of sale covering the properties and
attempted to return the earnest-deposit but petitioner refused on the ground that the
option to purchase had already expired.
A complaint for specific performance was filed against the petitioner and the latter filed a
motion to dismiss the complaint because the alleged exclusive option of the
respondents lacked a consideration separate and distinct from the purchase price and was
thus unenforceable; the complaint did not allege a cause of action because there was no
meeting of the mind between the parties and therefore the contact of sale was not
perfected.
The trial court granted the petitioners motion and dismissed the action. The respondents
filed a motion for reconsideration but were denied by the trial court. The respondents
elevated the matter to the Court of Appeals and the latter reversed the decision of the trial
court and held that a valid contract of sale had been complied with.
Petitioner filed a motion for reconsideration but was denied.
Issue: WON there was a perfected contract of sale between the parties
Ruling:

The decision of the appellate court was reversed and the respondents

complaint was dismissed.

Ratio Decidendi:

It is not the giving of earnest money , but the proof of the

concurrence of all the essential elements of the contract of sale which establishes the
existence of a perfected sale.
The P1 million earnest-deposit could not have been given as earnest money because at
the time when petitioner accepted the terms of respondents offer, their contract had not
yet been perfected. This is evident from the following conditions attached by respondents
to their letter.
The first condition for an option period of 30 days sufficiently shows that a sale was
never perfected. As petitioner correctly points out, acceptance of this condition did not

give rise to a perfected sale but merely to an option or an accepted unilateral promise on
the part of respondents to buy the subject properties within 30 days from the date of
acceptance of the offer. Such option giving respondents the exclusive right to buy the
properties within the period agreed upon is separate and distinct from the contract of sale
which the parties may enter. All that respondents had was just the option to buy the
properties which privilege was not, however, exercised by them because there was a
failure to agree on the terms of payment. No contract of sale may thus be enforced by
respondents.
Even the option secured by respondents from petitioner was fatally defective. Under the
second paragraph of Art. 1479, an accepted unilateral promise to buy or sell a determinate
thing for a price certain is binding upon the promisor only if the promise is supported by
a distinct consideration. Consideration in an option contract may be anything of value,
unlike in sale where it must be the price certain in money or its equivalent. There is no
showing here of any consideration for the option. Lacking any proof of such
consideration, the option is unenforceable.
Equally compelling as proof of the absence of a perfected sale is the second condition
that, during the option period, the parties would negotiate the terms and conditions of the
purchase. The stages of a contract of sale are as follows: (1) negotiation, covering the
period from the time the prospective contracting parties indicate interest in the contract to
the time the contract is perfected; (2) perfection, which takes place upon the concurrence
of the essential elements of the sale which are the meeting of the minds of the parties as
to the object of the contract and upon the price; and (3) consummation, which begins
when the parties perform their respective undertakings under the contract of sale,
culminating in the extinguishment thereof.
In the present case, the parties never got past the negotiation stage. The alleged
indubitable evidence of a perfected sale cited by the appellate court was nothing more
than offers and counter-offers which did not amount to any final arrangement containing
the essential elements of a contract of sale. While the parties already agreed on the real
properties which were the objects of the sale and on the purchase price, the fact remains

that they failed to arrive at mutually acceptable terms of payment, despite the 45-day
extension given by petitioner.

Matabuena vs Cervantes, 38 SCRA 284 - Digest

FACTS:
In 1956, herein appellants brother Felix Matabuena donated a piece of lot to
his common-law spouse, herein appellee Petronila Cervantes. Felix and Petronila got
married only in 1962 or six years after the deed of donation was executed. Five months
later, or September 13, 1962, Felix died. Thereafter, appellant Cornelia Matabuena, by
reason of being the only sister and nearest collateral relative of the deceased, filed a claim
over the property, by virtue of a an affidavit of self-adjudication executed by her in 1962,
had the land declared in her name and paid the estate and inheritance taxes thereon. The
lower court of Sorsogon declared that the donation was valid inasmuch as it was made at
the time when Felix and Petronila were not yet spouses, rendering Article 133 of the Civil
Code inapplicable.
ISSUE: Whether or not the ban on donation between spouses during a marriage applies
to a common-law relationship.
HELD:
While Article 133 of the Civil Code considers as void a donation between the
spouses during marriage, policy consideration of the most exigent character as well as the
dictates of morality requires that the same prohibition should apply to a common-law
relationship.
As stated in Buenaventura vs. Bautista (50 OG 3679, 1954), if the policy of the
law is to prohibit donations in favor of the other consort and his descendants because of
fear of undue and improper pressure and influence upon the donor, then there is every

reason to apply the same prohibitive policy to persons living together as husband and
wife without the benefit of nuptials.
The lack of validity of the donation by the deceased to appellee does not
necessarily result in appellant having exclusive right to the disputed property. As a
widow, Cervantes is entitled to one-half of the inheritance, and the surviving sister to the
other half.
Article 1001, Civil Code: Should brothers and sisters or their children survive
with the widow or widower, the latter shall be entitled to one-half of the inheritance and
the brothers and sisters or their children to the other half.

Rubias vs Batiller, 51 SCRA 120 (1973) - Digest

Olaguer vs Purgganan GR 158907, February 12 2007 - Digest