Republic v PLDT

Facts:
PLDT and RCA Communications Inc (which is not a party to this case but has contractual relations with e
parties) entered into an agreement where telephone messages, coming from the US and received by
RCA's domestic station could automatically be transferred to the lines of PLDT and vice versa.

The Bureau of Telecommunications set up its own Government Telephone System (GTS) by renting the
trunk lines of PLDT to enable government offices to call private parties. One of the many rules prohibits
the use of the service for his private use.

Republic of the Philippines entered into an agreement with RCA for a joint overseas telephone service
where the Bureau would convey radio-telephone overseas calls received by the RCA's station to and
from local residents.

PLDT complained that the Bureau was violating the conditions for using the trunk lines not only for the
use of government offices but even to serve private persons or the general public. PLDT gave a notice
that if violations were not stopped, PLDT would sever the connections -which PLDT did.

Republic sued PLDT commanding PLDT to execute a contract, through the Bureau, for the use of the
facilities of defendant's telephone system throughout the Philippines under such terms and conditions as
the court finds it reasonable.

Issue:
Whether or not Republic can command PLDT to execute the contract.

Held:
No. The Bureau was created in pursuance of a state policy reorganizing the government offices to meet
the exigencies attendant upon the establishment of a free Gov't of the Phil.

When the Bureau subscribed to the trunk lines, defendant knew or should have known that their use by
the subscriber was more or less public and all embracing in nature.

The acceptance by the defendant of the payment of rentals, despite its knowledge that the plaintiff had
extended the use of the trunk lines to commercial purposes, implies assent by the defendant to such
extended use. Since this relationship has been maintained for a long time and the public has patronized
both telephone systems, and their interconnection is to the public convenience, it is too late for the
defendant to claim misuse of its facilities, and it is not now at liberty to unilaterally sever the physical
connection of the trunk lines.

To uphold PLDT's contention is to subordinate the needs of the general public.

Cui vs Arellano University

TITLE: Emetrio Cui v Arellano University

CITATION: GR NO. L15127, May 30, 1961 | 112 Phil 135

FACTS:

Emetrio Cui took his preparatory law course at Arellano University. He then enrolled in its College of Law
from first year (SY1948-1949) until first semester of his 4 th year. During these years, he was awarded
scholarship grants of the said university amounting to a total of P1,033.87. He then transferred and took
his last semester as a law student at Abad Santos University. To secure permission to take the bar, he
needed his transcript of records from Arellano University. The defendant refused to issue the TOR until
he had paid back the P1,033.87 scholarship grant which Emetrio refunded as he could not take the bar
without Arellano’s issuance of his TOR.

On August 16, 1949, the Director of Private Schools issued Memorandum No. 38 addressing all heads of
private schools, colleges and universities. Part of the memorandum states that “the amount in tuition
and other fees corresponding to these scholarships should not be subsequently charged to the recipient
students when they decide to quit school or to transfer to another institution. Scholarships should not
be offered merely to attract and keep students in a school”.

ISSUE: Whether or not Emetrio Cui can refund the P1,033.97 payment for the scholarship grant provided
by Arellano University.

HELD:

The memorandum of the Director of Private Schools is not a law where the provision set therein was
advisory and not mandatory in nature. Moreover, the stipulation in question, asking previous students
to pay back the scholarship grant if they transfer before graduation, is contrary to public policy, sound
policy and good morals or tends clearly to undermine the security of individual rights and hence, null
and void.

The court sentenced the defendant to pay Cui the sum of P1,033.87 with interest thereon at the legal
rate from Sept.1, 1954, date of the institution of this case as well as the costs and dismissing defendant’s
counterclaim.
Leal v. IAC (Case Digest) G.R. No. L-65425

Leal v. IAC
G.R. No. L-65425
November 5, 1987

IRENEO LEAL, JOSE LEAL, CATALINA LEAL, BERNABELA LEAL, VICENTE LEAL EUIOGIA LEAL PATERNO
RAMOS, MACARIO DEL ROSARIO, MARGARITA ALBERTO, VICTORIA TORRES, JUSTINA MANUEL, JULIA
MANUEL, MELANIA SANTOS, CLEMENTE SAMARIO, MARIKINA VALLEY, INC., MIGUELA MENDOZA, and
REGISTER OF DEEDS OF RIZAL, petitioners,
vs.
TH E HONORABLE INTERMEDIATE APPELLATE COURT (4th Civil Cases Division), and VICENTE SANTIAGO
(Substituted by SALUD M. SANTIAGO), respondents

Facts:
On March 21, 1941, a document entitled “Compraventa”, written entirely in Spanish and involving three
parcels of land, was executed by the private respondents’ predecessors-in-interest, Vicente Santiago and
his brother Luis Santiago, in favor of Cirilo Leal, the deceased father of some of the petitioners. It was
stated in the document that the lands shall not be sold to any other person except only to the seller
Vicente Santiago or to his heirs or successors. However, between 1960 and 1965, the Leals had already
mortgaged or leased the lands to their co-petitioners. Sometime before the agricultural year 1966-1967,
Vicente Santiago approached the petitioners and offered to repurchase the properties. The petitioners
refused.

Issue:
Is the contract stating that the lands should not be sold to any other party except the seller thereof
valid?

Ruling:
No. A prohibition to alienate would be a subversion of public policy, which does not favor unwarranted
restrictions on the right to ownership. The contract perpetually prohibits the sale of the lands to other
parties and is a restriction to ownership, which is contrary to public policy. Even according to Article 1508
of the Civil Code of Spain (Article 1606 of the Civil Code of the Philippines), the right to repurchase, in
the absence of an expressed agreement as to time, shall last four years from the date of the contract.
Even if the contract validly vested a right to Santiago, his attempt to repurchase the properties was made
only a quarter of a century later, which obviously renders the right expired.

Baluyot vs CA
Facts:

On March 13, 1992 petitioners as resident of Barangay Cruz represented by petitioner Timoteo Baluyot
et.al filed for specific performance and damages against UP respondent contending that they have been
in open, peaceful, adverse and continuous possession in the concept of an owner of that parcel of land
in Quezon City

In 1979, UP approved the donation directly to the said residents for about 9.2 hectares and that UP
backed out to proceed with the donation and the execution of the legal instrument was not formalized.

Afterwards, the negotiation of donation was resumed thru the defendant Quezon City government
under the terms contrary to the right of the bonafide residents of the said barrio.

Petitioners apply for writ of injunction that was issued to restrain defendant UP from ejecting plaintiffs
and demolishing their improvements on the Riceland. Also, petitioners seek enforcement of the Deed of
donation made by UP defendant to the Quezon City government.

Under the said Deed of Donation the donee shall after lapse of 3 years transfer to the qualified residents
by way of donation the individual lots occupied by them.

However, UP President had failed to deliver the CTC to enable Quezon City government to register the
Deed of Donation.

The defendant UP had continuously, unlawfully refused to comply the obligation to deliver the title
despite several requests and conferences.

Revocation and reversion of a Deed of Donation without Judicial declaration is illegal and prejudicial to
the rights of the bonafide residents in Barangay Cruz na Ligas Quezon City.

By reason of deception, the residents reiterate the claim of ownership of 42 hectares which are included
in the tax declaration under the name of UP.
The plaintiff prayed for the declaration of the Deed of Donation as valid and subsisting.

The trial court rendered its decision that petitioners did not have a cause of action for specific
performance on the ground that the Deed of donation had already been revoked denying the injunction.

However CA ruled in favor of UP

Issue: Whether petitioners has the right to seek enforcement of the Deed of Donation.

Ruling:

The Supreme Court ruled in the affirmative, because there is a stipulation pour autrui

Under the Civil Code Art 1311

(READ ART. 1311 ON REQUISITES OF STIPULATION POUR AUTRUI)

That if a contract should contain, some stipulation in favour of a 3 rd person. He may demand its
fulfilment provided that he communicated his acceptance to the obligor before its revocation.

The contracting parties must have clearly and deliberately conferred a favor upon a 3 rd person.

Allegations are sufficient to bring the petitioners action within 2 nd paragraph of Art. 1311 on stipulation
pour autrui
1. That the Deed of donation contains some stipulation that Quezon city government is required to
transfer donation to the barrio residents.

2. Its stipulation is part of conditions and obligations imposed by UP as donor upon Quezon City
government donee.

3. The intent of the parties to the deed of donation was to confer a favour upon petitioners by
transferring lots occupied by them.

4. Conference were held between the parties to convince UP to surrender CTC to the city government
which donation had been accepted by petitioners by demanding fulfilment and that private respondents
were aware of such acceptance.

5. All allegations can be fairly inferred that neither of private respondents acted in representation of
the other, each private respondents had its own obligation in view of conferring a favor upon petitioners.

ILLIAM UY and RODEL ROXAS, petitioners,

vs.
COURT OF APPEALS, HON. ROBERT BALAO and NATIONAL HOUSING AUTHORITY, respondents.
G.R. No. 120465. September 9, 1999

Facts:

William Uy and Rodel Roxas are agents authorized to sell 8 parcels of land by the owners thereof. By
virtue of such authority, they offered to sell the lands, located in Benguet to National Housing Authority
(NHA) to be utilized and developed as a housing project. On 14 February 1989, the NHA Board passed
Resolution 1632 approving the acquisition of said lands, with an area of 31.8231 hectares, at the cost of
P23.867 million, pursuant to which the parties executed a series of Deeds of Absolute Sale covering the
subject lands. Of the 8 parcels of land, however, only 5 were paid for by the NHA because of the report it
received from the Land Geosciences Bureau of the Department of Environment and Natural Resources
(DENR) that the remaining area is located at an active landslide area and therefore, not suitable for
development into a housing project. On 22 November 1991, the NHA issued Resolution 2352 cancelling
the sale over the 3 parcels of land. The NHA, through Resolution 2394, subsequently offered the amount
of P1.225 million to the landowners as daños perjuicios.

On 9 March 1992, petitioners Uy and Roxas filed before the RTC Quezon City a Complaint for Damages
against NHA and its General Manager Robert Balao. After trial, the RTC rendered a decision declaring the
cancellation of the contract to be justified. The trial court nevertheless awarded damages to plaintiffs in
the sum of P1.255 million, the same amount initially offered by NHA to petitioners as damages.
Upon appeal by petitioners, the Court of Appeals reversed the decision of the trial court and entered a
new one dismissing the complaint. It held that since there was “sufficient justifiable basis” in cancelling
the sale, “it saw no reason” for the award of damages. The Court of Appeals also noted that petitioners
were mere attorneys-in-fact and, therefore, not the real parties-in-interest in the action before the trial
court. Their motion for reconsideration having been denied, petitioners seek relief from the Supreme
Court.

ISSUES:
1. Whether or not there was legal basis for rescinding the sale.
2. Whether or not the respondent CA erred in dimissing the subject complaint, finding that the
petitioners failed to join as indispensable party plaintiff the selling lot-owners.

HELD:

1) Yes. The right of rescission or, more accurately, resolution, of a party to an obligation under Article
1191 is predicated on breach of faith by the other party that violates the reciprocity between them. The
power to rescind, therefore, is given to the injured party. Article 1191 states that “the power to rescind
obligations is implied in reciprocal ones, in case one of the obligors should not comply with what is
incumbent upon him. The injured party may choose between the fulfillment and the rescission of the
obligation, with the payment of damages in either case. He may also seek rescission, even after he has
chosen fulfillment, if the latter should become impossible.” In the present case, the NHA did not rescind
the contract. Indeed, it did not have the right to do so for the other parties to the contract, the vendors
did not commit any breach, much less a substantial breach, of their obligation. Their obligation was
merely to deliver the parcels of land to the NHA, an obligation that they fulfilled. The NHA did not suffer
any injury by the performance thereof the cancellation was not a rescission under Article 1191. Rather,
the cancellation was based on the negation of the cause arising from the realization that the lands,
which were the object of the sale, were not suitable for housing.

Cause is the essential reason which moves the contracting parties to enter into it. In other words, the
cause is the immediate, direct and proximate reason which justifies the creation of an obligation through
the will of the contracting parties. Cause, which is the essential reason for the contract, should be
distinguished from motive, which is the particular reason of a contracting party which does not affect the
other party. Ordinarily, a party’s motives for entering into the contract donor affect the contract.
However, when the motive predetermines the cause, the motive may be regarded as the cause.

In this case, it is clear, and petitioners do not dispute, that NHA would not have entered into the contract
were the lands not suitable for housing. In other words, the quality of the land was an implied condition
for the NHA to enter into the contract. On the part of the NHA, therefore, the motive was the cause for
its being a party to the sale. SC held that the NHA was justified in canceling the contract. The realization
of the mistake as regards the quality of the land resulted in the negation of the motive/cause thus
rendering the contract inexistent. The Supreme Court denied the petition.

2) No. Section 2, Rule 3 of the Rules of Court requires that every action must be prosecuted and
defended in the name of the real party-in-interest. The real party-in-interest is the party who stands to
be benefited or injured by the judgment or the party entitled to the avails of the suit. “Interest,” within
the meaning of the rule, means material interest, an interest in the issue and to be affected by the
decree, as distinguished from mere interest in the question involved, or a mere incidental interest. Cases
construing the real party-in-interest provision can be more easily understood if it is borne in mind that
the true meaning of real party-in-interest may be summarized as follows: An action shall be prosecuted
in the name of the party who, by the substantive law, has the right sought to be enforced. Where the
action is brought by an attorney-in-fact of a landowner in his name, (as in our present action) and not in
the name of his principal, the action was properly dismissed because the rule is that every action must
be prosecuted in the name of the real parties-in-interest (Section 2, Rule 3, Rules of Court).

Petitioners claim that they lodged the complaint not in behalf of their principals but in their own name
as agents directly damaged by the termination of the contract. Petitioners in this case purportedly
brought the action for damages in their own name and in their own behalf. An action shall be prosecuted
in the name of the party who, by the substantive law, has the right sought to be enforced. Petitioners are
not parties to the contract of sale between their principals and NHA. They are mere agents of the
owners of the land subject of the sale. As agents, they only render some service or do something in
representation or on behalf of their principals. The rendering of such service did not make them parties
to the contracts of sale executed in behalf of the latter. Since a contract may be violated only by the
parties thereto as against each other, the real parties-in-interest, either as plaintiff or defendant, in
inaction upon that contract must, generally, either be parties to said contract. Petitioners have not
shown that they are assignees of their principals to the subject contracts. While they alleged that they
made advances and that they suffered loss of commissions, they have not established any agreement
granting them “the right to receive payment and out of the proceeds to reimburse themselves for
advances and commissions before turning the balance over to the principals.

Ang Yu Asuncion et al. vs. Court of Appeals and Buen Realty Corp.

(G.R. No. 109125, December 2, 1994)

Ponente: Vitug

Topic: Sales; Contract of sale v. Contract to sell; remedies for violation of right of first refusal

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 Unjieng’s 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 Petitioner’s 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 novinculum 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 offeror’s 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 Won’t Bind

Public advertisements or solicitations – Construed as mere invitations to make offers and/or proposals.

Related Cases

The cases of Equatorial v. Mayfair and Parañaque 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.

Bible Baptist Vs. CA

Socialize Us

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 Villanueva’s 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 non-compliance 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.

Heirs of Ureta v. Heirs of Ureta

G.R. No. 165748, 14 September 2011

FACTS:

Alfonso Ureta was financially well-off and owned several properties. He begot fourteen children,
including herein petitioners and Policronio, father of respondents. For taxation purposes, Alfonso sold,
without monetary consideration, several parcels of land to four of his children, including Policronio.
Alfonso continued to own, possess and enjoy the lands and their produce. Upon his death, Liberato
acted as the administrator. The Fernandez Family rented the portion transferred to Policronio. But even
after the fact, the tenants never turned over the produce of the lands to Policronio or any of this heirs,
but to Alfonso and, later, to the administrators of his estate. When Policronio died, except for a portion
of one of the parcels of land, neither Policronio nor his heirs ever took possession of the subject lands.
Alfonso’s heirs executed a Deed of Extra-Judicial Partition,8 which included all the lands that were
covered by the four (4) deeds of sale that were previously executed by Alfonso for taxation purposes.
Conrado, Policronio’s eldest son, representing the Heirs of Policronio, signed the Deed of Extra-Judicial
Partition in behalf of his co-heirs. Heirs of Policronio allegedly learned about the Deed of Extra-Judicial
Partition involving Alfonso’s estate when it was published in the July 19, 1995 issue of the Aklan
Reporter. The Heirs of Policronio averred that the extra-judicial partition is void because Conrado signed
the same without written authority form his siblings.
ISSUE:

WON Conrado Ureta’s lack of capacity to give his co-heirs’ consent to the Extra-Judicial Partition
rendered the same voidable.

RULING:

No. Article 1390 is not applicable in this case. Article 1390 (1) contemplates the incapacity of a party to
give consent to a contract. What is involved in the case at bench though is not Conrado’s incapacity to
give consent to the contract, but rather his lack of authority to do so. Instead, Articles 1403 (1), 1404,
and 1317 of the Civil Code find application to the circumstances prevailing in this case. The Deed of
Extrajudicial Partition and Sale is not a voidable or an annullable contract under Article 1390 of the New
Civil Code. Article 1390 renders a contract voidable if one of the parties is incapable of giving consent to
the contract or if the contracting party’s consent is vitiated by mistake, violence, intimidation, undue
influence or fraud. Therefore, Conrado’s failure to obtain authority from his co-heirs to sign the Deed of
Extra-Judicial Partition in their behalf did not result in his incapacity to give consent so as to render the
contract voidable, but rather, it rendered the contract valid but unenforceable against Conrado’s co-heirs
for having been entered into without their authority.

JG Summit Holdings Inc. vs. CA

on 7:00 AM in Case Digests, Commercial Law

G.R. No. 124293, November 20, 2000

FACTS:

The National Investment and Development Corporation (NIDC), a government corporation, entered into
a Joint Venture Agreement (JVA) with Kawasaki Heavy Industries, Ltd. for the construction, operation and
management of the Subic National Shipyard, Inc., later became the Philippine Shipyard and Engineering
Corporation (PHILSECO). Under the JVA, NIDC and Kawasaki would maintain a shareholding proportion of
60%-40% and that the parties have the right of first refusal in case of a sale.

Through a series of transfers, NIDC’s rights, title and interest in PHILSECO eventually went to the National
Government. In the interest of national economy, it was decided that PHILSECO should be privatized by
selling 87.67% of its total outstanding capital stock to private entities. After negotiations, it was agreed
that Kawasaki’s right of first refusal under the JVA be “exchanged” for the right to top by five percent the
highest bid for said shares. Kawasaki that Philyards Holdings, Inc. (PHI), in which it was a stockholder,
would exercise this right in its stead.

During bidding, Kawasaki/PHI Consortium is the losing bidder. Even so, because of the right to top by 5%
percent the highest bid, it was able to top JG Summit’s bid. JG Summit protested, contending that
PHILSECO, as a shipyard is a public utility and, hence, must observe the 60%-40% Filipino-foreign
capitalization. By buying 87.67% of PHILSECO’s capital stock at bidding, Kawasaki/PHI in effect now owns
more than 40% of the stock.

ISSUE:

o Whether or not PHILSECO is a public utility

o Whether or not Kawasaki/PHI can purchase beyond 40% of PHILSECO’s stocks

HELD:

In arguing that PHILSECO, as a shipyard, was a public utility, JG Summit relied on sec. 13, CA No. 146. On
the other hand, Kawasaki/PHI argued that PD No. 666 explicitly stated that a “shipyard” was not a
“public utility.” But the SC stated that sec. 1 of PD No. 666 was expressly repealed by sec. 20, BP Blg. 391
and when BP Blg. 391 was subsequently repealed by EO 226, the latter law did not revive sec. 1 of PD
No. 666. Therefore, the law that states that a shipyard is a public utility still stands.

A shipyard such as PHILSECO being a public utility as provided by law is therefore required to comply
with the 60%-40% capitalization under the Constitution. Likewise, the JVA between NIDC and Kawasaki
manifests an intention of the parties to abide by this constitutional mandate. Thus, under the JVA,
should the NIDC opt to sell its shares of stock to a third party, Kawasaki could only exercise its right of
first refusal to the extent that its total shares of stock would not exceed 40% of the entire shares of
stock. The NIDC, on the other hand, may purchase even beyond 60% of the total shares. As a
government corporation and necessarily a 100% Filipino-owned corporation, there is nothing to prevent
its purchase of stocks even beyond 60% of the capitalization as the Constitution clearly limits only
foreign capitalization.

Kawasaki was bound by its contractual obligation under the JVA that limits its right of first refusal to 40%
of the total capitalization of PHILSECO. Thus, Kawasaki cannot purchase beyond 40% of the capitalization
of the joint venture on account of both constitutional and contractual proscriptions.

Boston Bank of the Philippines (formerly Bank of Commerce) v. Manalo

482 SCRA 108

FACTS:

The Xavierville Estate, Inc. (XEI) was the owner of parcels of land in Quezon City, known as the Xavierville
Estate Subdivision, with an area of 42 hectares. XEI caused the subdivision of the property into
residential lots, which was then offered for sale to individual lot buyers.
XEI sold to the Overseas Bank of Manila (OBM) some residential lots in Xavierville subdivision. XEI
became agent of the bank, and continued selling the residential lots.

Sometime in 1972, then XEI president Emerito Ramos, Jr. contracted the services of Engr. Carlos Manalo,
Jr. who was in business of drilling deep water wells and installing pumps under the business name
Hurricane Commercial, Inc. For ₱34,887.66, Manalo, Jr. installed a water pump at Ramos’ residence at
the corner of Aurora Boulevard and Katipunan Avenue, Quezon City. Manalo, Jr. then proposed to XEI,
through Ramos, to purchase a lot in the Xavierville subdivision, and offered as part of the downpayment
the ₱34,887.66 Ramos owed him. XEI, through Ramos, agreed.

In a letter-agreement dated August 22, 1972 to Perla Manalo (Carlos’ wife), Ramos confirmed the
reservation of the lots. In the letter he also pegged the price of the lots at P348,060 with a 20% down
payment of the purchase price amounting to P69,612.00 (less the P34,887.66 owing from Ramos),
payable as soon as XEI resumes its selling operations; the corresponding Contract of Conditional Sale
would then be signed on or before the same date. Perla Manalo conformed to the letter agreement.

The spouses Manalo took possession of the property and constructed a house thereon. They were
notified of XEI’s resumption of selling operations but they did not pay the balance of the downpayment
because XEI failed to give them a contract of conditional sale.

XEI turned over its selling operations to OBM. Then, Commercial Bank of Manila (later renamed as
Boston Bank) acquired the Xavierville Estate from OBM.

CBM/Boston Bank requested Perla Manalo to stop any on-going construction on the property since she
had no permission for such construction. Perla informed them that her husband had a contract with
OBM, through XEI, to purchase the property. She promised to send CBM the documents but she failed to
do so.

The spouses filed a complaint for damages and specific performance against bank to obtain contract. The
spouses alleged that upon their partial payment of the downpayment, they were entitled to the
execution and delivery of a Deed of Absolute Sale covering the subject lots.

RTC ruled in favor of spouses and ordered delivery of Deed of Sale of lots, stating that the letter
agreement was a valid Contract To Sell (CTS). CA affirmed the ruling of RTC with modifications.

ISSUE:

Whether or not letter agreement was a valid contract to sell (CTS)?

HELD:

No. Contract is unenforceable because manner of payment of 80% balance has yet to be agreed upon.

For a perfected contract of sale or contract to sell to exist in law, there must be an agreement of the
parties, not only on the price of the property sold, but also on the manner the price is to be paid by the
vendee.

Price is an essential element in the formation of a binding and enforceable contract of sale. In a contract
to sell property by installments, it is not enough that the parties agree on the price as well as the amount
of downpayment. The parties must, likewise, agree on the manner of payment of the balance of the
purchase price and on the other terms and conditions relative to the sale. Even if the buyer makes a
downpayment or portion thereof, such payment cannot be considered as sufficient proof of the
perfection of any purchase and sale between the parties.

In this case, there is no showing that there was a schedule of payment of the balance of the purchase
price. In the letter agreements, parties confined themselves to agreeing on the price of the property, the
20% downpayment, and credited respondents for the amount owned by Ramos as part of the 20%
downpayment. However, the determination of the terms of payment of the 80% BALANCE had yet to be
agreed upon on or before December 31, 1972, or even afterwards, when the parties sign the
corresponding contract of conditional sale.

Jurisprudence has ruled that if a material element of a contemplated contract is left for future
negotiations, the same is too indefinite to be enforceable. And when an essential element of a contract is
reserved for future agreement of the parties, no legal obligation arises until such future agreement is
concluded.

Respondents failed and refused to pay the balance of the downpayment and of the purchase price of the
property amounting to Php278,448 despite notice to them of the resumption by XEI of its selling
operations. On the other hand, XEI and OBM failed and refused to transmit a contract of conditional sale
to the respondents. The respondent-spouses could have at least consigned the balance of the
downpayment after notice of the resumption of the selling operations of XEI and filed an action to
compel XEI or OBM to transmit to them the said contract; however, they failed to do so.

As a consequence, respondents and XEI (or OBM for that matter) failed to forge a perfected contract to
sell the two lots; hence, respondents have no cause of action for specific performance against petitioner.
Republic Act No. 6552 applies only to a perfected contract to sell and not to a contract with no binding
and enforceable effect.

Petition is GRANTED. RTC and CA decisions reversed and set aside.