PEOPLE'S HOMESITE & HOUSING CORPORATION vs. CA 133 SCRA 777, G.R. No.

L-61623 December 26,1984 FACTS: The PHHC board of directors passed Resolution No. 513 wherein it stated that subject to the approval of the Quezon City Council of the above-mentioned Consolidation Subdivision Plan, Lot 4 containing 4,182.2 square meters be awarded to Spouses Rizalino and Adelaida Mendoza, at a price of twenty-one pesos (P21.00) per square meter and that this award shall be subject to the approval of the OEC (PHHC) Valuation Committee and higher authorities. However, the city council disapproved the proposed consolidation subdivision plan of which the spouses were advised. Another subdivision plan was prepared and submitted to the city council for approval. The revised plan, which included Lot 4, with a reduced area of 2,608.7, was approved by the city council. The PHHC board of directors, however, passed a resolution recalling all awards of lots to persons who failed to pay the deposit or down payment for the lots awarded to them. The Mendozas never paid the price of the lot nor made the 20% initial deposit. Thereafter, PHHC board of directors passed ResolutionNo. 218, withdrawing the tentative award of Lot 4 to the Mendoza spouses and re-awarding said lot jointly and in equal shares to Miguela Sto. Domingo, Enrique Esteban, Virgilio Pinzon, Leonardo Redublo and Jose Fernandez. The five awardees made the initial deposit. The corresponding deeds of sale were executed in their favor. The subdivision of Lot 4 into five lots was approved by the city council and the Bureau of Lands. The Mendoza spouses asked for reconsideration of the withdrawal of the previous award to them of Lot 4 and for the cancellation of the re-award of said lot to Sto. Domingo and four others. Before the request could be acted upon, the spouses filed the instant action for specific performance and damages. ISSUE: Whether or not there was a perfected sale of the Lot 4, with the reduced area, to the Mendozas which they can enforce against the PHHC by an action for specific performance. HELD: No, there was no pertected sale of Lot 4. It was conditionally or contingently awarded to the Mendozas subject to the approval by the city council of the proposed consolidation subdivision plan and the approval of the award by the valuation committee and higher authorities. The city council did not approve the subdivision plan. The Mendozas were advised in 1961 of the disapproval. In 1964, when the plan with the area of Lot 4 reduced to 2,608.7 square meters was approved, the Mendozas should have manifested in writing their acceptance of the award for the purchase of Lot 4 just to show that they were still interested in its purchase although the area was reduced and to obviate ally doubt on the matter. They did not do so. The PHHC board of directors acted within its rights in withdrawing the tentative award. The contract of sale is perfect at the moment there is meeting of the 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 law governing the form of contracts (Art. 1475, Civil). Under the facts of this case, we cannot say there was a meeting of minds on the purchase of Lot 4 with an area of 2,608.7 square meters at P21 a square meter.

DALION VS. CA (G.R. NO. 78903 FEBRUARY 28, 1990) Dalion allegedly bought the parcel of land from Sabesaje. Sabesaje impugns the contract of sale since his signature was allegedly forged. The court ruled he was not able to substantiate his allegations of forgery by not presenting any witnesses on his affirmative defences. Dalion also said that the contract is of no effect since it is in a private instrument only. Ruling: 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). 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).

YUVIENCO V. DACUYCUY (May 27, 1981) FACTS: Petitioners own a property in Tacloban City which they intend to sell for 6.5M. They gave the respondents the right to purchase the property nut only until July 31, 1978. Respondents replied that they agree to buy the property and they will negotiate for details. Petitioner sent another telegram informing respondents that their proposal is accepted and a contract will be prepared. Lawyer of defendant, Mr.Gamboa, arrived bringing a contact with an altered mode of payment which says that the balance payment should be paid withing 30 days instead of the former 90 days. (Otiginal terms: 2M payment upon execution. 4.5M after 90 days) ISSUE: WON there was already a perfected contract of sale between the parties. HELD: There was no perfected contract of sale yet because both parties are still under negotiation and hence, no meeting of the minds. Mr.Gamboa even went to the respondents to negotiate for the sale. Even though there was an agreement on the terms of payment, there was no absolute acceptance because respondents still insisted on further details. With regard to the alleged violation of terms of payment, there was no written document to prove that the respondents agreed to pay not in cash but in installment. In sale of real property, payment of installment must be in requisite of a note under the statute of frauds.

EQUATORIAL REALTY DEVELOPMENT, INC. vs. MAYFAIR THEATER 332 SCRA 139Fac T h e S u p r e m e C o u r t p r o m u l g a t e d i t s d e c i s i o n i n E q u a t o r i a l ts: R e a l t y D e ve l op m e n t , In c. a n d C a r m e l o a n d B a u e r m a n n , In c. vs . M a yf a i r T h e a t e r , In c. , w h e r e b y t h e D e e d o f A b s o l u t e S a l e b e t w e e n p e t i t i o n e r s E q u a t o r i a l R e a l t y Develop ment, Inc. and Carmelo & Bauermann, Inc. is hereby deemed rescinded.Carmelo and Bauermann is ordered to return to Equatorial Realty Development thep u r c h a s e p r i c e . T h e l a t t e r i s d i r e c t e d t o e x e c u t e t h e d e e d s a n d d o c u m e n t s n e c e s s a r y t o r e t u r n o w n e r s h i p t o C a r m e l o & B a u e r m a n n o f t h e d i s p u t e d l o t s . Carmelo & Bauermann is ordered to allow Mayfair Theater, In c. to buy the lots forP 1 1 , 3 0 0 , 0 0 0 . 0 0 . R e s p o n d e n t t h e r e a f t e r f i l e d w i t h t h e R T C a m o t i o n f o r w r i t o f execution of the judgment which the latter granted in an order. Equatorial filed a m o t i o n f o r r e c o n s i d e r a t i o n o f t h e o r d e r , t h e r e c a l l a n d / o r q u a s h a l o f t h e w r i t o f execution and the notice to compl y, on the ground that the order of execution didn o t c o n f o r m t o t h e d i s p o s i t i v e p o r t i o n o f t h e S u p r e m e C o u r t ' s d e c i s i o n b u t w a s denied.Issue:Whether or not the orders of execution of the trial court inconsistent and atvariance with the dispositive portion of the SCs decision.Ruling:YesA writ of execution must conform to the judgment to be executed and adherestrictly to the ver y essential particulars. An order of execution, which varies thet e n o r o f t h e j u d g m e n t o r e x c e e d s t h e t e r m s t h e r e o f , i s a n u l l i t y . T h e w r i t o f execution "ma y not var y the terms of the judgment it seeks to enforce. Nor ma y itgo beyond the terms of the judgment sought to be executed. Where the execution isnot in harmony with the judgment which gives it life, and in fact exceeds it, has prot a n t o n o v a l i d i t y . T o m a i n t a i n o t h e r w i s e w o u l d b e t o i g n o r e t h e c o n s t i t u t i o n a l provision against depriving a person of his property without due process of law." Inissuing the questioned orders, the trial court exceeded its authority b y altering the essential portions of the Supreme Court decision. t h e 1 9 9 7 R u l e s o f C i v i l P r o c e d u r e f r o m O u r r e s o l u t i o n d e n y i n g h i s p e t i t i o n f o r review? RULING: No. A petition for relief from judgment is not an available remedy in theSupreme Court.I n D e l a C r u z v . A n d r e s , 10 W e r e i t e r a t e d O u r p r o n o u n c e m e n t i n M e s i n a v . Meer, 11 that a petition for relief from judgment is not an available remedy in theCourt of Appeals and the Supreme Court. The Court explained that under the 1997Revised Rules of Civil Procedure, the petition for relief must be filed within sixty (60)days after petitioner learns of the judgment, final order or other proceeding to beset aside and must be accompanied with affidavits showing the fraud, accident,mistake, or excusable negligence relied upon, and the facts constituting petitionersg o o d a n d s u b s t a n t i a l c a u s e o f a c t i o n o r d e f e n s e , a s t h e c a s e m a y b e . M o s t importantly, it should be filed with the same court which rendered the decision, viz. :S e c t i o n 1 . P e t i t i o n f o r r e l i e f f r o m j u d g m e n t , o r d e r , o r o t h e r proceedings. When a judgment or final order is entered, or anyother proceeding is thereafter taken against a party in any courtt h r o u g h f r a u d , a c c i d e n t , m i s t a k e , o r e x c u s a b l e n e g l i g e n c e , h e may file a petition in such court and in the same case praying thatt h e j u d g m e n t , o r d e r o r p r o c e e d i n g b e s e t a s i d e . ( U n d e r s c o r i n g supplied)W h i l e R u l e 3 8 u s e s t h e p h r a s e " a n y c o u r t , " i t r e f e r s o n l y t o Municipal/Metropolitan and Regional Trial CourtsProcedure in the CA and the Supreme Court are governed by separate provisions of the Rules of Court. It may, from time to time, be supplemented by additional rulespromulgated by the Supreme Court through resolutions or circulars. As it stands,n e i t h e r t h e R u l e s o f C o u r t n o r t h e R e v i s e d I n t e r n a l R u l e s o f t h e C A a l l o w s t h e remedy of petition for relief in the CA. T h e r e i s n o p r o v i s i o n i n t h e R u l e s o f C o u r t m a k i n g t h e p e t i t i o n f o r r e l i e f applicable in the CA or this Court. The procedure in the CA from Rules 44 to 55, witht h e e x c e p t i o n o f R u l e 4 5 w h i c h p e r t a i n s t o t h e S u p r e m e C o u r t , i d e n t i f i e s t h e remedies available before said Court such as annulment of judgments or final ordersor resolutions (Rule 47), motion for reconsideration (Rule 52), and new trial (Rule53). Nowhere is a petition for relief under Rule 38 mentioned. RULE 39 (Execution, Satisfaction and Effect of Judgments) Irish Silverio

Equatorial Realty vs. Mayfair Theater [G.R. No. 106063. November 21, 1996.] En Banc, Hermosisima Jr. (J): 13 concur, 1 took no part Facts: Carmelo & Bauermann Inc. (Carmelo) owned a parcel of land, together with two 2-storey buildings constructed thereon located at Claro M Recto Avenue, Manila (TCT 18529, Register of Deeds of Manila). On 1 June 1967, Carmelo entered into a contract of lease with Mayfair Theater for the latters lease of a portion of Carmelos property, i.e. a portion of the 2/F of the two-storey building with floor area of 1610 sq.ms. and the second floor and mezzanine of the two-storey building situated at CM Recto Avenue, Manila with a floor area of 150 sq.ms. for use by Mayfair as a motion picture theater and for a term of 20 years. Mayfair thereafter constructed on the leased property a movie house known as Maxim Theatre. On 31 March 1969, Mayfair entered into a second contract of lease with Carmelo for the lease of another portion of Carmelos property, i.e. a portion of the 2/F of the two-storey building with floor area of 1064 sq.ms. and two store spaces at the ground floor and mezzanine of the two-storey building situated at CM Recto Avenue, Manila with a floor area of 300 sq.ms. and bearing street numbers 1871 and 1875 for similar use as a movie theater and for a similar term of 20 years. Mayfair put up another movie house known as Miramar Theatre on this leased property. Both contracts of lease provide 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. 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$1,200,000, and Mr. Pascal asked Mr. Yang if the latter was willing to buy the property for P6 million to P7 million. Mr. Yang replied that he would let Mr. Pascal know of his decision. On 23 August 1974, Mayfair replied through a letter confirming the correspondence between Pascual and Yang and reiterating paragraph 8 of the two contracts of lease. Carmelo did no reply to this letter. On 18 September 1974, Mayfair sent another letter to
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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 30 July 1978, Carmelo sold its entire CM. 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 P1,300,000. In September 1978, Mayfair instituted the action for specific performance and annulment of the sale of the leased premises to Equatorial. In its Answer, Carmelo alleged as special and affirmative defense that it had informed Mayfair of its desire to sell the entire CM. 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 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 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 codefendant Carmelo for indemnification in respect of Mayfairs claims. After assessing the evidence, the court rendered decision dismissing the complaint with costs against Mayfair; ordering Mayfair to pay Carmelo & Bauermann P40,000.00 by way of attorneyss fees on its counterclaim; and ordering Mayfair to pay Equatorial Realty P35,000.00 per month as reasonable compensation for the use of areas not covered by the contracts of lease from 31 July 1979 until Mayfair vacates said areas plus legal interest from 31 July 1978; P70,000.00 per month as reasonable compensation for the use of the premises covered by the contracts of lease dated (1 June 1967 from 1 June 1987 until Mayfair vacates the premises plus legal interest from 1 June 1987; P55,000.00 per month as reasonable compensation for the use of the premises covered by the contract of lease dated 31 March 1969 from 30 March 1989 until Mayfair vacates the premises plus legal interest from 30 March 1989; and P40,000.00 as attorneys fees; and dismissing Equatorials crossclaim against Carmelo & Bauermann. The trial court adjudged the identically worded paragraph 8 found in both lease contracts to be an option clause which however cannot be deemed to be binding on Carmelo because of lack of distinct consideration therefor. Mayfair taking exception to the decision of the trial court, appealed to the Court of Appeals. The appellate court reversed the trial court and rendered judgment reversing and setting aside the appealed Decision; directing Mayfair to pay and return to Equatorial the amount of P11,300,000.00 within 15 days from notice of this Decision, and ordering Equatorial to accept such payment; directing Equatorial, upon payment of the sum of P11,300,000, to execute the deeds and documents necessary for the issuance and transfer of ownership to Mayfair of the lot registered under TCT 17350, 118612, 60936, and 52571; and should Mayfair be unable to pay the amount as adjudged, declaring the Deed of Absolute Sale between Carmelo and Equatorial as valid and binding upon an the parties. Hence, the petition for review. The Supreme Court denied the petition for review of the decision of the Court of Appeals (23 June 1992, in CA-GR CV 32918), declaring the Deed of Absolute Sale between Equatorial and Carmelo as deemed rescinded; ordering Carmelo to return to Equatorial the purchase price; directing Equatorial to execute the deeds and documents necessary to return ownership to Carmelo of the disputed lots; and ordering Carmelo to allow Mayfair to buy the lots for P11,300,000. 1. Issue on irregularities in Court of Appeals passed upon so as not to preempt the administrative proceedings related thereto It was raised that 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. This was related to letter complaint written by the counsel for Equatorial on 20 September 1992 to the Supreme Court
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alleging certain irregularities and infractions committed by certain lawyers, and Justices of the Court of

Appeals and of the Supreme Court in connection with case CA-GR CV 32918 (GR 106063). This partakes of the nature of an administrative complaint for misconduct, against members of the judiciary. While the lettercomplaint arose as an incident in said case, the disposition thereof should be separate and independent from case GR 106063. It would be correct, prudent and consistent course of action not to pre-empt the administrative proceedings to be undertaken respecting the said irregularities. A discussion of such in the present 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. 2. Paragraph 8 of lease contracts provides for a right of first refusal, and is not an option clause nor an option contract The contractual stipulation (Paragraph 8) provides for a right of first refusal in favor of Mayfair. It is not an option clause or an option contact. It is a contract of a right of first refusal. The true nature of the paragraph 8 is ascertained to be that of a contractual grant of the right of first refusal to Mayfair. 3. Option contract; Validity based on a separate and distinct consideration As early as 1916, in the case of Beaumont vs. Prieto, unequivocal was our characterization of an option contract as one necessarily invoking 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. T he deed of option or 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. 4. Option contract, according to Bouvier Law Dictionary Bouvier, in his Law Dictionary (edition of 1897) defines an option as a contract, 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.) 5. Option contract, according to Words and Phrases An agreement in writing to give a person the option to purchase lands within a given time at 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. (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]). 6. Cases involving option contracts In Tuason vs. de Asis (107 PHIL 131 [1960]), it was 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. In Mendoza vs. Comple (15 SCRA 162), the Court freed the landowner from her promise to sell her land if the prospective buyer could raise P4,500.00 in 3 weeks because such option was not supported by a distinct consideration. In the same vein, in Sanchez vs. Rigos (45 SCRA 368 [1972]), the Court also invalidated an instrument entitled, Option to Purchase a parcel of land for the sum of P1,510.00 because of lack of consideration. And as an exception to the doctrine enumerated in the two preceding cases, in Vda de Quirino vs. Palarca (29 SCRA 1 [1969]), it was 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. In all these cases, the
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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. Ang Yu Asuncion case: 7. Perfection of a contract of sale In sales, 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 that 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. 8. Contract to sell is conditional; Effect of breach of condition 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. 9. Unconditional mutual promise to buy and sell obligatory on the parties 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. 10. Perfected contract of option 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, which provides that 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) 11. Option not the contract of sale itself 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. 12. Offer 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). 13. Offer with a period; Effects of withdrawal (1) If the period is not itself founded upon or supported by a consideration, the offeror is still free and has the right to withdrawal the offer before its acceptance, or, if an acceptance has been made, before the offerors 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;
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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 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. 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). 14. Requirement for separate consideration has no applicability as paragraph 8 is not an option contract but a right of first refusal 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. Paragraph 8 grants the right of first refusal to Mayfair and is not an option contract. The requirement of a separate consideration for the option, thus, has no applicability in the case. There is nothing in paragraph 8 of the contracts which would bring them into the ambit of the usual offer or option requiring an independent consideration. 15. Option and Right of First Refusal distinguished 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. 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. 16. Right of First Refusal inutile if governed by Article 1324 on withdrawal of the offer on Article 1479 on promise to buy and sell 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 on Article 1479 on promise to buy and sell would render ineffectual or inutile the provisions on right of first refusal so commonly inserted in leases of real estate nowadays. 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. 17. Consideration in an agreement of right of first refusal: Consideration for lease It is not 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. 18. Consideration in an agreement of right of first refusal: Consideration is obligation or promise (reciprocal contract) 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, in reciprocal contract, the obligation or promise of each party is the consideration for that of the other.
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19. Difference to Ang Yu Asuncion case: Equatorial Realty and Carmelo acted in bad faith Carmelo and Equatorial Realty 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 counter-offers made by both parties. Carmelo, however, did not pursue the exercise to its logical end. While it initially recognized Mayfairs 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. 20. Rescission lies when the purchase is in bad faith Equatorial (being aware of the lease contracts because its lawyers had, prior to the sale, studied the said contracts) is a buyer in bad faith, and thus renders the sale to it of the property in question rescissible. Guzman, Bocaling & Co. vs. Bonnevie case 21. Rescission as remedy

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 preferential 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. 22. Purchaser not considered a third party 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 petitoner 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. 23. Purchaser in good faith defined A purchaser in good faith and for value 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 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. 24. Purchaser required to know term of lease contract when buying property under lease Having known that the property it was buying was under lease, it behooved it as a prudent person to have required the owner of the property or the broker to show to it the Contract of Lease in which the right of first refusal is contained. 25. Indivisibility of the property Common sense and fairness dictate that instead of nullifying the agreement on the basis that the entire
Sales, 2003 ( 107 ) Haystacks (Berne Guerrero)

property is indivisible property, 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 but also the appurtenant portions sold to Equatorial which are claimed by petitioners to be indivisible. 26. Boundaries of the property sold Mayfair is 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. 27. Doctrine in Ang Yu Asuncion deemed modified As to the remedy to enforce Mayfairs 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, it not amplified under the peculiar facts of the present case. 28. Multiplicity of suits frowned upon by Court; Relief: (1) Contract between Equatorial and Carmelo rescinded, (2) Price fixed The Supreme Court has always been against multiplicity of suits where all remedies according to the facts and the law can be included. 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. Since Carmelo sold the property for P11,300,000 to Equatorial, the price at which Mayfair could have purchased the property is, therefore, fixed. 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. 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. 29. Present case covered by law on contracts, not merely by codal provisions on human relations 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 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. 30. No interest due Carmelo and Equatorial cannot 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.

SANCHEZ vs. RlGOS 45 SCRA 368 G.R. No. L-25494

FACTS: On April 3, 1961, plaintiff Nicolas Sanchez and defendant Severina Rigos executed an-instrument entitled "Option to Purchase," whereby Rigos "agreed, promised _and committed to sell" to Sanchez at the sum P1,510.00 a parcel of land situated in San Jose, Nueva Ecija, described in TCT No. NT-12528, within two (2) years from said date with the understanding 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. Inasmuch as several tenders of payment of the sum of PI,510.00, made by Sanchez within said period, were rejected by Mrs. Rigos, on March 12, 1963, the former deposited said amount with the CFI of Nueva Ecija and commenced against the latter the present action, for specific performance and damages. After the filing of defendant's answer - admitting some allegations of the complaint, denying other allegations thereof, and alleging, as special defense, that the contract between the parties is 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" - on February 11, 1964, both parties, assisted by their respective counsel, jointly moved for a judgment on the pleadings. Accordingly, on February 28, 1964, the lower court rendered judgment for anchez, ordering Mrs. Rigos to accept the sum judicially consigned by him and to execute, in his favor, the requisite deed of conveyance. Mrs. Rigos was, likewise, sentenced to pay P200.00, as attorney's fees, and other costs. Hence, this appeal by Mrs. Rigos. ISSUE: Whether or not Rigos should accept the payment and execute the deed of conveyance. HELD: Yes. Article 1479 of the Civil Code provides that 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 promisor if the promise is supported by a consideration distinct from the price. An option is unilateral- a promise to sell at the price fixed whenever the offeree should decide to exercise his option within the specified time. After accepting the promise and before he exercises his option, the holder of the option is not bound to buy. He is free either to buy or not to buy later. In this case, however, upon accepting herein petitioner's offer a bilateral promise to sell and to buy ensued, and the respondent ipso facto assumed the obligation of a purchaser. He did not just get the right subsequently to buy or not to buy. It was not a mere option then; it was a bilateral contract of sale. "If the option is given without a consideration, it is a mere offer of a contract of sale, which is not binding until accepted. If, however, acceptance is made before a withdrawal, it constitutes a binding contract of sale, even though the option was not supported by a sufficient consideration. 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 or an offer to sell which, if accepted, results in a perfected contract of sale.