SECOND DIVISION

[G.R. No. 149734. November 19, 2004]

DR. DANIEL VAZQUEZ a ! "A. LUIZA ". VAZQUEZ, petitioners vs. A#ALA $%R&%RA'I%N, respondent. DE$I(I%N
'INGA, J.)

The rise in value of four lots in one of the countrys prime residential developments, Ayala Ala an! Villa!e in "untinlupa City, over a period of si# $%& years only, represents i! money' The hu!e price difference lies at the heart of the present controversy' (etitioners insist that the lots should e sold to them at )*+, prices -hile respondent maintains that the prevailin! mar.et price in )**/ should e the sellin! price' Dr' Daniel Va01ue0 and "a' 2uisa Va01ue0 filed this Petition for Review on Certiorari dated Octo er )), 5//) assailin! the Decision of the Court of Appeals dated Septem er %, 5//) -hich reversed the Decision of the 7e!ional Trial Court $7TC& and dismissed their complaint for specific performance and dama!es a!ainst Ayala Corporation'
3)4 354 364 3,4

Despite their disparate rulin!s, the 7TC and the appellate court a!ree on the follo-in! antecedents8
394

On April 23, 1981, spouses Daniel Vasquez and Ma. Luisa M. Vasquez (hereafter, Vasquez spouses entered into a Me!orandu! of A"ree!ent (MOA #ith A$ala %orporation (hereafter, A&ALA #ith A&ALA 'u$in" fro! the Vazquez spouses, all of the latter(s shares of sto)* in %onduit De+elop!ent, ,n). (hereafter, %onduit . -he !ain asset of %onduit #as a .9.9 he)tare propert$ in A$ala Ala'an", Muntinlupa, #hi)h #as then 'ein" de+eloped '$ %onduit under a de+elop!ent plan #here the land #as di+ided into Villa"es 1, 2 and 3 of the /Don Vi)ente Villa"e.0 -he de+elop!ent #as then 'ein" underta*en for %onduit '$ 1.2. %onstru)tion and De+elop!ent %orp. (hereafter, 12 %onstru)tion . 3nder the MOA, A$ala #as to de+elop the entire propert$, less #hat #as defined as the /4etained Area0 )onsistin" of 18,536 square !eters. -his /4etained Area0 #as to 'e retained '$ the Vazquez spouses. -he area to 'e de+eloped '$ A$ala #as )alled the /4e!ainin" Area0. ,n this /4e!ainin"

Area0 #ere . lots ad7a)ent to the /4etained Area0 and A$ala a"reed to offer these lots for sale to the Vazquez spouses at the pre+ailin" pri)e at the ti!e of pur)hase. -he rele+ant pro+isions of the MOA on this point are8 5.7. The BUYER hereby commits that it will develop the Remaining roperty! into a "irst class residential s#bdivision o" the same class as its $ew %labang &#bdivision' and that it intends to complete the "irst phase #nder its amended development plan within three ()* years "rom the date o" this %greement. + + +, 5.-5. The BUYER agrees to give the &E..ER& a "irst option to p#rchase "o#r developed lots ne+t to the Retained %rea, at the prevailing mar/et price at the time o" the p#rchase., The parties are agreed that the development plan re"erred to in paragraph 5.7 is not 0ond#it!s development plan' b#t %yala!s amended development plan which was still to be "orm#lated as o" the time o" the 12%. 3hile in the 0ond#it plan' the 4 lots to be o""ered "or sale to the 5as6#e7 &po#ses were in the "irst phase thereo" or 5illage -' in the %yala plan which was "orm#lated a year later' it was in the third phase' or hase 889c. 3nder the MOA, the Vasquez spouses !ade se+eral e9press #arranties, as follo#s8 /3.1. -he :;LL;4: shall deli+er to the <3&;48
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3.1.2. -he true and )o!plete list, )ertified '$ the :e)retar$ and -reasurer of the %o!pan$ sho#in"8
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D. A list of all persons and=or entities #ith #ho! the %o!pan$ has pendin" )ontra)ts, if an$.
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3.1.>. Audited finan)ial state!ents of the %o!pan$ as at %losin" date. .. %onditions 2re)edent

All o'li"ations of the <3&;4 under this A"ree!ent are su'7e)t to fulfill!ent prior to or at the %losin", of the follo#in" )onditions8 ..1. The representations and warranties by the &E..ER& contained in this %greement shall be tr#e and correct at the time o" 0losing as tho#gh s#ch representations and warranties were made at s#ch time: and
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6. 4epresentation and ?arranties '$ the :;LL;4: -he :;LL;4: 7ointl$ and se+erall$ represent and #arrant to the <3&;4 that at the ti!e of the e9e)ution of this A"ree!ent and at the %losin"8
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6.2.3. -here are no a)tions, suits or pro)eedin"s pendin", or to the *no#led"e of the :;LL;4:, threatened a"ainst or affe)tin" the :;LL;4: #ith respe)t to the :hares or the 2ropert$@ and 5. Additional ?arranties '$ the :;LL;4: 5.1. ?ith respe)t to the Audited Ainan)ial :tate!ents required to 'e su'!itted at %losin" in a))ordan)e #ith 2ar. 3.1.> a'o+e, the :;LL;4 7ointl$ and se+erall$ #arrant to the <3&;4 that8 5.1.1 -he said Audited Ainan)ial :tate!ents shall sho# that on the da$ of %losin", the %o!pan$ shall o#n the /4e!ainin" 2ropert$0, free fro! all liens and en)u!'ran)es and that the 0ompany shall have no obligation to any party e+cept "or billings payable to ; 0onstr#ction < =evelopment 0orporation and advances made by =aniel 5a76#e7 "or which BUYER shall be responsible in accordance with ar. > o" this %greement. 5.1.2 E+cept to the e+tent re"lected or reserved in the %#dited ?inancial &tatements o" the 0ompany as o" 0losing' and those disclosed to BUYER' the 0ompany as o" the date thereo"' has no liabilities o" any nat#re whether accr#ed' absol#te' contingent or otherwise' in)ludin", #ithout li!itation, ta9 lia'ilities due or to 'e)o!e due and #hether in)urred in respe)t of or !easured in respe)t of the %o!pan$(s in)o!e prior to %losin" or arisin" out of transa)tions or state of fa)ts e9istin" prior thereto.

5.2 &E..ER& do not /now or have no reasonable gro#nd to /now o" any basis "or any assertion against the 0ompany as at closing or any liability o" any nat#re and in any amo#nt not "#lly re"lected or reserved against s#ch %#dited ?inancial &tatements re"erred to above' and those disclosed to BUYER. 999 999 999

5.6.3 E+cept as otherwise disclosed to the BUYER in writing on or be"ore the 0losing' the 0ompany is not engaged in or a party to' or to the best o" the /nowledge o" the &E..ER&' threatened with' any legal action or other proceedings be"ore any co#rt or administrative body' nor do the :;LL;4: *no# or ha+e reasona'le "rounds to *no# of an$ 'asis for an$ su)h a)tion or pro)eedin" or of an$ "o+ern!ental in+esti"ation relati+e to the %o!pan$. 5.6.. -o the *no#led"e of the :;LL;4:, no de"a#lt or breach e+ists in the d#e per"ormance and observance by the 0ompany o" any term' covenant or condition o" any instr#ment or agreement to which the company is a party or by which it is bo#nd' and no condition e+ists which' with notice or lapse o" time or both' will constit#te s#ch de"a#lt or breach., After the e9e)ution of the MOA, A$ala )aused the suspension of #or* on Villa"e 1 of the Don Vi)ente 2ro7e)t. A$ala then re)ei+ed a letter fro! one Ma9i!o Del 4osario of Lan)er 1eneral <uilder %orporation infor!in" A$ala that he #as )lai!in" the a!ount of 21,>B9,>>8.8B as the su')ontra)tor of 1.2. %onstru)tion... 1.2. %onstru)tion not 'ein" a'le to rea)h an a!i)a'le settle!ent #ith Lan)er, on Mar)h 22, 1982, Lan)er sued 1.2. %onstru)tion, %onduit and A$ala in the then %ourt of Airst ,nstan)e of Manila in %i+il %ase Co. 82D8>98. 1.2. %onstru)tion in turn filed a )rossD)lai! a"ainst A$ala. 1.2. %onstru)tion and Lan)er 'oth tried to en7oin A$ala fro! underta*in" the de+elop!ent of the propert$. -he suit #as ter!inated onl$ on Ae'ruar$ 19, 1985, #hen it #as dis!issed #ith pre7udi)e after A$ala paid 'oth Lan)er and 12 %onstru)tion the total of 2.,686,113.39. -a*in" the position that A$ala #as o'li"ated to sell the . lots ad7a)ent to the /4etained Area0 #ithin 3 $ears fro! the date of the MOA, the Vasquez spouses sent se+eral /re!inder0 letters of the approa)hin" soD)alled deadline. Eo#e+er, no de!and after April 23, 198., #as e+er !ade '$ the Vasquez spouses for A$ala to sell the . lots. On the )ontrar$, one of the letters si"ned '$ their authorized a"ent, ;n"r. ;duardo -urla, )ate"ori)all$ stated that the$

e9pe)ted /de+elop!ent of 2hase 1 to 'e )o!pleted '$ Ae'ruar$ 19, 199B, three $ears fro! the settle!ent of the le"al pro'le!s #ith the pre+ious )ontra)tor.0 <$ earl$ 199B A$ala finished the de+elop!ent of the +i)init$ of the . lots to 'e offered for sale. -he four lots #ere then offered to 'e sold to the Vasquez spouses at the pre+ailin" pri)e in 199B. -his #as re7e)ted '$ the Vasquez spouses #ho #anted to pa$ at 198. pri)es, there'$ leadin" to the suit 'elo#. After trial, the )ourt a quo rendered its de)ision, the dispositi+e portion of #hi)h states8 /-E;4;AO4;, 7ud"!ent is here'$ rendered in fa+or of plaintiffs and a"ainst defendant, orderin" defendant to sell to plaintiffs the rele+ant lots des)ri'ed in the %o!plaint in the A$ala Ala'an" Villa"e at the pri)e of2.6B.BB per square !eter a!ountin" to 21,3.9,>.B.BB@ orderin" defendant to rei!'urse to plaintiffs attorne$(s fees in the su! of 22BB,BBB.BB and to pa$ the )ost of the suit.0 ,n its de)ision, the )ourt a quo )on)luded that the Vasquez spouses #ere not o'li"ated to dis)lose the potential )lai!s of 12 %onstru)tion, Lan)er and Del 4osario@ A$ala(s a))ountants should ha+e opened the re)ords of %onduit to find out all )lai!s@ the #arrant$ a"ainst suit is #ith respe)t to /the shares of the 2ropert$0 and the Lan)er suit does not affe)t the shares of sto)* sold to A$ala@ A$ala #as o'li"ated to de+elop #ithin 3 $ears@ to sa$ that A$ala #as under no o'li"ation to follo# a ti!e fra!e #as to put the Vasquezes at A$ala(s !er)$@ A$ala did not de+elop 'e)ause of a slu!p in the real estate !ar*et@ the MOA #as drafted and prepared '$ the A&ALA #ho should suffer its a!'i"uities@ the option to pur)hase the . lots is +alid 'e)ause it #as supported '$ )onsideration as the option is in)orporated in the MOA #here the parties had prestations to ea)h other. F;!phasis suppliedG
Ayala Corporation filed an appeal, alle!in! that the trial court erred in holdin! that petitioners did not reach their -arranties under the "OA dated April 56, )*+): that it -as o li!ed to develop the land -here the four $,& lots su ;ect of the option to purchase are located -ithin three $6& years from the date of the "OA: that it -as in delay: and that the option to purchase -as valid ecause it -as incorporated in the "OA and the consideration therefor -as the commitment y Ayala Corporation to petitioners em odied in the "OA'
3%4

As previously mentioned, the Court of Appeals reversed the 7TC Decision. Accordin! to the appellate court, Ayala Corporation -as never informed eforehand of the e#istence of the 2ancer claim' In fact, Ayala Corporation !ot a copy of the 2ancer su contract only on "ay 5*, )*+) from <'(' Constructions la-yers' The Court of Appeals thus held that petitioners

violated their -arranties under the "OA -hen they failed to disclose 2ancers claims' =ence, even concedin! that Ayala Corporation -as o li!ed to develop and sell the four $,& lots in 1uestion -ithin three $6& years from the date of the "OA, the o li!ation -as suspended durin! the pendency of the case filed y 2ancer' Interpretin! the "OAs para!raph 9'> a ove?1uoted, the appellate court held that Ayala Corporation committed to develop the first phase of its o-n amended development plan and not Conduits development plan' No-here does the "OA provide that Ayala Corporation shall follo- Conduits development plan nor is Ayala Corporation prohi ited from chan!in! the se1uence of the phases of the property it -ill develop' Anent the 1uestion of delay, the Court of Appeals ruled that there -as no delay as petitioners never made a demand for Ayala Corporation to sell the su ;ect lots to them' Accordin! to the appellate court, -hat petitioners sent -ere mere reminder letters the last of -hich -as dated prior to April 56, )*+, -hen the o li!ation -as not yet demanda le' At any rate, the Court of Appeals found that petitioners in fact -aived the three $6&?year period -hen they sent a letter throu!h their a!ent, En!r' Eduardo Turla, statin! that they @e#pect that the development of (hase I -ill e completed y )* Ae ruary )**/, three years from the settlement of the le!al pro lems -ith the previous contractor'B
3>4

The appellate court li.e-ise ruled that para!raph 9')9 a ove?1uoted is not an option contract ut a ri!ht of first refusal there ein! no separate consideration therefor' Since petitioners refused Ayala Corporations offer to sell the su ;ect lots at the reduced )**/ price of (9,///'// per s1uare meter, they have effectively -aived their ri!ht to uy the same' In the instant Petition, petitioners alle!e that the appellate court erred in rulin! that they violated their -arranties under the "OA: that Ayala Corporation -as not o li!ed to develop the @7emainin! (ropertyB -ithin three $6& years from the e#ecution of the "OA: that Ayala -as not in delay: and that para!raph 9')9 of the "OA is a mere ri!ht of first refusal' Additionally, petitioners insist that the Court should revie- the factual findin!s of the Court of Appeals as they are in conflict -ith those of the trial court' Ayala Corporation filed a Comment on the Petition dated "arch 5%, 5//5, contendin! that the petition raises 1uestions of fact and see.s a revie- of evidence -hich is -ithin the domain of the Court of Appeals' Ayala Corporation maintains that the su contract et-een <( Construction, -ith -hom Conduit contracted for the development of the property under a Construction Contract dated Octo er )/, )*+/, and 2ancer -as not disclosed y petitioners durin! the ne!otiations' Neither -as the lia ility for 2ancers claim included in the Audited Ainancial Statements su mitted y petitioners after the si!nin! of the "OA' These ;ustify the conclusion that petitioners reached their -arranties under the afore?1uoted para!raphs of the "OA' Since the 2ancer suit ended only in Ae ruary )*+*, the three $6&?year period -ithin -hich Ayala Corporation committed to develop the property should only e counted thence' Thus, -hen it
3+4

offered the su ;ect lots to petitioners in )**/, Ayala Corporation -as not yet in delay' In response to petitioners contention that there -as no action or proceedin! a!ainst them at the time of the e#ecution of the "OA on April 56, )*+), Ayala Corporation avers that the facts and circumstances -hich !ave rise to the 2ancer claim -ere already e#tant then' (etitioners -arranted that their representations under the "OA shall e true and correct at the time of @Closin!B -hich shall ta.e place -ithin four $,& -ee.s from the si!nin! of the "OA' Since the "OA -as si!ned on April 56, )*+), @Closin!B -as appro#imately the third -ee. of "ay )*+)' =ence, 2ancers claims, articulated in a letter -hich Ayala Corporation received on "ay ,, )*+), are amon! the lia ilities -arranted a!ainst under para!raph >')'5 of the "OA'
3*4

"oreover, Ayala Corporation asserts that the -arranties under the "OA are not ;ust a!ainst suits ut a!ainst all .inds of lia ilities not reflected in the Audited Ainancial Statements' It cannot e faulted for relyin! on the e#press -arranty that e#cept for illin!s paya le to <( Construction and advances made y petitioner Daniel Va01ue0 in the amount of (6+,>%%'/,, Conduit has no other lia ilities' =ence, petitioners cannot claim that Ayala Corporation should have e#amined and investi!ated the Audited Ainancial Statements of Conduit and should no- assume all its o li!ations and lia ilities includin! the 2ancer suit and the cross?claim of <( Construction' Aurthermore, Ayala Corporation did not ma.e a commitment to complete the development of the first phase of the property -ithin three $6& years from the e#ecution of the "OA' The provision refers to a mere declaration of intent to develop the first phase of its $Ayala Corporations& o-n development plan and not Conduits' True to its intention, Ayala Corporation did complete the development of the first phase $(hase II?A& of its amended development plan -ithin three $6& years from the e#ecution of the "OA' =o-ever, it is not o li!ed to develop the third phase $(hase II?C& -here the su ;ect lots are located -ithin the same time frame ecause there is no contractual stipulation in the "OA therefor' It is free to decide on its o-n the period for the development of (hase II? C' If petitioners -anted to impose the same three $6&?year timeta le upon the third phase of the amended development plan, they should have filed a suit to fi# the time ta le in accordance -ith Article ))*> of the Civil Code' =avin! failed to do so, Ayala Corporation cannot e declared to have een in delay'
3)/4

Ayala Corporation further contends that no demand -as made on it for the performance of its alle!ed o li!ation' The letter dated Octo er ,, )*+6 sent -hen petitioners -ere already a-are of the 2ancer suit did not demand the delivery of the su ;ect lots y April 56, )*+,' Instead, it re1uested Ayala Corporation to .eep petitioners posted on the status of the case' 2i.e-ise, the letter dated "arch ,, )*+, -as merely an in1uiry as to the date -hen the development of (hase ) -ill e completed' "ore importantly, their letter dated Cune 5>, )*++ throu!h En!r' Eduardo Turla e#pressed petitioners e#pectation that (hase ) -ill e completed y Ae ruary )*, )**/'

2astly, Ayala Corporation maintains that para!raph 9')9 of the "OA is a ri!ht of first refusal and not an option contract' (etitioners filed their Reply dated Au!ust )9, 5//5 reiteratin! the ar!uments in their Petition and contendin! further that they did not violate their -arranties under the "OA ecause the case -as filed y 2ancer only on April ), )*+5, eleven $))& months and ei!ht $+& days after the si!nin! of the "OA on April 56, )*+)' Ayala Corporation admitted that it received 2ancers claim efore the @Closin!B date' It therefore had all the time to rescind the "OA' Not havin! done so, it can e concluded that Ayala Corporation itself did not consider the matter a violation of petitioners -arranty'
3))4

"oreover, petitioners su mitted the Audited Ainancial Statements of Conduit and allo-ed an ac1uisition audit to e conducted y Ayala Corporation' Thus, the latter ou!ht Conduit -ith @open eyes'B (etitioners also maintain that they had no .no-led!e of the impendin! case a!ainst Conduit at the time of the e#ecution of the "OA' Aurther, the "OA ma.es Ayala Corporation lia le for the payment of all illin!s of <( Construction' Since 2ancers claim -as actually a claim a!ainst <( Construction ein! its su ? contractor, it is Ayala Corporation and not petitioners -hich is lia le' 2i.e-ise, petitioners aver that althou!h Ayala Corporation may chan!e the se1uence of its development plan, it is o li!ed under the "OA to develop the entire area -here the su ;ect lots are located in three $6& years' They also assert that demand -as made on Ayala Corporation to comply -ith their o li!ation under the "OA' Apart from their reminder letters dated Canuary 5,, Ae ruary )+ and "arch 9, )*+,, they also sent a letter dated "arch ,, )*+, -hich they claim is a cate!orical demand for Ayala Corporation to comply -ith the provisions of the "OA' The parties -ere re1uired to su mit their respective memoranda in the Resolution dated Novem er )+, 5//5' In compliance -ith this directive, petitioners su mitted theirMemorandum dated Ae ruary ),, 5//6 on even date, -hile Ayala Corporation filed its Memorandum dated Ae ruary ),, 5//6 on Ae ruary )>, 5//6'
3)54 3)64 3),4

De shall first dispose of the procedural 1uestion raised petition'

y the instant

It is -ell?settled that the ;urisdiction of this Court in cases rou!ht to it from the Court of Appeals y -ay of petition for revie- under 7ule ,9 is limited to revie-in! or revisin! errors of la- imputed to it, its findin!s of fact ein! conclusive on this Court as a matter of !eneral principle' =o-ever, since in the instant case there is a conflict et-een the factual findin!s of the trial court and the appellate court, particularly as re!ards the issues of reach of -arranty, o li!ation to develop and incurrence of delay, -e have to consider the evidence on record and resolve such factual issues as an e#ception to the !eneral rule'

In any event, the su mitted issue relatin! to the cate!ori0ation of the ri!ht to purchase !ranted to petitioners under the "OA is le!al in character'
3)94

The ne#t issue that presents itself is -hether petitioners reached their -arranties under the "OA -hen they failed to disclose the 2ancer claim' The trial court declared they did not: the appellate court found other-ise' Ayala Corporation summari0es the clauses of the "OA -hich petitioners alle!edly reached -hen they failed to disclose the 2ancer claim8

a %lause 5.1.1. H that %onduit shall not 'e o'li"ated to an$one e9)ept to 12 %onstru)tion for 238,566.B., and for ad+an)es !ade '$ Daniel Vazquez@ ' %lause 5.1.2. H that e9)ept as refle)ted in the audited finan)ial state!ents %onduit had no other lia'ilities #hether a))rued, a'solute, )ontin"ent or other#ise@ ) %lause 5.2. H that there is no 'asis for an$ assertion a"ainst %onduit of an$ lia'ilit$ of an$ +alue not refle)ted or reser+ed in the finan)ial state!ents, and those dis)losed to A$ala@ d %lause 5.6.3. H that %onduit is not threatened #ith an$ le"al a)tion or other pro)eedin"s@ and e %lause 5.6... H that %onduit had not 'rea)hed an$ ter!, )ondition, or )o+enant of an$ instru!ent or a"ree!ent to #hi)h it is a part$ or '$ #hi)h it is 'ound.
3)%4

The Court is convinced that petitioners did not violate the fore!oin! -arranties' The e#chan!es of communication et-een the parties indicate that petitioners su stantially apprised Ayala Corporation of the 2ancer claim or the possi ility thereof durin! the period of ne!otiations for the sale of Conduit' In a letter dated "arch 9, )*+,, petitioner Daniel Va01ue0 reminded Ayala Corporations "r' Adolfo Duarte $"r' Duarte& that prior to the completion of the sale of Conduit, Ayala Corporation as.ed for and -as !iven information that <( Construction su ?contracted, presuma ly to 2ancer, a !reater percenta!e of the pro;ect than it -as allo-ed' (etitioners !ave this information to Ayala Corporation ecause the latter intimated a desire to @ rea. the contract of Conduit -ith <('B Ayala Corporation did not deny this' In fact, "r' Duartes letter dated "arch %, )*+, indicates that Ayala Corporation had .no-led!e of the 2ancer su contract prior to its ac1uisition of Conduit' Ayala Corporation even admitted that it @tried to e#ploreEle!al asis to discontinue the contract of Conduit -ith <(B ut found this @not feasi le -hen information surfaced a out the tacit consent of Conduit to the su ?contracts of <( -ith 2ancer'B
3)>4 3)+4

At the latest, Ayala Corporation came to .no- of the 2ancer claim efore the date of Closin! of the "OA' 2ancers letter dated April 6/, )*+) informin! Ayala Corporation of its unsettled claim -ith <( Construction -as received y Ayala Corporation on "ay ,, )*+), -ell efore the @Closin!B -hich occurred four $,& -ee.s after the date of si!nin! of the "OA on April 56, )*+), or on "ay 56, )*+)'
3)*4 35/4

The full te#t of the pertinent clauses of the "OA 1uoted hereunder li.e-ise indicate that certain matters pertainin! to the lia ilities of Conduit -ere disclosed y petitioners to Ayala Corporation althou!h the specifics thereof -ere no lon!er included in the "OA8

5.1.1 -he said Audited Ainan)ial :tate!ents shall sho# that on the da$ of %losin", the %o!pan$ shall o#n the /4e!ainin" 2ropert$0, free fro! all liens and en)u!'ran)es and that the %o!pan$ shall ha+e no o'li"ation to an$ part$ e9)ept for 'illin"s pa$a'le to 12 %onstru)tion I De+elop!ent %orporation and ad+an)es !ade '$ Daniel Vazquez for #hi)h <3&;4 shall 'e responsi'le in a))ordan)e #ith 2ara"raph 2 of this A"ree!ent. 5.1.2 E+cept to the e+tent re"lected or reserved in the %#dited ?inancial &tatements o" the 0ompany as o" 0losing' and those disclosed to BUYER' the %o!pan$ as of the date hereof, has no lia'ilities of an$ nature #hether a))rued, a'solute, )ontin"ent or other#ise, in)ludin", #ithout li!itation, ta9 lia'ilities due or to 'e)o!e due and #hether in)urred in respe)t of or !easured in respe)t of the %o!pan$(s in)o!e prior to %losin" or arisin" out of transa)tions or state of fa)ts e9istin" prior thereto. 5.2 :;LL;4: do not *no# or ha+e no reasona'le "round to *no# of an$ 'asis for an$ assertion a"ainst the %o!pan$ as at %losin" of an$ lia'ilit$ of an$ nature and in an$ a!ount not full$ refle)ted or reser+ed a"ainst su)h Audited Ainan)ial :tate!ents referred to a'o+e, and those disclosed to BUYER.
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5.6.3 E+cept as otherwise disclosed to the BUYER in writing on or be"ore the 0losing' the %o!pan$ is not en"a"ed in or a part$ to, or to the 'est of the *no#led"e of the :;LL;4:, threatened #ith, an$ le"al a)tion or other pro)eedin"s 'efore an$ )ourt or ad!inistrati+e 'od$, nor do the :;LL;4: *no# or ha+e reasona'le "rounds to *no# of an$ 'asis for an$ su)h a)tion or pro)eedin" or of an$ "o+ern!ental in+esti"ation relati+e to the %o!pan$. 5.6.. -o the *no#led"e of the :;LL;4:, no default or 'rea)h e9ists in the due perfor!an)e and o'ser+an)e '$ the %o!pan$ of an$ ter!, )o+enant or )ondition of an$ instru!ent or a"ree!ent to #hi)h the %o!pan$ is a part$ or

'$ #hi)h it is 'ound, and no )ondition e9ists #hi)h, #ith noti)e or lapse of ti!e or 'oth, #ill )onstitute su)h default or 'rea)h.0 F;!phasis suppliedG
35)4

=ence, petitioners -arranty that Conduit is not en!a!ed in, a party to, or threatened -ith any le!al action or proceedin! is 1ualified y Ayala Corporations actual .no-led!e of the 2ancer claim -hich -as disclosed to Ayala Corporation efore the @Closin!'B At any rate, Ayala Corporation ound itself to pay all illin!s paya le to <( Construction and the advances made y petitioner Daniel Va01ue0' Specifically, under para!raph 5 of the "OA referred to in para!raph >')'), Ayala Corporation undertoo. responsi ility @for the payment of all illin!s of the contractor <( Construction F Development Corporation after the first illin! and any payments made y the company andGor SE22E7S shall e reim ursed y HIJE7 on closin! -hich advances to date is (),)9*,/)5'+>'B
3554

The illin!s .no-in!ly assumed y Ayala Corporation necessarily include the 2ancer claim for -hich <( Construction is lia le' (roof of this is Ayala Corporations letter to <( Construction dated efore @Closin!B on "ay ,, )*+), informin! the latter of Ayala Corporations receipt of the 2ancer claim em odied in the letter dated April 6/, )*+), ac.no-led!in! that it is ta.in! over the contractual responsi ilities of Conduit, and re1uestin! copies of all su ?contracts affectin! the Conduit property' The pertinent e#cerpts of the letter read8
3564

J ,n this )onne)tion, #e #ish to infor! $ou that this !ornin" #e re)ei+ed a letter fro! Mr. Ma9i!o D. Del 4osario, 2resident of Lan)er 1eneral <uilders %orporation apprisin" us of the e9isten)e of su')ontra)ts that the$ ha+e #ith $our )orporation. -he$ ha+e also furnished us #ith a )op$ of their letter to $ou dated 3B April 1981. :in)e #e are ta*in" o+er the )ontra)tual responsi'ilities of %onduit De+elop!ent, ,n)., #e 'elie+e that it is ne)essar$, at this point in ti!e, that $ou furnish us #ith )opies of all $our su')ontra)ts affe)tin" the propert$ of %onduit, not onl$ #ith Lan)er 1eneral <uilders %orporation, 'ut all su')ontra)ts #ith other parties as #ellJ
35,4

Kuite tellin!ly, Ayala Corporation even attached to its Pre-Trial Brief dated Culy *, )**5 a copy of the letter dated "ay 5+, )*+) of <( Constructions counsel addressed to Conduit furnishin! the latter -ith copies of all su ?contract a!reements entered into y <( Construction' Since it -as addressed to Conduit, it can e presumed that it -as the latter -hich !ave Ayala Corporation a copy of the letter there y disclosin! to the latter the e#istence of the 2ancer su ? contract'
3594 35%4

The inelucta le conclusion is that petitioners did not violate their -arranties under the "OA' The 2ancer su ?contract and claim -ere su stantially disclosed to Ayala Corporation efore the @Closin!B date of the "OA' Ayala Corporation cannot disavo- .no-led!e of the claim' "oreover, -hile in its correspondence -ith petitioners, Ayala Corporation did mention the filin! of the 2ancer suit as an o stacle to its development of the property, it never actually rou!ht up nor sou!ht redress for petitioners alle!ed reach of -arranty for failure to disclose the 2ancer claim until it filed its Answer dated Ae ruary )>, )**5'
35>4

De no- come to the correct interpretation of para!raph 9'> of the "OA' Does this para!raph e#press a commitment or a mere intent on the part of Ayala Corporation to develop the property -ithin three $6& years from date thereofL (ara!raph 9'> provides8

>.5. -he <3&;4 here'$ )o!!its that it #ill de+elop the K4e!ainin" 2ropert$( into a first )lass residential su'di+ision of the sa!e )lass as its Ce# Ala'an" :u'di+ision, and that it intends to )o!plete the first phase under its a!ended de+elop!ent plan #ithin three (3 $ears fro! the date of this A"ree!entJ.
35+4

Nota ly, -hile the first phrase of the para!raph uses the -ord @commitsB in reference to the development of the @7emainin! (ropertyB into a first class residential su division, the second phrase uses the -ord @intendsB in relation to the development of the first phase of the property -ithin three $6& years from the date of the "OA' The variance in -ordin! is si!nificant' Dhile @commitB connotes a pled!e to do somethin!, @intendB merely si!nifies a desi!n or proposition'
35*4 36/4

Atty' 2eopoldo Arancisco, former Vice (resident of Ayala Corporations le!al division -ho assisted in draftin! the "OA, testified8
COI7T Jou only as. -hat do you mean y that intent' Cust ans-er on that point' ATTJ' H2ANCO Dont tal. a out standard' DITNESS A Dell, the -ord intent here, your =onor, -as used to emphasi0e the tentative character of the period of development ecause it -ill e noted that the sentence refers to and I 1uote @to complete the first phase under its amended development plan -ithin three $6& years from the date of this a!reement, at the time of the e#ecution of this a!reement, your =onor'B That amended development plan -as not yet in e#istence ecause the uyer had manifested to the seller that the uyer could amend the su division plan ori!inally elon!in! to the seller to conform -ith its o-n standard of development and second, your =onor, $interrupted&36)4

It is thus unmista.a le that this para!raph merely e#presses an intention on Ayala Corporations part to complete the first phase under its amended development plan -ithin three $6& years from the e#ecution of the "OA' Indeed, this para!raph is so plainly -orded that to misunderstand its import is deplora le' "ore focal to the resolution of the instant case is para!raph 9'>s clear reference to the first phase of Ayala Corporations amended development plan as the su ;ect of the three $6&?year intended timeframe for development' Even petitioner Daniel Va01ue0 admitted on cross?e#amination that the para!raph refers not to Conduits ut to Ayala Corporations development plan -hich -as yet to e formulated -hen the "OA -as e#ecuted8
K8 No-, turnin! to Section 9'> of this "emorandum of A!reement, it is stated as follo-s8 @The Huyer here y commits that to develop the remainin! property into a first class residential su division of the same class as NeAla an! Su division, and that they intend to complete the first phase under its amended development plan -ithin three years from the date of this a!reement'B No-, my 1uestion to you, Dr' Vas1ue0 is that there is no dispute that the amended development plan here is the amended development plan of AyalaL A8 A8 Jes, sir' No, it is not' K8 In other -ords, it is not E#hi it @D?9B -hich is the ori!inal plan of ConduitL K8 This E#hi it @D?9B -as the plan that -as ein! follo-ed y <( Construction in )*+)L A8 Jes, sir' K8 And point of fact durin! your direct e#amination as of the date of the a!reement, this amended development plan -as still to e formulated y AyalaL A8 Jes, sir'3654

As correctly held y the appellate court, this admission is crucial ecause -hile the su ;ect lots to e sold to petitioners -ere in the first phase of the Conduit development plan, they -ere in the third or last phase of the Ayala Corporation development plan' =ence, even assumin! that para!raph 9'> e#presses a commitment on the part of Ayala Corporation to develop the first phase of its amended development plan -ithin three $6& years from the e#ecution of the "OA, there -as no parallel commitment made as to the timeframe for the development of the third phase -here the su ;ect lots are located' 2est it e for!otten, the point of this petition is the alle!ed failure of Ayala Corporation to offer the su ;ect lots for sale to petitioners -ithin three $6& years from the e#ecution of the "OA' It is not that Ayala Corporation committed or intended to develop the first phase of its amended development plan -ithin three

$6& years' Dhether it did or did not is actually eside the point since the su ;ect lots are not located in the first phase any-ay' De no- come to the issue of default or delay in the fulfillment of the o li!ation' Article ))%* of the Civil Code provides8

Art. 1169. -hose o'li"ed to deli+er or to do so!ethin" in)ur in dela$ fro! the ti!e the o'li"ee 7udi)iall$ or e9tra7udi)iall$ de!ands fro! the! the fulfill!ent of their o'li"ation. Eo#e+er, the de!and '$ the )reditor shall not 'e ne)essar$ in order that dela$ !a$ e9ist8 (1 ?hen the o'li"ation or the la# e9pressl$ so de)lares@ or (2 ?hen fro! the nature and the )ir)u!stan)es of the o'li"ation it appears that the desi"nation of the ti!e #hen the thin" is to 'e deli+ered or the ser+i)e is to 'e rendered #as a )ontrollin" !oti+e for the esta'lish!ent of the )ontra)t@ or (3 ?hen de!and #ould 'e useless, as #hen the o'li"or has rendered it 'e$ond his po#er to perfor!. ,n re)ipro)al o'li"ations, neither part$ in)urs in dela$ if the other does not )o!pl$ or is not read$ to )o!pl$ in a proper !anner #ith #hat is in)u!'ent upon hi!. Aro! the !o!ent one of the parties fulfills his o'li"ation, dela$ '$ the other 'e"ins.
In order that the de tor may e in default it is necessary that the follo-in! re1uisites e present8 $)& that the o li!ation e demanda le and already li1uidated: $5& that the de tor delays performance: and $6& that the creditor re1uires the performance ;udicially or e#tra;udicially'
3664

Inder Article ))*6 of the Civil Code, o li!ations for -hose fulfillment a day certain has een fi#ed shall e demanda le only -hen that day comes' =o-ever, no such day certain -as fi#ed in the "OA' (etitioners, therefore, cannot demand performance after the three $6& year period fi#ed y the "OA for the development of the first phase of the property since this is not the same period contemplated for the development of the su ;ect lots' Since the "OA does not specify a period for the development of the su ;ect lots, petitioners should have petitioned the court to fi# the period in accordance -ith Article ))*> of the Civil Code' As no such action -as filed y petitioners, their complaint for specific performance -as premature, the o li!ation not ein!
36,4

demanda le at that point' Accordin!ly, Ayala Corporation cannot li.e-ise e said to have delayed performance of the o li!ation' Even assumin! that the "OA imposes an o li!ation on Ayala Corporation to develop the su ;ect lots -ithin three $6& years from date thereof, Ayala Corporation could still not e held to have een in delay since no demand -as made y petitioners for the performance of its o li!ation' As found y the appellate court, petitioners letters -hich dealt -ith the three $6&?year timeta le -ere all dated prior to April 56, )*+,, the date -hen the period -as supposed to e#pire' In other -ords, the letters -ere sent efore the o li!ation could ecome le!ally demanda le' "oreover, the letters -ere mere reminders and not cate!orical demands to perform' "ore importantly, petitioners -aived the three $6&?year period as evidenced y their a!ent, En!r' Eduardo Turlas letter to the effect that petitioners a!reed that the three $6&?year period should e counted from the termination of the case filed y 2ancer' The letter reads in part8

,. %o!pletion of 2hase , As per the !e!orandu! of A"ree!ent also dated April 23, 1981, it #as underta*en '$ $our "oodsel+es to )o!plete the de+elop!ent of 2hase , #ithin three (3 $ears. Dr. I Mrs. Vazquez #ere !ade to understand that $ou #ere una'le to a))o!plish this 'e)ause of le"al pro'le!s #ith the pre+ious )ontra)tor. -hese le"al pro'le!s #ere resol+ed as of Ae'ruar$ 19, 1985, and Dr. I Mrs. Vazquez therefore e9pe)t that the de+elop!ent of 2hase , #ill 'e )o!pleted '$ Ae'ruar$ 19, 199B, three $ears fro! the settle!ent of the le"al pro'le!s #ith the pre+ious )ontra)tor. -he reason for this is, as $ou *no#, that se)urit$D#ise, Dr. I Mrs. Vazquez ha+e 'een ad+ised not to )onstru)t their residen)e till the surroundin" area (#hi)h is 2hase , is de+eloped and o))upied. -he$ ha+e 'een an9ious to 'uild their residen)e for quite so!e ti!e no#, and #ould li*e to re)ei+e assuran)e fro! $our "oodsel+es re"ardin" this, in )o!plian)e #ith the a"ree!ent. ,,. Option on the ad7oinin" lots ?e ha+e alread$ #ritten $our "oodsel+es re"ardin" the intention of Dr. I Mrs. Vazquez to e9er)ise their option to pur)hase the t#o lots on ea)h side (a total of . lots ad7a)ent to their /4etained Area0. -he$ are )on)erned that althou"h o+er a $ear has elapsed sin)e the settle!ent of the le"al pro'le!s, $ou ha+e not presented the! #ith the size, )onfi"uration, et). of these lots. -he$ #ould appre)iate 'ein" pro+ided #ith these at $our earliest )on+enien)e.
3694

"anifestly, this letter e#presses not only petitioners ac.no-led!ement that the delay in the development of (hase I -as due to the le!al pro lems -ith <(

Construction, ut also their ac1uiescence to the completion of the development of (hase I at the much later date of Ae ruary )*, )**/' "ore importantly, y no stretch of semantic interpretation can it e construed as a cate!orical demand on Ayala Corporation to offer the su ;ect lots for sale to petitioners as the letter merely articulates petitioners desire to e#ercise their option to purchase the su ;ect lots and concern over the fact that they have not een provided -ith the specifications of these lots' The letters of petitioners children, Cuan "i!uel and Victoria Va01ue0, dated Canuary 56, )*+, and Ae ruary )+, )*+, can also not e considered cate!orical demands on Ayala Corporation to develop the first phase of the property -ithin the three $6&?year period much less to offer the su ;ect lots for sale to petitioners' The letter dated Canuary 56, )*+, reads in part8
36%4 36>4

&ou #ill understand our interest in the )o!pletion of the roads to our propert$, sin)e #e )annot de+elop it till $ou ha+e )onstru)ted the sa!e. Allo# us to re!ind $ou of our Me!orandu! of A"ree!ent, as per #hi)h $ou )o!!itted to de+elop the roads to our propert$ /as per the ori"inal plans of the )o!pan$0, and that 1. -he 'a)* portion should ha+e 'een de+eloped 'efore the front portion H #hi)h has not 'een the )ase. 2. -he #hole pro7e)t H front and 'a)* portions 'e )o!pleted '$ 198..
The letter dated Ae ruary )+, )*+, is similarly -orded' It states8
36+4

,n this re"ard, #e #ould li*e to re!ind $ou of Arti)les >.5 and >.9 of our Me!orandu! of A"ree!ent #hi)h states respe)ti+el$8J
36*4

Even petitioner Daniel Va01ue0 letter dated "arch 9, )*+, does not ma.e out a cate!orical demand for Ayala Corporation to offer the su ;ect lots for sale on or efore April 56, )*+,' The letter reads in part8
3,/4

Jand that #e e9pe)t fro! $our "oodsel+es )o!plian)e #ith our Me!orandu! of A"ree!ent, and a definite date as to #hen the road to our propert$ and the de+elop!ent of 2hase , #ill 'e )o!pleted.
3,)4

At est, petitioners letters can only e construed as mere reminders -hich cannot e considered demands for performance ecause it must appear that the tolerance or enevolence of the creditor must have ended'
3,54

The petition finally as.s us to determine -hether para!raph 9')9 of the "OA can properly e construed as an option contract or a ri!ht of first refusal' (ara!raph 9')9 states8

>.1> -he <3&;4 a"rees to "i+e the :;LL;4: first option to pur)hase four de+eloped lots ne9t to the /4etained Area0 at the pre+ailin" !ar*et pri)e at the ti!e of the pur)hase.
3,64

The Court has clearly distin!uished et-een an option contract and a ri!ht of first refusal' An option is a preparatory contract in -hich one party !rants to another, for a fi#ed period and at a determined price, the privile!e to uy or sell, or to decide -hether or not to enter into a principal contract' It inds the party -ho has !iven the option not to enter into the principal contract -ith any other person durin! the period desi!nated, and -ithin that period, to enter into such contract -ith the one to -hom the option -as !ranted, if the latter should decide to use the option' It is a separate and distinct contract from that -hich the parties may enter into upon the consummation of the option' It must e supported y consideration'
3,,4

In a ri!ht of first refusal, on the other hand, -hile the o ;ect mi!ht e made determinate, the e#ercise of the ri!ht -ould e dependent not only on the !rantors eventual intention to enter into a indin! ;uridical relation -ith another ut also on terms, includin! the price, that are yet to e firmed up'
3,94

Applied to the instant case, para!raph 9')9 is o viously a mere ri!ht of first refusal and not an option contract' Althou!h the para!raph has a definite o ;ect, i.e., the sale of su ;ect lots, the period -ithin -hich they -ill e offered for sale to petitioners and, necessarily, the price for -hich the su ;ect lots -ill e sold are not specified' The phrase @at the prevailin! mar.et price at the time of the purchaseB connotes that there is no definite period -ithin -hich Ayala Corporation is ound to reserve the su ;ect lots for petitioners to e#ercise their privile!e to purchase' Neither is there a fi#ed or determina le price at -hich the su ;ect lots -ill e offered for sale' The price is considered certain if it may e determined -ith reference to another thin! certain or if the determination thereof is left to the ;ud!ment of a specified person or persons'
3,%4

Aurther, para!raph 9')9 -as inserted into the "OA to !ive petitioners the first crac. to uy the su ;ect lots at the price -hich Ayala Corporation -ould e -illin! to accept -hen it offers the su ;ect lots for sale' It is not supported y an independent consideration' As such it is o* !overned y Articles )65, and ),>* of the Civil Code, vi !

Art. 132.. ?hen the offeror has allo#ed the offeree a )ertain period to a))ept, the offer !a$ 'e #ithdra#n at an$ ti!e 'efore a))eptan)e '$ )o!!uni)atin" su)h #ithdra#al, e9)ept #hen the option is founded upon a )onsideration, as so!ethin" paid or pro!ised. Art. 1.59. A pro!ise to 'u$ and sell a deter!inate thin" for a pri)e )ertain is re)ipro)all$ de!anda'le.

An a))epted unilateral pro!ise to 'u$ or to sell a deter!inate thin" for a pri)e )ertain is 'indin" upon the pro!issor if the pro!ise is supported '$ a )onsideration distin)t fro! the pri)e.
Conse1uently, the @offerB may -ithdra-al to the other party'
3,>4

e -ithdra-n anytime

y communicatin! the

In this case, Ayala Corporation offered the su ;ect lots for sale to petitioners at the price of (%,9//'//Gs1uare meter, the prevailin! mar.et price for the property -hen the offer -as made on Cune )+, )**/' Insistin! on payin! for the lots at the prevailin! mar.et price in )*+, of (,%/'//Gs1uare meter, petitioners re;ected the offer' Ayala Corporation reduced the price to(9,///'//Gs1uare meter ut a!ain, petitioners re;ected the offer and instead made a counter?offer in the amount of (5,///'//Gs1uare meter' Ayala Corporation re;ected petitioners counter?offer' Dith this re;ection, petitioners lost their ri!ht to purchase the su ;ect lots'
3,+4 3,*4

It cannot, therefore, e said that Ayala Corporation reached petitioners ri!ht of first refusal and should e compelled y an action for specific performance to sell the su ;ect lots to petitioners at the prevailin! mar.et price in )*+,' +,ERE-%RE, the instant petition is DENIED' No pronouncement as to costs' (% %RDERED. Puno, "Chairman#, ''., concur. Austria-Martine , Calle$o, %r., and Chico-&a ario,

Dr. Da .e/ Va012e0 3 "a. L2.0a Va012e0 v4 A5a/a $or6. G.R. No. 149734 November 19, 2004 -a7*4) The rise in value of four lots in one of the countryMs prime residential developments, Ayala Ala an! Villa!e in "untinlupa City, over a period of si# $%& years only, represents i! money' The hu!e price difference lies at the heart of the present controversy' (etitioners insist that the lots should e sold to them at )*+, prices -hile respondent maintains that the prevailin! mar.et price in )**/ should e the sellin! price' Dr' Daniel Va01ue0 and "a' 2uisa Va01ue0 filed this (etition for 7evie- on Certiorari dated Octo er )), 5//) assailin! the Decision of the Court of Appeals dated Septem er %, 5//) -hich reversed the Decision of the 7e!ional Trial Court $7TC& and dismissed their complaint for specific performance and dama!es a!ainst Ayala Corporation' On April 56, )*+), spouses Daniel Vas1ue0 and "a' 2uisa "' Vas1ue0, -ith AJA2A uyin! from the Va01ue0 spouses, all of the latterMs shares of stoc. in Conduit Development, Inc' The main asset of Conduit -as a ,*'* hectare property in Ayala Ala an!, "untinlupa, -hich -as then ein! developed y Conduit under a development plan -here the land -as divided into Villa!es ), 5 and 6 of the NDon Vicente Villa!e'N The development -as then ein! underta.en for Conduit y <'(' Construction and Development Corp' Inder the "OA, Ayala -as to develop the entire property, less -hat -as defined as the N7etained AreaN consistin! of )+,>6% s1uare meters' This N7etained AreaN -as to e retained y the Va01ue0 spouses' The area to e developed y Ayala -as called the N7emainin! AreaN' In this N7emainin! AreaN -ere , lots ad;acent to the N7etained AreaN and Ayala a!reed to offer these lots for sale to the Va01ue0 spouses at the prevailin! price at the time of purchase'

Inder the "OA, the Vas1ue0 spouses made several e#press -arranties, as follo-s8 $)& The SE22E7S shall deliver to the HIJE78 The true and complete list, certified y the Secretary and Treasurer of the Company sho-in! a list of all persons andGor entities -ith -hom the Company has pendin! contracts, if any' $5& Audited financial statements of the Company as at closin! date' $6& All o li!ations of the HIJE7 under this A!reement are su ;ect to fulfillment prior to or at the Closin!, of the follo-in! conditions8 The representations and -arranties y the SE22E7S contained in this A!reement shall e true and correct at the time of Closin! as thou!h such representations and -arranties -ere made at such time' $,& 7epresentation and Darranties y the SE22E7S8 The SE22E7S ;ointly and severally represent and -arrant to the HIJE7 that at the time of the e#ecution of this A!reement and at the Closin!' After the e#ecution of the "OA, Ayala caused the suspension of -or. on Villa!e ) of the Don Vicente (ro;ect' Ayala then received a letter from one "a#imo Del 7osario of 2ancer <eneral Huilder Corporation informin! Ayala that he -as claimin! the amount of (),9/*,99+'+/ as the su contractor of <'(' Construction' <'(' Construction not ein! a le to reach an amica le settlement -ith 2ancer, on "arch 55, )*+5, 2ancer sued <'(' Construction, Conduit and Ayala in the then Court of Airst Instance of "anila in Civil Case' Construction in turn filed a cross?claim a!ainst Ayala' <'(' Construction and 2ancer oth tried to en;oin Ayala from underta.in! the development of the property' The suit -as terminated only on Ae ruary )*, )*+>, -hen it -as dismissed -ith pre;udice after Ayala paid oth 2ancer and <( Construction the total of (,,%+%,))6'6*' Hy early )**/ Ayala finished the development of the vicinity of the , lots to e offered for sale' The four lots -ere then offered to e sold to the Vas1ue0 spouses at the prevailin! price in )**/' This -as re;ected y the Vas1ue0 spouses -ho -anted to pay at )*+, prices, there y leadin! to the suit elo-' I442e) DGN petitioners reached their -arranties under the "OA -hen they failed to disclose the 2ancer claimL ,e/!) After trial, the court a 1uo rendered its decision, the dispositive portion of -hich states8 NT=E7EAO7E, ;ud!ment is here y rendered in favor of plaintiffs and a!ainst defendant, orderin! defendant to sell to plaintiffs the relevant lots descri ed in the Complaint in the Ayala Ala an! Villa!e at the price of (,%/'// per s1uare meter amountin! to (),6,*,9,/'//: orderin! defendant to reim urse to plaintiffs attorneyMs fees in the sum of (5//,///'// and to pay the cost of the suit'N In its decision, the court concluded that the Vas1ue0 spouses -ere not o li!ated to disclose the potential claims of <( Construction, 2ancer and Del 7osario: AyalaMs accountants should have opened the records of Conduit to find out all claims: the -arranty a!ainst suit is -ith respect to Nthe shares of the (ropertyN and the 2ancer suit does not affect the shares of stoc. sold to Ayala' Ayala -as o li!ated to develop -ithin 6 years: to say that Ayala -as under no o li!ation to follo- a time frame -as to put the Vas1ue0es at AyalaMs mercy: Ayala did not develop ecause of a slump in the real estate mar.et: the "OA -as drafted and prepared y the AJA2A -ho should suffer its am i!uities: the option to purchase the , lots is valid ecause it -as supported y consideration as the option is incorporated in the "OA -here the parties had prestations to each other' Ayala Corporation filed an appeal, alle!in! that the trial court erred in holdin! that petitioners did not reach their -arranties under the "OA dated April 56, )*+): that it -as o li!ed to develop the land -here the four $,& lots su ;ect of the option to purchase are located -ithin three $6& years from the date of the "OA: that it -as in delay: and that the option to purchase -as valid ecause it -as incorporated in the "OA and the consideration therefore -as the commitment y Ayala Corporation to petitioners em odied in the "OA' '8e $o2r* o9 A66ea/4 rever4e! *8e R'$ De7.4.o Accordin! to the appellate court, Ayala Corporation -as never informed eforehand of the e#istence of the 2ancer claim' In fact, Ayala Corporation !ot a copy of the 2ancer su contract only on "ay 5*, )*+) from <'(' ConstructionMs la-yers' The Court of Appeals thus held that petitioners violated their -arranties under the "OA -hen they failed to disclose 2ancerMs claims' =ence, even concedin! that Ayala Corporation -as o li!ed to develop and sell the four $,& lots in 1uestion -ithin three $6& years from the date of the "OA, the

o li!ation -as suspended durin! the pendency of the case filed y 2ancer' The appellate court li.e-ise ruled that para!raph 9')9 a ove?1uoted is not an option contract ut a ri!ht of first refusal there ein! no separate consideration therefor' Since petitioners refused Ayala CorporationMs offer to sell the su ;ect lots at the reduced )**/ price of (9,///'// per s1uare meter, they have effectively -aived their ri!ht to uy the same' "oreover, Ayala Corporation asserts that the -arranties under the "OA are not ;ust a!ainst suits ut a!ainst all .inds of lia ilities not reflected in the Audited Ainancial Statements' 2astly, Ayala Corporation maintains that para!raph 9')9 of the "OA is a ri!ht of first refusal and not an option contract' (etitioners filed their 7eply dated Au!ust )9, 5//5 reiteratin! the ar!uments in their (etition and contendin! further that they did not violate their -arranties under the "OA ecause the case -as filed y 2ancer only on April ), )*+5, eleven $))& months and ei!ht $+& days after the si!nin! of the "OA on April 56, )*+)' Ayala Corporation admitted that it received 2ancerMs claim efore the NClosin!N date' It therefore had all the time to rescind the "OA' Not havin! done so, it can e concluded that Ayala Corporation itself did not consider the matter a violation of petitionersM -arranty' &ro7e!2ra/ &ro7e44 De shall first dispose of the procedural 1uestion raised y the instant petition' It is -ell?settled that the ;urisdiction of this Court in cases rou!ht to it from the Court of Appeals y -ay of petition for revie- under 7ule ,9 is limited to revie-in! or revisin! errors of la- imputed to it, its findin!s of fact ein! conclusive on this Court as a matter of !eneral principle' =o-ever, since in the instant case there is a conflict et-een the factual findin!s of the trial court and the appellate court, particularly as re!ards the issues of reach of -arranty, o li!ation to develop and incurrence of delay, -e have to consider the evidence on record and resolve such factual issues as an e#ception to the !eneral rule' In any event, the su mitted issue relatin! to the cate!ori0ation of the ri!ht to purchase !ranted to petitioners under the "OA is le!al in character' R2/. : In this case, Ayala Corporation offered the su ;ect lots for sale to petitioners at the price of (%,9//'//Gs1uare meter, the prevailin! mar.et price for the property -hen the offer -as made on Cune )+, )**/' Insistin! on payin! for the lots at the prevailin! mar.et price in )*+, of (,%/'//Gs1uare meter, petitioners re;ected the offer' Ayala Corporation reduced the price to (9,///'//Gs1uare meter ut a!ain, petitioners re;ected the offer and instead made a counter?offer in the amount of (5,///'//Gs1uare meter' Ayala Corporation re;ected petitionersM counter?offer' Dith this re;ection, petitioners lost their ri!ht to purchase the su ;ect lots' It cannot, therefore, e said that Ayala Corporation reached petitionersM ri!ht of first refusal and should e compelled y an action for specific performance to sell the su ;ect lots to petitioners at the prevailin! mar.et price in )*+,' D=E7EAO7E, the instant petition is DENIED' No pronouncement as to costs' SO O7DE7ED'