1. Limketkai Sons Milling v.

CA
Facts: On 14 May 1976, Philippine Remnants Co., Inc. constituted the Bank of the Philippine
Islands (BPI) as its trustee to manage, administer, and sell its real estate property. One such
piece of property placed under trust was the disputed lot, a 33,056-sq.ms. lot at Barrio
Bagong Ilog, Pasig (TCT 493122). On 23 June 1988, Pedro Revilla, Jr., a licensed real
estate broker was given formal authority by BPI to sell the lot for P1,000.00 per sq.m. This
arrangement was concurred in by the owners of the Philippine Remnants. Broker Revilla
contacted Alfonso Lim of Limketkai Sons Milling (LSM) who agreed to buy the land. On 8
July 1988, LSMs officials and Revilla were given permission to enter and view the property
they were buying (by Rolando V. Aromin, BPI Assistant Vice-President). On 9 July 1988,
Revilla formally informed BPI that he had procured a buyer, LSM. On 11 July 1988, LSMs
officials, Alfonso Lim and Albino Limketkai, went to BPI to confirm the sale. They were
entertained by Vice-President Merlin Albano and Asst. Vice-President Aromin. LSM asked
that the price of P1,000.00 per sq.m. be reduced to P900.00 while Albano stated the price to
be P1,100.00. The parties finally agreed that the lot would be sold at P1,000.00 per sq.m. to
be paid in cash. Since the authority to sell was on a first come, first served and nonexclusive basis, it may be mentioned at this juncture that there is no dispute over LSMs
being the first comer and the buyer to be first served. Notwithstanding the final agreement to
pay P1,000.00 per sq.m. on a cash basis, Alfonso Lim asked if it was possible to pay on
terms. The bank officials stated that there was no harm in trying to ask for payment on terms
because in previous transactions, the same had been allowed. It was the understanding,
however, that should the term payment be disapproved, then the price shall be paid in cash.
It was Albano who dictated the terms under which the installment payment may be
approved, and acting thereon, Alfonso Lim, on the same date, 11 July 1988, wrote BPI
through Merlin Albano embodying the payment initially of 10% and the remaining 90% within
a period of 90 days. 2 or 3 days later, LSM learned that its offer to pay on terms had been
frozen. Alfonso Lim went to BPI on 18 July 1988 and tendered the full payment of
P33,056,000.00 to Albano. The payment was refused because Albano stated that the
authority to sell that particular piece of property in Pasig had been withdrawn from his unit.
The same check was tendered to BPI Vice-President Nelson Bona who also refused to
receive payment.
An action for specific performance with damages was thereupon filed on 25 August 1988 by
LSM against BPI with the RTC Pasig (Branch 151). In the course of the trial, BPI informed
the trial court that it had sold the property under litigation to National Book Store (NBS) on
14 July 1989. The complaint was thus amended to include NBS. On 10 June 1991, the trial
court rendered judgment in favor of LSM; holding that there was a perfected contract

between LSM and BPI, and thus declared the Deed of Sale involving the lot in Pasig in the
name of BPI and in favor of NBS as null and void; ordered the Register of Deeds of the
Province of Rizal to cancel the TCT which may have been issued in favor of NBS by virtue of
the said deed; ordered BPI upon receipt by it from LSM of the sum of P33,056,000,00 to
execute a Deed of Sale in favor of the latter of the said property at the price of P1,000.00 per
sq.m. and in default thereof, the Clerk of Court is directed to execute the deed dated 14 July
1989; ordered the Register of Deeds of Pasig, upon registration of the said deed, whether
executed by BPI or the Clerk of Court and payment of the corresponding fees and charges,
to cancel said TCT 493122 and to issue, in lieu thereof, another transfer certificate of title in
the name of LSM; ordered BPI and NBS to pay in solidum to LSM the sums of
P10,000,000.00 as actual and consequential damages and P150,000.00 as attorneys fees
and litigation expenses, both with interest at 12% per annum from date of judgment; on the
cross-claim by the bank against NBS, ordered NBS to indemnify the bank of whatever BPI
shall have paid to LSM; dismissed the counterclaim of both BPI and NBS against LSM and
the cross-claim of NBS against BPI; with costs against BPI and NBS.
Upon elevation of the case to the Court of Appeals, the decision of the trial court was
reversed and the complaint dismissed on 12 August 1994. It was held that no contract of
sale was perfected because there was no concurrence of the three requisites enumerated in
Article 1318 of the Civil Code. Hence, the petition.
The Supreme Court reversed and set aside the questioned judgment of the Court of
Appeals, and reinstated the 10 June 1991 judgment of Branch 151 of the RTC of The
National Capital Judicial Region stationed in Pasig, Metro Manila except for the award of
P10,000,000.00 damages, which was deleted.
Facts: Phil. Remnants Co. constituted BPI to manage, administer and sell its real property
located in Pasig, Metro Manila. BPI gave authority to real estate broker Pedro Revilla Jr. to
sell the lot for P1000 per square meter.
Revilla contacted Alfonso Lim of petitioner company who agreed to buy the land and
thereafter was allowed to view the land. Lim and Alfonso LImketkai went to BPI to confirm
the sale and both finally agreed that the land would be sold for P1000 per square meter.
Notwithstanding the agreement, Alfonso asked BPI if it was possible to pay in terms
provided that in case the term is disapproved, the price shall be paid in cash. Two or three
days later, petitioner learned that its offer to pay on terms had been frozen. Alfonso Lim went
to BPI on July 18, 1988 and tendered the full payment of P33,056,000.00 to Albano. The
payment was refused because Albano stated that the authority to sell that particular piece of
property in Pasig had been withdrawn from his unit. An action for specific performance with

damages was thereupon filed on August 25, 1988 by petitioner against BPI. In the course of
the trial, BPI informed the trial court that it had sold the property under litigation to NBS
ISSUE: WON there was a perfected contract of sale between Limketkai Co. and BPI.
HELD: There was already a perfected contract of sale because both parties already agreed
to the sale of P1000/sq.m. Even if Lim tried to negotiate for a payment in terms, it is clear
that if it be disapproved, the payment will be made in cash.
The perfection of the contract took place when Aromin and Albano, acting for BPI, agreed to
sell and Alfonso Lim with Albino Limketkai, acting for petitioner Limketkai, agreed to buy the
disputed lot at P1,000.00 per square meter. Aside from this there was the earlier agreement
between petitioner and the authorized broker. There was a concurrence of offer and
acceptance, on the object, and on the cause thereof.
The phases that a contract goes through may be summarized as follows:
a. preparation, conception or generation, which is the period of negotiation and bargaining,
ending at the moment of agreement of the parties;
b. perfection or birth of the contract, which is the moment when the parties come to agree on
the terms of the contract; and
c. consummation or death, which is the fulfillment or performance of the terms agreed upon
in the contract

the terms and conditions of the offer to sell and because of information received that
defendants were about to sell the property, plaintiffs were compelled to file the complaint to
compel defendants to sell the property to them. After the issues were joined, defendants
filed a motion for summary judgment which was granted by the lower court. The trial court
found that defendants offer to sell was never accepted by the plaintiffs for the reason that
the parties did not agree upon the terms and conditions of the proposed sale, hence, there
was no contract of sale at all. Nonetheless, the lower court ruled that should the defendants
subsequently offer their property for sale at a price of P11 million or below, plaintiffs will have
the right of first refusal.
Aggrieved by the decision, plaintiffs appealed to the Court of Appeals (CA-GR CV 21123). In
a decision promulgated on 21 September 1990 (penned by Justice Segundino G. Chua and
concurred in by Justices Vicente V. Mendoza and Fernando A. Santiago), the appellate court
affirmed with modification the lower courts judgment, holding that there was no meeting of
the minds between the parties concerning the sale of the property and thus, the claim for
specific performance will not lie. The appellate did not grant the appellants the right of first
refusal in the event the subject property is sold for a price in excess of P11 million.
The decision of the appellate court was brought to the Supreme Court by petition for review
on certiorari. The Supreme Court denied the appeal on 6 May 1991 for insufficiency in form
and substances.

2. Ang Yu Asuncion, et.al. vs. CA

Facts: On 29 July 1987 a Second Amended Complaint for Specific Performance was filed by
Ann Yu Asuncion, Arthur Go, and Keh Tiong against Bobby Cu Unjieng, Rose Cu Unjieng
and Jose Tan before the RTC Manila (Branch 31, Civil Case 87-41058) alleging, among
others, that the former are tenants or lessees of residential and commercial spaces owned
by the latter described as 630-638 Ongpin Street, Binondo, Manila; that they have occupied
said spaces since 1935 and have been religiously paying the rental and complying with all
the conditions of the lease contract; that on several occasions before 9 October 1986, the
latter informed the former that they are offering to sell the premises and are giving them
priority to acquire the same; that during the negotiations, Bobby Cu Unjieng offered a price
of P6-million while Ang Yu Asuncion, et.al. (plaintiffs) made a counter offer of P5-million; that
plaintiffs thereafter asked Bobby Cu Unjieng, Rose Cu Unjueng and Jose Tan (defendants)
to put their offer in writing to which request defendants acceded; that in reply to defendants
letter, plaintiffs wrote them on 24 October 1986 asking that they specify the terms and
conditions of the offer to sell; that when plaintiffs did not receive any reply, they sent another
letter dated 28 January 1987 with the same request; that since defendants failed to specify

On 15 November 1990, while CA-GR CV 21123 was pending consideration by the appellate
court, the Cu Unjieng spouses executed a Deed of Sale transferring the property in question
to Buen Realty and Development Corporation for P15 million. As a consequence of the sale,
TCT 105254/T-881 in the name of the Cu Unjieng spouses was cancelled and, in lieu
thereof, TCT 195816 was issued in the name of Buen Realty on 3 December 1990. On 1
July 1991, Buen Realty as the new owner of the subject property wrote a letter to the
lessees demanding that the latter vacate the premises. On 16 July 1991, the lessees wrote a
reply to Buen Realty stating that petitioner brought the property subject to the notice of lis
pendens regarding Civil Case 87-41058 annotated on TCT 105254/T-881 in the name of the
Cu Unjiengs.
The lessees filed a Motion for Execution dated 27 August 1991 of the Decision in Civil Case
87-41058 as modified by the Court of Appeals in CA-GR CV 21123. On 30 August 1991, the
Judge issued an order ordering Cu Unkieng to execute the necessary Deed of Sale of the
property in litigation in favor of plaintiffs Ang Yu Asuncion, Keh Tiong and Arthur Go for the
consideration of P15 Million pesos in recognition of the latters right of first refusal and that a

new TCT be issued in favor of the buyer, and thus, setting aside all previous transactions
involving the same property notwithstanding the issuance of another title to Buen Realty
Corporation, which was said to have been executed in bad faith. On 22 September 1991,
the Judge issue another order directing the Deputy Sheriff to implement the Writ of
Execution ordering the defendants among others to comply with the Order of the Court
within a period of 1 week from receipt of this Order and for defendants to execute the
necessary Deed of Sale of the property in litigation in favor of the plaintiffs Ang Yu Asuncion,
Keh Tiong and Arthur Go for the consideration of P15,000,000.00 and ordering the Register
of Deeds of the City of Manila, to cancel and set aside the title already issued in favor of
Buen Realty Corporation which was previously executed between the latter and defendants
and to register the new title in favor of the aforesaid plaintiffs Ang Yu Asuncion, Keh Tiong
and Arthur Go. On the same day, the corresponding writ of execution was issued.
On 4 December 1991, the appellate court, on appeal to it by Buen Realty (CA-GR SP
26345), set aside and declared without force and effect the questioned orders of the court a
quo. Hence, the petition for certiorari.
The Supreme Court upheld the decision of the Court of Appeals in ultimately setting aside
the questioned Orders, dated 30 August 1991 and 27 September 1991, of the court a quo;
with costs against Ang Yu Asuncion, et. al.
FACTS: The Unijeng spouses owned certain residential and commercial spaces leased by
Ang Yu. They offered to sell the said units to Ang Yu on several occasions and for P6M. Ang
Yu made a counter offer for P5M. The Unijeng spouses asked Ang Yu to specify his terms in
writing but the latter failed to do so. They failed to arrive at any definite agreement. When
Ang Yu discovered that the spouses were planning to sell the property to others, he sued
them for specific performance. While the case was pending, the spouses sold the units to
Buen Realty for P15M.
ISSUE: W/N there was a perfected contract of sale between Unijeng and Ang Yu
HELD: NO. There was no perfected contract of sale yet since there was yet any meeting of
the minds. Thus, there is no ground for specific performance. During the negotiation stage,
any party may withdraw the offer madeespecially if it was not supported by any
consideration.
An Option Contract of a Right of First Refusal is separate and distinct from the actual
contract of salewhich is the basis for specific performance. The remedy available to Any

Yu, in case the withdrawal was made capriciously and arbitrarily, would be to sue on the
basis of abuse of right. In case there was an option contract, timely acceptance would create
an obligation to sell on the part of the vendor; but no such circumstance attends in this case.
3. De la Cavada v. Diaz
Facts: On 15 November 1912, Antonio Diaz and Antonio Enriquez de la Cavada entered into
a contract of option for the latter to purchase the formers hacienda at Pitogo, within the
period necessary for the approval and issuance of a Torrens title thereto by the Government
for P30,000 in cash or P40,000 with 6% interest per annum within 6 years with due security,
i.e. the 100 hectares of land in Pitogo, Tayabas; containing 20,000 coconut trees and 10,000
nipa-palm trees sold to Enriquez for P70,000. Subsequently, Enriquez informed Diaz of his
conformity with the letter of option under the condition that he shall send a surveyor to
survey the said property, and to apply to the Government for a Torrens title therefor, and, if
the expenses incurred for the same should not exceed P1,000, he shall pay the P500 and
you the other P500; Provided, however, that Diaz shall give the surveyor all necessary
assistance during his stay at the hacienda; and that he shall pay the purchase price to you in
conformity with our letter of option of this date, and after the Torrens title shall have been
officially approved. Soon after the execution of said contract, and in part compliance with the
terms thereof, Diaz presented 2 petitions in the Court of Land Registration (13909 and
13919), each for the purpose of obtaining the registration of a part of the Hacienda de
Pitogo. Said petitions were granted, and each parcel was registered and a certificate of title
was issued for each part under the Torrens system to Diaz. Later, and pretending to comply
with the terms of said contract, Diaz offered to transfer to Enriquez one of said parcels only,
which was a part of said hacienda. Enriquez refused to accept said certificate for a part
only of said hacienda upon the ground that it was only a part of the Hacienda de Pitogo,
and under the contract he was entitled to a transfer to him a all said hacienda.
Raised in the lower court, Diaz theorized that the contract of sale of said Hacienda de
Pitogo included only 100 hectares, more or less, of said hacienda, and that offering to
convey to Enriquez a portion of said hacienda, and that by offering to convey to Enriquez a
portion of said hacienda composed of 100 hectares, more or less, he thereby complied
with the terms of the contract. Enriquez theorized, on the other hand, that he had purchased
all of said hacienda, and that the same contained, at least, 100 hectares, more or less. The
lower court sustained the contention of Enriquez, that the sale was a sale of the Hacienda
de Pitogo and not a sale of a part of it. The Court ordered Diaz, within 30 days from the
date upon which this decision becomes final, convey to Enriquez a good and sufficient title in
fee simple to the Court of Land Registration, upon payment or legal tender of payment by

Enriquez of the sum of P30,000 in cash, and upon Enriquez giving security approved by this
court for the payment within the term of 6 years from the date of the conveyance for the
additional sum of P40,000 with interest at the rate of 6% per annum. The Court further
ordered and adjudged that in the event of the failure of Diaz to execute the conveyance,
Enriquez has and recover judgment against him, Diaz, for the sum of P20,000, with interest
at the rate of 6% (6% per annum from the date upon which the conveyance should have
been made). From the judgment, Diaz appealed. The Supreme Court affirmed the judgment
of the lower court, with costs.
FACTS: Plaintiff Antonio dela Cavada and defendant Antonio Diaz made a Contract of
Option where the latter promised to sell to the former hisHacienda de Pitogo located in
Tayabas together with its coconut and nipa palm trees for 30 and 70 thousand pesos
respectively. The contract provides that Dela Cavada has the right to purchase the land until
after Diaz acquires its Torrens title.
Diaz applied two land titles for the hacienda dividing it in two parts. After the titles have
been issued, Diaz offers to sell to Dela Cavada only a portion of the entire hacienda.
ISSUE: WON Diaz is obliged to sell to Dela Cavada the entire hacienda and not only a part
of it.
HELD: A promise made by one party, if made in accordance with the forms required by the
law, may be a good consideration (causa) for a promise made by another party. The contract
is complete, provided they have complied with the forms required by the law and the
consideration need not be paid at the time of the promise.
The plaintiff stood ready to comply with his part of the contract. The defendant, even though
he had obtained a registered title to said parcel of land, refused to comply with his promise.
The contract was not, in fact, what is generally known as a "contract of option." It differs very
essentially from a contract of option. An optional contract is a privilege existing in one
person, for which he had paid a consideration, which gives him the right to buy, for example,
certain merchandise of certain specified property, from another person, if he chooses, at any
time within the agreed period, at a fixed price.
The contract is already in the perfected stage.
4. Carceller vs. Court of Appeals

FACTS: Carceller leased 2 parcels of land owned by State Investment Houses (SIHI), the
period being 18 months at P10,000/month rent. Under the lease, SIHI guaranteed Carceller
the exclusive right and option to purchase the said lots within the lease period for the
aggregate amount of P1.8M. Around 3 weeks before the end of the lease period, SIHI
informed Carceller of the impending termination of the lease and the short period left for him
to purchase. He begged for an extension, but SIHI refused. Nevertheless, SIHI offered the
property to him for lease for another year, but this time, it also offered it for sale to the public.
Carceller thus sued SIHI for specific performance to compel SIHI to execute a Deed of Sale
in his favor.
ISSUE: W/N Carceller may still exercise the option to purchase the property
HELD: YES. Even if Carceller failed to purchase the property within the said period, still
equity must intervene. He had introduced substantial improvements thereon; to rule against
him would cause damage to himand SIHI does not stand to gain much therefrom. SIHI
clearly intended to sell the lot to him considering that it was under financial distress, that is
constantly reminded him of the option and the impending deadline. The delay of 18 days is
not substantial. Carcellers letter to SIHI expressing his intent to purchase the lot is fair
notice of intent to exercise the option despite the request for extension. Carceller should
thus be allowed to buy the lots.
5. Adelfa Properties vs. CA
Facts: Rosario Jimenez-Castaneda, Salud Jimenez and their brothers, Jose and Dominador
Jimenez, were the registered co-owners of a parcel of land consisting of 17,710 sq. ms (TCT
309773) situated in Barrio Culasi, Las Pias, Metro Manila. On 28 July 1988, Jose and
Dominador Jimenez sold their share consisting of 1/2 of said parcel of land, specifically the
eastern portion thereof, to Adelfa Properties pursuant to a Kasulatan sa Bilihan ng Lupa.
Subsequently, a Confirmatory Extrajudicial Partition Agreement was executed by the
Jimenezes, wherein the eastern portion of the subject lot, with an area of 8,855 sq. ms. was
adjudicated to Jose and Dominador Jimenez, while the western portion was allocated to
Rosario and Salud Jimenez. Thereafter, Adelfa Properties expressed interest in buying the
western portion of the property from Rosario and Salud. Accordingly, on 25 November 1989,
an Exclusive Option to Purchase was executed between the parties, with the condition that
the selling price shall be P2,856,150, that the option money of P50,000 shall be credited as
partial payment upon the consummation of sale, that the balance is to be paid on or before
30 November 1989, and that in case of default by Adelfa Properties to pay the balance, the
option is cancelled and 50% of the option money shall be forfeited and the other 50%

refunded upon the sale of the property to a third party, and that all expenses including capital
gains tax, cost of documentary stamps are for the account of the vendors and the expenses
for the registration of the deed of sale for the account of Adelfa properties. Considering,
however, that the owners copy of the certificate of title issued to Salud Jimenez had been
lost, a petition for the re-issuance of a new owners copy of said certificate of title was filed in
court through Atty. Bayani L. Bernardo. Eventually, a new owners copy of the certificate of
title was issued but it remained in the possession of Atty. Bernardo until he turned it over to
Adelfa Properties, Inc.
Before Adelfa Properties could make payment, it received summons on 29 November 1989,
together with a copy of a complaint filed by the nephews and nieces of Rosario and Salud
against the latter, Jose and Dominador Jimenez, and Adelfa Properties in the RTC Makati
(Civil Case 89-5541), for annulment of the deed of sale in favor of Household Corporation
and recovery of ownership of the property covered by TCT 309773. As a consequence, in a
letter dated 29 November 1989, Adelfa Properties informed Rosario and Salud that it would
hold payment of the full purchase price and suggested that the latter settle the case with
their nephews and nieces, adding that if possible, although 30 November 1989 is a holiday,
we will be waiting for you and said plaintiffs at our office up to 7:00 p.m. Another letter of
the same tenor and of even date was sent by Adelfa Properties to Jose and Dominador
Jimenez. Salud Jimenez refused to heed the suggestion of Adelfa Properties and attributed
the suspension of payment of the purchase price to lack of word of honor. On 7 December
1989, Adelfa Properties caused to be annotated on the title of the lot its option contract with
Salud and Rosario, and its contract of sale with Jose and Dominador Jimenez, as Entry No.
1437-4 and entry No. 1438-4, respectively. On 14 December 1989, Rosario and Salud sent
Francisca Jimenez to see Atty. Bernardo, in his capacity as Adelfa Properties counsel, and
to inform the latter that they were cancelling the transaction. In turn, Atty. Bernardo offered to
pay the purchase price provided that P500,000.00 be deducted therefrom for the settlement
of the civil case. This was rejected by Rosario and Salud. On 22 December 1989, Atty.
Bernardo wrote Rosario and Salud on the same matter but this time reducing the amount
from P500,000.00 to P300,000.00, and this was also rejected by the latter. On 23 February
1990, the RTC dismissed Civil Case 89-5541.
On 28 February 1990, Adelfa Properties caused to be annotated anew on TCT 309773 the
exclusive option to purchase as Entry 4442-4.On the same day, 28 February 1990, Rosario
and Salud executed a Deed of Conditional Sale in favor of Emylene Chua over the same
parcel of land for P3,029,250.00, of which P1,500,000.00 was paid to the former on said
date, with the balance to be paid upon the transfer of title to the specified 1/2 portion. On 16
April 1990, Atty. Bernardo wrote Rosario and Salud informing the latter that in view of the

dismissal of the case against them, Adelfa Properties was willing to pay the purchase price,
and he requested that the corresponding deed of absolute sale be executed. This was
ignored by Rosario and Salud. On 27 July 1990, Jimenez counsel sent a letter to Adelfa
Properties enclosing therein a check for P25,000.00 representing the refund of 50% of the
option money paid under the exclusive option to purchase. Rosario and Salud then
requested Adelfa Properties to return the owners duplicate copy of the certificate of title of
Salud Jimenez. Adelfa Properties failed to surrender the certificate of title.
Rosario and Salud Jimenez filed Civil Case 7532 in the RTC Pasay City (Branch 113) for
annulment of contract with damages, praying, among others, that the exclusive option to
purchase be declared null and void; that Adelfa Properties be ordered to return the owners
duplicate certificate of title; and that the annotation of the option contract on TCT 309773 be
cancelled. Emylene Chua, the subsequent purchaser of the lot, filed a complaint in
intervention. On 5 September 1991, the trial court rendered judgment holding that the
agreement entered into by the parties was merely an option contract, and declaring that the
suspension of payment by Adelfa Properties constituted a counter-offer which, therefore,
was tantamount to a rejection of the option. It likewise ruled that Adelfa Properties could not
validly suspend payment in favor of Rosario and Salud on the ground that the vindicatory
action filed by the latters kin did not involve the western portion of the land covered by the
contract between the parties, but the eastern portion thereof which was the subject of the
sale between Adelfa Properties and the brothers Jose and Dominador Jimenez. The trial
court then directed the cancellation of the exclusive option to purchase, declared the sale to
intervenor Emylene Chua as valid and binding, and ordered Adelfa Properties to pay
damages and attorneys fees to Rosario and Salud, with costs.
On appeal, the Court of appeals affirmed in toto the decision of the court a quo (CA-GR
34767) and held that the failure of petitioner to pay the purchase price within the period
agreed upon was tantamount to an election by petitioner not to buy the property; that the
suspension of payment constituted an imposition of a condition which was actually a
counter-offer amounting to a rejection of the option; and that Article 1590 of the Civil Code
on suspension of payments applies only to a contract of sale or a contract to sell, but not to
an option contract which it opined was the nature of the document subject of the case at bar.
Said appellate court similarly upheld the validity of the deed of conditional sale executed by
Rosario and Salud in favor of intervenor Emylene Chua. Hence, the petition for review on
certiorari.
The Supreme Court affirmed the assailed judgment of the Court of Appeals in CA-GR CV
34767, with modificatory premises.

7. Soriano, et. al. v. Bautista, et. al.

6. Villamor vs. CA
Facts: Macaria Labingisa Reyes was the owner of a 600-square meter lot located at Baesa,
Caloocan City (TCT [18431] 18938, Register of Deeds of Rizal). In July 1971, Macaria sold a
portion of 300 sq. ms. of the lot to the Spouses Julio and Marina Villamor for the total
amount of P21,000.00. Earlier, Macaria borrowed P2,000.00 from the spouses which
amount was deducted from the total purchase price of the 300 sq. m. lot sold. The portion
sold to the Villamor spouses is now covered by TCT 39935 while the remaining portion
which is still in the name of Macaria Labingisa- is covered by TCT 39934. On 11 November
1971, Macaria executed a Deed of option in favor of Villamor in which the remaining 300
sq. m. portion (TCT No. 39934) of the lot would be sold to Villamor under the conditions
stated therein. According to Macaria, when her husband, Roberto Reyes, retired in 1984,
they offered to repurchase the lot sold by them to the Villamor spouses but Marina Villamor
refused and reminded them instead that the Deed of Option in fact gave them the option to
purchase the remaining portion of the lot. The Villamors, on the other hand, claimed that
they had expressed their desire to purchase the remaining 300 sq. m. portion of the lot but
the Reyes had been ignoring them.
On 13 July 1987, after conciliation proceedings in the barangay level failed, the Villamors
filed a complaint for specific performance against the Reyes before the RTC Caloocan City
(Branch 121, Civil Case C-12942). On 26 July 1989, judgment was rendered by the trial
court in favor of the Villamor spouses, ordering the Reyeses to sell the land to the Villamors,
to pay the the latter the sum of P3,000 as attorneys fees, and to pay the cost of suit. The
court dismissed the counterclaim for lack of merit.
Not satisfied with the decision of the trial court, the Reyes spouses appealed to the Court of
Appeals (CA-GR CV 24176). On 12 February 1991, the Court of Appeals rendered a
decision reversing the decision of the trial court and dismissing the complaint. The reversal
of the trial courts decision was premised on the finding of respondent court that the Deed of
Option is void for lack of consideration. The Villamor spouses brought the petition for review
on certiorari before the Supreme Court.
The Supreme Court denied the petition, affirmed the decision of the appellate court for
reasons cited in the decision, and dismissed the complaint in Civil Case C-12942 on the
ground of prescription and laches.

Facts: Spouses Basilio Bautista and Sofia de Rosas are the absolute and registered owners
of a parcel of land, situated in Teresa, Rizal (OCT 3905, Register of Deeds of Rizal). On 30
May 1956, the said spouses for and in consideration on the sum of P1,800, signed a
document entitled Kasulatan Ng Sanglaan in favor of Ruperto Soriano and Olimpia de
Jesus. Simultaneously with the signing of the deed, the spouses Bautista and de Rosas
transferred the possession of the said land to Soriano and de Jesus who have been and are
still in possession of the said property and have since that date been and are cultivating the
said land and have enjoyed and are still enjoying the produce thereof to the exclusion of all
other persons. Sometimes after 30 May 1956, the spouses Bautista and de Rosas received
from Soriano and de Jesus, the sum of P450.00 pursuant to the conditions agreed upon in
the document for which no receipt was issued and which was returned by the spouses
sometime on 31 May 1958. On 13 May 1958, a certain Atty. Angel O. Ver wrote a letter to
the spouses Bautista informing the said spouses that his clients Soriano and de Jesus have
decided to buy the parcel of land in question pursuant to paragraph 5 of the document in
question (That it has likewise been agreed that if the financial condition of the mortgagees
will permit, they may purchase said land absolutely on any date within the two-year term of
this mortgage at the agreed price of P3,900.00.). The spouses in spite of the receipt of the
letter refused to comply with the demand contained therein.
On 31 May 1958, Soriano and de Jesus filed before the Trial Court Civil Case 5023, praying
that they be allowed to consign or deposit with the Clerk of Court the sum of P1,650.00 as
the balance of the purchase price of the parcel of land in question. After due hearing,
judgment be rendered ordering Bautista and de Rosas to execute an absolute deed of sale
of the said property in their favor, plus damages.
On 9 June 1958, spouses Bautista and de Rosas filed a complaint against Soriano and de
Jesus, which case after hearing was dismissed for lack of jurisdiction. On 5 August 1959, the
spouses Bautista and de Rosas again filed a case in the CFI against Soriano and de Jesus
asking the Court to order Soriano and de Jesus to accept the payment of the principal
obligation and release the mortgage and to make an accounting of the harvest for the two
harvest seasons (1956-1957). The two cases, were by agreement of the parties assigned to
one branch so that they can be tried jointly. On 10 March 1959, the CFI Rizal, after a joint
trial of both cases, ordered Bautista and de Rosas to execute a deed of sale covering the
property in question in favor of Soriano and de Jesus upon payment by the latter of
P1,650.00 which is the balance of the price agreed upon, i.e. P3,900.00, and the amount

previously received by way of loan by the said spouses from Soriano and de Jesus, to pay
the sum of P500.00 by way of attorneys fees, and to pay the costs.
The Supreme Court affirmed the judgment appealed from, with costs.
8. Dizon vs. Court of Appeals
On 1974, Private respondent Overland Express Lines, Inc (lessee) entered into a Contract
of Lease with Option to Buy with petitioners (lessors) involving a land situated at Quezon
City for one (1) year. During that period the respondent was granted an option to purchase
the land. 1976, for failure of lessee to pay the rentals the petitioners filed an action for
ejectment. The City Court rendered judgment ordering lessee to vacate the leased premises
and to pay the rentals in arrears and damages with interests. Lessee filed a petition
enjoining the enforcement of said judgment and dismissal of the case for lack of jurisdiction.
Such petition was denied. Thereafter, lessee filed for an action for specific performance to
compel the execution of a deed of sale pursuant to the option to purchase and the receipt of
the partial consideration given to Alice Dizon and for the fixing of period to pay the balance.
Respondent Court of Appeals rendered a decision upholding the jurisdiction of City Court
and concluding that there was a perfected contract of sale between the parties due to the
said partial payment. Petitioners motion for reconsideration was denied by the respondent
Court.
Issue: Whether or not there is a perfected contract of sale?
Held: There was no perfected contract of sale between the parties. In herein case, the
lessee gave the money to Alice Dizon in an attempt to resurrect the lapsed option.The basis
for agency is representation and a person dealing with an agent is put upon inquiry and
must discover upon his peril the authority of the agent. Here, there was no showing that
petitioners consented to the act of Alice Dizon nor authorized her to act on their behalf with
regard to her transaction with the lessee. Therefore, one of the essential elements for a
contract of sale to be perfected is lacking: consent.

9. Sanchez vs. Rigos

Facts: On 3 April 1961, Nicolas Sanchez and Severina Rigos executed an instrument,
entitled Option to Purchase, whereby Mrs. Rigos agreed, promised and committed . . . to
sell to Sanchez, for the sum of P1,510.00, a parcel of land situated in the barrios of Abar
and Sibot, municipality of San Jose, province of Nueva Ecija, and more particularly
described in TCT NT-12528 of said province, 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 P1,510.00, made by Sanchez within said period, were
rejected by Mrs. Rigos, on 12 March 1963, the former deposited said amount with the CFI
Nueva Ecija and commenced against the latter the present action, for specific performance
and damages. On 11 February 1964, after the filing of defendants answer, both parties,
assisted by their respective counsel, jointly moved for a judgment on the pleadings.
Accordingly, on 28 February 1964, the lower court rendered judgment for Sanchez, 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
attorneys fees, and the costs. Hence, the appeal by Mrs. Rigos to the Court of Appeals,
which case was the certified by the latter court to the Supreme Court upon the ground that it
involves a question purely of law.
The Supreme Court affirmed the decision appealed from, with costs against Severina Rigos.

10. Montilla vs. CA [G.R. No. L-47968. May 9, 1988.]

Facts: On 27 April 1972, Emilio Aragon Jr. filed an action before the CFI Iloilo to compel
Lina Montilla to comply with a verbal contract to sell to him a piece of land situated at
Poblacion, Iloilo City, known as Lot 4 of the Consolidated Subdivision plan (LRC) Psc-11605.
In his complaint, Aragon claimed that in the last week of June 1969, Montilla had orally
offered to sell the lot to him at a price of P57,650.00 (at the rate of P50 per sq. m.), the price
being payable at any time within a 3-year period from June, 1969 provided that Aragon
constructed on the lot a house of strong materials and paid a nominal monthly rental in the
meantime; but despite Aragons acceptance of the offer, fulfillment by him of the specified
conditions, and his seasonable tender of the purchase price, Montilla had refused to comply
with her obligation. In her answer Montilla categorically denied ever having entered into such
an agreement, and set up the affirmative defenses of (1) unenforceability of the alleged
agreement under the Statute of Frauds; and (2) failure of the complaint to state a cause of
action, no allegation having been made therein of any consideration for the promise to sell
distinct and separate from the price, as required by Article 1479 of the Civil Code. At
Montillas instance, a preliminary hearing was had on her affirmative defenses in accordance
with Section 6, Rule 16 of the Rules of Court, as if a motion to dismiss had been filed. By
Order dated 5 December 1972, the Court denied the implicit motion to dismiss. After trial,
the Court rendered judgment on 22 August 1974 sentencing Montilla to execute the

requisite deed of conveyance of Lot 4, covered by TCT T-29976 in favor of Aragon upon full
payment by him to Montilla of the total consideration thereof in the aggregate sum of
P57,650.00; to pay to Montilla P2,000.00 as attorneys fees, and to pay the costs.
The decision was affirmed by the Court of Appeals. The latters adjudgment has, in turn,
been duly brought up to the Supreme Court by Montilla, on appeal by certiorari under Rule
45 of the Rules of Court.
The Supreme Court reversed and set aside the Decision of the Court of Appeals dated 18
January 1978 and that of the CFI dated 22 August 1974 thereby affirmed, and entered a new
one dismissing Aragons complaint, with costs against him.

13. Vasquez vs. CA [G.R. No. 83759. July 12, 1991.]

Facts: On 21 September 1964, Vallejera and Olea sold the lot to Vasquez and Gayaleno
under a Deed of Sale for the amount of P9,000.00. The Deed of Sale was duly ratified and
notarized. On the same day and along with the execution of the Deed of Sale, a separate
instrument, denominated as Right to Repurchase, was executed by the parties granting the
Vallejera and Olea the right to repurchase the lot for P12,000.00, said document was
likewise duly ratified and notarized. By virtue of the sale, the Vasquez and Gayaleno secured
TCT T-58898 in their name. On 2 January 1969, Vallejera and Olea sold the same lot to
Benito Derrama, Jr., after securing Vasquez and Gayalenos title, for the sum of P12,000.00.
Upon the protestations of Vasquez and Gayaleno, assisted by counsel, the said second sale
was cancelled after the payment of P12,000.00 by Vasquez and Gayaleno to Derrama.

11. Yao Ka Sin Trading vs. Court of Appeals (209 SCRA 763)
12. Nietes vs. Court of Appeals (46 SCRA 654)
FACTS: Nietes leased from Dr. Garcia the Angeles Educational Institute; the contract
contained an Option to Buy the land and school buildings within the period of the lease. It
also stipulated that the unused payment will be applied to the purchase price of the school.
Nietes paid Garcia certain sums in excess of the rent, which Garcia acknowledged as
forming partial payment of the purchase price of the property. Later on, Garcia, through
counsel, wrote Nietes informing him of his decision to rescind the contract due to certain
violations of the contractsuch as poor maintenance, lack of inventory of school equipment,
and the use of another name for the said school. Nietes replied by informing Garcia that he
decided to exercise his Option to Buy, but Garcia refused to sell. Nietes thereafter deposited
the balance of the price to Agro-Industrial Bank, but he later withdrew the said amounts. CA
ruled in favor of Garcia stating that the full purchase price must be paid before the Option to
Buy may be exercised. Thus, Nietes brought the matter to the SC.
ISSUE: W/N actual payment is needed before one may exercise the option to buy
HELD: NO. There is nothing in the contract that required Nietes to pay the full price before
he could exercise the option. It was sufficient that he informed Garcia of his choice and that
he was at that time ready to pay. The exercise of the option need not be coupled with actual
payment so long as such payment is made upon the fulfillment of the owners undertaking to
deliver the property. This is based on the principle that such option contracts involve
reciprocal obligationsand one does not incur delay if the other party fails or refuses to
comply with his respective obligation. That being the case, there was no need for Nietes to
deposit the said amountsand his withdrawal thereof does not affect his right.

On 15 January 1975, Spouses Martin Vallejera and Apolonia Olea filed an action against
Spouses Cirpriano Vasquez and Valeriana Gayaleno seeking to redeem Lot 1860 of the
Himamaylan Cadastre which was previously sold by the former to the latter on 21
September 1964. Said lot was registered in the name of Vallejera and Olea. On October
1959, the same was leased by them to Vasquez and Gayalleno up to crop year 1966-67,
which was extended to crop year 1968-69. After the execution of the lease, Vasquez and
Gayaleno took possession of the lot, up to now and devoted the same to the cultivation of
sugar. Vasquez and Gayeleno resisted the action for redemption on the premise that the
Right to Repurchase is just an option to buy since it is not embodied in the same document
of sale but in a separate document, and since such option is not supported by a
consideration distinct from the price, said deed for right to repurchase is not binding upon
them. After trial, the RTC Himamaylan, Negros Occidental (6th Judicial Region, Branch 56,
Civil Case 839) rendered judgment against Vasquez and Gayeleno, ordering them to resell
lot 1860 of the Himamaylan Cadastre to Vallejera and Olea for the repurchase price of
P24,000.00, which amount combines the price paid for the first sale and the price paid by
the former to Benito Derrama, Jr. Vallejera and Gayeleno moved for, but were denied
reconsideration. Excepting thereto, they appealed.
The Court of Appeals affirmed the decision of the RTC Himamaylan, Negros Occidental in
Civil Case 839. In addition, the appellate court ordered Vasquez and Gayeleno to pay the
amount of P5,000.00 as necessary and useful expenses in accordance with Article 1616 of
the Civil Code. Hence, the petition.

The Supreme Court granted the petition, reversed and set aside the questioned decision
and resolution of the Court of Appeals , and dismissed the complaint in Civil Case 839 of the
then CFI Negros Occidental 12th Judicial District Branch 6; without costs.
FACTS: The Vallejera spouses sought to recover from Vasquez an agricultural lot, which
they previously sold to him. Along with the previous execution of a Deed of Sale, the parties
also executed a Right of Repurchase allowing Vallejera to repurchase the said estate.
Vasquez resisted the redemption arguing that the option to buy was not supported by any
considerationand thus not binding upon him.
ISSUE: W/N there was a valid option contract
HELD: NO. It is apparent that the Right to Repurchase was not supported by any
consideration. Thus, in order for the doctrine under Sanchez v Rigos to apply, giving rise to a
valid contract of sale, it must be shown that the promissee (Vallejera) accepted the right of
repurchase before it was withdrawn by Vasquez. In this case, no such acceptance was
made. The vendor a retro (Vallejera) must make actual and simultaneous tender of payment
and consignation. Mere expressions of readiness and willingness to repurchase are
insufficient. Their ineffectual acceptance allowed Vasquez to withdraw the offer through his
refusal to sell the lot. Vasquez thus cannot be compelled to sell the lot.
14. Equatorial Realty vs. Mayfair Theater
Facts: Carmelo & Bauermann Inc. (Carmelo) owned a parcel of land, together with two 2storey 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 twostorey 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 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.

FACTS: For its theaters, Mayfair was leasing a portion of the property in CM Recto, which
Carmelo owns. Under the lease agreement, if Carmelo should decide to sell the leased
premises, Mayfair shall be given 30 days exclusive option to purchase the same. Carmelo,
through Henry Yang, informed the president of Mayfair that the former is interested in selling
the whole CM Recto propertyand that Araneta offered to purchase the same for $1.2M.
Mayfair twice replied through a letter of its intention to exercise its right to repurchasebut
Carmelo never replied. Thereafter, Carmelo sold the entire property to Equatorial Realty for
some P11M. Thus, Mayfair instituted an action for specific performance and annulment of
the sale.
Carmelo alleges that the right, being an option contract, is void for lack of consideration.
ISSUE: W/N the right to repurchase is an option contract and void for lack of consideration
HELD: NO. The clause in the lease agreement was NOT an option contract, but a RIGHT
OF FIRST REFUSAL. It was premised on Carmelos decision to sell the said property. It also
did not contain a stipulation as to the price of said property. The requirement of separate
consideration does not apply to a right of 1st refusal because consideration is already an
integral part of the lease. Carmelo violated such right by not affording Mayfair a fair chance
to negotiate. It abandoned the negotiations arbitrarily.
Equatorial was likewise in bad faith; it was well aware of the right conferred upon Mayfair
because its lawyers had ample time to review the contract. That being the case, the contract
between Carmelo and Equatorial is rescissible. Mayfair should be allowed to purchase the
entire property for the price offered by Equatorial. Rights of First Refusal are also governed
by the law on contracts, not the amorphous principles on human relations.