Republic of the Philippines

SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 166862

December 20, 2006

MANILA METAL CONTAINER

CORPORATION, petitioner,
REYNALDO C. TOLENTINO, intervenor,
vs.
PHILIPPINE NATIONAL BANK, respondent,
DMCI-PROJECT DEVELOPERS, INC., intervenor.
DECISION
CALLEJO, SR., J.:
Before us is a petition for review on certiorari of the
Decision1 of the Court of Appeals (CA) in CA-G.R. No. 46153
which affirmed the decision2 of the Regional Trial Court (RTC),
Branch 71, Pasig City, in Civil Case No. 58551, and its
Resolution3 denying the motion for reconsideration filed by
petitioner Manila Metal Container Corporation (MMCC).
The Antecedents
Petitioner was the owner of a 8,015 square meter parcel of land
located in Mandaluyong (now a City), Metro Manila. The
property was covered by Transfer Certificate of Title (TCT) No.
332098 of the Registry of Deeds of Rizal. To secure
a P900,000.00 loan it had obtained from respondent Philippine

National Bank (PNB), petitioner executed a real estate mortgage

over the lot. Respondent PNB later granted petitioner a new
credit accommodation of P1,000,000.00; and, on November 16,
1973, petitioner executed an Amendment4 of Real Estate
Mortgage over its property. On March 31, 1981, petitioner
secured another loan of P653,000.00 from respondent PNB,
payable in quarterly installments of P32,650.00, plus interests
and other charges.5
On August 5, 1982, respondent PNB filed a petition for
extrajudicial foreclosure of the real estate mortgage and sought
to have the property sold at public auction for P911,532.21,
petitioner's outstanding obligation to respondent PNB as of June
30, 1982,6 plus interests and attorney's fees.
After due notice and publication, the property was sold at public
auction on September 28, 1982 where respondent PNB was
declared the winning bidder for P1,000,000.00. The Certificate
of Sale7 issued in its favor was registered with the Office of the
Register of Deeds of Rizal, and was annotated at the dorsal
portion of the title on February 17, 1983. Thus, the period to
redeem the property was to expire on February 17, 1984.
Petitioner sent a letter dated August 25, 1983 to respondent
PNB, requesting that it be granted an extension of time to
redeem/repurchase the property.8 In its reply dated August 30,
1983, respondent PNB informed petitioner that the request had
been referred to its Pasay City Branch for appropriate action and
recommendation.9
In a letter10 dated February 10, 1984, petitioner reiterated its
request for a one year extension from February 17, 1984 within
which to redeem/repurchase the property on installment basis. It

reiterated its request to repurchase the property on

installment.11 Meanwhile, some PNB Pasay City Branch
personnel informed petitioner that as a matter of policy, the bank
does not accept "partial redemption."12
Since petitioner failed to redeem the property, the Register of
Deeds cancelled TCT No. 32098 on June 1, 1984, and issued a
new title in favor of respondent PNB.13 Petitioner's offers had
not yet been acted upon by respondent PNB.
Meanwhile, the Special Assets Management Department
(SAMD) had prepared a statement of account, and as of June 25,
1984 petitioner's obligation amounted to P1,574,560.47. This
included the bid price of P1,056,924.50, interest, advances of
insurance premiums, advances on realty taxes, registration
expenses, miscellaneous expenses and publication cost.14 When
apprised of the statement of account, petitioner
remitted P725,000.00 to respondent PNB as "deposit to
repurchase," and Official Receipt No. 978191 was issued to it.15
In the meantime, the SAMD recommended to the management
of respondent PNB that petitioner be allowed to repurchase the
property for P1,574,560.00. In a letter dated November 14,
1984, the PNB management informed petitioner that it was
rejecting the offer and the recommendation of the SAMD. It was
suggested
that
petitioner
purchase
the
property
for P2,660,000.00, its minimum market value. Respondent PNB
gave petitioner until December 15, 1984 to act on the proposal;
otherwise, its P725,000.00 deposit would be returned and the
property would be sold to other interested buyers.16
Petitioner, however, did not agree to respondent PNB's proposal.
Instead, it wrote another letter dated December 12, 1984

requesting for a reconsideration. Respondent PNB replied in a

letter dated December 28, 1984, wherein it reiterated its proposal
that petitioner purchase the property for P2,660,000.00. PNB
again informed petitioner that it would return the deposit should
petitioner desire to withdraw its offer to purchase the
property.17 On February 25, 1985, petitioner, through counsel,
requested that PNB reconsider its letter dated December 28,
1984. Petitioner declared that it had already agreed to the
SAMD's offer to purchase the property forP1,574,560.47, and
that was why it had paid P725,000.00. Petitioner warned
respondent PNB that it would seek judicial recourse should PNB
insist on the position.18
On June 4, 1985, respondent PNB informed petitioner that the
PNB Board of Directors had accepted petitioner's offer to
purchase the property, but for P1,931,389.53 in cash less
the P725,000.00 already deposited with it.19 On page two of the
letter was a space above the typewritten name of petitioner's
President, Pablo Gabriel, where he was to affix his signature.
However, Pablo Gabriel did not conform to the letter but merely
indicated therein that he had received it.20 Petitioner did not
respond, so PNB requested petitioner in a letter dated June 30,
1988 to submit an amended offer to repurchase.
Petitioner rejected respondent's proposal in a letter dated July 14,
1988. It maintained that respondent PNB had agreed to sell the
property for P1,574,560.47, and that since its P725,000.00
downpayment had been accepted, respondent PNB was
proscribed from increasing the purchase price of the
property.21 Petitioner averred that it had a net balance payable in
the amount of P643,452.34. Respondent PNB, however, rejected
petitioner's offer to pay the balance of P643,452.34 in a letter
dated August 1, 1989.22

On August 28, 1989, petitioner filed a complaint against

respondent PNB for "Annulment of Mortgage and Mortgage
Foreclosure, Delivery of Title, or Specific Performance with
Damages." To support its cause of action for specific
performance, it alleged the following:
34. As early as June 25, 1984, PNB had accepted the down
payment from Manila Metal in the substantial amount
of P725,000.00
for
the
redemption/repurchase
price
of P1,574,560.47 as approved by its SMAD and considering the
reliance made by Manila Metal and the long time that has
elapsed, the approval of the higher management of the Bank to
confirm the agreement of its SMAD is clearly a potestative
condition which cannot legally prejudice Manila Metal which
has acted and relied on the approval of SMAD. The Bank cannot
take advantage of a condition which is entirely dependent upon
its own will after accepting and benefiting from the substantial
payment made by Manila Metal.
35. PNB approved the repurchase price of P1,574,560.47 for
which it accepted P725,000.00 from Manila Metal. PNB cannot
take advantage of its own delay and long inaction in demanding
a higher amount based on unilateral computation of interest rate
without the consent of Manila Metal.
Petitioner later filed an amended complaint and supported its
claim for damages with the following arguments:
36. That in order to protect itself against the wrongful and
malicious acts of the defendant Bank, plaintiff is constrained to
engage the services of counsel at an agreed fee of P50,000.00
and to incur litigation expenses of at least P30,000.00, which the

defendant PNB should be condemned to pay the plaintiff Manila

Metal.
37. That by reason of the wrongful and malicious actuations of
defendant PNB, plaintiff Manila Metal suffered besmirched
reputation for which defendant PNB is liable for moral damages
of at leastP50,000.00.
38. That for the wrongful and malicious act of defendant PNB
which are highly reprehensible, exemplary damages should be
awarded in favor of the plaintiff by way of example or correction
for the public good of at least P30,000.00.23
Petitioner prayed that, after due proceedings, judgment be
rendered in its favor, thus:
a) Declaring the Amended Real Estate Mortgage (Annex "A")
null and void and without any legal force and effect.
b) Declaring defendant's acts of extra-judicially foreclosing the
mortgage over plaintiff's property and setting it for auction sale
null and void.
c) Ordering the defendant Register of Deeds to cancel the new
title issued in the name of PNB (TCT NO. 43792) covering the
property described in paragraph 4 of the Complaint, to reinstate
TCT No. 37025 in the name of Manila Metal and to cancel the
annotation of the mortgage in question at the back of the TCT
No.37025 described in paragraph 4 of this Complaint.
d) Ordering the defendant PNB to return and/or deliver physical
possession of the TCT No. 37025described in paragraph 4 of this
Complaint to the plaintiff Manila Metal.

e) Ordering the defendant PNB to pay the plaintiff Manila

Metal's actual damages, moral and exemplary damages in the
aggregate amount of not less than P80,000.00 as may be
warranted by the evidence and fixed by this Honorable Court in
the exercise of its sound discretion, and attorney's fees
of P50,000.00 and litigation expenses of at least P30,000.00 as
may be proved during the trial, and costs of suit.
Plaintiff likewise prays for such further reliefs which may be
deemed just and equitable in the premises.24
In its Answer to the complaint, respondent PNB averred, as a
special and affirmative defense, that it had acquired ownership
over the property after the period to redeem had elapsed. It
claimed that no contract of sale was perfected between it and
petitioner after the period to redeem the property had expired.
During pre-trial, the parties agreed to submit the case for
decision, based on their stipulation of facts.25 The parties agreed
to limit the issues to the following:
1. Whether or not the June 4, 1985 letter of the defendant
approving/accepting plaintiff's offer to purchase the property is
still valid and legally enforceable.
2. Whether or not the plaintiff has waived its right to purchase
the property when it failed to conform with the conditions set
forth by the defendant in its letter dated June 4, 1985.
3. Whether or not there is a perfected contract of sale between
the parties.26

While the case was pending, respondent PNB demanded, on

September 20, 1989, that petitioner vacate the property within
15 days from notice,27 but petitioners refused to do so.
On March 18, 1993, petitioner offered to repurchase the property
for P3,500,000.00.28 The offer was however rejected by
respondent PNB, in a letter dated April 13, 1993. According to
it, the prevailing market value of the property was
approximately P30,000,000.00, and as a matter of policy, it
could not sell the property for less than its market value. 29 On
June 21, 1993, petitioner offered to purchase the property
for P4,250,000.00 in cash.30The offer was again rejected by
respondent PNB on September 13, 1993.31
On May 31, 1994, the trial court rendered judgment dismissing
the amended complaint and respondent PNB's counterclaim. It
ordered respondent PNB to refund the P725,000.00 deposit
petitioner had made.32 The trial court ruled that there was no
perfected contract of sale between the parties; hence, petitioner
had no cause of action for specific performance against
respondent. The trial court declared that respondent had rejected
petitioner's offer to repurchase the property. Petitioner, in turn,
rejected the terms and conditions contained in the June 4, 1985
letter of the SAMD. While petitioner had offered to repurchase
the property per its letter of July 14, 1988, the amount
of P643,422.34 was way below the P1,206,389.53 which
respondent PNB had demanded. It further declared that
the P725,000.00 remitted by petitioner to respondent PNB on
June 4, 1985 was a "deposit," and not a downpayment or earnest
money.
On appeal to the CA, petitioner made the following allegations:

PLAINTIFF-APPELLANT TO COMPLETE THE BALANCE

OF THEIR PURCHASE PRICE.
V
I
THE LOWER COURT ERRED IN RULING THAT
DEFENDANT-APPELLEE'S LETTER DATED 4 JUNE 1985
APPROVING/ACCEPTING
PLAINTIFF-APPELLANT'S
OFFER TO PURCHASE THE SUBJECT PROPERTY IS NOT
VALID AND ENFORCEABLE.

THE LOWER COURT ERRED IN DISREGARDING THE

FACT THAT THERE WAS NO VALID RESCISSION OR
CANCELLATION
OF
SUBJECT
CONTRACT
OF
REPURCHASE.

II

VI

THE LOWER COURT ERRED IN RULING THAT THERE

WAS NO PERFECTED CONTRACT OF SALE BETWEEN
PLAINTIFF-APPELLANT AND DEFENDANT-APPELLEE.

THE LOWER COURT ERRED IN DECLARING THAT

PLAINTIFF FAILED AND REFUSED TO SUBMIT THE
AMENDED REPURCHASE OFFER.

III

VII

THE LOWER COURT ERRED IN RULING THAT

PLAINTIFF-APPELLLANT WAIVED ITS RIGHT TO
PURCHASE THE SUBJECT PROPERTY WHEN IT FAILED
TO CONFORM WITH CONDITIONS SET FORTH BY
DEFENDANT-APPELLEE IN ITS LETTER DATED 4 JUNE
1985.

THE LOWER COURT ERRED IN DISMISSING THE

AMENDED COMPLAINT OF PLAINTIFF-APPELLANT.

IV
THE LOWER COURT ERRED IN DISREGARDING THE
FACT THAT IT WAS THE DEFENDANT-APPELLEE WHICH
RENDERED IT DIFFICULT IF NOT IMPOSSIBLE FOR

VIII
THE LOWER COURT ERRED IN NOT AWARDING
PLAINTIFF-APPELLANT
ACTUAL,
MORAL
AND
EXEMPLARY DAMAGES, ATTOTRNEY'S FEES AND
LITIGATION EXPENSES.33
Meanwhile, on June 17, 1993, petitioner's Board of Directors
approved Resolution No. 3-004, where it waived, assigned and
transferred its rights over the property covered by TCT No.

33099 and TCT No. 37025 in favor of Bayani Gabriel, one of its
Directors.34 Thereafter, Bayani Gabriel executed a Deed of
Assignment over 51% of the ownership and management of the
property in favor of Reynaldo Tolentino, who later moved for
leave to intervene as plaintiff-appellant. On July 14, 1993, the
CA issued a resolution granting the motion,35 and likewise
granted the motion of Reynaldo Tolentino substituting petitioner
MMCC, as plaintiff-appellant, and his motion to withdraw as
intervenor.36
The CA rendered judgment on May 11, 2000 affirming the
decision of the RTC.37 It declared that petitioner obviously never
agreed to the selling price proposed by respondent PNB
(P1,931,389.53) since petitioner had kept on insisting that the
selling price should be lowered to P1,574,560.47. Clearly
therefore, there was no meeting of the minds between the parties
as to the price or consideration of the sale.
The CA ratiocinated that petitioner's original offer to purchase
the subject property had not been accepted by respondent PNB.
In fact, it made a counter-offer through its June 4, 1985 letter
specifically on the selling price; petitioner did not agree to the
counter-offer; and the negotiations did not prosper. Moreover,
petitioner did not pay the balance of the purchase price within
the sixty-day period set in the June 4, 1985 letter of respondent
PNB. Consequently, there was no perfected contract of sale, and
as such, there was no contract to rescind.
According to the appellate court, the claim for damages and the
counterclaim were correctly dismissed by the court a quo for no
evidence was presented to support it. Respondent PNB's letter
dated June 30, 1988 cannot revive the failed negotiations
between the parties. Respondent PNB merely asked petitioner to

submit an amended offer to repurchase. While petitioner

reiterated its request for a lower selling price and that the
balance of the repurchase be reduced, however, respondent
rejected the proposal in a letter dated August 1, 1989.
Petitioner filed a motion for reconsideration, which the CA
likewise denied.
Thus, petitioner filed the
on certiorari, alleging that:

instant

petition

for

review

I. THE COURT OF APPEALS ERRED ON A QUESTION OF

LAW WHEN IT RULED THAT THERE IS NO PERFECTED
CONTRACT OF SALE BETWEEN THE PETITIONER AND
RESPONDENT.
II. THE COURT OF APPEALS ERRED ON A QUESTION OF
LAW WHEN IT RULED THAT THE AMOUNT OF
PHP725,000.00 PAID BY THE PETITIONER IS NOT AN
EARNEST MONEY.
III. THE COURT OF APPEALS ERRED ON A QUESTION OF
LAW WHEN IT RULED THAT THE FAILURE OF THE
PETITIONER-APPELLANT
TO
SIGNIFY
ITS
CONFORMITY TO THE TERMS CONTAINED IN PNB'S
JUNE 4, 1985 LETTER MEANS THAT THERE WAS NO
VALID AND LEGALLY ENFORCEABLE CONTRACT OF
SALE BETWEEN THE PARTIES.
IV. THE COURT OF APPEALS ERRED ON A QUESTION OF
LAW THAT NON-PAYMENT OF THE PETITIONERAPPELLANT OF THE BALANCE OF THE OFFERED PRICE
IN THE LETTER OF PNB DATED JUNE 4, 1985, WITHIN

SIXTY (60) DAYS FROM NOTICE OF APPROVAL

CONSTITUTES
NO
VALID
AND
LEGALLY
ENFORCEABLE CONTRACT OF SALE BETWEEN THE
PARTIES.
V. THE COURT OF APPEALS SERIOUSLY ERRED WHEN
IT HELD THAT THE LETTERS OF PETITIONERAPPELLANT DATED MARCH 18, 1993 AND JUNE 21, 1993,
OFFERING TO BUY THE SUBJECT PROPERTY AT
DIFFERENT AMOUNT WERE PROOF THAT THERE IS NO
PERFECTED CONTRACT OF SALE.38
The threshold issue is whether or not petitioner and respondent
PNB had entered into a perfected contract for petitioner to
repurchase the property from respondent.
Petitioner maintains that it had accepted respondent's offer made
through the SAMD, to sell the property forP1,574,560.00. When
the acceptance was made in its letter dated June 25, 1984; it then
deposited P725,000.00 with the SAMD as partial payment,
evidenced by Receipt No. 978194 which respondent had issued.
Petitioner avers that the SAMD's acceptance of the deposit
amounted to an acceptance of its offer to repurchase. Moreover,
as gleaned from the letter of SAMD dated June 4, 1985, the PNB
Board of Directors had approved petitioner's offer to purchase
the property. It claims that this was the suspensive condition, the
fulfillment of which gave rise to the contract. Respondent could
no longer unilaterally withdraw its offer to sell the property
forP1,574,560.47, since the acceptance of the offer resulted in a
perfected contract of sale; it was obliged to remit to respondent
the balance of the original purchase price of P1,574,560.47,
while respondent was obliged to transfer ownership and deliver

the property to petitioner, conformably with Article 1159 of the

New Civil Code.
Petitioner posits that respondent was proscribed from increasing
the interest rate after it had accepted respondent's offer to sell the
property for P1,574,560.00. Consequently, respondent could no
longer validly make a counter-offer of P1,931,789.88 for the
purchase of the property. It likewise maintains that, although
theP725,000.00 was considered as "deposit for the repurchase of
the property" in the receipt issued by the SAMD, the amount
constitutes earnest money as contemplated in Article 1482 of the
New Civil Code. Petitioner cites the rulings of this Court
in Villonco v. Bormaheco39 and Topacio v. Court of Appeals.40
Petitioner avers that its failure to append its conformity to the
June 4, 1984 letter of respondent and its failure to pay the
balance of the price as fixed by respondent within the 60-day
period from notice was to protest respondent's breach of its
obligation to petitioner. It did not amount to a rejection of
respondent's offer to sell the property since respondent was
merely seeking to enforce its right to pay the balance
of P1,570,564.47. In any event, respondent had the option either
to accept the balance of the offered price or to cause the
rescission of the contract.
Petitioner's letters dated March 18, 1993 and June 21, 1993 to
respondent during the pendency of the case in the RTC were
merely to compromise the pending lawsuit, they did not
constitute separate offers to repurchase the property. Such offer
to compromise should not be taken against it, in accordance with
Section 27, Rule 130 of the Revised Rules of Court.

For its part, respondent contends that the parties never graduated
from the "negotiation stage" as they could not agree on the
amount of the repurchase price of the property. All that
transpired was an exchange of proposals and counter-proposals,
nothing more. It insists that a definite agreement on the amount
and manner of payment of the price are essential elements in the
formation of a binding and enforceable contract of sale. There
was no such agreement in this case. Primarily, the concept of
"suspensive condition" signifies a future and uncertain event
upon the fulfillment of which the obligation becomes effective.
It clearly presupposes the existence of a valid and binding
agreement, the effectivity of which is subordinated to its
fulfillment. Since there is no perfected contract in the first place,
there is no basis for the application of the principles governing
"suspensive conditions."

Pending such approval, it cannot be legally claimed that

respondent is already bound by any contract of sale with
petitioner.

According to respondent, the Statement of Account prepared by

SAMD as of June 25, 1984 cannot be classified as a counteroffer; it is simply a recital of its total monetary claims against
petitioner. Moreover, the amount stated therein could not
likewise be considered as the counter-offer since as admitted by
petitioner, it was only recommendation which was subject to
approval of the PNB Board of Directors.

Respondent reiterates that SAMD had informed petitioner that

its offer to repurchase had been approved by the Board subject to
the condition, among others, "that the selling price shall be the
total bank's claim as of documentation date x x x payable in cash
(P725,000.00 already deposited)

Neither can the receipt by the SAMD of P725,000.00 be

regarded as evidence of a perfected sale contract. As gleaned
from the parties' Stipulation of Facts during the proceedings in
the court a quo, the amount is merely an acknowledgment of the
receipt of P725,000.00 as deposit to repurchase the property. The
deposit ofP725,000.00 was accepted by respondent on the
condition that the purchase price would still be approved by its
Board of Directors. Respondent maintains that its acceptance of
the amount was qualified by that condition, thus not absolute.

According to respondent, petitioner knew that the SAMD has no

capacity to bind respondent and that its authority is limited to
administering, managing and preserving the properties and other
special assets of PNB. The SAMD does not have the power to
sell, encumber, dispose of, or otherwise alienate the assets, since
the power to do so must emanate from its Board of Directors.
The SAMD was not authorized by respondent's Board to enter
into contracts of sale with third persons involving corporate
assets. There is absolutely nothing on record that respondent
authorized the SAMD, or made it appear to petitioner that it
represented itself as having such authority.

within 60 days from notice of approval." A new Statement of

Account was attached therein indicating the total bank's claim to
be P1,931,389.53 less deposit of P725,000.00, or P1,206,389.00.
Furthermore, while respondent's Board of Directors accepted
petitioner's offer to repurchase the property, the acceptance was
qualified, in that it required a higher sale price and subject to
specified terms and conditions enumerated therein. This
qualified acceptance was in effect a counter-offer, necessitating
petitioner's acceptance in return.
The Ruling of the Court

The ruling of the appellate court that there was no perfected

contract of sale between the parties on June 4, 1985 is correct.
A contract is a meeting of minds between two persons whereby
one binds himself, with respect to the other, to give something or
to render some service.41 Under Article 1318 of the New Civil
Code, there is no contract unless the following requisites concur:
(1) Consent of the contracting parties;
(2) Object certain which is the subject matter of the contract;
(3) Cause of the obligation which is established.
Contracts are perfected by mere consent which is manifested by
the meeting of the offer and the acceptance upon the thing and
the cause which are to constitute the contract.42 Once perfected,
they bind other contracting parties and the obligations arising
therefrom have the form of law between the parties and should
be complied with in good faith. The parties are bound not only to
the fulfillment of what has been expressly stipulated but also to
the consequences which, according to their nature, may be in
keeping with good faith, usage and law.43
By the contract of sale, one of the contracting parties obligates
himself to transfer the ownership of and deliver a determinate
thing, and the other to pay therefor a price certain in money or
its equivalent.44 The absence of any of the essential elements will
negate the existence of a perfected contract of sale. As the Court
ruled in Boston Bank of the Philippines v. Manalo:45
A definite agreement as to the price is an essential element of a
binding agreement to sell personal or real property because it

seriously affects the rights and obligations of the parties. Price is

an essential element in the formation of a binding and
enforceable contract of sale. The fixing of the price can never be
left to the decision of one of the contracting parties. But a price
fixed by one of the contracting parties, if accepted by the other,
gives rise to a perfected sale.46
A contract of sale is consensual in nature and is perfected upon
mere meeting of the minds. When there is merely an offer by
one party without acceptance of the other, there is no
contract.47 When the contract of sale is not perfected, it cannot,
as an independent source of obligation, serve as a binding
juridical relation between the parties.48
In San Miguel Properties Philippines, Inc. v. Huang,49 the Court
ruled that the stages of a contract of sale are as follows: (1)
negotiation, covering the period from the time the prospective
contracting parties indicate interest in the contract to the time the
contract is perfected; (2) perfection, which takes place upon the
concurrence of the essential elements of the sale which are the
meeting of the minds of the parties as to the object of the
contract and upon the price; and (3) consummation, which
begins when the parties perform their respective undertakings
under the contract of sale, culminating in the extinguishment
thereof.
A negotiation is formally initiated by an offer, which, however,
must be certain.50 At any time prior to the perfection of the
contract, either negotiating party may stop the negotiation. At
this stage, the offer may be withdrawn; the withdrawal is
effective immediately after its manifestation. To convert the
offer into a contract, the acceptance must be absolute and must
not qualify the terms of the offer; it must be plain, unequivocal,

unconditional and without variance of any sort from the

proposal. In Adelfa Properties, Inc. v. Court of Appeals,51the
Court ruled that:

1. Upon approval of our request, we will pay your goodselves

ONE HUNDRED & FIFTY THOUSAND PESOS
(P150,000.00);

x x x The rule is that except where a formal acceptance is so

required, although the acceptance must be affirmatively and
clearly made and must be evidenced by some acts or conduct
communicated to the offeror, it may be shown by acts, conduct,
or words of the accepting party that clearly manifest a present
intention or determination to accept the offer to buy or sell.
Thus, acceptance may be shown by the acts, conduct, or words
of a party recognizing the existence of the contract of sale.52

2. Within six months from date of approval of our request, we

will pay another FOUR HUNDRED FIFTY THOUSAND
PESOS (P450,000.00); and

A qualified acceptance or one that involves a new proposal

constitutes a counter-offer and a rejection of the original offer. A
counter-offer is considered in law, a rejection of the original
offer and an attempt to end the negotiation between the parties
on a different basis.53 Consequently, when something is desired
which is not exactly what is proposed in the offer, such
acceptance is not sufficient to guarantee consent because any
modification or variation from the terms of the offer annuls the
offer.54 The acceptance must be identical in all respects with that
of the offer so as to produce consent or meeting of the minds.
In this case, petitioner had until February 17, 1984 within which
to redeem the property. However, since it lacked the resources, it
requested for more time to redeem/repurchase the property under
such terms and conditions agreed upon by the parties. 55 The
request, which was made through a letter dated August 25, 1983,
was referred to the respondent's main branch for appropriate
action.56 Before respondent could act on the request, petitioner
again wrote respondent as follows:

3. The remaining balance together with the interest and other

expenses that will be incurred will be paid within the last six
months of the one year grave period requested for.57
When the petitioner was told that respondent did not allow
"partial redemption,"58 it sent a letter to respondent's President
reiterating its offer to purchase the property.59 There was no
response to petitioner's letters dated February 10 and 15, 1984.
The statement of account prepared by the SAMD stating that the
net claim of respondent as of June 25, 1984 was P1,574,560.47
cannot be considered an unqualified acceptance to petitioner's
offer to purchase the property. The statement is but a
computation of the amount which petitioner was obliged to pay
in case respondent would later agree to sell the property,
including interests, advances on insurance premium, advances
on realty taxes, publication cost, registration expenses and
miscellaneous expenses.
There is no evidence that the SAMD was authorized by
respondent's Board of Directors to accept petitioner's offer and
sell the property for P1,574,560.47. Any acceptance by the
SAMD of petitioner's offer would not bind respondent. As this
Court ruled in AF Realty Development, Inc. vs. Diesehuan
Freight Services, Inc.:60

Section 23 of the Corporation Code expressly provides that the

corporate powers of all corporations shall be exercised by the
board of directors. Just as a natural person may authorize
another to do certain acts in his behalf, so may the board of
directors of a corporation validly delegate some of its functions
to individual officers or agents appointed by it. Thus, contracts
or acts of a corporation must be made either by the board of
directors or by a corporate agent duly authorized by the board.
Absent such valid delegation/authorization, the rule is that the
declarations of an individual director relating to the affairs of the
corporation, but not in the course of, or connected with the
performance of authorized duties of such director, are held not
binding on the corporation.
Thus, a corporation can only execute its powers and transact its
business through its Board of Directors and through its officers
and agents when authorized by a board resolution or its bylaws.61
It appears that the SAMD had prepared a recommendation for
respondent to accept petitioner's offer to repurchase the property
even beyond the one-year period; it recommended that petitioner
be allowed to redeem the property and pay P1,574,560.00 as the
purchase price. Respondent later approved the recommendation
that the property be sold to petitioner. But instead of
the P1,574,560.47 recommended by the SAMD and to which
petitioner had previously conformed, respondent set the
purchase price at P2,660,000.00. In fine, respondent's acceptance
of petitioner's offer was qualified, hence can be at most
considered as a counter-offer. If petitioner had accepted this
counter-offer, a perfected contract of sale would have arisen; as
it turns out, however, petitioner merely sought to have the

counter-offer reconsidered. This request for reconsideration

would later be rejected by respondent.
We do not agree with petitioner's contention that
the P725,000.00 it had remitted to respondent was "earnest
money" which could be considered as proof of the perfection of
a contract of sale under Article 1482 of the New Civil Code. The
provision reads:
ART. 1482. Whenever earnest money is given in a contract of
sale, it shall be considered as part of the price and as proof of the
perfection of the contract.
This contention is likewise negated by the stipulation of facts
which the parties entered into in the trial court:
8. On June 8, 1984, the Special Assets Management Department
(SAMD) of PNB prepared an updated Statement of Account
showing MMCC's total liability to PNB as of June 25, 1984 to
be P1,574,560.47 and recommended this amount as the
repurchase price of the subject property.
9. On June 25, 1984, MMCC paid P725,000.00 to PNB as
deposit to repurchase the property. The deposit of P725,000 was
accepted by PNB on the condition that the purchase price is
still subject to the approval of the PNB Board.62
Thus, the P725,000.00 was merely a deposit to be applied as part
of the purchase price of the property, in the event that respondent
would approve the recommendation of SAMD for respondent to
accept petitioner's offer to purchase the property
for P1,574,560.47. Unless and until the respondent accepted the
offer on these terms, no perfected contract of sale would arise.

Absent proof of the concurrence of all the essential elements of a

contract of sale, the giving of earnest money cannot establish the
existence of a perfected contract of sale.63
It appears that, per its letter to petitioner dated June 4, 1985, the
respondent had decided to accept the offer to purchase the
property for P1,931,389.53. However, this amounted to an
amendment of respondent's qualified acceptance, or an amended
counter-offer, because while the respondent lowered the
purchase price, it still declared that its acceptance was subject to
the following terms and conditions:
1. That the selling price shall be the total Bank's claim as of
documentation date (pls. see attached statement of account as of
5-31-85), payable in cash (P725,000.00 already deposited)
within sixty (60) days from notice of approval;
2. The Bank sells only whatever rights, interests and
participation it may have in the property and you are charged
with full knowledge of the nature and extent of said rights,
interests and participation and waive your right to warranty
against eviction.
3. All taxes and other government imposts due or to become due
on the property, as well as expenses including costs of
documents and science stamps, transfer fees, etc., to be incurred
in connection with the execution and registration of all covering
documents shall be borne by you;
4. That you shall undertake at your own expense and account the
ejectment of the occupants of the property subject of the sale, if
there are any;

5. That upon your failure to pay the balance of the purchase

price within sixty (60) days from receipt of advice accepting
your offer, your deposit shall be forfeited and the Bank is
thenceforth authorized to sell the property to other interested
parties.
6. That the sale shall be subject to such other terms and
conditions that the Legal Department may impose to protect the
interest of the Bank.64
It appears that although respondent requested petitioner to
conform to its amended counter-offer, petitioner refused and
instead requested respondent to reconsider its amended counteroffer. Petitioner's request was ultimately rejected and respondent
offered to refund its P725,000.00 deposit.
In sum, then, there was no perfected contract of sale between
petitioner and respondent over the subject property.
IN LIGHT OF ALL THE FOREGOING, the petition
is DENIED.
The assailed decision is AFFIRMED. Costs against petitioner
Manila Metal Container Corporation.
SO ORDERED.
Ynares-Santiago, J., Working Chairperson, Austria-Martinez,
and
Chico-Nazario,
JJ., concur.
Panganiban, C.J., retired as of December 7, 2006.

Republic of the Philippines

SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 124791 February 10, 1999
JOSE
RAMON
CARCELLER,
petitioner,
vs.
COURT OF APPEALS and STATE INVESTMENT HOUSES, INC.,
respondents.
QUISUMBING, J.:
Before us is a petition for review of the Decision 1 dated September 21,
1995 of the Court of Appeals 2 in CA G. R. CV No. 37520, as well as
its Resolution 3 dated April 25, 1996, denying both parties' motion for
partial reconsideration or clarification. The assailed decision affirmed
with modification the judgment 4 of the Regional Trial Court of Cebu
City, Branch 5, in Civil Case No. CEB 4700, and disposed of the
controversy as follows:
However, We do not find it just that the appellee, in exercising his option
to buy, should pay appellant SIHI only P1,800,000.00. In fairness to
appellant SIHI, the purchase price must be based on the prevailing
market price of real property in Bulacao, Cebu City. (Emphasis supplied)
The factual background of this case is quite simple.
Private respondent State Investment Houses, Inc. (SIHI) is the registered
owner of two (2) parcels of land with a total area of 9,774 square meters,
including all the improvements thereon, located at Bulacao, Cebu City,
covered by Transfer Certificate of Titles Nos. T-89152 and T-89153 of the
Registry of Deeds of Cebu City.

On January 10, 1985, petitioner and SIHI entered into a lease contract
with option to purchase 5 over said two parcels of land, at a monthly rental
of Ten Thousand (P10,000.00) pesos for a period of eighteen (18) months,
beginning on August 1, 1984 until January 30, 1986. The pertinent portion
of the lease contract subject of the dispute reads in part:
4. As part of the consideration of this agreement, the LESSOR hereby
grants unto the LESSEE the exclusive right, option and privilege to
purchase, within the lease period, the leased premises thereon for the
aggregate amount of P1,800,000.00 payable as follows:
a. Upon the signing of the Deed of Sale, the LESSEE shall immediately
pay P360,000.00.
b. The balance of P1,440,000.00 shall be paid in equal installments of
P41,425.87 over sixty (60) consecutive months computed with interest at
24% per annum on the diminishing balance; Provided, that the LESSEE
shall have the right to accelerate payments at anytime in which event the
stipulated interest for the remaining installments shall no longer be
imposed.
x . . The option shall be exercised by a written notice to the LESSOR at
anytime within the option period and the document of sale over the aforedescribed properties has to be consummated within the month
immediately following the month when the LESSEE exercised his option
under this contract. 6
On January 7, 1986, or approximately three (3) weeks before the
expiration of the lease contract, SIHI notified petitioner of the impending
termination of the lease agreement, and of the short period of time left
within which he could still validly exercise the option. It likewise
requested petitioner to advise them of his decision on the option, on or
before January 20, 1986. 7

In a letter dated January 15, 1986, which was received by SIHI on

January 29, 1986, petitioner requested for a six-month extension of the
lease contract, alleging that he needs ample time to raise sufficient funds
in order to exercise the option. To support his request, petitioner averred
that he had already made a substantial investment on the property, and had
been punctual in paying his monthly rentals. 8

Certificates of Title Nos. 89152 and 89153 of the Registry of Deeds of

Cebu City, in accordance with the lease contract executed on January 10,
1984 between the plaintiff and the defendant, but the purchase price may
be by "one shot payment" of P1,800,000.00; and the defendant to pay
attorney's fee of P20,000.00.
No damages awarded. 13

On February 14, 1986, SIHI notified petitioner that his request was
disapproved. Nevertheless, it offered to lease the same property to
petitioner at the rate of Thirty Thousand (P30,000.00) pesos a month, for
a period of one (1) year. It further informed the petitioner of its decision
to offer for sale said leased property to the general public. 9
On February 18, 1986, petitioner notified SIHI of his decision to exercise
the option to purchase the property and at the same time he made
arrangements for the payment of the downpayment thereon in the amount
of Three Hundred Sixty Thousand (P360,000.00) pesos. 10
On February 20, 1986, SIHI sent another letter to petitioner, reiterating its
previous stand on the latter's offer, stressing that the period within which
the option should have been exercised had already lapsed. SIHI asked
petitioner to vacate the property within ten (10) days from notice, and to
pay rental and penalty due. 11
Hence, on February 28, 1986, a complaint for specific performance and
damages 12 was filed by petitioner against SIHI before the Regional Trial
Court of Cebu City, to compel the latter to honor its commitment and
execute the corresponding deed of sale.
After trial, the court a quo promulgated its decision dated April 1, 1991,
the dispositive portion of which reads:

Not satisfied with the judgment, SIHI elevated the case to the Court of
Appeals by way of a petition for review.
On September 21, 1995, respondent court rendered its decision, affirming
the trial court's judgment, but modified the basis for assessing the
purchase price. While respondent court affirmed appellee's option to buy
the property, it added that, "the purchase price must be based on the
prevailing market price of real property in Bulacao, Cebu City." 14
Baffled by the modification made by respondent court, both parties filed a
motion for reconsideration and/or clarification, with petitioner, on one
hand, praying that the prevailing market price be the value of the property
in February 1986, the time when the sale would have been consummated.
SIHI, on the other hand, prayed that the market price of the property be
based on the prevailing price index at least 10 years later, that is, 1996.
Respondent court conducted further hearing to clarify the matter, but no
agreement was reached by the parties. Thus, on April 25, 1996,
respondent court promulgated the assailed resolution, which denied both
parties' motions, and directed the trial court to conduct further hearings to
ascertain the prevailing market value of real properties in Bulacao, Cebu
City and fix the value of the property subject of the controversy. 14a
Hence, the instant petition for review.

In the light of the foregoing considerations, the Court hereby renders

judgment in Civil Case No. CEB 4700, ordering the defendant to execute
a deed of sale in favor of the plaintiff, covering the parcels of land
together with all the improvements thereon, covered by Transfer

The fundamental issue to be resolved is, should petitioner be allowed to

exercise the option to purchase the leased property, despite the alleged
delay in giving the required notice to private respondent?

An option is a preparatory contract in which one party grants to the other,

for a fixed period and under specified conditions, the power to decide,
whether or not to enter into a principal contract. It binds the party who has
given the option, not to enter into the principal contract with any other
person during the period designated, and, within that period, to enter into
such contract with the one to whom the option was granted, if the latter
should decide to use the option. 15 It is a separate agreement distinct from
the contract which the parties may enter into upon the consummation of
the option. 16
Considering the circumstances in this case, we find no reason to disturb
the findings of respondent court, that petitioner's letter to SIHI, dated
January 15, 1986, was fair notice to the latter of the former's intent to
exercise the option, despite the request for the extension of the lease
contract. As stated in said letter to SIHI, petitioner was requesting for an
extension (of the contract) for six months "to allow us to generate
sufficient funds in order to exercise our option to buy the subject
property". 17 The analysis by the Court of Appeals of the evidence on
record and the process by which it arrived at its findings on the basis
thereof, impel this Court's assent to said findings. They are consistent
with the parties' primary intent, as hereafter discussed, when they
executed the lease contract. As respondent court ruled:
We hold that the appellee [herein petitioner] acted with honesty and good
faith. Verily, We are in accord with the trial court that he should be
allowed to exercise his option to purchase the lease property. In fact, SIHI
will not be prejudiced. A contrary ruling, however, will definitely cause
damage to the appellee, it appearing that he has introduced considerable
improvements on the property and has borrowed huge loan from the
Technology Resources Center. 17a
The contracting parties' primary intent in entering into said lease contract
with option to purchase confirms, in our view, the correctness of
respondent court's ruling. Analysis and construction, however, should not
be limited to the words used in the contract, as they may not accurately
reflect the parties' true intent. The reasonableness of the result obtained,
after said analysis, ought likewise to be carefully considered.

It is well-settled in both law and jurisprudence, that contracts are the law
between the contracting parties and should be fulfilled, if their terms are
clear and leave no room for doubt as to the intention of the contracting
parties. 18 Further, it is well-settled that in construing a written
agreement, the reason behind and the circumstances surrounding its
execution are of paramount importance. Sound construction requires one
to be placed mentally in the situation occupied by the parties concerned at
the time the writing was executed. Thereby, the intention of the
contracting parties could be made to prevail, because their agreement has
the force of law between them. 19
Moreover, to ascertain the intent of the parties in a contractual
relationship, it is imperative that the various stipulations provided for in
the contract be construed together, consistent with the parties'
contemporaneous and subsequent acts as regards the execution of the
contract. 20 And once the intention of the parties has been ascertained,
that element is deemed as an integral part of the contract as though it has
been originally expressed in unequivocal terms.
As sufficiently established during the trial, SIHI, prior to its negotiation
with petitioner, was already beset with financial problems. SIHI was
experiencing difficulty in meeting the claims of its creditors. Thus, in
order to reprogram the company's financial investment plan and facilitate
its rehabilitation and viability, SIHI, being a quasi-banking financial
institution, had been placed under the supervision and control of the
Central Bank (CB). It was in dire need of liquidating its assets, so to
speak, in order to stay afloat financially.
Thus, SIHI was compelled to dispose some of its assets, among which is
the subject leased property, to generate sufficient funds to augment its
badly-depleted financial resources. This then brought about the execution
of the lease contract with option to purchase between SIHI and the
petitioner.
The lease contract provided that to exercise the option, petitioner had to
send a letter to SIHI, manifesting his intent to exercise said option within
the lease period ending January 30, 1986. However, what petitioner did

was to request on January 15, 1986, for a six-month extension of the lease
contract, for the alleged purpose of raising funds intended to purchase the
property subject of the option. It was only after the request was denied on
February 14, 1986, that petitioner notified SIHI of his desire to exercise
the option formally. This was by letter dated February 18, 1986. In private
respondent's view, there was already a delay of 18 days, fatal to
petitioner's cause. But respondent court found the delay neither
"substantial" nor "fundamental" and did not amount to a breach that
would defeat the intention of the parties when they executed the lease
contract with option to purchase. 20a
In allowing petitioner to exercise the option, however, both lower courts
are in accord in their decision, rationalizing that a contrary ruling would
definitely cause damage to the petitioner, as he had the whole place
renovated to make the same suitable and conducive for the business he
established there. Moreover, judging from the subsequent acts of the
parties, it is undeniable that SIHI really intended to dispose of said leased
property, which petitioner indubitably intended to buy.
SIHI's agreement to enter first into a lease contract with option to
purchase with herein petitioner, is a clear proof of its intent to promptly
dispose said property although the full financial returns may materialize
only in a year's time. Furthermore, its letter dated January 7, 1986,
reminding the petitioner of the short period of time left within which to
consummate their agreement, clearly showed its desire to sell that
property. Also, SIHI's letter dated February 14, 1986 supported the
conclusion that it was bent on disposing said property. For this letter made
mention of the fact that, "said property is now for sale to the general
public".
Petitioner's determination to purchase said property is equally indubitable.
He introduced permanent improvements on the leased property,
demonstrating his intent to acquire dominion in a year's time. To increase
his chances of acquiring the property, he secured an P8 Million loan from
the Technology Resources Center (TRC), thereby augmenting his capital.
He averred that he applied for a loan since he planned to pay the purchase
price in one single payment, instead of paying in installment, which

would entail the payment of additional interest at the rate of 24% per
annum, compared to 73/4% per annum interest for the TRC loan. His
letter earlier requesting extension was premised, in fact, on his need for
time to secure the needed financing through a TRC loan.
In contractual relations, the law allows the parties reasonable leeway on
the terms of their agreement, which is the law between them. 21 Note that
by contract SIHI had given petitioner 4 periods: (a) the option to purchase
the property for P1,800,000.00 within the lease period, that is, until
January 30, 1986; (b) the option to be exercised within the option period
by written notice at anytime; (c) the "document of sale . . . to be
consummated within the month immediately following the month" when
petitioner exercises the option; and (d) the payment in equal installments
of the purchase price over a period of 60 months. In our view, petitioner's
letter of January 15, 1986 and his formal exercise of the option on
February 18, 1986 were within a reasonable time-frame consistent with
periods given and the known intent of the parties to the agreement dated
January 10, 1985. A contrary view would be harsh and inequituous
indeed.
In Tuason, Jr., etc. vs. De Asis, 22 this Court opined that "in a contract of
lease, if the lessor makes an offer to the lessee to purchase the property on
or before the termination of the lease, and the lessee fails to accept or
make the purchase on time, the lessee losses the right to buy the property
later on the terms and conditions set in the offer." Thus, on one hand,
petitioner herein could not insist on buying the said property based on the
price agreed upon in the lease agreement, even if his option to purchase it
is recognized. On the other hand, SIHI could not take advantage of the
situation to increase the selling price of said property by nearly 90% of
the original price. Such leap in the price quoted would show an
opportunistic intent to exploit the situation as SIHI knew for a fact that
petitioner badly needed the property for his business and that he could
afford to pay such higher amount after having secured an P8 Million loan
from the TRC. If the courts were to allow SIHI to take advantage of the
situation, the result would have been an injustice to petitioner, because
SIHI would be unjustly enriched at his expense. Courts of law, being also
courts of equity, may not countenance such grossly unfair results without
doing violence to its solemn obligation to administer fair and equal justice

for all.
WHEREFORE, the appealed decision of respondent court, insofar as it
affirms the judgment of the trial court in granting petitioner the
opportunity to exercise the option to purchase the subject property, is
hereby AFFIRMED. However the purchase price should be based on the
fair market value of real property in Bulacao, Cebu City, as of February
1986, when the contract would have been consummated. Further,
petitioner is hereby ordered to pay private respondent SIHI legal interest
on the said purchase price beginning February 1986 up to the time it is
actually paid, as well as the taxes due on said property, considering that
petitioner have enjoyed the beneficial use of said property. The case is
hereby remanded to Regional Trial Court of Cebu, Branch 5, for further
proceedings to determine promptly the fair market value of said real
property as of February 1986, in Bulacao, Cebu City.
Costs against private respondent.
SO ORDERED.
Bellosillo, Puno, Mendoza and Buena, JJ., concur.

Republic of the Philippines

SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 134971

March 25, 2004

HERMINIO TAYAG, petitioner,

vs.
AMANCIA LACSON, ROSENDO LACSON, ANTONIO

LACSON, JUAN LACSON, TEODISIA LACSONESPINOSA and THE COURT OF APPEALS, respondents.
DECISION
CALLEJO, SR., J.:
Before us is a petition for review on certiorari of the
Decision1 and the Resolution2 of respondent Court of Appeals in
CA-G.R. SP No. 44883.
The Case for the Petitioner
Respondents Angelica Tiotuyco Vda. de Lacson,3 and her
children Amancia, Antonio, Juan, and Teodosia, all surnamed
Lacson, were the registered owners of three parcels of land
located in Mabalacat, Pampanga, covered by Transfer
Certificates of Title (TCT) Nos. 35922-R, 35923-R, and 35925R, registered in the Register of Deeds of San Fernando,
Pampanga. The properties, which were tenanted agricultural
lands,4 were administered by Renato Espinosa for the owner.
On March 17, 1996, a group of original farmers/tillers, namely,
Julio Tiamson, Renato Gozun, Rosita Hernandez, Bienvenido
Tongol, Alfonso Flores, Norma Quiambao, Rosita Tolentino,
Jose Sosa, Francisco Tolentino, Sr., Emiliano Laxamana, Ruben
Torres, Meliton Allanigue, Dominga Laxamana, Felicencia de
Leon, Emiliano Ramos, and another group, namely, Felino G.
Tolentino, Rica Gozun, Perla Gozun, Benigno Tolentino,
Rodolfo Quiambao, Roman Laxamana, Eddie San Luis, Ricardo
Hernandez, Nicenciana Miranda, Jose Gozun, Alfredo Sosa, Jose
Tiamson, Augusto Tolentino, Sixto Hernandez, Alex Quiambao,
Isidro Tolentino, Ceferino de Leon, Alberto Hernandez, Orlando

Flores, and Aurelio Flores,5 individually executed in favor of the

petitioner separate Deeds of Assignment6 in which the assignees
assigned to the petitioner their respective rights as tenants/tillers
of the landholdings possessed and tilled by them for and in
consideration of P50.00 per square meter. The said amount was
made payable "when the legal impediments to the sale of the
property to the petitioner no longer existed." The petitioner was
also granted the exclusive right to buy the property if and when
the respondents, with the concurrence of the defendants-tenants,
agreed to sell the property. In the interim, the petitioner gave
varied sums of money to the tenants as partial payments, and the
latter issued receipts for the said amounts.
On July 24, 1996, the petitioner called a meeting of the
defendants-tenants to work out the implementation of the terms
of their separate agreements.7 However, on August 8, 1996, the
defendants-tenants, through Joven Mariano, wrote the petitioner
stating that they were not attending the meeting and instead gave
notice of their collective decision to sell all their rights and
interests, as tenants/lessees, over the landholding to the
respondents.8 Explaining their reasons for their collective
decision, they wrote as follows:
Kami ay nagtiwala sa inyo, naging tapat at nanindigan sa lahat
ng ating napagkasunduan, hindi tumanggap ng ibang buyer o
ahente, pero sinira ninyo ang aming pagtitiwala sa pamamagitan
ng demanda ninyo at pagbibigay ng problema sa amin na hindi
naman nagbenta ng lupa.
Kaya kami ay nagpulong at nagpasya na ibenta na lang ang
aming karapatan o ang aming lupang sinasaka sa landowner o sa
mga pamilyang Lacson, dahil ayaw naming magkaroon ng
problema.

Kaya kung ang sasabihin ninyong itoy katangahan, lalo

sigurong magiging katangahan kung ibebenta pa namin sa inyo
ang aming lupang sinasaka, kaya pasensya na lang Mister Tayag.
Dahil sinira ninyo ang aming pagtitiwala at katapatan.9
On August 19, 1996, the petitioner filed a complaint with the
Regional Trial Court of San Fernando, Pampanga, Branch 44,
against the defendants-tenants, as well as the respondents, for
the court to fix a period within which to pay the agreed purchase
price of P50.00 per square meter to the defendants, as provided
for in the Deeds of Assignment. The petitioner also prayed for a
writ of preliminary injunction against the defendants and the
respondents therein.10 The case was docketed as Civil Case No.
10910.
In his complaint, the petitioner alleged, inter alia, the following:
4. That defendants Julio Tiamson, Renato Gozun, Rosita
Hernandez, Bienvenido Tongol, Alfonso Flores, Norma
Quiambao, Rosita Tolentino, Jose Sosa, Francisco Tolentino, Sr.,
Emiliano Laxamana, Ruben Torres, Meliton Allanigue, Dominga
Laxamana, Felicencia de Leon, Emiliano Ramos are original
farmers or direct tillers of landholdings over parcels of lands
covered by Transfer Certificate of Title Nos. 35922-R, 35923-R
and 35925-R which are registered in the names of defendants
LACSONS; while defendants Felino G. Tolentino, Rica Gozun,
Perla Gozun, Benigno Tolentino, Rodolfo Quiambao, Roman
Laxamana, Eddie San Luis, Alfredo Gozun, Jose Tiamson,
Augusto Tolentino, Sixto Hernandez, Alex Quiambao, Isidro
Tolentino, Ceferino de Leon, Alberto Hernandez, and Aurelio
Flores are sub-tenants over the same parcel of land.

5. That on March 17, 1996 the defendants TIAMSON, et al.,

entered into Deeds of Assignment with the plaintiff by which the
defendants assigned all their rights and interests on their
landholdings to the plaintiff and that on the same date (March
17, 1996), the defendants received from the plaintiff partial
payments in the amounts corresponding to their names.
Subsequent payments were also received:
1st
PAYM
ENT

2nd
PAYMEN
T

CHECK
NO.

TOTAL

1.Julio Tiamson - - - P
P
-20,000 10,621.54

231281

P
30,621.
54

2. Renato Gozun - - --[son of Felix Gozun

(deceased)]

P
10,000

96,000

3. Rosita Hernandez ---

P
5,000

14,374.24

231274

P
19,374.
24

4. Bienvenido Tongol
--[Son of Abundio
Tongol (deceased)]

P
14,465.90
10,000

231285

24,465.9
0

5. Alfonso Flores - - ---

P
26,648.40
30,000

231271

56,648.4
0

6. Norma Quiambao P
41,501.10
--10,000

231279

51,501.1
0

7. Rosita Tolentino - P
22,126.08
--10,000

231284

32,126.0
8

106,000
.00

8. Jose Sosa - - - - - ---

P
14,861.31
10,000

9. Francisco
Tolentino, Sr.

P
24,237.62
10,000

10. Emiliano
Laxamana - -

P
10,000

11. Ruben Torres - - --[Son of Mariano

Torres (deceased)]

P
P
10,000 33,587.31

------

231291

24,861.3
1

231283

34,237.6
2

------

------

------

P
43,587.3
1

231269

P
22,944.7
7

12. Meliton Allanigue

P
12,944.77
10,000

13. Dominga
Laxamana

P
5,000

22,269.02

231275

27,269.0
2

14. Felicencia de
Leon

10,000

------

------

------

22. Eddie San Luis

10,000

------

------

------

23. Ricardo
Hernandez

10,000

------

------

------

24. Nicenciana
Miranda

10,000

------

------

------

25. Jose Gozun

10,000

------

------

------

26. Alfredo Sosa

5,000

------

------

------

27. Jose Tiamson

10,000

------

------

---

28. Augusto Tolentino

5,000

------

------

------

29. Sixto Hernandez

10,000

------

------

------

30. Alex Quiambao

10,000

------

------

------

31. Isidro Tolentino

10,000

------

------

------

------

11,378.70

231270

------

33. Alberto
Hernandez

10,000

------

------

------

34. Orlando Florez

10,000

------

------

------

10,000

------

------

------

32. Ceferino de Leon

15. Emiliano Ramos

5,000

18,869.60

231280

23,869.6
0

16. Felino G.
Tolentino

10,000

------

------

------

35. Aurelio Flores

17. Rica Gozun

5,000

------

------

------

18. Perla Gozun

10,000

------

------

------

19. Benigno
Tolentino

10,000

------

------

------

6. That on July 24, 1996, the plaintiff wrote the defendants

TIAMSON, et al., inviting them for a meeting regarding the
negotiations/implementations of the terms of their Deeds of
Assignment;

20. Rodolfo
Quiambao

10,000

------

------

------

21. Roman Laxamana 10,000

------

------

------

7. That on August 8, 1996, the defendants TIAMSON, et al.,

through Joven Mariano, replied that they are no longer willing to
pursue with the negotiations, and instead they gave notice to the

plaintiff that they will sell all their rights and interests to the
registered owners (defendants LACSONS).
A copy of the letter is hereto attached as Annex "A" etc.;
8. That the defendants TIAMSON, et. al., have no right to deal
with the defendants LACSON or with any third persons while
their contracts with the plaintiff are subsisting; defendants
LACSONS are inducing or have induced the defendants
TIAMSON, et. al., to violate their contracts with the plaintiff;
9. That by reason of the malicious acts of all the defendants,
plaintiff suffered moral damages in the forms of mental anguish,
mental torture and serious anxiety which in the sum of
P500,000.00 for which defendants should be held liable jointly
and severally.11
In support of his plea for injunctive relief, the petitioner, as
plaintiff, also alleged the following in his complaint:
11. That to maintain the status quo, the defendants TIAMSON,
et al., should be restrained from rescinding their contracts with
the plaintiff, and the defendants LACSONS should also be
restrained from accepting any offer of sale or alienation with the
defendants TIAMSON, et al., in whatever form, the latters
rights and interests in the properties mentioned in paragraph 4
hereof; further, the LACSONS should be restrained from
encumbering/alienating the subject properties covered by TCT
No. 35922-R, 35923-R and TCT No. 35925-R, Registry of
Deeds of San Fernando, Pampanga;
12. That the defendants TIAMSON, et al., threaten to rescind
their contracts with the plaintiff and are also bent on

selling/alienating their rights and interests over the subject

properties to their co-defendants (LACSONS) or any other
persons to the damage and prejudice of the plaintiff who already
invested much money, efforts and time in the said transactions;
13. That the plaintiff is entitled to the reliefs being demanded in
the complaint;
14. That to prevent irreparable damages and prejudice to the
plaintiff, as the latter has no speedy and adequate remedy under
the ordinary course of law, it is essential that a Writ of
Preliminary Injunction be issued enjoining and restraining the
defendants TIAMSON, et al., from rescinding their contracts
with the plaintiff and from selling/alienating their properties to
the LACSONS or other persons;
15. That the plaintiff is willing and able to put up a reasonable
bond to answer for the damages which the defendants would
suffer should the injunction prayed for and granted be found
without basis.12
The petitioner prayed, that after the proceedings, judgment be
rendered as follows:
1. Pending the hearing, a Writ of Preliminary Injunction be
issued prohibiting, enjoining and restraining defendants Julio
Tiamson, Renato Gozun, Rosita Hernandez, Bienvenido Tongol,
Alfonso Flores, Norma Quiambao, Rosita Tolentino, Jose Sosa,
Francisco Tolentino Sr., Emiliano Laxamana, Ruben Torres,
Meliton Allanigue, Dominga Laxamana, Felicencia de Leon,
Emiliano Ramos, Felino G. Tolentino, Rica Gozun, Perla Gozun,
Benigno Tolentino, Rodolfo Quiambao, Roman Laxamana,
Eddie San Luis, Ricardo Hernandez, Nicenciana Miranda, Jose

Gozun, Alfredo Sosa, Jose Tiamson, Augusto Tolentino,

Ceferino de Leon, Alberto Hernandez, Orlando Flores, and
Aurelio Flores from rescinding their contracts with the plaintiff
and from alienating their rights and interest over the
aforementioned properties in favor of defendants LACSONS or
any other third persons; and prohibiting the defendants
LACSONS from encumbering/alienating TCT Nos. 35922-R,
35923-R and 35925-R of the Registry of Deeds of San
Fernando, Pampanga.
2. And pending the hearing of the Prayer for a Writ of
Preliminary Injunction, it is prayed that a restraining order be
issued restraining the aforementioned defendants (TIAMSON, et
al.) from rescinding their contracts with the plaintiff and from
alienating the subject properties to the defendants LACSONS or
any third persons; further, restraining and enjoining the
defendants LACSONS from encumbering/selling the properties
covered by TCT Nos. 35922-R, 35923-R, and 35925-R of the
Registry of Deeds of San Fernando, Pampanga.
3. Fixing the period within which plaintiff shall pay the balance
of the purchase price to the defendants TIAMSON, et al., after
the lapse of legal impediment, if any.
4. Making the Writ of Preliminary Injunction permanent;
5. Ordering the defendants to pay the plaintiff the sum of
P500,000.00 as moral damages;
6. Ordering the defendants to pay the plaintiff attorneys fees in
the sum of P100,000.00 plus litigation expenses of P50,000.00;

Plaintiff prays for such other relief as may be just and equitable
under the premises.13
In their answer to the complaint, the respondents as defendants
asserted that (a) the defendant Angelica Vda. de Lacson had died
on April 24, 1993; (b) twelve of the defendants were
tenants/lessees of respondents, but the tenancy status of the rest
of the defendants was uncertain; (c) they never induced the
defendants Tiamson to violate their contracts with the petitioner;
and, (d) being merely tenants-tillers, the defendants-tenants had
no right to enter into any transactions involving their properties
without their knowledge and consent. They also averred that the
transfers or assignments of leasehold rights made by the
defendants-tenants to the petitioner is contrary to Presidential
Decree (P.D.) No. 27 and Republic Act No. 6657, the
Comprehensive Agrarian Reform Program (CARP).14 The
respondents interposed counterclaims for damages against the
petitioner as plaintiff.
The defendants-tenants Tiamson, et al., alleged in their answer
with counterclaim for damages, that the money each of them
received from the petitioner were in the form of loans, and that
they were deceived into signing the deeds of assignment:
a) That all the foregoing allegations in the Answer are hereby
repleaded and incorporated in so far as they are material and
relevant herein;
b) That the defendants Tiamson, et al., in so far as the Deeds of
Assignment are concern[ed] never knew that what they did sign
is a Deed of Assignment. What they knew was that they were
made to sign a document that will serve as a receipt for the loan
granted [to] them by the plaintiff;

c) That the Deeds of Assignment were signed through the

employment of fraud, deceit and false pretenses of plaintiff and
made the defendants believe that what they sign[ed] was a mere
receipt for amounts received by way of loans;
d) That the documents signed in blank were filled up and
completed after the defendants Tiamson, et al., signed the
documents and their completion and accomplishment was done
in the absence of said defendants and, worst of all, defendants
were not provided a copy thereof;
e) That as completed, the Deeds of Assignment reflected that the
defendants Tiamson, et al., did assign all their rights and
interests in the properties or landholdings they were tilling in
favor of the plaintiff. That if this is so, assuming arguendo that
the documents were voluntarily executed, the defendants
Tiamson, et al., do not have any right to transfer their interest in
the landholdings they are tilling as they have no right
whatsoever in the landholdings, the landholdings belong to their
co-defendants, Lacson, et al., and therefore, the contract is null
and void;
f) That while it is admitted that the defendants Tiamson, et al.,
received sums of money from plaintiffs, the same were received
as approved loans granted by plaintiff to the defendants
Tiamson, et al., and not as part consideration of the alleged
Deeds of Assignment; and by way of:15
At the hearing of the petitioners plea for a writ of preliminary
injunction, the respondents counsel failed to appear. In support
of his plea for a writ of preliminary injunction, the petitioner
adduced in evidence the Deeds of Assignment,16 the
receipts17 issued by the defendants-tenants for the amounts they

received from him; and the letter18 the petitioner received from
the defendants-tenants. The petitioner then rested his case.
The respondents, thereafter, filed a Comment/Motion to
dismiss/deny the petitioners plea for injunctive relief on the
following grounds: (a) the Deeds of Assignment executed by the
defendants-tenants were contrary to public policy and P.D. No.
27 and Rep. Act No. 6657; (b) the petitioner failed to prove that
the respondents induced the defendants-tenants to renege on
their obligations under the "Deeds of Assignment;" (c) not being
privy to the said deeds, the respondents are not bound by the
said deeds; and, (d) the respondents had the absolute right to sell
and dispose of their property and to encumber the same and
cannot be enjoined from doing so by the trial court.
The petitioner opposed the motion, contending that it was
premature for the trial court to resolve his plea for injunctive
relief, before the respondents and the defendants-tenants
adduced evidence in opposition thereto, to afford the petitioner a
chance to adduce rebuttal evidence and prove his entitlement to
a writ of preliminary injunction. The respondents replied that it
was the burden of the petitioner to establish the requisites of a
writ of preliminary injunction without any evidence on their
part, and that they were not bound to adduce any evidence in
opposition to the petitioners plea for a writ of preliminary
injunction.
On February 13, 1997, the court issued an Order19 denying the
motion of the respondents for being premature. It directed the
hearing to proceed for the respondents to adduce their evidence.
The court ruled that the petitioner, on the basis of the material
allegations of the complaint, was entitled to injunctive relief. It
also held that before the court could resolve the petitioners plea

for injunctive relief, there was need for a hearing to enable the
respondents and the defendants-tenants to adduce evidence to
controvert that of the petitioner. The respondents filed a motion
for reconsideration, which the court denied in its Order dated
April 16, 1997. The trial court ruled that on the face of the
averments of the complaint, the pleadings of the parties and the
evidence adduced by the petitioner, the latter was entitled to
injunctive relief unless the respondents and the defendantstenants adduced controverting evidence.
The respondents, the petitioners therein, filed a petition for
certiorari in the Court of Appeals for the nullification of the
February 13, 1997 and April 16, 1997 Orders of the trial court.
The case was docketed as CA-G.R. SP No. 44883. The
petitioners therein prayed in their petition that:
1. An order be issued declaring the orders of respondent court
dated February 13, 1997 and April 16, 1997 as null and void;
2. An order be issued directing the respondent court to issue an
order denying the application of respondent Herminio Tayag for
the issuance of a Writ of Preliminary Injunction and/or
restraining order.
3. In the meantime, a Writ of Preliminary Injunction be issued
against the respondent court, prohibiting it from issuing its own
writ of injunction against Petitioners, and thereafter making said
injunction to be issued by this Court permanent.
Such other orders as may be deemed just & equitable under the
premises also prayed for.20

The respondents asserted that the Deeds of Assignment executed

by the assignees in favor of the petitioner were contrary to
paragraph 13 of P.D. No. 27 and the second paragraph of Section
70 of Rep. Act No. 6657, and, as such, could not be enforced by
the petitioner for being null and void. The respondents also
claimed that the enforcement of the deeds of assignment was
subject to a supervening condition:
3. That this exclusive and absolute right given to the assignee
shall be exercised only when no legal impediments exist to the
lot to effect the smooth transfer of lawful ownership of the
lot/property in the name of the ASSIGNEE.21
The respondents argued that until such condition took place, the
petitioner would not acquire any right to enforce the deeds by
injunctive relief. Furthermore, the petitioners plea in his
complaint before the trial court, to fix a period within which to
pay the balance of the amounts due to the tenants under said
deeds after the "lapse" of any legal impediment, assumed that
the deeds were valid, when, in fact and in law, they were not.
According to the respondents, they were not parties to the deeds
of assignment; hence, they were not bound by the said deeds.
The issuance of a writ of preliminary injunction would restrict
and impede the exercise of their right to dispose of their
property, as provided for in Article 428 of the New Civil Code.
They asserted that the petitioner had no cause of action against
them and the defendants-tenants.
On April 17, 1998, the Court of Appeals rendered its decision
against the petitioner, annulling and setting aside the assailed
orders of the trial court; and permanently enjoining the said trial
court from proceeding with Civil Case No. 10901. The decretal
portion of the decision reads as follows:

However, even if private respondent is denied of the injunctive

relief he demands in the lower court still he could avail of other
course of action in order to protect his interest such as the
institution of a simple civil case of collection of money against
TIAMSON, et al.

EVIDENCE
OR
BASIS
FOR
ANY
CONCLUSION, AS THIS ALLEGATION, IS
STILL THE SUBJECT OF TRIAL IN THE
LOWER COURT (RTC).24
II

For all the foregoing considerations, the orders dated 13

February 1997 and 16 April 1997 are hereby NULLIFIED and
ordered SET ASIDE for having been issued with grave abuse of
discretion amounting to lack or excess of jurisdiction.
Accordingly, public respondent is permanently enjoined from
proceeding with the case designated as Civil Case No. 10901.22
The CA ruled that the respondents could not be enjoined from
alienating or even encumbering their property, especially so
since they were not privies to the deeds of assignment executed
by the defendants-tenants. The defendants-tenants were not yet
owners of the portions of the landholdings respectively tilled by
them; as such, they had nothing to assign to the petitioner.
Finally, the CA ruled that the deeds of assignment executed by
the defendants-tenants were contrary to P.D. No. 27 and Rep.
Act No. 6657.
On August 4, 1998, the CA issued a Resolution denying the
petitioners motion for reconsideration.23

THE COURT OF APPEALS CANNOT ENJOIN

THE HEARING OF A PETITION FOR
PRELIMINARY INJUNCTION AT A TIME
WHEN THE LOWER COURT (RTC) IS STILL
RECEIVING EVIDENCE PRECISELY TO
DETERMINE WHETHER OR NOT THE WRIT
OF PRELIMINARY INJUNCTION BEING
PRAYED FOR BY TAYAG SHOULD BE
GRANTED OR NOT.25
III
THE COURT OF APPEALS CANNOT USE
"FACTS" NOT IN EVIDENCE, TO SUPPORT
ITS CONCLUSION THAT THE TENANTS
ARE NOT YET "AWARDEES OF THE LAND
REFORM.26
IV

Hence, the petitioner filed his petition for review on certiorari

before this Court, contending as follows:
I
A MERE ALLEGATION IN THE ANSWER OF
THE TENANTS COULD NOT BE USED AS

THE COURT OF APPEALS CANNOT CAUSE

THE PERMANENT STOPPAGE OF THE
ENTIRE
PROCEEDINGS
BELOW
INCLUDING THE TRIAL ON THE MERITS
OF THE CASE CONSIDERING THAT THE

ISSUE INVOLVED ONLY THE PROPRIETY

OF MAINTAINING THE STATUS QUO.27
V
THE COURT OF APPEALS CANNOT
INCLUDE IN ITS DECISION THE CASE OF
THE OTHER 35 TENANTS WHO DO NOT
QUESTION THE JURISDICTION OF THE
LOWER COURT (RTC) OVER THE CASE
AND WHO ARE IN FACT STILL
PRESENTING THEIR EVIDENCE TO OPPOSE
THE INJUNCTION PRAYED FOR, AND TO
PROVE AT THE SAME TIME THE COUNTERCLAIMS THEY FILED AGAINST THE
PETITIONER.28
VI
THE
LOWER
COURT
(RTC)
HAS
JURISDICTION OVER THE CASE FILED BY
TAYAG FOR "FIXING OF PERIOD" UNDER
ART. 1197 OF THE NEW CIVIL CODE AND
FOR "DAMAGES" AGAINST THE LACSONS
UNDER ART. 1314 OF THE SAME CODE.
THIS CASE CANNOT BE SUPPRESSED OR
RENDERED
NUGATORY
29
UNCEREMONIOUSLY.
The petitioner faults the Court of Appeals for permanently
enjoining the trial court from proceeding with Civil Case No.
10910. He opines that the same was too drastic, tantamount to a
dismissal of the case. He argues that at that stage, it was

premature for the appellate court to determine the merits of the

case since no evidentiary hearing thereon was conducted by the
trial court. This, the Court of Appeals cannot do, since neither
party moved for the dismissal of Civil Case No. 10910. The
petitioner points out that the Court of Appeals, in making its
findings, went beyond the issue raised by the private
respondents, namely, whether or not the trial court committed a
grave abuse of discretion amounting to excess or lack of
jurisdiction when it denied the respondents motion for the
denial/dismissal of the petitioners plea for a writ of preliminary
injunction. He, likewise, points out that the appellate court
erroneously presumed that the leaseholders were not DAR
awardees and that the deeds of assignment were contrary to law.
He contends that leasehold tenants are not prohibited from
conveying or waiving their leasehold rights in his favor. He
insists that there is nothing illegal with his contracts with the
leaseholders, since the same shall be effected only when there
are no more "legal impediments."
At bottom, the petitioner contends that, at that stage, it was
premature for the appellate court to determine the merits of his
case since no evidentiary hearing on the merits of his complaint
had yet been conducted by the trial court.
The Comment/Motion of the
Respondents to Dismiss/Deny
Petitioners Plea for a Writ
of Preliminary Injunction
Was Not Premature.
Contrary to the ruling of the trial court, the motion of the
respondents to dismiss/deny the petitioners plea for a writ of
preliminary injunction after the petitioner had adduced his

evidence, testimonial and documentary, and had rested his case

on the incident, was proper and timely. It bears stressing that the
petitioner had the burden to prove his right to a writ of
preliminary injunction. He may rely solely on the material
allegations of his complaint or adduce evidence in support
thereof. The petitioner adduced his evidence to support his plea
for a writ of preliminary injunction against the respondents and
the defendants-tenants and rested his case on the said incident.
The respondents then had three options: (a) file a motion to
deny/dismiss the motion on the ground that the petitioner failed
to discharge his burden to prove the factual and legal basis for
his plea for a writ of preliminary injunction and, if the trial court
denies his motion, for them to adduce evidence in opposition to
the petitioners plea; (b) forgo their motion and adduce
testimonial and/or documentary evidence in opposition to the
petitioners plea for a writ of preliminary injunction; or, (c)
waive their right to adduce evidence and submit the incident for
consideration on the basis of the pleadings of the parties and the
evidence of the petitioner. The respondents opted not to adduce
any evidence, and instead filed a motion to deny or dismiss the
petitioners plea for a writ of preliminary injunction against
them, on their claim that the petitioner failed to prove his
entitlement thereto. The trial court cannot compel the
respondents to adduce evidence in opposition to the petitioners
plea if the respondents opt to waive their right to adduce such
evidence. Thus, the trial court should have resolved the
respondents motion even without the latters opposition and the
presentation of evidence thereon.

in
Issuing
its
and April 16, 1997 Orders

The
Abuse
to

(b) That the commission, continuance or non-performance of the

act or acts complained of during the litigation would probably
work injustice to the applicant; or

RTC
of
Excess

Committed
a
Discretion
or
Lack
of

Grave
Amounting
Jurisdiction

February

13,

1997

In its February 13, 1997 Order, the trial court ruled that the
petitioner was entitled to a writ of preliminary injunction against
the respondents on the basis of the material averments of the
complaint. In its April 16, 1997 Order, the trial court denied the
respondents motion for reconsideration of the previous order, on
its finding that the petitioner was entitled to a writ of preliminary
injunction based on the material allegations of his complaint, the
evidence on record, the pleadings of the parties, as well as the
applicable laws:
For the record, the Court denied the LACSONS
COMMENT/MOTION on the basis of the facts culled from the
evidence presented, the pleadings and the law applicable
unswayed by the partisan or personal interests, public opinion or
fear of criticism (Canon 3, Rule 3.02, Code of Judicial Ethics).30
Section 3, Rule 58 of the Rules of Court, as amended,
enumerates the grounds for the issuance of a writ of preliminary
injunction, thus:
(a) That the applicant is entitled to the relief demanded, and the
whole or part of such relief consists in restraining the
commission or continuance of the act or acts complained of, or
in requiring the performance of an act or acts, either for a limited
period or perpetually;

(c) That a party, court, agency or a person is doing, threatening,

or is attempting to do, or is procuring or suffering to be done,
some act or acts probably in violation of the rights of the
applicant respecting the subject of the action or proceeding, and
tending to render the judgment ineffectual.
A preliminary injunction is an extraordinary event calculated to
preserve or maintain the status quo of things ante litem and is
generally availed of to prevent actual or threatened acts, until the
merits of the case can be heard. Injunction is accepted as the
strong arm of equity or a transcendent remedy.31 While generally
the grant of a writ of preliminary injunction rests on the sound
discretion of the trial court taking cognizance of the case,
extreme caution must be observed in the exercise of such
discretion.32 Indeed, in Olalia v. Hizon,33 we held:
It has been consistently held that there is no power the exercise
of which is more delicate, which requires greater caution,
deliberation and sound discretion, or more dangerous in a
doubtful case, than the issuance of an injunction. It is the strong
arm of equity that should never be extended unless to cases of
great injury, where courts of law cannot afford an adequate or
commensurate remedy in damages.
Every court should remember that an injunction is a limitation
upon the freedom of action of the defendant and should not be
granted lightly or precipitately. It should be granted only when
the court is fully satisfied that the law permits it and the
emergency demands it.34
The very foundation of the jurisdiction to issue writ of injunction
rests in the existence of a cause of action and in the probability
of irreparable injury, inadequacy of pecuniary compensation and

the prevention of the multiplicity of suits. Where facts are not

shown to bring the case within these conditions, the relief of
injunction should be refused.35
For the court to issue a writ of preliminary injunction, the
petitioner was burdened to establish the following: (1) a right in
esse or a clear and unmistakable right to be protected; (2) a
violation of that right; (3) that there is an urgent and permanent
act and urgent necessity for the writ to prevent serious
damage.36 Thus, in the absence of a clear legal right, the issuance
of the injunctive writ constitutes a grave abuse of discretion.
Where the complainants right is doubtful or disputed, injunction
is not proper. Injunction is a preservative remedy aimed at
protecting substantial rights and interests. It is not designed to
protect contingent or future rights. The possibility of irreparable
damage without proof of adequate existing rights is not a ground
for injunction.37
We have reviewed the pleadings of the parties and found that, as
contended by the respondents, the petitioner failed to establish
the essential requisites for the issuance of a writ of preliminary
injunction. Hence, the trial court committed a grave abuse of its
discretion amounting to excess or lack of jurisdiction in denying
the respondents comment/motion as well as their motion for
reconsideration.
First. The trial court cannot enjoin the respondents, at the
instance of the petitioner, from selling, disposing of and
encumbering their property. As the registered owners of the
property, the respondents have the right to enjoy and dispose of
their property without any other limitations than those
established by law, in accordance with Article 428 of the Civil
Code. The right to dispose of the property is the power of the

owner to sell, encumber, transfer, and even destroy the property.

Ownership also includes the right to recover the possession of
the property from any other person to whom the owner has not
transmitted such property, by the appropriate action for
restitution, with the fruits, and for indemnification for
damages.38 The right of ownership of the respondents is not, of
course, absolute. It is limited by those set forth by law, such as
the agrarian reform laws. Under Article 1306 of the New Civil
Code, the respondents may enter into contracts covering their
property with another under such terms and conditions as they
may deem beneficial provided they are not contrary to law,
morals, good conduct, public order or public policy.
The respondents cannot be enjoined from selling or encumbering
their property simply and merely because they had executed
Deeds of Assignment in favor of the petitioner, obliging
themselves to assign and transfer their rights or interests as
agricultural farmers/laborers/sub-tenants over the landholding,
and granting the petitioner the exclusive right to buy the
property subject to the occurrence of certain conditions. The
respondents were not parties to the said deeds. There is no
evidence that the respondents agreed, expressly or impliedly, to
the said deeds or to the terms and conditions set forth therein.
Indeed, they assailed the validity of the said deeds on their claim
that the same were contrary to the letter and spirit of P.D. No. 27
and Rep. Act No. 6657. The petitioner even admitted when he
testified that he did not know any of the respondents, and that he
had not met any of them before he filed his complaint in the
RTC. He did not even know that one of those whom he had
impleaded as defendant, Angelica Vda. de Lacson, was already
dead.
Q: But you have not met any of these Lacsons?

A: Not yet, sir.

Q: Do you know that two (2) of the defendants are residents of
the United States?
A: I do not know, sir.
Q: You do not know also that Angela Tiotuvie (sic) Vda. de
Lacson had already been dead?
A: I am aware of that, sir.39
We are one with the Court of Appeals in its ruling that:
We cannot see our way clear on how or why injunction should
lie against petitioners. As owners of the lands being tilled by
TIAMSON, et al., petitioners, under the law, have the right to
enjoy and dispose of the same. Thus, they have the right to
possess the lands, as well as the right to encumber or alienate
them. This principle of law notwithstanding, private respondent
in the lower court sought to restrain the petitioners from
encumbering and/or alienating the properties covered by TCT
No. 35922-R, 35923-R and TCT No. 35925-R of the Registry of
Deeds of San Fernando, Pampanga. This cannot be allowed to
prosper since it would constitute a limitation or restriction, not
otherwise established by law on their right of ownership, more
so considering that petitioners were not even privy to the alleged
transaction between private respondent and TIAMSON, et al.40
Second. A reading the averments of the complaint will show that
the petitioner clearly has no cause of action against the
respondents for the principal relief prayed for therein, for the
trial court to fix a period within which to pay to each of the

defendants-tenants the balance of the P50.00 per square meter,

the consideration under the Deeds of Assignment executed by
the defendants-tenants. The respondents are not parties or privies
to the deeds of assignment. The matter of the period for the
petitioner to pay the balance of the said amount to each of the
defendants-tenants is an issue between them, the parties to the
deed.

are no legal impediment, you are using the word "legal

impediment," do you know the meaning of that?

Third. On the face of the complaint, the action of the petitioner

against the respondents and the defendants-tenants has no legal
basis. Under the Deeds of Assignment, the obligation of the
petitioner to pay to each of the defendants-tenants the balance of
the purchase price was conditioned on the occurrence of the
following events: (a) the respondents agree to sell their property
to the petitioner; (b) the legal impediments to the sale of the
landholding to the petitioner no longer exist; and, (c) the
petitioner decides to buy the property. When he testified, the
petitioner admitted that the legal impediments referred to in the
deeds were (a) the respondents refusal to sell their property;
and, (b) the lack of approval of the Department of Agrarian
Reform:

A : We have agreed to that, sir.

Q : There is no specific agreement prior to the execution of those

documents as when they will pay?
A : We agreed to that, that I will pay them when there are no
legal impediment, sir.
Q : Many of the documents are unlattered (sic) and you want to
convey to this Honorable Court that prior to the execution of
these documents you have those tentative agreement for instance
that the amount or the cost of the price is to be paid when there

A : When there are (sic) no more legal impediment exist, sir.

Q : Did you make how (sic) to the effect that the meaning of that
phrase that you used the unlettered defendants?

ATTY. OCAMPO:
May I ask, Your Honor, that the witness please answer my
question not to answer in the way he wanted it.
COURT:
Just answer the question, Mr. Tayag.
WITNESS:
Yes, Your Honor.
ATTY. OCAMPO:
Q : Did you explain to them?
A : Yes, sir.
Q : What did you tell them?
A : I explain[ed] to them, sir, that the legal impediment then
especially if the Lacsons will not agree to sell their shares to me

or to us it would be hard to (sic) me to pay them in full. And

those covered by DAR. I explain[ed] to them and it was clearly
stated in the title that there is [a] prohibited period of time before
you can sell the property. I explained every detail to them.41
It is only upon the occurrence of the foregoing conditions that
the petitioner would be obliged to pay to the defendants-tenants
the balance of the P50.00 per square meter under the deeds of
assignment. Thus:
2. That in case the ASSIGNOR and LANDOWNER will
mutually agree to sell the said lot to the ASSIGNEE, who is
given an exclusive and absolute right to buy the lot, the
ASSIGNOR shall receive the sum of FIFTY PESOS (P50.00)
per square meter as consideration of the total area actually tilled
and possessed by the ASSIGNOR, less whatever amount
received by the ASSIGNOR including commissions, taxes and
all allowable deductions relative to the sale of the subject
properties.

and the defendants-tenants had yet to submit the Deeds of

Assignment to the Department of Agrarian Reform which, in
turn, had to act on and approve or disapprove the same. In fact,
as alleged by the petitioner in his complaint, he was yet to meet
with the defendants-tenants to discuss the implementation of the
deeds of assignment. Unless and until the Department of
Agrarian Reform approved the said deeds, if at all, the petitioner
had no right to enforce the same in a court of law by asking the
trial court to fix a period within which to pay the balance of the
purchase price and praying for injunctive relief.

4. That the ASSIGNOR will remain in peaceful possession over

the said property and shall enjoy the fruits/earnings and/or
harvest of the said lot until such time that full payment of the
agreed purchase price had been made by the ASSIGNEE.42

We do not agree with the contention of the petitioner that the

deeds of assignment executed by the defendants-tenants are
perfected option contracts.43 An option is a contract by which the
owner of the property agrees with another person that he shall
have the right to buy his property at a fixed price within a certain
time. It is a condition offered or contract by which the owner
stipulates with another that the latter shall have the right to buy
the property at a fixed price within a certain time, or under, or in
compliance with certain terms and conditions, or which gives to
the owner of the property the right to sell or demand a sale. It
imposes no binding obligation on the person holding the option,
aside from the consideration for the offer. Until accepted, it is
not, properly speaking, treated as a contract.44 The second party
gets in praesenti, not lands, not an agreement that he shall have
the lands, but the right to call for and receive lands if he
elects.45 An option contract is a separate and distinct contract
from which the parties may enter into upon the conjunction of
the option.46

There is no showing in the petitioners complaint that the

respondents had agreed to sell their property, and that the legal
impediments to the agreement no longer existed. The petitioner

In this case, the defendants-tenants-subtenants, under the deeds

of assignment, granted to the petitioner not only an option but
the exclusive right to buy the landholding. But the grantors were

3. That this exclusive and absolute right given to the ASSIGNEE

shall be exercised only when no legal impediments exist to the
lot to effect the smooth transfer of lawful ownership of the
lot/property in the name of the ASSIGNEE;

merely the defendants-tenants, and not the respondents, the

registered owners of the property. Not being the registered
owners of the property, the defendants-tenants could not legally
grant to the petitioner the option, much less the "exclusive right"
to buy the property. As the Latin saying goes, "NEMO DAT
QUOD NON HABET."
Fourth. The petitioner impleaded the respondents as partiesdefendants solely on his allegation that the latter induced or are
inducing the defendants-tenants to violate the deeds of
assignment, contrary to the provisions of Article 1314 of the
New Civil Code which reads:
Art. 1314. Any third person who induces another to violate his
contract shall be liable for damages to the other contracting
party.
In So Ping Bun v. Court of Appeals, 47 we held that for the said
law to apply, the pleader is burdened to prove the following: (1)
the existence of a valid contract; (2) knowledge by the third
person of the existence of the contract; and (3) interference by
the third person in the contractual relation without legal
justification.
Where there was no malice in the interference of a contract, and
the impulse behind ones conduct lies in a proper business
interest rather than in wrongful motives, a party cannot be a
malicious interferer. Where the alleged interferer is financially
interested, and such interest motivates his conduct, it cannot be
said that he is an officious or malicious intermeddler.48
In fine, one who is not a party to a contract and who interferes
thereon is not necessarily an officious or malicious intermeddler.

The only evidence adduced by the petitioner to prove his claim

is the letter from the defendants-tenants informing him that they
had decided to sell their rights and interests over the landholding
to the respondents, instead of honoring their obligation under the
deeds of assignment because, according to them, the petitioner
harassed those tenants who did not want to execute deeds of
assignment in his favor, and because the said defendants-tenants
did not want to have any problem with the respondents who
could cause their eviction for executing with the petitioner the
deeds of assignment as the said deeds are in violation of P.D.
No. 27 and Rep. Act No. 6657.49 The defendants-tenants did not
allege therein that the respondents induced them to breach their
contracts with the petitioner. The petitioner himself admitted
when he testified that his claim that the respondents induced the
defendants-assignees to violate contracts with him was based
merely on what "he heard," thus:
Q: Going to your last statement that the Lacsons induces (sic)
the defendants, did you see that the Lacsons were inducing the
defendants?
A: I heard and sometime in [the] first week of August, sir, they
went in the barrio (sic). As a matter of fact, that is the reason
why they sent me letter that they will sell it to the Lacsons.
Q: Incidentally, do you knew (sic) these Lacsons individually?
A: No, sir, it was only Mr. Espinosa who I knew (sic) personally,
the alleged negotiator and has the authority to sell the property.50
Even if the respondents received an offer from the defendantstenants to assign and transfer their rights and interests on the
landholding, the respondents cannot be enjoined from

entertaining the said offer, or even negotiating with the

defendants-tenants. The respondents could not even be expected
to warn the defendants-tenants for executing the said deeds in
violation of P.D. No. 27 and Rep. Act No. 6657. Under Section
22 of the latter law, beneficiaries under P.D. No. 27 who have
culpably sold, disposed of, or abandoned their land, are
disqualified from becoming beneficiaries.
From the pleadings of the petitioner, it is quite evident that his
purpose in having the defendants-tenants execute the Deeds of
Assignment in his favor was to acquire the landholding without
any tenants thereon, in the event that the respondents agreed to
sell the property to him. The petitioner knew that under Section
11 of Rep. Act No. 3844, if the respondents agreed to sell the
property, the defendants-tenants shall have preferential right to
buy the same under reasonable terms and conditions:
SECTION 11. Lessees Right of Pre-emption. In case the
agricultural lessor desires to sell the landholding, the agricultural
lessee shall have the preferential right to buy the same under
reasonable terms and conditions: Provided, That the entire
landholding offered for sale must be pre-empted by the Land
Authority if the landowner so desires, unless the majority of the
lessees object to such acquisition: Provided, further, That where
there are two or more agricultural lessees, each shall be entitled
to said preferential right only to the extent of the area actually
cultivated by him. 51
Under Section 12 of the law, if the property was sold to a third
person without the knowledge of the tenants thereon, the latter
shall have the right to redeem the same at a reasonable price and
consideration. By assigning their rights and interests on the
landholding under the deeds of assignment in favor of the

petitioner, the defendants-tenants thereby waived, in favor of the

petitioner, who is not a beneficiary under Section 22 of Rep. Act
No. 6657, their rights of preemption or redemption under Rep.
Act No. 3844. The defendants-tenants would then have to vacate
the property in favor of the petitioner upon full payment of the
purchase price. Instead of acquiring ownership of the portions of
the landholding respectively tilled by them, the defendantstenants would again become landless for a measly sum of
P50.00 per square meter. The petitioners scheme is subversive,
not only of public policy, but also of the letter and spirit of the
agrarian laws. That the scheme of the petitioner had yet to take
effect in the future or ten years hence is not a justification. The
respondents may well argue that the agrarian laws had been
violated by the defendants-tenants and the petitioner by the mere
execution of the deeds of assignment. In fact, the petitioner has
implemented the deeds by paying the defendants-tenants
amounts of money and even sought their immediate
implementation by setting a meeting with the defendantstenants. In fine, the petitioner would not wait for ten years to
evict the defendants-tenants. For him, time is of the essence.
The
Appellate
In
Permanently
The
Regional
From
Continuing
Proceedings in Civil Case No. 10910.

Court
Trial
with

Erred
Enjoining
Court
the

We agree with the petitioners contention that the appellate court

erred when it permanently enjoined the RTC from continuing
with the proceedings in Civil Case No. 10910. The only issue
before the appellate court was whether or not the trial court
committed a grave abuse of discretion amounting to excess or
lack of jurisdiction in denying the respondents motion to deny

or dismiss the petitioners plea for a writ of preliminary

injunction. Not one of the parties prayed to permanently enjoin
the trial court from further proceeding with Civil Case No.
10910 or to dismiss the complaint. It bears stressing that the
petitioner may still amend his complaint, and the respondents
and the defendants-tenants may file motions to dismiss the
complaint. By permanently enjoining the trial court from
proceeding with Civil Case No. 10910, the appellate court acted
arbitrarily and effectively dismissed the complaint motu proprio,
including the counterclaims of the respondents and that of the
defendants-tenants. The defendants-tenants were even deprived
of their right to prove their special and affirmative defenses.
IN LIGHT OF ALL THE FOREGOING, the petition is
PARTIALLY GRANTED. The Decision of the Court of Appeals
nullifying the February 13, 1996 and April 16, 1997 Orders of
the RTC is AFFIRMED. The writ of injunction issued by the
Court of Appeals permanently enjoining the RTC from further
proceeding with Civil Case No. 10910 is hereby LIFTED and
SET ASIDE. The Regional Trial Court of Mabalacat, Pampanga,
Branch 44, is ORDERED to continue with the proceedings in
Civil Case No. 10910 as provided for by the Rules of Court, as
amended.
SO ORDERED.
Puno, (Chairman), Quisumbing, Austria-Martinez, and Tinga,
JJ., concur.

Republic of the Philippines

SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 97332 October 10, 1991
SPOUSES JULIO D. VILLAMOR AND MARINA
VILLAMOR, petitioners,
vs.
THE HON. COURT OF APPEALS AND SPOUSES
MACARIA LABINGISA REYES AND ROBERTO
REYES,respondents.
Tranquilino F. Meris for petitioners.
Agripino G. Morga for private respondents.
MEDIALDEA, J.:p
This is a petition for review on certiorari of the decision of the
Court of Appeals in CA-G.R. No. 24176 entitled, "Spouses Julio
Villamor and Marina Villamor, Plaintiffs-Appellees, versus
Spouses Macaria Labing-isa Reyes and Roberto Reyes,
Defendants-Appellants," which reversed the decision of the
Regional Trial Court (Branch 121) at Caloocan City in Civil
Case No. C-12942.
The facts of the case are as follows:

Macaria Labingisa Reyes was the owner of a 600-square meter

lot located at Baesa, Caloocan City, as evidenced by Transfer
Certificate of Title No. (18431) 18938, of the Register of Deeds
of Rizal.
In July 1971, Macaria sold a portion of 300 square meters of the
lot to the Spouses Julio and Marina and 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 square meter lot sold. The portion sold
to the Villamor spouses is now covered by TCT No. 39935 while
the remaining portion which is still in the name of Macaria
Labing-isa is covered by TCT No. 39934 (pars. 5 and 7,
Complaint). On November 11, 1971, Macaria executed a "Deed
of Option" in favor of Villamor in which the remaining 300
square meter portion (TCT No. 39934) of the lot would be sold
to Villamor under the conditions stated therein. The document
reads:
DEED OF OPTION
This Deed of Option, entered into in the City of Manila,
Philippines, this 11th day of November, 1971, by and between
Macaria Labing-isa, of age, married to Roberto Reyes, likewise
of age, and both resideing on Reparo St., Baesa, Caloocan City,
on the one hand, and on the other hand the spouses Julio
Villamor and Marina V. Villamor, also of age and residing at No.
552 Reparo St., corner Baesa Road, Baesa, Caloocan City.
WITNESSETH
That, I Macaria Labingisa, am the owner in fee simple of a
parcel of land with an area of 600 square meters, more or less,

more particularly described in TCT No. (18431) 18938 of the

Office of the Register of Deeds for the province of Rizal, issued
in may name, I having inherited the same from my deceased
parents, for which reason it is my paraphernal property;

IN WITNESS WHEREOF, this Deed of Option is signed in the

City of Manila, Philippines, by all the persons concerned, this
11th day of November, 1971.
JULIO VILLAMOR MACARIA LABINGISA

That I, with the conformity of my husband, Roberto Reyes, have

sold one-half thereof to the aforesaid spouses Julio Villamor and
Marina V. Villamor at the price of P70.00 per sq. meter, which
was greatly higher than the actual reasonable prevailing value of
lands in that place at the time, which portion, after segregation,
is now covered by TCT No. 39935 of the Register of Deeds for
the City of Caloocan, issued on August 17, 1971 in the name of
the aforementioned spouses vendees;
That the only reason why the Spouses-vendees Julio Villamor
and Marina V. Villamor, agreed to buy the said one-half portion
at the above-stated price of about P70.00 per square meter, is
because I, and my husband Roberto Reyes, have agreed to sell
and convey to them the remaining one-half portion still owned
by me and now covered by TCT No. 39935 of the Register of
Deeds for the City of Caloocan, whenever the need of such sale
arises, either on our part or on the part of the spouses (Julio)
Villamor and Marina V. Villamor, at the same price of P70.00
per square meter, excluding whatever improvement may be
found the thereon;
That I am willing to have this contract to sell inscribed on my
aforesaid title as an encumbrance upon the property covered
thereby, upon payment of the corresponding fees; and
That we, Julio Villamor and Marina V. Villamor, hereby agree to,
and accept, the above provisions of this Deed of Option.

With My Conformity:
MARINA VILLAMOR ROBERTO REYES
Signed in the Presence Of:
MARIANO
ROSALINDA S. EUGENIO

Z.

SUNIGA

ACKNOWLEDGMENT
REPUBLIC
OF
CITY OF MANILA ) S.S.

THE

PHILIPPINES)

At the City of Manila, on the 11th day of November, 1971,

personally appeared before me Roberto Reyes, Macaria
Labingisa, Julio Villamor and Marina Ventura-Villamor, known
to me as the same persons who executed the foregoing Deed of
Option, which consists of two (2) pages including the page
whereon this acknowledgement is written, and signed at the left
margin of the first page and at the bottom of the instrument by
the parties and their witnesses, and sealed with my notarial seal,
and said parties acknowledged to me that the same is their free
act and deed. The Residence Certificates of the parties were
exhibited to me as follows: Roberto Reyes, A-22494, issued at
Manila on Jan. 27, 1971, and B-502025, issued at Makati, Rizal
on Feb. 18, 1971; Macaria Labingisa, A-3339130 and B-

1266104, both issued at Caloocan City on April 15, 1971, their

joint Tax Acct. Number being 3028-767-6; Julio Villamor, A804, issued at Manila on Jan. 14, 1971, and B-138, issued at
Manila on March 1, 1971; and Marina Ventura-Villamor, A-803,
issued at Manila on Jan. 14, 1971, their joint Tax Acct. Number
being 608-202-6.
ARTEMIO
M.
Notary
Until
December
PTR
No.
January 15, 1971
Doc.
No.
Page
No.
Book
No.
Series of 1971. (pp. 25-29, Rollo)

31,
338203,

MALUBAY
Public
1972
Manila
1526;
24;
38;

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 square
meter portion of the lot but the Reyeses had been ignoring them.
Thus, on July 13, 1987, after conciliation proceedings in the
barangay level failed, they filed a complaint for specific
performance against the Reyeses.

On July 26, 1989, judgment was rendered by the trial court in

favor of the Villamor spouses, the dispositive portion of which
states:
WHEREFORE, and (sic) in view of the foregoing, judgment is
hereby rendered in favor of the plaintiffs and against the
defendants ordering the defendant MACARIA LABING-ISA
REYES and ROBERTO REYES, to sell unto the plaintiffs the
land covered by T.C.T No. 39934 of the Register of Deeds of
Caloocan City, to pay the plaintiffs the sum of P3,000.00 as and
for attorney's fees and to pay the cost of suit.
The counterclaim is hereby DISMISSED, for LACK OF
MERIT.
SO ORDERED. (pp. 24-25, Rollo)
Not satisfied with the decision of the trial court, the Reyes
spouses appealed to the Court of Appeals on the following
assignment of errors:
1. HOLDING THAT THE DEED OF OPTION EXECUTED
ON NOVEMBER 11, 1971 BETWEEN THE PLAINTIFFAPPELLEES AND DEFENDANT-APPELLANTS IS STILL
VALID AND BINDING DESPITE THE LAPSE OF MORE
THAN THIRTEEN (13) YEARS FROM THE EXECUTION OF
THE CONTRACT;
2. FAILING TO CONSIDER THAT THE DEED OF OPTION
CONTAINS OBSCURE WORDS AND STIPULATIONS
WHICH SHOULD BE RESOLVED AGAINST THE
PLAINTIFF-APPELLEES WHO UNILATERALLY DRAFTED
AND PREPARED THE SAME;

3. HOLDING THAT THE DEED OF OPTION EXPRESSED

THE TRUE INTENTION AND PURPOSE OF THE PARTIES
DESPITE
ADVERSE,
CONTEMPORANEOUS
AND
SUBSEQUENT ACTS OF THE PLAINTIFF-APPELLEES;
4. FAILING TO PROTECT THE DEFENDANTAPPELLANTS ON ACCOUNT OF THEIR IGNORANCE
PLACING THEM AT A DISADVANTAGE IN THE DEED OF
OPTION;
5. FAILING TO CONSIDER THAT EQUITABLE
CONSIDERATION TILT IN FAVOR OF THE DEFENDANTAPPELLANTS; and
6. HOLDING DEFENDANT-APPELLANTS LIABLE TO PAY
PLAINTIFF-APPELLEES THE AMOUNT OF P3,000.00 FOR
AND BY WAY OF ATTORNEY'S FEES. (pp. 31-32, Rollo)
On February 12, 1991, the Court of Appeals rendered a decision
reversing the decision of the trial court and dismissing the
complaint. The reversal of the trial court's 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 instant petition for review on
certiorari on the following grounds:
I. THE COURT OF APPEALS GRAVELY ERRED IN
FINDING THAT THE PHRASE WHENEVER THE NEED
FOR SUCH SALE ARISES ON OUR (PRIVATE
RESPONDENT) PART OR ON THE PART OF THE SPOUSES
JULIO D. VILLAMOR AND MARINA V. VILLAMOR'

CONTAINED IN THE DEED OF OPTION DENOTES A

SUSPENSIVE CONDITION;
II. ASSUMING FOR THE SAKE OF ARGUMENT THAT THE
QUESTIONED PHRASE IS INDEED A CONDITION, THE
COURT OF APPEALS ERRED IN NOT FINDING, THAT THE
SAID CONDITION HAD ALREADY BEEN FULFILLED;
III. ASSUMING FOR THE SAKE OF ARGUMENT THAT
THE QUESTIONED PHRASE IS INDEED A CONDITION,
THE COURT OF APPEALS ERRED IN HOLDING THAT
THE IMPOSITION OF SAID CONDITION PREVENTED
THE PERFECTION OF THE CONTRACT OF SALE
DESPITE THE EXPRESS OFFER AND ACCEPTANCE
CONTAINED IN THE DEED OF OPTION;
IV. THE COURT OF APPEALS ERRED IN FINDING THAT
THE DEED OF OPTION IS VOID FOR LACK OF
CONSIDERATION;
V. THE COURT OF APPEALS ERRED IN HOLDING THAT A
DISTINCT CONSIDERATION IS NECESSARY TO SUPPORT
THE DEED OF OPTION DESPITE THE EXPRESS OFFER
AND ACCEPTANCE CONTAINED THEREIN. (p. 12, Rollo)
The pivotal issue to be resolved in this case is the validity of the
Deed of Option whereby the private respondents agreed to sell
their lot to petitioners "whenever the need of such sale arises,
either on our part (private respondents) or on the part of Julio
Villamor and Marina Villamor (petitioners)." The court a quo,
rule that the Deed of Option was a valid written agreement
between the parties and made the following conclusions:

xxx xxx xxx

It is interesting to state that the agreement between the parties
are evidence by a writing, hence, the controverting oral
testimonies of the herein defendants cannot be any better than
the documentary evidence, which, in this case, is the Deed of
Option (Exh. "A" and "A-a")
The law provides that when the terms of an agreement have been
reduced to writing it is to be considered as containing all such
terms, and therefore, there can be, between the parties and their
successors in interest no evidence of their terms of the
agreement, other than the contents of the writing. ... (Section 7
Rule 130 Revised Rules of Court) Likewise, it is a general and
most inflexible rule that wherever written instruments are
appointed either by the requirements of law, or by the contract of
the parties, to be the repositories and memorials of truth, any
other evidence is excluded from being used, either as a substitute
for such instruments, or to contradict or alter them. This is a
matter both of principle and of policy; of principle because such
instruments are in their nature and origin entitled to a much
higher degree of credit than evidence of policy, because it would
be attended with great mischief if those instruments upon which
man's rights depended were liable to be impeached by loose
collateral evidence. Where the terms of an agreement are
reduced to writing, the document itself, being constituted by the
parties as the expositor of their intentions, it is the only
instrument of evidence in respect of that agreement which the
law will recognize so long as it exists for the purpose of
evidence. (Starkie, EV, pp. 648, 655 cited in Kasheenath vs.
Chundy, W.R. 68, cited in Francisco's Rules of Court, Vol. VII
Part I p. 153) (Emphasis supplied, pp. 126-127, Records).

The respondent appellate court, however, ruled that the said deed
of option is void for lack of consideration. The appellate court
made the following disquisitions:
Plaintiff-appellees say they agreed to pay P70.00 per square
meter for the portion purchased by them although the prevailing
price at that time was only P25.00 in consideration of the option
to buy the remainder of the land. This does not seem to be the
case. In the first place, the deed of sale was never produced by
them to prove their claim. Defendant-appellants testified that no
copy of the deed of sale had ever been given to them by the
plaintiff-appellees. In the second place, if this was really the
condition of the prior sale, we see no reason why it should be
reiterated in the Deed of Option. On the contrary, the alleged
overprice paid by the plaintiff-appellees is given in the Deed as
reason for the desire of the Villamors to acquire the land rather
than as a consideration for the option given to them, although
one might wonder why they took nearly 13 years to invoke their
right if they really were in due need of the lot.
At all events, the consideration needed to support a unilateral
promise to sell is a dinstinct one, not something that is as
uncertain as P70.00 per square meter which is allegedly 'greatly
higher than the actual prevailing value of lands.' A sale must be
for a price certain (Art. 1458). For how much the portion
conveyed to the plaintiff-appellees was sold so that the balance
could be considered the consideration for the promise to sell has
not been shown, beyond a mere allegation that it was very much
below P70.00 per square meter.
The fact that plaintiff-appellees might have paid P18.00 per
square meter for another land at the time of the sale to them of a
portion of defendant-appellant's lot does not necessarily prove

that the prevailing market price at the time of the sale was
P18.00 per square meter. (In fact they claim it was P25.00). It is
improbable that plaintiff-appellees should pay P52.00 per square
meter for the privilege of buying when the value of the land
itself was allegedly P18.00 per square meter. (pp. 34-35, Rollo)

not specifically stated in the deed of option, was ascertainable.

Petitioner's allegedly paying P52.00 per square meter for the
option may, as opined by the appellate court, be improbable but
improbabilities does not invalidate a contract freely entered into
by the parties.

As expressed in Gonzales v. Trinidad, 67 Phil. 682,

consideration is "the why of the contracts, the essential reason
which moves the contracting parties to enter into the contract."
The cause or the impelling reason on the part of private
respondent executing the deed of option as appearing in the deed
itself is the petitioner's having agreed to buy the 300 square
meter portion of private respondents' land at P70.00 per square
meter "which was greatly higher than the actual reasonable
prevailing price." This cause or consideration is clear from the
deed which stated:

The "deed of option" entered into by the parties in this case had
unique features. Ordinarily, an optional contract is a privilege
existing in one person, for which he had paid a consideration and
which gives him the right to buy, for example, certain
merchandise or certain specified property, from another person,
if he chooses, at any time within the agreed period at a fixed
price (Enriquez de la Cavada v. Diaz, 37 Phil. 982). If We look
closely at the "deed of option" signed by the parties, We will
notice that the first part covered the statement on the sale of the
300 square meter portion of the lot to Spouses Villamor at the
price of P70.00 per square meter "which was higher than the
actual reasonable prevailing value of the lands in that place at
that time (of sale)." The second part stated that the only reason
why the Villamor spouses agreed to buy the said lot at a much
higher price is because the vendor (Reyeses) also agreed to sell
to the Villamors the other half-portion of 300 square meters of
the land. Had the deed stopped there, there would be no dispute
that the deed is really an ordinary deed of option granting the
Villamors the option to buy the remaining 300 square meter-half
portion of the lot in consideration for their having agreed to buy
the other half of the land for a much higher price. But, the "deed
of option" went on and stated that the sale of the other half
would be made "whenever the need of such sale arises, either on
our (Reyeses) part or on the part of the Spouses Julio Villamor
and Marina V. Villamor. It appears that while the option to buy
was granted to the Villamors, the Reyeses were likewise granted
an option to sell. In other words, it was not only the Villamors

That the only reason why the spouses-vendees Julio Villamor

and Marina V. Villamor agreed to buy the said one-half portion
at the above stated price of about P70.00 per square meter, is
because I, and my husband Roberto Reyes, have agreed to sell
and convey to them the remaining one-half portion still owned
by me ... (p. 26, Rollo)
The respondent appellate court failed to give due consideration
to petitioners' evidence which shows that in 1969 the Villamor
spouses bough an adjacent lot from the brother of Macaria
Labing-isa for only P18.00 per square meter which the private
respondents did not rebut. Thus, expressed in terms of money,
the consideration for the deed of option is the difference between
the purchase price of the 300 square meter portion of the lot in
1971 (P70.00 per sq.m.) and the prevailing reasonable price of
the same lot in 1971. Whatever it is, (P25.00 or P18.00) though

who were granted an option to buy for which they paid a

consideration. The Reyeses as well were granted an option to
sell should the need for such sale on their part arise.
In the instant case, the option offered by private respondents had
been accepted by the petitioner, the promise, in the same
document. The acceptance of an offer to sell for a price certain
created a bilateral contract to sell and buy and upon acceptance,
the offer, ipso facto assumes obligations of a vendee (See Atkins,
Kroll & Co. v. Cua Mian Tek, 102 Phil. 948). Demandabilitiy
may be exercised at any time after the execution of the deed.
InSanchez v. Rigos, No. L-25494, June 14, 1972, 45 SCRA 368,
376, We held:
In other words, since there may be no valid contract without a
cause of consideration, the promisory is not bound by his
promise and may, accordingly withdraw it. Pending notice of its
withdrawal, his accepted promise partakes, however, of the
nature of an offer to sell which, if accepted, results in a
perfected contract of sale.
A contract of sale is, under Article 1475 of the Civil Code,
"perfected at the moment there is a meeting of minds upon the
thing which is the object of the contract and upon the price.
From that moment, the parties may reciprocally demand perform
of contracts." Since there was, between the parties, a meeting of
minds upon the object and the price, there was already a
perfected contract of sale. What was, however, left to be done
was for either party to demand from the other their respective
undertakings under the contract. It may be demanded at any time
either by the private respondents, who may compel the
petitioners to pay for the property or the petitioners, who may
compel the private respondents to deliver the property.

However, the Deed of Option did not provide for the period
within which the parties may demand the performance of their
respective undertakings in the instrument. The parties could not
have contemplated that the delivery of the property and the
payment thereof could be made indefinitely and render uncertain
the status of the land. The failure of either parties to demand
performance of the obligation of the other for an unreasonable
length of time renders the contract ineffective.
Under Article 1144 (1) of the Civil Code, actions upon written
contract must be brought within ten (10) years. The Deed of
Option was executed on November 11, 1971. The acceptance, as
already mentioned, was also accepted in the same instrument.
The complaint in this case was filed by the petitioners on July
13, 1987, seventeen (17) years from the time of the execution of
the contract. Hence, the right of action had prescribed. There
were allegations by the petitioners that they demanded from the
private respondents as early as 1984 the enforcement of their
rights under the contract. Still, it was beyond the ten (10) years
period prescribed by the Civil Code. In the case of Santos v.
Ganayo,
L-31854, September 9, 1982, 116 SCRA 431, this Court
affirming and subscribing to the observations of the courta
quo held, thus:
... Assuming that Rosa Ganayo, the oppositor herein, had the
right based on the Agreement to Convey and Transfer as
contained in Exhibits '1' and '1-A', her failure or the
abandonment of her right to file an action against Pulmano
Molintas when he was still a co-owner of the on-half (1/2)
portion of the 10,000 square meters is now barred by laches
and/or prescribed by law because she failed to bring such action
within ten (10) years from the date of the written agreement in

1941, pursuant to Art. 1144 of the New Civil Code, so that when
she filed the adverse claim through her counsel in 1959 she had
absolutely no more right whatsoever on the same, having been
barred by laches.
It is of judicial notice that the price of real estate in Metro
Manila is continuously on the rise. To allow the petitioner to
demand the delivery of the property subject of this case thirteen
(13) years or seventeen (17) years after the execution of the deed
at the price of only P70.00 per square meter is inequitous. For
reasons also of equity and in consideration of the fact that the
private respondents have no other decent place to live, this
Court, in the exercise of its equity jurisdiction is not inclined to
grant petitioners' prayer.
ACCORDINGLY, the petition is DENIED. The decision of
respondent appellate court is AFFIRMED for reasons cited in
this decision. Judgement is rendered dismissing the complaint in
Civil Case No. C-12942 on the ground of prescription and
laches.
SO ORDERED.
Narvasa (Chairman) and Cruz, JJ., concur.
Grio-Aquino, J., took no part.

Republic of the Philippines

SUPREME COURT
Manila
EN BANC

right to buy the property" within the stipulated period. Inasmuch

as several tenders of payment of the sum of Pl,510.00, made by
Sanchez within said period, were rejected by Mrs. Rigos, on
March 12, 1963, the former deposited said amount with the
Court of First Instance of Nueva Ecija and commenced against
the latter the present action, for specific performance and
damages.

G.R. No. L-25494 June 14, 1972

NICOLAS SANCHEZ, plaintiff-appellee,
vs.
SEVERINA RIGOS, defendant-appellant.
Santiago F. Bautista for plaintiff-appellee.
Jesus G. Villamar for defendant-appellant.
CONCEPCION, C.J.:p
Appeal from a decision of the Court of First Instance of Nueva
Ecija to the Court of Appeals, which certified the case to Us,
upon the ground that it involves a question purely of law.
The record shows that, on April 3, 1961, plaintiff Nicolas
Sanchez and defendant Severina Rigos executed an instrument
entitled "Option to Purchase," whereby Mrs. Rigos "agreed,
promised and committed ... to sell" to Sanchez 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 Transfer Certificate of Title No.
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

After the filing of defendant's answer admitting some

allegations of the complaint, denying other allegations thereof,
and alleging, as special defense, that the contract between the
parties "is a unilateral promise to sell, and the same being
unsupported by any valuable consideration, by force of the New
Civil Code, is null and void" on February 11, 1964, both
parties, assisted by their respective counsel, jointly moved for a
judgment on the pleadings. Accordingly, on February 28, 1964,
the lower court rendered judgment for 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 attorney's
fees, and other costs. Hence, this appeal by Mrs. Rigos.
This case admittedly hinges on the proper application of Article
1479 of our Civil Code, which provides:
ART. 1479. A promise to buy and sell a determinate thing for a
price certain is reciprocally demandable.
An accepted unilateral promise to buy or to sell a determinate
thing for a price certain is binding upon the promissor if the
promise is supported by a consideration distinct from the price.

In his complaint, plaintiff alleges that, by virtue of the option

under consideration, "defendant agreed and committed to sell"
and "the plaintiff agreed and committed to buy" the land
described in the option, copy of which was annexed to said
pleading as Annex A thereof and is quoted on the
margin. 1 Hence, plaintiff maintains that the promise contained in
the contract is "reciprocally demandable," pursuant to the first
paragraph of said Article 1479. Although defendant had really
"agreed, promised and committed" herself to sell the land to the
plaintiff, it is not true that the latter had, in turn, "agreed and
committed himself " to buy said property. Said Annex A does not
bear out plaintiff's allegation to this effect. What is more, since
Annex A has been made "an integral part" of his complaint, the
provisions of said instrument form part "and parcel" 2 of said
pleading.

(1) Article 1354 applies to contracts in general, whereas the

second paragraph of Article 1479 refers to "sales" in particular,
and, more specifically, to "an accepted unilateral promise to buy
or to sell." In other words, Article 1479 is controlling in the case
at bar.

The option did not impose upon plaintiff the obligation to

purchase defendant's property. Annex A is not a "contract to buy
and sell." It merely granted plaintiff an "option" to buy. And both
parties so understood it, as indicated by the caption, "Option to
Purchase," given by them to said instrument. Under the
provisions thereof, the defendant "agreed, promised and
committed" herself to sell the land therein described to the
plaintiff for P1,510.00, but there is nothing in the contract to
indicate that her aforementioned agreement, promise and
undertaking is supported by a consideration "distinct from the
price" stipulated for the sale of the land.

(3) Upon the other hand, defendant explicitly averred in her

answer, and pleaded as a special defense, the absence of said
consideration for her promise to sell and, by joining in the
petition for a judgment on the pleadings, plaintiff has impliedly
admitted the truth of said averment in defendant's answer. Indeed
as early as March 14, 1908, it had been held, in Bauermann v.
Casas, 3 that:

Relying upon Article 1354 of our Civil Code, the lower

court presumed the existence of said consideration, and this
would seem to be the main factor that influenced its decision in
plaintiff's favor. It should be noted, however, that:

(2) In order that said unilateral promise may be "binding upon

the promisor, Article 1479 requires the concurrence of a
condition, namely, that the promise be "supported by a
consideration distinct from the price." Accordingly, the promisee
can not compel the promisor to comply with the promise, unless
the former establishes the existence of said distinct
consideration. In other words, the promisee has the burden of
proving such consideration. Plaintiff herein has not even
alleged the existence thereof in his complaint.

One who prays for judgment on the pleadings without offering

proof as to the truth of his own allegations, and without giving
the opposing party an opportunity to introduce evidence, must be
understood to admit the truth of all the material and relevant
allegations of the opposing party, and to rest his motion for
judgment on those allegations taken together with such of his
own as are admitted in the pleadings. (La Yebana Company vs.
Sevilla, 9 Phil. 210). (Emphasis supplied.)

This view was reiterated in Evangelista v.

Rosa 4 and Mercy's Incorporated v. Herminia Verde. 5

De

la

Squarely in point is Southwestern Sugar & Molasses Co. v.

Atlantic Gulf & Pacific Co., 6 from which We quote:
The main contention of appellant is that the option granted to
appellee to sell to it barge No. 10 for the sum of P30,000 under
the terms stated above has no legal effect because it is not
supported by any consideration and in support thereof it invokes
article 1479 of the new Civil Code. The article provides:
"ART. 1479. A promise to buy and sell a determinate thing for a
price certain is reciprocally demandable.
An accepted unilateral promise to buy or sell a determinate thing
for a price certain is binding upon the promisor if the promise is
supported by a consideration distinct from the price."
On the other hand, Appellee contends that, even granting that the
"offer of option" is not supported by any consideration, that
option became binding on appellant when the appellee gave
notice to it of its acceptance, and that having accepted it within
the period of option, the offer can no longer be withdrawn and in
any event such withdrawal is ineffective. In support this
contention, appellee invokes article 1324 of the Civil Code
which provides:
"ART. 1324. When the offerer has allowed the offeree a certain
period to accept, the offer may be withdrawn any time before
acceptance by communicating such withdrawal, except when the
option is founded upon consideration as something paid or
promised."

There is no question that under article 1479 of the new Civil

Code "an option to sell," or "a promise to buy or to sell," as used
in said article, to be valid must be "supported by a consideration
distinct from the price." This is clearly inferred from the context
of said article that a unilateral promise to buy or to sell, even if
accepted, is only binding if supported by consideration. In other
words, "an accepted unilateral promise can only have a binding
effect if supported by a consideration which means that the
option can still be withdrawn, even if accepted, if the same is not
supported by any consideration. It is not disputed that the option
is without consideration. It can therefore be withdrawn
notwithstanding the acceptance of it by appellee.
It is true that under article 1324 of the new Civil Code, the
general rule regarding offer and acceptance is that, when the
offerer gives to the offeree a certain period to accept, "the offer
may be withdrawn at any time before acceptance" except when
the option is founded upon consideration, but this general rule
must be interpreted as modified by the provision of article 1479
above referred to, which applies to "a promise to buy and
sell" specifically. As already stated, this rule requires that a
promise to sell to be valid must be supported by a consideration
distinct from the price.
We are not oblivious of the existence of American authorities
which hold that an offer, once accepted, cannot be withdrawn,
regardless of whether it is supported or not by a consideration
(12 Am. Jur. 528). These authorities, we note, uphold
the general rule applicable to offer and acceptance as contained
in our new Civil Code. But we are prevented from applying
them in view of the specific provision embodied in article 1479.
While under the "offer of option" in question appellant has
assumed a clear obligation to sell its barge to appellee and the

option has been exercised in accordance with its terms, and there
appears to be no valid or justifiable reason for appellant to
withdraw its offer, this Court cannot adopt a different attitude
because the law on the matter is clear. Our imperative duty is to
apply it unless modified by Congress.
However, this Court itself, in the case of Atkins, Kroll and Co.,
Inc. v. Cua Hian Tek, 8 decided later thatSouthwestern Sugar &
Molasses Co. v. Atlantic Gulf & Pacific Co., 9 saw no distinction
between Articles 1324 and 1479 of the Civil Code and applied
the former where a unilateral promise to sell similar to the one
sued upon here was involved, treating such promise as an option
which, although not binding as a contract in itself for lack of a
separate consideration, nevertheless generated a bilateral
contract of purchase and sale upon acceptance. Speaking
through Associate Justice, later Chief Justice, Cesar Bengzon,
this Court said:
Furthermore, an option is unilateral: a promise to sell at the
price fixed whenever the offeree should decide to exercise his
option within the specified time. After accepting the promise
and before he exercises his option, the holder of the option is not
bound to buy. He is free either to buy or not to buy later. In this
case, however, upon accepting herein petitioner's offer a bilateral
promise to sell and to buy ensued, and the respondent ipso
facto assumed the obligation of a purchaser. He did not just get
the right subsequently to buy or not to buy. It was not a mere
option then; it was a bilateral contract of sale.
Lastly, even supposing that Exh. A granted an option which is
not binding for lack of consideration, the authorities hold that:

"If the option is given without a consideration, it is a mere offer

of a contract of sale, which is not binding until accepted. If,
however, acceptance is made before a withdrawal, it constitutes
a binding contract of sale, even though the option was not
supported by a sufficient consideration. ... . (77 Corpus Juris
Secundum, p. 652. See also 27 Ruling Case Law 339 and cases
cited.)
"It can be taken for granted, as contended by the defendant, that
the option contract was not valid for lack of consideration. But it
was, at least, an offer to sell, which was accepted by letter, and
of the acceptance the offerer had knowledge before said offer
was withdrawn. The concurrence of both acts the offer and
the acceptance could at all events have generated a contract,
if none there was before (arts. 1254 and 1262 of the Civil
Code)." (Zayco vs. Serra, 44 Phil. 331.)
In other words, since there may be no valid contract without a
cause or consideration, the promisor is not bound by his promise
and may, accordingly, withdraw it. Pending notice of its
withdrawal, his accepted promise partakes, however, of the
nature of an offer to sell which, if accepted, results in a perfected
contract of sale.
This view has the advantage of avoiding a conflict between
Articles 1324 on the general principles on contracts and
1479 on sales of the Civil Code, in line with the cardinal
rule of statutory construction that, in construing different
provisions of one and the same law or code, such interpretation
should be favored as will reconcile or harmonize said provisions
and avoid a conflict between the same. Indeed, the presumption
is that, in the process of drafting the Code, its author has
maintained a consistent philosophy or position. Moreover, the

decision in Southwestern Sugar & Molasses Co. v. Atlantic Gulf

& Pacific Co., 10 holding that Art. 1324 ismodified by Art. 1479
of the Civil Code, in effect, considers the latter as
an exception to the former, and exceptions are not favored,
unless the intention to the contrary is clear, and it is not so,
insofar as said two (2) articles are concerned. What is more, the
reference, in both the second paragraph of Art. 1479 and Art.
1324, to an option or promise supported by or founded upon a
consideration, strongly suggests that the two (2) provisions
intended to enforce or implement the same principle.
Upon mature deliberation, the Court is of the considered opinion
that it should, as it hereby reiterates the doctrine laid down in
the Atkins, Kroll & Co. case, and that, insofar as inconsistent
therewith, the view adhered to in theSouthwestern Sugar &
Molasses Co. case should be deemed abandoned or modified.
WHEREFORE, the decision appealed from is hereby affirmed,
with costs against defendant-appellant Severina Rigos. It is so
ordered.
Reyes, J.B.L., Makalintal, Zaldivar, Teehankee, Barredo and
Makasiar,
JJ.,
concur.
Castro, J., took no part.
Separate Opinions
ANTONIO, J., concurring:
I concur in the opinion of the Chief Justice.

I fully agree with the abandonment of the view previously

adhered to in Southwestern Sugar & Molasses Co. vs. Atlantic
Gulf and Pacific Co., 1 which holds that an option to sell can still
be withdrawn, even if accepted, if the same is not supported by
any consideration, and the reaffirmance of the doctrine in Atkins,
Kroll & Co., Inc. vs. Cua Hian Tek, 2 holding that "an option
implies ... the legal obligation to keep the offer (to sell) open for
the time specified;" that it could be withdrawn before
acceptance, if there was no consideration for the option, but once
the "offer to sell" is accepted, a bilateral promise to sell and to
buy ensues, and the offeree ipso facto assumes the obligations of
a purchaser. In other words, if the option is given without a
consideration, it is a mere offer to sell, which is not binding until
accepted. If, however, acceptance is made before a withdrawal,
it constitutes a binding contract of sale. The concurrence of both
acts the offer and the acceptance could in such event
generate a contract.
While the law permits the offeror to withdraw the offer at any
time before acceptance even before the period has expired, some
writers hold the view, that the offeror can not exercise this right
in an arbitrary or capricious manner. This is upon the principle
that an offer implies an obligation on the part of the offeror to
maintain in such length of time as to permit the offeree to decide
whether to accept or not, and therefore cannot arbitrarily revoke
the offer without being liable for damages which the offeree may
suffer. A contrary view would remove the stability and security
of business transactions. 3
In the present case the trial court found that the "Plaintiff
(Nicolas Sanchez) had offered the sum of Pl,510.00before any
withdrawal from the contract has been made by the Defendant
(Severina Rigos)." Since Rigos' offer sell was accepted by

Sanchez, before she could withdraw her offer, a bilateral

reciprocal contract to sell and to buy was generated.

Republic of the Philippines

SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 83759 July 12, 1991

SPOUSES CIPRIANO VASQUEZ and VALERIANA

GAYANELO, petitioners,
vs.
HONORABLE COURT OF APPEALS and SPOUSES
MARTIN VALLEJERA and APOLONIA OLEA,respondents.
Dionisio C. Isidto for petitioners.
Raymundo Lozada, Jr. for private respondents.
GUTIERREZ, JR., J.:p
This petition seeks to reverse the decision of the Court of
Appeals which affirmed the earlier decision of the Regional Trial
Court, 6th Judicial Region, Branch 56, Himamaylan, Negros
Occidental in Civil Case No. 839 (for specific performance and
damages) ordering the petitioners (defendants in the civil case)
to resell Lot No. 1860 of the Cadastral Survey of Himamaylan,
Negros Occidental to the respondents (plaintiffs in the civil case)
upon payment by the latter of the amount of P24,000.00 as well
as the appellate court's resolution denying a motion for
reconsideration. In addition, the appellate court ordered the
petitioners to pay the amount of P5,000.00 as necessary and
useful expenses in accordance with Article 1616 of the Civil
Code.
The facts of the case are not in dispute. They are summarized by
the appellate court as follows:
On January 15, 1975, the plaintiffs-spouses (respondents herein)
filed this action against the defendants-spouses (petitioners
herein) seeking to redeem Lot No. 1860 of the Himamaylan

Cadastre which was previously sold by plaintiffs to defendants

on September 21, 1964.
The said lot was registered in the name of plaintiffs. On October
1959, the same was leased by plaintiffs to the defendants up to
crop year 1966-67, which was extended to crop year 1968-69.
After the execution of the lease, defendants took possession of
the lot, up to now and devoted the same to the cultivation of
sugar.
On September 21, 1964, the plaintiffs sold the lot to the
defendants 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 (Exh. E), was
executed by the parties granting plaintiffs the right to repurchase
the lot for P12,000.00, said Exh. E likewise duly ratified and
notarized. By virtue of the sale, defendants secured TCT No. T58898 in their name. On January 2, 1969, plaintiffs sold the
same lot to Benito Derrama, Jr., after securing the defendants'
title, for the sum of P12,000.00. Upon the protestations of
defendant, assisted by counsel, the said second sale was
cancelled after the payment of P12,000.00 by the defendants to
Derrama.
Defendants resisted this action for redemption on the premise
that Exh. E 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 court below rendered judgment against the
defendants, ordering them to resell lot No. 1860 of the

Himamaylan Cadastre to the plaintiffs for the repurchase price of

P24,000.00, which amount combines the price paid for the first
sale and the price paid by defendants to Benito Derrama, Jr.

the period TEN (10) YEARS from the agricultural year 19691970 when my contract of lease over the property shall expire
and until the agricultural year 1979-1980.

Defendants moved for, but were denied reconsideration.

Excepting thereto, defendants-appealed, . . . (Rollo, pp. 44-45)

IN WITNESS WHEREOF, I have hereunto signed my name at

Binalbagan, Negros Occidental, this 21st day of September,
1964.

The petition was given due course in a resolution dated February

12, 1990.
The petitioners insist that they can not be compelled to resell Lot
No. 1860 of the Himamaylan Cadastre. They contend that the
nature of the sale over the said lot between them and the private
respondents was that of an absolute deed of sale and that the
right thereafter granted by them to the private respondents
(Right to Repurchase, Exhibit "E") can only be either an option
to buy or a mere promise on their part to resell the property.
They opine that since the "RIGHT TO REPURCHASE" was not
supported by any consideration distinct from the purchase price
it is not valid and binding on the petitioners pursuant to Article
1479 of the Civil Code.
The document denominated as "RIGHT TO REPURCHASE"
(Exhibit E) provides:
RIGHT TO REPURCHASE
KNOW ALL MEN BY THESE PRESENTS:
I, CIPRIANO VASQUEZ, . . ., do hereby grant the spouses
Martin Vallejera and Apolonia Olea, their heirs and assigns, the
right to repurchase said Lot No. 1860 for the sum of TWELVE
THOUSAND PESOS (P12,000.00), Philippine Currency, within

SGD. CIPRIANO VASQUEZ

SGD. VALERIANA G. VASQUEZ SGD. FRANCISCO
SANICAS
(Rollo, p. 47)
The Court of Appeals, applying the principles laid down in the
case of Sanchez v. Rigos, 45 SCRA 368 [1972] decided in favor
of the private respondents.
In the Sanchez case, plaintiff-appellee Nicolas Sanchez and
defendant-appellant Severino Rigos executed a document
entitled "Option to Purchase," whereby Mrs. Rigos "agreed,
promised and committed . . . to sell" to Sanchez for the sum of
P1,510.00, a registered parcel of land within 2 years from
execution of the document with the condition that said option
shall be deemed "terminated and lapsed," if "Sanchez shall fail
to exercise his right to buy the property" within the stipulated
period. In the same document, Sanchez" . . . hereby agree and
conform with all the conditions set forth in the option to
purchase executed in my favor, that I bind myself with all the

terms and conditions." (Emphasis supplied) The notarized

document was signed both by Sanchez and Rigos.
After several tenders of payment of the agreed sum of P1,510.00
made by Sanchez within the stipulated period were rejected by
Rigos, the former deposited said amount with the Court of First
Instance of Nueva Ecija and filed an action for specific
performance and damages against Rigos.
The lower court rendered judgment in favor of Sanchez and
ordered Rigos to accept the sum judicially consigned and to
execute in Sanchez' favor the requisite deed of conveyance.
Rigos appealed the case to the Court of Appeals which certified
to this Court on the ground that it involves a pure question of
law.
This Court after deliberating on two conflicting principles laid
down in the cases of Southwestern Sugar and Molasses Co. v.
Atlantic Gulf and Pacific Co., (97 Phil. 249 [1955]) and Atkins,
Kroll & Co., Inc. v. Cua Hian Tek, 102 Phil. 948 [1958]) arrived
at the conclusion that Article 1479 of the Civil Code which
provides:
Art. 1479. A promise to buy and sell a determinate thing for a
price certain is reciprocally demandable.
An accepted unilateral promise to buy or to sell a determinate
thing for a price certain is binding upon the promissory if the
promise is supported by a consideration distinct from the price.
and Article 1324 thereof which provides:

Art. 1324. When the offerer has allowed the offerer a certain
period to accept, the offer may be withdrawn at any time before
acceptance by communicating such withdrawal, except when the
option is founded upon a consideration, as something paid or
promised.
should be reconciled and harmonized to avoid a conflict between
the two provisions. In effect, the Court abandoned the ruling in
the Southwestern Sugar and Molasses Co. case and reiterated the
ruling in the Atkins, Kroll and Co. case, to wit:
However, this Court itself, in the case of Atkins, Kroll and Co.,
Inc. v. Cua Hian Tek, (102 Phil. 948, 951-952) decided later than
Southwestern Sugar & Molasses Co. v. Atlantic Gulf & Pacific
Co., (supra) saw no distinction between Articles 1324 and 1479
of the Civil Code and applied the former where a unilateral
promise to sell similar to the one sued upon here was involved,
treating such promise as an option which, although not binding
as a contract in itself for lack of separate consideration,
nevertheless generated a bilateral contract of purchase and sale
upon acceptance. Speaking through Associate Justice, later Chief
Justice, Cesar Bengzon, this Court said:
Furthermore, an option is unilateral: a promise to sell at the price
fixed whenever the offeree should decide to exercise his option
within the specified time. After accepting the promise and before
he exercises his option, the holder of the option is not bound to
buy. He is free either to buy or not to buy later. In this case
however, upon accepting herein petitioner's offer a bilateral
promise to sell and to buy ensued, and the respondent ipso
facto assumed the obligation of a purchaser. He did not just get
the right subsequently to buy or not to buy. It was not a mere
option then; it was bilateral contract of sale.

Lastly, even supposing that Exh. A granted an option which is

not binding for lack of consideration, the authorities hold that
If the option is given without a consideration, it is a mere offer
of a contract of sale, which is not binding until accepted. If,
however, acceptance is made before a withdrawal, it constitutes
a binding contract of sale, even though the option was not
supported by a sufficient consideration . . . (77 Corpus Juris
Secundum p. 652. See also 27 Ruling Case Law 339 and cases
cited.)
This Court affirmed the lower court's decision although the
promise to sell was not supported by a consideration distinct
from the price. It was obvious that Sanchez, the promisee,
accepted the option to buy before Rigos, the promisor, withdrew
the same. Under such circumstances, the option to purchase was
converted into a bilateral contract of sale which bound both
parties.
In the instant case and contrary to the appellate court's finding, it
is clear that the right to repurchase was not supported by a
consideration distinct from the price. The rule is that the
promisee has the burden of proving such consideration.
Unfortunately, the private respondents, promisees in the right to
repurchase failed to prove such consideration. They did not even
allege the existence thereof in their complaint. (See Sanchez v.
Rigos supra)
Therefore, in order that the Sanchez case can be applied, the
evidence must show that the private respondents accepted the
right to repurchase.

The record, however, does not show that the private respondents
accepted the "Right to Repurchase" the land in question. We
disagree with the appellate court's finding that the private
respondents accepted the "right to repurchase" under the
following circumstances: . . as evidenced by the annotation and
registration of the same on the back of the transfer of certificate
of title in the name of appellants. As vividly appearing therein, it
was signed by appellant himself and witnessed by his wife so
that for all intents and purposes the Vasquez spouses are
estopped from disregarding its obvious purpose and intention."
The annotation and registration of the right to repurchase at the
back of the certificate of title of the petitioners can not be
considered as acceptance of the right to repurchase. Annotation
at the back of the certificate of title of registered land is for the
purpose of binding purchasers of such registered land. Thus, we
ruled in the case of Bel Air Village Association,
Inc. v. Dionisio (174 SCRA 589 [1989]), citing Tanchoco
v. Aquino (154 SCRA 1 [1987]), and Constantino v. Espiritu (45
SCRA 557 [1972]) that purchasers of a registered land are bound
by the annotations found at the back of the certificate of title
covering the subject parcel of land. In effect, the annotation of
the right to repurchase found at the back of the certificate of title
over the subject parcel of land of the private respondents only
served as notice of the existence of such unilateral promise of
the petitioners to resell the same to the private respondents. This,
however, can not be equated with acceptance of such right to
repurchase by the private respondent.
Neither can the signature of the petitioners in the document
called "right to repurchase" signify acceptance of the right to
repurchase. The respondents did not sign the offer. Acceptance
should be made by the promisee, in this case, the private

respondents and not the promisors, the petitioners herein. It

would be absurd to require the promisor of an option to buy to
accept his own offer instead of the promisee to whom the option
to buy is given.
Furthermore, the actions of the private respondents (a) filing
a complaint to compel re-sale and their demands for resale prior
to filing of the complaint cannot be considered acceptance. As
stated in Vda. de Zulueta v. Octaviano (121 SCRA 314 [1983]):
And even granting, arguendo that the sale was a pacto de
retro sale, the evidence shows that Olimpia, through her lawyer,
opted to repurchase the land only on 16 February 1962,
approximately two years beyond the stipulated period, that is not
later than May, 1960.
If Olimpia could not locate Aurelio, as she contends, and based
on her allegation that the contract between her was one of sale
with right to repurchase, neither, however, did she tender the
redemption price to private respondent Isauro, but merely wrote
him letters expressing her readiness to repurchase the property.
It is clear that the mere sending of letters by the vendor
expressing his desire to repurchase the property without
accompanying tender of the redemption price fell short of the
requirements of law. (Lee v. Court of Appeals, 68 SCRA 197
[1972])
Neither did petitioner make a judicial consignation of the
repurchase price within the agreed period.
In a contract of sale with a right of repurchase, the redemptioner
who may offer to make the repurchase on the option date of

redemption should deposit the full amount in court . . .

(Rumbaoa v. Arzaga, 84 Phil. 812 [1949])
To effectively exercise the right to repurchase the vendor a retro
must make an actual and simultaneous tender of payment or
consignation. (Catangcatang v. Legayada, 84 SCRA 51 [1978])
The private respondents' ineffectual acceptance of the option to
buy validated the petitioner's refusal to sell the parcel which can
be considered as a withdrawal of the option to buy.
We agree with the petitioners that the case of Vda. de Zulueta
v. Octaviano, (supra) is in point.
Stripped of non-essentials the facts of the Zulueta case are as
follows: On November 25, 1952 (Emphasis supplied) Olimpia
Fernandez Vda. de Zulueta, the registered owner of a 5.5 hectare
riceland sold the lot to private respondent Aurelio B. Octaviano
for P8,600.00 subject to certain terms and conditions. The
contract was an absolute and definite sale. On the same day,
November 25, 1952, (Emphasis supplied) the vendee, Aurelio
signed another document giving the vendor Zulueta the "option
to repurchase" the property at anytime after May 1958 but not
later than May 1960. When however, Zulueta tried to exercise
her "option to buy" the property, Aurelio resisted the same
prompting Zulueta to commence suit for recovery of ownership
and possession of the property with the then Court of First
Instance of Iloilo.
The trial court ruled in favor of Zulueta. Upon appeal, however,
the Court of Appeals reversed the trial court's decision.
We affirmed the appellate court's decision and ruled:

The nature of the transaction between Olimpia and Aurelio, from

the context of Exhibit "E" is not a sale with right to repurchase.
Conventional redemption takes place "when the vendor reserves
the right to repurchase the thing sold, with the obligation to
comply with the provisions of Article 1616 and other
stipulations which may have been agreed upon. (Article 1601,
Civil Code).
In this case, there was no reservation made by the vendor,
Olimpia, in the document Exhibit "E" the "option to repurchase"
was contained in a subsequent document and was made by the
vendee, Aurelio. Thus, it was more of an option to buy or a mere
promise on the part of the vendee, Aurelio, to resell the property
to the vendor, Olimpia. (10 Manresa, p. 311 cited in Padilla's
Civil Code Annotated, Vol. V, 1974 ed., p. 467) As held in
Villarica v. Court of Appeals (26 SCRA 189 [1968]):
The right of repurchase is not a right granted the vendor by the
vendee in a subsequent instrument, but is a right reserved by the
vendor in the same instrument of sale as one of the stipulations
of the contract. Once the instrument of absolute sale is executed,
the vendor can no longer reserve the right to repurchase, and any
right thereafter granted the vendor by the vendee in a separate
instrument cannot be a right of repurchase but some other right
like the option to buy in the instant case. . . (Emphasis supplied)
The appellate court rejected the application of the Zulueta case
by stating:
. . . [A]s found by the trial court from which we quote with
approval below, the said cases involve the lapse of several days
for the execution of separate instruments after the execution of
the deed of sale, while the instant case involves the execution of

an instrument, separate as it is, but executed on the same day,

and notarized by the same notary public, to wit:
A close examination of Exh. "E" reveals that although it is a
separate document in itself, it is far different from the document
which was pronounced as an option by the Supreme Court in the
Villarica case. The option in the Villarica case was executed
several days after the execution of the deed of sale. In the
present case, Exh. "E" was executed and ratified by the same
notary public and the Deed of Sale of Lot No. 1860 by the
plaintiffs to the defendants were notarized by the same notary
public and entered in the same page of the same notarial
register . . .
The latter case (Vda. de Zulueta v. Octaviano, supra), likewise
involved the execution of the separate document after an
intervention of several days and the question of laches was
decided therein, which is not present in the instant case. That
distinction is therefore crucial and We are of the opinion that the
appellee's right to repurchase has been adequately provided for
and reserved in conformity with Article 1601 of the Civil Code,
which states:
Conventional redemption shall take place when the vendor
reserves the right to repurchase the thing sold, with the
obligation to comply with the provision of Article 1616 and
other stipulations which may have been agreed upon. (Rollo, pp.
46-47)
Obviously, the appellate court's findings are not reflected in the
cited decision. As in the instant case, the option to repurchase
involved in the Zulueta case was executed in a separate

document but on the same date that the deed of definite sale was
executed.
While it is true that this Court in the Zulueta case found Zulueta
guilty of laches, this, however, was not the primary reason why
this Court disallowed the redemption of the property by Zulueta.
It is clear from the decision that the ruling in the Zulueta case
was based mainly on the finding that the transaction between
Zulueta and Octaviano was not a sale with right to repurchase
and that the "option to repurchase was but an option to buy or a
mere promise on the part of Octaviano to resell the property to
Zulueta.
In the instant case, since the transaction between the petitioners
and private respondents was not a sale with right to repurchase,
the private respondents cannot avail of Article 1601 of the Civil
Code which provides for conventional redemption.
WHEREFORE, the petition is GRANTED. The questioned
decision and resolution of the Court of Appeals are hereby
REVERSED and SET ASIDE. The complaint in Civil Case No.
839 of the then Court of First Instance of Negros Occidental
12th Judicial District Branch 6 is DISMISSED. No costs.
SO ORDERED.
Fernan, C.J., Feliciano, Bidin and Davide, Jr., JJ., concur.

Republic of the Philippines

SUPREME COURT
Manila
EN BANC

That the lessor agrees to lease the above stated school to the
LESSEE under the following terms and conditions:
1. That the term will be for a period of five (5) years;
2. That the price of the rent is FIVE THOUSAND PESOS
(P5,000) per year payable in the following manners:

G.R. No. L-32873 August 18, 1972

AQUILINO NIETES, petitioner,
vs.
HON. COURT OF APPEALS & DR. PABLO C.
GARCIA, respondents.
Conrado V. del Rosario for petitioner.
Romeo D. Magat for private respondent.

a. That the amount of FIVE THOUSAND FIVE HUNDRED

PESOS (P5,500) will be paid upon the execution of this Contract
of Lease;
b. That the amount of FOUR THOUSAND FIVE HUNDRED
PESOS (P4,500) is payable on or before the 30th day of
October, 1959;
c. That the remaining balance of FIFTEEN THOUSAND
PESOS (P15,000) will be paid on or before March 30, 1960;

CONCEPCION, C.J.:p
Petitioner Aquilino Nietes seeks a review on certiorari of a
decision of the Court of Appeals.
It appears that, on October 19, 1959, said petitioner and
respondent Dr. Pablo C. Garcia entered into a "Contract of Lease
with Option to Buy," pursuant to the terms and conditions set
forth in the deed Exhibits A and A-1, (also, marked as Exhibit 2)
namely:
That the LESSOR is an owner of the ANGELES
EDUCATIONAL INSTITUTE situated at Angeles, Pampanga, a
school which is duly recognized by the Government;

3. That all improvements made during the lease by the LESSEE

will be owned by the LESSOR after the expiration of the term of
this Contract of Lease;
4. That the LESSOR agrees to give the LESSEE an option to
buy the land and the school building, for a price of ONE
HUNDRED THOUSAND PESOS (P100,000) within the period
of the Contract of Lease;
5. That should the LESSEE buy the lot, land and the school
building within the stipulated period, the unused payment for the
Contract of Lease will be considered as part payment for the sale
of the land and school;

6. That an inventory of all properties in the school will be made

on March 31, 1960;

August 4, 1961 ........................................ 100.00 (Exh. K)

_________

6A. That the term of this Contract will commence in June 1960
and will terminate in June 1965;

TOTAL ..................................... P24,757.00

7. That the LESSEE will be given full control and

responsibilities over all the properties of the school and over all
the supervisions and administrations of the school;

Moreover, Nietes maintains that, on September 4, 1961, and

December 13, 1962, he paid Garcia the additional sums of
P3,000 and P2,200, respectively, for which Garcia issued
receipts Exhibit B and C, reading:

8. That the LESSEE agrees to help the LESSOR to collect the

back accounts of students incurred before the execution of this
contract.

Received the amount of (P3,000.00) Three Thousand Pesos from

Mrs. Nietes as per advance pay for the school, the contract of
lease being paid.

Instead of paying the lessor in the manner set forth in paragraph

2 of said contract, Nietes had, as of August 4, 1961, made
payments as follows:

(Sgd.) PABLO GARCIA (Exh. B)

October 6,1960 ....................................... P18,957.00 (Exh. D)

December 21, 1960 ................................. 200.00 (Exh. F)

This is to certify that I received the sum of Two Thousand Two

Hundred Pesos, Philippine Currency, from Mrs. Catherine R.
Nietes as the partial payment on the purchase of the property as
specified on the original contract of "Contract of Lease with the
First Option to Buy" originally contracted and duly signed.

January 14, 1961 ..................................... 500.00 (Exh. G)

(Sgd.) DR. PABLO GARCIA (Exh. C)

February 16, 1961 ................................... 3,000.00 (Exh. H)

On or about July 31, 1964, Dr. Garcia's counsel wrote to Nietes

the letter Exhibit 1 (also Exhibit V) stating:

November 23, 1960 ................................. 300.00 (Exh. E)

To Whom it May Concern:

March 12, 1961 ....................................... 1,000.00 (Exh. I)

March 13, 1961 ....................................... 700.00 (Exh. J)

The
Philippine
Institute
Angeles, Pampanga

of

Director
Electronics

Sir:
I regret to inform you that our client, Dr. Pablo Garcia, desires to
rescind your contract, dated 19 October 1959 because of the
following:
1. That you had not maintained the building, subject of the lease
contract in good condition.
2. That you had not been using the original name of the school
Angeles Institute, thereby extinguishing its existence in the
eyes of the public and injuring its prestige.
3. That through your fault, no inventory has been made of all
properties of the school.
4. That up to this time, you had not collected or much less
helped in the collection of back accounts of former students.
This is to remind you that the foregoing obligations had been
one, if not, the principal moving factors which had induced the
lessor in agreeing with the terms embodied in your contract of
lease, without which fulfillment, said contract could not have
come into existence. It is not simply one of those reminders that
we make mention, that our client under the circumstances, is not
only entitled to a rescission of the contract. He is likewise
entitled to damages actual, compensatory and exemplary.
In view of the serious nature of the breach which warrant and
sanction drastic legal remedies against you, we earnestly request
you to please see the undersigned at the above-named address
two days from receipt hereof. Otherwise, if we shall not hear
from you, the foregoing will serve notice on your part to vacate

the premises within five (5) days to be counted from date of

notice.
Very
truly
(Sgd.) VICTOR T. LLAMAS, JR.

yours,

to which counsel for Nietes replied in the following language:

Atty.
Victor
T.
Llamas,
Victor
Llamas
Law
Corner
Rivera-Zamora
Dagupan City

Jr.
Office
Streets

Dear Sir:
Your letter dated July 31, 1964 addressed to my client, the
Director of the Philippine Institute of Electronics, Angeles City,
has been referred to me and in reply, please, be informed that my
client has not violated any provision of the CONTRACT OF
LEASE WITH OPTION TO BUY, executed by him as LESSEE
and Dr. Pablo Garcia as LESSOR. For this reason, there is no
basis for rescission of the contract nor of the demands contained
in your letter.
In this connection, I am also serving this formal notice upon
your client Dr. Pablo Garcia, thru you, that my client Mr.
AQUILINO T. NIETES will exercise his OPTION to buy the
land and building subject matter of the lease and that my said
client is ready to pay the balance of the purchase price in
accordance with the contract. Please, inform Dr. Pablo Garcia to
make available the land title and execute the corresponding Deed
of Sale pursuant to this notice, and that if he fails to do so within

fifteen (15) days from the receipt of this letter, we shall take the
corresponding action to enforce the agreement.
Truly yours,
(Sgd.)
CONRADO
Counsel
for
Mr.
Angeles City

V.
DEL
Aquilino

T.

ROSARIO
Nietes

On July 26, 1965, Nietes deposited with the branch office of the
Agro-Industrial Bank in Angeles City checks amounting to
P84,860.50, as balance of the purchase price of the property, but
he withdrew said sum of P84,860.50 on August 12, 1965, after
the checks had been cleared. On August 2, 1965, he commenced
the present action, in the Court of First Instance of Pampanga,
for specific performance of Dr. Garcia's alleged obligation to
execute in his (Nietes') favor a deed of absolute sale of the
leased property, free from any lien or encumbrance whatsoever,
he having meanwhile mortgaged it to the People's Bank and
Trust Company, and to compel him (Garcia) to accept whatever
balance of the purchase price is due him, as well as to recover
from him the aggregate sum of P90,000 by way of damages,
apart from attorney's fees and the costs.
Dr. Garcia filed an answer admitting some allegations of the
complaint and denying other allegations thereof, as well as
setting up a counterclaim for damages in the sum of P150,000.
After due trial, said court rendered its decision, the dispositive
part of which reads:
WHEREFORE, in view of the preponderance of evidence in
favor of the plaintiff and against the defendant, judgment is

hereby rendered ordering the latter to execute the Deed of

Absolute Sale of property originally leased together with the
school building and other improvements thereon which are
covered by the contract, Annex "A", upon payment of the former
of the balance (whatever be the amount) of the stipulated
purchase price; to free the said property from any mortgage or
encumbrance and deliver the title thereto to the plaintiff free
from any lien or encumbrance, and should said defendant fail to
do so, the proceeds from the purchase price be applied to the
payment of the encumbrance so that the title may be conveyed to
the plaintiff; to pay the plaintiff the sum of P1,000.00 as
attorney's fees, and the cost of this suit.
Both parties appealed to the Court of Appeals, Dr. Garcia insofar
as the trial court had neither dismissed the complaint nor upheld
his counterclaim and failed to order Nietes to vacate the property
in question, and Nietes insofar as the trial court had granted him
no more than nominal damages in the sum of P1,000, as
attorney's fees.
After appropriate proceedings, a special division of Court of
Appeals rendered its decision, on October 18, 1969, affirming, in
effect, that of the trial court, except as regards said attorney's
fees, which were eliminated. The dispositive part of said
decision of the Court of Appeals reads:
WHEREFORE, with the modification that the attorney's fees
awarded by the trial court in favor of the plaintiff is eliminated,
the appealed judgment is hereby affirmed in all other respects,
and the defendant is ordered to execute the corresponding deed
of sale for the school building and lot in question in favor of the
plaintiff upon the latter's full payment of the balance of the

purchase price. The costs of this proceedings shall be taxed

against the defendant-appellant.
On motion for reconsideration of defendant Garcia, said special
division set aside its aforementioned decision and rendered
another one, promulgated on March 10, 1970 reversing the
appealed decision of the court of first instance, and dismissing
the complaint of Nietes, with costs again him. Hence, the present
petition of Nietes for review certiorari of the second decision of
the Court of Appeals, dated March 10, 1970, to which petition
We gave due course.
Said decision of the Court of Appeals, reversing that of the Court
of First Instance, is mainly predicated upon the theory that,
under the contract between the parties, "the full purchase price
must be paid before the option counsel be exercised," because
"there was no need nor sense providing that "the unused
payment for the Contract Lease will be considered as part
payment for the sale the land and school'" inasmuch as
"otherwise there is substantial amount from which such unused
rental could be deducted"; that the statement in the letter, Exhibit
L, of Nietes, dated August 7, 1964, to the effect that he
"will exercise his OPTION to buy the land and building,"
indication that he did not consider the receipts, Exhibits B and
for P3,000 and P2,200, respectively, "as an effective exercise of
his option to buy"; that the checks for P84,860.50 deposited by
Nietes with the Agro-Industrial Development Bank, did not
constitute a proper tender of payment, which, at any rate, was
"made beyond the stipulated 5-year period"; that such deposit
"was not seriously made, because on August 12, 1965, the same
was withdrawn from the Bank and ostensibly remains in the
lessee's hand"; and that "the fact that such deposit was made by
the lessee shows that he himself believed that he should have

paid the entire amount of the purchase price before he could

avail of the option to buy, otherwise, the deposit was a senseless
gesture ... ."
Dr. Garcia, in turn, maintained in his answer "that the sums
paid" to him "were part of the price of the contract of lease
between the parties which were paid late and not within the
periods and/or schedules fixed by the contract (Annex A.)."
What is more, on the witness stand, Garcia claimed that he did
"not know" whether the signatures on Exhibits B and C the
receipt for P3,000 and P2,200, respectively were his, and
even said that he was "doubtful" about it.
This testimony is manifestly incredible, for a man of his
intelligence a Doctor of Medicine and the owner of an
educational institution could not possibly "not know" or
entertain doubts as to whether or not the aforementioned
signatures are his and the payments therein acknowledged had
been received by him. His dubious veracity becomes even more
apparent when we consider the allegations in paragraph (4) of
his answer referring to paragraphs 5 and 6 of the complaint
alleging, inter alia, the aforementioned partial payments of
P3,000 and P2,200, on account of the stipulated sale price to
the effect that said sums " paid to the herein defendant were part
of the price of the contract of lease." In other words, payment of
said sums of P3,000 and P2,200 is admitted in said answer.
Besides, the rentals for the whole period of the lease aggregated
P25,000 only, whereas said sums of P3,000 and P2,200, when
added to the payments previously made by Nietes, give a grand
total of P29,957.00, or P4,957 in excess of the agreed rentals for
the entire period of five years. Thus, Dr. Garcia was less than
truthful when he tried to cast doubt upon the fact of payment of

said sums of P3,000 and P2,200, as well as when he claimed that

the same were part of the rentals collectible by him.
We, likewise, find ourselves unable to share the view taken by
the Court of Appeals. Neither the tenor of the contract Exhibits
A and A-1 (also Exhibit 2) nor the behaviour of Dr. Garcia as
reflected in the receipts Exhibits B and C justifies such view.
The contract does not say that Nietes had to pay the stipulated
price of P100,000before exercising his option to buy the
property in question. Accordingly, said option is governed by the
general principles on obligations, pursuants to which:
In reciprocal obligations, neither party incurs in delay if the
other does not comply or is not ready to comply in a proper
manner with what is incumbent upon him. From the moment one
of the parties fulfills his obligation, delay by the other begins. 1

intent to show his ability to pay the balance of the sum due to
Dr. Garcia as the sale price of his property. In short, said deposit
and its subsequent withdrawal cannot affect the result of the
present case.
Nietes was entitled to exercise his option to buy "within the
period of the Contract of Lease," which pursuant to paragraph
6-A of said contract commenced "in June 1960" and was to
"terminate in June 1965." As early as September 4, 1961, or well
"within the period of the Contract of Lease," Nietes had paid Dr.
Garcia the following sums:
October 6, 1960 ............................ P18,957.00 (Exh. D)
November 23, 1960 ....................... 300.00 (Exh E)
December 21, 1960 ....................... 200.00 (Exh. F)

In the case of an option to buy, the creditor may validly and

effectively exercise his right by merely advising the debtor of
the former's decision to buy and expressing his readiness to pay
the stipulated price, provided that the same is available and
actually delivered to the debtor upon execution and delivery by
him of the corresponding deed of sale. Unless and until the
debtor shall have done this the creditor is not and cannot be in
default in the discharge of his obligation to pay. 2 In other words,
notice of the creditor's decision to exercise his option to buy
need not be coupled with actual payment of the price, so long as
this is delivered to the owner of the property upon performance
of his part of the agreement. Nietes need not have deposited,
therefore, with the Agro-Industrial Bank checks amounting
altogether to P84,860.50 on July 26, 1965, and the withdrawal
thereof soon after does not and cannot affect his cause of action
in the present case. In making such deposit, he may have had the

January 14, 1961 ........................... 500.00 (Exh. G)

February 16, 1961 ......................... 3,000.00 (Exh. H)
March 12, 1961 ............................. 1,000.00 (Exh. I)
March 13, 1961 ............................. 700.00 (Exh. J)
August 4, 1961 ............................... 100.00 (Exh. K)
September
________

4,

1961

.........................

TOTAL ............................... P27,757.00

3,000.00

(Exh.

B)

It is true that Nietes was bound, under the contract, to pay

P5,500 on October 19, 1959, P4,500 on or before October 30,
1959, and P15,000 on or before March 30, 1960, or the total sum
of P25,000, from October 19, 1959 to March 30, 1960, whereas
his first payment was not made until October 10, 1960, when he
delivered the sum of P18,957 to Dr. Garcia, and the latter had by
August 4, 1961, received from the former the aggregate sum of
P24,757. This is, however, P243.00 only less than the P25,000
due as of March 30, 1960, so that Nietes may be considered as
having complied substantially with the terms agreed upon.
Indeed, Dr. Garcia seems to have either agreed thereto or not
considered that Nietes had thereby violated the contract, because
the letter of the former, dated July 31, 1964, demanding
rescission of the contract, did not mention said acts or omissions
of Nietes among his alleged violations thereof enumerated in
said communication. In fact, when, on September 4, 1961, Mrs.
Nietes turned over the sum of P3,000 to Dr. Garcia, he issued the
receipt Exhibit B, stating that said payment had been made "as
per advance pay for the school, the Contract of Lease being
paid" in other words, in accordance or conformity with said
contract. Besides, when, on December 13, 1962, Mrs. Nietes
delivered the additional sum of P2,200, Dr. Garcia issued a
receipt accepting said amount "as the partial payment on the
purchase price of the property as specified on the original
contract," thus further indicating that the payment, in his
opinion, conformed with said contract, and that, accordingly, the
same was in full force and effect.
In any event, it is undisputed that, as of September 4, 1961, Dr.
Garcia had received the total sum of P27,757, or P2,757 in
excess of the P25,000 representing the rentals for the entire
period of the lease, and over P21,200 in excess of the rentals for
the unexpired portion of the lease, from September 4, 1961 to

June 1965. This circumstance indicates clearly that Nietes had,

on September 4, 1961, chosen to exercise and did exercise then
his option to buy. What is more, this is borne out by the receipt
issued by Dr. Garcia for the payment of P2,200, on December
13, 1962, to which he referred therein as a "partial payment on
the purchase of the property as specified on the original contract
of 'Contract of Lease with the First Option to Buy' ... ."
Further confirmation is furnished by the letter of Nietes, Exhibit
L, of August 1964 also, within the period of the lease
stating that he "will exercise his OPTION to buy the land and
building subject matter of the lease." It is not correct to construe
this expression as did the appealed decision as implying
that the option had not been or was not yet being exercised, or as
a mere announcement of the intent to avail of it at
some future time. This interpretation takes said expression out of
the context of Exhibit L, which positively states, also, that
Nietes "is ready to pay the balance of the purchase price in
accordance with the contract," and requests counsel for Dr.
Garcia to inform or advise him "to make available the land title
and execute the corresponding Deed of Sale pursuant to this
notice, and that if he fails to do so within fifteen (15) days ... we
shall take the corresponding action to enforce the agreement."
Such demand and said readiness to pay the balance of the
purchase price leave no room for doubt that, as stated in Exhibit
L, the same is "a formal notice" that Nietes had exercised his
option, and expected Dr. Garcia to comply, within fifteen (15)
days, with his part of the bargain. Surely, there would have been
no point for said demand and readiness to pay, if Nietes had not
yet exercised his option to buy.
The provision in paragraph 5 of the Contract, to the effect that
"should the LESSEE" choose to make use of his option to buy

"the unused payment for the Contract of Lease will be

considered as payment for the sale of the land and school,
"simply means that the rental paid for the unused portion of the
lease shall be applied to and deducted from the sale price of
P100,000 to be paid by Nietes at the proper time in other
words,simultaneously with the delivery to him of the
corresponding deed of sale, duly executed by Dr. Garcia.
It is, consequently, Our considered opinion that Nietes had
validly and effectively exercised his option to buy the property
of Dr. Garcia, at least, on December 13, 1962, when he
acknowledged receipt from Mrs. Nietes of the sum of P2,200
then delivered by her "in partial payment on the purchase of the
property" described in the "Contract of Lease with Option to
Buy"; that from the aggregate sum of P29,957.00 paid to him up
to that time, the sum of P12,708.33 should be deducted as rental
for the period from June 1960 to December 13, 1962, or roughly
thirty (30) months and a half, thereby leaving a balance of
P17,248.67, consisting of P12,291.67, representing the rentals
for the unused period of the lease, plus P4,957.00 paid in excess
of said rental and advanced solely on account of the purchase
price; that deducting said sum of P17,248.67 from the agreed
price of P100,000.00, there results a balance of P82,751.33
which should be paid by Nietes to Dr. Garcia, upon execution by
the latter of the corresponding deed of absolute sale of the
property in question, free from any lien or encumbrance
whatsoever, in favor of Nietes, and the delivery to him of said
deed of sale, as well as of the owner's duplicate of the certificate
of title to said property; and that Dr. Garcia should indemnify
Nietes in the sum of P2,500 as and for attorney's fees.
Thus modified, the decision of the Court of First Instance of
Pampanga is hereby affirmed in all other respects, and that of the

Court of Appeals reversed, with costs against respondent herein,

Dr. Pablo C. Garcia. It is so ordered.
Reyes, J.B.L., Makalintal, Zaldivar, Fernando, Teehankee,
Barredo, Makasiar Antonio and Esguerra, JJ., concur.
Castro, J., took no part.