Facts:

• July 29, 1987: An amended Complaint for Specific Performance was filed by
petitioners Ang Yu Asuncion and others against Bobby Cu Unjieng, Rose Cu
Unjieng and Jose Tan before RTC.
• Petitioners (Ang Yu) alleged that:
- they are the tenants or lessees of residential and commercial spaces owned by Bobby
Unijeng and others located in Binondo, Manila (since 1935)

that on several occasions before October 9, 1986, the lessors informed the lessees
(petitioners) that they are offering to sell the premises and are giving them priority to
acquire the same;
- that during the negotiations, Bobby Cu Unjieng offered a price of P6-million while they
made a counter offer of P5-million;
- that they wrote them on October 24, 1986 asking that they specify the terms and
conditions of the offer to sell; that when plaintiffs did not receive any reply, they sent
another letter dated January 28, 1987 with the same request;
• The RTC found that Cu Unjiengs’ offer to sell was never accepted by the
petitioners (Ang Yu) for the reason that they did not agree upon the terms and
conditions of the proposed sale, hence, there was no contract of sale at all. The
Court of Appeals affirmed the decision of the lower court. This decision was
brought to the Supreme Court by petition for review on certiorari which
subsequently denied the appeal on May 6, 1991 “for insufficiency in form and
substance”. (Referring to the first case filed by Ang Yu)
• November 15, 1990: While the case was pending consideration by this Court, the
Cu Unjieng spouses executed a Deed of Sale transferring the subject petitioner to
petitioner Buen Realty and Development Corporation.
• Petitioner Buen Realty and Development Corporation, as the new owner of the
subject property, wrote a letter to the lessees demanding that the latter vacate the
premises.
• August 30, 1991: the RTC ordered the Cu Unjiengs to execute the necessary Deed
of Sale of the property in litigation in favor of plaintiffs Ang Yu Asuncion, Keh Tiong
and Arthur Go for the consideration of P15 Million pesos in recognition of
petitioners’ right of first refusal and that a new Transfer Certificate of Title be issued
in favor of the buyer. The court also set aside the title issued to Buen Realty
Corporation for having been executed in bad faith. On September 22, 1991, the
Judge issued a writ of execution.
• The CA reversed the RTC ruling.
Issue: WON Buen Realty can be bound by the writ of execution by virtue of the notice of
lis pendens, carried over on TCT No. 195816 issued in the name of Buen Realty, at the
time of the latter’s purchase of the property on 15 November 1991 from the Cu Unjiengs.
NO

Held:

Right of first refusal is not a perfected contract of sale under Article 1458 of the
Civil Code
In the law on sales, the so-called “right of first refusal” is an innovative juridical relation.
Needless to point out, it cannot be deemed a perfected contract of sale under Article 1458
of the Civil Code.

In a right of first refusal, while the object might be made determinate, the exercise of the
right, however, would be dependent not only on the grantor’s eventual intention to enter
into a binding juridical relation with another but also on terms, including the price, that
obviously are yet to be later firmed up. Prior thereto, it can at best be so described as
merely belonging to a class of preparatory juridical relations governed not by contracts
(since the essential elements to establish the vinculum juris would still be indefinite and
inconclusive) but by, among other laws of general application, the pertinent scattered
provisions of the Civil Code on human conduct.

The proper action for violation of the right of first refysal is to file an action for
damages and NOT writ of execution
The final judgment in Civil Case No. 87-41058, it must be stressed, has merely accorded
a “right of first refusal” in favor of petitioners (Ang Yu et. al). The consequence of such a
declaration entails no more than what has heretofore been said. In fine, if, as it is here so
conveyed to us, petitioners are aggrieved by the failure of private respondents to honor
the right of first refusal, the remedy is not a writ of execution on the judgment, since there
is none to execute, but an action for damages in a proper forum for the purpose.
Unconditional mutual promise to buy vs. Accepted unilateral promise
An unconditional mutual promise to buy and sell, as long as the object is made
determinate and the price is fixed, can be obligatory on the parties, and compliance
therewith may accordingly be exacted.

An accepted unilateral promise which specifies the thing to be sold and the price to be
paid, when coupled with a valuable consideration distinct and separate from the price, is
what may properly be termed a perfected contract of option. This contract is legally
binding, and in sales, it conforms with the second paragraph of Article 1479 of the Civil
Code, viz:

Art. 1479. . . .
An accepted unilateral promise to buy or to sell a determinate thing for a price certain is
binding upon the promissor if the promise is supported by a consideration distinct from
the price. (1451a)

Observe, however, that the option is not the contract of sale itself. The optionee has the
right, but not the obligation, to buy. Once the option is exercised timely, i.e., the offer is
accepted before a breach of the option, a bilateral promise to sell and to buy ensues and
both parties are then reciprocally bound to comply with their respective undertakings.

Buen Realty cannot be ousted from the ownership and possession of the property
Furthermore, whether private respondent Buen Realty Development Corporation, the
alleged purchaser of the property, has acted in good faith or bad faith and whether or not
it should, in any case, be considered bound to respect the registration of the lis pendens
in Civil Case No. 87-41058 are matters that must be independently addressed in
appropriate proceedings. Buen Realty, not having been impleaded in Civil Case No. 87-
41058, cannot be held subject to the writ of execution issued by respondent Judge, let
alone ousted from the ownership and possession of the property, without first being duly
afforded its day in court.
 443 SCRA 239 – Civil Law – Law on Sales – Warranty – Option Contract

Daniel Vasquez owns Conduit Development, Inc. In 1981, Vasquez enters into a Memorandum of
Agreement (MOA) with Ayala Corporation wherein Ayala bought Conduit from Vasquez. Ayala committed
to develop Conduit’s lands including 4 parcels of land adjacent to Vasquez’ retained land. Be it noted that
these parcels of land were in the 3rd phase of Ayala’s development plan. Paragraph 5.15 of the MOA
provides:

5.15. The BUYER (AYALA) agrees to give the SELLERS (Vasquez) a first option to purchase four developed
lots next to the “Retained Area” at the prevailing market price at the time of the purchase.”

In 1990, Ayala was able to develop the said lots. (This was after some slump, and some litigation between
Conduit’s former contractor (GP construction) and GP’s subcontractor (Lancer Builders).) Ayala then
offered to sell the 4 parcels of land to Vasquez at P6.5k/sq. m. which was the market price in 1990.
Vasquez refused the offer. Vasquez contended that the purchase price should be P460/sq. m. which was
the market price in 1981 (time of purchase). Ayala then lowered the purchase price to P5k/sq. m. but
Vasquez refused again. Instead he made a counter offer to buy the lots at P2k/sq. m. This time, Ayala
refused.

ISSUE: Whether or not Paragraph 5.15 of the MOA is an option contract or right of first refusal.

HELD: No. The said paragraph is a mere right of first refusal. Although the paragraph has a definite object,
i.e., the sale of the 4 lots, the period within which they will be offered for sale to Vasquez and, necessarily,
the price for which the subject lots will be sold are not specified. The phrase “at the prevailing market
price at the time of the purchase” connotes that there is no definite period within which Ayala is bound
to reserve the subject lots for Vasquez to exercise his privilege to purchase. Neither is there a fixed or
determinable price at which the subject lots will be offered for sale. The price is considered certain if it
may be determined with reference to another thing certain or if the determination thereof is left to the
judgment of a specified person or persons.

Further, paragraph 5.15 was inserted into the MOA to give Vasquez the first crack to buy the subject lots
at the price which Ayala would be willing to accept when it offers the subject lots for sale. It is not
supported by an independent consideration.
Polytechnic University of the Philippines vs Court of Appeals and Firestone Ceramics
National Development Corporation vs Firestone Ceramics Inc.

[GR No. 143513 and 143590. November 14, 2001]

Bellosilo, J.:

Facts:

Petitioner National Development Corp., a government owned and controlled corporation, had in its disposal
a 10 hectares property. Sometime in May 1965, private respondent Firestone Corporation manifested its
desire to lease a portion of it for ceramic manufacturing business. On August 24, 1965, both parties entered
into a contract of lease for a term of 10 years renewable for another 10 years. Prior to the expiration of the
aforementioned contract, Firestone wrote NDC requesting for an extension of their lease agreement. It was
renewed with an express grant to Firestone of the first option to purchase the leased premise in the event
that it was decided "to dispose and sell the properties including the lot..."

Cognizant of the impending expiration of the leased agreement, Firestone informed NDC through letters
and calls that it was renewing its lease. No answer was given. Firestone's predicament worsened when it
learned of NDC's supposed plans to dispose the subject property in favor of petitioner Polytechnic
University of the Philippines. PUP referred to Memorandum Order No. 214 issued by then President Aquino
ordering the transfer of the whole NDC compound to the National Government. The order of conveyance
would automatically result in the cancellation of NDC's total obligation in favor of the National Government.

Firestone instituted an action for specific performance to compel NDC to sell the leased property in its favor.

Issue:

1. Whether or not there is a valid sale between NDC and PUP.

Ruling
A contract of sale, as defined in the Civil Code, is a contract where one of the parties obligates himself to
transfer the ownership of and to deliver a determinate thing to the other or others who shall pay therefore
a sum certain in money or its equivalent. It is therefore a general requisite for the existence of a valid and
enforceable contract of sale that it be mutually obligatory, i.e., there should be a concurrence of the promise
of the vendor to sell a determinate thing and the promise of the vendee to receive and pay for the property
so delivered and transferred. The Civil Code provision is, in effect, a "catch-all" provision which effectively
brings within its grasp a whole gamut of transfers whereby ownership of a thing is ceded for a consideration.

All three (3) essential elements of a valid sale, without which there can be no sale, were attendant in the
"disposition" and "transfer" of the property from NDC to PUP - consent of the parties, determinate subject
matter, and consideration therefor.

Consent to the sale is obvious from the prefatory clauses of Memorandum Order No. 214 which explicitly
states the acquiescence of the parties to the sale of the property. Furthermore, the cancellation of NDC's
liabilities in favor of the National Government constituted the "consideration" for the sale.

SPS. LITONJUA vs. L & R CORPORATION

FACTS:

This stems from loans obtained by the spouses Litonjua from L&R

Corporation in the aggregate sum of P400,000.00; P200,000.00 of

which was obtained on August 6, 1974 and the remaining P200,000.00

obtained on March 27, 1978. The loans were secured by a mortgage

constituted by the spouses upon their two parcels of land and the

improvements thereon. The mortgage was duly registered with the

Register of Deeds.

Spouses Litonjua sold to Philippine White House Auto Supply, Inc.

(PWHAS) the parcels of land they had previously mortgaged to L & R

Corporation for the sum of P430,000.00. Meanwhile, with the spouses

Litonjua having defaulted in the payment of their loans, L & R

Corporation initiated extrajudicial foreclosure proceedings with the Ex-

Oficio Sheriff of Quezon City. The mortgaged properties were sold at

public auction to L & R Corporation as the only bidder for the amount

of P221,624.58.

On April 22, 1981, L & R Corporation wrote a letter to the Sheriff, copy

furnished to the Register of Deeds, stating: (1) that the sale of the

mortgaged properties to PWHAS was without its consent, in

contravention of paragraphs 8 and 9 of their Deed of Real Estate

Mortgage; and (2) that it was not the spouses Litonjua, but PWHAS,

who was seeking to redeem the foreclosed properties, when under

Articles 1236 and 1237 of the New Civil Code, the latter had no legal

personality or capacity to redeem the same.

On the other hand, the spouses Litonjua asked the Register of Deeds to

annotate their Certificate of Redemption as an adverse claim on the

titles of the subject properties on account of the refusal of L & R

Corporation to surrender the owner’s duplicate copies of the titles to

the subject properties. With the refusal of the Register of Deeds to

annotate their Certificate of Redemption, the Litonjua spouses filed a

Petition on July 17, 1981 against L & R Corporation for the surrender of

the owner’s duplicate of Transfer Certificates of Title No. 197232 and

197233 before the then CFI.

ISSUE: WON there was a Valid and enforceable stipulation granting the

mortgagee the right of first refusal.

HELD:
While petitioners question the validity of paragraph 8 of their mortgage

contract, they appear to be silent insofar as paragraph 9 thereof is

concerned. Said paragraph 9 grants upon L & R Corporation the right

of first refusal over the mortgaged property in the event the mortgagor

decides to sell the same. We see nothing wrong in this provision. The

right of first refusal has long been recognized as valid in our

jurisdiction.

The consideration for the loan-mortgage includes the consideration for

the right of first refusal. L & R Corporation is in effect stating that it

consents to lend out money to the spouses Litonjua provided that in

case they decide to sell the property mortgaged to it, then L & R

Corporation shall be given the right to match the offered purchase

price and to buy the property at that price. Thus, while the spouses

Litonjua had every right to sell their mortgaged property to PWHAS

without securing the prior written consent of L & R Corporation, it had

the obligation under paragraph 9, which is a perfectly valid provision,

to notify the latter of their intention to sell the property and give it

priority over other buyers. It is only upon failure of L & R Corporation

to exercise its right of first refusal could the spouses Litonjua validly

sell the subject properties to others, under the same terms and

conditions offered to L & R Corporation.

It was then held that the Contract of Sale there, which violated the

right of first refusal, was rescissible.

In the case at bar, PWHAS cannot claim ignorance of the right of first

refusal granted to L & R Corporation over the subject properties since

the Deed of Real Estate Mortgage containing such a provision was duly

registered with the Register of Deeds. As such, PWHAS is presumed to

have been notified thereof by registration, which equates to notice to

the whole world.

That it did not duly exercised its right of first refusal at the opportune

time cannot be taken against it, precisely because it was not notified

by the spouses Litonjua of their intention to sell the subject property

and thereby, to give it priority over other buyers.

EDCA PUBLISHING v. SANTOS

FACTS:
The movable property in this case consists of books, which were bought from EDCA by an
impostor who sold it to SANTOS. EDCA Publishing sold to a person identifying himself as
Professor Jose Cruz who placed an order by telephone with the former for 406 books, payable on
delivery. EDCA prepared the corresponding invoice and delivered the books as ordered, for which
Cruz issued a personal check. On October 7, 1981, Cruz then sold the 120 of the books to Leonor
Santos who asked for verification, and was then showed the invoice for the books.
Meanwhile, EDCA having become suspicious over a second order placed by Cruz even before
clearing of his first check, made inquiries with the De la Salle College where he had claimed to be
a dean and was informed that there was no such person in its employ. Further verification revealed
that Cruz had no more account or deposit with the Philippine Amanah Bank, against which he had
drawn the payment check. EDCA then went to the police, which set a trap and arrested Cruz.
Investigation disclosed his real name as Tomas de la Peña and his sale of 120 of the books he had
ordered from EDCA to the private respondents.

ISSUE:
Whether or not EDCA PUBLISHINGAND DISTRIBUTING CORP was unlawfully deprived of
the property?
HELD:
NO
Santos was a good faith buyer after taking steps to verify the identity of the seller. When she was
showed the invoice, she reasonably believed that he was a legitimate seller. With regard to
unlawful deprivation, EDCA was not unlawfully deprived of the property by mere failure of
consideration. There was already a perfected contract of sale. Proof was even substantiated when
EDCA gave the invoice as proof of payment upon delivery of the books. This did not amount to
unlawful taking, because by the delivery of EDCA to Cruz, ownership of the books already
transferred to him.
It would certainly be unfair now to make the SANTOSES bear the prejudice sustained by EDCA
as a result of its own negligence. We cannot see the justice in transferring EDCA's loss to the
SANTOSES who had acted in good faith, and with proper care, when they bought the books from
Cruz.