A.

Preparatory

POLICITATION
GABELO v CA
FACTS:
Philippine Realty Corporation, owner of a parcel of land at Intramuros, Manila entered into a Contract of Lease with
the private respondent Ursula Maglente. The lease was for a period of three (3) years. Their contract prohibited the
lessee to cede, transfer, mortgage, sublease or in any manner encumber the whole or part of the leased land and its
improvements or its rights as LESSEE of the leased land, without the previous consent in writing of the LESSOR
contained in a public instrument. However, after the execution of the lease agreement, respondent Maglente started
leasing portions of the leased area to the herein petitioners who erected their respective houses thereon. When the
lease contract was about to expire, the Philippine Realty Corporation sent a written offer to sell subject properties to
respondent Ursula Maglente. Responding to such written offer, Maglente wrote a letter manifesting an intention to
exercise her right of first priority to purchase the property as stipulated in the lease contract. A Memorandum on the
offer of Maglente to purchase the property was approved with a down payment; the balance of the purchase price
payable within ten (10) years with interest at the rate of eighteen (18%) percent per annum. However, Philippine Realty
Corporation (PRC) also received a copy of a letter sent by the herein petitioners expressing their desire to purchase
the portions of subject property on which they have been staying for a long time.

ISSUE:
Whether petitioners have the right of first priority to purchase of the property because they are the actual occupants
of the said property and the contract between PRC and Maglente was not perfected for lack of consent.

RULING:
No. The contract of sale was already perfected - PRC offered the subject lot for sale to respondent Maglente.
Respondent Maglente accepted such offer through a letter manifesting their intention to purchase the property as
provided for under the lease contract. Thus, there was already an offer and acceptance giving rise to a valid contract.
As a matter of fact, respondents have already completed payment of their down payment. Therefore, as borne by
evidence on record, the requisites under Article 1318 of the Civil Code for a perfected contract have been met. Anent
petitioner’s submission that the sale has not been perfected because the parties have not affixed their signatures
thereto, suffice it to state that under the law, the meeting of the minds between the parties gives rise to a binding
contract although they have not affixed their signatures to its written form.

Manila Metal Container Corporation vs Philippine National Bank

[GR No. 166862, December 20, 2006]
Callejo, Sr., J.:

Facts:
Petitioner was the owner of 8,015 square meters of parcel of land located in Mandaluyong City, Metro Manila. To
secure a P900,000.00 loan it had obtained from respondent Philippine National Bank, petitioner executed a real estate
mortgage over the lot. Respondent PNB later granted petitioner a new credit accommodation. 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. After due notice and publication, the property was sold at public action where respondent PNB
was declared the winning bidder. Petitioner sent a letter to PNB, requesting it to be granted an extension of time to
redeem/repurchase the property. Some PNB personnel informed that as a matter of policy, the bank does not accept
“partial redemption”. Since petitioner failed to redeem the property, the Register of Deeds cancelled TCT No. 32098
and issued a new title in favor of PNB.
Meanwhile, the Special Asset Management Department (SAMD) had prepared a statement of account of petitioner’s
obligation. It also recommended the management of PNB to allow petitioner to repurchase the property
for P1,574,560.oo. PNB rejected the offer and recommendation of SAMD. It instead suggested to petitioner to purchase
the property for P2,660,000.00, in its minimum market value. Petitioner declared that it had already agreed to SAMD’s
offer to purchase for P1,574,560.47 and deposited a P725,000.00.
Issue:
Whether or not petitioner and respondent PNB had entered into a perfected contract for petitioner to repurchase the
property for respondent.

Ruling:
The SC affirmed the ruling of the appellate court that there was no perfected contact of sale between the parties.
A contract is meeting of minds between two persons whereby one binds himself, with respect to the other, to give
something or to render some service. Under 1818 of the Civil Code, there is no contract unless the following requisites
concur:
1. Consent of the contracting parties;
2. Objection certain which is the subject matter of the contract;
3. Cause of the obligation which is established.
Contract is perfected by mere consent which is manifested by the meeting of the offer and the acceptance upon
the thing and causes which are to constitute the contract. Once perfected, the bind between other contracting parties
and the obligations arising therefrom have the form of law between the parties and should be complied in good faith.
The absence of any essential element will negate the existence of a perfected contract of sale.
The court ruled in Boston Bank of the Philippines vs Manalo:
“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.”
In the case at bar, the parties to the contract is between Manila Metal Container Corporation and Philippine National
Bank and not to Special Asset Management Department. Since the price offered by PNB was not accepted, there is
no contract. Hence it cannot serve as a binding juridical relation between the parties.
OPTION CONTRACT
CARCELLER vs. COURT OF APPEALS and SIHI February 10, 1999
Quisumbing, J.
Petitioners: Jose Ramon Carceller Respondents: Court of Appeals and State Investment Houses, Inc.
CASE SUMMARY: SIHI leased its property to Carceller with an option to purchase said property within the lease period
agreed upon. Before the expiration of the lease period, SIHI informed Carceller that it would terminate the lease
contract, despite the latter’s timely request to extend the period (indicating his desire to purchase) so that he would
have time to collect the amount needed to exercise his option. Carceller was only able to formally exercise his right
after the expiration of the lease period, so SIHI said he forfeited his right to purchase. The Court however, ruled in
favor of Carceller, stating that there was a clear intention on both parties to enforce the right to purchase. SIHI needed
to dispose the property given the Corporations insolvent status, while Carceller was determined to buy it to the extent
of obtaining a large loan to pay the full amount. To deprive of the petitioner of his right to buy the property, when all
that time he was in good faith, was to unjustly enrich SIHI.
FACTS:
State Investment Houses, Inc. (SIHI) owned two parcels of land with improvements in Bulacao Cebu City. In 1985,
SIHI and Carceller entered into a lease contract with option to purchase at a monthly rental of P10, 000 for a period of
18 months from August 1, 1984 to January 30, 1986. The contract stipulated that Carceller as LESSEE had an
exclusive right, option and privilege to purchase within the lease period the properties for the aggregate amount of
P1,8000,000― with the following conditions: 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 afore-described properties has to be consummated
within the month immediately following the month when the LESSEE exercised his option under this contract.
Approximately three weeks before the expiration of the lease contract, SIHI notified the Carceller of the termination of
the lease agreement and the remaining time he could exercise the right to purchase, thus he must submit his decision
on January 20, 1986. In a letter dated January 15, 1986, which was received by SIHI only on January 29, petitioner
requested for a six-month extension of the lease contract, alleging that he needs ample time to raise the funds needed
to buy the properties. He also averred that he had already made a substantial investment on the contract, and that he
was always punctual in the payment of the rentals. The request, however, was disproved by SIHI, and offered to lease
the same properties to Carceller at P30, 000 a month for one year. It also informed the latter its intention to offer the
properties for sale to the general public. On February 18, 1986, Carceller again notified SIHI of its intention to exercise
his option to purchase and he made arrangements to make down payment in the amount of P360, 000. But on February
20, SIHI again denied Carceller’s offer, stating that the period to exercise the option (January 30) had already elapsed.
It ordered petitioner to vacate the premises within 10 days of notice, with rental and penalty due. When Carceller filed
an action for specific performance and damages, both the RTC and the Court of Appeals ruled in favor of him. They
ordered SIHI to execute a deed of sale in favor of Carceller, and ordered that the amount of payment must be according
to the prevailing market price to be determined by the trial court.

ISSUE:

W/N Petitioner is allowed to exercise his right to purchase the leased premises despite the alleged delay in giving the
required notice to private respondent.

HELD:

Petitioner HAS THE RIGHT to exercise his option to purchase. He was NOT in delay. RATIO: Petitioners letter to SIHI
on January 15, 1986 was fair notice of his intent to exercise the option, despite request for the extension of the lease
contract. He acted with honesty and good faith. The evidence is consistent with the parties primary intent in executing
the lease contract. The reasonableness of the result obtained should also be considered. SIHI urgently needed to
dispose the leased premises as soon as possible due to its insolvent status. It was eager for petitioner to purchase the
premises by reminding him of the short time left to exercise his right to buy. It was even ready to sell it to the “general
public in case petitioner did not exercise his option. Petitioner, on the other hand, was also indubitably determined to
acquire the property. He already introduced permanent improvements thereon, and obtained an P8, 000,000 loan from
Technology Resources Center to pay the purchase price in one single payment, thereby decreasing the interest he
needed to pay. 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 any time; 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 instalments of the purchase price over a
period of 60 months. In the Courts opinion, 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. In Tuason Jr. vs. De Asis, if a lessee fails to exercise his option to buy in a lease contract
with right to purchase, he loses the right to buy the property on the terms and conditions set in the offer. Petitioner
could not insist on buying the property based on the price agreed upon in the lease agreement, even if his option to
purchase was recognized. On the other hand, SIHI could not take advantage of the situation to increase the selling
price of the property to 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.

ADDITIONAL INFORMATION WHAT IS AN OPTION? 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 SIHI FINANCIAL STATUS Before the contract was created, SIHI
was beset with financial problems and was in dire need of money. It was already placed under the supervision of
Central Bank and needed to liquidate its assets immediately. This was the reason why SIHI needed to sell the subject
property as soon as possible.
 SORIANO V. BAUTISTA 6 SCRA 946 (1962)

Facts:

Spouses Bautista mortaged their lot to Spouses Soriano for the amount of P1,800. The contract stipulates that if the
financial condition of the mortgagees will permit, they may purchase said land absolutely on any date within the two-
year term of the mortgage at the agreed price of P3,900.00. Pursuant to said provision, Spouses Soriano decided to
purchase the lot. Spouses Bautista, however, refused to comply with the demand. Spouses Soriano, thus, filed a case,
praying that they be allowed to consign or deposit with the Clerk of Court the balance of the purchase price of the land
in question and that after due hearing, judgment be rendered ordering defendants to execute an absolute deed of
sale of said property in their favor, plus damages. Spouses Bautista subsequently filed a case against Soriano, asking
the court to order the latter to accept the payment of the principal obligation and release the mortgage. Spouses
Bautista contended that being mortgagors, they cannot be deprived of the right to redeem the mortgaged property,
because such right is inherent in and inseparable from this kind of contract. After a joint trial of both cases, the trial court
ordered Spouses Bautista to execute a deed of sale in favor of Spouses Soriano upon payment by the latter of the
balance of the price agreed upon.

Issue:

May Spouses Bautista redeem the subject property?

Held:

No. While the transaction is undoubtedly a mortgage and contains the customary stipulation concerning redemption, it
carries the added special provision, which renders the mortgagors' right to redeem defeasible at the election of the
mortgagees. There is nothing illegal or immoral in this. It is simply an option to buy, sanctioned by Article 1479 of the
Civil Code, which states: "A promise to buy and sell a determinate thing for a price certain is reciprocally demandable.
An accepted unilateral promise to buy or to sell a determinate thing for a price certain is binding upon the promisor if
the promise is supported by a consideration distinct from the price."

In this case the mortgagor's promise to sell is supported by the same consideration as that of the mortgage itself, which
is distinct from that which would support the sale, an additional amount having been agreed upon to make up the entire
price of P3, 900.00, should the option be exercised. The mortgagors' promise was in the nature of a continuing offer,
non-withdrawable during a period of two years, which upon acceptance by the mortgagees gave rise to a perfected
contract of purchase and sale.

Spouses Bautista's tender was ineffective for the purpose intended. It was made after the option to purchase had been
exercised by Spouses Soriano. Spouses Bautista's right to redeem is defeated by Spouses Soriano's pre-
emptive right to purchase. (Soriano vs Bautista, G.R. No. L-15752, December 29, 1962)

ADELFA PROPERTIES, INC vs. CA et al

G.R. No. 111238
January 25, 1995
FACTS:
Private respondents and their brothers Jose and Dominador were the registered CO-OWNERS of a parcel of land in
Las Pinas, covered by a TCT. Jose and Dominador sold their share (eastern portion of the land) to Adelfa. Thereafter,
Adelfa expressed interest in buying the western portion of the property from private respondents herein. Accordingly,
an “exclusive Option to Purchase” was executed between Adelfa and Private Respondents and an option money of
50,000 was given to the latter. A new owner’s copy of the certificate of title was issued (as the copy with respondent
Salud was lost) was issued but was kept by Adelfa’s counsel, Atty. Bernardo. Before Adelfa could make payments, it
received summons as a case was filed (RTC Makati) against Jose and Dominador and Adelfa, because of a complaint
in a civil case by the nephews and nieces of private respondents herein. As a consequence, Adelfa, through a letter,
informed the private respondents that it would hold payment of the full purchase price and suggested that they settle
the case with their said nephews and nieces. Salud did not heed the suggestion; respondent’s informed Atty. Bernardo
that they are cancelling the transaction. Atty Bernardo made offers but they were all rejected. RTC Makati dismissed
the civil case. A few days after, private respondents executed a Deed of Conditional Sale in favor of Chua, over the
same parcel of land.
Atty Bernardo wrote private respondents informing them that in view of the dismissal of the case, Adelfa is willing to
pay the purchase price, and requested that the corresponding deed of Absolute Sale be executed. This was ignored
by private respondents.
Private respondents sent a letter to Adelfa enclosing therein a check representing the refund of half the option money
paid under the exclusive option to purchase, and requested Adelfa to return the owner’s duplicate copy of Salud. Adelfa
failed to surrender the certificate of title, hence the private respondents filed a civil case before the RTC Pasay, for
annulment of contract with damages. The trial court directed the cancellation of the exclusive option to purchase. On
appeal, respondent CA affirmed in toto the decision of the RTC hence this petition.

ISSUE:
1. WON the agreement between Adelfa and Private respondents was strictly an option contract
2. WON Article 1590 applies in this case, thereby justifying the refusal by Adelfa to pay the balance of the purchase
price
3. WON Private respondents could unilaterally and prematurely terminate the option period, if indeed it is a option
contract, as the option period has not lapsed yet.

HELD: The judgement of the CA is AFFIRMED

1. NO. The agreement between the parties is a contract to sell, and not an option contract or a contract of sale.
Contract to SELL
– by agreement the ownership is reserved in the vendor and is not to pass until the full payment of the price
– title is retained by the vendor until the full payment of the price, such payment being a positive
Contract of SALE
– the title passes to the vendee upon the delivery of the thing sold
– the vendor has lost and cannot recover ownership until and unless the contract is resolved or rescinded

There are two features which convince us that the parties never intended to transfer ownership to petitioner except
upon the full payment of the purchase price.

(1) the exclusive option to purchase, although it provided for automatic rescission of the contract and partial
forfeiture of the amount already paid in case of default, does not mention that petitioner is obliged to return
possession or ownership of the property as a consequence of non-payment. There is no stipulation anent reversion
or reconveyance of the property to herein private respondents in the event that petitioner does not comply with its
obligation. With the absence of such a stipulation, although there is a provision on the remedies available to the
parties in case of breach, it may legally be inferred that the parties never intended to transfer ownership to the
petitioner to completion of payment of the purchase price.

(2) Secondly, it has not been shown there was delivery of the property, actual or constructive, made to herein
petitioner. The exclusive option to purchase is not contained in a public instrument the execution of which would
have been considered equivalent to delivery. Neither did petitioner take actual, physical possession of the property
at any given time. It is true that after the reconstitution of private respondents’ certificate of title, it remained in the
possession of petitioner’s counsel, Atty. Bayani L. Bernardo, who thereafter delivered the same to herein petitioner.
Normally, under the law, such possession by the vendee is to be understood as a delivery. 18However, private
respondents explained that there was really no intention on their part to deliver the title to herein petitioner with the
purpose of transferring ownership to it. They claim that Atty. Bernardo had possession of the title only because he
was their counsel in the petition for reconstitution.
In effect, there was an implied agreement that ownership shall not pass to the purchaser until he had fully paid the
price in this case. Article 1478 of the civil code does not require that such a stipulation be expressly made.
Consequently, an implied stipulation to that effect is considered valid and, therefore, binding and enforceable
between the parties. It should be noted that under the law and jurisprudence, a contract which contains this kind of
stipulation is considered a contract to sell.
The important task in contract interpretation is always the ascertainment of the intention (parties never intended to
transfer ownership to petitioner except upon the full payment of the purchase price) of the contracting parties and
that task is, of course, to be discharged by looking to the words they used to project that intention in their contract.
The title of a contract does not necessarily determine its true nature. Hence, the fact that the document under
discussion is entitled “Exclusive Option to Purchase” is not controlling where the text thereof shows that it is a
contract to sell.
The obligation of petitioner consisted of an obligation to give something, that is, the payment of the purchase price.
The contract did not simply give petitioner the discretion to pay for the property. It will be noted that there is nothing
in the said contract to show that petitioner was merely given a certain period within which to exercise its privilege to
buy. The agreed period was intended to give time to herein petitioner within which to fulfill and comply with its
obligation, that is, to pay the balance of the purchase price. No evidence was presented by private respondents to
prove otherwise.

The test in determining whether a contract is a “contract of sale or purchase” or a mere “option” is whether or not
the agreement could be specifically enforced. There is no doubt that the obligation of petitioner to pay the
purchase price is specific, definite and certain, and consequently binding and enforceable. Had private respondents
chosen to enforce the contract, they could have specifically compelled petitioner to pay the balance. This is distinctly
made manifest in the contract itself as an integral stipulation, compliance with which could legally and definitely be
demanded from petitioner as a consequence.
While there is jurisprudence to the effect that a contract which provides that the initial payment shall be totally
forfeited in case of default in payment is to be considered as an option contract, still we are not inclined to conform
with the findings of respondent court and the court a quo that the contract executed between the parties is an option
contract, for the reason that the parties were already contemplating the payment of the balance of the purchase
price, and were not merely quoting an agreed value for the property. The term “balance,” connotes a remainder or
something remaining from the original total sum already agreed upon.
In other words, the alleged option money was actually earnest money which was intended to form part of the
purchase price. The amount was not distinct from the cause or consideration for the sale of the property, but was
itself a part thereof. It is a statutory rule that 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. It constitutes an advance payment and
must, therefore, be deducted from the total price. Also, earnest money is given by the buyer to the seller to bind the
bargain.
There are clear distinctions between earnest money and option money, viz.:
(a) Earnest money is part of the purchase price, while option money ids the money given as a distinct consideration
for an option contract;

(b) Earnest money is given only where there is already a sale, while option money applies to a sale not yet perfected;
and

(c) When earnest money is given, the buyer is bound to pay the balance, while when the would-be buyer gives option
money, he is not required to buy.

The aforequoted characteristics of earnest money are apparent in the so-called option contract under review, even
though it was called “option money” by the parties. In addition, private respondents failed to show that the payment of
the balance of the purchase price was only a condition precedent to the acceptance of the offer or to the exercise of
the right to buy. On the contrary, it has been sufficiently established that such payment was but an element of the
performance of petitioner’s obligation under the contract to sell.

2. Its failure to pay the purchase price within the agreed period, petitioner invokes Article 1590 of the civil Code which
provides:
Art. 1590. Should the vendee be disturbed in the possession or ownership of the thing acquired, or should he have
reasonable grounds to fear such disturbance, by a vindicatory action or a foreclosure of mortgage, he may suspend
the payment of the price until the vendor has caused the disturbance or danger to cease, unless the latter gives
security for the return of the price in a proper case, or it has been stipulated that, notwithstanding any such
contingency, the vendee shall be bound to make the payment. A mere act of trespass shall not authorize the
suspension of the payment of the price.

Respondent court refused to apply the aforequoted provision of law on the erroneous assumption that the true
agreement between the parties was a contract of option. As we have hereinbefore discussed, it was not an option
contract but a perfected contract to sell. Verily, therefore, Article 1590 would properly apply.

Both lower courts, are in accord that since the Civil Case in Makati involved only the eastern half of the land subject
of the deed of sale between Adelfa and the Jimenez brothers, it did not, therefore, have any adverse effect on private
respondents’ title and ownership over the western half of the land which is covered by the contract subject of the
present case. But at a glance, it is easily discernible that, although the complaint prayed for the annulment only of the
contract of sale executed between petitioner and the Jimenez brothers, the plaintiffs therein were claiming to be co-
owners of the entire parcel of land, and not only of a portion thereof nor, as incorrectly interpreted by the lower
courts, not pertaining exclusively to the eastern half adjudicated to the Jimenez brothers.
Such being the case, petitioner was justified in suspending payment of the balance of the purchase price by reason
of the aforesaid vindicatory action filed against it. The assurance made by private respondents that petitioner did not
have to worry about the case because it was pure and simple harassment is not the kind of guaranty contemplated
under the exceptive clause in Article 1590 wherein the vendor is bound to make payment even with the existence of
a vindicatory action if the vendee should give a security for the return of the price.

3. YES. The private respondents may no longer be compelled to sell and deliver the subject property to petitioner for
two reasons that is, petitioner’s failure to duly effect the consignation of the purchase price after the disturbance had
ceased; and, secondarily, the fact that the contract to sell had been validly rescinded by private respondents.

The mere sending of a letter by the vendee expressing the intention to pay, without the accompanying payment, is
not considered a valid tender of payment. Besides, a mere tender of payment is not sufficient to compel private
respondents to deliver the property and execute the deed of absolute sale. It is consignation which is essential in
order to extinguish petitioner’s obligation to pay the balance of the purchase price.

The rule is different in case of an option contract or in legal redemption or in a sale with right to repurchase, wherein
consignation is not necessary because these cases involve an exercise of a right or privilege (to buy, redeem or
repurchase) rather than the discharge of an obligation, hence tender of payment would be sufficient to preserve the
right or privilege. This is because the provisions on consignation are not applicable when there is no obligation to
pay. A contract to sell, as in the case before us, involves the performance of an obligation, not merely the exercise
of a privilege of a right. Consequently, performance or payment may be effected not by tender of payment alone but
by both tender and consignation.
Furthermore, petitioner no longer had the right to suspend payment after the disturbance ceased with the dismissal
of the civil case filed against it. Necessarily, therefore, its obligation to pay the balance again arose and resumed
after it received notice of such dismissal. Unfortunately, petitioner failed to seasonably make payment. By reason of
petitioner’s failure to comply with its obligation, private respondents elected to resort to and did announce the
rescission of the contract through its letter to petitioner. That written notice of rescission is deemed sufficient under
the circumstances. Article 1592 of the Civil Code which requires rescission either by judicial action or notarial act is
not applicable to a contract to sell. Furthermore, judicial action for rescission of a contract is not necessary where the
contract provides for automatic rescission in case of breach, as in the contract involved in the present controversy.
In the case at bar, it has been shown that although petitioner was duly furnished and did receive a written notice of
rescission which specified the grounds therefore, it failed to reply thereto or protest against it. By such cavalier
disregard, it has been effectively estopped from seeking the affirmative relief it now desires but which it had
theretofore disdained.
NOTES:
1. a deed of sale is considered absolute in nature where there is neither

(a) a stipulation in the deed that title to the property sold is reserved in the seller until the full payment of the price,
nor

(b) one giving the vendor the right to unilaterally resolve the contract the moment the buyer fails to pay within a fixed
period.

2. We are not unaware of the ruling in University of the Philippines vs. De los Angeles, etc. 50 that the right to rescind
is not absolute, being ever subject to scrutiny and review by the proper court. It is our considered view, however, that
this rule applies to a situation where the extrajudicial rescission is contested by the defaulting party. In other words,
resolution of reciprocal contracts may be made extra judicially unless successfully impugned in court. If the debtor
impugns the declaration, it shall be subject to judicial determination 51 otherwise, if said party does not oppose it, the
extrajudicial rescission shall have legal effect. 52
3. Option vs. contract

An option, as used in the law on sales, is a continuing offer 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 is
also sometimes called an “unaccepted offer.” An option is not of itself a purchase, but merely secures the privilege to
buy. It is not a sale of property but a sale of property but a sale of the right to purchase. It is simply a contract by
which the owner of property agrees with another person that he shall have the right to buy his property at a fixed
price within a certain time. He does not sell his land; he does not then agree to sell it; but he does sell something,
that it is, the right or privilege to buy at the election or option of the other party.
Its distinguishing characteristic is that it imposes no binding obligation on the person holding the option, aside
from the consideration for the offer. Until acceptance, it is not, properly speaking, a contract, and does not vest,
transfer, or agree to transfer, any title to, or any interest or right in the subject matter, but is merely a contract by
which the owner of property gives the optionee the right or privilege of accepting the offer and buying the property on
certain terms.
On the other hand, a contract, like a contract to sell, involves a meeting of minds two persons whereby one binds
himself, with respect to the other, to give something or to render some service. Contracts, in general, 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. The offer must be certain and the acceptance absolute.

The distinction between an “option” and a contract of sale is that an option is an unaccepted offer. It states the terms
and conditions on which the owner is willing to sell the land, if the holder elects to accept them within the time limited.
If the holder does so elect, he must give notice to the other party, and the accepted offer thereupon becomes a valid
and binding contract. If an acceptance is not made within the time fixed, the owner is no longer bound by his offer,
and the option is at an end.

A contract of sale, on the other hand, fixes definitely the relative rights and obligations of both parties at the time of
its execution. The offer and the acceptance are concurrent, since the minds of the contracting parties meet in the
terms of the agreement.

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

NICOLAS SANCHEZ, plaintiff-appellee,
vs.
SEVERINA RIGOS, defendant-appellant.

Facts:
In 1961, Rigos and Sanchez executed a document titled ‘Option to Purchase’ whereby Rigos bound herself to sell a
parcel of land to Sanchez for 1.5k pesos within two years from the execution of the contract. This option contract had
no distinct consideration. Sanchez made several tenders of the purchase price to Rigos, but Rigos ignored them.
Sanchez consigned the payment in court less than 2 months before the expiration of the period to exercise his right.
In other words, Sanchez accepted the option before Rigos could withdraw the offer.
 The RTC ruled in favor of Sanchez, ordering Rigos to accept the payment of the price.
 On appeal, Rigos claims that she could validly withdraw the option given to Sanchez, even if Sanchez has
opted to exercise his right, since the contract was not supported by a separate and distinct consideration
(ruling in Southwestern Sugar v Altantic Gulf).

Issue: WON Rigos is bound by Sanchez’ acceptance even though the option is not supported by a separate
consideration. YES

Held:
Ruling in Southwestern abandoned; acceptance of option before withdrawal creates a binding obligation to
buy and sell even if not supported by consideration
Even if the "offer of option" is not supported by any consideration, the option became binding on the promisor when
the promisee 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.

Article 1479 must be read in relation to Article 1324

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.

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.

In Southwestern, the Court said while 1324 was applicable to contracts in general, Article 1479 specifically states that
in unilateral contracts to sell, there is a need for the separate consideration before the obligation to buy and sell arises.

However, this ruling was abandoned in the case of Atkins v Cua Hian Tek, where the Court decided there was no
distinction between the two articles. Both articles produced the same effect: the promise is treated 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.

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.

(SAME CASE)
FACTS:
Nicolas Sanchez and Severina Rigos executed an instrument entitled "Option to Purchase," whereby Mrs. Rigos
agreed, promised and committed to sell to Sanchez a parcel of land within two (2) years from said date with the
understanding that said option shall be deemed terminated and elapsed if Sanchez shall fail to exercise his right to
buy the property within the stipulated period. Inasmuch as several tenders of payment 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.
Rigos contended that the contract between them was only 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. Sanchez alleged in his
compliant 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. The lower court rendered judgment in favor of Sanchez
and ordered Rigos to accept the sum Sanchez judicially consigned, and to execute in his favor the requisite deed of
conveyance.
ISSUE:
Whether there was a contract to buy and sell between the parties or only a unilateral promise to sell.

COURT RULING:
The Supreme Court affirmed the lower court’s decision. The instrument executed in 1961 is not a "contract to buy
and sell," but merely granted SANCHEZ an option to buy, as indicated by its own title "Option to Purchase." The
option did not impose upon Sanchez the obligation to purchase Rigos' property. Rigos "agreed, promised and
committed" herself to sell the land to Sanchez, 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. Article 1479 refers to "an accepted unilateral promise to buy or to sell." 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.

Enrico S. Eulogio Petitioner vs. Spouses Clemente Apeles and Luz Apeles Respondents G. R. No. 167884
January 20, 2009

FACTS:
The Spouses Apeles leased a property to Arturo Eulogio (Arturo). When Arturo died, his son Enrico succeeded as
lessor of the subject property. He entered into a contract of lease with an option to purchase with the spouses. It is
stipulated in the contract that the LESSOR (Enrico) has an option to buy the subject house and lot within three years
and that the monthly rentals paid by him during the 3-year lease period will just be deducted from the purchase price
agreed upon by them. There is also a stipulation that if Enrico gives an oral or written notice to the spouses before the
expiration of the 3-year lessee period, then the latter shall proceed with the execution of the contract by selling,
transferring and conveying the said property to Enrico. Before the 3-year lease period expires. Enrico decided to
exercise his option to purchase the subject property by giving oral and written notice to the respondents. Unfortunately,
spouses Apeles ignored his manifestations. Enrico Eulogio then instituted a Complaint for Specific Performance with
Damages against the spouses Apeles. His cause of action is based on par. 5 of their Contract of Lease with Option to
Purchase vesting him the right to acquire ownership of the subject property after paying the agreed amount of
consideration. Enrico contended that Luz Apeles voluntarily signed their contract of lease and therefore the property
should be transferred to him. On the other hand, Luz Apeles denied that she signed the contract. According to Luz
Apeles, it was impossible for her to sign the contract because she was in the United States of America that time and
that her signature thereon was just forged. The RTC ruled in favor of Enrico and ordered them to comply with the
provisions of the Contract. The Court of Appeals noted that the Notary Public did not observe utmost care in certifying
the due execution of the Contract of Lease with Option to Purchase. The Court of Appeals chose not to accord the
disputed Contract full faith and credence.

ISSUE: Whether or not Enrico can compel the spouses Apeles to execute the Deed of Sale over the subject property
in his favor.

HELD: No. The Supreme Court held that Enrico Eulogio cannot compel the spouses Apeles to execute the Deed of
Sale in his favor. While it is true that a notarized document carries the evidentiary weight conferred upon it with respect
to its due execution, and has in its favor the presumption of regularity, this presumption, however, is not absolute. It
may be rebutted by clear and convincing evidence to the contrary. In civil cases, the party having the burden of proof
must establish his case by a preponderance of evidence. Preponderance of evidence is the weight, credit, and value
of the aggregate evidence on either side and is usually considered to be synonymous with the term "greater weight of
the evidence" or "greater weight of the credible evidence." Preponderance of evidence is a phrase which, in the last
analysis, means probability of the truth. It is evidence which is more convincing to the court as worthier of belief than
that which is offered in opposition thereto. In the case at bar, the spouses Apeles were able to prove beyond
preponderant evidence the invalidity of the Contract of Lease with Option to Purchase. While Enrico just relied on his
own self-serving testimonies, without asserting any proof of collaborating testimony or circumstantial evidence to
support his claim. This is considered as an option contract. It is a contract by which the owner of the property agrees
with another person that the latter shall have the right to buy the former s property at a fixed price within a certain time.
It is not a sale of property but a sale of right to purchase. In order for an option contract to be valid, there must be a
separate and distinct consideration that supports it. In the present case, it is definite that Enrico gave no consideration
to the spouses for the option contract. The absence of monetary or any material consideration keeps this court from
enforcing the rights of the parties under said option contract. An option is a contract by which the owner of the property
agrees with another person that the latter shall have the right to buy the former s 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 An option is not of itself a
purchase, but merely secures the privilege to buy. It is not a sale of property but a sale of the right to purchase. It is
simply 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. He does not sell his land; he does not then agree to sell it; but he does
sell something, i.e., the right or privilege to buy at the election or option of the other party. Its distinguishing
characteristic is that it imposes no binding obligation on the person holding the option, aside from the consideration for
the offer.

Distinguished Option from Right of First Refusal

EQUATORIAL vs. MAYFAIR G.R. No. 106063 November 21, 1996

FACTS:
Petitioners are Carmelo & Bauermann, Inc (owner/seller/lessor) Equatorial Realty Development, Inc (buyer)
Respondent is Mayfair Theater, Inc (lessee) Carmelo owned a parcel of land with two 2-storey buildings (covered by
4 land titles) at Recto In 1967, 2 portions of the property (covered by 2 titles) was leased to Mayfair for 20 years In
1978, Carmelo sold the entire Recto property to Equatorial for P11,300,000 Mayfair petitioned for annulment of the
sale on the ground that it was violative of Paragraph 8 of the Contract of lease between respondent and Carmelo,
which reads: “That if the LESSOR should desire to sell the leased premises, the LESSEE shall be given 30-days
exclusive option to purchase the same.” The Trial court ruled in favor of herein petitioners on the ground that Paragraph
8 was interpreted as an option contract Mayfair appealed and the CA reversed the decision of the Trial court saying
that Paragraph 8 should be interpreted as a “right of first refusal” and not an option contract
ISSUES:
1. Whether Paragraph 8 constitutes an option contract clause or a right of first refusal
2. WON sale of property to Equatorial is valid
HELD:
SC ruled in favor of Mayfair ordering rescission of the deed of sale and granting him right of first refusal to buy the
property at P11, 300,000. The issues were held as follows: 1. RIGHT OF FIRST REFUSAL. The SC agreed with
the CA’s ruling that Paragraph 8 cannot constitute an option clause (covered in Article 1324 & 1479 of the Civil
Code) for the lack of definite purchasing price in the agreement. Furthermore, the SC ruled that the stipulation
in question was created to manifest a reciprocal obligation to guard the interest of Mayfair in case of sale of the
property: (1) to give him the option to purchase the property or (2) to ensure that purchaser of the property shall
recognize the lease agreement earlier made. As such, Paragraph 8 is considered a “right of first refusal”. 2.
NO. Both Carmelo and Equatorial acted in bad faith for entering into Contract of Sale knowing that Paragraph
8 (right of first refusal) was agreed upon in the Contract of Lease and that Mayfair (another party) was interested
in the property in question

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.

B. Perfection
Fule v. CA
Facts:
Gregorio Fule, a banker and a jeweller, offered to sell his parcel of land to Dr. Cruz in exchange for P40,000 and a
diamond earring owned by the latter. A deed of absolute sale was prepared by Atty. Belarmino, and on the same day
Fule went to the bank with Dichoso and Mendoza, and Dr. Cruz arrived shortly thereafter. Dr. Cruz got the earrings
from her safety deposit box and handed it to Fule who, when asked if those were alright, nodded and took the earrings.
Two hours after, Fule complained that the earrings were fake. He files a complaint to declare the sale null and void on
the ground of fraud and deceit.
Issue:
Whether the sale should be nullified on the ground of fraud
Held:
A contract of sale is perfected at the moment there is a meeting of the minds upon the thing which is the object of the
contract and upon the price. Being consensual, a contract of sale has the force of law between the contracting parties
and they are expected to abide in good faith by their respective contractual commitments. It is evident from the facts
of the case that there was a meeting of the minds between petitioner and Dr. Cruz. As such, they are bound by the
contract unless there are reasons or circumstances that warrant its nullification.

Contracts that are voidable or annullable, even though there may have been no damage to the contracting parties are:
(1) those where one of the parties is incapable of giving consent to a contract; and (2) those where the consent is
vitiated by mistake, violence, intimidation, undue influence or fraud. The records, however, are bare of any evidence
manifesting that private respondents employed such insidious words or machinations to entice petitioner into entering
the contract of barter. It was in fact petitioner who resorted to machinations to convince Dr. Cruz to exchange her
jewelry for the Tanay property.
Furthermore, petitioner was afforded the reasonable opportunity required in Article 1584 of the Civil Code within which
to examine the jewelry as he in fact accepted them when asked by Dr. Cruz if he was satisfied with the same. By taking
the jewelry outside the bank, petitioner executed an act which was more consistent with his exercise of ownership over
it. This gains credence when it is borne in mind that he himself had earlier delivered the Tanay property to Dr. Cruz by
affixing his signature to the contract of sale. That after two hours he later claimed that the jewelry was not the one he
intended in exchange for his Tanay property, could not sever the juridical tie that now bound him and Dr. Cruz. The
nature and value of the thing he had taken preclude its return after that supervening period within which anything could
have happened, not excluding the alteration of the jewelry or its being switched with an inferior kind.
Ownership over the parcel of land and the pair of emerald-cut diamond earrings had been transferred to Dr. Cruz and
petitioner, respectively, upon the actual and constructive delivery thereof. Said contract of sale being absolute in nature,
title passed to the vendee upon delivery of the thing sold since there was no stipulation in the contract that title to the
property sold has been reserved in the seller until full payment of the price or that the vendor has the right to unilaterally
resolve the contract the moment the buyer fails to pay within a fixed period.
While it is true that the amount of P40,000.00 forming part of the consideration was still payable to petitioner, its
nonpayment by Dr. Cruz is not a sufficient cause to invalidate the contract or bar the transfer of ownership and
possession of the things exchanged considering the fact that their contract is silent as to when it becomes due and
demandable.
Santos vs Heirs of Mariano
G.R. No. 151440, June 17, 2003

- free patents issued over private lands are not valid

- difference between direct attack and collateral attack on title

FACTS:

Spouses Vicente Santiago and Magdalena Sanchez are the original owners of the parcel of land in dispute (Lot No.
2344). Simplicio Santiago purchased the land from his father, Pablo (one of Spouses Santiago's sons) and brother,
Guillermo. After acquiring the same, he then applied for a free patent over it on May 6, 1983, which free patent was
granted, thus, an Original Certificate of Title was issued in his name.

On the other hand, Mariano Santiago contended that Lot No. 2344 was subdivided into three portions: Lot 2344-A,
Lot 2344-B, and Lot 2344-C. Simplicio and his heirs owned only Lot 2344-B, and Lots 2344-A and 2344-C were
fraudulently included in the free patent and certificate of title issued to Simplicio Santiago. Mariano testified that he
and his sister bought Lot 2344-A from Simplicio Santiago for the price of Php 5,000.00, as evidenced by a deed of
sale dated Sept. 15, 1972. Immediately after sale, they constructed a house on the lot.

The trial court ruled in favor of Simplicio's heirs and held that Mariano's claim over the controverted lot lacks basis
and that his defense constitutes a collateral attack on the validity of a Torrens title.

The Court of Appeals reversed the trial court's decision.

Hence, the instant petition.

ISSUES:

(1) W/N the free patent and the certificate of title issued to Simplicio Santiago are valid
(2) W/N respondents' claim over Lots 2344-C and 2344-A is supported by the evidence
(3) Indefeasibility of Torrens Title

HELD:

First Issue: Validity of Free Patent

A free patent issued over a private land is null and void, and produces no legal effects whatsoever. Private
ownership of land - as when there is a prima facie proof of ownership like a duly registered possessory information or
a clear showing of open, continuous, exclusive, and notorious possession, by present or previous occupants - is not
affected by the issuance of a free patent over the same land, because the Public Land law applies only to lands of
the public domain. Consequently, a certificate of title issued pursuant to a homestead patent partakes of the nature
of a certificate issued in a judicial proceeding only if the land covered by it is really a part of the disposable land of
the public domain.

It was established that Lot 2344 is a private property of the Santiago clan since time immemorial, and that they have
declared the same for taxation.

Also, considering the open, continuous, exclusive, and notorious possession and occupation of the land by
respondents and their predecessors in interests, they are deemed to have acquired, by operation of law, a right to a
government grant without the necessity of a certificate of title being issued. Hence, the free patent covering Lot 2344,
a private land, and the certificate of title issued pursuant thereto, are void.
Second Issue: Sufficiency of Evidence of Claim of Ownership

Respondents' claim of ownership over Lot 2344-C and Lot 2344-A is fully substantiated. Their open, continuous,
exclusive, and notorious possession of Lot 2344-C in the concept of owners for more than seventy years supports
their contention that the lot was inherited by Mariano from his grandmother Marta. This was corroborated by
respondents' witnesses. It is worthy to note that although Lot 2344-C was within the property declared for taxation
purposes by the late Simplicio Santiago, he did not disturb the possession of Marta and Mariano.

Lot 2344-C was sold by Simplicio Santiago to Mariano Santiago and Belen Sanchez. The document of sale
evidencing the transaction is duly notarized and, as such, is considered a public document and enjoys the
presumption of validity as to its authenticity and due execution. This legal presumption was not overcome by
petitioners.

Third Issue: Indefeasibility of Torrens Title

A certificate of title issued under an administrative proceeding pursuant to a homestead patent covering a disposable
public land within the contemplation of the Public Land Law or Commonwealth Act No. 141 is as indefeasible as a
certificate of title issued under a judicial registration proceeding. Under the Land Registration Act, title to the property
covered by a Torrens certificate becomes indefeasible after the expiration of one year from the entry of the decree of
registration. The date of the issuance of the patent corresponds to the date of the issuance of the decree.

The one-year prescriptive period, however, does not apply when the person seeking annulment of title or
reconveyance is in possession of the lot. This is because the action partakes of a suit to quiet title which is
imprescriptible.

Inasmuch as respondents are in possession of the disputed portions of Lot 2344, their action to annul the Original
Certificate of Title, being in the nature of an action to quiet title, is therefore not barred by prescription.

Section 48 of P.D. 1529, the Property Registration Decree, provides that a certificate of title shall not be subject to
collateral attack and cannot be altered, modified, or cancelled except in a direct proceeding. The attack is direct
when the object of an action is to annul or set aside such judgment, or enjoin its enforcement. On the other hand, the
attack is indirect or collateral when, in an action to obtain a different relief, an attack on the judgment or proceeding is
nevertheless made as an incident thereof.

In the case at bar, the original action filed was accion publiciana or recovery of possession, but the Court may rule on
the validity of the free patent and the OCT because of the counterclaim filed by respondents. A counterclaim can be
considered a direct attack on the title, not a collateral attack.

Limketkai vs. CA

Facts: In this motion for reconsideration, the Court based its decision on several exhibits presented by Limketkai which
showed, among others, BPI’s repeated rejection of Limketkai’s proposal to buy a certain property which was issued to
a real estate broker to sell the property.

Issue: WON there was, as evidenced by the affidavits, a perfected contract of sale between Limketkai and BPI over
the subject property.

Held:

There was none.

Article 1475 of the NCC specifically provides when a contract of sale is deemed perfected, to wit:
Art. 1475. The contract of sale is perfected at the moment there is 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 performance, subject to the provisions of the law governing
the form of contracts.

The Court in Toyota Shaw, Inc. v. Court of Appeals had already ruled that a definite agreement on the manner of
payment of the price is an essential element in the formation of a binding and enforceable contract of sale. Petitioner’s
exhibits did not establish any definitive agreement or meeting of the minds between the concerned parties as regards
the price or term of payment.

N.B.

On the subject of consent as an essential element of contracts, Article 1319 of the Civil Code has this to say:

Art. 1319. Consent is manifested by the meeting of the offer and the acceptance upon the thing and the cause which
are to constitute the contract. The offer must be certain and the acceptance absolute. A qualified acceptance
constitutes a counter-offer.

The acceptance of an offer must therefore be unqualified and absolute. In other words, it must be identical in all
respects with that of the offer so as to produce consent or meeting of the minds. This was not the case herein
considering that petitioner’s acceptance of the offer was qualified, which amounts to a rejection of the original
offer. 7 And contrary to petitioner’s assertion that its offer was accepted by respondent BPI, there was no showing that
petitioner complied with the terms and conditions explicitly laid down by respondent BPI for prospective buyers. Neither
was the petitioner able to prove that its offer to buy the subject property was formally approved by the beneficial owner
of the property and the Trust Committee of the Bank; an essential requirement for the acceptance of the offer which
was clearly specified in Exhibits F and H. Even more telling is petitioner’s unexplained failure to reduce in writing the
alleged acceptance of its offer to buy the property at P1, 000/sq. m.

Laforteza vs Machuca

Facts:
Roberto Laforteza and Gonzalo Laforteza, Jr., in their capacities as attorneys-in-fact of Dennis Laforteza, entered into
a MOA (Contract to Sell) with Alonzo Machuca over a house and lot registered in the name of the late Francisco
Laforteza. Machuca was able to pay the earnest money but however failed to pay the balance on time. Upon a request
of an extension of time, Machuca informed petitioner heirs that the balance was already covered, but petitioners refused
to accept the balance and told Machuca that the subject property is no longer for sale. The petitioners contend that the
Memorandum of Agreement is merely a lease agreement with “option to purchase”; hence, it only gave the respondent
a right to purchase the subject property within a limited period without imposing upon them any obligation to purchase
it. And since the respondent’s tender of payment was made after the lapse of the option agreement, his tender did not
give rise to the perfection of a contract of sale.

Issue:
(1) WON the tender of payment after the lapse of the option agreement gave rise to the perfection of a contract of sale.
(2) WON the six-moth period during which the respondent would be in possession of the property as lessee was a
period within which to exercise an option.

Held:
(1) It did. A perusal of the Memorandum Agreement shows that the transaction between the petitioners and the
respondent was one of sale and lease.
A contract of sale is a consensual contract and is perfected at the moment there is a meeting of the minds upon the
thing which is the object of the contract and upon the price. From that moment the parties may reciprocally demand
performance subject to the provisions of the law governing the form of contracts. In the case at bench, all the elements
of a contract of sale were thus present.
(1) The six-month period during which the respondent would be in possession of the property as lessee, was clearly
not a period within which to exercise an option. An option is a contract granting a privilege to buy or sell within an
agreed time and at a determined price. An option contract is a separate and distinct contract from that which the parties
may enter into upon the consummation of the option. An option must be supported by consideration. An option contract
is governed by the second paragraph of Article 1479 of the Civil Code, which reads:
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.
In the present case, the six-month period merely delayed the demand ability of the contract of sale and did not
determine its perfection for after the expiration of the six-month period, there was an absolute obligation on the part of
the petitioners and the respondent to comply with the terms of the sale.

SERRANO VS CAGUIAT 517 SCRA 57

FACTS:
Spouses Serrano agreed to sell in favor of respondent Caguiat a parcel of land at ₱1,500.00 per square meter. Caguiat
partially paid petitioners ₱100, 000.00 as evidenced by a receipt issued by petitioners indicating therein respondent’s
promise to pay the remaining balance. Respondent, after making known his readiness to pay the balance, requested
from petitioners the preparation of the necessary Deed of Sale. When petitioners cancelled the transaction and
intended to return to Caguiat his partial payment, respondent filed a complaint for specific performance and damages.
The trial court relying on Article 1482of the Civil Code ruled that the payment of ₱ 100, 000.00 being an earnest money
signified the perfection of the contract of sale. The Court of Appeals denied petitioners’ motion for reconsideration in
affirmation of the lower court’s decision.

ISSUE:
Whether or not the partial payment constitutes an earnest money as manifested in Article 1482 of the Civil Code

HELD:
No. Article 1482 applies only to earnest money given in a contract of sale. It was apparent that the earnest money in
the case at bar was given in lieu of a contract to sell. Unlike in a contract of sale, the ownership of the parcel of land
was retained by the Spouses Serrano and shall only be passed to Caguiat upon full payment of the purchase price as
evidenced by the receipt. Relatively, no Deed of Sale has been executed as proof of the intention of the parties to
immediately transfer the ownership of the parcel of land. Spouses Serrano also retained ownership of the certificate of
title of the lot, thereby indicating no actual or constructive delivery of the ownership of the property. Finally, should the
transaction pushed through, Caguiat’s payment of the remaining balance would have been a suspensive condition
since the transfer of ownership was subordinated to the happening of a future and uncertain event.

C. Consummation
Ang Yu Asuncion vs CA
Facts:
Ang Yu Asuncion and Keh Tiong, et al. were lessees of residential and commercial spaces owned by defendants
described as Nos. 630-638 Ongpin Street, Binondo, Manila; that they have occupied said spaces since 1935 and have
been religiously paying the rental and complying with all the conditions of the lease contract; that on several occasions
before October 9, 1986, defendants informed plaintiffs 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 plaintiffs
made a counter offer of P5-million; that plaintiffs thereafter asked the defendants to put their offer in writing to which
request defendants acceded; that in reply to defendant's letter, plaintiffs 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; that since defendants failed to specify the terms and conditions
of the offer to sell and because of information received that defendants were about to sell the property, plaintiffs were
compelled to file the complaint to compel defendants to sell the property to them. RTC: Defendants' offer to sell was
never accepted by the plaintiffs for the reason that the parties did not agree upon the terms and conditions of the
proposed sale, hence, there was no contract of sale at all. Nonetheless, the lower court ruled that should the defendants
subsequently offer their property for sale at a price of P11-million or below, plaintiffs will have the right of first refusal.
SC (1st appeal): There was no meeting of the minds between the parties concerning the sale of the property. Absent
such requirement, the claim for specific performance will not lie. Appellants' demand for actual, moral and exemplary
damages will likewise fail as there exists no justifiable ground for its award. Summary judgment for defendants was
properly granted. Courts may render summary judgment when there is no genuine issue as to any material fact and
the moving party is entitled to a judgment as a matter of law (Garcia vs. Court of Appeals, 176 SCRA 815). All requisites
obtaining, the decision of the court a quo is legally justifiable. On November 15, 1990, while CA-G.R. CV No. 21123
was pending consideration by this Court, the Cu Unjieng spouses executed a Deed of Sale (Annex D, Petition)
transferring the property in question to herein petitioner Buen Realty and Development Corporation for 15 million pesos.
As the new owners, Buen Realty wrote a letter to Ang Yu Asuncion asking to vacate the premises. Ang Yu in return
refused and instead filed for a Writ of Execution of the order recognizing its Right of First Refusal, which the RTC
granted. The CA, on appeal to it by private respondent, set aside and declared without force and effect the above
questioned orders of the RTC hence this petition for review on certiorari
Issues:
WON the Writ of execution must be issued.
WON the Right of First Refusal gives rise to any other kind of right.
Held:
We affirm the decision of the appellate court. Petition denied. The questioned writ of execution is in variance with the
decision of the trial court as modified by this Court. As already stated, there was nothing in said decision 13 that
decreed the execution of a deed of sale between the Cu Unjiengs and respondent lessees, or the fixing of the price of
the sale, or the cancellation of title in the name of petitioner. Even on the premise that such right of first refusal has
been decreed under a final judgment, like here, its breach cannot justify correspondingly an issuance of a writ of
execution under a judgment that merely recognizes its existence, nor would it sanction an action for specific
performance without thereby negating the indispensable element of consensually in the perfection of contracts. 11 It
is not to say, however, that the right of first refusal would be inconsequential for, such as already intimated above, an
unjustified disregard thereof, given, for instance, the circumstances expressed in Article 19 12 of the Civil Code, can
warrant a recovery for damages. 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. 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.

FORM OF SALES
1. Really No form

DALLION V. CA (February 28, 2009)

FACTS:
On 28 May 1973, Ruperto Sabesaje Jr. sued to recover ownership of a parcel of land (located at Panyawan, Sogod,
Southern Leyte; TCT 11148, with an area of 8947 sq.ms., assessed at P180), based on a private document of absolute
sale, dated 1 July 1965, allegedly executed by Segundo Dalion, who, however Sales, 2003 ( 77 ) Haystacks (Berne
Guerrero) denied the fact of sale, contending that the document sued upon is fictitious, his signature thereon, a forgery,
and that subject land is conjugal property, which he and his wife (Epifania Sabesaje-Dalion) acquired in 1960 from
Saturnina Sabesaje as evidenced by the “Escritura de Venta Absoluta.” The spouses denied claims of Sabesaje that
after executing a deed of sale over the parcel of land, they had pleaded with Sabesaje, their relative, to be allowed to
administer the land because Dalion did not have any means of livelihood. They admitted, however, administering since
1958, 5 parcels of land in Sogod, Southern Leyte, which belonged to Leonardo Sabesaje, grandfather of Sabesaje,
who died in 1956. They never received their agreed 10% and 15% — commission on the sales of copra and abaca,
respectively. Sabesaje’s suit, they countered, was intended merely to harass, preempt and forestall Dalion’s threat to
sue for these unpaid commissions. The trial court rendered its decision on 17 January 1984, ordering Dalion to deliver
to Sabesaje the parcel of land subject of the case and to execute the corresponding formal deed of conveyance in a
public document in favor of Sabesaje (or in case of default, the deed shall be executed in their behalf by the Provincial
Sheriff or his deputy), ordering Dalion to pay Sabesaje the amount of P2, 000 as attorney fees and P500 as litigation
fees, and to pay the costs. From the adverse decision of the trial court, Dalion appealed, assigning errors some of
which, however, were disregarded by the appellate court, not having been raised in the trial court. On 26 May 1987,
the Court of Appeals affirmed in toto the ruling of the trial court, upholding the validity of the sale of a parcel of land by
Segundo Dalion in favor of Ruperto Sabesaje, Jr. Hence, the petition. The Supreme Court denied the petition, and
affirmed the decision of the Court of Appeals upholding the ruling of the trial court; without costs.

Petitioner Segundo Dalion allegedly sold his property in Southern Leyte to respondent Ruperto Sabesaje through a
private deed of sale. Dalion denies the sale and claims that his signature in the document was forged.

ISSUE: WON there has been a contract of sale between the parties.

HELD: The authenticity of the signature of Dallion was proven by the testimony of several witness including the person
who made the deed of sale. Dalion never presented any evidence or witness to prove his claim of forgery. Dallion claim
that the sale is invalid because it was not made in a public document is of no merit. This argument is misplaced. The
provision of Art. 1358 on the necessity of a public document is only for convenience, not for validity or enforceability. It
is not a requirement for the validity of a contract of sale of a parcel of land that this be embodied in a public
instrument. Sale is perfected upon meeting of the minds of both parties.

SECUYA v VDA DE SELMA

FACTS:
Caballero owned certain friar lands. She entered into an Agreement of Partition where she parted with 1/3 of the said
property in favor of Sabellona. Sabellona took possession thereof and sold a portion to Dalmacio Secuya through a
private instrument that is already lost. Secuya, along with his many relatives took possession of the said land. Later
on, Selma bought a portion of the said land, including that occupied by Secuya; she bought it from Caesaria Caballero.
She presented a Deed of Absolute Sale and a TCT. Secuya filed a case for quieting of title. CA upheld Selma a title
considering that she had a TCT and a Deed of Sale.

ISSUE: Who has a better right, Secuya or Selma?

HELD: The Secuyas have nothing to support their supposed ownership over the parcel of land. The best evidence
they could have had was the private instrument indicating the sale to their predecessor-in-interest. But the instrument
is lost. Even so, it is only binding as between the parties and cannot prejudice 3rd persons since it is not embodied in
the public document. Selma, on the other hand, has all the supporting documents necessary; she also acted in good
faith and thought that the Secuyas were merely tenants. They did not even pay realty taxes and did not have their
claim annotated to the certificate of sale Sandoval v. Court of Appeals, we held: "It is settled doctrine that one who
deals with property registered under the Torrens system need not go beyond the same, but only has to rely on the title.
He is charged with notice only of such burdens and claims as are annotated on the title. "The aforesaid principle admits
of an unchallenged exception: that a person dealing with registered land has a right to rely on the Torrens certificate
of title and to dispense without the need of inquiring further except when the party has actual knowledge of facts and
circumstances that would impel a reasonably cautious man to make such inquiry, or when the purchaser has
knowledge of a defect or the lack of title in his vendor or of sufficient facts to induce a reasonably prudent man to
inquire into the status of title of the property in litigation. The presence of anything which excites or arouses suspicion
should then prompt the vendee to look beyond the certificate and investigate the title of the vendor appearing on the
face of the certificate. One who falls within the exception can neither be denominated an innocent purchaser for value
nor a purchaser in good faith; and hence does not merit the protection of the law." Granting arguendo that private
respondent knew that petitioners, through Superales and his family, were actually occupying the disputed lot, we must
stress that the vendor, Cesaria Caballero, assured her that petitioners were just tenants on the said lot. Private
respondent cannot be faulted for believing this representation, considering that petitioners' claim was not noted in the
certificate of the title covering Lot No. 5679. Moreover, the lot, including the disputed portion, had been the subject of
several sales transactions. The title thereto had been transferred several times, without any protestation or complaint
from the petitioners. In any case, private respondent's title is amply supported by clear evidence, while petitioners claim
is barren of proof.

SECOND DIVISION [G.R. No. L-55048. May 27, 1981.] SUGA SOTTO YUVIENCO, BRITANIA SOTTO, and
MARCELINO SOTTO, Petitioners, v. HON. AUXENCIO C. DACUYCUY, Judge of the CFI of Leyte, DELY
RODRIGUEZ, FELIPE ANG CRUZ, CONSTANCIA NOGAR, MANUEL GO, INOCENTES DIME, WILLY JULIO,
JAIME YU, OSCAR DY, DY CHIU SENG, BENITO YOUNG, FERNANDO YU, SEBASTIAN YU, CARLOS UY, HOC
CHUAN and MANUEL DY, Respondents. Fulvio C. Pelaez, for Petitioners. Julio Villamor and Francisco Lava,
Jr. and Ramon V. Salazar for Respondents.

SYNOPSIS Petitioners, ow ners of a parcel of land and the building existing thereon, expressed through their
representative w ho w rote a letter to private respondents, the tenants therein, their w illingness to sell their property to
them. Private respondents replied by telegram w ith the follow ing w ords, "w e agree to buy proceed Tacloban to
negotiate details." When petitioners’representative arrived w ith the prepared contract to purchase and to sell, private
respondents found variance between the terms of payment and w hat they had in mind, hence the bankdraft being
offered for payment w as returned and the document remained unsigned by the latter. Private respondents filed an
action for specific performance in the Court of First Instance of Leyte and petitioners filed a motion to dismiss the
complaint on the grounds that the complaint states no cause of action and/or that the claim alleged therein is
unenforceable under the Statute of Frauds. Respondent judge ruled negatively; hence this petition. On certiorari and
prohibition, the Supreme Court ruled that the complaint does not state a cause of action w here the telegram-reply w
hich is not an absolute acceptance under Art. 1319 of the Civil Code does not show the existence of a perfected
contract of sale w hile the claim of private respondents for specific performance of the terms of payment of an evidently
oral contract involving the "sale of real property" is unenforceable under Art. 1403, No. 2 (e) of the Civil Code, otherw
ise know n as the Statute of Frauds. Impugned orders, set aside.

SYLLABUS 1. CIVIL LAW; CONTRACTS; ESSENTIAL REQUISITES OF CONTRACTS; ABSOLUTE

ACCEPTANCE OF OFFER; NOT PRESENT IN THE CASE AT BAR. — Respondents’ telegram w hich simply says
"We agree to buy property" does not necessarily connote acceptance of the price but instead suggests that the details
w ere to be subject of negotiation. That respondents w ere all the time agreeable to buy the property may be conceded,
but w hat impresses the Supreme Court is that instead of "absolutely" accepting the "certain" offer — if there w asone
— of the petitioners, they still insisted on further negotiation of details.

FACTS:
Petitioners own a property in Talban City which they intend to sell for 6.5M. They gave the respondents the right to
purchase the property nut only until July 31, 1978. Respondents replied that they agree to buy the property and they
will negotiate for details. Petitioner sent another telegram informing respondents that their proposal is accepted and a
contract will be prepared.

Lawyer of defendant, Mr.Gamboa, arrived bringing a contact with an altered mode of payment which says that the
balance payment should be paid withing 30 days instead of the former 90 days. (Original terms: 2M payment upon
execution. 4.5M after 90 days)

ISSUE:
WON there was already a perfected contract of sale between the parties.

HELD:
There was no perfected contract of sale yet because both parties are still under negotiation and hence, no meeting of
the minds. Mr.Gamboa even went to the respondents to negotiate for the sale. Even though there was an agreement
on the terms of payment, there was no absolute acceptance because respondents still insisted on further details.

With regard to the alleged violation of terms of payment, there was no written document to prove that the
respondents agreed to pay not in cash but in instalment. In sale of real property, payment of instalment must be in
requisite of a note under the statute of frauds.
 SPOUSES GODOFREDO ALFREDO and CARMEN LIMON ALFREDO v SPOUSES ARMANDO BORRAS and
ADELIA LOBATON BORRAS

FACTS:
The Alfredo spouses mortgaged their land to DBP. To pay their debt, they sold the land to spouses Borras for P15,000.
The latter also assumed to pay the loan. Borras subsequently paid the balance of the purchase price of the land for
which Alfredo issued a receipt dated 11 March 1970 as well as the corresponding owner’ s duplicate copy of the
land’s OCT. Borras thereafter took possession of the said land. Later, they found out that Alfredo sold the land again
to other buyers by securing duplicate copies of the OCTs upon petition with the court. Thus, they filed for specific
performance. Alfredo spouses claimed that the sale, not being in writing, is unenforceable under the Statute of Frauds.

ISSUE: W/N the contract of sale is unenforceable under the Statute of Frauds.

HELD: NO. The Statute of Frauds provides that a contract for the sale of real property shall be unenforceable unless
the contract or some note or memorandum of the sale is in writing and subscribed by the party charged or his agent.
The existence of the receipt dated 11 March 1970, which is a memorandum of the sale, removes the transaction from
the provisions of the Statute of Frauds. The Statute of Frauds applies only to executory contracts and not to contracts
either partially or totally performed. Thus, where one party has performed one’ s obligation, oral evidence will be
admitted to prove the agreement. In the instant case, the parties have consummated the sale of the Subject Land, with
both sellers and buyers performing their respective obligations under the contract of sale. In addition, a contract that
violates the Statute of Frauds is ratified by the acceptance of benefits under the contract. Alfredo spouses benefited
from the contract because they paid their DBP loan and secured the cancellation of their mortgage using the money
given by Borras. Alfredo also accepted payment of the balance of the purchase price. Alfredo spouses cannot invoke
the Statute of Frauds to deny the existence of the verbal contract of sale because they have performed their obligations,
and have accepted benefits, under the verbal contract. Borras spouses have also performed their obligations under
the verbal contract. Clearly, both the sellers and the buyers have consummated the verbal contract of sale of the
Subject Land. The Statute of Frauds was enacted to prevent fraud. This law cannot be used to advance the very evil
the law seeks to prevent.