YAO KA SIN TRADING v CA The root of this controversy is the undated letter-offer of Constancio B.

Maglana, President and Chairman of the Board of private respondent Prime White Cement Corporation, hereinafter referred to as PWCC, to Yao Ka Sin Trading, hereinafter referred to as YKS, which describes itself as "a business concern of single proprietorship," 3 and is represented by its manager, Mr. Henry Yao; the letter reads as follows: PRIME WHITE CEMENT CORPORATION 602 Cardinal Life Building Herran Street, Manila Yao Ka Sin Tacloban City Gentlemen: We have the pleasure to submit hereby our firm offer to you under the following quotations, terms, and conditions, to wit: 1). Commodity — Prime White Cement 2). Price — At your option: a) P24.30 per 94 lbs. bag net, FOB Cebu City; and b) P23.30 per 94 lbs. bag net, FOB Asturias Cebu. 3). Quality — As fully specified in certificate No. 224-73 by Bureau of Public Works, Republic of the Philippines. 4). Quantity — Forty-five Thousand (45,000) bags at 94 lbs. net per bag withdrawable in guaranteed monthly quantity of Fifteen Thousand (15,000) bags minimum effective from June, 1973 to August 1973. 5). Delivery Schedule — Shipment be made within four (4) days upon receipt of your shipping instruction. 6). Bag/Container — a) All be made of Standard Kraft (water resistant paper, 4 ply, with bursting strength of 220 pounds, and b) Breakage allowance — additional four percent (4%) over the quantity of each shipment. 7). Terms of Payment — Down payment of PESOS: TWO HUNDRED FORTY THREE THOUSAND (P243,000.00) payable on the signing of this contract and the balance to be paid upon presentation of corresponding shipping documents. It is understood that in the event of a delay in our shipment, you hold the option to discount any price differential resulting from a lower market price vis-avis the contract price. In addition, grant (sic) you the option to extend this contract until the complete delivery of Forty Five Thousand (45,000) bags of 94 lbs. each is made by us. You are also hereby granted the option to renew this contract under the same price, terms and conditions.

Please countersign on the space provided for below as your acknowledgement and confirmation of the above transaction. Thank You. Truly yours, PRIME WHITE CEMENT CORPORATION BY: (SGD) CONSTANCIO B. MAGLANA President & Chairman CONFORME: YAO KA SIN TRADING BY: (SGD) HENRY YAO WITNESSES: (SGD) T. CATINDIG (SGD) ERNESTO LIM RECEIVED from Mr. Henry Yao of Yao Ka Sin Trading, in pursuance of the above offer, the sum of Pesos: TWO HUNDRED FORTY THREE THOUSAND ONLY (P243,000.00) in the form of Producers' Bank of the Philippines Check No. C-153576 dated June 7, 1973. This letter-offer, hereinafter referred to as Exhibit "A", was prepared, typed and signed on 7 June 1973 in the office of Mr. Teodoro Catindig, Senior Vice-President of the Consolidated Bank and Trust Corporation (Solid Bank). 5 The principal issue raised in this case is whether or not the aforesaid letter-offer, as accepted by YKS, is a contract that binds the PWCC. The trial court rule in favor of the petitioner, but the respondent Court held otherwise. The records disclose the following material operative facts: In its meeting in Cebu City on 30 June 1973, or twentythree (23) days after the signing of Exhibit "A", the Board of Directors of PWCC disapproved the same; the rejection is evidenced by the following Minutes (Exhibit "10"): the 10,000 bags of white cement sold to Yao Ka Sin Trading is sold not because of the alledged letter-contract adhered to by them, but must be understood as a new and separate contract, and has in no way to do with the letter-offer which they (sic) as consummated is by this resolution totally disapproved and is unacceptable to the corporation. On 5 July 1973, PWCC wrote a letter (Exhibit "1") to YKS informing it of the disapproval of Exhibit "A". Pursuant, however, to its decision with respect to the 10,000 bags of cement, it is issued the corresponding Delivery Order (Exhibit "4") and Official Receipt No. 0394 (Exhibit "5") for the payment of the same in the amount of P243,000.00 This is the same amount received and acknowledged by Maglana in Exhibit "A".

but this was returned to sender as unclaimed. it was established that the original thereof was shown to Mr.30 per 94 lbs. "has the power to execute and sign. all contracts or agreements which the corporation enters into. at P24. therefore. Enclosed in the reply was a copy of Exhibit "2". and that all contracts of the corporation should meet the approval of the NIDC and/or the PNB Board because of an exposure and financial involvement of around P10 million therein. prior to and after he had signed and executed said contracts. On 3 November 1973. (f) the rejection by the Board of Exhibit "A" was made known to YKS through various letters sent to it. . (d) the latter disapproved it. Maglana. PWCC reiterated the unenforceability of Exhibit "A". While YKS denied having received a copy of Exhibit "1". no copy of the said 4 August 1973 letter of YKS was presented in evidence. Henry Yao sent a letter (Exhibit "G") to PWCC calling the latter's attention to the statement of delivery dated 24 August 1973.000 bags for it did not send its boat or truck to PWCC's plant. In its Counterclaim.775 bags of white cement. its President and Chairman. for and in behalf of the corporation. exemplary damages in the sum of P500. PWCC reminded YKS of its (PWCC's) 5 July 1973 letter (Exhibit "1") and told the latter that PWCC "only committed to you and which you correspondingly paid 10. While the records reveal that YKS received this reply also on 21 August 1973 (Exhibit "3" "A").00. (c) such signing was subject to the condition that Exhibit "A" be approved by the Board of Directors of PWCC. particularly the price change from P23.000 bags of white cement. PWCC wrote another letter (Exhibit "3") 7 to YKS in reply to the latter's letter of 15 August 1973. On 10 September 1973. subject only to the declared objects and purpose of the corporation and the existing provisions of law. 10 On 12 September 1973. 13 As of 7 December 1973. 22 On that occasion. (7) To enter into (sic) agreement or contract of any kind with any person in the name and for and in behalf of the corporation through its President. YKS filed with the then Court of First Instance of Leyte a complaint for Specific Performance with Damages against PWCC." (b) Mr. 1973.30 per bag FOB Asturias. 2 and 3.00.30 to P24.000 bags of white cement of which 4. Maglana was not authorized to make the offer and sign the contract in behalf of the corporation.000." Furthermore. as corporate commitments are made through it. 8 it still denied having received it.YKS accepted without protest both the Delivery and Official Receipts. 24 Among the powers of the President is "to operate and conduct the business of the corporation according to his own judgment and . Likewise. but under a separate contract prepared by the Board.000 bags of white cement on August 6-7. YKS wrote PWCC a letter (Exhibit "H") requesting. Per its By-Laws (Exhibit "8"). it was likewise stated for the record "that the corporation is a semi-subsidiary of the government because of the NIDC participation in the same. 18 (g) YKS knew." In said reply. bag net FOB Asturias. copies of which were attached to the Answer as Annexes 1. Cebu. 14 On 27 February 1974. compliance by the latter with its obligation under Exhibit "A". YKS sent to PWCC a letter (Exhibit "D") as a follow-up to the 2 November 1973 telegram. no cause of action. no copy of the so-called 15 August 1973 letter was presented in evidence.000 bags were sold to it without any terms or conditions. In its Answer with Counterclaim 17 filed on 1 July 1974. On 24 July 1974. the Chairman of the Board. 23 During the trial. PWCC asks for moral damages in the amount of not less than P10. YKS sent a telegram (Exhibit "C") 12 to PWCC insisting on the full compliance with the terms of Exhibit "A" and informing the latter that it is exercising the option therein stipulated.030 bags of white cement. Cebu. On 9 February 1974. who is also the President of the corporation. YKS filed its Answer to the Counterclaim. 11 On 2 November 1973. PWCC presented evidence to prove that Exhibit "A" is not binding upon it because Mr. On 21 August 1973. PWCC had delivered only 9. . On 4 August 1973. wrote a letter 9 to PWCC as a follow-up to the letter of 15 August 1973.00 and attorney's fees in the sum of P10. YKS insisted on the delivery of 45. the original was left at the latter's office and this fact was duly noted in Exhibit "1" (Exhibit "l-A"). (e) it agreed to sell 10.000." subject to the qualification that "all the president's actuations. hence Exhibit "A" was never consummated and is not enforceable against PWCC. the parties admitted that according to the By-Laws of PWCC. 15 On 4 March 1974. Cebu. PWCC sent an answer (Exhibit "7") to the aforementioned letter of 9 February 1974. thru M/V Taurus. for the last time. (h) YKS is solely to blame for the failure to take complete delivery of 10. per Delivery Order 19 and Official Receipt 20 issued by PWCC. the trial court conducted a pre-trial. and (i) YKS has.000.150 bags were already delivered to you as of August 11. The complaint 16 was based on Exhibit "A" and was docketed as Civil Case No. 1973 at Asturias. 5064. YKS. through Henry Yao. PWCC wrote a letter (Exhibit "2") to YKS in answer to the latter's 4 August 1973 letter stating that it is "withdrawing or taking delivery of not less than 10. PWCC denied under oath the material averments in the complaint and alleged that: (a) YKS "has no legal personality to sue having no legal personality even by fiction to represent itself. 21 Issues having been joined. 6 Unfortunately. not under Exhibit "A". Henry Yao. shall be given to the board of directors of defendant Corporation. that only 10. since no one would sign a receipt for it. only the Board of Directors has the power . was lured into signing Exhibit "A".

does not require that Exhibit "A" be approved by the Board of Directors.000.00 as exemplary damages. thus: . Finally. it further ruled that the By-Laws." It then concluded: It is obvious therefore. In disregarding PWCC's theory.00. however. THE TRIAL COURT ERRED IN NOT AWARDING TO THE PLAINTIFF ACTUAL DAMAGES. PLAIN LANGUAGE AND DULY INFORMED AND TRANSMITTED TO PLAINTIFF." 25 Per standard practice of the corporation. net per bag at the price agreed. — to mean that the latter may enter into such contract or agreement at any time and that the same is not subject to the ratification of the board of directors but "subject only to the declared objects and purpose of the corporation and existing laws. and the costs of these proceedings.discretion. ruled that the option to sell is not valid because it is not supported by any consideration distinct from the price.000. 29 The trial court found no evidence that the board had set a prior limitation upon the exercise of such judgment and discretion. While the president.00 as attorney's fees. Finally. THE TRIAL COURT ERRED IN DISMISSING DEFENDANT'S COUNTER-CLAIMS AS THE SAME ARE DULY SUPPORTED BY CLEAR AND INDUBITABLE EVIDENCE. Both parties appealed from the said decision to the respondent Court of Appeals before which petitioner presented the following Assignment of Errors: THE TRIAL COURT ERRED IN HOLDING THAT THE OPTION TO RENEW THE CONTRACT OF SALE IS NOT ENFORCEABLE BECAUSE THE OPTION WAS MADE EVEN BEFORE THE COMPLIANCE OF (sic) THE ORIGINAL CONTRACT BY DEFENDANT AND THAT DEFENDANT'S PROMISE TO SELL IS NOT SUPPORTED BY ANY CONSIDERATION DISTINCT FROM THE PRICE. as moral damages. that it is not the whole membership of the board of directors who actually enters into any contract with any person in the name and for and in behalf of the corporation. the dispositive portion of which reads: WHEREFORE. in the light of the Chairman's power to "execute and sign for and in behalf of the corporation all contracts or agreements which the corporation may enter into" (Exhibit "I-1"). THE TRIAL COURT ERRED IN HOLDING THAT PLAINTIFF CAN LEGALLY UTILIZE THE COURTS AS THE FORUM TO GIVE LIFE AND VALIDITY TO A TOTALLY UNENFORCEABLE OR NON-EXISTING CONTRACT. Exhibit "A" was validly entered into by Maglana and thus binds the corporation. IN FACT EXHIBIT "A" WAS TOTALLY REJECTED AND DISAPPROVED IN TOTO BY THE DEFENDANT'S BOARD OF DIRECTORS IN CLEAR. may be tasked with the preparation of a contract. 26 On 20 November 1975. in view of the foregoing." 31 while the private respondent cited the following errors: THE TRIAL COURT ERRED IN HOLDING THAT EXHIBIT "A" IS A VALID CONTRACT OR PLAINTIFF CAN CLAIM THAT THE PROPOSED LETTER-CONTRACT. it must first pass through the legal counsel and the comptroller of the corporation. Because of its interest in the PWCC. SUFFICIENT EXEMPLARY DAMAGES AND ATTORNEY'S FEES AS ALLEGED IN THE COMPLAINT AND PROVEN DURING THE TRIAL. directives or resolutions. It is likewise crystal clear that this automatic representation of the board by the president is limited only by the "declared objects and purpose of the corporation and existing provisions of law. Maglana merely followed the By-Laws "presumably both as president and chairman of the board thereof. it was exercised before compliance with the original contract by PWCC. directives or resolutions of the board of directors and according to his own judgment and discretion whenever the same is not expressly limited by such orders. whenever the same is not expressly limited by such orders." 30 Hence. among the duties of its legal counsel is to review proposed contracts before they are submitted to the Board. EXHIBIT "A" IS LEGALLY ENFORCEABLE. The trial court. directives or resolutions of the board of directors.000 bags of prime white cement at 94 lbs." to mean that the president can operate and conduct the business of the corporation according to his own judgment and discretion as long as it is not expressly limited by the orders.000 BAGS OF CEMENT ONLY. it concluded that Mr." 28 It likewise interpreted the provision on the power of the president to "operate and conduct the business of the corporation according to the orders. directives and resolutions. the trial court interpreted the provision of the By-Laws — granting its Board of Directors the power to enter into an agreement or contract of any kind with any person through the President. after trial on the merits. and the repudiation of the original contract by PWCC was deemed a withdrawal of the option before acceptance by the petitioner. 32 In its decision 33 promulgated on 21 December 1979. UNDER THE PRICE. the court handed down its decision in favor of herein petitioner. with a breakage allowance of empty bags at 4% over the quantity agreed. (2) Ordering defendant to pay P50.000. P3. but only its president. goes over contracts involving funds of and white cement produced by the PWCC. THE TRIAL COURT ERRED IN ALLOWING YAO KA SIN TO IMPUGN AND CONTRADICT HIS VERY OWN ACTUATIONS AND REPUDIATE HIS ACCEPTANCE AND RECEIPTS OF BENEFITS FROM THE COUNTER-OFFER OF DEFENDANT FOR 10. NOT HAVING BEEN PREVIOUSLY AUTHORIZED TO BE ENTERED INTO OR LATER ON RATIFIED BY THE DEFENDANTS BOARD OF DIRECTORS. judgment is hereby rendered (1) Ordering defendant: to complete the delivery of 45. contracts should first pass through the marketing and intelligence unit before they are finalized. TERMS AND CONDITIONS TOTALLY FOREIGN TO AND WHOLLY DIFFERENT FROM THOSE WHICH APPEAR IN EXHIBIT "A". the respondent Court reversed the decision of the trial court. through its comptroller. AS THE SAME IS A MERE UNACCEPTED PROPOSAL. the NIDC. P5.

"A") entered into by the President and Chairman of the Board of Directors Constancio B.30 per bag (Annex "5". Plaintiff is ordered to pay defendant corporation P25. Letter dated August 21. Having no cause of action against defendant corporation. Exhibit "A". 1403 (1). the agreement is unenforceable (Art.00 check was considered by both parties as payment of the 10. First. 34 Its motion for reconsideration having been denied by the respondent Court in its resolution 35 dated 15 April 1980. 3224).. Third. Board of Liquidators vs. That the contract (Exh. 1974. Archbishop of Manila. 1973. plaintiff is not entitled to any relief. with cash financial exposure of some P10. While it may be true that Maglana is President of defendant corporation nowhere in the Articles of Incorporation nor in the By-Laws of said corporation was he empowered to enter into any contract all by himself and bind the corporation without first securing the authority and consent of the Board of Directors. we will not hear from you but you will withdraw cement at P24. Such conclusion is based on its findings. 3. plaintiff is deemed to have admitted. therefore. 3. 1973 that defendant "only committed to you and which you accordingly paid 10. We see no justification. per instruction of the Board. Second. the defendant corporation is supervised and principally financed by the National Investment and Development Corporation (NIDC).000. not only the due execution and genuiness (sic) of said documents. Plaintiff's complaint is dismissed with costs. Rules of Court) but also the allegations therein (Rule 9. insofar as defendant corporation is concerned.000.00 dated June 7.000 bags of white cement at P24. then we will deposit your check of P243. Letter to stores dated August 21. 28.WHEREFORE. 1973 (Annex "3" to defendant's Answer). Exh "I" or "8"). vs. Gana vs. on the 10. 1973 issued by the Producers Bank of the Philippines. That the contract (Exh. the judgment appealed from is REVERSED and set aside. actuation ratified by the Board.000 bags of white cement delivered to plaintiff was not by reason of the letter contract. We find consistency herein because according to the Corporation Law. was rejected by defendant corporation's Board of Directors and plaintiff was duly notified thereof and that the P243. . The resolution contained in defendant's letter to plaintiff dated July 5. As proof of which plaintiff did not complain nor protest until February 9. petitioner filed the instant petition based on the following grounds: 1. Receipt from plaintiff (sic) P243. 43 O-G. 343. 4. 1973. A corporate officers power as an agent must be sought from the law. Law. Rules of Court). 13 CA Rep. That the option to renew the contract as contained in Exhibit "A" is enforceable. 36 We gave due course 37 to the petition after private respondent filed its Comment 38 and required the parties . 1973 to plaintiff reiterating defendant's letter of August 4. All of the foregoing documents tend to prove that the letter-offer. Maglana in behalf of the respondent corporation binds the said corporation. when he threatened legal action.000. 1. 20 SCRA 987). Civil Code). This fact is very material to the issue of whether defendant corporations president can bind the corporation with his own act.00 attorney's fees.30 per bag from our plant. which was totally disapproved by defendant corporation's board of directors.000. clearly stating that "If within ten (10) days from date hereof. Raquiza et al. Maglana's signing the letter-offer prepared for him in the Solidbank was made clearly upon the condition that it was subject to the approval of the board of directors of defendant corporation. Fourth. the articles of incorporation and the ByLaws or from a resolution of the Board (Vicente vs. It clearly results from the foregoing that the judgment appealed from is untenable.000. Lilles et al. and P10. Whatever authority Maglana may have must be derived from the Board of Directors of defendant corporation. What Henry Yao and Maglana agreed upon as embodied in Exhibit "A"." (Annex "I" to defendant's Answer). Rule 9 of the said Rules with regards (sic) to denying under oath refers only to allegations of usury. for the court a quo's awards in its favor. 5.000 bags of white cement of which 4. 8. and the By-Laws of defendant corporation. was an unauthorized contract (Arts. And because Maglana was not authorized by the Board of Directors of defendant corporation nor was his. 2. . 1. Sec. 1317 and 1403 (1). PNB is a government financial institution whose Board is chairmaned (sic) by the Minister of National Defense. Letter of defendant to plaintiff dated August 4. That Sec.00. to defendant's Answer).00 exemplary damages. to wit: Before resolving the issue. . Geraldez. the express authority of the Board of Directors (Sec. Kalaw. all corporate commitments and business are conducted by.000.000. (Rule 8 Sec. it is helpful to bring out some preliminary facts. 52 SCRA 227. Corp. and contracts entered into through. 8. 2. a subsidiary investment of the Philippine National Bank (PNB). Civil Code. "A") was never novated nor superceded (sic) by a subsequent contract. 1973" (Annex "2" of defendant's Answer). for failure to deny under oath the following actionable documents in support of defendant's counterclaim: 1. Rule 8 of the Rules of Court only applies when the adverse party appear (sic) to be a party to the instrument but not to one who is not a party to the instrument and Sec. 4.000 bags of cement under a separate transaction.150 bags were already delivered to you as of August 1.00 in payment of 10. Exhibit "A".

In the caption of both the complaint and the instant petition. enter into (sic) agreement or contract of any kind with any person in the name and for and in behalf of the corporation through its President. 40 and is described in the body thereof as "a business concern of single proprietorship owned and operated by Yao Ka Sin. Petitioner. register the business name." and that "[a] sole proprietorship does not. subject only to the declared objects and purpose of the corporation and the existing provisions of law. owned and operated by YAO KA SIN. Rule 3 of the Rules of Court. (Exhibit "8-A"). Government Service Insurance System 49 and Board of Liquidators vs. In Juasing Hardware vs. "all acts within the powers of said corporation may be performed by agents of its selection. liabilities and incapacities as are agents of individuals and private persons. which the parties subsequently complied with. except so far as limitations or restrictions may be imposed by special charter. the same witnesses. . or statutory provisions. no Yao Ka Sintestified. The name of the plaintiff would constitute the only difference between the old trial and the new. 46 The complaint then should have been amended to implead Yao Ka Sin as plaintiff in substitution of Yao Ka Sin Trading. for the sake of argument. and the same evidence. Maglana was not so authorized under the By-Laws. " . for and in behalf of the corporation. The respondent Court correctly ruled that Exhibit "A" is not binding upon the private respondent. Instead. Rule 10 of the Rules of Court which provides that "[a] defect in the designation of the parties may be summarily corrected at any stage of the action provided no prejudice is caused thereby to the adverse party. pursuant to the doctrine laid down by this Court in Francisco vs. it is described as "a single proprietorship business concern. nullify all proceedings had before the trial court and the respondent Court on the sole ground of petitioner's lack of capacity to sue. the defect is merely formal and not substantial. are subject to the same rules. there would be on the retrial the same complaint. . all contracts or agreements which the corporation may enter into" (Exhibit "I-1"). Kalaw. possess any juridical personality separate and apart from the personality of the owner of the enterprise and the personality of the persons acting in the name of such proprietorship. . although raised in the Answer of private respondent. 44 this Court held that a single proprietorship is neither a natural person nor a juridical person under Article 44 of the Civil Code. Mendoza. bylaw. the plaintiff and the petitioner. and this includes powers which have been . maintains that it is a valid contract because the Maglana has the power to enter into contracts for the corporation as implied from the following provisions of the By-Laws of private respondent: a) The power of the Board of Directors to . and. is: YAO KA SIN TRADING. The issue. as We held in Juasing. And even admitting. it is not an entity authorized by law to bring suit in court: The law merely recognizes the existence of a sole proprietorship as a form of business organization conducted for profit by a single individual. Considering that private respondent did not pursue this issue before the respondent Court and this Court. as gathered from the decision of the trial court. As this Court stated nearly eighty (80) years ago in Alonso vs. its President and Chairman. 50 is still bound by his act for clothing him with apparent authority." 47 We hold and declare that Yao Ka Sin should be deemed as the plaintiff in Civil Case No. Mr. was neither pursued in its appeal before the respondent Court nor in its Comment and Memorandum in this case. which is of paramount importance. the proper party plaintiff/petitioner should be YAO KA SIN. respectively. It does not vest juridical or legal personality upon the sole proprietorship nor empower it to file or defend an action in court. And now to the merits of the petition. and pair taxes to the national government. It also eluded the attention of the trial court and the respondent Court. in effect. only natural or juridical persons or entities authorized by law may be parties in a civil action. the same defense. . a corporate officer or agent may represent and bind the corporation in transactions with third persons to the extent that authority to do so has been conferred upon him. that Mr. or members acting in their stead. the same interests. of coarse. Villamor: 48 No one has been misled by the error in the name of the party plaintiff. this Court must first resolve an issue which. of whatever status or rank. 45 Accordingly. it is now too late in the history of this case to dismiss this petition and. the private respondent. and b) The power of the Chairman of the Board of Directors to "execute and sign." 42 It also appears that." 51 Moreover. Since a corporation. on the other hand. In our judgment there is not enough in a name to justify such action. and agents when once appointed. such as the private respondent. and an amendment to cure such defect is expressly authorized by Section 4. If we should by reason of this error send this case back for amendment and new trial. Maglana. the same answer. was not empowered to execute it. one Henry Yao took the witness stand and testified that he is the "manager of Yao Ka Sin Trading" and "it was in representation of the plaintiff" that he signed Exhibit "A" 43 Under Section 1.to submit simultaneously their Memoranda. 39 Before going any further." 41 In the body of the petition. the same general principles of law which govern the relation of agency for a natural person govern the officer or agent of a corporation. We are not persuaded. that. and requires the proprietor or owner thereof to secure licenses and permits. concerns the lack of capacity of plaintiff/petitioner to sue. 5064 and the petitioner in the instant case. in respect to his power to act for the corporation. However. can act only through its officers and agents.

" 54 Also. as where an officer is allowed to exercise a particular authority with respect to the business.000 advanced by her father. "if a private corporation intentionally or negligently clothes its officers or agents with apparent power to perform acts for it." It goes without saying then that Mr. and the legal counsel. entered into contracts similar to that of Exhibit "A" either with the petitioner or with other parties. as usually pertaining to the particular officer or agent. taken together with the unconditional acceptance of three other subsequent remittances from plaintiff. of the Board of Directors. and over the signature of defendant's general manager Rodolfo Andal. inter alia. Art. Petitioner miserably failed to do that. We note that the private corporation has a general manager who. this Court found sufficient evidence. under its By-Laws has. This Court then ruled that: This silence." 55 This "apparent authority may result from (1) the general manner. and also such powers as. or may be implied from. This is the import of the words through the president in Exhibit "8-A" and the clear intent of the power of the chairman "to execute and sign for and in behalf of the corporation all contracts and agreements which the corporation may enter into" in Exhibit "I-1". his actual authority if he acts within the scope of an apparent authority with which the corporation has clothed him by holding him out or permitting him to appear as having such authority. It was sent by the GSIS Board Secretary and defendant did not disown the same. Moreover. the above provisions of said private respondent's By-Laws do not in any way confer upon the President the authority to enter into contracts for the corporation independently. in the usual course of the particular business. was validly accepted by the GSIS. The cases then of Francisco vs. the following powers: "(a) to have the active and direct management of the business and operation of the corporation." 53 We find such inapplicable in this case. are incidental to. and such apparent powers as the corporation has caused persons dealing with the officer or agent to believe that it has conferred. or a particular branch of it. That power is exclusively lodged in the latter. in the past. 1393).intentionally conferred. to expedite or facilitate the execution of the contract. delegated authority. Besides. namely. the powers intentionally conferred. private respondent's evidence overwhelmingly shows that no contract can be signed by the president without first being approved by the Board of Directors. Notwithstanding this notice. the practice of the corporation has been to allow its general manager to negotiate and execute contracts in its copra trading activities for and in . with knowledge of the reason which renders the contract voidable and such reason having ceased. Kalaw are hopelessly unavailing to the petitioner. the person who has a right to invoke it should execute an act which necessarily implies an intention to waive his right In the second case. such approval may only be given after the contract passes through. 1393. In said cases. in a letter remitting the payment of P30. In the first case. Maglana with the apparent power to execute Exhibit "A" or any similar contract. at least. Art. directives or resolutions of the Board of Directors or of the president. as to innocent third persons dealing in good faith with such officers or agents. 56 It was incumbent upon the petitioner to prove that indeed the private respondent had clothed Mr. plaintiff was informed telegraphically that her proposal had been accepted. Maglana did not have a direct and active and in the management of the business and operations of the corporation. Maglana with the apparent power to act for it and had caused persons dealing with it to believe that he was conferred with such power. based on the conduct and actuations of the corporations concerned. this Court found: In the case at bar. Petitioner's last refuge then is his alternative proposition. Although there is authority "that if the president is given general control and supervision over the affairs of the corporation. No greater power can be implied from such express. Maglana's position as president and chairman of the corporation. by which the corporation holds out an officer or agent as having power to act or. 52 While there can be no question that Mr. who is the NIDC representative. conducting the same accordingly to the order. GSIS pocketed the amount and kept silent about the telegram. the corporation is bound thereby in favor of a person who deals with him in good faith in reliance on such apparent authority. GSIS and Board of Liquidators vs. Both powers presuppose a prior actof the corporation exercised through the Board of Directors. whether within or without the scope of his ordinary powers. it will be presumed that he has authority to make contract and do acts within the course of its ordinary business. that private respondent had clothed Mr. but limited. it was established that the offer of compromise made by plaintiff in the letter. the corporation will be estopped to deny that such apparent authority in real. with actual or constructive knowledge thereof. The rule is of course settled that "[a]lthough an officer or agent acts without. the apparent authority with which it clothes him to act in general or (2) acquiescence in his acts of a particular nature. Maglana had. the comptroller. Ratification may be effected expressly or tactly it is understood that there is a tacit ratification if. of apparent authority conferred upon the officer involved which bound the corporations on the basis of ratification. This was in itself notice to the corporation of the terms of the allegedly unauthorized telegram. The terms of the trial offer were clear. Upon the other hand. Neither can it be logically claimed that any power greater than that expressly conferred is inherent in Mr. or so much thereof as are required for the act — shall sign it for the corporation. This could have been easily done by evidence of similar acts executed either in its favor or in favor of other parties. for a considerable time. only the President — and not all the members of the Board. or in excess of. plaintiff quoted verbatim the telegram of acceptance. Exhibit "A". Nevertheless. constitutes in itself a binding ratification of the original agreement (Civil Code. powers added by custom and usage. in other words. no evidence was adduced to show that Mr. continuously and publicly. Maglana was an officer — the President and Chairman — of private respondent corporation at the time he signed Exhibit "A".

however. contrary to Our conclusion above. It assumes. to be a party to the instrument or when compliance with an order for an inspection of the original instrument is refused. nevertheless. has been execrated.00 dated June 7. and forthwith notified petitioner of its decision that "If within ten (10) days from date hereof we will not hear from you but you will withdraw cement at P24. then we will deposit your check of P243. Accordingly. treated as an entirely different contract. 1317. that Exhibit "A" is a valid contract binding upon the private respondent.00. at the same time. and sets forth what he claims to be the facts. The second ground is based on a wrong premise.000 bags of white cement. A contract entered into in the name of another by one who has no authority or legal representation. The inevitable conclusion then is that Exhibit "A" is an unenforceable contract under Article 1317 of the Civil Code which provides as follows: Art. 59 While the respondent Court. How to contest genuineness of such documents — When an action or defense is founded upon a written instrument." 57 Petitioner received the copy of this notification and thereafter accepted without any protest the Delivery Receipt covering the 10. Section 8.00 received Mr. but this provision does not apply when the adverse party does not appear.000 bags of white cement.000. 58 The fourth ground is. or unless he has by law a right to represent him. CA AFFIRMED . The third ground must likewise fail. No one may contract in the name of another without being authorized by the latter. per instruction of the Board. shall be unenforceable. 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. It is clear that the petitioner is not a party to any of the documents attached to the private respondent's Answer. Under the given circumstances. Exhibit "A" being unenforceable. the above quoted rule is not applicable. If the by-laws were to be literally followed. The respondent Court thus correctly ruled that petitioner had in fact agreed to a new transaction involving only 10. except when the option is founded upon a consideration. It was effectively disapproved and rejected by the Board of Directors which. under oath. Thus. the genuineness and due execution of the instrument shall be deemed admitted unless the adverse party. considered the amount of P243. it can not validly bind the private respondent. Maglana as payment for 10. expressly or impliedly.000.000. 1973 issued by the Producers Bank of the Philippines. the board should give its stamp of prior approval on all corporate contracts. or who has acted beyond his powers. the challenged decision must. practically laid aside the by-laws requirement of prior approval. while Article 1749 of the same Code provides: A promise to buy and sell a determinate thing for a price certain is reciprocally demandable. the offer may be withdrawn at any time before acceptance by communicating such withdrawal. copied in or attached in the corresponding pleading as provided in the preceding section. this case is without any consideration Article 1324 of the Civil Code expressly provides that: When the offerer has allowed the offeree a certain period to accept. by its acts and through acquiescence. the option to renew it would have no leg to stand on.30 per bag from our plant. meritorious. as something paid or promised.NACOCO's behalf without prior board approval. erred in holding otherwise. before it is revoked by the other contracting party. But that board itself. 8. Rule 8 of the Rules of Court provides: Sec. unless it is ratified. by the person on whose behalf it. stand in view of the above disquisitions on the first to the third grounds of the petition.000 bags and the Official Receipt for the P243. the Kalaw contracts are valid corporate acts. specifically denies them. In any event. the option granted in. The river cannot rise higher than its source. even if it were accepted.

administrators or assigns.000. that plaintiffs are tenants or lessees of residential and commercial spaces owned by defendants described as Nos. 195816 was issued in the name of petitioner on December 3. plaintiffs were compelled to file the complaint to compel defendants to sell the property to them. holding: In resume. the Cu Unjieng spouses executed a Deed of Sale (Annex D. judgment is hereby rendered in favor of the defendants and against the plaintiffs summarily dismissing the complaint subject to the aforementioned condition that if the defendants subsequently decide to offer their property for sale for a purchase price of Eleven Million Pesos or lower.R. Defendants filed their answer denying the material allegations of the complaint and interposing a special defense of lack of cause of action. Manila in Civil Case No. among others. there was no contract of sale at all. except the pending ejectment proceeding. moral and exemplary damages will likewise fail as there exists no justifiable ground for its award. receipt of which in full is hereby acknowledged. Branch 31. his heirs. Santiago). 176 SCRA 815). 21123 was pending consideration by this Court.R. 21123. this Court affirmed with modification the lower court's judgment. against Bobby Cu Unjieng.ANG YU ASUNCION v CA On July 29. that in reply to defendant's letter. Bobby Cu Unjieng offered a price of P6-million while plaintiffs made a counter offer of P5-million. Manila. there was no meeting of the minds between the parties concerning the sale of the property. the decision of the court a quo is legally justifiable. Rose Cu Unjieng and Jose Tan before the Regional Trial Court. The trial court found that defendants' offer to sell was never accepted by the plaintiffs for the reason that the parties did not agree upon the terms and conditions of the proposed sale. 1987 a Second Amended Complaint for Specific Performance was filed by Ang Yu Asuncion and Keh Tiong. 1991. On November 15. finding the appeal unmeritorious. that during the negotiations. As a consequence of the sale. In a decision promulgated on September 21. Chua and concurred in by Justices Vicente V. 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 appealed to this Court in CA-G. that when plaintiffs did not receive any reply. TCT No. The Supreme Court denied the appeal on May 6. otherwise. but subject to the following modification: The court a quo in the aforestated decision gave the plaintiffs-appellants the right of first refusal only if the property is sold for a purchase price of Eleven Million pesos or lower. Petition). Nonetheless. then the plaintiffs has the option to purchase the property or of first refusal. that plaintiffs thereafter asked the defendants to put their offer in writing to which request defendants acceded. Mendoza and Fernando A. alleging. 630-638 Ongpin Street. the VENDORS hereby sells. On July 1. defendants filed a motion for summary judgment which was granted by the lower court. CV No. registration fees for the transfer of title in his favor and other expenses incidental to the sale of abovedescribed property including capital gains tax and accrued real estate taxes. the claim for specific performance will not lie. Petition) transferring the property in question to herein petitioner Buen Realty and Development Corporation. 1986. The decision of this Court was brought to the Supreme Court by petition for review on certiorari. plaintiffs will have the right of first refusal.000. Thus the dispositive portion of the decision states: WHEREFORE. petitioner as the new owner of the subject property wrote a letter to the lessees demanding that the latter vacate the premises. executors. 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. All requisites obtaining. That the VENDEE shall pay the Documentary Stamp Tax. Binondo. 1990. 87-41058. TCT No. et al. Absent such requirement. considering the mercurial and uncertain forces in our market economy today. CV No. 1987 with the same request. Aggrieved by the decision. 1990. the above-described property with all the improvements found therein including all the rights and interest in the said property free from all liens and encumbrances of whatever nature. they sent another letter dated January 28. transfers and conveys for and in favor of the VENDEE.. 1990 (penned by Justice Segundino G. 105254/T-881 in the name of the Cu Unjieng spouses was cancelled and. defendants informed plaintiffs that they are offering to sell the premises and are giving them priority to acquire the same. the lower court ruled that should the defendants subsequently offer their property for sale at a price of P11-million or below. We find no reason not to grant the same right of first refusal to herein appellants in the event that the subject property is sold for a price in excess of Eleven Million pesos. hence. while CA-G. in lieu thereof. No pronouncement as to costs. WHEREFORE. After the issues were joined. Appellants' demand for actual. That for and in consideration of the sum of FIFTEEN MILLION PESOS (P15. 2. Summary judgment for defendants was properly granted. 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. subject to the following terms and conditions: 1. . 1991 "for insufficiency in form and substances" (Annex H. Court of Appeals.00). 1986 asking that they specify the terms and conditions of the offer to sell. however. the judgment appealed from is hereby AFFIRMED. plaintiffs wrote them on October 24. defendants need not offer the property to the plaintiffs if the purchase price is higher than Eleven Million Pesos. that on several occasions before October 9.

finally.000. is hereby set aside as having been executed in bad faith. 1991. delicts and quasi-delicts). Both defendants Bobby Cu Unjieng and Rose Cu Unjieng represented by Atty. its consummation. Keh Tiong and Arthur Go. Petition) was issued. to do or not to do (Art. the lessees wrote a reply to petitioner stating that petitioner brought the property subject to the notice of lis pendens regarding Civil Case No. which is a meeting of minds between two persons whereby one binds himself. defendants are hereby ordered to execute the necessary Deed of Sale of the property in litigation in favor of plaintiffs Ang Yu Asuncion. 1991. to cancel and set aside the title already issued in favor of Buen Realty Corporation which was previously executed between the latter and defendants and to register the new title in favor of the aforesaid plaintiffs Ang Yu Asuncion. The obligation is constituted upon the concurrence of the essential elements thereof. CV No.R. Petition) quoted as follows: Presented before the Court is a Motion for Execution filed by plaintiff represented by Atty. and (c) the subject-persons who. CV-21123. there was an Entry of Judgment by the Supreme Court as of June 6.. to do or not to do). All previous transactions involving the same property notwithstanding the issuance of another title to Buen Realty Corporation. the dispositive portion of which reads: WHEREFORE. petitioners contend that Buen Realty can be held bound by the writ of execution by virtue of the notice of lis pendens. A contract which is consensual as to perfection is so established upon a mere meeting of minds. 1991. 87-41058 as modified by the Court of Appeals in CA-G. had now become final and executory. quasi-contracts. on appeal to it by private respondent. September 27. in . 1305. and considering the mercurial and uncertain forces in our market economy today. As a consequence. Vicente Sison and Atty. let there be Writ of Execution issue in the above-entitled case directing the Deputy Sheriff Ramon Enriquez of this Court to implement said Writ of Execution ordering the defendants among others to comply with the aforesaid Order of this Court within a period of one (1) week from receipt of this Order and for defendants to execute the necessary Deed of Sale of the property in litigation in favor of the plaintiffs Ang Yu Asuncion. the appellate court. 1 On 04 December 1991. viz: (a) The vinculum juris or juridical tie which is the efficient cause established by the various sources of obligations (law. On August 30. For ready reference. carried over on TCT No. required to be observed (to give. Civil Code). The lessees filed a Motion for Execution dated August 27. The perfection of the contract takes place upon the concurrence of the essential elements thereof. 1991 respondent Judge issued another order. 195816 issued in the name of Buen Realty. Anacleto Magno respectively were duly notified in today's consideration of the motion as evidenced by the rubber stamp and signatures upon the copy of the Motion for Execution. An obligation is a juridical necessity to give. the concurrence of offer and acceptance. 1990 as modified by the Court of Appeals in its decision in CA G. Antonio Albano. the same right of first refusal to herein plaintiffs/appellants in the event that the subject property is sold for a price in excess of Eleven Million pesos or more. Keh Tiong and Arthur Go for the consideration of P15. contracts. 1991 in G. Civil Code). A contract undergoes various stages that include its negotiation or preparation. We affirm the decision of the appellate court. to give something or to render some service (Art. 21123. set aside and declared without force and effect the above questioned orders of the court a quo. WHEREFORE.000. No. 1991 of the Decision in Civil Case No. on the object and on the cause thereof. and elevated to the Supreme Court upon the petition for review and that the same was denied by the highest tribunal in its resolution dated May 6. On the same day. 1157.00 and ordering the Register of Deeds of the City of Manila.On July 16. stating that the aforesaid modified decision had already become final and executory. its perfection and.R. Among the sources of an obligation is a contract (Art. A not too recent development in real estate transactions is the adoption of such arrangements as the right of first refusal. i. are the active (obligee) and the passive (obligor) subjects. Keh Tiong and Arthur Go for the consideration of P15 Million pesos in recognition of plaintiffs' right of first refusal and that a new Transfer Certificate of Title be issued in favor of the buyer.e. viewed from the demandability of the obligation. 1991 the corresponding writ of execution (Annex C. On September 22. A contract which requires. a purchase option and a contract to sell. L-97276. Civil Code). In this petition for review on certiorari. we might point out some fundamental precepts that may find some relevance to this discussion. with respect to the other. 8741058 annotated on TCT No. 105254/T-881 in the name of the Cu Unjiengs. The gist of the motion is that the Decision of the Court dated September 21. (b) the object which is the prestation or conduct. Negotiation covers the period from the time the prospective contracting parties indicate interest in the contract to the time the contract is concluded (perfected). respondent Judge issued an order (Annex A. at the time of the latter's purchase of the property on 15 November 1991 from the Cu Unjiengs.R. It is the observation of the Court that this property in dispute was the subject of theNotice of Lis Pendens and that the modified decision of this Court promulgated by the Court of Appeals which had become final to the effect that should the defendants decide to offer the property for sale for a price of P11 Million or lower. 1156.

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. although denominated a "Deed of Conditional Sale. The offer. the full payment of the purchase price). 4 An unconditional mutual promise to buy and sell. is what may properly be termed a perfected contract ofoption. such as in a "Contract to Sell" where invariably the ownership of the thing sold is retained until the fulfillment of a positive suspensive condition (normally. and observe honesty and good faith. in fact. 43 Phil. (1451a) 6 Observe. to deliver and to transfer ownership of a thing or right to another." a sale is still absolute where the contract is devoid of any proviso that title is reserved or the right to unilaterally rescind is stipulated. can be obligatory on the parties. a contract of "option" is deemed perfected. the offer is accepted before a breach of the option. and it is to be distinguished from the projected main agreement (subject matter of the option) which is obviously yet to be concluded. Rigos. Inc. 1319. and it would be a breach of that contract to withdraw the offer during the agreed period. 948. 97 Phil. to which the topic for discussion about the case at bench belongs. act with justice. the contract is perfected when a person. Civil Code. however. it conforms with the second paragraph of Article 1479 of the Civil Code. A negotiation is formally initiated by an offer. for if. Until the contract is perfected. called the buyer. otherwise. 8 Let us elucidate a little. is commonly referred to as a real contract. vs. serve as a binding juridical relation. to buy. 1479. in fact. 7 The optionee has the right. In sales. a bilateral promise to sell and to buy ensues and both parties are then reciprocally bound to comply with their respective undertakings. Article 1458 of the Civil Code provides: Art. Court of Appeals (158 SCRA 375). modifying the previous decision in South Western Sugar vs. Civil Code). either negotiating party may stop the negotiation. The stage of consummationbegins when the parties perform their respective undertakings under the contract culminating in the extinguishment thereof. must not be exercised whimsically or arbitrarily." (2) If the period has a separate consideration.. Thus.. is an independent contract by itself.A contract of sale may be absolute or conditional. until or unless the price is paid. Atlantic Gulf. 135 SCRA 409. Arias.e. before the offeror's coming to know of such fact. holding that this rule is applicable to a unilateral promise to sell under Art. This contract is legally binding. may be withdrawn. however.addition to the above. vs. at any time prior to the perfection of the contract. These relations. 270). as an independent source of obligation. 1458. obligates himself. 1479. by communicating that withdrawal to the offeree (see Art. the withdrawal is effective immediately after its manifestation. but not the obligation. An imperfect promise (policitacion) is merely an offer. the prescribed form being thereby an essential element thereof. Civil Code. Public advertisements or solicitations and the like are ordinarily construed as mere invitations to make offers or only as proposals. compliance with certain formalities prescribed by law. Kroll & Co. Once the option is exercised timely.g. Rural Bank of Parañaque. the following rules generally govern: (1) If the period is not itself founded upon or supported by a consideration. the main contract could be deemed perfected. Sanchez vs. When the sale is not absolute but conditional. it could give rise to a damage claim under Article 19 of the Civil Code which ordains that "every person must. when coupled with a valuable consideration distinct and separate from the price. the delivery of the object of the agreement. The right to withdraw. we have said that. Where a period is given to the offeree within which to accept the offer. are not considered binding commitments. however. The option. until a contract is perfected. it has been intended to be part of the consideration for the main contract with a right of withdrawal on the part of the optionee. . 1324. is essential in order to make the act valid. it cannot. the latter may not sue for specific performance on the proposed contract ("object" of the option) since it has failed to reach its own stage of perfection. Where the condition is imposed upon the perfection of the contract itself. a similar instance would be an "earnest money" in a . see also Art. Ownership will then be transferred to the buyer upon actual or constructive delivery (e. and compliance therewith may accordingly be exacted. in the exercise of his rights and in the performance of his duties. for a price certain. the optioner-offeror withdraws the offer before its acceptance(exercise of the option) by the optioneeofferee. In these cases.g. If. that the option is not the contract of sale itself. over which the latter agrees. the failure of the condition would prevent such perfection. Remolado. particularly. 3 If the condition is imposed on the obligation of a party which is not fulfilled. Cua. the offeror is still free and has the right to withdraw the offer before its acceptance. 249. give everyone his due. 102 Phil.. see also Atkins. renders himself liable for damages for breach of the option. if an acceptance has been made. such as by its mailing and not necessarily when the offeree learns of the withdrawal (Laudico vs. . and in sales. viz: Art. and the other to pay therefor a price certain in money or its equivalent. the other party may either waive the condition or refuse to proceed with the sale (Art.. as in a pledge or commodatum. 5 An accepted unilateral promise which specifies the thing to be sold and the price to be paid. By the contract of sale one of the contracting parties obligates himself to transfer the ownership of and to deliver a determinate thing. 45 SCRA 368). by the execution of a public document) of the property sold. care should be taken of the real nature of the consideration given. In a solemn contract. however. as long as the object is made determinate and the price is fixed. at this stage. e. called the seller. . 2 In Dignos vs. i. The optioner-offeror. 1545. such as in a donation of real property. or. the breach of the condition will prevent the obligation to convey title from acquiring an obligatory force.

the alleged purchaser of the property. an unjustified disregard thereof. petitioners are aggrieved by the failure of private respondents to honor the right of first refusal. Buen Realty. 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 cancellation of title in the name of petitioner (Limpin vs. however. or the fixing of the price of the sale. 11 It is not to say. has acted in good faith or bad faith and whether or not it should. the questioned writ of execution is in variance with the decision of the trial court as modified by this Court. the exercise of the right. the remedy is not a writ of execution on the judgment. while the object might be made determinate. its breach cannot justify correspondingly an issuance of a writ of execution under a judgment that merely recognizes its existence. understood in its normal concept. In the law on sales. Needless to point out. if. IAC. 143 SCRA 311. not having been impleaded in Civil Case No. As already stated. has merely accorded a "right of first refusal" in favor of petitioners. given. Furthermore. such as already intimated above. It is likewise quite obvious to us that the decision in Civil Case No. Pamantasan ng Lungsod ng Maynila vs. 147 SCRA 516. 122 SCRA 885). An option or an offer would require. or possibly of an offer under Article 1319 9 of the same Code. 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. for instance. can warrant a recovery for damages. later affirmed in CA-G.contract of sale that can evidence its perfection (Art. in any case. cannot be held subject to the writ of execution issued by respondent Judge. CA AFFIRMED . that the right of first refusal would be inconsequential for. We are also unable to agree with petitioners that the Court of Appeals has erred in holding that the writ of execution varies the terms of the judgment in Civil Case No. that obviously are yet to be later firmed up. The Court of Appeals. Pastor vs. 87-41058. 87-41058. like here. has observed: Finally. among other laws of general application. Neither can the right of first refusal. it cannot be deemed a perfected contract of sale under Article 1458 of the Civil Code. as it is here so conveyed to us. 1482. The consequence of such a declaration entails no more than what has heretofore been said. whether private respondent Buen Realty Development Corporation. nor would it sanction an action for specific performance without thereby negating the indispensable element of consensuality in the perfection of contracts. CA. Civil Code). in this regard. In a right of first refusal. be considered bound to respect the registration of the lis pendens in Civil Case No. 10 a clear certainty on both the object and the cause or consideration of the envisioned contract. it must be stressed. Prior thereto. IAC. the circumstances expressed in Article 19 12 of the Civil Code. 87-41058. including the price. per se be brought within the purview of an option under the second paragraph of Article 1479. 87-41058 could not have decreed at the time the execution of any deed of sale between the Cu Unjiengs and petitioners. would be dependent not only on the grantor's eventual intention to enter into a binding juridical relation with another but also on terms. the pertinent scattered provisions of the Civil Code on human conduct. let alone ousted from the ownership and possession of the property. Even on the premise that such right of first refusal has been decreed under a final judgment. CV-21123. aforequoted. among other things.R. 137 SCRA 730. De Guzman vs. since there is none to execute. however. CA. but an action for damages in a proper forum for the purpose. without first being duly afforded its day in court. In fine. the so-called "right of first refusal" is an innovative juridical relation. The final judgment in Civil Case No. 87-41058 are matters that must be independently addressed in appropriate proceedings.

Enrico used the subject property as his residence and place of business. 253990 issued by the Registry of Deeds of Quezon City in the names of the spouses Apeles. The lot has an area of 360. 1987 and shall remain valid and binding for THREE (3) YEARS from the said date. Before the expiration of the three-year lease period provided in the lease contract. pursuant to a Special Power of Attorney executed by the latter in favor of the former on 24 January 1979. docketed as Civil Case No.[10] On 8 October 2002. trial on the merits ensued before the RTC. the spouses Apeles offered as evidence Luz’s Philippine Passport which showed that on 26 January 1987. According to the said lease contract. she took it with her for notarization. but despite several notices. the spouses Apeles demanded that he pay his rental arrears from January 1991 to December 1996 and he vacate the subject property since it would be needed by the spouses Apeles themselves. The LESSOR hereby gives the LESSEE under this Contract of Lease the right and option to buy the subject house and lot within the said 3-year lease period. TRANSFER and CONVEY the house and lot subject of this Contract in favor of the LESSEE. Q-99-36834. in rebuttal. The spouses Apeles likewise presented several official documents bearing her genuine signatures to reveal their remarkable discrepancy from the signature appearing in the disputed lease contract. That if the LESSEE shall give oral or written notice to the LESSOR on or before the expiry date of the 3-year lease period stipulated herein of his desire to exercise his option to buy or purchase the house and lot herein leased. The pertinent provisions of the Contract of Lease are reproduced below: 3. the spouses Apeles and Enrico allegedly entered into a Contract of Lease [6] with Option to Purchase involving the subject property. provided further. and posited that Luz’s signature thereon was a forgery. The spouses Apeles maintained that they did not intend to sell the subject property. That the purchase price or total consideration of the house and lot subject of this Contract of Lease shall. Clemente. He narrated that he and Luz entered into the Contract of Lease with Option to Purchase on 26 January 1987. that the said purchase price. Quezon City. the spouses Apeles leased the subject property to Arturo Eulogio (Arturo). the LESSOR upon receipt of the purchase price/total consideration as fixed or agreed upon less the total amount of monthly rentals paid the LESSEE during the 3-year lease period shall execute the appropriate Deed to SELL. This prompted Enrico to seek recourse from the barangay for the enforcement of his right to purchase the subject property.[4] In 1979. as it is hereby agreed. free from all liens and encumbrances. Enrico’s cause of action is founded on paragraph 5 of the Contract of Lease with Option to Purchase vesting him with the right to acquire ownership of the subject property after paying the agreed amount of consideration.[8] On the other hand. and by the time the document was returned to him. Enrico instituted on 23 February 1999 a Complaint for Specific Performance with Damages against the spouses Apeles before the RTC. the spouses Apeles denied that Luz signed the Contract of Lease with Option to Purchase. 87 Timog Avenue. his heirs. Luz Apeles was authorized to enter into the same as the attorney-in-fact of her husband. should the LESSEE exercise his option to buy it on or before the expiration of the 3-year lease period. it was already notarized. the spouses Apeles failed to appear before the barangay for settlement proceedings.5 Million. with Luz signing the said Contract at Enrico’s office in Timog Avenue. she was in the United States of America.000.00) and.500.[5] On 6 January 1987. Enrico further related that after Luz signed the lease contract. before the expiration of the three-year lease period. the RTC rendered a Decision in Civil Case No.60 square meters. Enrico’s father. together with all the fixtures and accessories therein. 4.EULOGIO v Spouses EPELES The real property in question consists of a house and lot situated at No. Q-99-36834 in favor of Enrico. Enrico exercised his option to purchase the subject property by communicating verbally and in writing to Luz his willingness to pay the agreed purchase price. [7] In a letter dated 26 January 1997 to Enrico. Provided. Upon Arturo’s death. retracted his prior declaration that the said Contract was signed by Luz on 26 January 1996. Enrico himself testified as the sole witness for his side. The Contract was notarized on the same day as evidenced by the Certification on the Notary Public’s Report issued by the Clerk of Court of the RTC of Manila. Enrico was engaged in the business of buying and selling imported cars. 5. Since none of . successors and assigns. covered by Transfer Certificate of Title No. but the spouses Apeles supposedly ignored Enrico’s manifestation. Instead. the date when Luz allegedly signed the said Contract. the option to purchase the subject property for a price not exceeding P1. Hence. the barangay issued to Enrico a Certificate to File Action. shall not be more than ONE MILLION FIVE HUNDRED THOUSAND PESOS (P1. Without heeding the demand of the spouses Apeles. his son Enrico succeeded as lessor of the subject property. Following the pre-trial conference. To buttress their contention. [9] After the spouses Apeles established by documentary evidence that Luz was not in the country at the time the Contract of Lease with Option to Purchase was executed. That this Contract shall be effective commencing from January 26. Quezon City (subject property). The contract purportedly afforded Enrico. that the monthly rentals paid by the LESSEE to the LESSOR during the 3-year lease period shall form part of or be deducted from the purchase price or total consideration as may hereafter be mutually fixed or agreed upon by the LESSOR and the LESSEE. be fixed or agreed upon by the LESSOR and the LESSEE. Enrico averred that Luz signed the Contract after she arrived in the Philippines on 30 May 1987. Enrico.

In arriving at its assailed decision. In fact. the appellate court noted that the Notary Public did not observe utmost care in certifying the due execution of the Contract of Lease with Option to Purchase. [16] WHEREFORE.[14] The reliance of appellate tribunals on the factual findings of the trial court is based on the postulate that the latter had firsthand opportunity to hear the witnesses and to observe their conduct and demeanor during the proceedings. line. Enrico’s insistence on the infallibility of the findings of the RTC seriously impairs the discretion of the appellate tribunal to make independent determination of the merits of the case appealed before it. and upon payment of total consideration as stipulated in the said CONTRACT for [the spouses Apeles] to execute a Deed of Absolute Sale in favor of [Enrico]. it is imperative for the Court of Appeals to review the findings of fact made by the trial court. The Court of Appeals held. the foregoing premises considered. appeal by writ of error to the Court of Appeals under Rule 41 of the Revised Rules of Court. 76933 granting the appeal of the spouses Apeles and overturning the judgment of the RTC. CV No.000. the RTC bound the parties to the clear and unequivocal stipulations they made in the lease contract. The RTC found striking similarity between Luz’s genuine signatures in the documents presented by the spouses Apeles themselves and her purportedly forged signature in the Contract of Lease with Option to Purchase. the parties may raise both questions of fact and/or of law. Quezon City. Although we have indeed held that the factual findings of the trial courts are to be accorded great weight and respect. The Court of Appeals chose not to accord the disputed Contract full faith and credence. Enrico asserts that the said Contract was voluntarily entered into and signed by Luz who had it notarized herself. Q-99-36834 for specific performance with damages is hereby REVERSED and a new is one entered dismissing [Enrico’s] complaint. (2) [The spouses Apeles] to pay [Enrico] moral and exemplary damages in the respective amounts of P100. the RTC ordered the spouses Apeles to execute a Deed of Sale in favor of Enrico upon the latter’s payment of the agreed amount of consideration.[15] Moreover. RTC decision reads: WHEREFORE.[12] Enrico assiduously prays before this Court to sustain the validity of the Contract of Lease with Option to Purchase. this Court finds [Enrico’s] complaint to be substantiated by preponderance of evidence and accordingly orders – Enrico’s Motion for Reconsideration was denied by the Court of Appeals in a Resolution[13] dated 25 April 2005. but on the assessment of documents that are available to appellate magistrates and subject to their scrutiny. 87 Timog Avenue. (1) [The spouses Apeles] to comply with the provisions of the Contract of Lease with Option to Purchase. The spouses Apeles should be obliged to respect the terms of the agreement. (3) [The spouses Apeles] to pay attorney’s fees of P50. assigning the following errors thereto: THE COURT OF APPEALS COMMITTED (sic) REVERSIBLE ERROR WHEN IT BRUSHED ASIDE THE RULING OF THE COURT A QUO UPHOLDING THE VALIDITY OF THE CONTRACT OF LEASE WITH OPTION TO PURCHASE AND IN LIEU THEREOF RULED THAT THE SAID CONTRACT OF LEASE WAS A FORGERY AND THUS. The spouses Apeles called attention to Enrico’s inconsistent declarations as to material details involving the execution of the lease contract. and not . 2002 of the Regional Trial Court of Quezon City. the appealed decision dated October 8.the parties presented a handwriting expert. reliance on the trial court finds no application.000. Enrico is presently before this Court seeking the reversal of the unfavorable judgment of the Court of Appeals. when such findings are not anchored on their credibility and their testimonies. The Court of Appeals even has the power to try cases and conduct hearings. 87 since she was not in the Philippines on that date and returned five months thereafter. On 20 December 2004. Simply.00 and P50. Enrico faults the Court of Appeals for disturbing the factual findings of the RTC in disregard of the legal aphorism that the factual findings of the trial court should be accorded great weight and respect on appeal. Accordingly. Branch 215 in Civil Case No.000. the Court of Appeals cannot swallow hook. the Court of Appeals rendered a Decision in CA-G. We do not agree. thus: THE COURT OF APPEALS COMMITTED (sic) REVERSIBLE ERROR WHEN CONTRARY TO THE FINDINGS OF THE COURT A QUO IT RULED THAT THE DEFENSE OF FORGERY WAS SUBSTANTIALLY AND CONVINCINGLY PROVEN BY COMPETENT EVIDENCE.00. and sinker the factual conclusions of the trial court without crippling the very office of review. thereby casting doubt on Enrico’s credibility. Certainly. However. The spouses Apeles argued that it was physically impossible for Luz to sign said Contract on Jan26. Absent any finding of forgery.[11] The spouses Apeles challenged the adverse RTC Decision before the Court of Appeals and urged the appellate court to nullify the assailed Contract of Lease with Option to Purchase since Luz’s signature thereon was clearly a forgery. N &VOID.00 and costs of the suit.R. over the parcel of land and the improvements existing thereon located at No. the RTC relied on its own examination of the specimen signatures submitted to resolve the issue of forgery. they are not absolutely conclusive upon the appellate court. receive evidence and perform any and all acts necessary to resolve factual issues raised in cases falling within its original and appellate jurisdiction. as well as on the presumed regularity of the contract as a notarized document.

Enrico made a complete turnabout and claimed that Luz signed the Contract in question on 30 May 1987 after her arrival in the country. It may be rebutted by clear and convincing evidence to the contrary. even if accepted. Preponderance of evidence is the weight.[23] It is also sometimes called an “unaccepted offer” and is sanctioned by Article 1479 of the Civil Code: Art. this presumption. but merely secures the privilege to buy. the provision on the option to purchase the subject property incorporated in said Contract still remains unenforceable. [20] Enrico himself admitted that Luz took the document and had it notarized without his presence. Atlantic Gulf and Pacific Co. to be valid must be “supported by a consideration distinct from the price.. It is not a sale of property but a sale of the right to purchase. it must be supported by consideration: There is no question that under Article 1479 of the new Civil Code “an option to sell. Such fact alone overcomes the presumption of regularity since a notary public is enjoined not to notarize a document unless the persons who signed the same are the very same persons who executed and personally appeared before the said notary public to attest to the contents and truth of what are stated therein. Even assuming for the sake of argument that we agree with Enrico that Luz voluntarily entered into the Contract of Lease with Option to Purchase and personally affixed her signature to the said document. In contrast.[17] but he recanted his testimony on the matter after the spouses Apeles established by clear and convincing evidence that Luz was not in the Philippines on that date. in the last analysis. Enrico testified that Luz signed the Contract of Lease with Option to Purchase on 26 January 1987 in his presence. In other words..[24] In the landmark case of Southwestern Sugar and Molasses Company v. but he does sell something.[21] In the case at bar. For an option contract to be valid and enforceable against the promissor. While it is true that a notarized document carries the evidentiary weight conferred upon it with respect to its due execution. or in compliance with certain terms and conditions. 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. His contradictory statements on important details simply eroded the integrity of his testimony. In civil cases.be allowed to renege on their commitment thereunder and frustrate the sanctity of contracts. 1479. He does not sell his land. Again. “an accepted unilateral promise” can only have a binding effect if supported by a consideration. ignoring blatant contradictions that destroy his credibility and the veracity of his claims. even if accepted. is not absolute. however. He compel the spouses Apeles to Deed of Sale over the subject 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. is only binding if supported by a consideration. to purchase the same under the with Option to Purchase. or which gives to the owner of the property the right to sell or demand a sale.[22] An option is not of itself a purchase. we are not persuaded. Q-99-36834 was his purported right to acquire ownership of the subject property in the . i.[18] In rebuttal. buy and sell a price certain is 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. which means that the option can still be withdrawn. It can therefore There is no dispute that what Enrico sought to enforce in Civil Case No. exercise of his option Contract of Lease ultimately wants to already execute the property in his favor. the party having the burden of proof must establish his case by a preponderance of evidence. there must be a separate and distinct consideration that supports it.” This is clearly inferred from the context of said article that a unilateral promise to buy or to sell. aside from the consideration for the offer. We agree with the Court of Appeals that in ruling out forgery. Its distinguishing characteristic is that it imposes no binding obligation on the person holding the option. he does not then agree to sell it. Although there is no direct evidence to prove forgery. and has in its favor the presumption of regularity. credit. the RTC heavily relied on the testimony proffered by Enrico during the trial.” as used in said article. without asserting any proof of corroborating testimony or circumstantial evidence to buttress his claim. if the same is not supported by any consideration. or under. [25] we declared that for an option contract to bind the promissor. means probability of the truth.[19] The inconsistencies in Enrico’s version of events have seriously impaired the probative value of his testimony and cast serious doubt on his credibility.” or “a promise to buy or to sell. 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. Here it is not disputed that the option is without consideration. preponderance of evidence inarguably favors the spouses Apeles. A promise to determinate thing for a reciprocally demandable.” Preponderance of evidence is a phrase which. It is evidence which is more convincing to the court as worthier of belief than that which is offered in opposition thereto. On direct examination.e. Enrico seemed to rely only on his own self-serving declarations. the spouses Apeles were able to overcome the burden of proof and prove by preponderant evidence in disputing the authenticity and due execution of the Contract of Lease with Option to Purchase. The second paragraph of Article 1479 provides for the definition and consequent rights and obligations under an option contract. the right or privilege to buy at the election or option of the other party. 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.

in view of the onerous nature of the option contract. The consideration is “the why of the contracts. but we have found none. However. as defined in Article 1479. for any direct evidence or evidence aliunde to prove the existence of consideration for the option contract. The consideration need not be monetary but could consist of other things or undertakings. by the very nature of an option contract. we stressed that an option contract needs to be supported by a separate consideration. the same is an onerous contract for which the consideration must be something of value. Court of Appeals. Without consideration that is separate and distinct from the purchase price. said consideration must be clearly specified as such in the option contract or clause. Actual cash need not be exchanged for the option. it must be supported by a consideration separate and distinct from the price. . when a consideration for an option contract is not monetary. The absence of monetary or any material consideration keeps this Court from enforcing the rights of the parties under said option contract. as well as the pleadings submitted by the parties. and their testimonies in open court.be withdrawn notwithstanding the acceptance made of it by appellee. these must be things or undertakings of value. [27] In the present case. In Bible Baptist Church v.5 Million. which could not be deemed to be the same consideration for the option contract since the law and jurisprudence explicitly dictate that for the option contract to be valid. However. Furthermore. although its kind may vary.[26] We have painstakingly examined the Contract of Lease with Option to Purchase. it is indubitable that no consideration was given by Enrico to the spouses Apeles for the option contract. the essential reason which moves the contracting parties to enter into the contract.” This definition illustrates that the consideration contemplated to support an option contract need not be monetary.) The doctrine requiring the payment of consideration in an option contract enunciated in Southwestern Sugar is resonated in subsequent cases and remains controlling to this day. if the consideration is not monetary. The only consideration agreed upon by the parties in the said Contract is the supposed purchase price for the subject property in the amount not exceeding P1. that holds true even if the unilateral promise is already accepted by the optionee. an option contract cannot be enforced. (Emphasis supplied.

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