Republic of the Philippines SUPREME COURT Manila FIRST DIVISION G.R. No.

183612 March 15, 2010

POLYTECHNIC UNIVERSITY OF THE PHILIPPINES, Petitioner, vs. GOLDEN HORIZON REALTY CORPORATION, Respondent. x - - - - - - - - - - - - - - - - - - - - - - -x G.R. No. 184260 NATIONAL DEVELOPMENT COMPANY, Petitioner, vs. GOLDEN HORIZON REALTY CORPORATION, Respondent. DECISION VILLARAMA, JR., J.: The above-titled consolidated petitions filed under Rule 45 of the 1997 Rules of Civil Procedure, as amended, seek to reverse the Decision1 dated June 25, 2008 and Resolution dated August 22, 2008 of the Court of Appeals (CA) in CA-G.R. CV No. 84399 which affirmed the Decision2 dated November 25, 2004 of the Regional Trial Court (RTC) of Makati City, Branch 144 in Civil Case No. 88-2238. The undisputed facts are as follows: Petitioner National Development Company (NDC) is a government- owned and controlled corporation, created under Commonwealth Act No. 182, as amended by Com. Act No. 311 and Presidential Decree (P.D.) No. 668. Petitioner Polytechnic University of the Philippines (PUP) is a public, non-sectarian, non-profit educational institution created in 1978 by virtue of P.D. No. 1341. In the early sixties, NDC had in its disposal a ten (10)-hectare property located along Pureza St., Sta. Mesa, Manila. The estate was popularly known as the NDC Compound and covered by Transfer Certificate of Title Nos. 92885, 110301 and 145470. On September 7, 1977, NDC entered into a Contract of Lease (C-33-77) with Golden Horizon Realty Corporation (GHRC) over a portion of the property, with an area of 2,407 square meters for a period of ten (10) years, renewable for another ten (10) years with mutual consent of the parties.3 On May 4, 1978, a second Contract of Lease (C-12-78) was executed between NDC and GHRC covering 3,222.80 square meters, also renewable upon mutual consent after the expiration of the ten (10)-year lease period. In addition, GHRC as lessee was granted the "option to purchase the area leased, the price to be negotiated and determined at the time the option to purchase is exercised."4 Under the lease agreements, GHRC was obliged to construct at its own expense buildings of strong material at no less than the stipulated cost, and other improvements which shall automatically belong to the NDC as lessor upon the expiration of the lease period. Accordingly, GHRC introduced permanent improvements and structures as required by the terms of the contract. After the completion of the industrial complex project, for which GHRC spentP5 million, it was leased to various manufacturers, industrialists and other businessmen thereby generating hundreds of jobs.5 On June 13, 1988, before the expiration of the ten (10)-year period under the second lease contract, GHRC wrote a letter to NDC indicating its exercise of the option to renew the lease for another ten (10) years. As no response was received from NDC, GHRC sent another letter on August 12, 1988, reiterating its desire to renew the contract and also requesting for priority to negotiate for its purchase should NDC opt to sell the leased premises.6 NDC still did not reply but continued to accept rental payments from GHRC and allowed the latter to remain in possession of the property. Sometime after September 1988, GHRC discovered that NDC had decided to secretly dispose the property to a third party. On October 21, 1988, GHRC filed in the RTC a complaint for specific performance, damages with preliminary injunction and temporary restraining order.7 In the meantime, then President Corazon C. Aquino issued Memorandum Order No. 214 dated January 6, 1989, ordering the transfer of the whole NDC Compound to the National Government, which in turn would convey the said property in favor of PUP at acquisition cost. The memorandum order cited the serious need of PUP, considered the "Poor Man’s University," to expand its campus, which adjoins the NDC Compound, to accommodate its growing student population, and the willingness of PUP to buy and of NDC to sell its property. The order of conveyance of the 10.31-hectare property would automatically result in the cancellation of NDC’s total obligation in favor of the National Government in the amount of P57,193,201.64.8 On February 20, 1989, the RTC issued a writ of preliminary injunction enjoining NDC and its attorneys, representatives, agents and any other persons assisting it from proceeding with the sale and disposition of the leased premises.9

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On February 23, 1989, PUP filed a motion to intervene as party defendant, claiming that as a purchaser pendente lite of a property subject of litigation it is entitled to intervene in the proceedings. The RTC granted the said motion and directed PUP to file its Answer-in-Intervention.10 PUP also demanded that GHRC vacate the premises, insisting that the latter’s lease contract had already expired. Its demand letter unheeded by GHRC, PUP filed an ejectment case (Civil Case No. 134416) before the Metropolitan Trial Court (MeTC) of Manila on January 14, 1991.11 Due to this development, GHRC filed an Amended and/or Supplemental Complaint to include as additional defendants PUP, Honorable Executive Secretary Oscar Orbos and Judge Ernesto A. Reyes of the Manila MeTC, and to enjoin the afore-mentioned defendants from prosecuting Civil Case No. 134416 for ejectment. A temporary restraining order was subsequently issued by the RTC enjoining PUP from prosecuting and Judge Francisco Brillantes, Jr. from proceeding with the ejectment case.12 In its Second Amended and/or Supplemental Complaint, GHRC argued that Memorandum Order No. 214 is a nullity, for being violative of the writ of injunction issued by the trial court, apart from being an infringement of the Constitutional prohibition against impairment of obligation of contracts, an encroachment on legislative functions and a bill of attainder. In the alternative, should the trial court adjudge the memorandum order as valid, GHRC contended that its existing right must still be respected by allowing it to purchase the leased premises.13 Pre-trial was set but was suspended upon agreement of the parties to await the final resolution of a similar case involving NDC, PUP and another lessee of NDC, Firestone Ceramics, Inc. (Firestone), then pending before the RTC of Pasay City.14 On November 14, 2001, this Court rendered a decision in G.R. Nos. 143513 (Polytechnic University of the Philippines v. Court of Appeals) and 143590 (National Development Corporation v. Firestone Ceramics, Inc.),15which declared that the sale to PUP by NDC of the portion leased by Firestone pursuant to Memorandum Order No. 214 violated the right of first refusal granted to Firestone under its third lease contract with NDC. We thus decreed: WHEREFORE, the petitions in G.R. No. 143513 and G.R. No. 143590 are DENIED. Inasmuch as the first contract of lease fixed the area of the leased premises at 2.90118 hectares while the second contract placed it at 2.60 hectares, let a ground survey of the leased premises be immediately conducted by a duly licensed, registered surveyor at the expense of private respondent FIRESTONE CERAMICS, INC., within two (2) months from the finality of the judgment in this case. Thereafter, private respondent FIRESTONE CERAMICS, INC., shall have six (6) months from receipt of the approved survey within which to exercise its right to purchase the leased property at P1,500.00 per square meter, and petitioner Polytechnic University of the Philippines is ordered to reconvey the property to FIRESTONE CERAMICS, INC., in the exercise of its right of first refusal upon payment of the purchase price thereof. SO ORDERED.16 The RTC resumed the proceedings and when mediation and pre-trial failed to settle the case amicably, trial on the merits ensued.17 On November 25, 2004, the RTC rendered its decision upholding the right of first refusal granted to GHRC under its lease contract with NDC and ordering PUP to reconvey the said portion of the property in favor of GHRC. The dispositive portion reads: WHEREFORE, premises considered, judgment is hereby rendered in favor of the plaintiff and against the defendants ordering the plaintiff to cause immediate ground survey of the premises subject of the leased contract under Lease Contract No. C-33-77 and C-12-78 measuring 2,407 and 3,222.8 square meters respectively, by a duly licensed and registered surveyor at the expense of the plaintiff within two months from receipt of this Decision and thereafter, the plaintiff shall have six (6) months from receipt of the approved survey within which to exercise its right to purchase the leased property at P554.74 per square meter. And finally, the defendant PUP, in whose name the property is titled, is hereby ordered to reconvey the aforesaid property to the plaintiff in the exercise of its right of its option to buy or first refusal upon payment of the purchase price thereof. The defendant NDC is hereby further ordered to pay the plaintiff attorney’s fees in the amount of P100,000.00. The case against defendant Executive Secretary is dismissed and this decision shall bind defendant Metropolitan Trial Court, Branch 20 of Manila. With costs against defendants NDC and PUP. SO ORDERED.18 NDC and PUP separately appealed the decision to the CA.19 By Decision of June 25, 2008, the CA affirmed in totothe decision of the RTC.20 Both the RTC and the CA applied this Court’s ruling in Polytechnic University of the Philippines v. Court of Appeals (supra), considering that GHRC is similarly situated as a lessee of NDC whose right of first refusal under the lease contract was violated by the sale of the property to PUP without NDC having first offered to sell the same to GHRC despite the latter’s request for the renewal of the lease and/or to purchase the leased premises prior to the expiration of the second lease contract. The CA further agreed with the RTC’s finding that there was an implied renewal of the lease upon the failure of NDC to act on GHRC’s repeated requests for renewal of the lease contract, both verbal and written, and continuing to accept monthly rental payments from GHRC which was allowed to continue in possession of the leased premises. The CA also rejected the argument of NDC and PUP that even assuming that GHRC had the right of first refusal, said right pertained only to the second lease contract, C-12-78 covering 3,222.80 square meters, and not to the first lease contract, C-33-77 covering 2,407 square meters, which had already expired. It sustained the RTC’s finding that the two (2) lease contracts were interrelated because each formed part of GHRC’s industrial complex, such that business operations would be rendered useless and inoperative if the first contract were to be detached from the other, as similarly held in the aforementioned case of Polytechnic University of the Philippines v. Court of Appeals.

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29 As the option to purchase clause in the second lease contract has no definite period within which the leased premises will be offered for sale to respondent lessee and the price is made subject to negotiation and determined only at the time the option to buy is exercised. respondent can no longer exercise the option to purchase the leased premises when the same were conveyed to PUP pursuant to Memorandum Order No. not to enter into the principal contract with any other person during the period designated. the same did not include the right of first refusal originally granted to respondent. be a sale and/or purchase from one (1) government agency to another.R. [emphasis supplied] 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. when respondent was allowed to continue staying in the leased premises under an implied renewal of the lease and without the right of refusal carried over to such month-to-month lease. 3 .24 Petitioner NDC further faults the CA in sustaining the RTC’s decision which erroneously granted respondent the option to purchase the leased premises at the rate of P554. not of the sale of a property. the price to be negotiated and determined at the time the option to purchase is exercised.23 On its part. long after the expiration of C-33-77 and C-12-78 in September 1988. That respondent was granted a right of first refusal under the second lease contract appears not to have been disputed by petitioners. Nos. We rule in the affirmative. which incidentally appears only in the second lease contract and not in the first lease contract. Lessee shall also have the option to purchase the area leased. 214. or in compliance with certain terms and conditions.28 As distinguished from an option contract. nor was it a price a "willing seller" would demand and accept for parting with his real property. 214 dated January 6.25 The issue to be resolved is whether or not our ruling in Polytechnic University of the Philippines v. as the latter does not share the same pocket. or which gives to the owner of the property the right to sell or demand a sale. Hence.74 per square meter. usually inserted in lease contracts to give the lessee the first crack to buy the property in case the lessor decides to sell the same. What petitioners assail is the CA’s erroneous conclusion that such right of refusal subsisted even after the expiration of the original lease period. Rhoel Mabazza. therefore.271avvphi1 Upon the other hand. but of the first priority to buy the property in the event the owner sells the same. with the beneficiary. The provisions of C-33-77 and C-12-78 clearly state that the lessee is granted the option "to renew for another ten (10) years with the mutual consent of both parties.21 Petitioner PUP further contends that while it is conceded that there was an implied new lease between respondent and petitioner NDC after the expiration of the lease contracts. 1989. 143513 and 143590 (Polytechnic University of the Philippines v. Petitioners’ position is untenable. Court of Appeals applies in this case involving another lessee of NDC who claimed that the option to purchase the portion leased to it was similarly violated by the sale of the NDC Compound in favor of PUP pursuant to Memorandum Order No. while the object might be made determinate. With the implicit renewal of the lease on a monthly basis. As testified to by their witnesses Leticia Cabantog and Atty. that are yet to be firmed up. as appearing on its accounting books. a right of first refusal is a contractual grant. and. merely returning to the petitioner/transferor the cost of acquisition thereof. It must be noted that such consideration or rate was imposed by Memorandum Order No. the same rate for which NDC sold the property to petitioner PUP and/or the National Government. within that period. which is the mere acquisition cost thereof. The provision entitling the lessee the option to purchase the leased premises is not deemed incorporated in the impliedly renewed contract because it is alien to the possession of the lessee. there was no agreement or document to the effect that respondent’s request for extension or renewal of the subject contracts of lease for another ten (10) years was approved by NDC. Respondent cannot favorably invoke the decision in G. In no case should the rentals be increased by more than 100% of the original amount fixed. Magsaysay22 that the lessee cannot any more exercise its option to purchase after the lapse of the one (1)-year period of the lease contract. the impliedly renewed lease was only month-tomonth and not ten (10) years since the rentals are being paid on a monthly basis. as held in Dizon v. who has given the option. cannot be extended to respondent as a private entity.26 It binds the party. when the leased premises were conveyed to PUP. The CA should have applied the ruling in Dizon v. The second lease contract contained the following provision: III. to enter into such contract with the one to whom the option was granted. Magsaysay. 214. with option to renew for another ten (10) years with the mutual consent of both parties. the contracts of lease of respondent with NDC were not mutually extended or renewed for another ten (10) years. in a right of first refusal. It was intended merely as a transfer of one (1) user of the National Government to another. as in this case. including the price. in effect. the exercise of the right of first refusal would be dependent not only on the owner’s eventual intention to enter into a binding juridical relation with another but also on terms. Petitioners thus maintain that no right of refusal was violated by the sale of the property in favor of PUP pursuant to Memorandum Order No. respondent’s right of option to purchase the leased premises was not violated despite the impliedly renewed contract of lease with NDC. it is obviously a mere right of refusal. Court of Appeals)for the simple reason. so to speak. respondent did not any more have any right of first refusal. that unlike in said cases. PUP in this case. 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. among others. the other terms of the original contract of lease which are revived in the implied new lease under Article 1670 of the Civil Code are only those terms which are germane to the lessee’s right of continued enjoyment of the property leased. Such benefit. with the National Government. if the latter should decide to use the option. petitioner NDC assails the CA in holding that the contracts of lease were impliedly renewed for another ten (10)-year period." As regards the continued receipt of rentals by NDC and possession by the respondent of the leased premises. 214 under the premise that it shall.Petitioner PUP argues that respondent’s right to exercise the option to purchase had expired with the termination of the original contract of lease and was not carried over to the subsequent implied new lease between respondent and petitioner NDC. It is mutually agreed by the parties that this Contract of Lease shall be in full force and effect for a period of ten (10) years counted from the effectivity of the payment of rental as provided under sub-paragraph (b) of Article I. Thus. Consequently. or under. It does not in any way reflect the true and fair market value of the property.

it is clear that NDC violated respondent’s right of first refusal. Respondent thus timely exercised its option to purchase on August 12. Jake C. reviewing a proposed memorandum order submitted to President Corazon C. 1989. or under terms and conditions more favorable to the lessor. paragraph (b) of C-12-78. Henson dated 15 July 1988 addressed to Mr. 1988 HON.31 Such contention does not hold water. however. or on October 1."32 Perusal of the letter dated August 12. 1989 which is prior to the issuance of Memorandum Order No. the lessee. employ not less than 300 employees and contribute even foreign earnings. 214 on January 6. respondent’s lease contracts had already expired (September 1988) at the time said memorandum order was issued. belies such claim of petitioner NDC that it was merely informative. 1978). Director and Special Assistant to Executive Secretary Catalino Macaraeg. considering that NDC had been negotiating through the National Government for the sale of the property in favor of PUP as early as July 15. The date of the expiration of the lease contract in said case is December 31. 1988 becomes irrelevant since at the time of the negotiations of the sale to a third party. Under the premises. respondent’s right of first refusal was still subsisting.that is. 1989 but the commencement of such negotiations as early as July 1988 when respondent’s right of first refusal was still subsisting and the lease contracts still in force. as provided in Art. is different because the lease contract therein had not yet expired while in this case respondent’s lease contracts have already expired and never renewed. 1988. including the premises leased by respondent. 1988 formally advising your goodselves of our intention to exercise our option for another ten (10) years. respondent adduced in evidence a letter of Antonio A. 214 on January 6. and a request at its best. an opportunity to recoup our investments and obtain a fair return thereof. in favor of petitioner PUP. TIU HAN TENG President33 4 .When a lease contract contains a right of first refusal. we also request for priority to negotiate for its purchase at terms and/or conditions mutually acceptable. ANTONIO HENSON General Manager NATIONAL DEVELOPMENT COMPANY 377 Se(n). the lessor has the legal duty to the lessee not to sell the leased property to anyone at any price until after the lessor has made an offer to sell the property to the lessee and the lessee has failed to accept it. the matter of the right of refusal not having been carried over to the impliedly renewed month-to-month lease after the expiration of the second lease contract on October 21. thus: August 12. one hundred and fifty (150) days from the signing of the contract (May 4. As a backgrounder. Petitioner NDC in its memorandum contended that the CA erred in applying the ruling in Polytechnic University of the Philippines v. as well as provide ourselves. Petitioner NDC had dismissed these letters as "mere informative in nature. Should the National Development Company opt to sell the property covered by said leases. C-33-77 & C-12-78 Dear Sir: This is further to our earlier letter dated June 13. nor to the subsequent letter of August 12. 1988. As already mentioned. very truly yours. petitioner PUP. Metro Manila REF: Contract of Lease Nos. Gil J. It is in this context that we are requesting for the extension of the lease contract to prevent serious economic disruption and dislocation of the business concerns. Court of Appeals pointing out that the case of lessee Firestone Ceramics. This letter was offered in evidence by respondent to prove the existence of documents as of that date and even prior to the expiration of the second lease contract or the lapse of the ten (10)-year period counted from the effectivity of the rental payment -. we have improved on the property by constructing bodega-type buildings which presently house all legitimate trading and manufacturing concerns. 1988 without first offering to sell it to respondent and even when respondent communicated its desire to exercise the option to purchase granted to it under the lease contract. Petitioner NDC did not bother to respond to respondent’s letter of June 13. However. Only after the lessee has failed to exercise his right of first priority could the lessor sell the property to other buyers under the same terms and conditions offered to the lessee. Aquino transferring the whole NDC Compound.30 Records showed that during the hearing on the application for a writ of preliminary injunction. Your favorable consideration on our request will be very much appreciated. Puyat Avenue Makati. 1988 informing it of respondent’s exercise of the option to renew and requesting to discuss further the matter with NDC. 1988. 1988 reiterating the request for renewing the lease for another ten (10) years and also the exercise of the option to purchase under the lease contract. Inc. Lagonera. I. the reckoning point of the offer of sale to a third party was not the issuance of Memorandum Order No. we wish to inform you that since the start of our lease. In contrast. These business are substantial taxpayers.

00 per square meter actual value of NDC’s property at that time it was sold to PUP atP554. wanted to be assured that it would be given the first opportunity to buy the property at a price for which it would be offered. it would have been more proper for the courts below to have ordered the sale of the property also at the same price. as follows: It now becomes apropos to ask whether the courts a quo were correct in fixing the proper consideration of the sale at P1. Petitioners submitted a sketch plan and pictures taken of the driveways. Thus. To prove that petitioner NDC had considered the leased premises as a single unit. Court of Appeals in the case of respondent who was similarly prejudiced by petitioner NDC’s sale of the property to PUP.500. Alejandro E. which was pegged by the RTC at P554. It is a settled principle in civil law that when a lease contract contains a right of first refusal.39 [emphasis supplied] In the light of the foregoing. and that the two (2) lease contracts are distinct from each other. Mayfair Theater. the right of first refusal is an integral and indivisible part of the contract of lease and is inseparable from the whole contract. It appearing that the whole NDC compound was sold to PUP for P554.74 per square meter. the lessee is in effect stating that it consents to lease the premises and to pay the price agreed upon provided the lessor also consents that. Engr.38 the execution of such right consists in directing the grantor to comply with his obligation according to the terms at which he should have offered the property in favor of the grantee and at that price when the offer should have been made. should be bound by such determination.. inasmuch as the stipulation is part and parcel of the contract of lease making the consideration for the lease the same as that for the option. would serve as license for us. who supervised the construction of the structures on the leased premises. Inc. The consideration for the right is built into the reciprocal obligations of the parties." Thus: . However. While education may be 5 . then. we sustain the RTC and CA in finding that the second contract.80 square meters. should be adjusted to P1. In entering into the contract.407 square meters. We then determined the proper rate at which the leased portion should be reconveyed to respondent by PUP. it was then implicit for NDC to have first offered the leased premises of 2. Consistent with their agreement. Accordingly. the CA was correct in declaring that there exists no justifiable reason not to apply the same rationale inPolytechnic University of the Philippines v. again. and following an earlier ruling in Equatorial Realty Development. in view of the total amount of its investments in the property.00 per square meter.37 [emphasis supplied] As we further ruled in the afore-cited case.As to petitioners’ argument that respondent’s right of first refusal can be invoked only with respect to the second lease contract which expressly provided for the option to purchase by the lessee. basic is the rule that a party to a contract cannot unilaterally withdraw a right of first refusal that stands upon valuable consideration. as found by the courts a quo. the lessor is under a legal duty to the lessee not to sell to anybody at any price until after he has made an offer to sell to the latter at a certain price and the lessee has failed to accept it. Since the stipulation forms part of the entire lease contract. Thus Should the LESSOR desire to sell the leased premises during the term of this Agreement. the contractual grant of a right of first refusal is enforceable. It is to be noted that Memorandum Order No. Tinio. as to entitle the respondent to exercise its option to purchase until October 1988 inasmuch as the May 4. The structures built on the leased premises. invoked by petitioner PUP in the Firestone case. XV of their third contract denominated as A-10-78 executed on 22 December 1978 which. respondent submitted evidence showing that NDC issued only one (1) receipt for the rental payments for the two portions. the basis of the right of first refusal must be the current offer of the seller to sell or the offer to purchase of the prospective buyer.34 Such was a desperate attempt to downplay the commercial purpose of respondent’s substantial improvements which greatly contributed to the increased value of the leased premises.500. to show the building concept as a one-stop industrial site and integrated commercial complex. then we see no compelling reason to modify the holdings of the courts a quo that the leased premises be sold at that price. 214 itself declared that the transfer is "subject to such liens/leases existing [on the subject property]. and any party for that matter.40 We have categorically ruled that it is not correct to say that there is no consideration for the grant of the right of first refusal if such grant is embodied in the same contract of lease. while on the other hand it admitted that the value of the property stood at P1.00 per square meter. should it sell the leased property. v. is interrelated to and inseparable from the first contract over 2. form part of an integrated system of a commercial complex leased out to manufacturers. which shall have the right of first option to purchase the leased premises subject to mutual agreement of both parties. and not in the first lease contract which contained no such clause.35 Respondent further presented the blueprint plan prepared by its witness.222.we now proceed to determine whether FIRESTONE should be allowed to exercise its right of first refusal over the property.74 per square meter. covering an area of 3. 1978 contract embodied the option to renew the lease for another ten (10) years upon mutual consent and giving respondent the option to purchase the leased premises for a price to be negotiated and determined at the time such option was exercised by respondent. to destroy the sanctity of binding obligations.74 per square meter.36 In fine. Only if FIRESTONE failed to exercise its right of first priority could NDC lawfully sell the property to petitioner PUP. which did not offer any amount to petitioner NDC. andneither disputed the P1. to whom the lessor NDC sold it in violation of respondent lessee’s right of first refusal. or any extension thereof. since FIRESTONE never raised this as an issue. we hold that respondent. Inc. the price at which the leased premises should be sold to respondent in the exercise of its right of first refusal under the lease contract with petitioner NDC. In contracts of sale. the LESSOR shall first give to the LESSEE. fabricators and other businesses. The lessee has a right that the lessor’s first offer shall be in his favor..500. Indeed. the consideration for the lease includes the consideration for the grant of the right of first refusal. which are adjacent to each other. Such right was expressly stated by NDC and FIRESTONE in par. Only after the lessee-grantee fails to exercise its right under the same terms and within the period contemplated can the owner validly offer to sell the property to a third person.500. the lessee shall be given the right to match the offered purchase price and to buy the property at that price. as duly considered by this Court in the Firestone case. The option in this case was incorporated in the contracts of lease by NDC for the benefit of FIRESTONE which.60 hectares to FIRESTONE prior to the sale in favor of PUP. In the instant case. in an effort to show that the leased premises can be used separately by respondent. it is not correct for petitioners to insist that there was no consideration paid by FIRESTONE to entitle it to the exercise of the right.41 We have further stressed that not even the avowed public welfare or the constitutional priority accorded to education.. under the same terms as offered to the grantee.00 per square meter. which more accurately reflects its true value at that time of the sale in favor of petitioner PUP. was interrelated to and inseparable from their first contract denominated as C-30-65 executed on 24 August 1965 and their second contract denominated as C-26-68 executed on 8 January 1969.

TROPICANA PROPERTIES AND DEVELOPMENT CORPORATION AND STANDARD REALTY CORPORATION. MARTIN S. the petitions are DENIED. CIRILOS. 6 . PUNO Chief Justice TERESITA J. no reversible error was committed by the CA in sustaining respondent’s contractual right of first refusal and ordering the reconveyance of the leased portion of petitioner NDC’s property in its favor. 2004 of the Regional Trial Court of Makati City. Mr. as affirmed by the Court of Appeals in its Decision dated June 25. 84399. offering to buy three contiguous parcels of land in Parañaque that The Holy See and Philippine Realty Corporation (PRC) owned for P1. Domingo A. 88-2238."[1] He undertook to pay the balance of the purchase price upon presentation of the title for transfer and once the property has been cleared of its occupants. and Mrs. 1988 Ramon Licup wrote Msgr. REYNATO S. Associate Justice WE CONCUR: REYNATO S. No. Msgr.R. Cirilos on April 26.000. Cirilos. is hereby AFFIRMED with MODIFICATION in that the price to be paid by respondent Golden Horizon Realty Corporation for the leased portion of the NDC Compound under Lease Contract Nos. DECISION ABAD. INC. PETITIONER. representing The Holy See and PRC.240. No pronouncement as to costs. Branch 144 in Civil Case No.42 Clearly.R. 2008 in CA-G. requesting that the titles to the land be instead transferred to petitioner Starbright Sales Enterprises. But the check could not be encashed due to Licup's stop-order payment. MSGR. 2012] STARBRIGHT SALES ENTERPRISES. Cu. J. did not sign the letter. it is doubtful if such importance can be used to confiscate private property such as the right of first refusal granted to a lessee of petitioner NDC. DOMINGO A. I certify that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Court’s Division.: The present case involves a determination of the perfection of contract of sale.. BERSAMIN Associate Justice CERTIFICATION Pursuant to Section 13. CV No. VS. C-3377 and C-12-78 is hereby increased to P1. Inc.00 per square meter. SSE's representatives. Licup wrote Msgr.00 per square meter. LEONARDO-DE CASTRO Associate Justice THIRD DIVISION [G. JR. He enclosed a new check for the same amount. WHEREFORE. RESPONDENTS. (SSE). Cirilos. PUNO Chief Justice Chairperson CONCHITA CARPIO MORALES Associate Justice LUCAS P. signed his name on the conformeportion of the letter and accepted the check. 1988.500. VILLARAMA. The Decision dated November 25. Licup accepted the responsibility for removing the illegal settlers on the land and enclosed a check for P100. PHILIPPINE REALTY CORPORATION.prioritized for legislative and budgetary purposes. The Facts and the Case On April 17. January 18.00 to "close the transaction. Article VIII of the 1987 Constitution. SO ORDERED. 177936.

the Parañaque RTC treated the April 17. In its Decision of February 14. and (3) the cause of the obligation which is established. against The Holy See. The Issue Presented The only issue in this case is whether or not the CA erred in holding that no perfected contract of sale existed between SSE and the land owners."[2] It would be willing to comply with Msgr. 1988 to Msgr. Cirilos made no unconditional acceptance that would give rise to a perfected contract. PRC. As to the P100. Cirilos constituted a perfected contract. Since such agreement was wanting. the representative of the property's owners." His offer to rid the land of its occupants was a "mere gesture of accommodation if only to expedite the transfer of its title. Cirilos affixed his signature on that letter. 1988 letter between Licum and Msgr. The Court's Ruling Three elements are needed to create a perfected contract: 1) the consent of the contracting parties. Cirilos and that the next thing they knew. Its demand for rescission unheeded.On November 29. claiming that as a foreign government. Cirilos would return to it the P100. consequently. it cannot be sued without its consent.[6] Under the law on sales. The CA held that no perfected contract can be gleaned from the April 17. 1996 the case was transferred to the Parañaque RTC.00 in his letter as refund of what he earlier received. On appeal to the Court of Appeals (CA)."[4] Further. should it decide not to do this. Msgr. 2007. Msgr. 1989 Msgr. constituted a perfected contract. The Court believes that the April 17. The Holy See sought dismissal of the case against it. Cirilos. the latter rendered judgment on November 10.00 to "close the transaction. 1989 SSE demanded rescission of that sale. On January 26. Cirilos. 2000." He said that other buyers were willing to acquire the property on an "as is." The CA denied SSE's motion for reconsideration on May 2. SSE claimed that it got no reply from Msgr. the CA considered it an option money that secured for SSE only the privilege to buy the property even if Licup called it a "deposit. 1989 SSE replied with an "updated proposal. over which the latter agrees. Msgr. Cirilos. 1988 letter between Licup and Msgr.150. And. Cirilos wrote back.000. a contract of sale is perfected when the seller. SSE claimed that.400. By Order of January 26. Cirilos' condition provided the purchase price is lowered to P1. 1992. Cirilos acted in bad faith when he set the price of the property at P1. 1989 SSE wrote Msgr. 1988 letter that SSE had relied on. Cirilos.000. and Tropicana Properties in Civil Case 90-183. on August 4. SSE amended its complaint on February 24. Indeed. Cirilos would take it that SSE has lost interest in the same.68 per square meter. On February 4. to deliver and to transfer ownership of a thing or right to the buyer. 1994. Msgr. SSE alleged that Licup's original letter of April 17. where is" basis at P1.00 per square meter. 1988 Msgr.00 per square meter when in truth. Cirilos show that the parties were grappling with the terms of the sale. the subsequent exchange of letters between SSE and Msgr. 1989 Tropicana Properties sold the three parcels of land to Standard Realty. for a price certain. Cirilos that they already had a perfected contract of sale in the April 17. he expressed his conformity to the terms of Licup's offer appearing on it. impleading Standard Realty as additional defendant. Cirilos attempted to change the terms of contract and return SSE's initial deposit but the parties reached no agreement regarding such change.[7] From that moment. On January 24. obligates himself. When Msgr. There was 7 . otherwise. Cirilos as a perfected contract of sale between the parties. The RTC held otherwise but. Msgr. 1988 letter which he signed and that. he could no longer impose amendments such as the removal of the informal settlers at the buyer's expense and the increase in the purchase price.00 per square meter. on the other hand. requesting it to remove the occupants on the property and. He gave SSE seven days within which to buy the property at P1. On May 15. the parties may demand reciprocal performance. He enclosed a check for P100.000.00 that he received. 1988 letter continued to bind the parties. Msgr.00 per square meter. Meanwhile. (2) an object certain which is the subject matter of the contract. Branch 61. rejecting the "updated proposal. Licup even gave an earnest money of P100. that based on their exchange of letters. represented by Msgr. on December 1.[5] reversing the Parañaque RTC decision.400. only after the negotiations between them fell through did he sell the land to Tropicana Properties. 2006. the land had been sold to Tropicana Properties on March 30.00 given to Msgr. no contract of sale was perfected between SSE and the parties he represented. 1989. SSE filed a complaint for annulment of sale and reconveyance with damages before the Regional Trial Court (RTC) of Makati. the property was sold to Tropicana Properties for only P760. Branch 258. Cirilos maintained. Cirilos wrote SSE.[3] the Court reversed the ruling of the RTC and ordered the case against The Holy See dismissed.400. the original terms provided in the April 17. Msgr.000. in representing The Holy See and PRC.

1988 letter to Msgr. Velasco. CORONEL. 2) an agreement of all parties concerned to a new contract. Cirilos as "deposit" cannot be considered as earnest money. DECISION MELO. respondents. The proposed substitution of Licup by SSE opened the negotiation stage for a new contract of sale as between SSE and the owners. As it turned out. and Msgr. 1988 letter upon the owners. The P100. JJ. CONCEPCION D.one is to extinguish an existing obligation. Cirilos did not act in bad faith when he sold the property to Tropicana even if it was for a lesser consideration. impose the terms Licup stated in his April 17. CORONEL. Licup and Msgr. regarded SSE's first letter to Msgr. J."[11] This proposal took up two issues: which party would undertake to evict the occupants on the property and how much must the consideration be for the property. Cirilos dated April 17.: 8 .00 that was given to Msgr. SSE cannot revert to the original terms stated in Licup's letter to Msgr. Jr.[12] Earnest money applies to a perfected sale. 1996] ROMULO A. CORONEL. These are clear indications that there was no meeting of the minds between the parties.000. 103577. thus producing no perfected sale between them. SO ORDERED. on the other hand. Where the parties merely exchanged offers and counter-offers. NOEL as attorney-infact. the parties reached no consensus regarding these issues. therefore. THE COURT OF APPEALS.[13] Petitioner SSE cannot. a subjective novation took place. No. Tupper.. 1988 since it was not privy to such contract. as attorney-in-fact).R.petitioners.. It is not improbable for prospective buyers to offer to buy the property during that time. FLORAIDA A. The parties to it were Licup and Msgr. concur. (Chairperson). ALMONTE.meeting of the minds as to the object and consideration of the contract. Cirilos affixed their signatures on the original agreement embodied in Licup's letter of April 26.requiring concurrence of four requisites: 1) a previous valid obligation. CORONEL. THIRD DIVISION [G.R.[8] Novation serves two functions . GONZALES (for herself and on behalf of Floraida C. The succeeding exchange of letters between Mr. ALCARAZ and RAMONA PATRICIA ALCARAZ. Mendoza. It cannot favor or prejudice a third person. Msgr. Cirilos attests to an unfinished negotiation. assisted by GLORIA F. Cirilos. WHEREFORE. 2006 in CA-G. ALARICO A. and Perlas-Bernabe. Cirilos referred to his discussion with SSE regarding the purchase as a "pending transaction. No similar letter agreement can be found between SSE and Msgr. October 7. Parenthetically. Stephen Cu. ANNETTE A.[9] Notably. 3) the extinguishment of the old obligation. Cirilos that the property be instead transferred to SSE. CV 67366. Msgr. 1989. ANNABELLE C. To accomplish a subjective novation through change in the person of the debtor. no contract is perfected since they did not yet give their consent to such offers. the Court DISMISSES the petition and AFFIRMS the Court of Appeals Decision dated November 10. A subjective novation results through substitution of the person of the debtor or through subrogation of a third person to the rights of the creditor. Under the principle of relativity of contracts. and 4) the birth of a valid new obligation. Peralta. But when Licup ordered a stop-payment on his deposit and proposed in his April 26."[10] Cu. vs. 1988. the old debtor needs to be expressly released from the obligation and the third person or new debtor needs to assume his place in the relation. SSE's representative. Cirilos. contracts can only bind the parties who entered into it. the other to substitute a new one in its place . Cirilos as an "updated proposal. and CATALINA BALAIS MABANAG. More than a month had passed since the last communication between the parties on February 4. CIELITO A.

“F”. Catalina caused the annotation of a notice of adverse claim covering the same property with the Registry of Deeds of Quezon City (Exh.00) pesos upon execution of the document aforestated. 327043 to intervenor-appellant Catalina B.000.000. The undisputed facts of the case were summarized by respondent court in this wise: On January 19. Exh.000. 1985. “7”). Mabanag (hereinafter referred to as Catalina) for One Million Five Hundred Eighty Thousand (P1. On the same date (January 15.000. Exh. 119627 of the Registry of Deeds of Quezon City. Quezon City.000.240. We bind ourselves to effect the transfer in our names from our deceased father. 2. mother of Ramona. (hereinafter referred to as Coronels) executed a document entitled “Receipt of Down Payment” (Exh.00. Alcaraz (hereinafter referred to as Concepcion). 1985. Ramona will make a down payment of Fifty Thousand (P50.00.00) Pesos (Exh.000. On April 2. (Rollo. 3.000.00) Pesos. 1985. “2”). “G”. 327043 (Exh. the Coronels will execute the deed of absolute sale in favor of Ramona and the latter will pay the former the whole balance of One Million One Hundred Ninety Thousand (P1. “5”). in the total amount of P1. paid the down payment of Fifty Thousand (P50.000.Balance Received from Miss Ramona Patricia Alcaraz of 146 Timog. 1985).190. Exh. 1985. “A”) with Ramona by depositing the down payment paid by Concepcion in the bank in trust for Ramona Patricia Alcaraz. filed a complaint for a specific performance against the Coronels and caused the annotation of a notice of lis pendens at the back of TCT No.00) Pesos after the latter has paid Three Hundred Thousand (P300. Clearly.190. “F-3”. “B”. Catalina Balais Mabanag) to consummate the sale of a parcel of land with its improvements located along Roosevelt Avenue in Quezon City entered into by the parties sometime in January 1985 for the price of P1. the transfer certificate of title immediately upon receipt of the down payment above-stated. al. We will immediately execute the deed of absolute sale of said property and Miss Ramona Patricia Alcaraz shall immediately pay the balance of the P1.The petition before us has its roots in a complaint for specific performance to compel herein petitioners (except the last named. “E”.000. Exh “4”) On February 18. Concepcion.240.00 . On February 22.240. the Coronels sold the property covered by TCT No.00 . On our presentation of the TCT already in or name. On April 25. 134-136) 9 . Exh. Upon the transfer in their names of the subject property. plaintiff-appellee Concepcion D. On February 6.580.000. the property originally registered in the name of the Coronel’s father was transferred in their names under TCT No. 1985. “8”). “A”) in favor of plaintiff Ramona Patricia Alcaraz (hereinafter referred to as Ramona) which is reproduced hereunder: RECEIPT OF DOWN PAYMENT P1. covered by TCT No. et. the sum of Fifty Thousand Pesos purchase price of our inherited house and lot. Exh. 1985.000. Constancio P. the Coronels executed a Deed of Absolute Sale over the subject property in favor of Catalina (Exh. Coronel.000. “6”).190. “6-C”) For this reason. defendants-appellants Romulo Coronel. Coronels canceled and rescinded the contract (Exh..00 .00) Pesos down payment. Exh. 327403 (Exh.00. al.00) Pesos (Exhs. “H”. 351582 (Exh. “D”. 1985.Total amount 50. a new title over the subject property was issued in the name of Catalina under TCT No.Down payment -----------------------------------------P1. the conditions appurtenant to the sale are the following: 1. The Coronels will cause the transfer in their names of the title of the property registered in the name of their deceased father upon receipt of the Fifty Thousand (P50. On June 5. pp. et.

Coming now to the twin prayer for reconsideration of the Decision dated March 1. (Rollo. they were deemed to have acquiesced thereto and they are now estopped from questioning said authority of Judge Roura after they received the decision in question which happens to be adverse to them. he did not lose his authority to decide or resolve cases submitted to him for decision or resolution because he continued as Judge of the Regional Trial Court and is of co-equal rank with the undersigned Presiding Judge. Pampanga for the Quezon City branch. The heart of the controversy which is the ultimate key in the resolution of the other issues in the case at bar is the precise determination of the legal significance of the document entitled “Receipt of Down Payment” which was offered in evidence by both parties. On March 1. While we deem it necessary to introduce certain refinements in the disquisition of respondent court in the affirmance of the trial court’s decision. 1989. 331582) of the Registry of Deeds for Quezon City. (2) When the defendants and intervenor did not object to the authority of Judge Reynaldo Roura to decide the case prior to the rendition of the decision. as well as the counterclaims of defendants and intervenors are hereby dismissed. then defendants (now petitioners) accordingly offered and marked them as Exhibits “1” through “10”. plaintiffs therein (now private respondents) proffered their documentary evidence accordingly marked as Exhibits “A” through “J”. he was in all respects the Presiding Judge with full authority to act on any pending incident submitted before this Court during his incumbency. No pronouncement as to costs.190. we definitely find the instant petition bereft of merit. Upon motion of the parties. Plaintiffs’ claim for damages and attorney’s fees. SO ORDERED. who was then temporarily detailed to preside over Branch 82 of the RTC of Quezon City. 1992.) rendered its decision fully agreeing with the trial court. RTC. Thus. The standing rule and supported by jurisprudence is that a Judge to whom a case is submitted for decision has the authority to decide the case notwithstanding his transfer to another branch or region of the same court (Sec. the Court of Appeals (Buena. 1989. the “Motion for Reconsideration and/or to Annul Decision and Render Anew Decision by the Incumbent Presiding Judge” dated March 20. The fact that they were allowed to file memoranda at some future date did not change the fact that the hearing of the case was terminated before Judge Roura and therefore the same should be submitted to him for decision. p. 1991. 1989 is supported by evidence and. There is no dispute as to the fact that the 10 . likewise inclusive of their corresponding submarkings.. (3) While it is true that Judge Reynaldo Roura was merely a Judge-ondetail at this Branch of the Court. after a meticulous examination of the documentary evidence presented by the parties. the trial court gave them thirty (30) days within which to simultaneously submit their respective memoranda. was filed on September 15. private respondents’ Reply Memorandum. 1989 is hereby DENIED. Pampanga. therefore. thusly: The prayer contained in the instant motion. i. the case was submitted for resolution before Judge Reynaldo Roura. Pampanga for Quezon City. when they met for the first time before the undersigned Presiding Judge at the hearing of a pending incident in Civil Case No. July 12. 331582 of the Registry of Deeds for Quezon City in the name of intervenor is hereby canceled and declared to be without force and effect. Gonzaga-Reyes. to immediately deliver the said document of sale to plaintiffs and upon receipt thereof. When he returned to his Official Station at Macabebe. 1989. the plaintiffs are ordered to pay defendants the whole balance of the purchase price amounting toP1. Transfer Certificate of Title No. 1989 rendered in the instant case.00 in cash. Quezon City. however.000. Hence. 1993. judgment for specific performance is hereby rendered ordering defendant to execute in favor of plaintiffs a deed of absolute sale covering that parcel of land embraced in and covered by Transfer Certificate of Title No. to annul the decision and to render anew decision by the undersigned Presiding Judge should be denied for the following reasons: (1) The instant case became submitted for decision as of April 14. JJ. On April 14. Adopting these same exhibits as their own. 1988 when the parties terminated the presentation of their respective documentary evidence and when the Presiding Judge at that time was Judge Reynaldo Roura. and an additional 15 days within which to submit their corresponding comment or reply thereto. due to the voluntary inhibition of the Justice to whom the case was last assigned. the instant petition which was filed on March 5. (Rollo. re-raffled to undersigned ponente only on August 28.In the course of the proceedings before the trial court (Branch 83. resolution of which now pertains to the undersigned Presiding Judge. 1988. IN VIEW OF THE FOREGOING. March 1. Q-46145 on November 11. 108-109) Petitioners thereupon interposed an appeal. Macabebe. the case would be deemed submitted for resolution. 1996. Rule 135. 327403 (now TCT No. pp. Estrada. The last pleading. she is convinced that the Decision of March 1. Philippines. but on December 16. The case was.e. disposing as follows: WHEREFORE. and once accomplished. together with all the improvements existing thereon free from all liens and encumbrances. should not be disturbed. 9. 1988. inclusive of their corresponding submarkings. Quezon City) the parties agreed to submit the case for decision solely on the basis of documentary exhibits. Rule of Court). 106) A motion for reconsideration was filed by petitioners before the new presiding judge of the Quezon City RTC but the same was denied by Judge Estrella T. after which. Defendants and intervenor and all other persons claiming under them are hereby ordered to vacate the subject property and deliver possession thereof to plaintiffs. Abad-Santos (P). So Ordered. judgment was handed down by Judge Roura from his regular bench at Macabebe.

1305. In a contract to sell. it is the position of private respondents that the “Receipt of Down Payment” embodied a perfected contract of sale. and the heirs of Constancio P. the prospective seller does not as yet agree or consent to transfer ownership of the property subject of the contract to sell until the happening of an event. 1479. this Court. upon the fulfillment of the suspensive condition which is the full payment of the purchase price. but the latter. is a consensual contract because it is perfected by mere consent. 119627. Determinate subject matter. the non-fulfillment of which prevents the obligation to sell from arising and thus. but to a third person. a Contract to Sell may not be considered as a Contract of Sale because the first essential element is lacking. meaning. Sale. and Price certain in money or its equivalent. In Roque vs. that is. petitioners on their part insist that what the document signified was a mere executory contract to sell. because in a conditional contract of sale. A promise to buy and sell a determinate thing for a price certain is reciprocally demandable. the first element of consent is present. of course. Stated positively. to give something or to render some service. In other words the full payment of the purchase price partakes of a suspensive condition. 133 SCRA 777 [1984]). The Civil Code defines a contract of sale. which perforce. said contract could not possibly ripen into a contract of absolute sale. 1458. Lapuz (96 SCRA 741 [1980]). binds himself to sell the said property exclusively to the prospective buyer upon fulfillment of the condition agreed upon. such that if there had already been previous delivery of the property subject of the sale to the buyer. An accepted unilateral promise to buy or to sell a determinate thing for a price certain is binding upon the promissor of the promise is supported by a consideration distinct from the price. there being no previous sale of the property. a third person buying such property despite the fulfillment of the suspensive condition such as the full payment of the purchase price. the prospective seller’s obligation to sell the subject property by entering into a contract of sale with the prospective buyer becomes demandable as provided in Article 1479 of the Civil Code which states: Art. thus: Art. which for present purposes we shall take as the full payment of the purchase price. ownership is retained by the prospective seller without further remedies by the prospective buyer. A contract is a meeting of minds between two persons whereby one binds himself. may not even be considered as a conditional contract of sale where the seller may likewise reserve title to the property subject of the sale until the fulfillment of a suspensive condition. the prospective seller explicitly reserves the transfer of title to the prospective buyer. What the seller agrees or obliges himself to do is to fulfill his promise to sell the subject property when the entire amount of the purchase price is delivered to him. It is essential to distinguish between a contract to sell and a conditional contract of sale specially in cases where the subject property is sold by the owner not to the party the seller contracted with. In a contract to sell. Alcaraz. If the suspensive condition is not fulfilled. However. Homesite and Housing Corp. full payment of the purchase price. and because of the absence of Ramona P. such variance in the contending parties’ contention is brought about by the way each interprets the terms and/or conditions set forth in said private instrument. although it is conditioned upon the happening of a contingent event which may or may not occur. There is no double sale in such case. such payment being a positive suspensive condition and failure of which is not a breach. is now called upon to adjudge what the real intent of the parties was at the time the said document was executed. casual or serious. subject to certain suspensive conditions. Title to the property will transfer to the buyer after registration because there is no defect in the owner-seller’s title per se. We hold that the contract between the petitioner and the respondent was a contract to sell where the ownership or title is retained by the seller and is not to pass until the full payment of the price. The essential elements of a contract of sale are the following: a) b) c) Consent or meeting of the minds. with respect to the other. consent to transfer ownership in exchange for the price. ownership thereto automatically transfers to the buyer by operation of law without any further act having to be performed by the seller. by its very nature. that is. pertaining to a particular house and lot covered by TCT No. they seek to enforce by means of an action for specific performance. while expressly reserving the ownership of the subject property despite delivery thereof to the prospective buyer. By the contract of sale one of the contracting parties obligates himself to transfer the ownership of and to deliver a determinate thing. A contract to sell as defined hereinabove. for instance. who left for the United States of America. The prospective seller still has to convey title to the prospective buyer by entering into a contract of absolute sale. Coronel on the other. but simply an event that prevented the obligation of the vendor to convey title from acquiring binding force. if the suspensive condition is fulfilled. the perfection of the contract of sale is completely abated (cf. and the other to pay therefor a price certain in money or its equivalent. In a contract to sell. While. cannot be deemed a buyer in bad faith and the prospective buyer cannot seek the relief of reconveyance of the property. may be sued for damages by the intending buyer. the contract of sale is thereby perfected. vs. as defined in Article 1305 of the Civil Code of the Philippines which reads as follows: Art. upon the fulfillment of the suspensive condition which is the full payment of the purchase price. this Court had occasion to rule: Hence. as in the case at bench. Under this definition. based on whatever relevant and admissible evidence may be available on record.said document embodied the binding contract between Ramona Patricia Alcaraz on the one hand. ownership will not automatically transfer to the buyer although the property may have been previously delivered to him. Plainly. Court of Appeals. 11 . as were the courts below. Withal. A contract to sell may thus be defined as a bilateral contract whereby the prospective seller.

to the latter and to execute the deed of absolute sale whereupon. the respective obligations of the parties under the contract of sale became mutually demandable. 1199627 of the Registry of Deeds of Quezon City.00. as sellers.190. the conditional contract of sale between petitioners and private respondent Ramona P. which petitioners unequivocally committed themselves to do as evidenced by the “Receipt of Down Payment. Thus. the sellers were the ones who were unable to enter into a contract of absolute sale by reason of the fact that the certificate of title to the property was still in the name of their father. as well as the extinguishment or loss of those already acquired.. was obliged to forthwith pay the balance of the purchase price amounting to P1. if there had been previous delivery of the subject property. 1985.000. The Court significantly notes that this suspensive condition was. In conditional obligations. As soon as the new certificate of title is issued in their names.000. plainly applies to the case at bench. in turn. petitioners conclusively admitted that: 12 . they could not fully effect such transfer although the buyer was then willing and able to immediately pay the purchase price. the acquisition of rights.000. Such second buyer cannot defeat the first buyer’s title. it becomes more manifest that there was a clear intent on the part of petitioners to transfer title to the buyer. al. Thus. petitioners. “D”. as it were. the parties had agreed to a conditional contract of sale. we now proceed to the task of deciphering the real nature of the contract entered into by petitioners and private respondents. to execute the written deed of absolute sale. however. 212 SCRA 586 [1992]). Since the condition contemplated by the parties which is the issuance of a certificate of title in petitioner’s names was fulfilled on February 6. were obliged to present the transfer certificate of title already in their names to private respondent Ramona P. Constancio P. completely willing to transfer ownership of the subject house and lot to the buyer if the documents were then in order. and to immediately execute the deed of absolute sale. that the transfer certificate of title was then still in the name of their father. In case a title is issued to the second buyer. Thus. pay the entire balance of the purchase price. Applying Article 1544 of the Civil Code. promised to sell the property to the latter. the sum of Fifty Thousand Pesos purchase price of our inherited house and lot. had the certificate of title been in the names of petitioners-sellers at that time. Coronel. the natural and ordinary idea conveyed is that they sold their property. Therefore. they undertook to have the certificate of title change to their names and immediately thereafter. It is also significant to note that in the first paragraph in page 9 of their petition. so to speak. What may be perceived from the respective undertakings of the parties to the contract is that petitioners had already agreed to sell the house and lot they inherited from their father. Under the established facts and circumstances of the case. the execution of an contract of absolute sale. the buyer. Alcaraz. In fact. to their names. There is no doubt that unlike in a contract to sell which is most commonly entered into so as to protect the seller against a buyer who intends to buy the property in installment by withholding ownership over the property until the buyer effects full payment therefor. having already agreed to sell the subject property. Furthermore. Quezon City. the Court may safely presume that. there would have been no reason why an absolute contract of sale could not have been executed and consummated right there and then. in the contract entered into in the case at bar. petitioners were committed to immediately execute the deed of absolute sale. without any reservation of title until full payment of the entire purchase price. in correlation with Article 1181. in the total amount of P1. 1181. or at least was charged with the obligation to discover such defect. when petitioners declared in the said “Receipt of Down Payment” that they -Received from Miss Ramona Patricia Alcaraz of 146 Timog. the seller’s ownership or title to the property is automatically transferred to the buyer such that. Art. consummation of which is subject only to the successful transfer of the certificate of title from the name of petitioners’ father. after which. the seller will no longer have any title to transfer to any third person. petitioners-sellers undertook upon receipt of the down payment from private respondent Ramona P. It just so happened. Art. now in their names. unlike in a contract to sell.In a conditional contract of sale.” Article 1475. after compliance by the buyer with certain terms and conditions. subject to the provisions of the law governing the form of contracts. on said date. That is why they undertook to cause the issuance of a new transfer of the certificate of title in their names upon receipt of the down payment in the amount of P50. From that moment.00. the sale becomes absolute and this will definitely affect the seller’s title thereto. the first buyer may seek reconveyance of the property subject of the sale. 1475. Alcaraz. Thus. but since the transfer certificate of title was still in the name of petitioner’s father. the latter shall. It was more expedient to first effect the change in the certificate of title so as to bear their names. petitioners in the case at bar did not merely promise to sell the property to private respondent upon the fulfillment of the suspensive condition. fulfilled on February 6. covered by TCT No. in fact. while the buyer on her part. the parties did not merely enter into a contract to sell where the sellers. What is clearly established by the plain language of the subject document is that when the said “Receipt of Down Payment” was prepared and signed by petitioners Romulo A. shall depend upon the happening of the event which constitutes the condition.240. Moreover. the circumstance which prevented the parties from entering into an absolute contract of sale pertained to the sellers themselves (the certificate of title was not in their names) and not the full payment of the purchase price. On the contrary. to cause the issuance of a new certificate of title in their names from that of their father. With the above postulates as guidelines. they promised to present said title. Coronel.00. the only act required for the consummation thereof being the delivery of the property by means of the execution of the deed of absolute sale in a public instrument. that is. the parties may reciprocally demand performance. however. both of the Civil Code. Court of Appeals. Alcaraz became obligatory. Exh. It is a canon in the interpretation of contracts that the words used therein should be given their natural and ordinary meaning unless a technical meaning was intended (Tan vs. had the impediment which prevented. Only then will the obligation of the buyer to pay the remainder of the purchase price arise. “4”). 1985 (Exh. et. The agreement could not have been a contract to sell because the sellers herein made no express reservation of ownership or title to the subject parcel of land. The contract of sale is perfected at the moment there is a meeting of minds upon the thing which is the object of the contract and upon the price. When the “Receipt of Down payment” is considered in its entirety. cannot be a registrant in good faith. such second buyer of the property who may have had actual or constructive knowledge of such defect in the seller’s title. It was the sellers in this case who. upon the fulfillment of the suspensive condition.

Villanueva. 1985. 1187. for which reason. Exh. there could be no perfected contract of sale. Exh. . Rule 6. Alcaraz. The Civil Code expressly states that: Art. rights and obligations to the extent and value of the inheritance of a person are transmitted through his death to another or others by his will or by operation of law. p. the retroactive effect of the condition that has been complied with. 1985. that: . Through estoppel an admission or representation is rendered conclusive upon the person making it. reciprocal obligations of both seller and buyer arose. telephone number. Coronel. Rollo. “D”.) (Ibid. The effects of conditional obligation to give. 90 Phil. 43). “D”. which by express provision of the rules.) not aware that they have set their own trap for themselves. continuing in the same paragraph. in each case. The sale was still subject to this suspensive condition. and Special Power of Attorney (Paragraphs 14 and 15. petitioners are precluded from raising their supposed lack of capacity to enter into an agreement at that time and they cannot be allowed to now take a posture contrary to that which they took when they entered into the agreement with private respondent Ramona P. Civil Code. . Aside from this. Thus. 327403 (Exh. Revised Rules of Court). they contend. without leaving her address. Only. . Answer with Compulsory Counterclaim to the Amended Complaint. Article 774 of the Civil Code defines Succession as a mode of transferring ownership as follows: Art. on February 6. Cuison vs. the courts shall determine. “1”). petitioners cannot claim now that they were not yet the absolute owners thereof at that time. the rights and obligations of the parties with respect to the perfected contract of sale became mutually due and demandable as of the time of fulfillment or occurrence of the suspensive condition on February 6. Petitioners also argue there could been no perfected contract on January 19. The petitioners-sellers Coronel bound themselves “to effect the transfer in our names from our deceased father Constancio P. in accordance with Article 1187 which pertinently provides Art. The condition shall be deemed fulfilled when the obligor voluntarily prevents its fulfillment. at the point their father drew his last breath. We note that these supposed grounds for petitioner’s rescission. for Article 1186 of the Civil Code expressly provides that: Art. Be it also noted that petitioners’ claim that succession may not be declared unless the creditors have been paid is rendered moot by the fact that they were able to effect the transfer of the title to the property from the decedent’s name to their names on February 6. are deemed controverted even if no reply is filed by the plaintiffs (Sec. Coronel are compulsory heirs who were called to succession by operation of law. they were correct in unilaterally rescinding the contract of sale. Exh. such that any rights or obligations pertaining thereto became binding and enforceable upon them. p. We. it should be stressed and emphasized that what is more controlling than these mere hypothetical arguments is the fact that the condition herein referred to was actually and indisputably fulfilled on February 6. Petitioners-sellers in the case at bar being the sons and daughters of the decedent Constancio P. and cannot be denied or disproved as against the person relying thereon. 2. 11. when a new title was issued in the names of petitioners as evidenced by TCT No.) (Rollo. . 774. 1985. 16) Petitioners themselves recognized that they entered into a contract of sale subject to a suspensive condition. Besides. The records are absolutely bereft of any supporting evidence to 13 . “4”). shall retroact to the day of the constitution of the obligation . petitioners stepped into his shoes insofar as the subject property is concerned. (Emphasis supplied. “A”. p. hold that. the latter breach her reciprocal obligation when she rendered impossible the consummation thereof by going to the United States of America. Succession is a mode of acquisition by virtue of which the property. 1985. Had petitioners-sellers not complied with this condition of first transferring the title to the property under their names. the parties entered into a contract of sale subject to the suspensive condition that the sellers shall effect the issuance of new certificate title from that of their father’s name to their names and that. so petitioners conclude. (Emphasis supplied. 1985 because they were then not yet the absolute owners of the inherited property. as evidenced by the document denominated as “Receipt of Down Payment” (Exh. therefore. the transfer certificate of title immediately upon receipt of the downpayment above-stated". We cannot sustain this argument. 1431. Alcaraz.3. Having represented themselves as the true owners of the subject property at the time of sale. The inevitable conclusion is that on January 19. “4”). 1985. 850 [1952]). In obligations to do or not to do. once the condition has been fulfilled. this condition was fulfilled (Exh. As of that point in time. We do not agree with petitioners that there was a valid rescission of the contract of sale in the instant case. It is expressly provided that rights to the succession are transmitted from the moment of death of the decedent (Article 777. Petitioners also contend that although there was in fact a perfected contract of sale between them and Ramona P. 1186. are mere allegations found only in their responsive pleadings.

in good faith. The idea conveyed is that at the time petitioner Mabanag. 1993 Edition. 58530. 79 Phil. it was held that it is essential. 1544. the exceptions being: (a) when the second buyer. Ramona’s mother. Alcaraz because although the evidence on record shows that the sale was in the name of Ramona P. Article 1169 of the Civil Code defines when a party in a contract involving reciprocal obligations may be considered in default. Vitug.190. the second sale between petitioners Coronels and petitioner Mabanag was supposedly perfected prior thereto or on February 18. 95843. (Emphasis supplied. In his commentaries on the Civil Code. the ownership shall be transferred to the person who may have first taken possession thereof in good faith. to wit: Art. Knowledge by the first buyer of the second sale cannot defeat the first buyer’s rights except when the second buyer first registers in good faith the second sale (Olivares vs. title or ownership will not transfer to him to the prejudice of the first buyer. as far as petitioners are concerned. Exh. xxx In reciprocal obligations. Dignos vs. Alcaraz with her own personal Check (Exh. 132 SCRA 722 [1984]) Moreover. therefore. In a case of double sale. CA. Ramona’s corresponding obligation to pay the balance of the purchase price in the amount of P1. 604). 22 June 1984. petitioners are estopped from raising the alleged absence of Ramona P. potior jure (first in time. 376 [1947]). if not also in her own behalf. acquires possession of the property ahead of the first buyer. the second paragraph of Article 1544 shall apply. Petitioners who are precluded from setting up the defense of the physical absence of Ramona P. registers the sale ahead of the first buyer. 1985. Alcaraz was in the United States of America on February 6. Thus. and. (J. 1985. 69 SCRA 99. Alcaraz as above-explained offered no proof whatsoever to show that they actually presented the new transfer certificate of title in their names and signified their willingness and readiness to execute the deed of absolute sale in accordance with their agreement. she was unaware of any adverse claim or previous sale. the sale to the other petitioner. The above-cited provision on double sale presumes title or ownership to pass to the buyer. the sellers had been dealing with Concepcion D. the second buyer. bought the property under a clean title. Vda. Compendium of Civil Law and Jurisprudence. “2”) for and in behalf of Ramona P. Unless. Catalina B. Cabana (G. 1985. the down payment was made by Concepcion D. if it should be movable property. No. G. Crisostomo vs. stronger in right). Those obliged to deliver or to do something. Conversely. G. Petitioners point out that the notice of lis pendens in the case at bar was annotated on the title of the subject property only on February 22. “B”. in good faith. De Vera. 1985 as proof of the second contract of sale was registered with the Registry of Deeds of Quezon City giving rise to the issuance of a new certificate of title in the name of Catalina B. explains: The governing principle is prius tempore. to wit: Art. Taguba vs. knowledge gained by the second buyer of the first sale defeats his rights even if he is first to register. for which reason she is a buyer in good faith. Ng Diong. Alcaraz when they accepted her personal check. the ownership shall belong to the person acquiring it who in good faith first recorded it in the Registry of Property. No. 129 SCRA 656). Embisan. that the second realty buyer must act in good faith in registering his deed of sale (citing Carbonell vs. Alcaraz. Even assuming arguendo that Ramona P.R. Ramona P. neither party incurs in delay if the other does not comply or is not ready to comply in a proper manner with what is incumbent upon him. 1985. 14 . what finds relevance and materiality is not whether or not the second buyer in good faith but whether or not said second buyer registers such second sale in good faith. there being no express stipulation authorizing the sellers to extrajudicially rescind the contract of sale. Court of Appeals. who had acted for and in behalf of her daughter. 158 SCRA 375 [1988]. without knowledge of any defect in the title of the property sold. Court of Appeals. provided there is good faith.substantiate petitioners’ allegations. From the moment one of the parties fulfill his obligation. since knowledge taints his registration with bad faith (see also Astorga vs. she cannot be deemed to have been in default. Accordingly. delay by the other begins. second paragraph. Mere allegation is not an evidence (Lagasca vs. in the absence thereof to the person who presents the oldest title. We are not persuaded by such argument. 110 Phil.R. Alcaraz as the buyer. Justice Jose C. the second buyer satisfies these requirements. (cf. and (b) should there be no inscription by either of the two buyers.R. whereas. Mabanag on June 5. an accepted authority on the subject. In Cruz vs. Alcaraz cannot even be deemed to be in default. 159 SCRA 33). If the same thing should have been sold to different vendees. With the foregoing conclusions. Neither did they raise any objection as regards payment being effected by a third person. 02 September 1992). Recaro vs. Mabanag. Should it be immovable property. Alcaraz. 2 SCRA 598 [1961]). 882 [1961]. De Leon. the ownership shall pertain to the person who in good faith was first in the possession. Gonzales. 56232. 1169. to merit the protection of Art. now a distinguished member of the Court. Vitug. 26 December 1984). gave rise to a case of double sale where Article 1544 of the Civil Code will apply. There is no evidence showing that petitioners ever questioned Concepcion’s authority to represent Ramona P. The record of the case shows that the Deed of Absolute Sale dated April 25. 1544.000. incur in delay from the time the obligee judicially or extrajudicially demands from them the fulfillment of their obligation. We have stressed time and again that allegations must be proven by sufficient evidence (Ng Cho Cio vs.00 (as buyer) never became due and demandable and. CA. we cannot justify petitioners-sellers’ act of unilaterally and extrajudicially rescinding the contract of sale. Should there be no inscription. Indeed. No. the physical absence of Ramona P. when the second buyer. p. insofar as her obligation to pay the full purchase price is concerned. Alcaraz is not a ground to rescind the contract of sale. that is.) There is thus neither factual nor legal basis to rescind the contract of sale between petitioners and respondents. Corollarily.

No. 146. respondent PNB filed a petition for extrajudicial foreclosure of the real estate mortgage and sought to have the property sold at public auction for P911. 166862 December 20.00 loan it had obtained from respondent Philippine National Bank (PNB). INC.015 square meter parcel of land located in Mandaluyong (now a City).5 On August 5. Respondent PNB later granted petitioner a new credit accommodation of P1. SO ORDERED.: Before us is a petition for review on certiorari of the Decision1 of the Court of Appeals (CA) in CA-G. Metro Manila. 1973. petitioner executed an Amendment4 of Real Estate Mortgage over its property. a notice of lis pendens had been annotated on the transfer certificate of title in the names of petitioners.6 plus interests and attorney's fees. the registration will constitute a registration in bad faith and will not confer upon him any right. J. as agent insofar as the subject contract of sale is concerned. or. Petitioner Mabanag cannot close her eyes to the defect in petitioners’ title to the property at the time of the registration of the property. 1985. and Francisco. The property was covered by Transfer Certificate of Title (TCT) No. Cagaoan. was correctly upheld by both the courts below.. 1985 because as early as February 22. respondent. (Chairman). DECISION CALLEJO.00. intervenor. in Civil Case No. vs. Davide. nor in such assumption disputed between mother and daughter. petitioner Mabanag knew that the same property had already been previously sold to private respondents.000. her mother. petitioner's outstanding obligation to respondent PNB as of June 30.As clearly borne out by the evidence in this case. the instant petition is hereby DISMISSED and the appealed judgment AFFIRMED. Pasig City.) Thus. registered the sale entered into on February 18. prior to that between petitioners and Catalina B.R. 1985. Although there may be ample indications that there was in fact an agency between Ramona as principal and Concepcion. 1985. We will not touch this issue and no longer disturb the lower courts’ ruling on this point.. 87 SCRA 349 [1978]. 46153 which affirmed the decision2 of the Regional Trial Court (RTC). intervenor.R. Thus.00 from respondent PNB. and. Fernandez vs.. premises considered. whereas petitioner Mabanag registered the said sale sometime in April. On March 31. she was charged with knowledge that a previous buyer is claiming title to the same property.000.000. No. 58551. 1985. no part. 43 Phil. 43 Phil.000. 1981. SR. 43 Phil. at least. To secure a P900. perfected on February 6. 581. Mercader. Republic of the Philippines SUPREME COURT Manila FIRST DIVISION G. Narvasa. 1982. Jr.J. C. 332098 of the Registry of Deeds of Rizal. 554. The Antecedents Petitioner was the owner of a 8. the issue of whether or not Concepcion was also acting in her own behalf as a co-buyer is not squarely raised in the instant petition. Panganiban. 2006 MANILA METAL CONTAINER CORPORATION. JJ. petitioner Mabanag could not have in good faith. plus interests and other charges. (Salvoro vs..650. At the time of registration. petitioner. payable in quarterly installments of P32. and its Resolution3 denying the motion for reconsideration filed by petitioner Manila Metal Container Corporation (MMCC). Branch 71. Tanega. TOLENTINO. on November 16.21. J. petitioner executed a real estate mortgage over the lot. Cagaoan vs.00. 1982. petitioner secured another loan of P653.. concur. Mabanag on February 18. therefore. Director of Land.532. PHILIPPINE NATIONAL BANK. DMCI-PROJECT DEVELOPERS. 15 . the sale of the subject parcel of land between petitioners and Ramona P. This Court had occasions to rule that: If a vendee in a double sale registers the sale after he has acquired knowledge that there was a previous sale of the same property to a third party or that another person claims said property in a previous sale. WHEREFORE. citing Palarca vs. Alcaraz. REYNALDO C.

1985.574. 35.47. Respondent PNB.560. 1984 within which to redeem/repurchase the property on installment basis. the SAMD recommended to the management of respondent PNB that petitioner be allowed to repurchase the property for P1.22 On August 28. exemplary damages should be awarded in favor of the plaintiff by way of example or correction for the public good of at least P30.560. PNB had accepted the down payment from Manila Metal in the substantial amount of P725. The Bank cannot take advantage of a condition which is entirely dependent upon its own will after accepting and benefiting from the substantial payment made by Manila Metal. and as of June 25. 1983. That for the wrongful and malicious act of defendant PNB which are highly reprehensible. respondent PNB informed petitioner that the request had been referred to its Pasay City Branch for appropriate action and recommendation.000. the Register of Deeds cancelled TCT No. the property was sold at public auction on September 28.000.00 and to incur litigation expenses of at least P30.00. requested that PNB reconsider its letter dated December 28. the bank does not accept "partial redemption. judgment be rendered in its favor.34.660. however.23 Petitioner prayed that.574.000. It was suggested that petitioner purchase the property for P2. and that was why it had paid P725.11 Meanwhile.000. It reiterated its request to repurchase the property on installment.00.9 In a letter10 dated February 10. respondent PNB informed petitioner that the PNB Board of Directors had accepted petitioner's offer to purchase the property. Pablo Gabriel did not conform to the letter but merely indicated therein that he had received it. registration expenses. miscellaneous expenses and publication cost.560.47. 1982 where respondent PNB was declared the winning bidder for P1. 1984. petitioner remitted P725. rejected petitioner's offer to pay the balance of P643. 1989. 1985. 1984.452.056.000.00 deposit would be returned and the property would be sold to other interested buyers. Pablo Gabriel.000.34 in a letter dated August 1. where he was to affix his signature.574. and was annotated at the dorsal portion of the title on February 17. through counsel. wherein it reiterated its proposal that petitioner purchase the property for P2. PNB cannot take advantage of its own delay and long inaction in demanding a higher amount based on unilateral computation of interest rate without the consent of Manila Metal.000.389. 1984.00. This included the bid price of P1. Petitioner later filed an amended complaint and supported its claim for damages with the following arguments: 36.560. interest. 38. Petitioner warned respondent PNB that it would seek judicial recourse should PNB insist on the position. Thus. plaintiff Manila Metal suffered besmirched reputation for which defendant PNB is liable for moral damages of at least P50. 1983 to respondent PNB.574. Meanwhile.000. 1984 petitioner's obligation amounted to P1. Instead. it wrote another letter dated December 12. Petitioner sent a letter dated August 25. In a letter dated November 14.13 Petitioner's offers had not yet been acted upon by respondent PNB.47.8 In its reply dated August 30. but for P1. 32098 on June 1. Respondent PNB replied in a letter dated December 28. the Special Assets Management Department (SAMD) had prepared a statement of account.00 for the redemption/repurchase price of P1. advances on realty taxes.000.660.17 On February 25.000.50.19 On page two of the letter was a space above the typewritten name of petitioner's President.000. petitioner reiterated its request for a one year extension from February 17.53 in cash less the P725. PNB again informed petitioner that it would return the deposit should petitioner desire to withdraw its offer to purchase the property. after due proceedings.560.00. As early as June 25. the PNB management informed petitioner that it was rejecting the offer and the recommendation of the SAMD. 1984 requesting for a reconsideration. Respondent PNB gave petitioner until December 15. requesting that it be granted an extension of time to redeem/repurchase the property.18 On June 4. PNB approved the repurchase price of P1.21 Petitioner averred that it had a net balance payable in the amount of P643. 978191 was issued to it.000. the approval of the higher management of the Bank to confirm the agreement of its SMAD is clearly a potestative condition which cannot legally prejudice Manila Metal which has acted and relied on the approval of SMAD."12 Since petitioner failed to redeem the property." and Official Receipt No. The Certificate of Sale7 issued in its favor was registered with the Office of the Register of Deeds of Rizal.924. Delivery of Title. did not agree to respondent PNB's proposal.00.000.00.574. 1984 to act on the proposal. 37. 1984. its minimum market value. petitioner filed a complaint against respondent PNB for "Annulment of Mortgage and Mortgage Foreclosure.00 from Manila Metal.931.560.20 Petitioner did not respond.000.00 already deposited with it. petitioner. 1988 to submit an amended offer to repurchase. 1989. 1984. plaintiff is constrained to engage the services of counsel at an agreed fee of P50. That in order to protect itself against the wrongful and malicious acts of the defendant Bank. its P725.47 as approved by its SMAD and considering the reliance made by Manila Metal and the long time that has elapsed. That by reason of the wrongful and malicious actuations of defendant PNB.000. however. 1983. Petitioner rejected respondent's proposal in a letter dated July 14.16 Petitioner. otherwise.00. It maintained that respondent PNB had agreed to sell the property for P1.00. respondent PNB was proscribed from increasing the purchase price of the property. thus: 16 . Petitioner declared that it had already agreed to the SAMD's offer to purchase the property forP1. it alleged the following: 34. 1984.15 In the meantime. which the defendant PNB should be condemned to pay the plaintiff Manila Metal. 1984.47 for which it accepted P725.14 When apprised of the statement of account.00 to respondent PNB as "deposit to repurchase." To support its cause of action for specific performance. However. and that since its P725. so PNB requested petitioner in a letter dated June 30. and issued a new title in favor of respondent PNB. the period to redeem the property was to expire on February 17. some PNB Pasay City Branch personnel informed petitioner that as a matter of policy.After due notice and publication.574. or Specific Performance with Damages. advances of insurance premiums.00 downpayment had been accepted. 1988.452.

24 In its Answer to the complaint. and costs of suit. rejected the terms and conditions contained in the June 4.500. On appeal to the CA. based on their stipulation of facts.00 as may be warranted by the evidence and fixed by this Honorable Court in the exercise of its sound discretion. to reinstate TCT No. 1988.34 was way below the P1. 37025described in paragraph 4 of this Complaint to the plaintiff Manila Metal. 3.31 On May 31. respondent PNB averred.37025 described in paragraph 4 of this Complaint.000.29 On June 21. that it had acquired ownership over the property after the period to redeem had elapsed.00 in cash. b) Declaring defendant's acts of extra-judicially foreclosing the mortgage over plaintiff's property and setting it for auction sale null and void. hence. in a letter dated April 13. 2. in turn. Whether or not the June 4. c) Ordering the defendant Register of Deeds to cancel the new title issued in the name of PNB (TCT NO. the parties agreed to submit the case for decision. e) Ordering the defendant PNB to pay the plaintiff Manila Metal's actual damages.389. It further declared that the P725.00 and litigation expenses of at least P30.206.000. While petitioner had offered to repurchase the property per its letter of July 14. as a special and affirmative defense. 1993. d) Ordering the defendant PNB to return and/or deliver physical possession of the TCT No. and attorney's fees of P50.a) Declaring the Amended Real Estate Mortgage (Annex "A") null and void and without any legal force and effect.00. it could not sell the property for less than its market value. petitioner had no cause of action for specific performance against respondent.000. that petitioner vacate the property within 15 days from notice. 17 .422. the amount of P643.25 The parties agreed to limit the issues to the following: 1. and as a matter of policy.000.00 as may be proved during the trial.000. 1985 letter of the defendant approving/accepting plaintiff's offer to purchase the property is still valid and legally enforceable. 1985.000. 1989. on September 20. The trial court declared that respondent had rejected petitioner's offer to repurchase the property. It ordered respondent PNB to refund the P725. moral and exemplary damages in the aggregate amount of not less than P80.53 which respondent PNB had demanded. III THE LOWER COURT ERRED IN RULING THAT PLAINTIFF-APPELLLANT WAIVED ITS RIGHT TO PURCHASE THE SUBJECT PROPERTY WHEN IT FAILED TO CONFORM WITH CONDITIONS SET FORTH BY DEFENDANT-APPELLEE IN ITS LETTER DATED 4 JUNE 1985.00 deposit petitioner had made.250. 37025 in the name of Manila Metal and to cancel the annotation of the mortgage in question at the back of the TCT No. petitioner offered to purchase the property for P4. the trial court rendered judgment dismissing the amended complaint and respondent PNB's counterclaim.30The offer was again rejected by respondent PNB on September 13.32 The trial court ruled that there was no perfected contract of sale between the parties. Whether or not the plaintiff has waived its right to purchase the property when it failed to conform with the conditions set forth by the defendant in its letter dated June 4.28 The offer was however rejected by respondent PNB.000.26 While the case was pending.000." and not a downpayment or earnest money. 1994. On March 18. petitioner offered to repurchase the property for P3. It claimed that no contract of sale was perfected between it and petitioner after the period to redeem the property had expired. 1993.27 but petitioners refused to do so.00 remitted by petitioner to respondent PNB on June 4.000. 43792) covering the property described in paragraph 4 of the Complaint. 1993. 1985 letter of the SAMD. petitioner made the following allegations: I THE LOWER COURT ERRED IN RULING THAT DEFENDANT-APPELLEE'S LETTER DATED 4 JUNE 1985 APPROVING/ACCEPTING PLAINTIFF-APPELLANT'S OFFER TO PURCHASE THE SUBJECT PROPERTY IS NOT VALID AND ENFORCEABLE. Petitioner. According to it. respondent PNB demanded. the prevailing market value of the property was approximately P30.00. Plaintiff likewise prays for such further reliefs which may be deemed just and equitable in the premises. II THE LOWER COURT ERRED IN RULING THAT THERE WAS NO PERFECTED CONTRACT OF SALE BETWEEN PLAINTIFF-APPELLANT AND DEFENDANT-APPELLEE. 1985 was a "deposit. 1993. During pre-trial. Whether or not there is a perfected contract of sale between the parties.

THE COURT OF APPEALS ERRED ON A QUESTION OF LAW WHEN IT RULED THAT THERE IS NO PERFECTED CONTRACT OF SALE BETWEEN THE PETITIONER AND RESPONDENT. On July 14. as plaintiff-appellant. and as such. however.35 and likewise granted the motion of Reynaldo Tolentino substituting petitioner MMCC. V. Moreover. one of its Directors. 1985 LETTER MEANS THAT THERE WAS NO VALID AND LEGALLY ENFORCEABLE CONTRACT OF SALE BETWEEN THE PARTIES.931. THE COURT OF APPEALS ERRED ON A QUESTION OF LAW WHEN IT RULED THAT THE FAILURE OF THE PETITIONER-APPELLANT TO SIGNIFY ITS CONFORMITY TO THE TERMS CONTAINED IN PNB'S JUNE 4. the CA issued a resolution granting the motion.00 PAID BY THE PETITIONER IS NOT AN EARNEST MONEY. THE COURT OF APPEALS ERRED ON A QUESTION OF LAW WHEN IT RULED THAT THE AMOUNT OF PHP725. WITHIN SIXTY (60) DAYS FROM NOTICE OF APPROVAL CONSTITUTES NO VALID AND LEGALLY ENFORCEABLE CONTRACT OF SALE BETWEEN THE PARTIES. According to the appellate court.IV THE LOWER COURT ERRED IN DISREGARDING THE FACT THAT IT WAS THE DEFENDANT-APPELLEE WHICH RENDERED IT DIFFICULT IF NOT IMPOSSIBLE FOR PLAINTIFF-APPELLANT TO COMPLETE THE BALANCE OF THEIR PURCHASE PRICE. 33099 and TCT No. 1993. MORAL AND EXEMPLARY DAMAGES.47. ATTOTRNEY'S FEES AND LITIGATION EXPENSES. respondent rejected the proposal in a letter dated August 1. where it waived. 1985 letter specifically on the selling price. which the CA likewise denied. petitioner did not agree to the counter-offer.36 The CA rendered judgment on May 11. II. assigned and transferred its rights over the property covered by TCT No.574. and the negotiations did not prosper. Clearly therefore.560. petitioner's Board of Directors approved Resolution No. petitioner filed the instant petition for review on certiorari. While petitioner reiterated its request for a lower selling price and that the balance of the repurchase be reduced. Respondent PNB merely asked petitioner to submit an amended offer to repurchase. petitioner did not pay the balance of the purchase price within the sixty-day period set in the June 4.38 18 . Petitioner filed a motion for reconsideration. on June 17. alleging that: I. and his motion to withdraw as intervenor. VII THE LOWER COURT ERRED IN DISMISSING THE AMENDED COMPLAINT OF PLAINTIFF-APPELLANT. there was no perfected contract of sale. THE COURT OF APPEALS ERRED ON A QUESTION OF LAW THAT NON-PAYMENT OF THE PETITIONER-APPELLANT OF THE BALANCE OF THE OFFERED PRICE IN THE LETTER OF PNB DATED JUNE 4.389.53) since petitioner had kept on insisting that the selling price should be lowered to P1. 1993 AND JUNE 21.33 Meanwhile. Respondent PNB's letter dated June 30.000. The CA ratiocinated that petitioner's original offer to purchase the subject property had not been accepted by respondent PNB. 1993. there was no contract to rescind. 1985 letter of respondent PNB. 1985.34 Thereafter. 1989. 1993. III. who later moved for leave to intervene as plaintiffappellant. V THE LOWER COURT ERRED IN DISREGARDING THE FACT THAT THERE WAS NO VALID RESCISSION OR CANCELLATION OF SUBJECT CONTRACT OF REPURCHASE. 3-004. 1988 cannot revive the failed negotiations between the parties. THE COURT OF APPEALS SERIOUSLY ERRED WHEN IT HELD THAT THE LETTERS OF PETITIONER-APPELLANT DATED MARCH 18. VIII THE LOWER COURT ERRED IN NOT AWARDING PLAINTIFF-APPELLANT ACTUAL. there was no meeting of the minds between the parties as to the price or consideration of the sale. VI THE LOWER COURT ERRED IN DECLARING THAT PLAINTIFF FAILED AND REFUSED TO SUBMIT THE AMENDED REPURCHASE OFFER. it made a counteroffer through its June 4. OFFERING TO BUY THE SUBJECT PROPERTY AT DIFFERENT AMOUNT WERE PROOF THAT THERE IS NO PERFECTED CONTRACT OF SALE. Consequently. IV. the claim for damages and the counterclaim were correctly dismissed by the court a quo for no evidence was presented to support it. Bayani Gabriel executed a Deed of Assignment over 51% of the ownership and management of the property in favor of Reynaldo Tolentino. Thus. In fact. 2000 affirming the decision of the RTC. 37025 in favor of Bayani Gabriel.37 It declared that petitioner obviously never agreed to the selling price proposed by respondent PNB (P1.

00 was considered as "deposit for the repurchase of the property" in the receipt issued by the SAMD. the amount constitutes earnest money as contemplated in Article 1482 of the New Civil Code." A new Statement of Account was attached therein indicating the total bank's claim to be P1. Pending such approval. Primarily. the Statement of Account prepared by SAMD as of June 25.206.560. it was only recommendation which was subject to approval of the PNB Board of Directors. "that the selling price shall be the total bank's claim as of documentation date x x x payable in cash (P725. The SAMD does not have the power to sell.560. Respondent maintains that its acceptance of the amount was qualified by that condition. Furthermore. it is simply a recital of its total monetary claims against petitioner. the acceptance was qualified. It claims that this was the suspensive condition. This qualified acceptance was in effect a counter-offer.The threshold issue is whether or not petitioner and respondent PNB had entered into a perfected contract for petitioner to repurchase the property from respondent. or otherwise alienate the assets. evidenced by Receipt No. Rule 130 of the Revised Rules of Court. while respondent was obliged to transfer ownership and deliver the property to petitioner.789. Petitioner's letters dated March 18.00. there is no basis for the application of the principles governing "suspensive conditions.47. as gleaned from the letter of SAMD dated June 4. Petitioner avers that the SAMD's acceptance of the deposit amounted to an acceptance of its offer to repurchase. there is no contract unless the following requisites concur: (1) Consent of the contracting parties. It likewise maintains that. conformably with Article 1159 of the New Civil Code.000.41 Under Article 1318 of the New Civil Code. or P1.00 was accepted by respondent on the condition that the purchase price would still be approved by its Board of Directors.00. although theP725." According to respondent. Petitioner posits that respondent was proscribed from increasing the interest rate after it had accepted respondent's offer to sell the property for P1. in accordance with Section 27. since the acceptance of the offer resulted in a perfected contract of sale. among others. It insists that a definite agreement on the amount and manner of payment of the price are essential elements in the formation of a binding and enforceable contract of sale. 1993 and June 21. The Ruling of the Court The ruling of the appellate court that there was no perfected contract of sale between the parties on June 4. Neither can the receipt by the SAMD of P725.574. Court of Appeals. since the power to do so must emanate from its Board of Directors. When the acceptance was made in its letter dated June 25. they did not constitute separate offers to repurchase the property. 19 . necessitating petitioner's acceptance in return. 1984 letter of respondent and its failure to pay the balance of the price as fixed by respondent within the 60-day period from notice was to protest respondent's breach of its obligation to petitioner.574. managing and preserving the properties and other special assets of PNB. Moreover. the effectivity of which is subordinated to its fulfillment. the amount is merely an acknowledgment of the receipt of P725. dispose of.574. The SAMD was not authorized by respondent's Board to enter into contracts of sale with third persons involving corporate assets.931. Such offer to compromise should not be taken against it. respondent contends that the parties never graduated from the "negotiation stage" as they could not agree on the amount of the repurchase price of the property. Consequently.570. 978194 which respondent had issued.00 already deposited) within 60 days from notice of approval.00.47.47. Petitioner cites the rulings of this Court in Villonco v. Respondent could no longer unilaterally withdraw its offer to sell the property for P1. petitioner knew that the SAMD has no capacity to bind respondent and that its authority is limited to administering. 1984 cannot be classified as a counter-offer. A contract is a meeting of minds between two persons whereby one binds himself. the PNB Board of Directors had approved petitioner's offer to purchase the property. In any event. 1985 is correct.53 less deposit of P725. thus not absolute. the concept of "suspensive condition" signifies a future and uncertain event upon the fulfillment of which the obligation becomes effective. nothing more. respondent could no longer validly make a counter-offer of P1.40 Petitioner avers that its failure to append its conformity to the June 4. the amount stated therein could not likewise be considered as the counter-offer since as admitted by petitioner. Petitioner maintains that it had accepted respondent's offer made through the SAMD. 1985.564. Respondent reiterates that SAMD had informed petitioner that its offer to repurchase had been approved by the Board subject to the condition.000. Bormaheco39 and Topacio v. it cannot be legally claimed that respondent is already bound by any contract of sale with petitioner.00.560. It did not amount to a rejection of respondent's offer to sell the property since respondent was merely seeking to enforce its right to pay the balance of P1.00 as deposit to repurchase the property.000.00 be regarded as evidence of a perfected sale contract. while respondent's Board of Directors accepted petitioner's offer to repurchase the property. 1984. It clearly presupposes the existence of a valid and binding agreement. it was obliged to remit to respondent the balance of the original purchase price of P1.88 for the purchase of the property.000. to give something or to render some service.574. encumber. There is absolutely nothing on record that respondent authorized the SAMD.389. As gleaned from the parties' Stipulation of Facts during the proceedings in the court a quo. in that it required a higher sale price and subject to specified terms and conditions enumerated therein. it then deposited P725. There was no such agreement in this case.000.931. to sell the property forP1. respondent had the option either to accept the balance of the offered price or to cause the rescission of the contract. 1993 to respondent during the pendency of the case in the RTC were merely to compromise the pending lawsuit. The deposit of P725.389.000. Since there is no perfected contract in the first place.560. Moreover.000. All that transpired was an exchange of proposals and counter-proposals. (2) Object certain which is the subject matter of the contract. the fulfillment of which gave rise to the contract. or made it appear to petitioner that it represented itself as having such authority. According to respondent. with respect to the other.00 with the SAMD as partial payment. For its part.

1984.560. The statement of account prepared by the SAMD stating that the net claim of respondent as of June 25. 2. Court of Appeals. such acceptance is not sufficient to guarantee consent because any modification or variation from the terms of the offer annuls the offer. we will pay your goodselves ONE HUNDRED & FIFTY THOUSAND PESOS (P150.52 A qualified acceptance or one that involves a new proposal constitutes a counter-offer and a rejection of the original offer. unconditional and without variance of any sort from the proposal. unequivocal. Any acceptance by the SAMD of petitioner's offer would not bind respondent. To convert the offer into a contract. or words of a party recognizing the existence of the contract of sale.574. which was made through a letter dated August 25.54 The acceptance must be identical in all respects with that of the offer so as to produce consent or meeting of the minds.560. it must be plain. registration expenses and miscellaneous expenses.56 Before respondent could act on the request. and the other to pay therefor a price certain in money or its equivalent. Inc. Thus. advances on realty taxes. There is no evidence that the SAMD was authorized by respondent's Board of Directors to accept petitioner's offer and sell the property for P1. Huang. The statement is but a computation of the amount which petitioner was obliged to pay in case respondent would later agree to sell the property.53 Consequently.574. v.:60 Section 23 of the Corporation Code expressly provides that the corporate powers of all corporations shall be exercised by the board of directors. serve as a binding juridical relation between the parties. the withdrawal is effective immediately after its manifestation. or words of the accepting party that clearly manifest a present intention or determination to accept the offer to buy or sell. however. 1984 within which to redeem the property. In Adelfa Properties."58 it sent a letter to respondent's President reiterating its offer to purchase the property. As this Court ruled in AF Realty Development. gives rise to a perfected sale. it requested for more time to redeem/repurchase the property under such terms and conditions agreed upon by the parties. which takes place upon the concurrence of the essential elements of the sale which are the meeting of the minds of the parties as to the object of the contract and upon the price.48 In San Miguel Properties Philippines. At this stage.000. may be in keeping with good faith.55 The request. a rejection of the original offer and an attempt to end the negotiation between the parties on a different basis. But a price fixed by one of the contracting parties. which. there is no contract.(3) Cause of the obligation which is established. was referred to the respondent's main branch for appropriate action. they bind other contracting parties and the obligations arising therefrom have the form of law between the parties and should be complied with in good faith. including interests. Manalo:45 A definite agreement as to the price is an essential element of a binding agreement to sell personal or real property because it seriously affects the rights and obligations of the parties.47 When the contract of sale is not perfected. The parties are bound not only to the fulfillment of what has been expressly stipulated but also to the consequences which. usage and law. advances on insurance premium. As the Court ruled in Boston Bank of the Philippines v. 1984 wasP1.47.43 By the contract of sale. The fixing of the price can never be left to the decision of one of the contracting parties. petitioner had until February 17. although the acceptance must be affirmatively and clearly made and must be evidenced by some acts or conduct communicated to the offeror. and (3) consummation.00). Contracts are perfected by mere consent which is manifested by the meeting of the offer and the acceptance upon the thing and the cause which are to constitute the contract. Inc. Price is an essential element in the formation of a binding and enforceable contract of sale. which begins when the parties perform their respective undertakings under the contract of sale.42 Once perfected. Within six months from date of approval of our request. petitioner again wrote respondent as follows: 1. Inc.000. must be certain. Diesehuan Freight Services. In this case.57 When the petitioner was told that respondent did not allow "partial redemption. Just as a natural person may authorize another to do certain acts in his behalf. When there is merely an offer by one party without acceptance of the other.47 cannot be considered an unqualified acceptance to petitioner's offer to purchase the property. culminating in the extinguishment thereof. v. A negotiation is formally initiated by an offer. acceptance may be shown by the acts. according to their nature. either negotiating party may stop the negotiation.51 the Court ruled that: x x x The rule is that except where a formal acceptance is so required.00). since it lacked the resources.50 At any time prior to the perfection of the contract. one of the contracting parties obligates himself to transfer the ownership of and deliver a determinate thing. the offer may be withdrawn. The remaining balance together with the interest and other expenses that will be incurred will be paid within the last six months of the one year grave period requested for. so may the board of directors of a corporation validly delegate 20 . it may be shown by acts. conduct. and 3. (2) perfection. we will pay another FOUR HUNDRED FIFTY THOUSAND PESOS (P450. vs. conduct. if accepted by the other.59 There was no response to petitioner's letters dated February 10 and 15. it cannot. as an independent source of obligation. the acceptance must be absolute and must not qualify the terms of the offer. 1983. publication cost. However. Inc. Upon approval of our request.49 the Court ruled that the stages of a contract of sale are as follows: (1) negotiation. covering the period from the time the prospective contracting parties indicate interest in the contract to the time the contract is perfected. A counter-offer is considered in law.44 The absence of any of the essential elements will negate the existence of a perfected contract of sale. when something is desired which is not exactly what is proposed in the offer.46 A contract of sale is consensual in nature and is perfected upon mere meeting of the minds.

hence can be at most considered as a counter-offer. Thus.63 It appears that. it recommended that petitioner be allowed to redeem the property and pay P1. but not in the course of. 2. per its letter to petitioner dated June 4.64 It appears that although respondent requested petitioner to conform to its amended counter-offer. etc. contracts or acts of a corporation must be made either by the board of directors or by a corporate agent duly authorized by the board. respondent's acceptance of petitioner's offer was qualified.00 it had remitted to respondent was "earnest money" which could be considered as proof of the perfection of a contract of sale under Article 1482 of the New Civil Code. petitioner refused and instead requested respondent to reconsider its amended counter-offer. That upon your failure to pay the balance of the purchase price within sixty (60) days from receipt of advice accepting your offer. That the sale shall be subject to such other terms and conditions that the Legal Department may impose to protect the interest of the Bank. the giving of earnest money cannot establish the existence of a perfected contract of sale.000.574. the Special Assets Management Department (SAMD) of PNB prepared an updated Statement of Account showing MMCC's total liability to PNB as of June 25.560. 9.560. transfer fees. a perfected contract of sale would have arisen. 5. payable in cash (P725. 6.53. Unless and until the respondent accepted the offer on these terms.560.00 as the purchase price. petitioner merely sought to have the counter-offer reconsidered. However. The provision reads: ART.574. Respondent later approved the recommendation that the property be sold to petitioner. The assailed decision is AFFIRMED. 1985.574.62 Thus. Petitioner's request was ultimately rejected and respondent offered to refund its P725. as well as expenses including costs of documents and science stamps. We do not agree with petitioner's contention that the P725. if there are any. 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..574. because while the respondent lowered the purchase price.00 was merely a deposit to be applied as part of the purchase price of the property. 21 . it still declared that its acceptance was subject to the following terms and conditions: 1. a corporation can only execute its powers and transact its business through its Board of Directors and through its officers and agents when authorized by a board resolution or its by-laws. MMCC paid P725. the rule is that the declarations of an individual director relating to the affairs of the corporation.00 deposit. in the event that respondent would approve the recommendation of SAMD for respondent to accept petitioner's offer to purchase the property for P1. 1482.00 to PNB as deposit to repurchase the property.000. this amounted to an amendment of respondent's qualified acceptance. the respondent had decided to accept the offer to purchase the property for P1.000. your deposit shall be forfeited and the Bank is thenceforth authorized to sell the property to other interested parties. All taxes and other government imposts due or to become due on the property. On June 8. interests and participation it may have in the property and you are charged with full knowledge of the nature and extent of said rights.00 already deposited) within sixty (60) days from notice of approval. respondent set the purchase price at P2.000 was accepted by PNB on the condition that the purchase price is still subject to the approval of the PNB Board. as it turns out. If petitioner had accepted this counter-offer. Thus.000. are held not binding on the corporation.61 It appears that the SAMD had prepared a recommendation for respondent to accept petitioner's offer to repurchase the property even beyond the one-year period. That the selling price shall be the total Bank's claim as of documentation date (pls. the petition is DENIED. interests and participation and waive your right to warranty against eviction.389.660.some of its functions to individual officers or agents appointed by it. 1984. The deposit of P725.47 recommended by the SAMD and to which petitioner had previously conformed. the P725. 1984.00. On June 25. IN LIGHT OF ALL THE FOREGOING. SO ORDERED. to be incurred in connection with the execution and registration of all covering documents shall be borne by you. or connected with the performance of authorized duties of such director. 4. however. see attached statement of account as of 5-31-85). then. In fine.47.560. This request for reconsideration would later be rejected by respondent. 1984 to be P1. But instead of the P1. or an amended counter-offer. Costs against petitioner Manila Metal Container Corporation. there was no perfected contract of sale between petitioner and respondent over the subject property. 3. This contention is likewise negated by the stipulation of facts which the parties entered into in the trial court: 8. In sum.000. That you shall undertake at your own expense and account the ejectment of the occupants of the property subject of the sale.47 and recommended this amount as the repurchase price of the subject property. The Bank sells only whatever rights. Absent such valid delegation/authorization. no perfected contract of sale would arise. Absent proof of the concurrence of all the essential elements of a contract of sale.931.000.

Austria-Martinez. concur. 2006. C. JJ.. J. Working Chairperson. 22 .. Panganiban.J. retired as of December 7. and Chico-Nazario.Ynares-Santiago..