G.R. No.

167213

October 31, 2006

DARREL CORDERO, EGMEDIO BAUTISTA, ROSEMAY BAUTISTA, MARION BAUTISTA, DANNY BOY CORDERO, LADYLYN CORDERO and BELEN CORDERO, petitioners, vs. F.S. MANAGEMENT & DEVELOPMENT CORPORATION, respondent. DECISION CARPIO MORALES, J.: Assailed via petition for review are issuances of the Court of Appeals in CA-G.R. CV No. 66198, Decision1 dated April 29, 2004 which set aside the decision of Branch 260 of the Regional Trial Court (RTC) of Parañaque in Civil Case No. 97067, and Resolution dated February 21, 2005 denying petitioners’ motion for reconsideration. On or about October 27, 1994,2 petitioner Belen Cordero (Belen), in her own behalf and as attorney-in-fact of her co-petitioners Darrel Cordero, Egmedio Bautista, Rosemay Bautista, Marion Bautista, Danny Boy Cordero and Ladylyn Cordero, entered into a contract to sell3 with respondent, F.S. Management and Development Corporation, through its chairman Roberto P. Tolentino over five (5) parcels of land located in Nasugbu, Batangas described in and covered by TCT Nos. 62692, 62693, 62694, 62695 and 20987. The contract to sell contained the following terms and conditions: 1. That the BUYER will buy the whole lots above described from the OWNER consisting of 50 hectares more or less at P25/sq.m. or with a total price of P12,500,000.00; 2. That the BUYER will pay the OWNER the sum of P500,000.00 as earnest money which will entitle the latter to enter the property and relocate the same, construct the necessary paths and roads with the help of the necessary parties in the area; 3. The BUYER will pay the OWNER the sum of THREE MILLION FIVE HUNDRED THOUSAND PESOS ONLY (P3,500,000.00) on or before April 30, 1995 and the remaining balance will be paid within 18 mons. (sic) from the date of payment of P3.5 Million pesos in 6 equal quarterly payments or P1,411,000.00 every quarter; 4. The title will be transferred by the OWNER to the BUYER upon complete payment of the agreed purchase price.

Provided that any obligation by the OWNER brought about by encumbrance or mortgage with any bank shall be settled by the OWNER or by the BUYER which shall be deducted the total purchase price; 5. Provided, the OWNER shall transfer the titles to the BUYER even before the complete payment if the BUYER can provide post dated checks which shall be in accordance with the time frame of payments as above stated and which shall be guaranteed by a reputable bank; 6. Upon the payment of the earnest money and the down payment of 3.5 Million pesos the BUYER can occupy and introduce improvements in the properties as owner while owner is guaranteeing that the properties will have no tenants or squatters in the properties and cooperate in the development of any project or exercise of ownerships by the BUYER; 7. Delay in the payment by the BUYER in the agreed due date will entitle the SELLER for the legal interest.4 Pursuant to the terms and conditions of the contract to sell, respondent paid earnest money in the amount of P500,000 on October 27, 1994.5 She likewise paid P1,000,000 on June 30, 1995 and another P1,000,000 on July 6, 1995. No further payments were made thereafter.6 Petitioners thus sent respondent a demand letter dated November 28, 19967 informing her that they were revoking/canceling the contract to sell and were treating the payments already made as payment for damages suffered as a result of the breach of contract, and demanding the payment of the amount of P10 Million Pesos for actual damages suffered due to loss of income by reason thereof. Respondent ignored the demand, however. Hence, on February 21, 1997, petitioner Belen, in her own behalf and as attorney-in-fact of her copetitioners, filed before the RTC of Parañaque a complaint for rescission of contract with damages8 alleging that respondent failed to comply with its obligations under the contract to sell, specifically its obligation to pay the downpayment of P3.5 Million by April 30, 1995, and the balance within 18 months thereafter; and that consequently petitioners are entitled to rescind the contract to sell as well as demand the payment of damages. In its Answer,9 respondent alleged that petitioners have no cause of action considering that they were the first to violate the contract to sell by preventing access to the properties despite payment of P2.5 Million Pesos; petitioners
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prevented it from complying with its obligation to pay in full by refusing to execute the final contract of sale unless additional payment of legal interest is made; and petitioners’ refusal to execute the final contract of sale was due to the willingness of another buyer to pay a higher price. In its Pre-trial Order10 of June 9, 1997, the trial court set the pre-trial conference on July 8, 1997 during which neither respondent’s representative nor its counsel failed to appear. And respondent did not submit a pre-trial brief, hence, it was declared as in default by the trial court which allowed the presentation of evidence ex parte by petitioners.11 Petitioners presented as witnesses petitioner Belen and one Ma. Cristina Cleofe. Belen testified on the execution of the contract to sell; the failure of respondent to make the necessary payments in compliance with the contract; the actual and moral damages sustained by petitioners as a result of the breach, including the lost opportunity to sell the properties for a higher price to another buyer, Ma. Cristina Cleofe; and the attorney’s fees incurred by petitioners as a result of the suit.12 Ma. Cristina Cleofe, on the other hand, testified on the offer she made to petitioners to buy the properties at P35.00/sq.m.13 which was, however, turned down in light of the contract to sell executed by petitioners in favor of the respondent.14 Respondent filed a motion to set aside the order of default15 which was denied by the trial court by Order dated September 12, 1997.16 Via petition for certiorari, respondent challenged the said order, but it was denied by the Court of Appeals. 17 Meanwhile, the trial court issued its decision18 on November 18, 1997, finding for petitioners and ordering respondent to pay damages and attorney’s fees. The dispositive portion of the decision reads: WHEREFORE, premises considered, the contract to sell between the Plaintiffs and the Defendant is hereby declared as rescinded and the defendant is likewise ordered to pay the plaintiff: (1) P4,500,000.00 computed as follows: P5,000,000.00 in actual damages and P2,000,000.00 in moral and exemplary damages, less defendant’s previous payment of P2,500,000.00 under the contract to sell; and (2) P800,000.00 by way of attorney’s fees as well as the costs of suit. SO ORDERED. (Underscoring supplied)

Before the Court of Appeals to which respondent appealed the trial court’s decision, it raised the following errors: 3.01. The Regional Trial Court erred when it awarded plaintiffs-appellees Five Million Pesos (P5,000,000.00) as actual damages. Corollary thereto, the Regional Trial Court erred in declaring defendant-appellant to have acted in wanton disregard of its obligations under the Contract to Sell. 3.02. The Regional Trial Court erred when it awarded plaintiffs-appellees Two Million Pesos (P2,000,000.00) as moral and exemplary damages. 3.03. The Regional Trial Court erred when it awarded plaintiffs-appellees Eight Hundred Thousand Pesos (P800,000.00) as attorney’s fees.19 In the assailed decision,20 the Court of Appeals set aside the contract to sell, it finding that petitioners’ obligation thereunder did not arise for failure of respondent to pay the full purchase price. It also set aside the award to petitioners of damages for not being duly proven. And it ordered petitioners to return "the amount received from [respondent]." Thus the dispositive portion of the appellate court’s decision reads: WHEREFORE, the Decision dated 18 November 1997 of the Regional Trial Court, Branch 260 of Parañaque City in Civil Case No. 97-067 is hereby VACATED. A NEW DECISION is ENTERED ordering the SETTING-ASIDE of the Contract to Sell WITHOUT payment of damages. Plaintiffsappellees are further ORDERED TO RETURN THE AMOUNTS RECEIVED from defendant-appellant. (Underscoring supplied) SO ORDERED. Their motion for reconsideration having been denied, petitioners filed the present petition for review which raises the following issues: 1. Whether the Court of Appeals erred in ruling on the nature of the contract despite the fact that it was not raised on appeal. 2. Whether or not a contract to sell may be subject to rescission under Article 1191 of the Civil Code. 3. Whether or not the Court of Appeals erred in setting aside the award of damages. Petitioners contend that the Court of Appeals erred in ruling on the nature of the contract to
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sell and the propriety of the remedy of rescission under Article 1191 of the Civil Code, these matters not having been raised by respondents in the assigned errors. In any event, petitioners claim that the contract to sell involves reciprocal obligations, hence, it falls within the ambit of Article 1191.21 While a party is required to indicate in his brief an assignment of errors and only those assigned shall be considered by the appellate court in deciding the case, appellate courts have ample authority to rule on matters not assigned as errors in an appeal if these are indispensable or necessary to the just resolution of the pleaded issues.22 Thus this Court has allowed the consideration of other grounds or matters not raised or assigned as errors, to wit: 1) grounds affecting jurisdiction over the subject matter; 2) matters which are evidently plain or clerical errors within the contemplation of the law; 3) matters the consideration of which is necessary in arriving at a just decision and complete resolution of the case or to serve the interest of justice or to avoid dispensing piecemeal justice; 4) matters of record which were raised in the trial court and which have some bearing on the issue submitted which the parties failed to raise or which the lower court ignored; 5) matters closely related to an error assigned; and 6) matters upon which the determination of a question properly assigned is dependent.23 In the present case, the nature as well as the characteristics of a contract to sell is determinative of the propriety of the remedy of rescission and the award of damages. As will be discussed shortly, the trial court committed manifest error in applying Article 1191 of the Civil Code to the present case, a fundamental error which "lies at the base and foundation of the proceeding, affecting the judgment necessarily," or, as otherwise expressed, "such manifest error as when removed destroys the foundation of the judgment."24 Hence, the Court of Appeals correctly ruled on these matters even if they were not raised in the appeal briefs. Under a contract to sell, the seller retains title to the thing to be sold until the purchaser fully pays the agreed purchase price. The full payment is a positive suspensive condition, the non-fulfillment of which is not a breach of contract but merely an event that prevents the seller from conveying title to the purchaser. The non-payment of the purchase price renders the contract to sell ineffective and without force and effect.25 Since the obligation of petitioners did not arise because of the failure of respondent to fully pay the purchase price, Article 1191 of the Civil Code would have no application.

Rayos v. Court of Appeals26 explained: Construing the contracts together, it is evident that the parties executed a contract to sell and not a contract of sale. The petitioners retained ownership without further remedies by the respondents until the payment of the purchase price of the property in full. Such payment is a positive suspensive condition, failure of which is not really a breach, serious or otherwise, but an event that prevents the obligations of the petitioners to convey title from arising, in accordance with Article 1184 of the Civil Code. x x x The non-fulfillment by the respondent of his obligation to pay, which is a suspensive condition to the obligation of the petitioners to sell and deliver the title to the property, rendered the contract to sell ineffective and without force and effect. The parties stand as if the conditional obligation had never existed. Article 1191 of the New Civil Code will not apply because it presupposes an obligation already extant. There can be no rescission of an obligation that is still non-existing, the suspensive condition not having happened. [Emphasis and underscoring supplied; citations omitted] The subject contract to sell clearly states that "title will be transferred by the owner (petitioners) to the buyer (respondent) upon complete payment of the agreed purchase price."27 Since respondent failed to fully pay the purchase price, petitioners’ obligation to convey title to the properties did not arise. While rescission does not apply in this case, petitioners may nevertheless cancel the contract to sell, their obligation not having arisen.28 This brings this Court to Republic Act No. 6552 (THE REALTY INSTALLMENT BUYER PROTECTION ACT). In Ramos v. Heruela29 this Court held: Articles 1191 and 1592 of the Civil Code are applicable to contracts of sale. In contracts to sell, RA 6552 applies. In Rillo v. Court of Appeals,30 the Court declared: x x x Known as the Maceda Law, R.A. No. 6552 recognizes in conditional sales of all kinds of real estate (industrial, commercial, residential) the right of the seller to cancel the contract upon non-payment of an installment by the buyer, which is simply an event that prevents the obligation of the vendor
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242 at a public auction conducted on December 20.33 It is on this score that a modification of the challenged issuances of the appellate court is in order.R.R. serious or otherwise. [Emphasis supplied] The properties subject of the contract having been intended for commercial. the award of damages is not warranted in this case.92 inclusive of interests and other charges. to secure the payment of which they forged on October 28. CV No. since respondent paid less than two years of installments. other than judicial costs. Article 220835 of the Civil Code provides that subject to certain exceptions.109. but.34 Consequently. The properties subject of the mortgage were sold for P10. petitioner. failure to make full payment of the purchase price in a contract to sell is not really a breach. None of the enumerated exceptions in Article 2208 is present in this case. (Dao Heng) in the total amount of P11 Million. 173856 November 20.31 petitioners are entitled to retain the payments already made by respondent. the assailed Court of Appeals Decision dated April 29. married to Reynaldo Laigo. J. There appears to have been no further action taken by the parties after the appraisal of the properties. G. through its Vice President on Property Management & Credit Services Department. 20001 wherein it indicated that they had an outstanding obligation of P10. The loans were payable within 12 months from the execution of the promissory notes covering the loans. RA 6552 expressly recognizes the vendor’s right to cancel contracts to sell on installment basis industrial and commercial properties with full retention of previous payments. Inc. It also provides the right of the buyer on installments in case he defaults in the payment of succeeding installments x x x. Dao Heng thereupon filed in September 2000 an application to foreclose the real estate mortgages executed by respondents. It bears stressing that the policy of the law is to put no premium on the right to litigate. With regard to attorney’s fees. Laigo. 1997 three Real Estate Mortgages covering two parcels of land registered in the name of respondent "Lilia D. INC. now BANCO DE ORO UNIVERSAL BANK. . It appears that respondents negotiated for the redemption of the mortgages for by a June 29.. . 1996." one containing 569 square meters and the other containing 537 square meters. 2005 in CA-G.36 WHEREFORE. however. attorney’s fees and expenses of litigation. it is not entitled to any refund. 2000 to Banco de Oro Universal Bank (hereafter petitioner) which was the highest bidder. Dao Heng was later to demand the settlement of respondents' obligation by letter of August 18. SO ORDERED. Dao Heng in fact commissioned an appraiser whose fees were shouldered by it and respondents. SPS. purposes. petitioner vs. 2001 letter2 to them. Respecting petitioners’ claim for damages. as priorly stated. The mortgages were duly registered in the Registry of Deeds of Quezon City. LILIA and REYNALDO LAIGO. As of 2000.: The Spouses Lilia and Reynaldo Laigo (respondents) obtained loans from Dao Heng Bank. 1996 and April 18.to convey title from acquiring binding force. . cannot be recovered in the absence of stipulation. To appraise the value of the mortgaged lands. respondent. to which Dao Heng had been merged. 2004 and the Resolution dated February 21. respondents failed to settle their outstanding obligation. an event that prevents the obligation of the vendor to convey title to the property from arising. 2008 DAO HENG BANK. DECISION CARPIO MORALES. and not for residential.385.32 But even assuming that the properties were not intended for commercial or industrial purpose. Respondents failed to heed the demand. advised respondent Lilia Laigo as follows: 4 . 66198 are AFFIRMED with the MODIFICATION that petitioners are entitled to retain the payments already received from respondent. drawing them to verbally offer to cede to Dao Heng one of the two mortgaged lots by way of dacion en pago. November 18. No.776.

please affix your signature showing your conformity thereto at the space provided below. Petitioner thereupon filed a Motion to Dismiss the complaint on the ground that the claim on which respondents' action is founded is unenforceable under the Statute of Frauds and the complaint states no cause of action. Payments shall be covered by post dated checks b. In its Opposition to respondents' Application for a TRO. P3MM .5MM plus 12% interest based on diminishing balance payable in staggered payments up to January 2. Arrangement to be covered by an Agreement If you are agreeable to the foregoing terms and conditions. it would proceed to consolidate the titles immediately after the expiration of the redemption period on January 2. advised her by letter of December 26. TCT No. Six days before the expiration of the redemption period or on December 27. the titles were not delivered to them pursuant to the dacion en pago but by reason of the execution of the mortgage loan agreement.5 (Emphasis and underscoring supplied) Respondents assailed the dismissal of their complaint via Petition for Review before this Court which referred it to the Court of Appeals for disposition. 92257 (along Commonwealth) P7. the same cannot be enforced in an action in court. praying for the annulment of the foreclosure of the properties subject of the real estate mortgages and for them to be allowed "to deliver by way of ‘dacion en pago' one of the mortgaged properties as full payment of [their] mortgaged obligation" and to. TCT No.immediately upon receipt of this approval b. the appellate court. 2001 as follows: 1. italics supplied) Nothing was heard from respondents. 2001. Respondents opposed the motion. The Court is not persuaded by plaintiffs' contention that their case is an exception to the operation of the rule on statute of frauds because of their partial performance of the obligation in the dacion en pago consisting of the delivery of the titles of the properties to the defendants. 2002 2. otherwise. Redemption price shall be P11. A hearing on the application for a TRO was conducted by Branch 215 of the RTC of Quezon City following which it denied the same.500 MM* b. If indeed a dacion en pago agreement was entered into between the parties. The trial court granted petitioner's Motion to Dismiss in this wise: [P]laintiffs' claim must be based on a document or writing evidencing the alleged dacion en pago.This is to formally advise you of the bank's response to your proposal pertaining to the redemption of the two (2) foreclosed lots located in Fairview. contending that their delivery of the titles to the mortgaged properties constituted partial performance of their obligation under the dacion en pago to take it out from the coverage of the Statute of Frauds.5MM plus interest c. in the meantime. Dao Heng verbally agreed to enter into a dacion en pago. 2002. TCT No. 2002 as follows: a. petitioner by its Manager. 92257 shall be the first property to be released upon payment of the first P7. N-146289 (along Regalado) P4. As correctly pointed out by the defendants. hence. Quezon City as has been relayed to you last June 13. Property Management & Credit Services Department. Reversing the trial court's dismissal of the complaint. by Decision of 5 . respondents filed a complaint before the Regional Trial Court (RTC) of Quezon City. 20013 that in view of their failure to conform to the conditions set by it for the redemption of the properties. Release Values for Partial Redemption: a. issue a TRO directing the defendant-herein petitioner to desist from consolidating ownership over their properties. By respondents' claim. (Emphasis and underscoring in the original. Injunction with Prayer for Temporary Restraining Order (TRO). for Annulment. Other Conditions: a.000 MM* * excluding 12% interest 3.4 petitioner claimed that there was no meeting of the minds between the parties on the settlement of respondents' loan via dacion en pago. Balance payable in staggered payments (plus interest) up to January 2. it is inconceivable that a written document would not be drafted considering the magnitude of the amount involved.

146289: P8. the present petition was filed faulting the appellate court in ruling: I. In paragraph 5 of their complaint. 2 .. .11 petitioner. however. the protest of plaintiffs notwithstanding and in blatant breach of the agreed "Dacion en pago" as the mode of full payment of plaintiffs' mortgage obligation. defendant Dao Heng Bank had the mortgaged properties appraised to determine which of the two (2) mortgaged properties shall be delivered as full payment of the mortgage obligation. No. Cor. THAT THE COMPLAINT ALLEGED A SUFFICIENT CAUSE OF ACTION DESPITE THE ALLEGATIONS. year 2000.T.7 In ordering the reinstatement of respondents' complaint. responding to 6 . plaintiffs for their part paid P5.00 for the appraisal expense..00 for the appraisal expense. As reported by the appraiser commissioned by Defendant Dao Heng.000. . [5] As part of the agreement. plaintiffs for their part paid P5.00. QC [6] Sometime in December. . AS WELL AS ADMISSIONS FROM THE RESPONDENTS. III. In their complaint.C. (Underscoring supplied) Even if a complaint states a cause of action. 2006. defendant Dao Heng Bank as the creditor bank agreed to the full settlement of plaintiffs' mortgage obligation of P9 Million through the assignment of one of the two (2) mortgaged properties. Fairview. by taking into account the discussions in said motion to dismiss and the disposition thereto. 92257: P12. . even without a hearing. THAT THERE WAS NO PERFECTED DACION EN PAGO CONTRACT. As reported by the appraiser commissioned by defendant Dao Heng. . an unconscionably very low price. . the appellate court held that the complaint states a cause of action. 1 . No.T.10 In its Opposition to respondents' application for the issuance of a TRO. the presence of a cause of action is determined from the facts alleged in the complaint. petitioners[-herein respondents] averred partial performance of the supposed verbal dacion en pago. DESPITE THE ABSENCE OF A WRITTEN & BINDING CONTRACT. the appraised value of the mortgaged properties were as follows: (a) Property No. Ipil St.242.C. the court can dismiss a complaint on this ground.000. . the appraised value of the mortgaged properties were as follows: x x x" Having done so.T. THAT THE ALLEGED DACION EN PAGO IS NOT UNENFORCEABLE UNDER THE STATUTE OF FRAUDS. Neopolitan. . respondents alleged: xxxx 4.9 Generally. they stated: "As part of the agreement. Sometime in the middle of the year 2000.000. (Underscoring supplied) Petitioner's Motion for Reconsideration having been denied by the appellate court by Resolution of July 19. THAT THE COMPLAINT SUFFICIENTLY STATED A CAUSE OF ACTION. to which the respondents may equally present their evidence in refutation of the formers' case. QC (b) Property No.00 L2A Blk 12 Don Mariano Marcos Ave.00 L36 Blk 87 Regalado Ave.518. Thus the appellate court ratiocinated: Particularly.055.6 reinstated respondents' complaint. In such instances. Also as part of the deal. II.776. defendant Dao Heng Bank proceeded to foreclose the mortgaged properties above-described and sold said properties which were aggregately valued at more than P20 Million for only P10. .000.January 26. in seeking exception to the application of the Statute of Frauds. petitioners are at least entitled to a reasonable opportunity to prove their case in the course of a full trial. defendant Dao Heng Bank had the mortgaged property appraised to determine which of the two shall be delivered as full payment of the mortgage obligation. respondents having alleged that there was partial performance of the agreement to settle their obligation via dacion en pago when they agreed to have the properties appraised to thus place their agreement within the exceptions provided under Article 14038 of the Civil Code on Statute of Frauds. 2006. a motion to dismiss for insufficiency of cause of action may be granted if the evidence discloses facts sufficient to defeat the claim and enables the court to go beyond the disclosures in the complaint. Also as part of the deal.T.

what actually takes place in dacion en pago is an objective novation of the obligation where the thing offered as an accepted equivalent of the performance of an obligation is considered as the object of the contract of sale. both for security and registration purposes. while the debt is considered the purchase price. what will prevent the mortgagor from again encumbering it also by mortgage or even by sale to a third party. much less did the negotiations mature into the execution of a dacion en pago instrument. The delivery to petitioner of the titles to the properties is a usual condition sine qua non to the execution of the mortgage. that after the appraisal of the properties."14 (Emphasis. 146 SCRA 205. and cause or consideration must be present. namely. "The power to decide whether or not to foreclose on the mortgage is the sole prerogative of the mortgagee" (Rural Bank of San Mateo. Intermediate Appellate Court. common consent is an essential prerequisite. the debtor offers another thing to the creditor who accepts it as equivalent of payment of an outstanding debt. In any case. vs. There is no concrete showing.242. nothing came out of said proposal. be it sale or novation. Finally. As such the elements of a contract of sale. citation omitted) Being likened to that of a contract of sale. For if the title to a property is not delivered to the mortgagee.respondents' allegation that it agreed to the settlement of their obligation via the assignment of one of the two mortgaged properties. or more valuable than that which is due" (Article 1244. and their delivery to petitioner of the titles to the properties constitute partial performance of their agreement to take the case out of the provisions on the Statute of Frauds. Branch 215 dismissing respondents' complaint is REINSTATED.776. there was no meeting of the minds between defendant Dao Heng Bank and the plaintiffs to dacion any of the mortgaged properties as full settlement of the loan. The law clearly provides that "the debtor of a thing cannot compel the creditor to receive a different one. 2001 letter to them. object and cause of the obligation concur and are clearly established to be present. In its modern concept. Quite to the contrary. Court of Appeals. that respondents did not deny proposing to redeem the mortgages.17 as reflected in petitioner's June 29. his services for which they and petitioner paid. to have the effect of totally extinguishing the debt or obligation. .15 The partial execution of a contract of sale takes the transaction out of the provisions of the Statute of Frauds so long as the essential requisites of consent of the contracting parties. the creditor is really buying the thing or property of the debtor. The undertaking really partakes in one sense of the nature of sale. SO ORDERED. In dacion en pago. Inc. . italics and underscoring supplied.00 are clearly WITHOUT BASIS. capitalization and underscoring supplied) Dacion en pago as a mode of extinguishing an existing obligation partakes of the nature of sale whereby property is alienated to the creditor in satisfaction of a debt in money. hence. although the latter may be of the same value. Plaintiffs' claim that defendant Dao Heng Bank[s] foreclosure sale of the mortgaged properties was improper because there was an agreement to dacion one of the two (2) mortgaged properties as full settlement of the loan obligation and that defendant Dao Heng Bank and Banco de Oro were already negotiating and colluding for the latter's acquisition of the mortgaged [properties] for the unsconscionably low price of P10. 444 [1998]). 7 . however. that is. Although there was a PROPOSAL and NEGOTIATIONS to settle the loan by way of dacion. object certain. payment for which is to be charged against the debtor's debt. as a special mode of payment. common consent of the parties is required in order to extinguish the obligation. it opted to foreclose on the mortgage. the Court of Appeals Decision of January 26. 2002 of the Regional Trial Court of Quezon City. .13 It is an objective novation of the obligation. dooms their claim of the existence of a perfected dacion en pago. dacion en pago is governed by the law on sales. consent. "The oblige is entitled to demand fulfillment of the obligation or performance as stipulated" (Palmares v. at 213 [1986]) Defendant Dao Heng Bank merely opted to exercise such prerogative. 288 SCRA 422 at p. New Civil Code). 2006 is REVERSED and SET ASIDE.16 Respondents claim that petitioner's commissioning of an appraiser to appraise the value of the mortgaged properties. alleged that there was no meeting of the minds thereon: 4. WHEREFORE. The Resolution of July 2. Defendant Dao Heng Bank found the offer to settle by way of dacion not acceptable and thus. petitioner approved respondents' proposal to settle their obligation via dacion en pago.12 (Emphasis in the original.

118342 January 5. In the following cases an agreement hereafter made shall be unenforceable by action.000. plaintiff Lydia P. therefore. the trial court conducted a pre-trial where CUBA and DBP agreed on the following facts. and interests over the fishpond. The following contracts are unenforceable unless they are ratified: x x x (2) Those that do not comply with the Statute of Frauds as set forth in this number.. DAVIDE.00 under the terms stated in the Promissory Notes dated September 6. or by his agent. August 11.R. or a secondary evidence of its contents: x x x (e) An agreement for the leasing for a longer period than one year. and interests over a 44-hectares fishpond located in Bolinao. Plaintiff Lydia P. 1974. P109. (3) the annulment of DBP's sale of the subject fishpond to Caperal. 2. DEVELOPMENT BANK OF THE PHILIPPINES and AGRIPINA P. petitioner. Cuba is a grantee of a Fishpond Lease Agreement No. and P98. Cuba executed two Deeds of Assignment of her Leasehold Rights. which were embodied in the pre-trial order: 2 1. 2083 (new) dated May 13. title. and (5) the recovery of damages. (2) the annulment of the Deed of Conditional Sale executed in her favor by DBP. respondents. JR. COURT OF APPEALS.000. No. for being violative of Article 2088 of the Civil Code. 1998 DEVELOPMENT BANK OF THE PHILIPPINES. 8 . or some note or memorandum thereof be in writing. respondents. The said complaint sought (1) the declaration of nullity of DBP's appropriation of CUBA's rights. unless the same.: These two consolidated cases stemmed from a complaint 1 filed against the Development Bank of the Philippines (hereafter DBP) and Agripina Caperal filed by Lydia Cuba (hereafter CUBA) on 21 May 1985 with the Regional Trial Court of Pangasinan. After the joinder of issues following the filing by the parties of their respective pleadings.00. 118367 January 5. or for the sale of real property or of an interest therein. COURT OF APPEALS and LYDIA CUBA. CUBA. Plaintiff Lydia P.00. As security for said loans.700. (4) the restoration of her rights. CAPERAL. vs. evidence. of the agreement cannot be received without the writing. Branch 54. 1974 from the Government. and expenses of litigation. and subscribed by the party charged. vs. G. Pangasinan. No. petitioner. title. and April 4.R. 1998 LYDIA P.8 Article 1403. 3. J. Cuba obtained loans from the Development Bank of the Philippines in the amounts of P109. 1977. 1975. x x x G. attorney's fees.

plaintiff Lydia Cuba addressed two letters to the Manager DBP. 5. 9. 14. 3 Trial was thereafter had on other matters. Defendant Caperal sided with DBP. Plaintiff failed to pay her loan on the scheduled dates thereof in accordance with the terms of the Promissory Notes. After plaintiff Lydia Cuba failed to pay the amortization as stated in Deed of Conditional Sale. That after defendant DBP took possession of the Leasehold Rights over the fishpond in question. Without foreclosure proceedings. 1979. 1984. 10. After the Deed of Conditional Sale was executed in favor of plaintiff Lydia Cuba. in turn. It disagreed with DBP's stand that the Assignments of Leasehold Rights were not contracts of mortgage because (1) they were given as security for loans. The creditor cannot appropriate the things given by way of pledge or mortgage. DBP's only right was to foreclose the Assignment in accordance with law. 1980 was issued by the Ministry of Agriculture and Food in favor of plaintiff Lydia Cuba only. defendant DBP took possession of the Leasehold Rights of the fishpond in question. to dispose of the property. upon CUBA's default. In the negotiation for repurchase. Plaintiff Lydia Cuba failed to pay the amortizations stipulated in the Deed of Conditional Sale. 13. which was not a contract of mortgage. a new Fishpond Lease Agreement No. The principal issue presented was whether the act of DBP in appropriating to itself CUBA's leasehold rights over the fishpond in question without foreclosure proceedings was contrary to Article 2088 of the Civil Code and. 1982. Dagupan City dated November 6. DBP thereafter accepted the offer to repurchase in a letter addressed to plaintiff dated February 1. defendant DBP. After the Notice of Rescission. Defendant Caperal admitted only the facts stated in paragraphs 14 and 15 of the pre-trial order. Defendant DBP thereafter sent a Notice of Rescission thru Notarial Act dated March 13. and which was received by plaintiff Lydia Cuba. 6. 11. she entered with the DBP a temporary arrangement whereby in consideration for the deferment of the Notarial Rescission of Deed of Conditional Sale. or dispose of them. 1982. and (3) the intention of the contracting parties to treat the Assignment of Leasehold Rights as a mortgage was obvious and unmistakable. 2083-A on December 28. 8. defendant DBP appropriated the Leasehold Rights of plaintiff Lydia Cuba over the fishpond in question. therefore. 1984.4. CUBA insisted on an affirmative resolution. Thereafter. 2088. DBP advertised in the SUNDAY PUNCH the public bidding dated June 24. hence. executed a Deed of Conditional Sale of the Leasehold Rights in favor of plaintiff Lydia Cuba over the same fishpond in question. defendant Caperal was awarded Fishpond Lease Agreement No. 15. The trial court resolved the issue in favor of CUBA by declaring that DBP's taking possession and ownership of the property without foreclosure was plainly violative of Article 2088 of the Civil Code which provides as follows: Art. 2083-A dated March 24. Any stipulation to the contrary is null and void. DBP stressed that it merely exercised its contractual right under the Assignments of Leasehold Rights. invalid. 7. (2) although the "fishpond land" in question is still a public land. After defendant DBP has appropriated the Leasehold Rights of plaintiff Lydia Cuba over the fishpond in question. That the DBP thereafter executed a Deed of Conditional Sale in favor of defendant Agripina Caperal on August 16. 1984. CUBA's leasehold rights and interest thereon are alienable rights which can be the proper subject of a mortgage. 1984 by the Ministry of Agriculture and Food. whether judicial or extra-judicial. 9 . 1979 and December 20. plaintiff Lydia Cuba promised to make certain payments as stated in temporary Arrangement dated February 23. 12. excluding her husband.

2. Accordingly.000. 1) and the acts of notarial rescission of the Development Bank of the Philippines relative to said sale (Exhs.067. as well as the Assignment of Leasehold Rights executed by Caperal in favor of DBP. equipment.500. and the Deed of Conditional Sale in favor of defendant Caperal. without any judicial or extra-judicial foreclosure. 1980 by and between the defendant Development Bank of the Philippines and plaintiff (Exh.000 attorney's fees in view of the considerable expenses she incurred for lawyers' fees and in view of the finding that she was entitled to exemplary damages. all acts of ownership and possession by the said bank were void.000 pieces of bangus fish (milkfish). 2083-A dated December 28.500. CUBA had stocked the fishpond with 250. degradation. and other articles used in fishpond operation which were kept in the house were missing. It then concluded that since DBP never acquired lawful ownership of CUBA's leasehold rights. jointly and severally. DECLARING the Deed of Conditional Sale dated February 21. and after deducting 25% of said value as reasonable allowance for the cost of feeds. 1985 executed by defendant Agripina Caperal in favor of the defendant Development Bank of the Philippines (Exh. judgment is hereby rendered in favor of plaintiff: 1.000. At the conservative price of P3. were also void and ineffective. The missing items were valued at about P550. ORDERING defendant Development Bank of the Philippines and defendant Agripina Caperal. 24) as void ab initio. social humiliation. the gross value would have been P690. tools. the notarial rescission of such sale. 5. CUBA "suffered moral shock. 12 of the Assignment of Leasehold Rights for being a clear case of pactum commissorium expressly prohibited and declared null and void by Article 2088 of the Civil Code. and that when CUBA's son and caretaker went there on 15 September 1985. 4 the trial court disposed as follows: WHEREFORE. 21). the Deed of Conditional Sale in favor of CUBA. The trial court also held that CUBA was entitled to P100. The trial court further found that DBP was guilty of gross bad faith in falsely representing to the Bureau of Fisheries that it had foreclosed its mortgage on CUBA's leasehold rights.The trial court also declared invalid condition no. F and Exh. to restore to plaintiff the latter's leasehold rights and interests and right of possession over the fishpond land in question. 1984 by and between the Development Bank of the Philippines and defendant Agripina Caperal (Exh. It then set the aggregate of the actual damages sustained by CUBA at P1. machineries. E and Exh. the Fishpond Lease Agreement No. It further found that when CUBA and her men were ejected by DBP for the first time in 1979. DECLARING the Deed of Conditional Sale dated August 16. 2083 (new). And considering that by reason of her unlawful ejectment by DBP. they found the said house unoccupied and destroyed and CUBA's personal belongings. DECLARING null and void and without any legal effect the act of defendant Development Bank of the Philippines in appropriating for its own interest. all of which died because the DBP representatives prevented CUBA's men from feeding the fish. As to damages. without prejudice to the right of defendant Development Bank of the Philippines to foreclose the securities given by plaintiff. CUBA suffered a loss of P517. the trial court found "ample evidence on record" that in 1984 the representatives of DBP ejected CUBA and her caretakers not only from the fishpond area but also from the adjoining big house. plaintiff's leasehold rights and interest over the fishpond land in question under her Fishpond Lease Agreement No. 4. 3. 16 and 26) as void and ineffective. ORDERING defendant Development Bank of the Philippines to pay to plaintiff the following amounts: a) The sum of ONE MILLION SIXTYSEVEN THOUSAND 10 . 23) and the Assignment of Leasehold Rights dated February 12.00 per fish. 1984 of defendant Agripina Caperal (Exh. In its decision of 31 January 1990. Such representation induced the said Bureau to terminate CUBA's leasehold rights and to approve the Deed of Conditional Sale in favor of CUBA. and serious anxieties for which she became sick and had to be hospitalized" the trial court found her entitled to moral and exemplary damages.

It then ordered DBP to turn over possession of the property to Caperal as lawful holder of the leasehold rights and to pay CUBA the following amounts: (a) P1. (3) the deeds of assignment represented the voluntary act of CUBA in assigning her property rights in payment of her debts. (c) in holding that CUBA was estopped from questioning the validity of the deed of assignment when she agreed to repurchase her leasehold rights under a deed of conditional sale.000 as moral damages.500.500 as actual damages. the Fishpond Lease Agreement in favor of Caperal. CUBA and DBP interposed separate appeals from the decision to the Court of Appeals. 2083.R. in her petition (G.067. CUBA contends that the Court of Appeals erred (1) in not holding that the questioned deed of assignment was a pactum commissorium contrary to Article 2088 of the Civil Code. and (4) the deed of conditional sale between DBP and Caperal.75) representing the amounts paid by defendant Agripina Caperal to defendant Development Bank of the Philippines under their Deed of Conditional Sale. And ORDERING defendant Development Bank of the Philippines to reimburse and pay to defendant Agripina Caperal the sum of ONE MILLION FIVE HUNDRED THIRTY-TWO THOUSAND SIX HUNDRED TEN PESOS AND SEVENTY-FIVE CENTAVOS (P1. 6. DBP assails the award of actual and moral damages and attorney's fees in favor of CUBA.R. (b) in holding that the deed of assignment effected a novation of the promissory notes.067. 11 . but agreed with the trial court as to the actual damages of P1.000. b) The sum of ONE HUNDRED THOUSAND (P100. 6 DBP and CUBA filed separate petitions for review.000 and attorney's fees. deleted the amount of exemplary damages and reduced the award of moral damages from P100. In its decision 5 of 25 May 1994. as and for attorney's fees. We agree with CUBA that the assignment of leasehold rights was a mortgage contract.067. since she agreed to repurchase the said rights under a deed of conditional sale.000 to P50. No. the assignment was not a cession under Article 1255 of the Civil Code because DBP appeared to be the sole creditor to CUBA — cession presupposes plurality of debts and creditors.500. the Court of Appeals ruled that (1) the trial court erred in declaring that the deed of assignment was null and void and that defendant Caperal could not validly acquire the leasehold rights from DBP. d) And the sum of ONE HUNDRED THOUSAND (P100. there was a provision that: "In the event of foreclosure of the mortgage securing this notes.000. It. 118342). and P50. (2) contrary to the claim of DBP.FIVE HUNDRED PESOS (P1. It also ruled that CUBA was not entitled to loss of profits for lack of evidence.000 as attorney's fees.000 to P50. from P100. and (5) condition no.000.00) PESOS.00). (3) the deed of conditional sale between CUBA and DBP. Since their motions for reconsideration were denied. each of which was covered by a promissory note.00) PESOS.00) PESOS as moral damages. and (d) in reducing the amounts of moral damages and attorney's fees.610. while the latter questioned the findings of fact and law of the lower court. Upon the other hand. I/We further bind myself/ourselves. In its petition (G. in deleting the award of exemplary damages. c) The sum of FIFTY THOUSAND (P50.532. and the assignment of leasehold rights executed by Caperal in favor of DBP.000. as and for actual damages. The Court of Appeals thus declared as valid the following: (1) the act of DBP in appropriating Cuba's leasehold rights and interest under Fishpond Lease Agreement No. as and for exemplary damages. The former sought an increase in the amount of damages. 12 of the deed of assignment was an express authority from CUBA for DBP to sell whatever right she had over the fishpond. 118367). P50. It is undisputed that CUBA obtained from DBP three separate loans totalling P335.000. however. which amounted to a novation of the promissory notes executed by CUBA in favor of DBP. In all of these notes. No. (2) the deeds of assignment executed by Cuba in favor of DBP. (4) CUBA was estopped from questioning the assignment of the leasehold rights. and in not increasing the amount of damages.

Any amount received from rents. 33 provided that if "foreclosure is actually accomplished. and the instrument itself. to sell or otherwise dispose of whatever rights the Assignor has or might have over said property and/or its improvements and perform any other act which the Assignee may deem convenient to protect its interest. As pointed out by CUBA. condition no. plaintiff Lydia P. to pay the deficiency. in their stipulation of facts the parties admitted that the assignment was by way of security for the payment of the loans. an integral part hereof. buy CUBA's argument that condition no. the last paragraph of the assignment stated: "The assignor further reiterates and states all terms. Significantly. to lease the same or any portion thereof and collect rentals. the DBP. sale or disposal of said property may be supplied by the Assignee to the payment of repairs. which reads: "Dation in payment. Odom." 7 Simultaneous with the execution of the notes was the execution of "Assignments of Leasehold Rights" 8 where CUBA assigned her leasehold rights and interest on a 44-hectare fishpond. improvements. Nor did the assignment constitute dation in payment under Article 1245 of the civil Code. Also. We find no merit in DBP's contention that the assignment novated the promissory notes in that the obligation to pay a sum of money the loans (under the promissory notes) was substituted by the assignment of the rights over the fishpond (under the deed of assignment). the Assignor hereby appoints the Assignee his Attorney-in-fact with full power and authority to take actual possession of the property above-described. and the assignment merely served as security for the loans covered by the promissory notes. subject to the approval of the Secretary of Agriculture and Natural Resources. and conditions stipulated in the promissory note or notes covering the proceeds of this loan." And. the deeds of assignment constantly referred to the assignor (CUBA) as "borrower". the obligation to pay a sum of money remained. thus: 3. As correctly pointed out by CUBA. Article 1255 contemplates the existence of two or more creditors and involves the assignment of all the debtor's property. as mortgage contract. assessments and other incidental expenses and obligations and the balance. it was provided that "failure to comply with the terms and condition of any of the loans shall cause all other loans to become due and demandable and all mortgages shall be foreclosed. no shred of doubt that a mortgage was intended. the assigned rights." Neither did the assignment amount to payment by cession under Article 1255 of the Civil Code for the plain and simple reason that there was only one creditor. Said condition reads: 12. the usual 10% attorney's fees and 10% liquidated damages of the total obligation shall be imposed. The former was only an accessory to the latter." There is. together with all improvements thereon. That effective upon the breach of any condition of this assignment. shall be governed by the law on sales. If after disposal or sale of said property and upon application of total amounts received there shall 12 . 22 of the deed. the said assignment merely complemented or supplemented the notes. to the payment of interest and then on the capital of the indebtedness secured hereby. taxes. however. 12 of the deed of assignment constituted pactum commissorium." It bears stressing that the assignment. as mortgaged properties. if any. Cuba executed two Deeds of Assignment of her Leasehold Rights. administration. All expenses advanced by the Assignee in connection with purpose above indicated which shall bear the same rate of interest aforementioned are also guaranteed by this Assignment. Moreover. Contrary to DBP's submission.jointly and severally. Besides. to make repairs or improvements thereon and pay the same. making said promissory note or notes. As security for said loans. both the deeds of assignment and the promissory notes were executed on the same dates the loans were granted. 10 We do not. being in its essence a mortgage. 9 this Court had the occasion to rule that an assignment to guarantee an obligation is in effect a mortgage. whereby property is alienated to the creditor in satisfaction of a debt in money. was but a security and not a satisfaction of indebtedness. if any. In People's Bank & Trust Co. both could stand together. under condition no. vs. therefore. covenants. together with the improvements thereon. to all intent and purposes.

12 did not provide that CUBA's default would operate to vest in DBP ownership of the said rights. exceeded the authority vested by condition no. DBP should have foreclosed the mortgage. together with all interest thereon until fully paid. As held by this Court in some cases. appropriated the [l]easehold [r]ights of plaintiff Lydia Cuba over the fishpond in question. and to apply the proceeds to the payment of the loan. 13 estoppel cannot give validity to an act that is prohibited by law or against public policy. it had "[w]ithout foreclosure proceedings. Instead of taking ownership of the questioned real rights upon default by CUBA. the Vendor [DBP] by virtue of a deed of assignment executed in its favor by the herein vendees [Cuba spouses] the former acquired all the right and interest of the latter over the abovedescribed property." 14 This only goes to show that DBP was aware of the necessity of foreclosure proceedings. In view of the false representation of DBP that it had already foreclosed the mortgage. The elements of pactum commissorium are as follows: (1) there should be a property mortgaged by way of security for the payment of the principal obligation. It is obvious from the above-quoted paragraphs that DBP had appropriated and taken ownership of CUBA's leasehold rights merely on the strength of the deed of assignment. advances and interest shall have been fully paid. 22 of the deed of assignment. an assignment to guarantee an obligation. As stated earlier. said Assignor hereby binds himself to pay the same to the Assignee upon demand. among other things. being contrary to Article 2088 of the Civil Code and to public policy. Estoppel is unavailing in this case. Hence. (Emphasis supplied). in its letter dated 26 October 1979. addressed to the Minister of Agriculture and Natural Resources and coursed through the Director of the Bureau of Fisheries and Aquatic Resources. Yet. . as in the present case. in case of default by CUBA. there was no such foreclosure. or disposing of. is virtually a mortgage and not an absolute conveyance of title which confers ownership on the assignee. The fact that CUBA offered and agreed to repurchase her leasehold rights from DBP did not estop her from questioning DBP's act of appropriation. . condition no. But. This provision is a standard condition in mortgage contracts and is in conformity with Article 2087 of the Civil Code. 12 At any rate. 11 Condition no. the appropriation of the leasehold rights. which forbids a credit or from appropriating. It merely provided for the appointment of DBP as attorney-in-fact with authority. Said acts which were predicated on such false representation. as admitted by DBP. DBP. however. DBP declared that it "had foreclosed the mortgage and enforced the assignment of leasehold rights on March 21. and (2) there should be a stipulation for automatic appropriation by the creditor of the thing mortgaged in case of nonpayment of the principal obligation within the stipulated period." Its contention that it limited itself to mere administration by posting caretakers is further belied by the deed of conditional sale it executed in favor of CUBA. The deed stated: WHEREAS. as has been stipulated in condition no. The power herein granted shall not be revoked as long as the Assignor is indebted to the Assignee and all acts that may be executed by the Assignee by virtue of said power are hereby ratified.remain a deficiency. 12 did not provide that the ownership over the leasehold rights would automatically pass to DBP upon CUBA's failure to pay the loan on time. which authorizes the mortgagee to foreclose the mortgage and alienate the mortgaged property for the payment of the principal obligation. cannot be deemed validated by estoppel. As admitted by it during the pre-trial. . DBP's act of appropriating CUBA's leasehold rights was violative of Article 2088 of the Civil Code. 12 of the deed of assignment. 1979 for failure of said spouses [Cuba spouces] to pay their loan amortizations. DBP cannot take refuge in condition no. 12 of the deed of assignment to justify its act of appropriating the leasehold rights. approved the deed of conditional sale. should therefore be set aside. xxx xxx xxx The title to the real estate property [sic] and all improvements thereon shall remain in the name of the Vendor until after the purchase price. as well as the subsequent acts emanating from DBP's appropriation of the leasehold rights. Besides. to sell or otherwise dispose of the said real rights. the thing given as security for the payment of a debt. whether judicial or extrajudicial. the Bureau of Fisheries cancelled CUBA's original lease permit. To 13 . and issued a new permit in favor of CUBA.

may be applied to the payment of repairs. DBP should render an accounting of the income derived from the operation of the fishpond in question and apply the said income in accordance with condition no. .000. 16 A court cannot rely on speculations. Actual or compensatory damages cannot be presumed. if any. 3135. there was not "inventory of the alleged lost items before the loss which is normal in a project which sometimes. in her letter dated 24 October 1979. 19 she declared: 1. I was then seriously ill in Manila and within the same period I neglected the management and supervision of the cultivation and harvest of the produce of the aforesaid fishpond thereby resulting to the irreparable loss in the produce of the same in the amount of about P500. and other incidental expenses and obligations and the balance. the trial court awarded in favor of CUBA P1. Such loss was not duly proved.000 pieces of bangus allegedly stocked in 1979 when DBP first ejected CUBA from the fishpond and the adjoining house. conjectures. however. We find that the alleged loss of personal belongings and equipment was not proved by clear evidence. 12 of the deed of assignment which provided: "Any amount received from rents. 15 With more reason that the sale of property given as security for the payment of a debt be set aside if there was no prior fore closure proceeding. the same was not called for." We shall now take up the issue of damages. From 1979 until after the filing of her complaint in court in May 1985. in her complaint dated 17 May 1985. but all of which died because of DBP's representatives prevented her men from feeding the fish. was therefore speculative.500 as actual damages consisting of P550. In view.000 which represented the value of the alleged lost articles of CUBA and P517. which was written seven months after DBP took possession of the fishpond. . the claim therefor was delayed unreasonably. as amended. did CUBA intimate that upon DBP's take-over there was a total of 230. Article 2199 provides: Except as provided by law or by stipulation.500 which represented the value of the 230. administration. but must be proved with reasonable degree of certainty. CUBA did not bring to the attention of DBP the alleged loss. . be struck down for lack of sufficient basis. if not most often. is left to the care of other persons. this Court had not hesitated to nullify the consequent auction sale for failure to comply with the requirements laid down by law.000 pieces of bangus. In fact. there was no proof as to the existence of those items before DBP took over the fishpond in question. Such claim for "losses of property. one is entitled to an adequate compensation only for such pecuniary loss suffered by him as he has duly proved. The alleged loss could have been a mere afterthought or subterfuge to justify her claim for actual damages. but must depend upon competent proof that they have been suffered by the injured party and on the best obtainable evidence of the actual amount thereof.00 to my great damage and prejudice due to fraudulent acts of some of my fishpond workers. That from February to May 1978. besides. The award of actual damages should. as well as its false representation to the then Ministry of Agriculture and Natural Resources that it had "foreclosed the mortgage. therefore. 17 It must point out specific facts which could afford a basis for measuring whatever compensatory or actual damages are borne. With regard to the award of P517. Hence. Nowhere in the said letter. such as Act No." Neither was a single receipt or record of acquisition presented. or guesswork as to the fact and amount of damages. Curiously. This award was affirmed by the Court of Appeals. to the payment of interest and then on the capital of the indebtedness.validate these acts would open the floodgates to circumvention of Article 2088 of the Civil Code.000 pieces of bangus which died when DBP took possession of the fishpond in March 1979. of DBP's act of appropriating CUBA's leasehold rights which was contrary to law and public policy. taxes. . improvements.067." having been made before knowledge of the alleged actual loss.000 representing the value of the alleged 230. Yet. . it was only in September 1985 when her son and a caretaker went to the fishpond and the adjoining house that she came to know of the alleged loss of several articles. Other than the testimony of CUBA and her caretaker. CUBA included "losses of property" as among the damages resulting from DBP's take-over of the fishpond. 18 In the present case." an award of moral damages in the 14 . assessment. Such compensation is referred to as actual or compensatory damages. As pointed out by DBP. Even in cases where foreclosure proceedings were had.

shall be paid by Mr. Don Andres Quiroga grants the exclusive right to sell his beds in the Visayan Islands to J. Jose Arnaiz and Pascual B. PARSONS HARDWARE CO. Parsons for the latter's establishment in Iloilo. whether of the same or of different styles. insurance. (B) Mr. PARSONS. Exemplary or corrective damages in the amount of P25. and J.000. except as to the award of P50. as party of the first part. and the freight. in this city of manila. the 25 May 1994 Decision of the Court of Appeals in CA-G. within a period of sixty days from the date of their shipment. 20 There being an award of exemplary damages.000 to P25. in Civil Case No. Crossfield & O'Brien for appellee.000. 1918 ANDRES QUIROGA. as well as the statement of the account of Lydia P. and as such a deduction of 2 per cent shall be made from the amount of the invoice.amount of P50. 26535 is hereby REVERSED. in the invoices.. Quiroga shall furnish beds of his manufacture to Mr. and by reducing the amounts of moral damages from P100. SO ORDERED. and shall invoice them at the same price he has fixed for sales. Azanza for appellant. FOR THE EXCLUSIVE SALE OF "QUIROGA" BEDS IN THE VISAYAN ISLANDS. Parsons binds himself to pay Mr. Parsons (to whose rights and obligations the present defendant later subrogated itself). the exemplary damages. from P100. and for the determination of each party's financial obligation to one another. Branch 54. (C) The expenses for transportation and shipment shall be borne by M. 12 of the deed of assignment constituted pactum commissorium and the award of actual damages. BOTH MERCHANTS ESTABLISHED IN MANILA. as commission on the sale.R. Quiroga for the beds received.000 is in order conformably with Article 2219(10). vs. ARTICLE 1. 15 . 21 WHEREFORE. shall make and allowance of a discount of 25 per cent of the invoiced prices. plaintiff-appellant. Quiroga.000 to P50. and Mr. Mr. Parsons may deem convenient to pay in cash. defendantappellee. L-11491 August 23.R. Parsons. Quiroga should request its payment. AVANCEÑA. CV No. and the attorney's fees. a contract in the following tenor was entered into by and between the plaintiff. attorney's fees are also recoverable. and. Let this case be REMANDED to the trial court for the reception of the income statement of DBP. in Manila. (D) If. The 31 January 1990 Decision of the Regional Trial Court of Pangasinan. which is hereby sustained.: On January 24. in relation to Article 21. Parsons under the following conditions: (A) Mr. Alfredo Chicote. G. The same discount shall be made on the amount of any invoice which Mr. before an invoice falls due.000 as moral damages. A-1574 is MODIFIED setting aside the finding that condition no. and cost of unloading from the vessel at the point where the beds are received. said payment when made shall be considered as a prompt payment. of the Civil Code. 1911.000. from P50. Cuba. No. J. as party of the second part: CONTRACT EXECUTED BY AND BETWEEN ANDRES QUIROGA AND J. The Development Bank of the Philippines is hereby ordered to render an accounting of the income derived from the operation of the fishpond in question.000 to P20. Parsons shall order the beds by the dozen.000 should likewise be awarded by way of example or correction for the public good.

and if he does not succeed in selling it. or establish branches of his agency for the sale of "Quiroga" beds in all the towns of the Archipelago where there are no exclusive agents. and agrees that if on the date when such alteration takes effect he should have any order pending to be served to Mr. and that said obligations are implied in a contract of commercial agency. the latter. according to their class. Parsons. is that the plaintiff was to furnish the defendant with the beds which the latter might order. in this latter case. The whole question. without any other consideration and regardless as to whether he had or had not sold the beds. itself to conduct the agency. and may be terminated by either of the contracting parties on a previous notice of ninety days to the other party. but delivers to the principal the price he obtains from the sale of the thing to a third person. In compensation for the expenses of advertisement which. to keep the beds on public exhibition. a former vice-president of the defendant corporation and who established and 16 . such order shall enjoy the advantage of the alteration if the price thereby be lowered. The plaintiff calls attention to the testimony of Ernesto Vidal. In order to classify a contract. Quiroga for his approval. or before. In the contract in question. and to pay for the advertisement expenses for the same. Quiroga assumes the obligation to offer and give the preference to Mr. for the benefit of both contracting parties. and that the defendant was to pay the price in the manner stipulated. than a mere discount on the invoice price. 4. and in these last two cases an additional discount was to be allowed for prompt payment. none of the obligations imputed to the defendant in the two causes of action are expressly set forth in the contract. (F) Mr. besides. and shall immediately report such action to Mr. ART. There was the obligation on the part of the plaintiff to supply the beds. Not a single one of these clauses necessarily conveys the idea of an agency. The price agreed upon was the one determined by the plaintiff for the sale of these beds in Manila. or in cash. as constituting its cause and subject matter. the least that can be said is that they are not incompatible with the contract of purchase and sale. This contract is made for an unlimited period. Mr. therefore. 3.(E) Mr. he returns it. But the plaintiff alleged that the defendant was his agent for the sale of his beds in Iloilo. Parsons may sell. and does not pay its price. The words commission on sales used in clause (A) of article 1 mean nothing else. in order to show that it was not one made on the basis of a commission on sales. only two of them constitute the subject matter of this appeal and both substantially amount to the averment that the defendant violated the following obligations: not to sell the beds at higher prices than those of the invoices. with a discount of from 20 to 25 per cent. by reason of the contract hereinbefore transcribed. reduced itself to a determination as to whether the defendant. But. none of them is found that substantially supports the plaintiff's contention. and to order the beds by the dozen and in no other manner. was necessarily obliged to pay their price within the term fixed. Mr. As may be seen. ART. with the exception of the obligation on the part of the defendant to order the beds by the dozen and in no other manner. Parsons binds himself not to sell any other kind except the "Quiroga" beds. for. Parsons in case anyone should apply for the exclusive agency for any island not comprised with the Visayan group. that the contract by and between the defendant and the plaintiff is one of purchase and sale. due regard must be given to its essential clauses. Quiroga binds himself to give notice at least fifteen days before hand of any alteration in price which he may plan to make in respect to his beds. as the plaintiff claims it was. but shall not be affected by said alteration if the price thereby be increased. It would be enough to hold. The word agency. on receiving the beds. examining the clauses of this contract. for these contracts are incompatible with each other. what was essential. at the plaintiff's request. Mr. Parsons may find himself obliged to make. also used in articles 2 and 3. if the defendant so preferred. ART. only expresses that the defendant was the only one that could sell the plaintiff's beds in the Visayan Islands. as stated in the contract itself. By virtue of the contract between the plaintiff and the defendant. These features exclude the legal conception of an agency or order to sell whereby the mandatory or agent received the thing to sell it. Mr. Payment was to be made at the end of sixty days. was a purchaser or an agent of the plaintiff for the sale of his beds. at the price stipulated. on the part of the defendant. and. Quiroga assumed the obligation to invoice the beds at the price at which the order was given. With regard to the remaining clauses. 2. Of the three causes of action alleged by the plaintiff in his complaint. to have an open establishment in Iloilo. as we do. These are precisely the essential features of a contract of purchase and sale. to pay their price.

his statement as to what was his idea in contracting with the plaintiff is of no importance. But. when questioned as to what was his purpose in contracting with the plaintiff. requested the plaintiff's prior consent with respect to said beds. prior to the time of his testimony. when such interpretation is necessary. constitute. As regards the shipment of beds without previous notice. And with respect to the so-called commissions. and. even supposing that Ernesto Vidal has stated the truth. it was Mariano Lopez Santos. and that the obligations the breach of which is alleged as a cause of action are not imposed upon the defendant. The judgment appealed from is affirmed. and in connection with. inasmuch as the agreements contained in Exhibit A which he claims to have drafted. but was for other beds of another kind. In respect to the defendant's obligation to order by the dozen. Guillermo Parsons. This only means that Ernesto Vidal was mistaken in his classification of the contract. either by agreement or by law. For the foregoing reasons. Only the acts of the contracting parties. replied that it was to be an agent for his beds and to collect a commission on sales. It appears that this witness. as in the instant case. subsequent to. it forwarded to the defendant the beds that it wanted. such sales were to be considered as a result of that advertisement. at the most only shows that. we have said that they merely constituted a discount on the invoice price. the only one expressly imposed by the contract. to make this return. with costs against the appellant. on the part of both of them. according to the defendant's evidence. a contract of purchase and sale. and not one of commercial agency. the execution of the contract. But all this. the effect of its breach would only entitle the plaintiff to disregard the orders which the defendant might place under other conditions. and that. which shows that it was not considered that the defendant had a right. the return made was of certain brass beds. it is insinuated in the record that these brass beds were precisely the ones so shipped. that. So ordered. its essential agreements are clearly set forth and plainly show that the contract belongs to a certain kind and not to another. a director of the corporation. and had even accused one of its partners. not as the parties stipulated it. and it gives no right to have the contract considered. of falsification. But it must be understood that a contract is what the law defines it to be. and not what it is called by the contracting parties. had maintained a civil suit against it. but as they performed it. and the reason for applying this benefit to the beds sold directly by the plaintiff to persons in Iloilo was because. He testified that it was he who drafted the contract Exhibit A. but not when. without previous notice. but if the plaintiff consents to fill them. must be considered for the purpose of interpreting the contract. he waives his right and cannot complain for having acted thus at his own free will. as the defendant obligated itself in the contract to incur the expenses of advertisement of the plaintiff's beds. for this very reason. who prepared Exhibit A. by virtue of the contract. and that the defendant received its commission for the beds sold by the plaintiff directly to persons in Iloilo. had serious trouble with the defendant. and was not effected in exchange for the price paid for them. Furthermore.managed the latter's business in Iloilo. The plaintiff also endeavored to prove that the defendant had returned beds that it could not sell. However. and for the letter Exhibit L-1. 17 . as we have said. we are of opinion that the contract by and between the plaintiff and the defendant was one of purchase and sale. the plaintiff agreed to their return. there was mutual tolerance in the performance of the contract in disregard of its terms.

well-nigh insuperable stands in the way. In its answer. As a result. is the retention of the ownership of the goods delivered to the possession of the dealer. We affirm.33. it filed a petition for review with the Court of Tax Appeals. in which the sale price of all goods sold less the discount given to the Distributor by the Company in accordance with the provision of paragraph 13 of this agreement. Leyte. whether or not such sale price shall have been collected by the Distributor from the purchaser or purchasers. Negros Oriental. the then Commissioner Domingo maintained his stand that petitioner should be taxed in such amount as a commercial broker. Afurong and Special Atty. Jr. The decision under review conforms to and is in accordance with the controlling doctrine announced in the recent case of Commissioner of Internal Revenue v. Selph and Carrascoso for petitioner. 1949 to December 31. The juridical consequences must inevitably follow. orders are to be filled in whole or in part from the stocks carried by the Company's neighboring branches. 2 The shipments would cover products "for consumption in Cebu. and compromise penalty for the period from July 1. Alafriz. respondent. Solicitor Alejandro B. LTD. or to bind the Company in any manner or thing whatsoever.: Petitioner Ker & Co. terms of payment.R. The contract was to apply to transactions between the former and petitioner. Its plea. Jolo. 5 Then came this crucial stipulation: "The Company shall from time to time consign to the Distributor and the Distributor will receive. shall immediately be paid and remitted by the Distributor to the Company. Samar. as Distributor.." 6 All specifications for the goods ordered were subject to acceptance by the Company with petitioner. Balbino Gatdula. as found by respondent Court. and the Distributor agrees that responsibility for the final sole of all goods delivered shall rest with him.33 as the commercial broker's percentage tax. the Court of Tax Appeals held petitioner taxable except as to the compromise penalty of P500. petitioner. being precluded from disposing such products elsewhere than in the above places unless written consent would first be obtained from the Company. J. L-20871 April 30. required to accept such goods shipped as well as to clear the same through customs and to arrange for delivery in its warehouse in Cebu City. 1971 KER & CO. Domingo the sum of P20. as Acting Commissioner of Internal Revenue. but all sales made by the Distributor shall be in his name. Constantino . to which we defer. express or implied. No. Moreover. surcharge. 7 Shipments were to be invoiced at prices to be agreed upon. It is further agreed that this agreement does not constitute Distributor the agent or legal representative 4 of the Company for any purpose whatsoever. JOSE B. FERNANDO.. as therein set forth. like herein petitioner. 1948 to continue in force until terminated by either party giving to the other sixty days' notice. with the customs duties being paid by petitioner. is required to exert every effort to have the shipment of the products in the maximum quantity and to promote in every way the sale thereof. and Mindanao except [the] province of Davao". terms of delivery and other conditions of sale were subject to change in the discretion of the Company.G. discounts. for respondent. Ross. in behalf of or in the name of the Company. 3 Petitioner. LINGAD. for resale to customers. the former being referred to as the Distributor and the latter specifically designated as the Company.272. 1953. would have us reverse a decision of the Court of Tax Appeals. petitioner. There was a request on the part of petitioner for the cancellation of such assessment. Distributor is not granted any right or authority to assume or to create any obligation or responsibility. Office of the Solicitor General Arturo A. unmistakably indicate that such a situation does exist. accept and/or hold upon consignment the products specified under the terms of this agreement in such quantities as in the judgment of the Company may be necessary for the successful solicitation and maintenance of business in the territory. as Distributor. which request was turned down.. The facts.00. the price and terms remaining subject to the control of the firm consigning such goods. Such liability arose from a contract of petitioner with the United States Rubber International. as Distributor. 1 The decisive test. as Distributor. the amount due from it being fixed at P19. as Distributor. 1962. from July 1. notwithstanding the vigorous effort of its counsel. for account of 18 . Bohol. holding it liable as a commercial broker under Section 194 (t) of the National Internal Revenue Code. An obstacle. In the decision now under review. 4 The prices.772. subsidiaries or other sources of Company's brands. is not sufficiently persuasive. vs. It was shown that petitioner was assessed by the then Commissioner of Internal Revenue Melecio R. promulgated on October 19. All goods on consignment shall remain the property of the Company until sold by the Distributor to the purchaser or purchasers. Ltd.

sell or bring about sales or purchases of merchandise for other persons or bring proposed buyers and sellers together. accepts and/or holds upon consignment the products. 8). all resale prices. 2). that every effort shall be made by petitioner to promote in every way the sale of the products (Par. or for the shippers. 8 Moreover. by contractual stipulation. Petitioner. Constantino . however." 15 We find ourselves in agreement. petitioner had to make payment on such invoice or invoices on due date with the Company being privileged at its option to terminate and cancel the agreement forthwith upon the failure to comply with this obligation. or bona fide employees. with the Company rendering an invoice on sales as described to be dated as of the date of inventory and sales report. together with the actual conduct of the parties in respect thereto. upon analysis of the contract. All these circumstances are irreconcilably antagonistic to the idea of an independent merchant. Brooks 19 cited in support of such a view follows: " 'The difficulty in 19 . The term includes commission merchants. specifying therein the quantities." 13 The issue with the Court of Tax Appeals. is. it was to render inventory of the existing stock which could be subject to change. the policy of such insurance to be payable to it in the event of loss. that the rubber company agrees to keep the consigned goods fully insured under insurance policies payable to it in case of loss (Par. 19). which remain properties of the latter company (Par. 17 In the language of Justice J. that sales made by petitioner are subject to approval by the company (Par. we cannot heed petitioner's plea for reversal. manufacturers. until such time as provision can be made by the Company for disposition. unless excepted by the contract or by the Rubber Company (Par. According to the National Internal Revenue Code. all goods held on consignment shall be held by petitioner for the account of the rubber company until their disposition is provided for by the latter (Par. . or consignors or consignees of freight carried by vessels or other means of transportation. 14)." It would be. that upon request of the rubber company at any time. 10 On a date to be determined by the Company. as Distributor. As Distributor. other than importers. even as it delivered possession unto the dealer for resale to customers. as Distributor. Rubber International is borne out by the facts that petitioner can dispose of the products of the Company only to certain persons or entities and within stipulated limits. As noted at the outset.the Company. as Distributor. 9 The dealer." 16 The controlling decision as to the test to be followed as to who falls within the above definition of a commercial broker is that of Commissioner of Internal Revenue v." 18 An excerpt from Salisbury v. petitioner shall render a detailed report showing sales during the month (Par. B. lists. to impart to such an express disclaimer a meaning it should not possess to ignore what is manifestly the role assigned to petitioner considering the instrument as a whole.S.. 11 The Company. was required to report to it data showing in detail all sales during the month immediately preceding. Ltd. sizes and types together with such information as may be required for accounting purposes. that the rubber company shall invoice the sales as of the dates of inventory and sales report (Par. Reyes. 1. L. the relationship between the company and the dealer is one of agency. notwithstanding the able brief filed on behalf of petitioner by its counsel. 12 There was furthermore this equally tell-tale covenant: "Upon the termination or any cancellation of this agreement all goods held on consignment shall be held by the Distributor for the account of the Company. was to keep the consigned stock fully insured against loss or damage by fire or as a result of fire.. the petitioner. without expense to the Company. . a commercial broker "includes all persons. 12). assumed full responsibility with reference to the stock and its safety at all times. an agent of U. producers. for compensation or profit. is allowed a discount of ten percent on the net amount of sales of merchandise made under such agreement. is whether the relationship thus created is one of vendor and vendee or of broker and principal. the price and terms of which were subject to the company's control. and upon request of the Company at any time. or negotiate freights or other business for owners of vessels or other means of transportation. 15). that on dates determined by the rubber company. as with us now. discounts and general terms and conditions of local resale were to be subject to the approval of the Company and to change from time to time in its discretion. that it merely receives. That would be to lose sight altogether of what has been agreed upon. as a whole. 3). and that upon termination or cancellation of the Agreement." 14 Hence its conclusion: "However. we have arrived at the conclusion that the relationship between them is one of brokerage or agency. The Court of Tax Appeals was not misled in the language of the decision now on appeal: "That the petitioner Ker & Co. Not that there would have been the slightest doubt were it not for the categorical denial in the contract that petitioner was not constituted as "the agent or legal representative of the Company for any purpose whatsoever. petitioner shall render an inventory of the existing stock which may be checked by an authorized representative of the former (Par. 15). who penned the opinion: "Since the company retained ownership of the goods. 14). who. at its own expense..

Nor is it to be lost sight of that on a matter left to the discretion of the Court of Tax Appeals which has developed an expertise in view of its function being limited solely to the interpretation of revenue laws. Instead. Salisbury was to furnish the mill and put the timber owned by him into a marketable condition in the form of lumber. Brooks was to furnish the funds necessary for that purpose. as was contended in the second assignment of error. Petitioner ought to have been aware that there was no need for such an inquiry. While it is to be admitted that counsel for petitioner did scrutinize with care the decision under review with a view to exposing what was considered its flaws. 20 . If it constitutes an agreement to sell. But they cannot be ignored. Certainly. the Court of Tax Appeals decision of October 19. such a result is to be avoided. The terms of the contract. It would be to frustrate the objective for which administrative tribunals are created if the judiciary. Neither did such Court fail to appreciate in its true significance the act and conduct pursued in the implementation of the contract by both the United States Rubber International and petitioner. is to ignore their appraisal on a matter that forms the staple of their specialized competence. If such transfer puts the transferee in the attitude or position of an owner and makes him liable to the transferor as a debtor for the agreed price. who remains the owner and has the right to control sales. were likewise referred to. but as the property of the principal. 1962 is affirmed. WHEREFORE. as noted. The decisions say the transfer of title or agreement to transfer it for a price paid or promised is the essence of sale. and account therefor to Salisbury upon the specific terms of the agreement. and not merely as an agent who must account for the proceeds of a resale. and terms. it cannot be said that there was such a failure to apply what the law commands as to call for its reversal. the stipulations were so worded as to lead to no other conclusion than that the control by the United States Rubber International over the goods in question is. then it would not have included covenants which in their totality would negate the concept of a firm acquiring as vendee goods from another.' " 20 The opinion relied on the work of Mechem on Sales as well as Mechem on Agency. less the compensation fixed by the parties in lieu of interest on the money advanced and for services as agent.distinguishing between contracts of sale and the creation of an agency to sell has led to the establishment of rules by the application of which this difficulty may be solved. A reading thereof discloses that the relationship arising therefrom was not one of seller and purchaser. this Court is not prepared to substitute its own judgment unless a grave abuse of discretion is manifest. 2. while the essence of an agency to sell is the delivery to an agent. Instead. No merit therefore attaches to the first error imputed by petitioner to the Court of Tax Appeals. what cannot be denied is that the Court of Tax Appeals reached a result to which the Court in the recent Constantino decision gave the imprimatur of its approval. in the language of the Constantino opinion. consummated by the final written expression of the agreement. not as his property. With costs against petitioner. There is lacking that degree of ambiguity sufficient to give rise to serious doubt as to what was contemplated by the parties. If it were thus intended. The Court of Tax Appeals decision now under review pays fealty to such an applicable doctrine. absent such a showing. they are meaningless. The insistence on a relationship opposed to that apparent from the language employed might even yield the impression that such a mode of construction was resorted to in order that the applicability of a taxing statute might be rendered nugatory. Williston and Tiedman both of whom wrote treatises on Sales. sell the manufactured product. speak quite clearly. "pervasive"." 21 Hence the Constantino opinion could categorically affirm that the mere disclaimer in a contract that an entity like petitioner is not "the agent or legal representative for any purpose whatsoever" does not suffice to yield the conclusion that it is an independent merchant if the control over the goods for resale of the goods consigned is pervasive in character. demand and receive the proceeds less the agent's commission upon sales made. Equally relevant is this portion of the Salisbury opinion: "It is difficult to understand or appreciate the necessity or presence of these mutual requirements and obligations on any theory other than that of a contract of agency. They were placed there for some purpose. the transaction is a sale. fix the price. These requirements and stipulations are in tent with any other conception of the contract. doubtless as the result of definite antecedent negotiations therefore.

No. On January 10. Rollo) From this judgment. The findings of facts of the appellate court are as follows: . The appellant is a businesswoman. Exh. is a contract of agency to sell or a contract of sale of the subject tobacco between petitioner and the complainant. This agreement was made in the presence of plaintiff's sister.. de Ayroso. 14. 21 . appeal was taken to the then Court of Appeals which affirmed the decision of the lower court but modified the penalty imposed by sentencing her "to suffer an indeterminate penalty of one (1) month and one (1) day of arresto mayor as minimum to one (1) year and one (1) day of prision correccional as maximum. de Ayroso. Exhibit "A". dated January 10.30 a kilo.50.50 without subsidiary imprisonment. which reads: To Whom It May Concern: This is to certify that I have received from Mrs..G. vs. six hundred fifteen kilos of leaf tobacco to be sold at Pl. The appellant at that time was bringing a jeep. 1984 LOURDES VALERIO LIM. Salvador Bantug drew the document. 1966. and that the "camarin" the appellant was empty. Rollo) The question involved in this case is whether the receipt. Ngayon kung gosto mo ay kahit konte muna ay bibigyan kita. and this was paid on three different times. 1966. Salud G. it is a fact that on October 19. dahil kokonte pa ang nasisingil kong pera. Maria de Guzman Vda. Bantug. 24. Demands for the payment of the balance of the value of the tobacco were made upon the appellant by Ayroso. and to pay the costs of suit. she wrote a letter to Salud Bantug which reads as follows: Dear Salud. but the appellant often eluded her. L-34338 November 21. magintay ka hanggang dito sa linggo ito at tiak na ako ay magdadala sa iyo. Although the appellant denied that demands for payment were made upon her. of Gapan.: Petitioner Lourdes Valerio Lim was found guilty of the crime of estafa and was sentenced "to suffer an imprisonment of four (4) months and one (1) day as minimum to two (2) years and four (4) months as maximum. Maria de Guzman Vda. and to pay the costs." (p. Salud Bantug. Of the total value of P799. the appellant went to the house of Maria Ayroso and proposed to sell Ayroso's tobacco. petitioner.R. with subsidize imprisonment in case of insolvency. Pupunta lang kami ni Mina sa Maynila ngayon. The appellant was to receive the overprice for which she could sell the tobacco. This was signed by the appellant and witnessed by the complainant's sister. J. the appellant had paid to Ayroso only P240. and particularly by her sister.50." (p. Salud Bantug further testified that she had gone to the house of the appellant several times.30 per kilo. Genoveva Ruiz. Ayroso agreed to the proposition of the appellant to sell her tobacco consisting of 615 kilos at P1. 1966. and the tobacco was loaded in the jeep and brought by the appellant.00. respondent. Salud Bantug. and the latter's maid.50) will be given to her as soon as it was sold. RELOVA. Hindi ako nakapunta dian noon a 17 nitong nakaraan. Gosto ko Salud ay makapagbigay man lang ako ng marami para hindi masiadong kahiyahiya sa iyo. A. PEOPLE OF THE PHILIPPINES. to indemnify the complainant in the amount of P550. The proceed in the amount of Seven Hundred Ninety Nine Pesos and 50/100 (P 799. Nueva Ecija. to indemnify the offended party in the amount of P559. thereby precluding criminal liability of petitioner for the crime charged.

19. it would not have been the appellant who would have gone to the house of Ayroso. Whether or not the Honorable Court of Appeals was legally right in holding that the foregoing document (Exhibit "A") "fixed a period" and "the obligation was therefore. going receipt (Exhibit "A") gives rise to an obligation wherein the duration of the period depends upon the will of the debtor in which case the only action that can be maintained is a petition to ask the court to fix the duration of the period.. 1197 of the New Civil Code does not apply" as against the alternative theory of the petitioner that the fore. Ludy Pursuant to this letter. but from its nature and the circumstances it can be inferred that a period was intended in which case the only action that can be maintained is a petition to ask the court to fix the duration thereof. the complainant filed a complaint against the appellant for estafa. Hence. 1967.00 on March 8. Exhibit "A".. Aside from the fact that Maria Ayroso testified that the appellant asked her to be her agent in selling Ayroso's tobacco. 22 . strongly negates transfer of ownership of the goods to the petitioner. Rollo) The fact that appellant received the tobacco to be sold at P1. Exh. Rollo) It is clear in the agreement. 15. the appellant herself admitted that there was an agreement that upon the sale of the tobacco she would be given something. or. 6) as against the theory of the petitioner that the obligation does not fix a period.30 per kilo and the proceeds to be given to complainant as soon as it was sold. Whether or not the Honorable Court of Appeals was legally right in holding that "Art. that the obligation was immediately demandable as soon as the tobacco was disposed of. to wit: 1. the Court of Appeals correctly resolved the matter as follows: .00 on October 24. B).00. Lourdes Valerio Lim poses the following questions of law.Salud kung talagang kailangan mo ay bukas ay dadalhan kita ng pera. 4. Huwag kang mabahala at tiyak na babayaran kita. does not apply. (pp. the appellant sent a money order for P100. Medio mahirap ang maningil sa palengke ng Cabanatuan dahil nagsisilipat ang mga suki ko ng puesto. immediately demandable as soon as the tobacco was sold" (Decision. 1967. if she was doing a favor to Maria Ayroso and it was Ayroso who had requested her to sell her tobacco. Rollo) In this petition for review by certiorari. that the proceeds of the sale of the tobacco should be turned over to the complainant as soon as the same was sold. 2.00 on April 18. and it is unbelievable that she would go to the extent of going to Ayroso's house and take the tobacco with a jeep which she had brought if she did not intend to make a profit out of the transaction. or a total of P240. Patnubayan tayo ng mahal na panginoon Dios. As no further amount was paid. Article 1197 of the New Civil Code. dated April 18. 16. p. The appellant is a businesswoman. 3-4. The agreement (Exhibit "A') constituted her as an agent with the obligation to return the tobacco if the same was not sold. which provides that the courts may fix the duration of the obligation if it does not fix a period. and 3. 1967. and she paid P90. 1967 as evidenced by the receipt Exh. but it would have been Ayroso who would have gone to the house of the appellant and deliver the tobacco to the appellant. (p. 2. Certainly. and another for P50. (pp. Whether or not the honorable Court of Appeals was legally right in holding that the foregoing receipt is a contract of agency to sell as against the theory of the petitioner that it is a contract of sale. 14. Anent the argument that petitioner was not an agent because Exhibit "A" does not say that she would be paid the commission if the goods were sold. (Exh.

all the trouble and expense of registering a special trade name for its sash business and then orders company stationery carrying the bold print "Oriental Sash Factory (Celestino Co & Company. respondent. petitioner. sash and windows for the public but only upon special order of its select customers. sashes. G.ACCORDINGLY. Manufacturers of all kinds of doors. in accordance with section one hundred eighty-six of the National Revenue Code imposing taxes on sale of manufactured articles. vs. used season-dried and kiln-dried lumber. Prop. However in 1952 it began to claim liability only to the contractor's 3 per cent tax (instead of 7 per cent) under section 191 of the same Code. furniture. door and window factory. windows. Tel. I cannot believe that petitioner company would take. Celestino Co & Company is a duly registered general copartnership doing business under the trade name of "Oriental Sash Factory". where it also failed.) 926 Raon St.R. BENGZON. sketches of doors and windows and price quotations supposedly sent by the manager of the Oriental Sash Factory to four customers who allegedly made special orders to doors and window from the said factory. and having failed to convince the Bureau of Internal Revenue. as in fact it has taken.: Appeal from a decision of the Court of Tax Appeals. windows and sash of its special and limited customers. . of the best quality workmanships" solely for the purpose of supplying the needs for doors. . One ill note that petitioner has chosen for its tradename and has offered itself to the public as a 23 . Fisrt Assistant Solicitor General Guillermo E. No. the petition for review on certiorari is dismissed for lack of merit. . L-8506 August 31. SO ORDERED. counsel presented . Office of the Solicitor General Ambrosio Padilla. The conclusion that counsel would like us to deduce from these few exhibits is that the Oriental Sash Factory does not manufacture readymade doors. Sian for respondent. From 1946 to 1951 it paid percentage taxes of 7 per cent on the gross receipts of its sash. . . etc. duplicate copies of letters. 1956 CELESTINO CO & COMPANY. . J. it brought the matter to the Court of Tax Appeals. Quiapo. With costs. Said the Court: To support his contention that his client is an ordinary contractor . COLLECTOR OF INTERNAL REVENUE. Manila. No. 33076. Torres and Solicitor Federico V. .

That it "manufactures" the same is practically admitted by appellant itself. p. Any builder or homeowner. p. (Payton vs. with sufficient money. doors and windows upon special order of customers fall under the category of "road. Therefore it is not true that it serves special customers only or confines its services to them alone. 68). There was a strong dissent.754. panels-as it ordinarily manufactured or was in a position habitually to manufacture. 1112). and since petitioner's contractual relation with his customers is that of a contract for a piece of work or since petitioner is engaged in the sale of services. may order windows or doors of the kind manufactured by this appellant.. frames. that does not make it a contractor within the purview of section 191 of the national Internal Revenue Code. in contradiction with the tax imposed in section 186 of the same Code which is a tax on the original sales of articles by the manufacturer. and likes. Having thus eliminated the feasibility off taxing petitioner as a contractor under 191 of the national Internal Revenue Code. does not alter the nature of the establishment. 2d 878. as it has represented in its stationery and advertisements to the public. manufacturers sash. the doors ordered by Don Toribio Teodoro & Sons Inc. The percentage tax imposed in section 191 of our Tax Code is generally a tax on the sales of services. structures. which means it is out to do business. 179 Okl. And anyone who sees. it follows that the petitioner should be taxed under section 191 of the Tax Code and NOT under section 185 of the same Code. water workers and other construction work contractors" are those who alter or repair buildings.69. windows and doors. 1952. Inc. we cannot find under which the business of manufacturing sash. but upon careful consideration of the whole matter are inclines to accept the above statement of the facts and the law. Vol. altering or repairing for which machinery driven by mechanical power is used. there are no less than fifty occupations enumerated in the aforesaid section of the national Internal Revenue Code subject to percentage tax and after reading carefully each and every one of them. doors and windows worth P188. may purchase from appellant doors of the same kind. I find it difficult to believe that this amount which runs to six figures was derived by petitioner entirely from its few customers who made special orders for these items. 880." (Appellant's brief. doors and windows for the public and that it makes these articles only special order of its customers. for instance. artesian well. The fact that windows and doors are made by it only when customers place their orders. The important thing to remember is that Celestino Co & Company habitually makes sash. City of Anadardo 64 P. in its chosen lines on a big scale. Moreover. streets. are not in existence and which never would have existed but for the order of the party desiring it. for it is obvious that it only accepted such orders as called for the employment of such material-moulding. (Formilleza's Commentaries and Jurisprudence on the National Internal Revenue Code."Factory". II. by clear proof of facts not disputed by the respondent. this leaves us to decide the remaining issue whether or not petitioner could be taxed with lesser strain and more accuracy as seller of its manufactured articles under section 186 of the same code. producer or importer. 744). 1952 to September 30. sash factories receive orders for doors and windows of special design only in particular cases but the bulk of their sales is derived from a readymade doors and windows of standard sizes for the average home. As a general rule. But the argument rests on a false foundation. sewers. and includes any other work for the construction. it sold sash. navigation. as shown from the investigation of petitioner's book of accounts. as the respondent Collector of Internal Revenue has in fact been doing the Oriental Sash Factory was established in 1946. provided he 24 . Even if we were to believe petitioner's claim that it does not manufacture readymade sash. windows and doors only for special customers and upon their special orders and in accordance with the desired specifications of the persons ordering the same and not for the general market: since the doors ordered by Don Toribio Teodoro & Sons. street railways railroads logging roads. highways. building. Perhaps the following paragraph represents in brief the appellant's position in this Court: Since the petitioner. The fact that the articles sold are manufactured by the seller does not exchange the contract from the purview of section 186 of the National Internal Revenue Code as a sale of articles. electric lines or power lines. during the period from January 1.

they were neither lease of services nor contract jobs by a contractor. The appealed decision is consequently affirmed. Surely. But as the doors and windows had been admittedly "manufactured" by the Oriental Sash Factory. they are bought because they meet the specifications desired by the purchaser. If they do. because although the Factory does not. Neither does it take the transaction out of the category of sales under Article 1467 above quoted. for it can easily duplicate or even massproduce the same doors-it is mechanically equipped to do so. The same consideration applies to this sash manufacturer. They were merely orders for work — nothing is shown to call them special requiring extraordinary service of the factory. but if the goods are to be manufactured specially for the customer and upon his special order. The Oriental Sash Factory does nothing more than sell the goods that it mass-produces or habitually makes. Would a factory do business performing only special. the appellant will not refuse. If these specifications do not happen to be of the kind habitually manufactured by appellant — special forms for sash. but merely contracted for particular pieces of work or "merely sold its services". So ordered. as alleged-all the work of appellant is only to fill orders previously made. Nobody will say that when a sawmill cuts lumber in accordance with the peculiar specifications of a customer-sizes not previously held in stock for sale to the public-it thereby becomes an employee or servant of the customer. whether the same is on hand at the time or not. supposing for the moment that the transactions were not sales.1 not the seller of lumber. and should be taxed as "transfers" thereof under section 186 of the National Revenue Code. panels. The thought occurs to us that if.pays the price. Nobody would regard the doing of two window panels a construction work in common parlance. On the other hand. mouldings of panels — it would not accept the order — and no sale is made. Said article reads as follows: A contract for the delivery at a certain price of an article which the vendor in the ordinary course of his business manufactures or procures for the general market. panels. mouldings and panels it used therefor (some of them at least). 2 Appellant invokes Article 1467 of the New Civil Code to bolster its contention that in filing orders for windows and doors according to specifications. and not for the general market. but regular work. petitioner's idea of being a contractor doing construction jobs is untenable. sash. Such new form does not divest the Oriental Sash Factory of its character as manufacturer. That the doors and windows must meet desired specifications is neither here nor there. cutting them to such sizes and combining them in such forms as its customers may desire. frames. In our opinion when this Factory accepts a job that requires the use of extraordinary or additional equipment. It is at once apparent that the Oriental Sash Factory did not merely sell its services to Don Toribio Teodoro & Co. is a contract of sale. it could stock and/or probably had in stock the sash. extraordinary or peculiar merchandise? Anyway. in the ordinary course of its business. (To take one instance) because it also sold the materials. it is contract for a piece of work. The orders herein exhibited were not shown to be special. such orders should not be called special work. or involves services not generally performed by it-it thereby contracts for a piece of work — filing special orders within the meaning of Article 1467. 25 . mouldings — to Teodoro & Co. The truth of the matter is that it sold materials ordinarily manufactured by it — sash. such transactions could be. it did not sell. mouldings. although in such form or combination as suited the fancy of the purchaser.. manufacture and keep on stock doors of the kind sold to Teodoro. the transaction would be no different from a purchasers of manufactured goods held is stock for sale.

is declared exempt from the deficiency manufacturers sales tax covering the period from June 1. on which occasion voluminous records of the firm were seized and confiscated. inclusive of the 25% and 50% surcharges. Rosete. (Exh.: Petition for review on certiorari of the decision of the Court of Tax Appeals in CTA Case No. the facts of this case are as follows: Engineering Equipment and Supply Co. 173177 T. Engineering payment of the increased amount and suggested that P10. petitioner..56 representing deficiency advance sales tax and manufacturers sales tax. Barredo. Engineering appealed the case to the Court of Tax Appeals and during the pendency of the case the investigating revenue examiners reduced Engineering's deficiency tax liabilities from P916. 1966. petitioner. Gal-lang. I) The Commissioner replied that the assessment was in accordance with law and the facts of the case.) On September 30. of Internal Revenue (hereinafter referred to as Commissioner) that Engineering be assessed for P480. Juan G. vs. Vol. and as established by the evidence on record. 1948. G.62 as compensating tax and 25% surcharge for the period from 1953 26 . wrote the then Collector. Melquides C. Luis Ma. and demanded upon. I pp. Balonkita for Engineering and Supply Company.362. revenue examiners Quesada and Catudan reported and recommended to the then Collector. THE COMMISSIONER OF INTERNAL REVENUE AND THE COURT OF TAX APPEALS. BIR Law Division. now Commissioner. No.912.000 be paid as compromise in extrajudicial settlement of Engineering's penal liability for violation of the Tax Code. 1957. L-27044 June 30. 162-170. Gutierrez. (Exh. Vol. pp. pumping plants and steel fabrications. etc. (pp.62 on the Engineering Equipment and Supply Company. The firm. of Internal Revenue denouncing Engineering for tax evasion by misdeclaring its imported articles and failing to pay the correct percentage taxes due thereon in connivance with its foreign suppliers (Exh. No. to September 2. vs. the decision of respondent appealed from is hereby modified. 86-88 BIR rec. respondent. 1975 THE COMMISSIONER OF INTERNAL REVENUE. 1966. a raid and search was conducted by a joint team of Central Bank.). 1 BIR record Vol. On November 29. I). "2" p. Ong. as a contractor. and petitioner. As found by the Court of Tax Appeals.141. National Bureau of Investigation (NBI) and Bureau of Internal Revenue (BIR) agents on September 27. (Vol.362. ESGUERRA. contested the tax assessment and requested that it be furnished with the details and particulars of the Commissioner's assessment. petitioner is ordered to pay respondent. I) On March 3. dated November 29. the sum of P174.N. ENGINEERING EQUIPMENT AND SUPPLY COMPANY AND THE COURT OF TAX APPEALS. (Engineering for short).S.01 as deficiency advance sales tax on the theory that it misdeclared its importation of air conditioning units and parts and accessories thereof which are subject to tax under Section 185(m) 1 of the Tax Code. 1956. is an engineering and machinery firm. however. the dispositive portion of which reads as follows: For ALL THE FOREGOING CONSIDERATIONS. Montalino for Commissioner of Internal Revenue. or his duly authorized collection agent. assessing a compensating tax of P174. 1975 ENGINEERING EQUIPMENT AND SUPPLY COMPANY.S.R. in the design and installation of central type air conditioning system. Collas. in line with the observation of the Chief. "B" and "15".65 to P740. and was raised to P916. 1956. L-27452 June 30. Solicitor Lolita O. 1959. based on findings after conferences had with Engineering's Accountant and Auditor. the Commissioner assessed against. among others.R. respondents. one Juan de la Cruz. August 23. Engineering was likewise denounced to the Central Bank (CB) for alleged fraud in obtaining its dollar allocations. 72-80 BIR rec. 681. BIR rec. (CB). J.86 (Exhs. "R" and "9" pp. Office of the Solicitor General Antonio P. 12-16 T. As operator of an integrated engineering shop. However. 1956. Jose U. 59-63 BIR rec. now Commissioner.G. 1959. a domestic corporation. and Special Attorney Gemaliel H.N.R. (pp. the Court of Tax Appeals rendered its decision. "3" pp.587. it is engaged. Guerrero and J. 1959. instead of Section 186 of the same Code. On July 30. Acting on these denunciations. Assistant Solicitor General Felicisimo R. Jr. 1960) On July 27.441. I) This assessment was revised on January 23. Vol.

appealed to this Court on January 18. on January 4. With costs against petitioner. it is subject to the 30% advance sales tax prescribed by Section 185(m) of the Tax Code. filed with the Court of Tax Appeals a motion for reconsideration of the decision abovementioned. On the other hand. in relation to Sections 183(b) and 194 of the Code.86 as deficiency advance sales tax. Engineering. Engineering in its Petition claims that the Court of Tax Appeals committed the following errors: 1. or a contractor under Section 191 of the same Code. rather than to the compensating tax of only 7%. Since the two cases. In holding the respondent company liable for P174. 1967. L-27452. In holding that the respondent company is a contractor and not a manufacturer. docketed as G. deficiency manufacturers tax and 25% and 50% surcharge for the period from June 1. No. 4. 1956. 2. in relation to Section 194 of the same. The Commissioner. The main issue revolves on the question of whether or not Engineering is a manufacturer of air conditioning units under Section 185(m). The Commissioner on the other hand claims that the Court of Tax Appeals erred: 1.587. This was denied on April 6. We have decided to consolidate and jointly decide them. L-27452. supra.62 as 30% compensating tax and 25% surcharge instead of completely absolving it from the deficiency assessment of the Commissioner. G. 3. (G. No.R. 1967. That the Court of Tax Appeals erred in holding Engineering Equipment & Supply Company guilty of fraud in effecting the said importations on the basis of incomplete quotations from the contents of alleged photostat copies of documents seized illegally from Engineering Equipment and Supply Company which should not have been admitted in evidence. not satisfied with the decision of the Court of Tax Appeals. fabricated. therefore. In not holding the company liable to the 50% fraud surcharge under Section 183 of the Tax Code on its importations of parts and accessories of air conditioning units. 5. prompting Engineering to file also with this Court its appeal.141. In holding respondent company liable to the 3% contractor's tax imposed by Section 191 of the Tax Code instead of the 30% sales tax prescribed in Section 185(m) in relation to Section 194(x) both of the same Code. in relation to section 185(m) both of the same Code. involve the same parties and issues. 4. That the Court of Tax Appeals erred in holding Engineering Equipment & Supply Company liable to the 30% compensating tax on its importations of equipment and ordinary articles used in the central type air conditioning systems it designed. In holding that the respondent company is subject only to the 30% compensating tax under Section 190 of the Tax Code and not to the 30% advance sales tax imposed by section 183 (b). notwithstanding the finding of said court that the respondent company fraudulently misdeclared the said importations. 1948 to December 31. The Commissioner contends that Engineering is a manufacturer and seller of air conditioning units and parts or accessories thereof and. 1967. That the Court of Tax Appeals erred in holding Engineering Equipment & Supply Company liable for the sum of P174. constructed and installed in the buildings and premises of its customers.R. 3. on its importations of parts and accessories of air conditioning units.to September 1956. That the Court of Tax Appeals erred in holding Engineering Equipment & Supply Company liable to the 25% surcharge prescribed in Section 190 of the Tax Code. No.62 as compensating tax and 25% surcharge instead of P740. That the Court of Tax Appeals erred in holding the assessment as not having prescribed. L-27044 and G. 2.141. 5.R. L-27044). No. which defines a manufacturer as follows: 27 .R.

as alleged by the Commissioner to hold it liable to the advance sales tax under Section 185(m). it is a contract for a piece of work. or who by any such process alters the quality of any such material or manufactured or partially manufactured product so as to reduce it to marketable shape. and not as to the means by which it is accomplished. A contract for the delivery at a certain price of an article which the vendor in the ordinary course of his business manufactures or procures for the general market. but if the goods are to be manufactured specially for the customer and upon his special order and not for the general market. With the foregoing criteria as guideposts. Trinidad. 819. labor and materials is tested by the inquiry whether the thing transferred is one not in existence and which never would have existed but for the order of the party desiring to acquire it. 1970 Ed. 185 and 186 of the Code. The arguments of both the Engineering and the Commissioner call for a clarification of the term contractor as well as the distinction between a contract of sale and contract for furnishing services. 28 . or it only had its services "contracted" for installation purposes to hold it liable under section 198 of the Tax Code. or prepare it for any of the uses of industry. 318. would seem to be that he renders service in the course of an independent occupation. and who in addition alters such raw material or manufactured or partially manufactured products. representing the will of his employer only as to the result of his work. — In applying the provisions of this Title.. whether the same is on hand at the time or not. labor and materials. 191 (2). 3 Our New Civil Code. vs. which is essentially a tax on the sale of services or labor of a contractor rather than on the sale of articles subject to the tax referred to in Sections 184. Phil.Section 194. Engineering claims that it is not a manufacturer and setter of air-conditioning units and spare parts or accessories thereof subject to tax under Section 185(m) of the Tax Code. The distinction between a contract of sale and one for work. Phil. the defendants order for it. but a contractor engaged in the design. Annotations and Jurisprudence on the National Internal Revenue Code. 807808. — Words and Phrases Defined. We shall now examine whether Engineering really did "manufacture" and sell. using his own means and methods without submitting himself to control as to the petty details. even though it may be entirely made after. or combines the same to produce such finished products for the purpose of their sale or distribution to others and not for his own use or consumption. undertakes to do a specific job or piece of work for other persons. 816. is a contract of sale. and no change or modification of it is made at defendant's request. 2 If the article ordered by the purchaser is exactly such as the plaintiff makes and keeps on hand for sale to anyone. 43. or a thing which would have existed and has been the subject of sale to some other persons even if the order had not been given. words and phrases shall be taken in the sense and extension indicated below: xxx xxx xxx (x) "Manufacturer" includes every person who by physical or chemical process alters the exterior texture or form or inner substance of any raw material or manufactured or partially manufactured products in such manner as to prepare it for a special use or uses to which it could not have been put in its original condition. supply and installation of the central type of air-conditioning system subject to the 3% tax imposed by Section 191 of the same Code. and in consequence of. par. In answer to the above contention. (Arañas. or who by any such process combines any such raw material or manufactured or partially manufactured products with other materials or products of the same or of different kinds and in such manner that the finished product of such process of manufacture can be put to special use or uses to which such raw material or manufactured or partially manufactured products in their original condition could not have been put. 43. 803. likewise distinguishes a contract of sale from a contract for a piece of work thus: Art.) The true test of a contractor as was held in the cases of Luzon Stevedoring Co. The word "contractor" has come to be used with special reference to a person who. p. and La Carlota Sugar Central vs. in the pursuit of the independent business. it is a contract of sale. 1467. Trinidad.

supplies and installs in the buildings of its various customers the central type air conditioning system. and the sources of heat gain or cooling load on the plant such as sun load. water and drains. the purpose for which the various air conditioning areas are to be used. lighting. The room air conditioner is a unitary equipment designed specifically for a room or similar small space. "H". As found by the lower court. where all of the functional components are included in one or two packages. fabricates. (t. from an Engineering handbook by L. require the installation of components at different points in a building and their interconnection. 20-36. Exhs. "I". 29 .. therefore.. there is a great variety of equipment in use to do this job (of air conditioning).C. I) Engineering also testified during the hearing in the Court of Tax Appeals that relative to the installation of air conditioning system. therefore. in a nutshell. As quoted by Engineering Equipment & Supply Co. and the imported air conditioning units and spare parts or accessories thereof are supplied and installed by petitioner upon previous orders of its customers conformably with their needs and requirements. is not an idle play of words as claimed by the Commissioner. packaged. "K". supply and installation of air conditioning units of the central type (t. Morrow. and installation involves only making service connection such as electricity. others to perform a specific function. heat exchangers or coils.s. taking into consideration in the process such factors as the area of the space to be air conditioned. Generally. "G". and other electrical appliances which are or may be in the plan. are distinct from the central system which Engineering dealt in. often referred to as applied or built-up systems. quoting from books. To Our mind. prepares the plans and specifications therefor which are distinct and different from each other. We find that Engineering did not manufacture air conditioning units for sale to the general public. but imported some items (as refrigeration compressors in complete set. the air conditioning units and spare parts or accessories thereof used by petitioner are not the window type of air conditioner which are manufactured. or what we know as self-contained air conditioning units. The Commissioner in his Brief argues that "it is more in accord with reason and sound business management to say that anyone who desires to have air conditioning units installed in his premises and who is in a position and willing to pay the price can order the same from the company (Engineering) and.n. and it is made by a great number of manufacturers. The unitary equipment classification includes those designs such as room air conditioner. they may be grouped into two classifications — unitary and central system.s. undertook negotiations and execution of individual contracts for the design. It is unique among air conditioning equipment in two respects: It is in the electrical appliance classification. p.n. 34. Vol.n.I After going over the three volumes of stenographic notes and the voluminous record of the BIR and the CTA as well as the exhibits submitted by both parties. 39) which were used in executing contracts entered into by it. Engineering. and which We reproduce hereunder for easy reference: . and "M"). t. but a significant fact which We just cannot ignore. assembled and produced locally for sale to the general market. The facts and circumstances aforequoted support the theory that Engineering is a contractor rather than a manufacturer. "L". Some devices are designed to serve a specific type of space. the number of persons occupying or would be occupying the premises. assembles. however. in its Brief. the distinction as explained by Engineering. "F". Engineering designed and engineered complete each particular plant and that no two plants were identical but each had to be engineered separately. pp. and still others as components to be assembled into a tailor-made system to fit a particular building." This is untenable in the light of the fact that air conditioning units. which finding 4 We adopt — Engineering. "J". Central-station systems.s. Engineering could have mass produced and stockpiled air conditioning units for sale to the public or to any customer with enough money to buy the same.. p.

103) Similarly. Continuing further. its President and General Manager. therefore. PROP. as it did register a special trade name for its sash business and ordered company stationery carrying the bold print "ORIENTAL SASH FACTORY (CELESTINO CO AND COMPANY. or for a period of only nine (9) months. Manila (Exh. pp.. 186).There is also the testimony of one Carlos Navarro. and the procedure followed by you in obtaining and executing contracts which you have already testified to in previous hearing. Inc. Definitely there is quite a big difference in the operation because the window type air conditioner is a sort of compromise. Take for instance the case of Celestino Co where this Court held the taxpayer to be a manufacturer rather than a contractor of sash. who was once the Chairman of the Board of Examiners for Mechanical Engineers and who was allegedly responsible for the preparation of the refrigeration and air conditioning code of the City of Manila. which go into air conditioning plant or system of the central type which your company undertakes.G. 841 and Manila Trading & Supply Co. 1952. would you say that the covering contracts for these different projects listed . 97.n. 99 Phil.. Quiapo. 102. sashes etc. 3629). windows. Phil. Engineers.s. It likewise paid the contractors tax on all the contracts for the design and construction of central system as testified to by Mr. (t. Collector of Customs. Celestino Co never put up a contractor's bond as required by Article 1729 of the Civil Code. p. Neither are they applicable because the facts in all the cases cited are entirely different. City of Manila. . who said that "the central type air conditioning system is an engineering job that requires planning and meticulous layout due to the fact that usually architects assign definite space and usually the spaces they assign are very small and of various sizes. Windows .754. Machinery Mechanical Supplies. 174 Marques de Comillas. Applying the abovestated facts to the case at bar. whereas the central type system definitely requires an intelligent operator. vs. This Court found said sum difficult to have been derived from its few customers who placed special orders for these items. 1952 to September 30..s. Vol. rather the manufacturers. and not as manufacturers.. as a general rule. Celestino Co & Co. vs. were able to satisfy themselves that the desired comfort within a room could be made by a definite setting of the machine as it comes from the factory.69 for the period from January. from the very start. 56 O. Contractors.n. Manufacturers of All Kinds of Doors. doors and windows manufactured in its factory. Rey Parker. We found them to he inapposite. . Engineering did not have readymade air conditioning units for sale but as per testimony of Mr. Engineering advertised itself as Engineering Equipment and Supply Company. No. Indeed. he testified: I don't think I have seen central type of air conditioning machinery room that are exactly alike because all our buildings here are designed by architects dissimilar to existing buildings. "B" and "15" BIR rec. Collector of Internal Revenue. etc. (t. which "sales" were reflected in their books of accounts totalling P118. In fact it cannot control humidity to the desired level. Celestino Co intended itself to be a manufacturer of doors." Likewise. but the bulk of their sales is derived from ready-made doors and windows of standard sizes for the average home. 636.. by hit and miss. a licensed Mechanical and Electrical Engineer. we have to make use of the available space that they are assigning to us so that we have to design the different component parts of the air conditioning system in such a way that will be accommodated in the space assigned and afterwards the system may be considered as a definite portion of the building. is this — Engineering definitely did not and was not engaged in the manufacture of air conditioning units but had its services contracted for the installation of a central system. The cases cited by the Commissioner (Advertising Associates..) 926 Raon St. sash factories receive orders for doors and windows of special design only in particular cases. and usually they don't coordinate and get the advice of air conditioning and refrigerating engineers so much so that when we come to design. 301-305. referred to 30 . II) The point. are not in point. p.. Parker upon inquiry of Judge Luciano of the CTA — Q — Aside from the general components. Tel. vs.. Also. Manila.

To transmit the warm or cool air over the buildings. the appellant installed system of ducts running from the basic units through walls. and that the customers did not purchase the equipment and have the same installed. "F" are identical in every respect? I mean every plan or system covered by these different contracts are identical in standard in every respect. so that you can reproduce them? A — No. McFarland. when they are allegedly subject to a higher rate of tax (30%) under its Section 185(m). resold. Lawrence Co. Engineering should be held liable to pay taxes prescribed under Section 190 5 of the Code. and as such was liable for sales or use tax as the consumer of materials and equipment used in the consummation of contracts. We see that the supply of air conditioning units to Engineer's various customers." The Court held the appellant a contractor which used the materials and the equipment upon the value of which the tax herein imposed was levied in the performance of its contracts with its customers. The contract called for completed air conditioning systems which became permanent part of the buildings and improvements to the realty. The Commissioner charged Engineering with misdeclaration of the imported air conditioning units and parts or accessories thereof so as to make them subject to a lower rate of percentage tax (7%) under Section 186 of the Tax Code. was a contractor engaged in the construction or improvement of real property. 101.. pp. Therefore. We have but to affirm the conclusion of the Court of Tax Appeals that Engineering is a contractor rather than a manufacturer. Since it has been proved to Our satisfaction that Engineering imported air conditioning units. whether the said machineries were in hand or not. This compensating tax is not a tax on the importation of goods but a tax on the use of imported goods not subject to sales tax. Exh.in the list.M. Each one must be designed and constructed to meet the particular requirements. the said air conditioning units were not intended for sale to the general public. Appellee took the Position that appellant was not engaged in the business of selling air conditioning equipment as such but in the furnishing to its customers of completed air conditioning systems pursuant to contract. is liable for sale or use tax as a contractor rather than a retailer of tangible personal property. This charge of fraud was denied by Engineering but the Court of Tax Appeals in its decision found adversely and said" . We are amply convinced from the evidence presented by respondent that petitioner deliberately and purposely misdeclared its importations. On the contrary. in addition to the furnishing of a cooling unit. subject to the contractors tax prescribed by Section 191 of the Code and not to the advance sales tax imposed by Section 185(m) in relation to Section 194 of the same Code. instructing them on how to invoice and describe the air 31 . This evidence consists of letters written by petitioner to its foreign suppliers. 101-102) What We consider as on all fours with the case at bar is the case of S. therefore. They are not all standard. but without the 50% mark up provided in Section 183(b). should be held liable to the payment of 30% compensating tax in accordance with Section 190 of the Tax Code in relation to Section 185(m) of the same.n. 100. II We take up next the issue of fraud. whether the application is to be operated. Applying the facts of the aforementioned case to the present case. the connection of such unit with electrical and plumbing facilities and the installation of ducts within and through walls. Commissioner of Internal Revenue of the State of Tennessee and McCanless. was especially made for each customer and installed in his building upon his special order. ceilings and floors to convey cool air to various parts of the building. (t. Engineering. bartered or exchanged. parts or accessories thereof for use in its construction business and these items were never sold.. irrespective of the tax status of its contractors. ceilings and floors to registers. 355 SW 2d. which work requires. none of them are the same.s. The air conditioning units installed in a central type of air conditioning system would not have existed but for the order of the party desiring to acquire it and if it existed without the special order of Engineering's customer. "where the cause presents the question of whether one engaged in the business of contracting for the establishment of air conditioning system in buildings. sir. vs.

1953 attached.) We have gone over the exhibits submitted by the Commissioner evidencing fraud committed by Engineering and We reproduce some of them hereunder for clarity. (p. Engineering in a letter of even date wrote to Trane Co. U. (Exh.A. New York. and which indicates the necessity of discontinuing the use of the term "Air conditioning Machinery or Air Coolers". BIR rec. 147-149.. San Francisco. mining tax. and franchise tax. 146. gift taxes. No mention of words air conditioning equipment should be made on any shipping documents as well as on the cases. Instances of the exclusion in the Tax Code of the 50% surcharge are those dealing on tax on banks. . "3-J-1" pp..) viz: Your invoices should be made in the name of Madrigal & Co. BIR rec. 1953. amusement tax and the monthly percentage taxes. 152-155.. 1953.conditioning units ordered by petitioner. otherwise great difficulties will be encountered with the Philippine Bureau of Customs when clearing the shipment on its arrival in Manila. it can readily be seen. When invoicing. and inform them that. (p. Philippines.. Neither can petitioner be held subject to the 50% surcharge under Section 190 of the Tax Code dealing on compensating tax because the provisions thereof do not include the 50% surcharge. if in the future. your invoices should be exactly as detailed in the customer's Letter Order dated March 14th. taxes on receipts of insurance companies. however. This is in accordance with the Philippine import licenses granted to Madrigal & Co. Likewise on April 30. 1953 (Exh. Manila." The same instruction was made to Acme Industries. Where a particular provision of the Tax Code does not impose the 50% surcharge as fraud penalty we cannot enforce a non-existing provision of law notwithstanding the assessment of respondent to the contrary. and we will ask that on receipt of this letter that you again write to Universal Transcontinental Corp. BIR rec.) On April 6. they are 32 . that petitioner cannot legally be held subject to the 50% surcharge imposed by Section 183(a) of the Tax Code. However. if the Tax Code imposes the 50% surcharge as fraud penalty. Manila. "3-1" pp. "3-H" p.. "3-K" pp. As early as March 18.. Engineering wrote to OwensCorning Fiberglass Corp. it expressly so provides as in the cases of income tax.) Despite the above findings. (Exh.) also enjoining the latter from mentioning or referring to the term 'air conditioning' and to describe the goods on order as Fiberglass pipe and pipe fitting insulation instead. 218 CTA rec. All invoices and cases should be marked "THIS EQUIPMENT FOR RIZAL CEMENT CO. the Court of Tax Appeals absolved Engineering from paying the 50% surcharge prescribe by Section 183(a) of the Tax Code by reasoning out as follows: The imposition of the 50% surcharge prescribed by Section 183(a) of the Tax Code is based on willful neglect to file the monthly return within 20 days after the end of each month or in case a false or fraudulent return is willfully made..): It will be noted that the Universal Transcontinental Corporation is not following through on the instructions which have been covered by the above correspondence. and such details must only be shown on all papers and shipping documents for this shipment. Accordingly.S. Engineering threatened to discontinue the forwarding service of Universal Transcontinental Corporation when it wrote Trane Co. Our instructions concerning this general situation have been sent to you in ample time to have avoided this error in terminology. (Exh. 150151. we hold that petitioner is not subject to the 50% surcharge despite the existence of fraud in the absence of legal basis to support the importation thereof. c/o Engineering Equipment & Supply Co. Philippines — forwarding all correspondence and shipping papers concerning this order to us only and not to the customer.. Inc. BIR rec. Inc. estate and inheritance taxes. 1953. California in a letter dated March 19. 228 CTA rec. Please give this matter your careful attention. Inc.

And since the commission of fraud is altogether too glaring. To date. manufactured air conditioning. "3-C" p. And on July 17. heating and heat transfer equipment. Please inform them that we will not tolerate another failure to follow our requirements. no documents of any kind should be sent with the order that indicate in any way that the equipment could possibly be used for air conditioning. suggesting a solution. "3-F-1". As aptly stated by then Solicitor General. otherwise We will be giving premium to a plainly intolerable act of tax evasion. viz: We feel that we can probably solve all the problems by following the procedure outlined in your letter of March 25. It is realized that this a broad request and fairly difficult to accomplish and administer.) Another interesting letter of Engineering is one dated August 27. (Exh. BIR rec. and we are asking that from hereon that whoever takes care of the processing of our orders be carefully instructed so as to avoid again using the term "Climate changers" or in any way referring to the equipment as "air conditioning. but we believe with proper caution it can be executed. We would then include the set made up according to the import license in the shipping boxes themselves and use those items as our actual shipping documents and invoices.' Anent the 25% delinquency surcharge. p. We cannot agree with the Court of Tax Appeals in absolving Engineering from the 50% fraud surcharge.) In the process of clearing the shipment from the piers. by separate correspondence.No. 141 BIR rec. 144 BIR rec. serve the same purpose as the returns required by Section 183(a) of the Code. 1953 (Exh. Accordingly. viz: In the past."3-g" p. Barredo: 'this circumstance will not free it from the 50% surcharge because in any case whether it is subject to advance sales tax or compensating tax. the inspectors insisted that this equipment was being imported for air conditioning purposes. therefore. We fully agree to the ruling made by the Court of Tax Appeals and hold Engineering liable for the same. 1955 (Exh.unable to cooperate with us on this requirement. and we will send the other regular invoice to you. Upon presenting the packing list. Antonio P.) Engineering wrote Trane Co. 1953. another letter. we will thereafter be unable to utilize their forwarding service. as air conditioning equipment. it was discovered that the same was prepared on a copy of your letterhead which indicated that the Trane Co. quantity and value of the imported goods declared and where the customs duties. it is required by law to truly declare its importation in the import entries and internal revenue declarations before the importations maybe released from customs custody." And in response to the aforequoted letter. now Justice. The said entries are the very documents where the nature. This matter of avoiding any tie-in on air conditioning is very important to us. we have not been able to clear the shipment and it is possible that we will be required to pay heavy taxes on equipment. (Emphasis supplied) The aforequoted communications are strongly indicative of the fraudulent intent of Engineering to misdeclare its importation of air conditioning units and spare parts or accessories thereof to evade payment of the 30% tax. 145. and other fees or charges incident to the importation are computed. we have always paid the air conditioning tax on climate changers and that mark is recognized in the Philippines. internal revenue taxes. 1953 wherein you stated that in all future jobs you would enclose photostatic copies of your import license so that we might make up two sets of invoices: one set describing equipment ordered simply according to the way that they are listed on the import license and another according to our ordinary regular methods of order write-up. wrote on July 30. These entries. one of the Customs inspectors requested to see the packing list. As held by the lower court: 33 . Your cooperation and close supervision concerning these matters will be appreciated. Trane Co. The purpose of this letter is to request that in the future.

224-226 CTA rec. A review of the record however reveals that Engineering did file a tax return or declaration with the Bureau of Customs before it paid the advance sales tax of 7%. And the declaration filed reveals that it did in fact misdeclare its importations. corresponding entry should be made in the books of accounts if any are kept or a written notice thereof sent to the Collector of Internal Revenue and payment of the corresponding compensating tax made within 30 days from the date of such entry or notice and if tax is not paid within such period the amount of the tax shall be increased by 25% the increment to be a part of the tax. which invariably provides among others. fraud or omission. 1946. Section 332(a) prescribing ten years is inapplicable. 1511 and 1612 effective October 1. .. 253. will show that the contention of petitioner is without merit. 1956 and August 24. or a proceeding in court for the collection of such tax may be begun without assessment at any time within ten years after the discovery of the falsity. surcharge of 25% is sound. it is therefore subject to the 25% surcharge for delinquency in the payment of the said tax. by posting in its books of accounts or notifying the Collector of Internal Revenue that the imported articles were used for other purposes within 30 days... The original text of Section 190 of Commonwealth Act 466. 361. does not provide for the filing of a compensation tax return and payment of the 25 % surcharge for late payment thereof. — (a) In the case of a false or fraudulent return with intent to evade tax or of a failure to file a return. the contention of the petitioner that it is not subject to the 25% surcharge appears to be legally tenable. Under the original text of Section 190 of the Tax Code as amended by Commonwealth Act No. 503. 1949. considering the preponderance of evidence of fraud with the intent to evade the higher rate of percentage tax due from Engineering. as the 30% compensating tax was not paid by petitioner within the time prescribed by Section 190 of the Tax Code as amended. 1948. Consequently. June 9. claiming that the pertinent prescriptive period is five years from the date the questioned importations were made. tax assessment was made within the period prescribed by law and prescription had not set in against the Government. it is incumbent upon the latter to comply with the aforequoted requirement of Section 190 of the Code. However.At first blush it would seem that the contention of petitioner that it is not subject to the delinquency. Since the imported air conditioning units-and spare parts or accessories thereof are subject to the compensating tax of 30% as the same were used in the construction business of Engineering. 34 . June 16. is applicable. the tax may be assessed. a serious study and critical analysis of the historical provisions of Section 190 of the Tax Code dealing on compensating tax in relation to Section 183(a) of the same Code. therefore. 1939. Engineering contends that it was not guilty of tax fraud in effecting the importations and. — Exceptions as to period of limitation of assessment and collection of taxes. The.. Section 332 of the Tax Code which provides: Section 332. otherwise known as the National Internal Revenue Code. However. If any article withdrawn from the customhouse or the post office without payment of the compensating tax is subsequently used by the importer for other purposes. Section 190 of the Tax Code was subsequently amended by the Republic Acts Nos. valid and tenable.) III Lastly the question of prescription of the tax assessment has been put in issue. 1956 respectively. (pp. July 1. effective on October 1. 503. as amended by Commonwealth Act No. the following: .

00) PESOS to the herein plaintiff. Branch 12 dismissing the complaint filed by petitioner. DECISION YNARES-SANTIAGO. CV No. 4. 61948 promulgated on May 7. covered by Transfer Certificate of Title No. filed a complaint4 before the Regional Trial Court of Davao City seeking the annulment of a Deed of Absolute Sale5 involving a parcel of land purportedly executed by Paz S. as attorney-in-fact. JR. No. 2003. T-11072 of the Registry of Deeds of Davao City. LIM. On May 29. Lim in favor of her brother. which affirmed the July 27. That plaintiff is an owner of a parcel of land situated at Bajada. 7.. vs.. who notarized the said deed. respondents. represented by his mother. petitioner alleged the following: xxx xxx xxx 4. Lim. VICTOR K.: This is a petition for review on certiorari of the decision1 and the resolution2 of the Court of Appeals in CA-G.WHEREFORE. That no consideration was ever paid. Petitioner Antonio S. 5. Lim. SO ORDERED. Simply put.763 square meters. Lim Sr. In the second amended complaint dated May 27. 1993. and that defendant is paying an annual lease of ONE HUNDRED THOUSAND (P100. 1991. 2003 and August 13. the Deed 35 . LIM. brought about by the demise of her late husband. represented by his attorney-in-fact. San. respondent Victor K. the herein defendant taking undue advantage of the depressed mental state of plaintiff’s Attorney-in-Fact. Dr. Jr. Paz S. That constructed on the afore-cited parcel of land is a fourteen (14) doors commercial building. G.R. PAZ S. x x x. more or less. 2003 decision3 of the Regional Trial Court of Davao City. the decision appealed from is affirmed with the modification that Engineering is hereby also made liable to pay the 50% fraud surcharge. x x x. Davao City.000. which later turn (sic) out to be an Absolute Deed of Sale. much less received by the plaintiff or by his Attorney-in-Fact. petitioner. containing an area of 1. 2004 ANTONIO S. SAN and ELINDO LO. Antonio A. J.. 6.A. That the signature of the Attorney-inFact in the aforecited Deed of Absolute Sale was obtained through fraud and trickery employed by the herein defendant and that she never appeared before the Notary Public.R. 159723 September 9. caused some papers for her to sign. respectively.

San.15 as such it is perfected by mere consent. Petitioner’s motion for reconsideration9 was denied in a Resolution10 dated August 13. Knowing that he is holding an infirmed Title. T-191262. and (3) it should be spontaneous.8 Petitioner appealed to the Court of Appeals which affirmed the judgment of the trial court in toto.17 Consent in contracts presupposes the following requisites: (1) it should be intelligent or with an exact notion of the matter to which it refers. violence. intimidation. as follows: TCT NO. or those without which there can be no contract – consent. the Regional Trial Court of Davao City rendered a decision dismissing the complaint. He alleged that the parcel of land covered by TCT No. Lim to the deed of sale pertaining to the subject property. a contract where consent is given through mistake. He further claimed that he does not have any lease contract with the petitioner with respect to the contested property and does not pay any monthly rental over the same. maintain that the parties to the deed of sale validly entered into the same. after trial on the merits. a perusal of the records of this case showed that the petitioner failed to establish that violence. T-165010 of the Registry of Deeds of Davao City and registered in his name was validly and regularly issued. T-191258. the contract is non-existent. T-191255. and that she received the consideration agreed upon by the parties.7 notwithstanding the Notice of Adverse Claim and Lis Pendens annotated on the title of the said parcel of land. and spontaneity by fraud. 2003.of Absolute Sale was void ab initio for "lack of consideration" and for "lack of a valid consent". and that the defendant had already caused the cancellation of the Mother Title No.13 A knowledge of these essential elements is material because the perfection stage or the birth of the contract only occurs when the parties to a contract agree upon the essential elements of the same. After the signing of the aforecited Deed of Sale with its attendant legal flaws and infirmities.6 Respondent Victor K. T-165010 by subdividing the same into eight (8) lots with eight (8) different titles. San denied all the allegations of the petitioner. that Paz S. In determining whether consent is vitiated by the circumstances provided for in Article 1330 of the Civil Code of the Philippines. T-191262.450. subject matter and cause. respondent claimed that there was full payment of the consideration of P264. T-191261. A contract is a meeting of minds between two persons whereby one binds himself. defendant. Hence the present petition based on the following grounds: a) that the Court of Appeals erred in affirming the trial court’s judgment declaring that the petitioner failed to prove by clear and convincing evidence that the signature of his attorney-in-fact was obtained through fraud and trickery and that no consideration was ever paid.16 Consent is essential for the existence of a contract. T-191259. On July 27. 1998. intimidation and undue influence vitiated the consent of Paz S.19 Contrary to the allegations of the petitioner that the consent of his attorney-in-fact to the deed of sale was vitiated.11 Petitioner contends that the deed of sale should be declared void because his consent to the same was vitiated by intimidation and that no consideration was paid for the subject property. intimidation or undue influence. After a careful review of the records of this case. with respect to the other. (2) it should be free. b) that the Court of Appeals erred in declaring that the medical certificates issued by foreign medical institutions to prove Paz S. courts are given a wide latitude in weighing the facts or circumstances in a given case and in deciding in 36 . T191257. on the other hand. T-191256. and where it is wanting. Respondent Elindo Lo was impleaded as a codefendant on account of his purchase of one lot covered by TCT No. we find no cogent reason to deviate from the rulings of the court a quo and the Court of Appeals. Moreover. xxx xxx x x x. Victor K. freedom by violence. Victor K. 9. Intelligence in consent is vitiated by error. plaintiff’s Title was transferred in the name of the defendant. San is now in the process of selling the aforecited property including the commercial building erected thereon to any third person. x x x. Lim (sic) severe mental state of depression cannot be given evidentiary weight considering that its due execution and authenticity were not properly established. to give something or to render some service. T191260.14 A contract of sale is consensual. 18 Thus. undue influence or fraud is voidable. Respondents.00 for the subject property. Lim freely and voluntarily gave her consent to the sale.12 It has three essential elements. 8.

Defect or lack of valid consent. Sr. Lim. 20 While it is true that upon the death of her husband. Q That was at the time you were then staying with your brother. not only to prove vitiation of consent. he having allegedly threatened to kill you? A I am the big sister. sir. violence or undue influence upon the former. which opportunity is denied to the appellate courts. I just told my cousin and my nephew. The following testimony is enlightening: Q You claim that your brother. San threatened to kill you if you will not cooperate you recall having mentioned that on direct? A When? Q Is it not that you mentioned on the direct that you were threatened by your brother Victor San? A Yes. Only the trial judge can observe the furtive glance. sigh or the scant or full realization of an oath – all of which are useful for an accurate determination of a witness’ honesty and sincerity. 21. Q After leaving your brother’s house. is AFFIRMED in toto. and not merely by a preponderance thereof. on May 18. many times he will not let me leave. Q What is the complete name of this William? A William Tom. must be established by full.21 Paz S. such fact per se is not sufficient to establish that the latter employed intimidation..favor of what they believe to have actually occurred. Antonio T. 2003 of the Court of Appeals affirming the dismissal of Civil Case No. 37 . Q After leaving your brother’s house late in 1991. how can I do that to my own brother. calmness.25 WHEREFORE. did you ever report this incident wherein you were threatened by your brother to the police? A No. irrespective of whether the contract is in a public or private writing. Q In other words.23 Paz S. relationship and the conduct of the parties at the time of making the contract and subsequent thereto.924-93 before the Regional Trial Court of Davao City. Marlene Babao was living downstairs. the defendant in this case? A Yes. 2003 and the Resolution dated August 13. intelligence. flippant or sneering tone. blush of conscious shame. Dr. Q Up to the present you are staying with him? A Yes. The Decision dated May 7. where did you live? A With my nephew William. SO ORDERED. you did not report this treatment by your brother to the police nor filed any criminal case against him in Court even up to the present? A Yes. sir. she said that we live near each other and that I did not know that from then on my relatives just lived across the fence. Branch 12. I am afraid to stay there longer. but also to overturn the presumption that private transactions have been fair and regular. considering the age. 1990. sir. clear and convincing evidence. you left your brother’s house in late 1991? A Yes. hesitation. physical infirmity. Lim’s behavior belies the allegation that respondent threatened to harm her.22 Petitioner’s mere allegations that respondent threatened his mother with harm if she will not sign the contract failed to measure up to the yardstick of evidence required. Q Did you ever file a criminal case against your brother for grave threats. I am a Christian. the defendant Victor K. the petition is DENIED. I sneaked out of the gate and I saw my cousin Lucila. Lim returned to the Philippines and subsequently stayed at the house of the respondent.24 Well-settled is the rule that the findings of facts and assessment of credibility of witnesses is a matter best left to the trial court because of its unique position of having observed that elusive and incommunicable evidence of the witnesses deportment on the stand while testifying. Q Let me be clarified. in order to make the contract voidable. Q When did you leave your brother in his residence? A One day when he was out I think in 1991. based on the foregoing.

G. Sometime in 1988. The other move was to sell at once or in one package all the SMNV companies worldwide which were engaged in match and lighter operations thru a global deal (hereinafter. global deal). retained for itself the packaging business.000.6 million. Swedish Match AB (hereinafter SMAB) is a corporation organized under the laws of Sweden not doing business in the Philippines. and OTT/Louie (Phils. Inc. CV No. the president and general manager of ALS. (SMNV). NICANOR ESCALANTE. Swedish Match. Inc. among whom were the AFP Retirement and Separation Benefits System.R. No. all organized under Philippine laws. Provident Tree Farms. decided to sell SMAB of Sweden and the latter’s worldwide match. GLORIA REYES. LITONJUA. with the resulting transaction. Several interested parties tendered offers to acquire the Phimco shares. RODRIGO ORTIZ. JACOBUS NICOLAAS. now known as Swedish Match NV of Netherlands.5 Through its Chief Executive Officer. JUANITO HERRERA. which proposed sale would stave-off defaults in the loan covenants of SMNV with its syndicate of lenders. and a match company in Brazil.). a corporation organized and existing under the laws of Netherlands. LAMBRTO DE LA EVA. however. In his letter dated 21 May 1990. SMNV initiated steps to sell the worldwide match and lighter businesses while retaining for itself the shaving business. entitled "ALS Management et al. J. v. SMAB." The appellate court overturned the trial court’s Order4 dismissing the respondents’ complaint for specific performance and remanded the case to the trial court for further proceedings. ALS should submit its final offer in US dollar terms not later than 30 June 1990. ALS MANAGEMENT & DEVELOPMENT CORPORATION and ANTONIO K. Inc.000. SAMUEL PARTOSA. DECISION TINGA. AB et al. PETER HODGSON. AB. in view of the tight loan covenants of SMNV. in its letter dated 1 December 1989.6 Thereafter.. Rossi made it clear that at the completion of the due diligence process. However. petitioners. the then parent company of SMAB. (Phimco).R. STORA. lighter and shaving products operation to Eemland Management Services.7 Litonjua stressed that the bid amount could be adjusted subject to availability of additional information and audit verification of the company finances. Inc. Enriquez was held under strict instructions that the sale of Phimco shares should be executed on or before 30 June 1990. 128120 October 20. Inc. informing the former that ALS should undertake a due diligence process or pre-acquisition audit and review of the draft contract for the Match and Forestry activities of Phimco at ALS’ convenience. In his letter dated 3 November 1989. made subject to final approval by the board. JOSEPH PEKELHARING (now Representing himself without court sanction as "JOOST PEKELHARING). SMAB. SMNV adopted a twopronged strategy." MASSIMO ROSSI and ED ENRIQUEZ. Rossi informed respondents that their price offer was below their expectations but urged them to undertake a comprehensive review and analysis of the value and profit potentials of the Phimco shares.. for the sum of P750.00. thanked respondents for their interest in the Phimco shares.3 in CA-G. COURT OF APPEALS. Ed Enriquez (Enriquez). 35886. vs. an exchange of correspondence ensued between petitioners and respondents regarding the projected sale of the Phimco shares. however. which per another letter of the same date was increased to US$36 million. for the shares of SMAB 38 . Massimo Rossi (Rossi). Litonjua offered to buy the disputed shares. HERMINDA ASUNCION. RENE DIZON. the first being to sell its shares in Phimco Industries. excluding the lighter division for US$30.: Petitioners seek a reversal of the twin Orders1 of the Court of Appeals dated 15 November 19962 and 31 January 1997. Responding to Litonjua’s offer. Vice-President of Swedish Match Sociedad Anonimas (SMSA)—the management company of the Swedish Match group—was commissioned and granted full powers to negotiate by SMNV. respondents. to wit: Phimco Industries.). and OTT/Louie (Phils. BETH FLORES. JUAN ENRIQUEZ. herein respondent ALS Management & Development Corporation and respondent Antonio Litonjua (Litonjua). with the assurance that respondents would enjoy a certain priority although several parties had indicated their interest to buy the shares. however. STORA. Inc. FRANCISCO RAPACON. FIEL SANTOS. Rossi sent his letter dated 11 June 1990. 2004 SWEDISH MATCH. Litonjua submitted to SMAB a firm offer to buy all of the latter’s shares in Phimco and all of Phimco’s shares in Provident Tree Farm. had three subsidiary corporations in the Philippines. Enriquez came to the Philippines in November 1989 and informed the Philippine financial and business circles that the Phimco shares were for sale.

He emphasized that the new offer constituted an attempt to reopen the already perfected contract of sale of the shares in his favor. The individual defendants were sued in their respective capacities as officers of the corporations or entities involved in the aborted transaction. filed before the Regional Trial Court (RTC) of Pasig a complaint for specific performance with damages. 10 Enriquez sent notice to Litonjua that they would be constrained to entertain bids from other parties in view of Litonjua’s failure to make a firm commitment for the shares of Swedish Match in Phimco by 30 June 1990.16 Respondents claimed that the Phimco management maliciously and deliberately delayed the delivery of documents to Laya Manabat Salgado & Co.00 of ALS’ costs related to the due diligence process.8 Litonjua in a letter dated 18 June 1990. as plaintiffs.000. expressed disappointment at the apparent change in SMAB’s approach to the bidding process. now petitioners. citing the advice to him of the auditing firm that the financial statements would not be completed until the end of July.9 Two days prior to the deadline for submission of the final bid. for all intents and purposes. Litonjua added that he would indicate in their final offer more specific details of the payment mechanics and consider the possibility of signing a conditional sale at that time. Rossi informed Litonjua that on 2 July 1990. Litonjua again advised Rossi that they would be unable to submit the final offer by 30 June 1990.corresponding to ninety-six percent (96%) of the Match and Forestry activities of Phimco. Litonjua promptly responded by letter dated 4 July 1990.11 In a letter dated 3 July 1990.13 More than two months from receipt of Litonjua’s last letter. they would remit payment within ten (10) days from the execution of the contracts. the US$36 million bid which he submitted on 21 May 1990 was their final bid based on the financial statements for the year 1989. the adjustments were brought about by SMAB’s subsequent disclosures and validated accounts. He intimated that he could not accept the new terms and conditions contained therein. Aside from the averments related to their principal cause of action for specific performance. Contrary to his prior manifestations. against defendants. such as the aspect that only ninety-six percent (96%) of Phimco shares was actually being sold and not one-hundred percent (100%). SMAB would reimburse up to US$20. Additionally.12 Apparently irked by SMAB’s decision to junk his bid. He indicated that SMAB would be prepared to negotiate with ALS on an exclusive basis for a period of fifteen (15) days from 26 September 1990 subject to the terms contained in the letter.14 Shortly thereafter. He pointed out that they submitted the best bid and they were already finalizing the terms of the sale. He pointed out that in their 4 June 1990 meeting. They contended that the Phimco management took an interest in acquiring for itself the Phimco shares and that petitioners conspired to thwart the closing of such sale by interposing various obstacles to the completion of the acquisition audit. He informed Rossi that it may not be possible for them to submit their final bid on 30 June 1990. Litonjua sent a letter expressing his objections to the totally new set of terms and conditions for the sale of the Phimco shares. advising him that the proposed sale of SMAB’s shares in Phimco with local buyers did not materialize. Rossi added that in case the "global deal" presently under negotiation for the Swedish Match Lights Group would materialize. in utter bad faith. considering that the acquisition audit of Phimco and the review of the draft agreements had not yet been completed.17 Respondents added that SMAB’s refusal to consummate the perfected sale of the Phimco shares amounted to an abuse of right and 39 . induced SMAB to violate its contract with respondents. Enriquez sent a fax communication to the former. He stressed that they were firmly committed to their bid of US$36 million and if ever there would be adjustments in the bid amount. he was advised that one final bidder would be selected from among the four contending groups as of that date and that the decision would be made by 6 June 1990. Enriquez then invited Litonjua to resume negotiations with SMAB for the sale of Phimco shares. however. He criticized SMAB’s decision to accept a new bidder who was not among those who participated in the 25 May 1990 bidding. that they would be able to finalize their bid on 17 July 1990 and that in case their bid would turn out better than any other proponent. He said. respondents. 15 On 14 December 1990. He told Litonjua that his bid would no longer be considered unless the local group would fail to consummate the transaction on or before 15 September1990. respondents alleged that the Phimco management. they signed a conditional contract with a local group for the disposal of Phimco. SMAB would enter into negotiations with other buyers. with a prayer for the issuance of a writ of preliminary injunction. which prevented them from completing the acquisition audit in time for the deadline on 30 June 1990 set by petitioners. Enriquez clarified that if the sale would not be completed at the end of the fifteen (15)-day period. he asserted that.

18 Respondents prayed that petitioners be enjoined from selling or transferring the Phimco shares. INDEPENDENTLY FOR THE OTHER CAUSES OF ACTION. THE TRIAL COURT EXCEEDED ITS AUTHORITY AND JURISDICTION WHEN IT ERRED PROCEDURALLY IN MOTU PROPIO (sic) DISMISSING THE COMPLAINT IN ITS ENTIRETY FOR "LACK OF A VALID CAUSE OF ACTION" WITHOUT THE BENEFIT OF A FULL-BLOWN TRIAL AND ON THE MERE MOTION TO DISMISS. THE TRIAL COURT ERRED IN IGNORING PLAINTIFFS-APPELLANTS’ CAUSE OF ACTION BASED ON PROMISSORY ESTOPPEL WHICH. such acceptance was merely preparatory to a formal acceptance by the SMAB—the acceptance that would eventually lead to the execution and signing of the contract of sale. whether formal or informal. but only that the case should not have been dismissed on the ground of unenforceability under the Statute of Frauds. the trial court noted. D. The appellate court opined that any document or writing. taken together. THE TRIAL COURT JUDGE ERRED IN FORSWEARING JUDICIAL OBJECTIVITY TO FAVOR DEFENDANTS-APPELLEES BY MAKING UNFOUNDED FINDINGS. as the case may be. THE TRIAL COURT ERRED IN IGNORING PLAINTIFF-APPELLANTS’ CAUSE OF ACTION BASED ON TORT WHICH. relied upon by respondents. Hence. Traversing the complaint. written either for the purpose of furnishing evidence of the contract or for another purpose which satisfies all the Statute’s requirements as to contents and signature would be sufficient. the RTC dismissed respondents’ complaint. ALL IN VIOLATION OF PLAINTIFFS-APPELLANTS’ RIGHT TO DUE PROCESS. Petitioners added that respondents’ cause of action. that by reversing the appealed decision it was not thereby declaring that respondents are entitled to the reliefs prayed for in their complaint. and that any such sale to third parties be annulled and set aside. or otherwise implementing the sale or transfer thereof. thus. the evidence which they adduced in support of their respective positions on the writ of preliminary injunction incident. respondents’ complaint should not have been dismissed on the ground that it was unenforceable under the Statute of Frauds. It ruled that the series of written communications between petitioners and respondents collectively constitute a sufficient memorandum of their agreement under Article 1403 of the Civil Code. were sufficient to establish that an agreement to sell the disputed shares to respondents was reached. showed that petitioners did not accept the bid offer of respondents as the letter was a mere invitation for respondents to conduct a due diligence process or pre-acquisition audit of Phimco’s match and forestry operations to enable them to submit their final offer on 30 June 1990. The court a quo said that the letter dated 11 June 1990. contending that no perfected contract. Assuming that respondent’s bid was favored by an oral acceptance made in private by officers of SMAB. HAVING BEEN SUFFICIENTLY PLEADED. The Court of Appeals clarified. It ordered the remand of the case to the trial court for further proceedings. the court noted that respondents failed to submit their final bid on the deadline set by petitioners. morals. Moreover. Both parties agreed to adopt as their evidence in support of or against the motion to dismiss.constituted conduct which is contrary to law.19 It ruled that there was no perfected contract of sale between petitioners and respondents. WARRANTED A FULL-BLOWN TRIAL. INDEPENDENTLY WARRANTED A FULL-BLOWN TRIAL. The appellate court concluded that the letters exchanged by and between the parties. assigning the following errors: A. that two or more writings properly connected could be considered together. HAVING BEEN SUFFICIENTLY PLEADED. which the trial court granted. and. good customs and public policy. if any. however. the Court of Appeals reversed the trial court’s decision. C. B. whether verbal or written. In its Order dated 17 April 1991. Respondents appealed to the Court of Appeals.20 After assessing the respective arguments of the parties. this petition. Petitioners argue that the Court of Appeals erred in failing to consider that the Statute of Frauds requires not just the existence of any note or memorandum but that such note or 40 . Respondents also asked that petitioners be ordered to execute all documents or instruments and perform all acts necessary to consummate the sales agreement in their favor. petitioners alleged that respondents have no cause of action. Petitioners filed a motion for a preliminary hearing of their defense of bar by the Statute of Frauds. was barred by the Statute of Frauds since there was no written instrument or document evidencing the alleged sale of the Phimco shares to respondents. existed between them. in favor of any person or entity other than respondents.

and (2) whether there was a perfected contract of sale between petitioners and respondents with respect to the Phimco shares. there was no word. of the Civil Code22 requires certain contracts enumerated therein to be evidenced by some note or memorandum in order to be enforceable. at the same time stating that the broad terms and conditions described in their meeting were inadequate for them to make a response at that time so much so that he would have to await the corresponding specifics. All these incidents.23 Evidence of the agreement cannot be received without the writing or a secondary evidence of its contents. by requiring certain enumerated contracts and transactions to be evidenced by a writing signed by the party to be charged.memorandum should evidence an agreement to sell. overwhelmingly prove that the contract of sale of the Phimco shares was perfected.00. Manabat. Respondents assert that the sale of the subject shares to them was perfected as shown by the following circumstances. The Statute. or that a contract be proved in a certain way. By law. respondents engaged the services of Laya. but merely regulates the formalities of the contract necessary to render it enforceable. it is then just as binding as if the Statute has been complied with. if the parties permit a contract to be proved. and. Petitioners stress that respondent Litonjua made it clear in his letters that the quoted prices were merely tentative and still subject to further negotiations between him and the seller. without any objection. they engaged the services of Laya. petitioner corporation confirmed its previous verbal acceptance of their offer in a letter dated 11 June 1990.27 41 . respondents maintain that the Court of Appeals correctly ruled that the Statute of Frauds does not apply to the instant case. that in this case.000. Hence. Petitioners argue that the foregoing circumstances prove that they failed to reach an agreement on the sale of the Phimco shares. according to respondents..21 The basic issues to be resolved are: (1) whether the appellate court erred in reversing the trial court’s decision dismissing the complaint for being unenforceable under the Statute of Frauds.000. petitioners directed them to proceed with the acquisition audit and to submit a comfort letter from the United Coconut Planters’ Bank (UCPB). petitioners orally accepted their revised offer and the acceptance was relayed to them by Rene Dizon. They alleged that with the prior approval of petitioners. provided all the essential requisites for their validity are present. to immediately proceed with the acquisition audit. the form required is for evidentiary purposes only. that requirement is absolute and indispensable. paragraph (2). Litonjua signified their inability to submit their final bid on 30 June 1990.26 The purpose of the Statute is to prevent fraud and perjury in the enforcement of obligations depending for their evidence on the unassisted memory of witnesses. to conduct the acquisition audit. Salgado & Co.00.24 Consequently. The Statute of Frauds embodied in Article 1403. Salgado & Co. They point out that there was no meeting of the minds on the essential terms and conditions of the sale because SMAB did not accept respondents’ offer that consideration would be paid in Philippine pesos. phrase. Moreover. petitioner corporation reiterated its commitment to be bound by the result of the acquisition audit and promised to reimburse respondents’ cost to the extent of US$20. Further. simply provides the method by which the contracts enumerated therein may be proved but does not declare them invalid because they are not reduced to writing. and.6 million to US$36 million. when the law requires that a contract be in some form in order that it may be valid or enforceable. the sale would be awarded to them and that they did in fact increase their previous bid of US$30. however. they have submitted a comfort letter from UCPB to show petitioners that the bank was willing to finance the acquisition of the Phimco shares. Respondents added that in compliance with their obligations under the contract.25 Clearly. In their Comment. However. The term "Statute of Frauds" is descriptive of statutes which require certain classes of contracts to be in writing. Manabat. with the prior approval of petitioners. an independent auditing firm. namely: petitioners assured them that should they increase their bid. The Statute does not deprive the parties of the right to contract with respect to the matters therein involved. They averred that petitioners agreed to be bound by the results of the audit and offered to reimburse the costs thereof to the extent of US$20. contracts are obligatory in whatever form they may have been entered into. respondents argued that there was partial performance of the perfected contract on their part. the effect of noncompliance with the requirement of the Statute is simply that no action can be enforced unless the requirement is complied with. or statement in the letters exchanged between the two parties to show or even imply that an agreement had been reached for the sale of the shares to respondent.

40 An offer would require. Perfection or birth of the contract takes place when the parties agree upon the essential elements of the contract. and consummation. or others.39 The offer. dollar terms. If this were so. for a note or memorandum to satisfy the Statute. to do. liabilities and net worth of Phimco and its subsidiaries and on the final negotiation between ourselves. it would be inane for Litonjua to 42 .31 Even if we were to consider the letters between the parties as a sufficient memorandum for purposes of taking the case out of the operation of the Statute the action for specific performance would still fail. contracts undergo three distinct stages. 28 Such note or memorandum must contain the essential elements of the contract expressed with certainty that may be ascertained from the note or memorandum itself. among other things.S. This offer. proposing the acquisition of the Phimco shares for US$36 million was merely an offer. Consent in a contract of sale should be manifested by the meeting of the offer and the acceptance upon the thing and the cause which are to constitute the contract. culminating in the extinguishment thereof. An imperfect promise (policitacion). "is understood to be subject to adjustment on the basis of an audit of the assets.38 Public advertisements or solicitations and the like are ordinarily construed as mere invitations to make offers or only as proposals. In paragraph (5) of the letter. At any time prior to the perfection of the contract. consent to transfer ownership in exchange for the price.34 Specifically. respondents were supposed to submit their final offer in U. Second. the letter does not state the mode of payment of the price. Litonjua was supposed to indicate in his final offer how and where payment for the shares was planned to be made.However. at that after the completion of the due diligence process.35 Such contract is born from the moment there is a meeting of minds upon the thing which is the object of the contract and upon the price. Rossi’s letter dated 11 June 1990. on the other hand. at this stage. is a mere unaccepted offer. to wit: negotiation. and (c) price certain in money or its equivalent. the trial court’s dismissal of the complaint on the ground of unenforceability under the Statute of Frauds is warranted. The offer must be certain and the acceptance absolute. (b) object certain which is the subject matter of the contract. in Litonjua’s own words. or some other writing to which it refers or within which it is connected. to wit: (a) consent or meeting of the minds. heavily relied upon by respondents. is not complete in itself. the terms and conditions of the contract. The paragraph undoubtedly proves that there was as yet no definite agreement as to the price. Litonjua repeatedly stressed in his letters that they would not be able to submit their final bid by 30 June 1990. may be withdrawn.43 With indubitable inconsistency. First. (b) determinate subject matter. Consummation occurs when the parties fulfill or perform the terms agreed upon in the contract. respondents later claimed that for all intents and purposes. a clear certainty on both the object and the cause or consideration of the envisioned contract. which is manifested by the meeting of the offer and the acceptance upon the thing and the cause which are to constitute the contract. perfection or birth. to the fulfillment of a prestation to give. In fact. by virtue of which one or more persons bind themselves in favor of another. The note or memorandum must contain the names of the parties.41 Quite obviously. it must be complete in itself and cannot rest partly in writing and partly in parol. A contract is defined as a juridical convention manifested in legal form.36 In general. that is."42 Was the offer certain enough to satisfy the requirements of the Statute of Frauds? Definitely not. the exchange of correspondence between the parties hardly constitutes the note or memorandum within the context of Article 1403 of the Civil Code. Negotiation begins from the time the prospective contracting parties manifest their interest in the contract and ends at the moment of agreement of the parties. or reciprocally. and a description of the property sufficient to render it capable of identification. either negotiating party may stop the negotiation.32 There can be no contract unless the following requisites concur: (a) consent of the contracting parties.30 Evidently. such as by its mailing and not necessarily when the offeree learns of the withdrawal. or not to do. in the case of a contract of sale. A qualified acceptance constitutes a counter-offer. the withdrawal is effective immediately after its manifestation. the US$36 million was their final bid. it does not indicate at what price the shares were being sold. required is the concurrence of three elements.37 A negotiation is formally initiated by an offer.29 Contrary to the Court of Appeals’ conclusion. (c) cause of the obligation which is established. without resorting to parol evidence.33 Contracts are perfected by mere consent. however. Litonjua’s letter dated 21 May 1990. A perfected promise merely tends to insure and pave the way for the celebration of a future contract.

The lack of a definite offer on the part of respondents could not possibly serve as the basis of their claim that the sale of the Phimco shares in their favor was perfected. however. The Statute of Frauds is applicable only to contracts which are executory and not to those which have been consummated either totally or partially. which may be express or implied. the first is for specific performance53 premised on the existence of the contract of sale. apart from petitioners’ alleged refusal to honor the contract of sale— which has never been perfected in the first place —respondents made a number of averments in their complaint all in support of said cause of action.54 With respect to the first cause of action for specific performance. The acquisition audit and submission of a comfort letter. in his letter dated 28 June 1990 that they would be in a position to submit their final bid only on 17 July 1990. A close examination of the complaint reveals that it alleges two distinct causes of action. the exclusion of parol evidence would promote fraud or bad faith. However. as he did.51 If a contract has been totally or partially performed.45 Quite recently. Respondents’ plea of partial performance should likewise fail. is predicated on the fact of ratification of the contract within the meaning of Article 1405 of the Civil Code either (1) by failure to object to the presentation of oral evidence to prove the same. there must be acceptance.48 In other words. even if considered together. In the instant case. for it would enable the defendant to keep the benefits already derived by him from the transaction in litigation. Respondents’ failure to submit their final bid on the deadline set by petitioners prevented the perfection of the contract of sale. predicated on the purported dilatory maneuvers executed by the Phimco management. this Court reiterated the long-standing doctrine that the manner of payment of the purchase price is an essential element before a valid and binding contract of sale can exist since the agreement on the manner of payment goes into the price such that a disagreement on the manner of payment is tantamount to a failure to agree on the price. It is dramatically clear that the US$36 million was not the actual price agreed upon but merely a preliminary offer which was subject to adjustment after the conclusion of the audit of the company finances. the continuing objections raised by petitioners to the admission of parol evidence50 on the alleged verbal acceptance of the offer rendered any evidence of acceptance inadmissible.49 Respondents’ attempt to prove the alleged verbal acceptance of their US$36 million bid becomes futile in the face of the overwhelming evidence on record that there was in the first place no meeting of the minds with respect to the price.46 Granting arguendo. the trial court properly rejected the averments in conjunction with the dismissal of the complaint for specific performance. evade the obligations. it would remain as a mere offer in the absence of evidence of its acceptance. Quite the contrary. Respondents conducted the audit as part of the due diligence process to help them arrive at and make their final offer. At any rate.47 The acceptance of an offer must be unqualified and absolute to perfect the contract. and at the same time. but it must not qualify the terms of the offer. As there was no such perfected contract.state. from the procedural stand point. They point out that the complaint presents several causes of action. or (2) by the acceptance of benefits under them. On the other hand. the submission of the comfort letter was merely a guarantee that respondents had the financial capacity to pay the price in the event that their bid was accepted by petitioners. The price must be certain. while the other is solely for damages. Respondents claimed that petitioners were guilty of promissory estoppel. the trial court erred in dismissing the complaint altogether.44 There can be no sale without a price. it must be identical in all respects with that of the offer so as to produce consent or meeting of the minds. It was not perfected due to the absence of one essential element which was the price certain in money or its equivalent. they indicated that the sale was far from concluded. respondents failed to prove that there was partial performance of the contract within the purview of the Statute. otherwise there is no true consent between the parties. responsibilities or liabilities assumed or contracted by him thereby. To produce a contract.52 This rule. respondents’ second cause of action due to the alleged malicious and deliberate delay of the Phimco management in the delivery of documents necessary for the completion of the 43 . for one essential element of a contract of sale was obviously wanting—the price certain in money or its equivalent. Respondents insist that even on the assumption that the Statute of Frauds is applicable in this case. These averments are predicated on or at least interwoven with the existence or perfection of the contract of sale. that the amount of US$36 million was a definite offer. failed to prove the perfection of the contract.55 warranty breaches56 and tortious conduct57 in refusing to honor the alleged contract of sale.

or pay at the time some part of the purchase money. (c) An agreement made in consideration of marriage. or some note or memorandum thereof. or miscarriage of another. the petition is in part GRANTED. but when a sale is made by auction and entry is made by the auctioneer in his sales book. or by his agent. the Court cannot forthwith order dismissal of the complaint without affording respondents an opportunity to substantiate their allegations with respect to its cause of action for damages against the officers of Phimco based on the latter’s alleged self-serving dilatory maneuvers. of the amount and kind of property sold. In the following cases an agreement hereafter made shall be unenforceable by action. other than a mutual promise to marry. The complaint before the trial court is ordered DISMISSED insofar as the cause of action for specific performance is concerned. (b) A special promise to answer for the debt. of such things in action. could stand independently of the action for specific performance and should not be deemed barred by the dismissal of the cause of action predicated on the failed contract. or for the sale of real property or of an interest therein. The case is ordered REMANDED to the trial court for further proceedings with respect to the cause of action for damages as above specified. 1403.audit on time. Art. not being based on the existence of the contract of sale. 22 accept and receive part of such goods and chattels. unless the same. default. names of the purchasers and person on whose account the sale is made. WHEREFORE. price. unless the buyer 44 . The appealed Decision is hereby MODIFIED insofar as it declared the agreement between the parties enforceable under the Statute of Frauds. (f) A representation as to the credit of a third person. evidence. SO ORDERED. of the agreement cannot be received without the writing. The following contracts are unenforceable. (d) An agreement for the sale of goods. or some of them. terms of sale. at a price not less than five hundred pesos. it is a sufficient memorandum. unless they are ratified: xxx (2) Those that do not comply with the Statute of Frauds as set forth in this number. If substantiated. therefore. Thus. at the time of the sale. chattels or things in action. (e) An agreement for the leasing for a longer period than one year. be in writing. or a secondary evidence of its contents: (a) An agreement that by its terms is not to be performed within a year from the making thereof. or the evidences. and subscribed by the party charged. this cause of action would entitle respondents to the recovery of damages against the officers of the corporation responsible for the acts complained of.

1982. PHILIPPINE NATIONAL BANK. Petitioner sent a letter dated August 25. 1985. petitioner. in Civil Case No.: Before us is a petition for review on certiorari of the Decision1 of the Court of Appeals (CA) in CAG. Thus.00 from respondent PNB. intervenor. 1982.000. After due notice and publication. otherwise. 978191 was issued to it." and Official Receipt No. 1984. through counsel.574.R. Pasig City.000.00. respondent PNB informed petitioner that the request had been referred to its Pasay City Branch for appropriate action and recommendation. petitioner executed an Amendment4 of Real Estate Mortgage over its property. 1984 petitioner's obligation amounted to P1.660.9 In a letter10 dated February 10.00 loan it had obtained from respondent Philippine National Bank (PNB). Respondent PNB replied in a letter dated December 28.G. and as of June 25. PNB again informed petitioner that it would return the deposit should petitioner desire to withdraw its offer to purchase the property. and.560.650.13 Petitioner's offers had not yet been acted upon by respondent PNB. payable in quarterly installments of P32. 1984. advances of insurance premiums. INC.000.532. petitioner reiterated its request for a one year extension from February 17. registration expenses. 1982 where respondent PNB was declared the winning bidder for P1. It was suggested that petitioner purchase the property for P2. REYNALDO C. and was annotated at the dorsal portion of the title on February 17. 1981. vs. The property was covered by Transfer Certificate of Title (TCT) No. 1983.00 to respondent PNB as "deposit to repurchase.015 square meter parcel of land located in Mandaluyong (now a City).11 Meanwhile. plus interests and other charges. the bank does not accept "partial redemption. on November 16. 46153 which affirmed the decision2 of the Regional Trial Court (RTC). No. TOLENTINO. miscellaneous expenses and publication cost. 1984. The Antecedents Petitioner was the owner of a 8. Meanwhile..21. advances on realty taxes.17 On February 25. its minimum market value. interest.00. 1984 within which to redeem/repurchase the property on installment basis. 1983 to respondent PNB.14 When apprised of the statement of account. 5 On August 5.056.924.660. 1984 to act on the proposal.00. Respondent PNB later granted petitioner a new credit accommodation of P1.."12 Since petitioner failed to redeem the property. It reiterated its request to repurchase the property on installment. intervenor. the Special Assets Management Department (SAMD) had prepared a statement of account. the period to redeem the property was to expire on February 17.00. and its Resolution 3 denying the motion for reconsideration filed by petitioner Manila Metal Container Corporation (MMCC). 1984. No.574.47. respondent. In a letter dated November 14.000. petitioner secured another loan of P653. requesting that it be granted an extension of time to redeem/repurchase the property.00 deposit would be returned and the property would be sold to other interested buyers. petitioner executed a real estate mortgage over the lot.000. This included the bid price of P1. 166862 December 20. the Register of Deeds cancelled TCT No. SR. 2006 MANILA METAL CONTAINER CORPORATION. however. did not agree to respondent PNB's proposal. the SAMD recommended to the management of respondent PNB that petitioner be allowed to repurchase the property for P1.000.8 In its reply dated August 30.560. 1983. 32098 on June 1. Respondent PNB gave petitioner until December 15.15 In the meantime. respondent PNB filed a petition for extrajudicial foreclosure of the real estate mortgage and sought to have the property sold at public auction for P911.00. petitioner's outstanding obligation to respondent PNB as of June 30. and issued a new title in favor of respondent PNB. it wrote another letter dated December 12.000. Instead. 45 .000. Branch 71. The Certificate of Sale7 issued in its favor was registered with the Office of the Register of Deeds of Rizal. petitioner remitted P725. DMCI-PROJECT DEVELOPERS. the property was sold at public auction on September 28. 1973. DECISION CALLEJO.00. petitioner.000. Metro Manila. requested that PNB reconsider its letter dated December 28.50.16 Petitioner. some PNB Pasay City Branch personnel informed petitioner that as a matter of policy. To secure a P900. wherein it reiterated its proposal that petitioner purchase the property for P2.R.6 plus interests and attorney's fees. its P725. 332098 of the Registry of Deeds of Rizal. J. On March 31. 1984. 58551.000. the PNB management informed petitioner that it was rejecting the offer and the recommendation of the SAMD. 1984 requesting for a reconsideration.

1984. Petitioner declared that it had already agreed to the SAMD's offer to purchase the property for P1,574,560.47, and that was why it had paid P725,000.00. Petitioner warned respondent PNB that it would seek judicial recourse should PNB insist on the position. 18 On June 4, 1985, respondent PNB informed petitioner that the PNB Board of Directors had accepted petitioner's offer to purchase the property, but for P1,931,389.53 in cash less the P725,000.00 already deposited with it.19 On page two of the letter was a space above the typewritten name of petitioner's President, Pablo Gabriel, where he was to affix his signature. However, Pablo Gabriel did not conform to the letter but merely indicated therein that he had received it.20 Petitioner did not respond, so PNB requested petitioner in a letter dated June 30, 1988 to submit an amended offer to repurchase. Petitioner rejected respondent's proposal in a letter dated July 14, 1988. It maintained that respondent PNB had agreed to sell the property for P1,574,560.47, and that since its P725,000.00 downpayment had been accepted, respondent PNB was proscribed from increasing the purchase price of the property.21 Petitioner averred that it had a net balance payable in the amount of P643,452.34. Respondent PNB, however, rejected petitioner's offer to pay the balance of P643,452.34 in a letter dated August 1, 1989.22 On August 28, 1989, petitioner filed a complaint against respondent PNB for "Annulment of Mortgage and Mortgage Foreclosure, Delivery of Title, or Specific Performance with Damages." To support its cause of action for specific performance, it alleged the following: 34. As early as June 25, 1984, PNB had accepted the down payment from Manila Metal in the substantial amount of P725,000.00 for the redemption/repurchase price of P1,574,560.47 as approved by its SMAD and considering the reliance made by Manila Metal and the long time that has elapsed, the approval of the higher management of the Bank to confirm the agreement of its SMAD is clearly a potestative condition which cannot legally prejudice Manila Metal which has acted and relied on the approval of SMAD. The Bank cannot take advantage of a condition which is entirely dependent upon its own will after accepting and benefiting from the substantial payment made by Manila Metal. 35. PNB approved the repurchase price of P1,574,560.47 for which it accepted P725,000.00 from Manila Metal. PNB

cannot take advantage of its own delay and long inaction in demanding a higher amount based on unilateral computation of interest rate without the consent of Manila Metal. Petitioner later filed an amended complaint and supported its claim for damages with the following arguments: 36. That in order to protect itself against the wrongful and malicious acts of the defendant Bank, plaintiff is constrained to engage the services of counsel at an agreed fee of P50,000.00 and to incur litigation expenses of at least P30,000.00, which the defendant PNB should be condemned to pay the plaintiff Manila Metal. 37. That by reason of the wrongful and malicious actuations of defendant PNB, plaintiff Manila Metal suffered besmirched reputation for which defendant PNB is liable for moral damages of at least P50,000.00. 38. That for the wrongful and malicious act of defendant PNB which are highly reprehensible, exemplary damages should be awarded in favor of the plaintiff by way of example or correction for the public good of at least P30,000.00.23 Petitioner prayed that, after due proceedings, judgment be rendered in its favor, thus: a) Declaring the Amended Real Estate Mortgage (Annex "A") null and void and without any legal force and effect. b) Declaring defendant's acts of extrajudicially foreclosing the mortgage over plaintiff's property and setting it for auction sale null and void. c) Ordering the defendant Register of Deeds to cancel the new title issued in the name of PNB (TCT NO. 43792) covering the property described in paragraph 4 of the Complaint, to reinstate TCT No. 37025 in the name of Manila Metal and to cancel the annotation of the mortgage in question at the back of the TCT No. 37025 described in paragraph 4 of this Complaint. d) Ordering the defendant PNB to return and/or deliver physical possession of the TCT No. 37025 described in paragraph 4 of this Complaint to the plaintiff Manila Metal. e) Ordering the defendant PNB to pay the plaintiff Manila Metal's actual damages,
46

moral and exemplary damages in the aggregate amount of not less than P80,000.00 as may be warranted by the evidence and fixed by this Honorable Court in the exercise of its sound discretion, and attorney's fees of P50,000.00 and litigation expenses of at least P30,000.00 as may be proved during the trial, and costs of suit. Plaintiff likewise prays for such further reliefs which may be deemed just and equitable in the premises.24 In its Answer to the complaint, respondent PNB averred, as a special and affirmative defense, that it had acquired ownership over the property after the period to redeem had elapsed. It claimed that no contract of sale was perfected between it and petitioner after the period to redeem the property had expired. During pre-trial, the parties agreed to submit the case for decision, based on their stipulation of facts.25 The parties agreed to limit the issues to the following: 1. Whether or not the June 4, 1985 letter of the defendant approving/accepting plaintiff's offer to purchase the property is still valid and legally enforceable. 2. Whether or not the plaintiff has waived its right to purchase the property when it failed to conform with the conditions set forth by the defendant in its letter dated June 4, 1985. 3. Whether or not there is a perfected contract of sale between the parties.26 While the case was pending, respondent PNB demanded, on September 20, 1989, that petitioner vacate the property within 15 days from notice,27 but petitioners refused to do so. On March 18, 1993, petitioner offered to repurchase the property for P3,500,000.00.28 The offer was however rejected by respondent PNB, in a letter dated April 13, 1993. According to it, the prevailing market value of the property was approximately P30,000,000.00, and as a matter of policy, it could not sell the property for less than its market value.29 On June 21, 1993, petitioner offered to purchase the property for P4,250,000.00 in cash.30 The offer was again rejected by respondent PNB on September 13, 1993.31 On May 31, 1994, the trial court rendered judgment dismissing the amended complaint and respondent PNB's counterclaim. It ordered respondent PNB to refund the P725,000.00 deposit petitioner had made.32 The trial court

ruled that there was no perfected contract of sale between the parties; hence, petitioner had no cause of action for specific performance against respondent. The trial court declared that respondent had rejected petitioner's offer to repurchase the property. Petitioner, in turn, rejected the terms and conditions contained in the June 4, 1985 letter of the SAMD. While petitioner had offered to repurchase the property per its letter of July 14, 1988, the amount of P643,422.34 was way below the P1,206,389.53 which respondent PNB had demanded. It further declared that the P725,000.00 remitted by petitioner to respondent PNB on June 4, 1985 was a "deposit," and not a downpayment or earnest money. On appeal to the CA, petitioner made the following allegations: I THE LOWER COURT ERRED IN RULING THAT DEFENDANT-APPELLEE'S LETTER DATED 4 JUNE 1985 APPROVING/ACCEPTING PLAINTIFFAPPELLANT'S OFFER TO PURCHASE THE SUBJECT PROPERTY IS NOT VALID AND ENFORCEABLE. II THE LOWER COURT ERRED IN RULING THAT THERE WAS NO PERFECTED CONTRACT OF SALE BETWEEN PLAINTIFFAPPELLANT AND DEFENDANT-APPELLEE. 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. 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. V THE LOWER COURT ERRED IN DISREGARDING THE FACT THAT THERE WAS NO VALID RESCISSION OR CANCELLATION OF SUBJECT CONTRACT OF REPURCHASE. VI
47

THE LOWER COURT ERRED IN DECLARING THAT PLAINTIFF FAILED AND REFUSED TO SUBMIT THE AMENDED REPURCHASE OFFER. VII THE LOWER COURT ERRED IN DISMISSING THE AMENDED COMPLAINT OF PLAINTIFFAPPELLANT. VIII THE LOWER COURT ERRED IN NOT AWARDING PLAINTIFF-APPELLANT ACTUAL, MORAL AND EXEMPLARY DAMAGES, ATTOTRNEY'S FEES AND LITIGATION EXPENSES.33 Meanwhile, on June 17, 1993, petitioner's Board of Directors approved Resolution No. 3-004, where it waived, assigned and transferred its rights over the property covered by TCT No. 33099 and TCT No. 37025 in favor of Bayani Gabriel, one of its Directors.34 Thereafter, Bayani Gabriel executed a Deed of Assignment over 51% of the ownership and management of the property in favor of Reynaldo Tolentino, who later moved for leave to intervene as plaintiffappellant. On July 14, 1993, the CA issued a resolution granting the motion,35 and likewise granted the motion of Reynaldo Tolentino substituting petitioner MMCC, as plaintiffappellant, and his motion to withdraw as intervenor.36 The CA rendered judgment on May 11, 2000 affirming the decision of the RTC.37 It declared that petitioner obviously never agreed to the selling price proposed by respondent PNB (P1,931,389.53) since petitioner had kept on insisting that the selling price should be lowered to P1,574,560.47. Clearly therefore, there was no meeting of the minds between the parties as to the price or consideration of the sale. The CA ratiocinated that petitioner's original offer to purchase the subject property had not been accepted by respondent PNB. In fact, it made a counter-offer through its June 4, 1985 letter specifically on the selling price; petitioner did not agree to the counter-offer; and the negotiations did not prosper. Moreover, petitioner did not pay the balance of the purchase price within the sixty-day period set in the June 4, 1985 letter of respondent PNB. Consequently, there was no perfected contract of sale, and as such, there was no contract to rescind. According to the appellate court, the claim for damages and the counterclaim were correctly dismissed by the court a quo for no evidence was presented to support it. Respondent PNB's letter dated June 30, 1988 cannot revive the failed

negotiations between the parties. Respondent PNB merely asked petitioner to submit an amended offer to repurchase. While petitioner reiterated its request for a lower selling price and that the balance of the repurchase be reduced, however, respondent rejected the proposal in a letter dated August 1, 1989. Petitioner filed a motion for reconsideration, which the CA likewise denied. Thus, petitioner filed the instant petition for review on certiorari, alleging that: I. THE COURT OF APPEALS ERRED ON A QUESTION OF LAW WHEN IT RULED THAT THERE IS NO PERFECTED CONTRACT OF SALE BETWEEN THE PETITIONER AND RESPONDENT. II. THE COURT OF APPEALS ERRED ON A QUESTION OF LAW WHEN IT RULED THAT THE AMOUNT OF PHP725,000.00 PAID BY THE PETITIONER IS NOT AN EARNEST MONEY. III. THE COURT OF APPEALS ERRED ON A QUESTION OF LAW WHEN IT RULED THAT THE FAILURE OF THE PETITIONERAPPELLANT TO SIGNIFY ITS CONFORMITY TO THE TERMS CONTAINED IN PNB'S JUNE 4, 1985 LETTER MEANS THAT THERE WAS NO VALID AND LEGALLY ENFORCEABLE CONTRACT OF SALE BETWEEN THE PARTIES. IV. THE COURT OF APPEALS ERRED ON A QUESTION OF LAW THAT NON-PAYMENT OF THE PETITIONER-APPELLANT OF THE BALANCE OF THE OFFERED PRICE IN THE LETTER OF PNB DATED JUNE 4, 1985, WITHIN SIXTY (60) DAYS FROM NOTICE OF APPROVAL CONSTITUTES NO VALID AND LEGALLY ENFORCEABLE CONTRACT OF SALE BETWEEN THE PARTIES. V. THE COURT OF APPEALS SERIOUSLY ERRED WHEN IT HELD THAT THE LETTERS OF PETITIONER-APPELLANT DATED MARCH 18, 1993 AND JUNE 21, 1993, OFFERING TO BUY THE SUBJECT PROPERTY AT DIFFERENT AMOUNT WERE PROOF THAT THERE IS NO PERFECTED CONTRACT OF SALE.38 The threshold issue is whether or not petitioner and respondent PNB had entered into a perfected contract for petitioner to repurchase the property from respondent. Petitioner maintains that it had accepted respondent's offer made through the SAMD, to sell the property for P1,574,560.00. When the acceptance was made in its letter dated June 25,
48

574.47. The SAMD was not authorized by respondent's Board to enter into contracts of sale with third persons involving corporate assets. Petitioner cites the rulings of this Court in Villonco v. Court of Appeals.00 was considered as "deposit for the repurchase of the property" in the receipt issued by the SAMD. The deposit of P725. as gleaned from the letter of SAMD dated June 4.000. it cannot be legally claimed that respondent is already bound by any contract of sale with petitioner.560. 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. According to respondent.00 be regarded as evidence of a perfected sale contract. the effectivity of which is subordinated to its fulfillment. 1984 letter of respondent and its failure to pay the balance of the price as fixed by respondent within the 60day period from notice was to protest respondent's breach of its obligation to petitioner.560.789. Moreover.00 as deposit to repurchase the property. 1993 to respondent during the pendency of the case in the RTC were merely to compromise the pending lawsuit.000. It clearly presupposes the existence of a valid and binding agreement. respondent had the option either to accept the balance of the offered price or to cause the rescission of the contract. the amount is merely an acknowledgment of the receipt of P725.00 with the SAMD as partial payment. since the power to do so must emanate from its Board of Directors.40 Petitioner avers that its failure to append its conformity to the June 4.560. encumber. it then deposited P725. 1984 cannot be classified as a counter-offer.000. 49 . the amount stated therein could not likewise be considered as the counter-offer since as admitted by petitioner. or made it appear to petitioner that it represented itself as having such authority.00 was accepted by respondent on the condition that the purchase price would still be approved by its Board of Directors. although the P725. the concept of "suspensive condition" signifies a future and uncertain event upon the fulfillment of which the obligation becomes effective. respondent could no longer validly make a counter-offer of P1. Petitioner avers that the SAMD's acceptance of the deposit amounted to an acceptance of its offer to repurchase. It claims that this was the suspensive condition. 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. it was only recommendation which was subject to approval of the PNB Board of Directors. Such offer to compromise should not be taken against it. 1993 and June 21. it is simply a recital of its total monetary claims against petitioner. There was no such agreement in this case. It likewise maintains that. Neither can the receipt by the SAMD of P725. As gleaned from the parties' Stipulation of Facts during the proceedings in the court a quo. Since there is no perfected contract in the first place. Bormaheco39 and Topacio v. 978194 which respondent had issued.47.000. All that transpired was an exchange of proposals and counter-proposals. Petitioner's letters dated March 18. Rule 130 of the Revised Rules of Court. the amount constitutes earnest money as contemplated in Article 1482 of the New Civil Code. evidenced by Receipt No. Respondent maintains that its acceptance of the amount was qualified by that condition. the fulfillment of which gave rise to the contract.88 for the purchase of the property. Petitioner posits that respondent was proscribed from increasing the interest rate after it had accepted respondent's offer to sell the property for P1." According to respondent. Moreover.000. There is absolutely nothing on record that respondent authorized the SAMD. Primarily.00. thus not absolute. the PNB Board of Directors had approved petitioner's offer to purchase the property. the Statement of Account prepared by SAMD as of June 25. Respondent could no longer unilaterally withdraw its offer to sell the property for P1.574. nothing more. The SAMD does not have the power to sell. petitioner knew that the SAMD has no capacity to bind respondent and that its authority is limited to administering. while respondent was obliged to transfer ownership and deliver the property to petitioner.574. dispose of. In any event. managing and preserving the properties and other special assets of PNB. Consequently.564. Pending such approval. it was obliged to remit to respondent the balance of the original purchase price of P1. there is no basis for the application of the principles governing "suspensive conditions. For its part. since the acceptance of the offer resulted in a perfected contract of sale.570.47. in accordance with Section 27.931. 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. conformably with Article 1159 of the New Civil Code. they did not constitute separate offers to repurchase the property. or otherwise alienate the assets. 1985.1984.

53 less deposit of P725.49 the Court ruled that the stages of a contract of sale are as follows: (1) negotiation. v. covering the period from the time the prospective contracting parties indicate interest in the contract to the time the contract is perfected.52 50 . while respondent's Board of Directors accepted petitioner's offer to repurchase the property. they bind other contracting parties and the obligations arising therefrom have the form of law between the parties and should be complied with in good faith. the acceptance was qualified. and the other to pay therefor a price certain in money or its equivalent. either negotiating party may stop the negotiation. and (3) consummation. there is no contract unless the following requisites concur: (1) Consent of the contracting parties. (3) Cause of the obligation which is established. one of the contracting parties obligates himself to transfer the ownership of and deliver a determinate thing.000. unconditional and without variance of any sort from the proposal. usage and law. if accepted by the other. Price is an essential element in the formation of a binding and enforceable contract of sale. serve as a binding juridical relation between the parties. Court of Appeals. 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. or P1. the acceptance must be absolute and must not qualify the terms of the offer.50 At any time prior to the perfection of the contract.931. Huang. A negotiation is formally initiated by an offer. In Adelfa Properties. or words of the accepting party that clearly manifest a present intention or determination to accept the offer to buy or sell. it must be plain. Thus.51 the Court ruled that: x x x The rule is that except where a formal acceptance is so required. Inc. 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. At this stage. however. 1985 is correct.389. Furthermore.42 Once perfected. the withdrawal is effective immediately after its manifestation. which begins when the parties perform their respective undertakings under the contract of sale. But a price fixed by one of the contracting parties. unequivocal. (2) perfection. with respect to the other.41 Under Article 1318 of the New Civil Code.43 By the contract of sale. there is no contract. conduct. As the Court ruled in Boston Bank of the Philippines v.00. 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. the offer may be withdrawn. 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. to give something or to render some service. necessitating petitioner's acceptance in return.00. culminating in the extinguishment thereof. in that it required a higher sale price and subject to specified terms and conditions enumerated therein. To convert the offer into a contract. A contract is a meeting of minds between two persons whereby one binds himself. which. or words of a party recognizing the existence of the contract of sale. "that the selling price shall be the total bank's claim as of documentation date x x x payable in cash (P725. acceptance may be shown by the acts. as an independent source of obligation. although the acceptance must be affirmatively and clearly made and must be evidenced by some acts or conduct communicated to the offeror.46 A contract of sale is consensual in nature and is perfected upon mere meeting of the minds.Respondent reiterates that SAMD had informed petitioner that its offer to repurchase had been approved by the Board subject to the condition.00 already deposited) within 60 days from notice of approval. (2) Object certain which is the subject matter of the contract. gives rise to a perfected sale. may be in keeping with good faith.389. conduct. must be certain.44 The absence of any of the essential elements will negate the existence of a perfected contract of sale. v. This qualified acceptance was in effect a counter-offer. among others. Inc.206. The parties are bound not only to the fulfillment of what has been expressly stipulated but also to the consequences which." A new Statement of Account was attached therein indicating the total bank's claim to be P1.000. 47 When the contract of sale is not perfected. When there is merely an offer by one party without acceptance of the other. according to their nature. it may be shown by acts.48 In San Miguel Properties Philippines. The fixing of the price can never be left to the decision of one of the contracting parties. it cannot.

560. was referred to the respondent's main branch for appropriate action. This request for reconsideration would later be rejected by respondent. it requested for more time to redeem/repurchase the property under such terms and conditions agreed upon by the parties.53 Consequently. hence can be at most considered as a counter-offer. since it lacked the resources. 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.574. however. including interests. In this case. and 3.560. Just as a natural person may authorize another to do certain acts in his behalf. Respondent later approved the recommendation that the property be sold to petitioner.47.000.56 Before respondent could act on the request.560.00). respondent set the purchase price at P2.57 When the petitioner was told that respondent did not allow "partial redemption. as it turns out. which was made through a letter dated August 25. The statement of account prepared by the SAMD stating that the net claim of respondent as of June 25.574."58 it sent a letter to respondent's President reiterating its offer to purchase the property. But instead of the P1. 1984.00 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. vs.00. Inc.560. the rule is that the declarations of an individual director relating to the affairs of the corporation. A counter-offer is considered in law.000. Diesehuan Freight Services.47 recommended by the SAMD and to which petitioner had previously conformed. publication cost. In fine.660. However. a rejection of the original offer and an attempt to end the negotiation between the parties on a different basis. it shall be 51 . 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.54 The acceptance must be identical in all respects with that of the offer so as to produce consent or meeting of the minds. petitioner again wrote respondent as follows: 1. 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. Upon approval of our request. Whenever earnest money is given in a contract of sale.A qualified acceptance or one that involves a new proposal constitutes a counter-offer and a rejection of the original offer. it recommended that petitioner be allowed to redeem the property and pay P1. Absent such valid delegation/authorization. so may the board of directors of a corporation validly delegate some of its functions to individual officers or agents appointed by it. If petitioner had accepted this counter-offer. Thus. advances on insurance premium. we will pay your goodselves ONE HUNDRED & FIFTY THOUSAND PESOS (P150.574. Inc. 1984 was P1. As this Court ruled in AF Realty Development.574. when something is desired which is not exactly what is proposed in the offer. petitioner merely sought to have the counter-offer reconsidered. we will pay another FOUR HUNDRED FIFTY THOUSAND PESOS (P450. Within six months from date of approval of our request. registration expenses and miscellaneous expenses. a corporation can only execute its powers and transact its business through its Board of Directors and through its officers and agents when authorized by a board resolution or its bylaws. 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. The provision reads: ART. such acceptance is not sufficient to guarantee consent because any modification or variation from the terms of the offer annuls the offer.00 as the purchase price. Thus.55 The request. 1983. 1984 within which to redeem the property.000.000. advances on realty taxes. Any acceptance by the SAMD of petitioner's offer would not bind respondent. 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. 2.47 cannot be considered an unqualified acceptance to petitioner's offer to purchase the property.:60 Section 23 of the Corporation Code expressly provides that the corporate powers of all corporations shall be exercised by the board of directors. a perfected contract of sale would have arisen.00).59 There was no response to petitioner's letters dated February 10 and 15. respondent's acceptance of petitioner's offer was qualified. We do not agree with petitioner's contention that the P725. or connected with the performance of authorized duties of such director. but not in the course of. petitioner had until February 17. 1482.

52 . That you shall undertake at your own expense and account the ejectment of the occupants of the property subject of the sale. or an amended counter-offer.000. 5. This contention is likewise negated by the stipulation of facts which the parties entered into in the trial court: 8.000. see attached statement of account as of 5-31-85). payable in cash (P725. etc. the P725. as well as expenses including costs of documents and science stamps.574.560.389.47. Unless and until the respondent accepted the offer on these terms. All taxes and other government imposts due or to become due on the property. 2.00 was merely a deposit to be applied as part of the purchase price of the property. However.574. it still declared that its acceptance was subject to the following terms and conditions: 1.000 was accepted by PNB on the condition that the purchase price is still subject to the approval of the PNB Board.64 It appears that although respondent requested petitioner to conform to its amended counteroffer.00 to PNB as deposit to repurchase the property. On June 25. In sum. Petitioner's request was ultimately rejected and respondent offered to refund its P725. IN LIGHT OF ALL THE FOREGOING. if there are any. per its letter to petitioner dated June 4. interests and participation and waive your right to warranty against eviction. transfer fees. 1984 to be P1. That the selling price shall be the total Bank's claim as of documentation date (pls. then.00 already deposited) within sixty (60) days from notice of approval. MMCC paid P725.000. in the event that respondent would approve the recommendation of SAMD for respondent to accept petitioner's offer to purchase the property for P1. 3. 4. 1984. interests and participation it may have in the property and you are charged with full knowledge of the nature and extent of said rights. 1984. to be incurred in connection with the execution and registration of all covering documents shall be borne by you.53..000.00 deposit.560. this amounted to an amendment of respondent's qualified acceptance. The assailed decision is AFFIRMED. petitioner refused and instead requested respondent to reconsider its amended counteroffer. no perfected contract of sale would arise. The deposit of P725. because while the respondent lowered the purchase price. Costs against petitioner Manila Metal Container Corporation. On June 8.47 and recommended this amount as the repurchase price of the subject property. 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. 1985. the petition is DENIED.considered as part of the price and as proof of the perfection of the contract. The Bank sells only whatever rights. your deposit shall be forfeited and the Bank is thenceforth authorized to sell the property to other interested parties. 6. there was no perfected contract of sale between petitioner and respondent over the subject property.63 It appears that. That upon your failure to pay the balance of the purchase price within sixty (60) days from receipt of advice accepting your offer. the respondent had decided to accept the offer to purchase the property for P1. 9. the Special Assets Management Department (SAMD) of PNB prepared an updated Statement of Account showing MMCC's total liability to PNB as of June 25.931. Absent proof of the concurrence of all the essential elements of a contract of sale. SO ORDERED.62 Thus.

49900. a letter informing CLCI of the bank’s board of directors’ resolution of October 10.538. respectively. 1986.. 2. title to the property shall be delivered only upon full payment of the repurchase price via Deed of Absolute Sale. Registration fees. collectively referred to as respondents. The RTC ruled in favor of respondents Cuison Lumber Co. The bank was declared the highest bidder at the public auction that followed.. A Certificate of Sale and a Sheriff’s Final Certificate of Sale were subsequently issued in the bank’s favor. 5. INC. viz: 1. documentary stamps. Inc. The bank received and regarded these amounts as "earnest money" for the repurchase of the subject property. She stated: 1. THE BACKGROUND FACTS On July 14. 174286 June 5. Remedios Calaguas. CLCI.000.000. 1978 and December 9. Cuison).000. 1986). vs.69.R. 4. specific performance.84. (Atty. through its then president. 7. Davao City.00 (on September 3. De Cuison (Mrs. 1986. 1986) and P85. in the action they commenced for breach of contract.53. as the president and general manager of CLCI. J.. with interest rate at 26% computed on diminishing balance. 1986. That the repurchase price shall be at total bank’s claim as of the date of implementation.R. 2. to be remitted on or before October 31. 10282 (subject property). Roman Cuison Sr.669. Roman Cuison. Petitioner. On July 31. CLCI manifested its intention to restructure its loan obligations and to repurchase the subject property. 3. That I will pay the interest of P115. Mrs. and JOSEFA JERODIAS VDA.00 (on August 8.632.: We review in this petition for review on certiorari1 the decision2 and resolution3 of the Court of Appeals (CA) in CA-G. passed a resolution for the repurchase of your property acquired by the bank.G. interest as of October 31. and attorney’s fees. 1986 is P65. representing 20% of the bid price. That client shall initially pay P132.5 CLCI paid the bank P50. a letter indicating her offered terms of repurchase.00 within fifteen (15) days from the expiration of the redemption period (August 8.35 on August 8. damages. In a series of written communications between CLCI and the bank. 1986. Respondents.00 to be paid in three (3) years in twelve (12) quarterly amortizations.. However. No. The CA affirmed with modifications the decision4 of the Regional Trial Court (RTC). That I will pay 20% of the bid price of P949. the total amount of which is P132. 1986 (TRB Repurchase Agreement). conducted on August 1. 1985. CLCI failed to pay the loan. 1986) and further payment of P200. transfer taxes at the date of sale and other similar government impost shall be for the exclusive account of the buyer. Cuison. DECISION BRION.632. prompting the bank to extrajudicially foreclose the mortgage on the subject property. Possession of the property shall be deemed transferred after signing of the Contract to Sell. CUISON LUMBER CO. Cuison). Branch 13. 1986. the bank sent Atty. Jr. 1979. That whatever remaining balance after the above two (2) payments shall be amortized for five (5) years on equal monthly installments including whatever interest accruing lease on diminishing balance. That all the interest and other charges starting from August 8.000. with prayer for the issuance of a writ of preliminary injunction against petitioner Traders Royal Bank (bank). 1986. plus whatever interest accruing within sixty (60) days from August 8.84. the widow and administratrix of the estate of Roman Cuison Sr. That the balance of P749. 53 . 1986 to date of approval shall be paid first before implementation of the request. subject to the following terms and conditions. The loans were secured by a real estate mortgage over a parcel of land covered by Transfer Certificate of Title No. (CLCI) and Josefa Vda. CV No. 3. in its regular meeting held on October 10. The improvement of the property shall at all times be covered by insurance against loss with a policy to be obtained from a reputable company which designates the bank as beneficiary but premiums shall be paid by the client.66..293. On October 20. 6. plus the additional expenses of P17. obtained two loans from the bank. 2009 TRADERS ROYAL BANK. laying down the conditions for the repurchase of the subject property: This is to formally inform you that our Board of Directors.832. wrote the bank’s Officer-in-Charge. DE CUISON.

requested that CLCI’s outstanding obligation of P1. 1989. filed with the RTC a complaint for breach of contract. Execute and consummate a Contract to Sell which is reflective of the true consideration indicated in the Resolution of the Board of Directors of Traders Royal Bank held on October 10. instead of applying them to the purchase price. A year later.00 and P100. 1994 Decision states: WHEREFORE. The bank responded that the request was still under consideration by the bank’s Manila office. CLCI demanded that the bank rectify the repurchase agreement to reflect the true consideration agreed upon for which the earnest money had been given. Cuison. 1987. and the succeeding installment shall be due every three (3) months thereafter. judgment is hereby rendered in favor of plaintiffs and against the defendant bank. The dispositive portion of its November 4.61 be condoned by the bank. Nevertheless. by way of counterclaim. The check. 10.00 CLCI paid was not a deposit.485.00 on August 28. On April 20. and that the bank was willing to return these sums.000. the bank sent Atty. premises considered. and the amount of P221. We attach herewith your Statement of Account6 as of October 31.00) as earnest money.5 million. Cuison. was returned for "insufficiency of funds.8. however. CLCI tendered. Other terms and conditions that the bank may further impose to protect its interest. a check for P135. less the amounts forfeited to answer for the unremitted rentals on the subject property. Cuison a letter informing him that the P185.9 After trial on the merits.00. 1988.091. sale is automatically cancelled.57 to cover fifty percent (50%) of the twenty percent (20%) bid price. all realty taxes which will become due on the property shall be for the account of the buyer. the bank filed its Answer alleging that the TRB repurchase agreement was already cancelled given CLCI’s failure to comply with its provisions. contract is automatically cancelled at the Bank’s option and all payments already made shall be treated as rentals or as liquidated damages. otherwise.18. 1989. The bank did not act on the demand. CLCI offered to repurchase the subject property for P1. but the period within which the first quarterly payment being on quarterly payment shall 54 . On August 28. the bank informed CLCI that it would resell the subject property at an offered price of P3 million. 1989. In view of these developments. on February 10. damages. Very truly yours. That the sale is good for thirty (30) days from the buyer’s receipt of notice of approval of the offer. the mode of payment being on quarterly installment.221. it informed CLCI that the amounts it received were not earnest money. the bank would sell the subject property to third parties. but formed part of the earnest money under the TRB Repurchase Agreement. 1986. Instead.000. the bank also demanded the payment of the accrued rentals in the subject property as of January 31. 9. 1987. Should you agree with the above terms and conditions please sign under "Conforme" on the space provided below. as it had wrongly considered its payments (in the amounts of P140. and attorney’s fees against the bank. on February 3. specific performance.8 On May 29.61 (as of July 31. CLCI inquired about the status of its request. 11. P200. 1987. On October 26.00 and P200. CLCI paid the bank P100. That the first quarterly installment shall be due within ninety (90) days of approval hereof." On May 13. and the award of moral damages and exemplary damages as well as attorney’s fees and litigation expenses for the unfounded suit instituted against the bank by CLCI. Thank you. Through its counsel. for your reference. 1986 (Exhibit "F" and Exhibit "13"). the RTC ruled in respondents’ favor. (Signed) Conforme: (Not signed)7 CLCI failed to comply with the above terms notwithstanding the extensions of time given by the bank.000. CLCI tendered an additional P50. 1987. otherwise. and 12. by letter. The bank credited both payments as earnest money. Effective upon signing of the Contract to Sell. given that it had already tendered the amount of P400. CLCI and Mrs.000. and gave CLCI 15 days to make a formal offer. Atty. 1988.000 as earnest money to be part of the price.000. ordering said defendant bank to: 1.000. 1987. 1987) be reduced to P1 million. On September 30.075. Upon default of the buyer to pay two (2) successive quarterly installments.00 as earnest money. To show its commitment to the request. duly accrediting the amount of P435.000. CLCI subsequently claimed that the bank breached the terms of repurchase.075.

00. nor the latter’s expressed intent to cancel or abandon the perfected repurchase agreement. the repurchase agreement did not ripen into a perfected contract. since CLCI violated its terms and conditions. The CA however ruled that the award of moral and exemplary damages. v. II.e. Cuison’s letter of July 31. The appellate court reasoned that while the amounts tendered cannot be strictly considered as earnest money under Article 1482 of the New Civil Code. the award of moral damages was not in order as there was no showing that CLCI’s reputation was debased or besmirched by the bank’s action of applying the previous payments made to the interest and rentals due on the subject property. 1987 and October 26. the bank pointed out the misappreciation of facts the RTC committed and argued that: first. 1986 is considered a counter-offer by the bank. and declared that the conditions laid down in the letter dated October 20.00 operated as an implied acceptance of the bank’s counter-offer. the bank had the right to revoke it and apply the payments already made to the rentals due for the use of the subject property.00 in concept of moral damages. The bank subsequently moved but failed to secure a reconsideration of the CA decision.be made to commence upon the execution of said Contract to Sell. The CA rejected the theory that CLCI had abandoned the terms of the TRB Repurchase Agreement and found no incompatibility between the agreement and the contents of the August 28. notwithstanding CLCI’s failure to expressly manifest its conforme. Sr. the bank contended that CLCI had abandoned the TRB Repurchase Agreement in its letters dated August 28. the CA struck down the bank’s position that CLCI’s payments were "deposits" rather than earnest money. The counterclaim of defendant bank is hereby dismissed.000. The bank thus came to us with the following – ISSUES I. 3. 2. the bank objected to the award of damages in the plaintiffs’ favor. Further. SO ORDERED. Pay to plaintiffs the amounts of P50. On appeal to the CA. Although it deleted the awards of attorney’s fees.000. 1986) of CLCI’s proposal contained in Mrs. neither is Mrs. but nonetheless held that CLCI has not yet violated its terms given the bank’s previous acts (i.5 million. Pay attorney’s fees of P20. 55 . and second. the CA issued the challenged Decision and affirmed the RTC’s factual findings and legal conclusions.. The CA also ruled that there was nothing in the records to warrant the awards of exemplary damages and attorney’s fees. P20. failure to comply with the latter obligation does not result in the failure of the contract and only gives the other party the options and/or remedies to protect its interest.10 they were nevertheless within the concept of earnest money under this Court’s ruling in Spouses Doromal. In light of these findings. In the same manner. and 4. 1988 letters which did not show an implied abandonment by CLCI. 1987 and October 26. even assuming that there was a perfected repurchase agreement.000. Cuison entitled to moral damages without any evidence to justify this award.00. or as liquidated damages under paragraph 11 of the TRB Repurchase Agreement. THE CA DECISION On March 31. The CA held that the same conclusion obtains even if the letter of October 20. CA. the grant of extensions to pay). CLCI’s payment of P135. 1986 merely relate to the manner the obligation is to be performed and implemented.00 as exemplary damages. 1988 when it proposed to repurchase the subject property for P1 million and P1. which showed that it had waived the agreement’s original terms of payment. the CA went on to acknowledge the validity of the terms of paragraph 11 of the TRB Repurchase Agreement. The CA distinguished between a condition imposed on the perfection of the contract and a condition imposed on the performance of an obligation.000. the CA ruled that there was a perfected contract to repurchase the subject property given the bank’s acceptance (as stated in the letter dated October 20. The CA found that the bank acted in good faith and based its actions on the erroneous belief that CLCI had already abandoned the repurchase agreement. Pay litigation expenses in the amount of P2. attorney’s fees and litigation expenses lacked factual and legal support. THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN APPREHENDING THE SIGNIFICATION (SIC) OF THE TERM "OFFER" ON THE ONE HAND AND "ACCEPTANCE" ON THE OTHER HAND IN SALES CONTRACT WHICH ERROR LED IT TO ARRIVE AT A WRONG CONCLUSION OF LAW. respectively. 1986. Likewise. 2006.000. moral and exemplary damages.11 since they were paid as a guarantee so that the buyer would not back out of the contract. Lastly.

to be considered certain. through her letter of July 31. Cuison constituted the "offer" contemplated by law. confirmed by the testimony of Atty.000. no less. THE COURT’S RULING We GRANT the petition. the payment of earnest money in the total amount of P435. Cuison’s letter of July 31. Cuison to repurchase the property. Cuison. and the parties’ subsequent conduct showing their acknowledgement of the existence of their agreement. who proposed to repurchase the foreclosed property. 14 The law requires that the offer must be certain and the acceptance absolute and unqualified. either because of the bank’s acceptance of CLCI’s offer (made through Mrs." the CA concluded that there was a perfected contract. a qualified offer constitutes a counteroffer.00 she had promised to pay as initial payment. the conclusions of law reached by the said courts are correct. that is. the crucial points that the lower courts apparently considered were Mrs. the respondents’ payments (designated as earnest money) and the bank’s acceptance of these payments. The case presents to us as threshold issue the presence or absence of consent as a requisite for a perfected contract to repurchase the subject property. Cuison’s letter of July 31.000. does not detract from the accomplished fact that plaintiffs had acquiesced or assented to the standing "conditional counter-offer" of TRB. Cuison. and the reply of TRB was the corresponding "acceptance" of the proposal-offer. She in fact had tendered right away an amount of P50.000.00 which forms part of the price and. argues differently and concludes that the undisputed facts of the case show that there was no meeting of the minds between the parties given CLCI’s failure to give its consent and conformity to the bank’s letter of October 20. 1986 constituted a counter-offer or politacion. 1986.15 An acceptance of an offer may be express and implied. operates effectively as an implied acceptance of TRB’s counter-offer. the bank’s letter of October 20. is proof of the perfection of the contract. however. Reduced to the most basic.17 while an acceptance is considered absolute and unqualified when it is identical in all respects with that of the offer so as to produce consent or a meeting of the minds.13 Based on these findings. the existence of the TRB Repurchase Agreement which "clearly depicts the repurchase agreement of the subject property under the terms therein embodied". as initial payment.12 In concurring with the foregoing findings on appeal. in turn. and second. Our task in this petition for review on certiorari is not to review the factual findings of the CA and the RTC. on the basis of the said findings. TRB sent a letter dated October 20. Under the circumstance.00 as partial payment of the P132.00 as initial payment of the price. from the moment that there is a meeting of the offer and the acceptance upon the thing and the cause that constitute the contract. 1986 to Atty. In response. The absence of a signature to signify plaintiff’s conforme to the repurchase agreement is of no moment. the main issue posed is whether or not a perfected contract of repurchase existed and can be enforced between the parties. Cuison informing him of the resolution passed by the Board of Directors of TRB acknowledging the proposal of Ms. Under the law. must be definite. 1986.THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN ITS INTERPRETATION OF THE STIPULATIONS AND TERMS AND CONDITIONS EMBODIED IN THE PROPOSED REPURCHASE AGREEMENT xxx WHICH LED IT TO ERRONEOUSLY CONCLUDE THAT THERE WAS A "PERFECTED" REPURCHASE AGREEMENT BETWEEN RESPONDENTS AND PETITIONER AND WHICH INTERPRETATION IS NOT IN ACCORDANCE WITH THE APPLICABLE LAW AND ESTABLISHED JURISPRUDENCE. specifically.18 We have also previously held that the ascertainment of whether there is a meeting of minds on the offer and acceptance 56 . 1986 to CLCI. the proposal made by Ms.000. this fact. the CA.16 Case law holds that an offer. CLCI’s ensuing remittance of P135. 1986 to the bank. when he denied that CLCI consented to the agreement’s terms of implementation. The petitioner bank. if impliedly. but to determine whether or not. Plaintiffs’ "conforme" would at best be a mere formality considering that the repurchase agreement had already been perfected. However. The RTC ruled that a perfected contract existed based mainly on the following facts: first. a contract is perfected by mere consent. unlike the RTC’s conclusion that relied on CLCI’s payment and the bank’s acceptance of the payment as "earnest money. While the conforme portion of the subject repurchase agreement indeed bears no signature at all. declared that there was a meeting of the minds between the parties on the offer and acceptance for the repurchase of the subject property under the following quoted facts: It may be recalled that it was Mrs. 1986). or by CLCI’s implied acceptance indicated by its initial payments in compliance with the terms of the TRB Repurchase Agreement. of course. xxx Conceding arguendo that TRB’s letter-response October 20.

after expressing his intention to purchase the merchandise. CA. Yuviengco v. We noted that the vendee. v. The incomplete details of the agreement led us to conclude in Insular Life Assurance Co. Cuison testified that CLCI did not agree with the implementation of the repurchase transaction since the bank made a wrong computation.19 In Villonco Realty Co. there was also no acceptance as the letter of Planters Development Bank indicated the need to discuss other details of the transaction.24 that no perfected contract existed. as we considered that the letter and telegrams sent by the parties to each other showed that there was no meeting of minds in the absence of an unconditional acceptance to the terms of the contract of sale. in Philippine National Bank v. although they did not affix their signatures to any written document. simultaneously enclosed a purchase order whose receipt prompted the vendor to immediately order the merchandise. there were "other matters or details – in addition to the subject matter and the consideration – [that] would be stipulated and agreed. a binding contract may exist between the parties whose minds have met. In Schuback & Sons Philippine Trading Corp. The required concurrence. involving the same property. that does not essentially change the terms of the offer. the bank’s October 20. except for the repurchase price. Bormacheco. Atty. however. we said that the terms of this earlier contract cannot be considered in determining the acceptance and compliance with the terms of a proposed second contract – a distinct and separate contract from the one earlier aborted. Similarly.26 The facts of the present case. which the parties mutually cancelled. otherwise.23 we ruled that there was no perfected contract of sale because the specified terms and conditions imposed under the facts of the case constituted counter-offers against each other that were not accepted by either of the parties. In this sense.21 we declared a meeting of minds between the vendor and the vendee even though the quantity of goods purchased had not been fully determined. A reading of the petitioner’s letter of October 20. Dacuycuy22 yielded a different result. Evidence exists showing that CLCI did not sign any document to show its conformity with the bank’s counter-offer. the allowance of the buyer for the seller to encash the check containing the partial payment. may not always be immediately clear and may have to be read from the attendant circumstances. 1986. the acceptance of the partial payment by the seller. while the acceptance of this offer – express or implied – must be unmistakable. Planters Development Bank25 is another case where we saw no perfected contract. although ambivalent in some respects. We also took into account the act of the vendee in requesting for a discount as proof of his acceptance of the quoted price. was subject to conditions not identical in all respects with the CLCI’s letter-offer of July 31. as the offer was incomplete for lack of agreed details on the manner of paying the purchase price. 1986 letter was effectively a counter-offer that CLCI must be shown to have accepted absolutely and unqualifiedly in order to give birth to a perfected contract. 1986 informing CLCI that the bank’s board of directors "passed a resolution for the repurchase of [your] property" shows that the tenor of acceptance. This case involved a first contract. Under these circumstances. v. The recent Navarra v. Assets Builders Corp. and identical in all respects to the offer. the buyers would not have included the phrase "to negotiate details" when they agreed to the property that was subject of the proposed contract. We took note of the acts of the parties – the payment of the buyer of an amount representing the partial payment under the contract. unqualified. Testimony also exists explaining why CLCI did not sign. CA.depends on the circumstances surrounding the case. in fact. 20 the Court found a perfected contract of sale between the parties after considering the parties’ written communications showing the offer (counter-offer) and acceptance by the seller who formally manifested his conformity with the offer in the buyer’s letter. we also declared that a change in a phrase in the offer to purchase. The clear and neat principle is that the offer must be certain and definite with respect to the cause or consideration and object of the proposed contract. point on the whole to the conclusion that both parties agreed to the repurchase of the subject property. v. Ltd. does not amount to a rejection of the offer and the tender of a counter-offer.27 57 ." We likewise considered the subsequent acts between the parties and the existence of a second proposal which belied the perfection of any initial contract. the subsequent return of the amount representing the partial payment by the buyer with the corresponding interest stated in the buyer’s letter (offer) – and considered them evidence of the perfection of the sale.1awphil All these cases illustrate the rule that the concurrence of the offer and acceptance is vital to the birth and the perfection of a contract.

unconditionally paid without protests or objections30 . and instead. (c) The bank’s acceptance of CLCI’s payments as earnest money for the repurchase of the property. 1986 of the bank. (f) The Statement of Account dated July 31.31 The bank. 1986 date of receipt. 1986). the bank gave CLCI an extension of time (until November 30.29 (c) The CLCI’s continuous payments of the repurchase price after their receipt of the bank’s letter of October 20. at the time you received this document Exh. which the latter failed to honor. 1989 of the bank’s counsel. 1986.33 the bank’s employees who handled the CLCI transactions – who admitted the existence of the repurchase agreement with CLCI and the latter’s failure to comply with the agreement’s terms. in fact. addressed to CLCI’s counsel. (b) In the same letter. Cuizon tendered a check for P135. Arlene Aportadera. reminding CLCI that it was remiss in its commitments to pay 20% of the bid price under the terms of the TRB Repurchase Agreement. (e) The bank’s grant of extensions to CLCI for the payment of its obligations under the contract.091. 1987 (to the bank’s letter of January 13. 1987 showing that the bank applied CLCI’s payments according to the terms of the TRB Repurchase Agreement. partially executed the agreement. Cuison’s letter-reply of February 3. that is precisely we [sic] deposited in consideration of the repurchase agreement. too. (d) CLCI’s possession of the subject property pursuant to paragraph 5 of the TRB Repurchase Agreement. Eulogio Giramis32 and Ms. which represented 50% of the 20% bid price. (g) The letter of January 26. xxx COURT Q Insofar as Exh. as indicators leading to the conclusion that a perfected contract existed: CLCI did not raise any objection to the terms and conditions of the TRB Repurchase Agreement. for its part." which was on October 23. "F" from the defendant bank. as shown by the following testimony: Q When you received this document. "F" is concerned? A There was initially.28 (b) Mrs. Abarquez. and (h) The testimonies of the bank’s witnesses – Mr. CLCI requested an extension of time. notwithstanding the absence of a signed contract to sell between the parties. did you already consider this as an agreement? A We consider that as a negotiated agreement pending the documentation of the formal contract to sell which is stated under the repurchase agreement. 1986 of Atty. Atty. as president and general manager of CLCI. 1986) to comply with its past due obligations under the agreement.57. we find that CLCI accepted the terms of the TRC Repurchase Agreement and thus unqualifiedly accepted the bank’s counter-offer under the TRB Repurchase Agreement and. to pay its due obligation. showing the bank’s recognition that there was an agreement between the bank and CLCI. Cuison’s admission that the TRB Repurchase Agreement was already a negotiated agreement between CLCI and the bank. (d) CLCI’s continued possession of the subject property with the bank’s consent. 1987) showed that she acknowledged CLCI’s failure to comply with its requested extension and proposed a new payment scheme that would be reasonable given CLCI’s critical economic difficulties. CLCI’s acknowledgment of their obligations under the TRB Repurchase Agreement (as shown by Atty. and Atty.These indicators notwithstanding. to the bank (in response to the bank’s demand letter dated November 27. xxx We counted the following facts. "F. Cuison’s letter of November 29. Cuison. Q In other words. as shown from the following undisputed evidence: (a) The letter-reply dated November 29. until the end of December 1986. 1986 to pay 20% of the bid price). showed its recognition of the existence of a repurchase agreement between itself and CLCI by the following acts: (a) The letter dated November 27. was there already a meeting of the minds between the parties? A That is precisely we put [sic] the earnest money because we were of the opinion that the bank is already agreeable to the implementation of the repurchase agreement. 58 . Mrs. this Exh.

Admittedly. 1986.632. the previous offers made by CLCI to change the payment scheme of the repurchase of the subject property which was not accepted.00 within fifteen (15) days from the expiration of the redemption period (August 8. and disregarding CLCI’s counter-offer to buy the subject property for P1.36 The settled rule for contracts to sell is that the full payment of the purchase price is a positive suspensive condition.000. Paragraphs 2 and 10 state: 2. It is at this point that we diverge from the conclusions of the CA and the RTC. We arrive at this conclusion after considering the following reasons: First. Upon default of the buyer to pay two (2) successive quarterly installments. Paragraph 4 of the agreement provides: 4. CLCI’s rights acquired under the TRB Repurchase Agreement to repurchase the subject property have been defeated by its own failure to comply with its obligations under the agreement. Paragraphs 2 and 10 of the TRB Repurchase Agreement are clear on the respondents’ obligation to pay the bid price and the quarterly installments.lavvphi1 Third. the bank cannot be compelled to perform its obligations under the TRB Repurchase Agreement that has been rendered ineffective by the respondents’ non-performance of their own obligations. the respondents themselves claim that the bank violated the agreement when it applied the respondents’ payments to the interest and penalties due without the respondents’ consent. were the results of CLCI’s failure to comply with its obligations to pay the amounts due on the stipulated time and were made after the parties’ minds had met on the terms of the contract. That all the interest and other charges starting from August 8. before applying any payment to the repurchase price.84 representing 20% of the bid price to be remitted on or before October 31. they came after the contract had been perfected and. not only with respect to the 20% of the bid price. xxx xxx xxx 10. as we conclude that while there was a perfected contract between the parties. therefore. 1986 to date of approval shall be paid first before implementation of the request.34 These incidents. do not go into and affect the perfection of the contract. as discussed below. we now determine the consequential rights. Second. 1986 which states.669. were indicative of the bank’s cancellation of the repurchase agreement.38 An examination of the provisions of the TRB Repurchase Agreement reveals that the bank is allowed to apply the respondents’ payments first to the amounts due as interests and other charges. the bank’s expressed intent to offer the subject property for sale to third persons at a higher price. The seemingly contrary indications. the bank effectively cancelled the contract when it communicated with CLCI that it would sell the subject property at a higher price to third parties. instead of applying these to the repurchase price for the subject property. 1986 is P65. We note. that the TRB Repurchase Agreement is in the nature of a contract to sell where the title to the subject property remains in the bank’s name. passed a resolution for the repurchase of your property acquired by the bank…. as vendees. In light of this conclusion. 1986) and further payment of P200. That client shall initially pay P132. as indicated in the bank’s letter of October 20. 59 . however.35 Thus. as follows: 11. 1987 indicating that the respondents were already in default. the bank communicated its intent not to proceed with the repurchase as above outlined and formally cancelled the TRB Repurchase Agreement in its letters dated January 11 and 30. The approval referred to under paragraph 10 is the approval by the bank of the repurchase of the subject property. but simply an event that prevents the obligation of the vendor to convey title from acquiring any obligatory force. but also with the three quarterly installments. casual or serious. obligations and liabilities of the parties. That the first quarterly installment shall be due within ninety (90) days of approval hereof. giving CLCI 15 days to make a formal offer. upon the full payment of the repurchase price. as the vendor. contract is automatically cancelled at the Bank’s option and all payments already made shall be treated as rentals or as liquidated damages. and shall only pass to the respondents. the respondents violated the terms and conditions of the TRB Repurchase Agreement when they failed to pay their obligations under the agreement as these obligations fell due. 1989 to CLCI. interest as of October 31. "This is to formally inform you that our Board of Directors in its regular meeting held on October 10. and the succeeding installment shall be due every three (3) months thereafter. 1986.37 Viewed in this light. and the unaccepted counter-offer by the respondents after the bank increased the purchase price). some evidence on record may be argued to point to the absence of a meeting of the minds (more particularly.53." It was on the basis of this approval and the quoted terms of the agreement that the bank issued its Statement of Account dated July 31. The right to cancel for breach is provided under paragraph 11 of the TRB Repurchase Agreement. the failure to pay in full is not to be considered a breach. additionally.5 million.

44 Given the implied consent.000.Under these terms. as the CA ruled. Thus. the bank was well within its right to consider the agreement cancelled when. from judicial or extrajudicial demand under and subject to 60 . it changed the repurchase terms to P3.40 Although this claim was not alleged in the bank’s Answer being an after-acquired claim which was only raised during the trial proper through the testimony dated August 17. which amount the bank accepted as earnest money.45 In National Power Corporation v. 1987. the bank also seeks to recover the rentals that accrued after January 31. judgment may be validly rendered on this issue even if no motion had been filed and no amendment had been ordered.39 We note that subsequent to the bank’s counterclaim for the payment of rentals due as of January 31. CA. paying P300.47 we laid down the following guidelines with respect to the award and the computation of legal interest. When the obligation is breached. Significantly. Under these facts. hence. the Court may treat the pleading as amended to conform to the evidence. As we explained in Banco de Oro Universal Bank v. 1993 of Ms. in September 1988.00 already paid as part of the purchase price. the respondents have been in continuous possession of the subject property since October 1986. failed to act except to ask the bank for the status of its requested condonation. Lastly.0 million. neither party moved. Cuison. requested that part of its outstanding obligation be condoned by the bank. Fourth. 1993 amounted to P1. instead of asserting its rights under the TRB Repurchase Agreement. we note that the respondents did not object to the presentation of this evidence. which as of August 8. In Eastern Shipping Lines v. Likewise.00 as shown by the evidence presented by the bank before the RTC and in the pleadings it had filed before the RTC. to have already waived the terms of the TRB Repurchase Agreement by extending the time to pay and subsequently accepting late payments. a loan or forbearance of money. applying Section 5. which shows that the bank considered the respondents already in default. Atty.41 the bank is not barred from recovering these rentals. all payments already made shall be treated as rentals or as liquidated damages. the interest due shall itself earn legal interest from the time it is judicially demanded. heretofore cited.. The undisputed facts show that the bank has been deprived of the use and benefit of its property that has been in the possession of the respondents for the latter’s use and benefit without paying any rentals thereon. quoted above. as well as the accrual thereof.00 as of August 31. Rule 10 of the 1997 Rules of Civil Procedure. 1987. CA. Additionally. Furthermore.500. We find it significant that the respondents. even granting that a waiver had intervened as of August 31. 43 the issue should be treated in all respects as if it had been raised in the pleadings. the issue of rentals from August 8.e. the respondents are still in possession of the subject property. i.123. the rate of interest. despite the absence of a contract to sell apparently with the bank’s consent. the rate of interest shall be 12% per annum to be computed from default. the interest due should be that which may have been stipulated in writing. the respondents. 1987.5 million with the P400. Moreover.42 a party is not barred from setting up a claim even after the filing of the answer if the claim did not exist or had not matured at the time said party filed its answer. as follows: II. The records reveal that until now. 1993 and onwards was tried with the implied consent of the parties. CA. counteroffered P1. in fact. CA.46 we held that where there is a variance in the defendant’s pleadings and the evidence adduced by it at the trial. At this point. a continuing breach of the agreement took place. i. and it consists in the payment of a sum of money. The CA’s conclusion lacks factual and legal basis taking into account that the Statement of Account of July 31. of the agreement.. 1989. and the Court. The agreement also provides under its paragraph 11 that upon the respondents’ default and the cancellation of the agreement. 1989. is imposed. the bank cannot be faulted for the application of other amounts paid as rentals as this is allowed under paragraph 11.e. the respondents are also liable to pay interest by way of damages for their failure to pay the rentals due for the use of the subject property. who had continuing payments to make and who had the burden of complying with the terms of the agreement. the perfected repurchase agreement itself provides for the respondents’ possession of the subject property. the petitioner bank cannot be said. as follows: 1. by letter. Arlene Aportadera. the bank cannot be faulted for the application of payments it made. In the absence of stipulation. With regard particularly to an award of interest in the concept of actual and compensatory damages. it was clear that even the respondents themselves considered the TRB Repurchase Agreement cancelled. For one whole year thereafter.000. At that point.

specific performance. The complaint in Civil Case No. above. We find no basis for the award of exemplary damages. reckless. 19416-89 for breach of contract. 2006 of the Court of Appeals in CA-G. When the judgment of the court awarding a sum of money becomes final and executory. for the use and occupation of the subject property in the amount of P1.48 However. Costs against the respondents. The respondents are further ordered to pay reasonable compensation. or malevolent manner. 61 . oppressive. Accordingly. we can hardly characterize respondents’ act of insisting on the enforcement of the repurchase agreement as wanton.123. 1993. the interest shall begin to run only from the date the judgment of the court is made (at which time quantification of damages may be deemed to have been reasonably ascertained).500. 1989 up to the finality of this decision.. or malevolent. SO ORDERED. the rate of legal interest shall be computed at twelve percent (12%) per annum from such finality until its satisfaction.00.000. Under the circumstances. the records show that the bank made a counterclaim for the payments of the rentals due as of January 31.700.00 a month by way of rentals starting from August 8. representing the accrued rentals as of August 8.the provisions of Article 1169 of the Civil Code. 3. 1993 until they vacate the subject property. whether the case falls under paragraph 1 or paragraph 2. [Emphasis supplied] The records are unclear on when the bank made a demand outside of the judicial proceedings for the rentals on the subject property. this interim period being deemed to be by then an equivalent to a forbearance of credit. respondents are also ordered to pay the amount of P13. 2006 and Resolution dated August 11. where the demand is established with reasonable certainty. After this decision becomes final and executory. 1989 in its Answer and subsequently. premises considered. Inc. in any case. Article 2232 of the Civil Code declares: Article 2232. the interest shall begin to run from the time the claim is made judicially or extrajudicially (Art. In additiodn. Considering the factual circumstances we have discussed above. the interest shall be computed at 12% per annum from such finality up to full satisfaction. the court may award exemplary damages if the defendant acted in a wanton. we can impose a 6% interest on the rentals from April 20. oppressive.R. The actual base for the computation of legal interest shall. not constituting a loan or forbearance of money. 1989 until the finality of this decision. 49900 are hereby REVERSED and SET ASIDE. with preliminary injunction filed by Cuison Lumber Co. WHEREFORE. be on the amount finally adjudged. and attorney’s fees. The rentals shall earn a corresponding legal interest of six percent (6%) per annum to be computed from April 20. 1989 when the bank set up its counterclaim for rentals in the subject property. shall be adjudged on unliquidated claims or damages except when or until the demand can be established with reasonable certainty. No interest. is breached. fraudulent. and Mrs. we hereby GRANT the petition. Applying Eastern Shipping Lines. less the amount of P485. reckless. CV No. The Decision dated March 31. a claim for the after-acquired rentals was made by the bank through the testimony of Ms. the payment of interest for the rentals shall be reckoned from the date the judicial demand was made by the bank or on April 20. As there is no basis for an award of exemplary damages. damages. however. the rate of legal interest.00 representing deposits paid by the respondents. 2. Arlene Aportadera. Cuison against Traders Royal Bank is hereby DISMISSED. The respondents are ordered to vacate the subject property and to restore its possession to the petitioner bank. fraudulent. shall be 12% per annum from such finality until its satisfaction. Thereafter. an interest on the amount of damages awarded may be imposed at the discretion of the court at the rate of 6% per annum. 1169 Civil Code) but when such certainty cannot be so reasonably established at the time the demand is made. In contracts and quasi-contracts. the awards of attorney’s fees and litigation expenses to the bank are not justified under Article 2208 of the Civil Code. When an obligation.

DBP allegedly cancelled the restructuring agreement for ERHC’s failure to comply with some of the material conditions5 of the agreement. ERHC filed with the Regional Trial Court of Iriga City a complaint for annulment of the foreclosure sale of the personal and real properties. ERHC maintained that the loan was not yet due and demandable because the DBP had restructured the loan. Sheriffs Ramos and Galeon failed to execute the corresponding certificates of posting of the notices. Deputy Provincial Sheriffs Abel Ramos and Ruperto Galeon issued the required notices of public auction sale of the personal and real properties. DBP further claimed that it cancelled the conditional restructuring of ERHC’s loan because ERHC failed to comply with some material conditions of the restructuring agreement. the auction sale of the personal properties proceeded. To secure the loan. claiming that it complied with the legal requirements for a valid foreclosure.G. Consequently. 25 July 1986 and 1 August 1986 the notice of auction sale of the real properties. ERHC mortgaged its personal and real properties to DBP.000. However.000. The Facts Private respondent Emerald Resort Hotel Corporation ("ERHC") obtained a loan from petitioner Development Bank of the Philippines ("DBP").500.862. CARPIO. ERHC first delivered to DBP on 20 October 1981 Stock Certificate No.000.852 shares. After the parties presented their evidence. premises considered. vs. Meanwhile. COURT OF APPEALS and EMERALD RESORT HOTEL CORPORATION. an Application for Extra-judicial Foreclosure of Real Estate and Chattel Mortgages. The Court of Appeals affirmed the Decision3 of the Regional Trial Court of Iriga City.00 on 27 September 1975. disputes the authority of Jaime Nuevas who signed the agreement for ERHC. DBP approved a restructuring of ERHC’s loan subject to certain conditions.000.R. CV Nos.00 on 14 September 1976. On 10 July 1986. petitioner.7 On 22 December 1986.000.148 shares.00 per share. Then ERHC delivered on 3 November 1981 Stock Certificate No. DBP filed with the Office of the Sheriff. P1. and on 27 November 1981 Stock Certificate No. 30 covering 1. Subsequently. 4 On 25 August 1981. Thereafter. declaring the foreclosure of the mortgaged properties void for failure to comply with the statutory requisites. 32 covering 923. Regional Trial Court of Iriga City. Accordingly. 38569 and 38604 dated 31 January 1996 and the Resolution dated 30 July 1996 denying the motion for reconsideration.052 shares with a par value of P1. alleging that ERHC failed to pay its loan.00 in three installments: P2. acting on ERHC’s application for the issuance of a writ of preliminary injunction. DBP did not republish the notice of the rescheduled auction sale because DBP and ERHC signed an agreement to postpone the 12 August 1986 auction sale. DBP filed its answer. Subsequently. DBP moved to dismiss the complaint because it stated no cause of action and ERHC had waived the alleged procedural defenses. On 5 June 1986. the dispositive portion of which reads: WHEREFORE.00 on 14 June 1976 and P500. and (2) the foreclosure was premature. No. the trial court enjoined DBP from enforcing the legal effects of the foreclosure of both the chattel and real estate mortgages.477. However.R. the trial court granted the writ on 20 August 1990. 125838 June 10.052 shares. ERHC filed a Supplemental Complaint. The Office of the Sheriff scheduled on 12 August 1986 the public auction sale of the real properties. Branch 36. DBP released the loan of P3. trial on the merits ensued. Declaring as null and void the foreclosure and auction sale of the 62 . J. ERHC alleged that the foreclosure was void mainly because (1) DBP failed to comply with the procedural requirements prescribed by law. 31 covering 691. ERHC delivered to DBP three stock certificates of ERHC aggregating 3.000. ERHC informed DBP of its intention to lease the foreclosed properties. respondents. judgment is hereby rendered in favor of the plaintiff corporation and against the defendants: 1.: The Case This petition for review on certiorari1 seeks to reverse the Joint Decision2 of the Court of Appeals in CA-G. 2003 DEVELOPMENT BANK OF THE PHILIPPINES. The trial court denied the motion to dismiss. the Office of the Sheriff postponed the auction sale on 12 August 1986 to 11 September 1986 at the request of ERHC. the trial court rendered a Decision8 dated 28 January 1992. On 18 March 1981. In a letter dated 24 November 1986.6 ERHC. however. The Bicol Tribune published on 18 July 1986.

this petition. (c) The acceptance of the foregoing by the DBP without raising the fact of delay as embodied in condition no. Stock certificate No.00 (Exhs. the value of which are broken as follows: 1. The Court of Appeals held that the non-execution of the certificate of posting of the notices of auction sale and the non-republication of the notice of the rescheduled 11 September 1986 auction sale invalidated the foreclosure. The Ruling of the Court of Appeals The Court of Appeals sustained the trial court’s ruling that the foreclosure was void.000. 1981 which relates to the progress of the restructuring of the mortgage account of Emerald Resort Hotel Corporation and that the same has been approved by the SEC (Exh. (f) No rejection was also made when plaintiff corporation did not avail of the additional loan which was allegedly part of the package accommodation.052 shares worth P691. 031. (d) No rejection was made by the defendant-appellant DBP at the time the shares of stocks were being held by the latter.10 Hence. 3. "F" and "F-1").862. The Issues 63 . ERHC anchored its appeal on the insufficiency of the moral damages awarded by the trial court and the absence of any award of temperate. 7 of Exh.148 shares worth P1.personal properties of plaintiff corporation held on July 10.00 (Exhs. Finding the foreclosure void. affirmed the decision of the trial court. "D") (b) The transfer of shares of stocks to appellant DBP. assisted by sheriffs and several armed men. These acts. into Hotel Ibalon and the sheriffs’ inventory of the hotel’s furniture and fixtures caused fear and anxiety to the hotel owner. staff and guests. The Court of Appeals found that DBP’s intrusion. 32 for 932. opprobrium and disrepute as a consequence thereto.862.00 (Exhs. debased the hotel’s goodwill and undermined its viability warranting the award of moral damages.11 The Court of Appeals also affirmed the trial court’s award of moral damages but denied ERHC’s claim for temperate and exemplary damages. "M" and "M-5"). Ordering the Register of Deeds of Camarines Sur (now Iriga City) to cancel the annotations of the Sheriff’s Certificate of Sale on the aforestated titles as null and void and without any legal effect. 3. RT-1077 (22367) and TCT No. 1986. 1986. Stock certificate No. (e) The belated rejection of the shares of stocks was interposed only at the time the instant suit was filed which was long after the expiration of the 90-day period extended by DBP to Emerald. TCT No. the Court of Appeals also denied DBP’s petition for a deficiency claim and a writ of possession. assailed the decision as well as the order dismissing its petition for a writ of possession. 9 DBP filed a Motion for Reconsideration which the Court of Appeals denied. 2. RT1076 (19981). "B". Declaring as null and void the foreclosure and auction sale of the real properties of plaintiff corporation covered by TCT No. for 691. Both ERHC and DBP appealed the trial court’s decision to the Court of Appeals.852. TCT No. on the other hand. 4. and 5.852 shares worth P953. which consolidated the appeals. and all the improvements therein. 30 for 1. nominal or exemplary damages. The Court of Appeals also found that the parties perfected the restructuring agreement and that ERHC substantially complied with its conditions based on the following "circumstances": (a) The transmittal letter dated October 20. RT-1075 (19980). 10244 of the Register of Deeds of Camarines Sur (now Iriga City) in the auction sale thereof held on September 11. 2. "D" and "D1"). Ordering the defendant DBP to pay plaintiff corporation moral damages in the amount of P500.052. Ordering the defendant Development Bank of the Philippines to comply with the restructuring of plaintiff corporation’s loans retroactively as though the foreclosure had not taken place in the interest of justice and equity. The Court of Appeals. DBP’s appeal.00 for initiating what was a clearly illegal foreclosure and causing the said plaintiff corporation to suffer needlessly anguish. according to the Court of Appeals. SO ORDERED. The Court of Appeals affirmed the trial court’s finding that DBP failed to comply with the posting and publication requirements under the applicable laws.148. Stock certificate No.

a newspaper of general circulation in the province of Camarines Sur. 3135.20 In the absence of contrary evidence. DBP did not anymore publish the notice of the 11 64 . and at the Iriga City Hall Bulletin Board. A careful examination of these two documents clearly shows that the foreclosing sheriffs posted the required notices of sale.14 In the present case. this fact alone does not prove that the sheriffs failed to post the required notices. As held in Bohanan. The Court’s Ruling The petition is partly meritorious. This Court ruled in Cristobal v. The partial report dated 10 July 1986 signed by both Sheriff Abel Ramos and Deputy Sheriff Ruperto Galeon states in part: That on July 1. the certificate of sale of the real properties signed by both Sheriff Ramos and Deputy Sheriff Galeon on 11 September 1986 states in part: I. Iriga City xxx.DBP presents the following issues for resolution: 1. which is present in this case.12 DBP insists that the non-execution of the certificate of posting of the auction sale notices did not invalidate the foreclosure. the undersigned sheriffs posted the notice of public auction sale of chattel mortgage in the conspicuous places. First Issue: Compliance with the posting and publication requirements under applicable laws Posting requirement under Acts Nos. Cristobal merely reiterated the doctrine laid down in Bohanan v. Court of Appeals13 that a certificate of posting is not required. ERHC bore the burden of presenting evidence that the sheriffs failed to post the notices of sale. the foreclosing sheriffs failed to execute the certificate of posting of the auction sale notices. 2. as in this case. Thus. agreed to postpone the same to 11 September 1986. for three (3) consecutive weeks and three (3) copies of the notices of sale were posted in three (3) public places of the City where the properties are located for no less than twenty (20) days before the sale. Whether DBP complied with the posting and publication requirements under applicable laws for a valid foreclosure. Publication requirement under Act No. 17 (Emphasis supplied) Deputy Sheriff Galeon also testified that he. there is clear and convincing evidence of the posting of the notices of sale. we shall now resolve whether there was publication of the notice of sale of the real properties in compliance with Act No. the presumption prevails that the sheriffs performed their official duty of posting the notices of sale. However. Moreover. FURTHERMORE CERTIFY that the Notice of Sale was published in BICOL TRIBUNE. 1986.19 Indisputably. Whether the award of moral damages to ERHC.16 (Emphasis supplied) Similarly. we hold that the non-execution of the certificate of posting cannot nullify the foreclosure of the chattel and real estate mortgages in the instant case. DBP presented sufficient evidence to prove that the sheriffs posted the notices of the extrajudicial sale. 3135 Having shown that there was posting of the notices of auction sale. Court of Appeals. Whether ERHC’s offer to lease the foreclosed properties constitutes a waiver of its right to question the validity of the foreclosure. and not the execution of the certificate of posting. What the law requires is the posting of the notice of sale. The trial and appellate courts glaringly erred and gravely abused its discretion in disregarding the sheriffs’ partial report and the sheriffs’ certificate of sale executed after the auction sale. DBP maintains that it complied with the mandatory posting requirement under applicable laws.18 actually posted the notices of sale. We agree. is proper. including Ibalon Hotel. 4. Consequently. much less considered indispensable for the validity of an extrajudicial foreclosure sale of real property under Act No. DBP contends that the agreement to postpone dispensed with the need to publish again the notice of auction sale. 3. a juridical person. 3135. no auction sale took place on 12 August 1986 because DBP. Whether the restructuring agreement between DBP and ERHC was perfected and implemented by the parties before the foreclosure. 3135 and 1508 In alleging that the foreclosure was valid. "the fact alone that there is no certificate of posting attached to the sheriff's records is not sufficient to prove the lack of posting."15 Based on the records. However. at the instance of ERHC. together with Sheriff Ramos.21 There is no question that DBP published the notice of auction sale scheduled on 12 August 1986.

as amended by Act No. as we have passed upon the same query in Philippine National Bank v. Consequently. Rizal. The Court held recently in Ouano v. he may adjourn the sale from day to day. DBP insists that the law does not require republication of the notice of a rescheduled auction sale. Initially scheduled on August 12. and the absence of such republication invalidates the foreclosure sale.24 However. 3135 is necessary for the validity of a postponed extrajudicial foreclosure sale.25 the Court held that: 65 . Without such agreement. (Emphasis supplied) DBP also maintains that ERHC’s act of requesting postponement of the 12 August 1986 auction sale estops ERHC from challenging the absence of publication of the notice of the rescheduled auction sale. xxx Publication. This decision was affirmed in toto by the Court of Appeals. Petitioner therein sought extrajudicial foreclosure of respondent’s mortgaged properties with the Sheriff’s Office of Pasig. At the outset. Another publication is required in case the auction sale is rescheduled. 1976. We do not agree. Upholding the conclusions of the trial and appellate courts. The trial court declared the sale void for non-compliance with Act No. therefore. Rule 68 of the Rules of Court applies in cases of judicial foreclosure sale. applies to the present case. and an extrajudicial foreclosure sale. distinction should be made of the three different kinds of sales under the law. the auction sale proceeded on December 20.. 24. ERHC indeed requested postponement of the auction sale scheduled on 12 August 1986. Section 24 of Rule 39 provides: Sec. with petitioner as the highest bidder.September 1986 auction sale. namely: an ordinary execution sale. the officer may adjourn any sale upon execution to any date agreed upon in writing by the parties. 4118 otherwise known as "An Act to Regulate the Sale of Property under Special Powers Inserted in or Annexed to Real Estate Mortgages" applies in cases of extrajudicial foreclosure sale. the auction sale was rescheduled several times without republication of the notice of sale. The Court declared thus: Petitioner further contends that republication may be waived voluntarily by the parties. To allow the parties to waive this jurisdictional requirement would result in converting into a private sale what ought to be a public auction. The issue of whether republication may be waived is not novel. Rule 39 of the Rules of Court. Aggrieved. On the other hand. A different set of law applies to each class of sale mentioned. The Court ruled in Ouano that Section 24 of Rule 39 does not apply to extrajudicial foreclosure sales. The Court also ruled in Ouano that the parties have no right to waive the publication requirement in Act No. 3135. DBP further asserts that Section 24. DBP argues vigorously that the extrajudicial foreclosure of the real estate mortgage is valid. In Philippine National Bank v. We do not agree. Nepomuceno Productions Inc. The cited provision in the Rules of Court hence does not apply to an extrajudicial foreclosure sale. Act No. Court of Appeals22 that republication in the manner prescribed by Act No. This argument has no basis in law. as stipulated in their Agreements to Postpone Sale. a judicial foreclosure sale. is required to give the foreclosure sale a reasonably wide publicity such that those interested might attend the public sale. Finally. the records are bereft of any evidence that ERHC requested the postponement without need of republication of the notice of sale. if it becomes necessary to do so for lack of time to complete the sale on the day fixed in the notice. Nepomuceno Productions Inc. 3135. Adjournment of Sale – By written consent of debtor and creditor. 1976. 3135. respondents sued to nullify the foreclosure sale. 3135. we held: Petitioner and respondents have absolutely no right to waive the posting and publication requirements of Act No. which allows adjournment of execution sales by agreement of the parties. An ordinary execution sale is governed by the pertinent provisions of Rule 39 of the Rules of Court. thus: Petitioner submits that the language of the abovecited provision23 implies that the written request of the parties suffices to authorize the sheriff to reset the sale without republication or reposting.

M. the following property with all its improvements." __________ (date) "SHERIFF" (Emphasis supplied) The last paragraph of the prescribed notice of sale allows the holding of a rescheduled auction sale without reposting or republication of the notice. Prepare a Notice of Extra-judicial Sale using the following form: "NOTICE OF EXTRA-JUDICIAL SALE" "Upon extra-judicial petition for sale under Act 3135/1508 filed _________ against (name and address of Mortgagor/s) to satisfy the mortgage indebtedness which as of ___________ amounts to P __________ excluding penalties. the Court hopes to deter the practice of some mortgagors in requesting postponement of the auction sale of real properties. 99-1005-0. First. 4. the extrajudicial foreclosure of the real estate mortgage is void. There was no publication of the notice of the rescheduled auction sale of the real properties. Therefore. therefore. No. Clearly. Second.______ without further notice. 3135. as amended by the Resolutions of 30 January 2001 and 7 August 2001. However. With the added information in the notice of sale. for cash or manager’s check and in Philippine Currency. If the notice of auction sale contains this particular information. there is no information in the notice of auction sale of any date of a rescheduled auction sale. the Court seeks to minimize the expenses which the mortgagee incurs in publishing the notice of extrajudicial sale. however. which is to notify the mortgagor and the public of the foreclosure sale. attorney’s fees and expenses of foreclosure. if the first auction sale does not proceed. charges. 3135 and 1508 precisely because the interested parties as well as the public are informed of the schedule of the next auction sale. to wit: "(Description of Property") "All sealed bids must be submitted to the undersigned on the above stated time and date. the purpose of a notice of sale.M. Respondents. to request it without need of compliance with the statutory requirements is another.x x x To request postponement of the sale is one thing. Section 4(a) of Circular No." "In the event the public auction should not take place on the said date. the rescheduled auction sale will only be valid if the rescheduled date of auction is clearly specified in the prior notice of sale. or soon thereafter at the main entrance of the ________ (place of sale) to the highest bidder. DBP failed to comply with the publication requirement under Act No. is satisfied. the reposting and republication of the notice of sale would still be necessary because Circular No. 72002 took effect only on 22 April 2002. 3135.27 the only requirement is posting of the 66 . it shall be held on ___________. Therefore. The Court issued these Resolutions for two reasons. There is no violation of the notice requirements under Acts Nos. Such development will eventually work against mortgagors because mortgagees will hesitate to grant postponements to mortgagors. the undersigned or his duly authorized deputy will sell at public auction on (date of sale) ________ at 10:00 A. There were no such guidelines in effect during the questioned foreclosure. Under the Chattel Mortgage Law. did not commit any act that would have estopped them from questioning the validity of the foreclosure sale for non-compliance with Act No. DBP. The absence of this information in the prior notice of sale will render the rescheduled auction sale void for lack of reposting or republication. In the instant case. The Sheriff to whom the application for extra-judicial foreclosure of mortgage was raffled shall do the following: a. whether or not the parties agreed to such rescheduled date. The Office of the Court Administrator issued Circular No. 7-2002 provides that: Sec. there is no more need for the reposting or republication of the notice of the rescheduled auction sale. 7-2002 pursuant to the 14 December 1999 Resolution of this Court in A. Even if such information were stated in the notice of sale. xxx The form of the notice of extrajudicial sale is now prescribed in Circular No. the mortgagee need not cause the reposting and republication of the notice of the rescheduled auction sale. then later attacking the validity of the foreclosure for lack of republication. 7-200226 issued by the Office of the Court Administrator on 22 January 2002. complied with the mandatory posting of the notices of the auction sale of the personal properties. This practice will only force mortgagees to deny outright requests for postponement by mortgagors since it will only mean added publication expense on the part of mortgagees.

B.00 Representing 40% of the Total Outstanding Obligations. 956.00 and Restructuring of the Account. Immediate conversion into common and/or preferred shares at borrower’s option. 1985 and payable quarterly at the following interest rates: Original Loan 1st Additional Loan Total P1.00 as of May 15.00 representing 40% of the total outstanding obligation as of May 15.00.000 at 18% interest per annum P3.00 to reduce its total arrearages on interest and other charges of P3.500. the conversion price to be equal to the par value of the shares. ERHC maintains that the delivery of its certificates of stocks to DBP was part of its compliance with the conditions of the restructuring agreement. Second Issue: Perfection and implementation of the restructuring agreement between DBP and ERHC ERHC consistently argues that its restructuring agreement with DBP was perfected and even implemented by the parties. Emerald Resort Hotel Corporation (Hotel Ibalon) – Conversion Into Common and/or Preferred Shares of P2. the extrajudicial foreclosure of the chattel mortgage in the instant case suffers from no procedural infirmity. Contrary to ERHC’s allegations and the Court of Appeals’ findings.0 00 subject to the following terms and conditions: A. 1980 to P3. A third additional loan of Six Hundred Seventy-Nine Thousand Pesos (P679. ERHC failed to comply with the material conditions for the perfection of the restructuring agreement. 956 dated 19 March 198128 approving the restructuring agreement.465. and 3.00). and b.00 Additional Loan a.200 at 18% interest per annum 1.00.965. the Board. 1980 not otherwise covered by the proposed equity conversion of P2. which should be 67 . the restructuring agreement was never perfected. Thus.000.425.786.786.500.786.000. That the proceeds of this additional loan shall be applied to subject-firm’s accrued interest and other charges due DBP as of May 15. 1981.00 composed of outstanding principal balance of P3. For the P679.000.000 at 18% interest per annum 500. of P2.000. a Third Additional Loan of P679. That subject-firm shall first pay the amount of P473.00 and total arrearages on interest and other charges of P3.000. payable quarterly under the same restructured terms of the original and two (2) additional loans.465. 1980. There was no postponement of the auction sale of the personal properties and the foreclosure took place as scheduled. at 18% interest per annum.000. That a quasi-reorganization shall first be undertaken for the purpose of eliminating existing deficits.000. upon motion made and duly seconded.000.000. Restructuring of the firm’s total outstanding principal obligation of P3.00 in the form of extension of grace period on principal repayment from two (2) years to nine (9) years to make a maximum loan term of nineteen (19) years.500.notice of auction sale. As specified in DBP Resolution No.000. the following are the conditions for the restructuring agreement: RESOLUTION NO.800 at 16% interest per annum 574. regular amortizations to commence three (3) months after the end of the extended grace period on October 31.000. in the reduced amount of P6. APPROVED in favor of Emerald Resort Hotel Corporation (Hotel Ibalon) the following: 1. For Both Additional Loan and Restructuring a. xxx In view thereof and as favorably recommended by the Manager of the Industrial Projects Department III in her memorandum dated February 24.00. 2. We do not agree.473.000.465.

ERHC failed to comply with the important condition of converting into equity 40 percent of its outstanding debt to DBP. x x x 2. xxx (Emphasis supplied) A careful review of the facts and the evidence presented by the parties discloses that ERHC failed to comply with the terms and conditions set forth in DBP Resolution No. This Stock Certificate has to be surrendered to the corporation for cancellation before we can issue by way of further assignment the 520. 030 for 1.725 shares. First. Moreover. should comply with legal requirements. Reyes.294. Finally. ERHC’s reply letter.925 shares (3. 31 The deficiency of 2. xxx30 On 17 April 1985.formally authorized by the stockholders of the corporation. xxx e. That subject-firm shall apply with SEC for an amendment of its authorized capitalization to include preferred shares in case immediate conversion into equity of 40% of the total outstanding obligation as of May 15. it was to comply with ERHC’s commitment under the original mortgage contracts. signed by its President Atty.917.777 shares.29 ERHC committed to pledge or assign to DBP at least 67 percent of its outstanding shares to secure the original loan accommodation.852 shares which was transferred to DBP conditionally. 956.148 shares which had been transferred to DBP be considered as an alternative compliance to the raising of DBP’s assigned shares to the full 67% or 3. 1980 will include preferred shares.862.000 shares you transferred in the name of DBP as an alternative compliance with 65% requirement.294. (Emphasis supplied) In its reply letter dated 11 June 1985 to DBP. the corporation is agreeable that Stock Certificate No. Jose C. more of the outstanding voting shares have increased.294. 1982. the 3 blocks of shares mentioned above would result as follows: 1. In short. Thus. We are ready to bring up the assigned shares in favor of DBP to 67% of the corporation’s outstanding voting shares of 4.862. the corporation will further assign to DBP another 520.500 outstanding voting shares as of December 31.800 shares have been assigned instead of 3. 2.500 as of December 31. 032 for 923. ERHC did not present any evidence to show that it complied with this particular requirement. The said percentages of shares assigned shall be maintained at all times and the said assignment to subsist for as long as the Assignee may deem necessary during the existence of the Mortgagee’s approved accommodation. The corporation will maintain its previous assignment of 911. While it is true that ERHC delivered to DBP certificates of stocks. I am pleased to inform your goodself of the action taken on the various items thereon enumerated. Assignment of 67% of outstanding voting shares. ERHC signified its readiness to assign 67 percent of its outstanding shares to DBP. By an assignment to the Mortgagee of not less than 67% of the total subscribed and outstanding voting shares of the company.725 . The original mortgage contracts contain the following condition: xxx c. only 911. Of the 4. to wit: 1.917. The letter of DBP states in part: 2. 1982 or total of 3.786.800) may however be covered by the 2. DBP informed ERHC that it had not complied with the condition in the original mortgage contract on the assignment of 67 percent of its outstanding shares to DBP.294. and should be approved by the Securities and Exchange Commission which sees to it that the rights of creditors are not prejudiced.800 shares.777 shares in exchange of Stock Certificate No. 911.725 shares. states in part: With reference to your letter dated 17 April 1985 which could not be seasonably acted upon on account of my absence from the country for medical reasons. The condition requiring ERHC to assign in favor of DBP at least 67% of the subscribed and outstanding voting shares of company has not been met.148 shares 68 .725 (67% of 4.382. Your formal conformity to this arrangement is likewise requested.000).911.800 shares 1.917.

respectively: t.00 in liabilities of ERHC into equity was to reduce ERHC’s debt to equity ratio. ERHC did not avail of the P679. as well as its liabilities. On July 31. copy whereof is attached as Annex "C".3. Considering that ERHC failed to comply with the material conditions of the restructuring agreement. which the assignment and delivery of the stock certificates did not and could not have achieved. xxx It will thus be noted from the foregoing communications that we have exerted our utmost best to comply with the conditions for the restructuring of our loan accounts and all have been complied. Total – 520. there is a vast difference between an assignment of shares to DBP by existing stockholders and conversion of DBP’s loan into equity of ERHC. ERHC failed to comply with the quasireorganization requirement. ERHC’s refusal to avail of the additional loan.00 additional loan. the paid-up capital of ERHC. In the latter. for reasons beyond our legal control since it is the SEC that passes upon the question as to whether or not we meet the SEC guidelines for a quasireorganization. intended to up-date ERHC’s loan account. Besides.33 (Emphasis supplied) The quasi-reorganization is required specifically to eliminate ERHC’s existing deficits. it was to comply with ERHC’s commitment under the original mortgage contracts. as clearly admitted in ERHC’s letter dated 3 November 1982 to DBP. x x x Implementation of the restructuring scheme as approved shall take effect upon compliance with the terms and conditions and with all the legal and documentation requirements. despite this being a material condition of the restructuring agreement. thus: 3.294.34 xxx xxx xxx 7.000. not the restructuring agreement.786. the agreement was never implemented or even perfected.725 ERHC shares did not reduce the liabilities of ERHC. we once more communicated with your Naga Branch advising of the Emerald Resort Hotel Corporation’s Stockholders Resolution approving the quasi-reorganization and the Petition filed with the Securities and Exchange Commission requesting approval of the corporation’s resolution on quasi-reorganization and the transfer of 1. However. which is the conversion of debt into equity required under the restructuring agreement. 1981. never happened. Second. the SEC must first approve the quasireorganization which approval ERHC admittedly failed to secure. The delivery to DBP of stock certificates representing 3.35 The trial and appellate courts gravely misapprehended the facts and made manifestly 69 . On September 7. with the exception of the quasireorganization. The perfection and implementation of the restructuring agreement were expressly subject to the following conditions embodied in DBP Resolution No. prevented the perfection of the restructuring agreement. otherwise. the paid-up capital of ERHC remains the same. Lastly.148 shares in favor of the DBP. this accommodation shall be automatically cancelled.862. Through no fault of DBP. 1981.725 shares of 67% outstanding voting shares 32 x x x. when ERHC delivered the certificates of stocks. Clearly. In the first. changes in that the liabilities are transferred to the capital account to the extent of the conversion. All documents for this loan approval shall be executed and perfected within 90 days from the date of this notice. SEC disapproved ERHC’s application for quasireorganization. for the reasons stated in Annex "H" and the enclosures thereto.294. the SEC felt that ERHC was not within their guidelines for a quasireorganization. copy whereof is attached as Annex "D". we received by personal delivery a letter from Manager Mario C. Unfortunately.777 shares 3. Clearly. Leaño. The reason for the requirement to convert P2. ERHC could not simply refuse to avail of the additional loan because the proceeds of this loan were to pay the balance of ERHC’s accrued interest and other charges due DBP as of 15 May 1980. 4. 956 and in DBP’s notice of approval to ERHC.000. I reiterated our request in our letter dated 19 June 1981 that in view of the circumstances affecting our papers in the Securities and Exchange Commission there was need to extend our period of compliance. In our conversation had on this occasion. The latter case.

38 Moreover. a juridical person. no emotions. The Court of Appeals erred in awarding moral damages to ERHC. thus: The award of moral damages cannot be granted in favor of a corporation because. The Court of Appeals’ sole basis for its ruling is a quoted portion of the testimony of ERHC’s President. essential that the claimant satisfactorily prove the existence of the factual basis of the damage (Art. The award of moral damages is deleted for lack of basis. 38569 and 38604 is AFFIRMED with MODIFICATION.R. though incapable of pecuniary estimation. the Joint Decision of the Court of Appeals in CA-G. Manero and Mambulao Lumber Co. when DBP filed the application for extrajudicial foreclosure of the chattel and real estate mortgages. ERHC’s intention to lease the foreclosed properties cannot simply outweigh DBP’s failure to comply with the statutory requisite for a valid extrajudicial foreclosure. thus: xxx while no proof of pecuniary loss is necessary in order that moral damages may be awarded. As the Court of Appeals correctly ruled. Third Issue: ERHC’s offer to lease the foreclosed properties ERHC offered to lease from DBP the foreclosed properties after the auction sale. the amount of indemnity being left to the discretion of the court (Art. The statement in People v. DBP argues that when ERHC offered to lease from DBP the foreclosed properties.39 WHEREFORE. being an artificial person and having existence only in legal contemplation. are in the category of an award designed to compensate the claimant for actual injury suffered and not to impose a penalty on the wrongdoer. On this score alone the award for damages must be set aside. 2217) and its causal relation to defendant’s acts. It cannot. Atty.37 (Emphasis supplied) In the body of its decision.mistaken inferences in finding that the parties had perfected the restructuring agreement. We do not agree. is not entitled to moral damages. "there can be no waiver of the posting and publication requirements in foreclosure proceedings because the same is contrary to law and public order." Fourth Issue: Award of moral damages DBP maintains that ERHC. it is. this Court has held that the claimant for moral damages must present concrete proof to justify its award. since RBS is a corporation. no senses.36 A mere offer to lease the foreclosed properties cannot constitute a waiver of ERHC’s right to contest the validity of the foreclosure on the ground of noncompliance with the statutory requisites. the trial court gave no basis to justify the award of moral damages. therefore. which can be experienced only be one having a nervous system. experience physical suffering and mental anguish. as a general rule. the intent to waive must be shown clearly and convincingly. PNB that a corporation may recover moral damages if it "has a good reputation that is debased. The testimony was not even offered to prove the justification and amount of damages which ERHC claims against DBP. it has no feelings. CV Nos. ERHC waived its right to question the validity of the foreclosure. Consequently. Jose Reyes. ERHC was already in default in paying its debt to DBP. The trial court simply awarded moral damages in the dispositive portion of its decision. 70 . The extrajudicial foreclosure of the chattel mortgage is valid whereas the extrajudicial foreclosure of the real estate mortgage is void. To constitute a waiver. This is so because moral damages. resulting in social humiliation" is an obiter dictum. The offer to lease the foreclosed properties cannot validate or ratify a void foreclosure. ERHC failed to present evidence to warrant the award of moral damages. nevertheless. v. ERHC counters that its reputation was debased when the sheriffs and several armed men intruded into Hotel Ibalon’s premises and inventoried the furniture and fixtures in the hotel. No costs. SO ORDERED. moral damages are not awarded to a corporation. In other words. In a long line of decisions. ERHC’s offer to lease does not relinquish ERHC’s right to challenge the validity of the foreclosure. 2216).

of a part of the Nagtajan Hacienda. (3) that. W. 1916 HARTFORD BEAUMONT. the said Nagtajan Hacienda. and offered to pay to the defendant. of the entire hacienda. December 4. Manila. (See U.000. Real Estate Agent. he filed the complaint that originated these proceedings. titles and other documents pertaining to the property. in case it can shown that specific performance of the contract 71 . 1911.000 sq.. was attached to the complaint. and to incorporate the same in a public instrument. p. which document is inserted in the amendment to the complaint.) Hausserman.993. on all occasions. meters of land. that the plaintiff was and had been. the plaintiff had incurred great expense and suffered great losses. SIR: In compliance with your request I herewith give you an option for three months to buy the property of Mr.G. vs. Borck addressed to Benito Valdes several letters relative to the purchase and sale of the hacienda. Cohn & Fisher (and subsequently) Gilbert. in spite of the frequent demands made by the plaintiff. J. and as he did not obtain what he expected or believe he was entitled to obtain from Valdes. In said amended complaint it is alleged that the defendant Benito Legarda was the owners of fee simple of the Nagtajan Hacienda. L-8988 March 30. 1911. that the plaintiff. on account of said refusal on the part of the defendant Valdes. and. the price stipulated in the contract for said hacienda which is also described in the complaint. plaintiff-appellee. The plaintiff concluded by praying: (1) That the defendant Valdes be ordered to execute the necessary formal document as proof of the contract or obligation before referred to. JR. quoted at the beginning of this decision. Mr. Lim & Irurreta Goyena for appellants Legarda and Valdes. 1912. the defendant Benito Valdez gave to the plaintiff the document written and signed by him. and BENITO VALDES. No appearance for the other appellants. B. and BENITO VALDES as administrator of the estate of Benito Legarda. said Benito Valdes. 1. and that the defendant Legarda be ordered to convey in absolute sale to the plaintiff. had suffered damages in the amount of P760. to wit. 1911. ARAULLO. post. together with legal interest on the amounts thereof.I. on the date abovementioned. that on or above December 4. prior to December 4. Borck and Benito Valdes. assignee of W. and later on. situated in the district of Sampaloc of this city of Manila and belonging to Benito Legarda. Benito Legarda known as the Nagtahan Hacienda. Supreme Court decision in this same case. marked as Exhibit A.S.R.000. and Escaler & Salas and Ledesma. Valdes. BENITO LEGARDA. deceased. until the date of the execution of the judgment that may be rendered in these proceedings. whereby he was prejudiced in the mount of P80. described in the complaint. 985. referred to in the letter above quoted. a copy of which. the letter aforementioned. the plaintiff in writing accepted the terms of said offer and requested of Valdes to be allowed to inspect the property. and consisting of about. by the tardiness. and that Benito Valdes was his attorney in fact and had acted as such on the occasions reffered to in the complaint by virtue of a power of attorney duly executed under notarial seal and presented in the office of the register of deeds. between W. based on instructions from the defendant Legarda. the defendants ha persistently refused to deliver to him the property titles and other documents relative to said property and to execute any instrument of conveyance thereof in his favor. BORCK. situated in the district of Sampaloc. as well as its value and the revenue annually obtainable therefrom. Borck. April. Beaumont & Tenney and Aitken & DeSelms for appellee. defendants and appellants. Manila. relative to the purchase. 1912. W. which was amended on the 10th of the following month. at first. Cohn & Fisher. addressed to said Borck the following letter (Exhibit E): MANILA.. by a property deed. (2) that both defendants and each of them be ordered and required to render an account to the plaintiff of such rents and profits as they may have collected from the said property from the 19th of January. that on January 19. for the price of its assessed government valuation. Subsequent to the said date. either directly or through the defendant Valdes. by bringing his action not only against Benito Valdes but also against Benito Legarda. willing to comply with the obligation imposed upon him to pay to the defendants the full stipulated price. MAURO PRIETO. while the offer or option mentioned in said document still stood. failure and refusal of the defend to comply with his obligation. VALDES. No.: Negotiations having been had. immediately and in cash as soon as a reasonable examination could be made of said property titles and other documents. that. P.

and therefore alleged as true. answering the complaint as amended. according to the understanding and agreement between himself and the plaintiff. the court. denied each and all of the allegations thereof from paragraph 4. The defendant Benito Legarda also interposed a demurrer to the amended complaint on the grounds that the facts therein set forth did not constitute a right of action against him. without his (Legarda's) knowledge or consent. The defendant Benito Legarda. While this complaint was not yet amended.000. that the option said to have been executed in behalf of the plaintiff had been obtained by the latter by a false and malicious interruption of the letter of December 4. through deceit employed by the plaintiff with respect to its contents. had instructions not to give any option on the hacienda in question without Legarda's previous knowledge and consent. The defendant Benito Valdes. on the prior to January 19. as the defendant Legarda has not approved said option. (4) that he sighed the letter of December 4. and finally. and had neither proven his solvency nor offered to pay the price in cash. 1912. answering the complaint. After the hearing. Valdes. that the defendant be ordered to pay the plaintiff damages in the sum of P760. He finally prayed that the complaint be dismissed with costs against the plaintiff. in said proceedings. induced the defendant Valdes to sign the said option. quoted at the beginning of this decision). was made to his codefendant Valdes. (1) That the instrument Exhibit E that is. that the plaintiff have recovered the interests and the costs in these proceedings. presented in evidence at the trial and of which mention will be made elsewhere herein). and in view of the agreement entered into in said proceedings by all of the latter's creditors. (3) that the latter gave the option. of the contract. (3) that the option offered by him to the plaintiff had not been accepted by the latter within a reasonable period of time nor during the time it was in force. (4) that he had disapproved and rejected the option in question as soon as he had learned of it. a copy of which accompanied the complaint) and as confirmed by Exhibit G (the letter of January 19. the defendant Valdes filed a demurer. (2) that the plaintiff made a sufficient tender of performance. though his attorney-in-fact. constituted a contract by which the principal defendant undertook to convey to the plaintiff the property therein described. in accordance with its assessed value. This demurrer was likewise overruled on June 26. the assignee of his rights. (5) that he had been informed.is impossible. (3) that the 72 . that the complaint did not set forth fact that constituted a cause of action against said defendant. it had no value whatever. 1912. the letter of December 4. unintelligible and vague. in accordance with section 347 of the Code of Civil Procedure. Borck. and that it was ambiguous. in which the respective parties presented their evidence. 1911. and (6) that he. from paragraph 3. except such as he expressly admitted and were contained in the special defense inserted in said answer. This demurrer was overruled on April 11. 1912. in which he alleged: (1) That his codefendant Benito Valdes. the plaintiff was insolvent. ordered that the plaintiff Borck be substituted in the instant proceedings by Hartford Beaumont. (5) that the plaintiff. for the plaintiff had stated to him that it was written in accordance with what had been agreed upon by both parties. of his part. in which he alleged: (1) That the option given by him to the plaintiff was an option without consideration and subject to the approval of the defendant Legarda. 1911. alleged by the plaintiff. as well as to the date of the answer. was merely a general attorney in fact of the defendant Benito Legarda and had no interest whatever in the subjectmatter of the suit. as the trustee appointed therein and representative of the said plaintiff's creditors. addressed by the plaintiff Borck to the defendant Valdes. as he had agreed to do. rendered judgment in which he found. On the 22nd of the same month of June. 1912. a tender of payment of the price of the Nagtajan Hacienda. (2) that. on the grounds that there was a misjoinder of parties on account of the erroneous inclusion therein of the defendant Valdes. the date on which. was insolvent. (2) that on and before December 4. (6) that the option said to have been tendered to the plaintiff had not been legally accepted. by the plaintiff W. ruling on a petition made in voluntary insolvency proceedings brought on May 10. and (7) that on the subsequently to January 19. without which statement he would not have signed it. the plaintiff had knowledge of the scope and limitations of the powers conferred upon the defendant Valdes. according to the plaintiff. as supported by Exhibit A (the power of attorney. availing himself of such interpretation. and in all his acts had carried out the instructions of the said Legarda. 1911. on February 12. 1912. in accordance with the conditions agreed upon between the parties. thus violating the instructions he had given to the said Valdes. in which he tendered to the plaintiff the option which has given rise to this suit. the Court of First Instance of this city of Manila. except those which the admitted in the special defense. nor in the litigation. and that the plaintiff. 1912. denied each and all of the allegations thereof. 1912.

in that he admitted certain evidence and excluded others. to wit. which never was offered as such. 1912. and that the plaintiff was entitled to the specific performance thereof. should execute and deliver to the plaintiff good and sufficient conveyance. empowered to execute contracts in his (Legarda's) name in respect to real property. other errors consisting in the court having held that he voluntarily executed the option in question. as the agent or attorney in fact of the other defendant Benito Legarda. as the plaintiff in the complaint made the necessary allegations to explain the relations that existed between the principal Legarda and the agent Valdez with 73 . as especially affecting his rights. mentioned in the letter of December 4. and that he based one of his findings thereon. attached to the plaintiffs complaint. instead of holding that it was obtained through fraud. if any. Benito Legarda. of the income and profits derived from said property since January 19. although it appears in said instrument that the agent Valdes acted in his own name. have been founded. within the period and for the price specified therein. The plaintiff's action is based on the failure of the defendant Valdes. or to the clerk of the court. that the court held that Benito Valdes was his agent.000. obtained from the land since January 19. within thirty days. the defendant Benito Legarda and Benito Valdes excepted thereto and at the same time prayed that it be se aside and that they be granted a new trial on the grounds that the judgment was not sufficiently supported by the evidence and was contrary to law. Their prayer having been denied by a ruling to which they also excepted. by virtue of which Borck knew that Valdes was Legarda's agent or attorney-in-fact. also particularly with reference to himself. among the said errors. as alternative damages. The defendant Benito Valdes specified. and the object or purpose of these proceedings is to require fulfillment of the said obligation and to secure the payment of a proper indemnity for damages to the plaintiff because of its not having been duly and timely complied with. between the plaintiff Borck and the defendant Valdes with respect to the maters set forth in that document. and to the net income. The parties having being notified of this judgment. and (4) that the defendants should render an accounting. and in not holding that said option was an offer subject to the approval of the defendant Legarda. further. and the same together with the decree. and likewise in holding that the document Exhibit E was a contract of option and not an offer to sell. 1912. the clear of the court should execute one. that the court admitted in evidence the document Exhibit A. others. 1911 (Exhibit E). so far as the same was included within the terms of Exhibit G. or his codefendant and attorney-in-fact. they have brought these proceedings on appeal to the Supreme Court by the proper bill of exceptions. free of all incumbrance. and that the findings of fact therein contained were manifestly and openly contrary to the weight of the evidence. and. both with respect to the plaintiff and the two defendants' and still others refer to the various statements in the judgment resulting from those findings and on which the conclusions arrived at. the said defendant. of the property described in Exhibits B and C. the plaintiff should have and recover from the defendant Legarda. but that he had not shown sufficient loss which entitle him to additional damage unless it subsequently should appear that a conveyance could not be made. Inasmuch as it does not appear from the bill of exceptions that the defendants recorded the exceptions to the overruling of the demurrer respectively filed to the complaint by both defendants. the copy of the power of attorney attached to the complaint. Inasmuch as it was set forth in the document Exhibit E that the property known as the Nagtajan Hacienda. (3) that if for any sufficient reason such conveyance could not then be made. the assignment of error relative to the said ruling cannot be taken into consideration by this Supreme Court. and pay the costs of the proceedings. The defendant Benito Legarda also alleged. this being the alleged cause of the erroneous consideration of the instrument Exhibit E and of the rights and obligations derived from it.defendants had failed to execute such conveyance in accordance with said contract. the sum of P73. The court accordingly decreed: (1) That upon the payment by the plaintiff to the principal defendant. should constitute a true conveyance. 1912.000. (an option to buy which was given by the defendant Valdes to the plaintiff Borck) belonged to Benito Legarda. and have specified in their respective briefs several errors which they allege the lower court committed. introduced by the plaintiff. (2) that upon the said defendants' failure to execute such conveyance within a reasonable time after such payment. as negotiations had been undertaken prior to the execution of the said document. with interest thereon at 6 per cent per annum from March 13. Some of these errors consist in that the trial judge overruled the demurrer filed to the complaint. to perform the obligation contracted by the Benito Valdes to sell to the plaintiff the property belonging to the said Legarda. of the sum of P307.

the authority under which the defendant Valdes acted in executing this document. constituted the basis of the action brought in the complaint. and cannot bring an action against the agent also. it appears that the defendant Valdes. to fulfill the stipulations therein contained. pursuant to section 103 of the Code of Civil Procedure. vested with the powers specified in this instrument. ceding. existed between Benito Legarda and Benito Valdes as to the obligation contracted by means of Exhibit E. there was attached to the complaint a copy of the power of attorney marked Exhibit A. and the lower court did not err in so holding. who signed the said document. 1911. though the person who contracts with an agent has no action against the principal. when the rights and obligations. and there can be no doubt whatever. exchanging. that the agent Benito Valdes was and in a necessary party in these proceedings for the complete and proper determination of the matter involved. and the fulfillment thereof was established by means of the said allegations. had acted according to the aforesaid document Exhibit F. in the letter of December 4. Inasmuch as the relation which. pursuant to the above-cited provision of law. and the silence of the statute on this point should not be construed in that sense. the attorney-in-fact of Benito Legarda. supported. each of complement of the other. which was likewise inserted in the amended complaint as a part thereof. as it appeared. the facts alleged in the complaint did constitute a right of action against either or both defendants. supported by the copy of the said power of attorney attached to the complaint. Exhibit E. for said article 1717. in which paragraph that averment is made. — the matter brought into discussion by means of the action prosecuted. Section 114 of the Code of Civil Procedure in force. by the power of attorney Exhibit A. — cannot be legally and juridically determined without hearing both the principal and the agent. and in the document Exhibit E. stated that the property. And as it is unquestionable that. the option to buy which was granted by the said defendant Valdes to the plaintiff Borck. as they might have done. treating of the parties who should be included in an action as defendants. Borck. in giving to the plaintiff the option to buy the said hacienda. in providing that in cases like the one here in question the person who contracted with the agent has an action against the principal. or the letter setting forth the option given to the plaintiff Valdes to buy the said Nagtajan Hacienda belonging to Legarda. pursuant to article 1717 of the Civil Code. the option to buy which he gave to the plaintiff. among them. according to the plaintiff. when the agent acts in his own name. the owner of the Nagtajan Hacienda. the aforementioned power of attorney to prove its existence and the fact of Valdes being his attorney in fact. as in such a case the agent would be directly liable to the person with whom he contracted as if it were a personal matter of the agent's yet this does not occur when the acts performed by the agent involved the principal's own things. cannot be considered separately. and as their genuineness and due execution were not denied under oath by either of the two defendants. to wit. but to show the legal status of each of them in the obligation referred to. does not say that such person does not have. in view of the allegations of the complaint and the action brought thereon against the two defendants. in view of the terms of the document Exhibit E. by means of said power of attorney. belonged to Legarda. as the said document Exhibit A constitutes prima facie proof of the fact that Benito Valdes is the attorney-in-fact of Benito 74 .regard to the said document Exhibit E and the failure alleged by the plaintiff. notwithstanding the general denial made by the defendant Legarda in his answer of the allegations contained in the complaint from its third paragraph on. and the document Exhibit E. So that as said two documents. by virtue of which. admitting in payment or by way of compensation or in any other manner acquiring or conveying all kinds of real property for such prices and on such conditions he might deem proper. or who is a necessary party to a complete determination or settlement of the questions involved therein. As one of the allegations of the complaint was that the defendant Benito Valdes was the attorney in fact of Benito Legarda. authorizing him to perform various acts. it is also unquestionable that Valdes was properly included in the complaint as one of the defendant. and the record itself shows. which was inserted in the complaint when the latter was amended. therefore. the plaintiff was not obliged to present at the trial. On the contrary. the action was properly brought against Benito Legarda as Valdes' principal. the defendant Benito Valdes. Exhibit A or the power of attorney executed by Legarda in favor of Valdes. the joining of the copy of the power of attorney to the complaint cannot be considered to have been done merely for the purpose of attesting the personality of either of the defendants. and by the letter or document Exhibit E (which were made by the plaintiff a part of the complaint). as therein also set forth. includes any person who has or claims an interest in the controversy or the subject-mater thereof adverse to the plaintiff. for. that of selling. and as said two documents. as well as the fact of hi having been granted such authority by the defendant Legarda. as proof.

He does not sell his land. 198. what amounts to the same thing. In his Law Dictionary. from his point of view. The lower court in the judgment appealed from said: There is some discussion in the briefs as to whether this instrument constitutes a mere offer to sell or an actual contract of option. by means of said document.. did not err in holding that Benito Valdes was the agent of Benito Legarda. B certain securities or properties within a limited time at a specified price. as stated in the letter... 12 Phil. Consequently. and of the negotiations previously entered into between the latter and Valdes with respect to the purchase of the hacienda. therefore. the right to call for the receive lands if he elects. Rep.. he receives the right to elect to buy. nor in considering as proof the power of attorney. 6 Phil. Martinez. a grant which necessarily implied the offer or obligation on the part of the defendant Valdes to sell to Borck the said hacienda during the period and for the price mentioned. Bouvier defines an option as a contract. Papa vs. the defendant Valdes granted to the plaintiff Borck the right to purchase the Nagtajan Hacienda belonging to Benito Legarda. pursuant to article 121 of the Civil Code. and that he is vested with the powers specified therein. The second party gets in praesenti. inasmuch as. Pua Te Ching. as principal of the other defendant. McKay & Zoeller. on account of Legarda's not having denied under oath the genuiness and due execution of the said document. 314. to the case where there was cause or consideration for the obligation.. 17) the following quotation has been taken: An agreement in writing to give a person the `option' to purchase lands within a given time at a named price is neither a sale nor an agreement to sell. Knight vs. vs. But it is not shown that there was any cause or consideration for that agreement.Y. nor an agreement that he shall have lands. rather. Valdes. The second party receives this right. vested with powers to execute contracts for the sale of real estate in the latter's name. the powers therein mentioned. Doucette.. 222. or selling to. and making it the basis of one of the conclusions of the judgment. quoted at the beginning of this decision. he does not then agree to sell it. acquires the privilege of buying from. Leiser (24 Pac. 125 Cal.) The lower court. the letter of December 4. 613.. But the two definitions above cited refer to the contract of option. Banco Espanol-Filipino vs. page 5001.. (Merchant vs. for. It is unquestionable that.." citing the case of Ide vs. 5. with regard to the stipulations made in the said document. the terms of the said document Exhibit E appear to be of the nature of an option contract between Valdes and Borck. and this omission is a bar which precludes our holding that the stipulations contained in Exhibit E is a contract of option. 183. during the period of three months and for its assessed valuation. 10 Mont. It is simply a contract by which the owner of property agrees with another person that he shall have the right to buy his property at a fixed price within a certain time.. Salamon. in the following language: A contract by virtue of which A. International Banking Corporation. Whitmore. Chinese Chamber of Commerce vs. therefore a meeting of minds on the part of the one and the other. for a limited period. but he does get something of value. There was.) From vol. and as the grant made by Valdes to Borck in the said letter was made as a result of the requests of Borck himself. of the work "Words and Phrases. not lands. the former finally accepted the propositions of the latter with respect to the granting of that right to Borck. that is. 420. in consideration of the payment of a certain sum to B. McCormick Harvesting Machine Co. that is. or. by virtue thereof. Exhibit C. by means of the document Exhibit E. the subject of the agreement made by the parties. it was therefore incumbent upon Legarda himself to prove that he had not executed the said power of attorney in Valdes' favor and that he had not conferred upon him. 14 Phil. In terms it purports to be the latter 75 . (Story vs. of the cause for the obligation to be established. St. there can be no contract without the requisite. and which was contended by the plaintiff to be one of the grounds of the action brought in this complaint against the two defendants. 24 Am. the letter which two days before was addressed by Borck to Valdes. The owner parts with his right to sell his lands. the plaintiff's Exhibit A. while in the case at bar there was no such cause or consideration. to wit. that is. 40. the court likewise did not err in admitting the evidence introduced by the plaintiff himself to show the existence of the contractual obligation on the part of the defendant Legarda. the right or privilege to buy at the election or option of the other party.. 71 N. but he does sell something. 695. or. 1911. except to the second party.Legarda. notwithstand that it was not offered as such proof by the plaintiff. edition of 1897. 61 Minn. 27 Phil. 6. among others. as shown in the letter of the 2d of the same month of December.

what amounts to the same thing. that. part 1 of the record). told the plaintiff Borck that he (Valdes) withdrew the offer of sale contained in the document Exhibit E. But viewing the instrument as in itself no more than an offer. or. McCausland. the terms of the said document became a contract. A certainly this document Exhibit E contains an offer or promise on the part of the defendant Valdes. Alemany. 120 Iowa. On this occasion. it must be concluded that there is no proof on this point. also testified that about the 12th or 15th of January. to sell the hacienda in question to the plaintiff Borck. Dr. Referring particularly to the sale of real estate. Valdes also presented the witnesses Alejandro Roces and Jose E. to wit. if it were not such already. So the. In order that such an offer. there is in fact practically no difference between a contract of option to purchase land and an offer or promise to sell it. at a time when he was in Dr. on the occasion above referred to. He stated that it was at least a continuing offer for three months — an offer which it was neither alleged nor proven to have been withdrawn during that period — and held that but the plaintiff's mere acceptance at any time during the course of said period. or proposal. and that it would be difficult to find a purchaser for cash. Valdes' office.and in fact recites the acceptance of a "request" or offer. An option for the purchase of a real estate is merely a right of election to purchase which when exercised. The second witness. at its assessed valuation. the addressee might say to Borck that the writer was not very anxious to sell the property except for a price greater than P400. by mere acceptance. to whom was granted three months within which to make use of his right to purchase the property. or promise on the part of Valdes. but the defendant Valdes introduced evidence to prove that the withdrawal of the offer was made before the plaintiff had accepted it. with reference to the steps taken by Borck for the purchase of the Nagtajan Hacienda. or as an offer or promise on the part of the former to sell the estate to the latter within the period and for the price specified in Exhibit E.000. dated November 13. (Hopwood vs. Valdes about P300. that is. But. if such it were not already. a real contract of option was executed. who signed it. In this letter Legarda stated to Prieto. as the date when he did this does not appear. The defendant Valdes testified that the contents of this letter were communicated by him to Borck.000. and that the latter replied to Valdes that it was very dear.000 in cash." and as it is not claimed to have been withdrawn during that period. by the said document Exhibit E. within the period stipulated. Jose E. 1911. also one of Legarda's attorneys in fact. on an occasion when he was in Dr. nor afterward. 1912. by the plaintiff.) So that in the case at bar it is immaterial whether the contents of the document be considered as an option granted by the defendant Valdes to the plaintiff to purchase the Nagtajan Hacienda. it was at least a continuing one. this witness also heard them talking about P400. The first testified that sometime during the second half of January. and addressed from Paris to Mauro Prieto. or promise. and for this purpose presented a letter from the defendant Legarda (p. and that right becomes a contract when it is exercised. by comes a contract. though he did not state positively on what date. it was necessary that the latter should have accepted the offer. Alemany. and that he also heard them talk about P400. Valdes' office.000. that he did not want it. though it had been proven that the withdrawal of the offer was 76 . for here merely communicated to Borck the contents of the said letter from Legarda to Prieto. among other things. 218. before January 17. the lower court did not insist that. In both cases the purchaser has the right to decide whether he will buy the land. he heard the latter and Borck speaking. the plaintiff could at any time enter into an actual contract. that the lower court erred in holding that the document Exhibit E was a contract of option and not an offer to sell. to sell the said hacienda might be converted into a binding contract for him and for Borck. by making use of the right thereby granted him. and that Borck said something to Dr. he heard a conversation between Valdes and Borck in which the former said to the latter that what Borck wanted was impossible. There is therefor no foundation for the third assignment of error made by the defendant Valdes. offer. that he did not have the money. "for three months. or when the offer or promise to sell the property is accepted in conformity with the terms and conditions specified in such option. when use is made of the option. As the record does not show positively that the defendant Valdes. and paying the price agreed upon in that document. In the defendants' answer no concrete allegation was made that either of them had withdrawn said offer to sell. and as the statements made by the witnesses with regard to the conversation they heard between Valdes and Borck are vague and as it cannot be deduced therefrom that such statements referred expressly to the fact that Valdes withdrew the offer on that occasion. 103.

and offered to pay the defendant Valdes as soon as a reasonable examination could be made of the said property titles and other documents. such a fact could not be a bar to. in conformity with its terms. To prove this allegation. situated in the district of Sampaloc and Nagtahan.000 mentioned in the said letter was made to depend on the condition that all the documents relative to the Nagtahan Hacienda. Exhibit E. immediately and in cash to the defendant Valdes as he alleged in his complaint. BENITO VALDES. DR. the lower court did not err in holding that the offer and not been withdrawn during the three months mentioned and that it could be converted into a real contract by the plaintiff Borck's mere acceptance within the same period. or annul the acceptance by the plaintiff Borck. as stated by Valdes' counsel in his brief. Manila. 1912. and in the Province of Rizal. contracts of leases and other matters be immediately placed at my disposal for inspection and if such papers have been found in good order. c. the payment of the stipulated price should have been made in order that it might be an immediate cash payment. consisting of about 1. that is. and requested permission of the defendant Valdes to inspect the property titles and other documents pertaining to the estate. SIR: I hereby advise you that I am ready to purchase the Hacienda Nagtahan. Therefore the withdrawal of the offer claimed to have been made by this defendant was null and void.000. the plaintiff Borck was also entitled to refrain from making payment as long as he should not find the documents relative to the said property complete and satisfactory. for the simple reason 77 . before the sale of the property should be consummated by means of the execution of the proper deed of conveyance in his favor by the defendant Valdes as the attorney-in-fact of the other defendant Legarda. it cannot be understood that the plaintiff tendered payment to the defendant immediately and in cash. and be found satisfactory. City. 1912.000) pesos Ph. 195 San Sebastian. Of court.. the plaintiff presented the document Exhibit G. A simple statement of the last part of the letter is enough to convince that the plaintiff did not offer to pay. But aside from the fact that the complete payment of the P307. 1912. 1912. which reads as follows: MANILA. property of Mr. square meters of land. Pursuant to the language of that part of the document or letter Exhibit G to which we now refer in respect to the payment. the price stipulated and agreed upon between themselves in the said document Exhibit E. etc. Consequently. BORCK. of said offer on any date prior to the expiration of the three months fixed in the document Exhibit E. as no other was then pending between the plaintiff and this defendant. while the said offer was still open. But at the very moment this instrument was executed and signed by the vendor. Very truly yours. 1911. such as the Torrens title. W. be immediately placed at the plaintiff's disposal for his inspection. is that on January 19. consequently. 1911. March 4. In the preceding letter that plaintiff in fact did state that he accepted the offer made to him or the option given to him by the defendant Valdes in the document or letter of December 4. Benito Legarda. it is undeniable that the plaintiff Borck had a right to examine the title deed and all the documents relative to the Nagtajan Hacienda. the price quoted in the option given my by you. and. as the plaintiff Borck had a right to accept the offer during that period. the said tender of payment was offered to be made on or before March 3. immediately and in cash the price stipulated and agreed upon in the contract for the said stipulated and agreed upon in the contract for the said hacienda. an indispensable condition in order that the said deed of conveyance might be executed in his favor. Full payment will be made on or before the third day of March 1912. even though it was not stated therein what option it was that was mentioned in the said letter it is unquestionable that it could refer to no other than to the option or offer mentioned in the said Exhibit E. provided all documents in connection with the Hacienda Nagtahan. One of the allegations made by the plaintiff in the complaint. as we have seen.made in the month of December. January 19. or before January 17.993. for the sum of three hundred and seven thousand (307. for a specific period of time. for. it was Valdes' corresponding duty not to withdraw the offer during the same period. and. the plaintiff accepted it in writing. because the offer or promise to sell therein contained was not made without period or limitation whatever (in which case Valdes might have withdrawn it and the latter have accepted it at nay time until it was withdrawn) but for three months. to wit. 1912. as Torrens title deed.

the one written four days before. on the 3d of March. in relation to the allegation as to the presentation of the letter of January 19. even though he may have found satisfactory all the documents that the defendant might have placed at his disposal to be examined. the purchaser Borck might pay the stipulated price of the property. Exhibit G. from the 25th of January up to the said 3d day of March. is drawn up_in such a way that it also does not contain any tender of "immediate and cash" payment by the plaintiff Borck to the defendant Valdes. ten days after the Torrens title deeds and all papers in connection with the hacienda should have been placed at his disposal for inspection and should have been found satisfactory. And were they any doubt that the meaning or the sense. could have made full payment to the defendant Valdes.. that is. As may be seen by the language in which the preceding letter is couched. although the proper deed of conveyance of the property should have been executed in his favor. for nothing else can be understood by.000. the plaintiff virtually recognized. dated January 19. the price of the property. to wit. for example. just as he had done in the letter of January 19th. and he could not have been obliged to pay the said price until the very day of March 3. the letter of January 23. under date of the 23rd of the same month of January This document is marked Exhibit J and is of the following tenor: January 23. the plaintiff also presented as proof. or have the period from the 25th of January to the 3d of March within which to pay it. as alleged in the complaint. on January 20th.. of the price of the hacienda. three hundred and seven thousand (307. Exhibit G.that if the documents had been placed by the defendant at the plaintiff's disposal for his inspection. that is. could improve the conditions of payment for the hacienda. to the purchaser Borck. Ph. Exhibit G. another letter written by himself. the day following the date of the letter Exhibit G. and also addressed to the defendant Valdes. Exhibit G. ten days after the Torrens title deeds and all papers in connection with the hacienda have been placed at my disposal for inspection and these documents and papers have been found in good order. DR.000.000) pesos. had the pleasure to inform he latter that he. SIR. according to the exact terms of the letter of acceptance of the offer. 1912. of the P307. but within the limited period of ten days after the documents-relative to the property should have been delivered to the plaintiff for his inspection and been found satisfactory. in said letter Exhibit J. was not indeed to be effected on the third of March or prior thereto. or on this same date. 195 Calle San Sebastian. City. But." In short. Exhibit J. that the tender of payment to the defendant Valdes. c. Exhibit J. 1912. but that payment might be made on any date prior to March 3. and consequently. Borck. and no other meaning and scope can attach to. that he had the pleasure to inform him that he could improve the conditions of payment for the Hacienda Nagtajan in so far as to agree to pay the whole amount of purchase price. 1912. in the manner aforementioned by paying the whole amount of the purchase price ten days after the documents should have been delivered to the plaintiff and he should have found them satisfactory. Indeed. Respectfully yours. by means of the proper deed. or on any date on which the deed of conveyance was issued. by the way the part of said document Exhibit G relative to the offer of payment in the example above given is drawn. as said letter makes the total payment of the price of the property depend on the delivery 78 . on January 19th. of said offer was not as just above stated. Exhibit G. 1912. and the defendant Valdes had executed in the plaintiff's favor the proper deed of conveyance or sale of the hacienda on the 25th of the same month of January. In connection with the allegation we have just been discussing. the plaintiff. P307. the former. that is. to wit. could not be understood to have been a tender of "immediate and cash" payment. 1912. for the payment which Borck offered to make to Valdes. the purchaser Borck. BENITO VALDES. and the plaintiff had examined and found them satisfactory. that the plaintiff Borck made a tender of payment to the defendant Valdes "immediately and in cash" of the price of the hacienda fixed in the instrument Exhibit G. and meanwhile the ownership of the estate would already have been conveyed. the words "full payment will be made on or before the third day of March 1912. it would be removed by a mere perusal of the statement made therein by the plaintiff telling the defendant Valdes that he. those mentioned in the letter written' four days before. I have the pleasure to inform you that I can improve the conditions of payment for the Hacienda Nagtahan in so far as to agree to pay the whole amount of purchase price. Nothing else is meant by the statement made by the plaintiff Borck to the defendant Valdes in the letter of January 23. by reason of the contents of the said letter. of the price of the property.

if the documents were delivered to Borck on February 1 for his inspection. and reads as follows: MANILA. or for the eleventh day. and then had found them satisfactory. The first words of the letter of course indicate that the plaintiff Borck himself. this price was to be paid "at one and in cash. in writing them. Furthermore: The plaintiff Borck also presented another letter in connection with his aforementioned allegation made in the complaint. for in the said last letter. and this would have been authorized by the ambiguous terms in which the tender of payment are couched. February 28. the date of payment cannot be-understood to have been fixed for any certain day after those ten days. but twenty days. DR. In that event. and that the vendor might immediately have executed the proper deed of conveyance of the property in the purchaser's favor. until February 20. had not conformed to the terms of the offer of sale or of the option to buy." and then says: I wish to advise you that the purchase price for the Hacienda Nagtahan is ready to be paid over to you. that the tender of payment made by him to the defendant was made in accordance with the said allegation. and on the condition that Borck should find them satisfactory. and after the lapse of ten days thereafter he had not finished examining them and had kept them in his possession for this purpose for ten days longer. of the 23 of the same month. at least the was not sure. pursuant to the provisions of article 1462. he." This letter (Exhibit K) bears the date of February 28. he virtually admits. BENITO VALDES. "immediately and in cash. Exhibits G and J. the offer of the sale of the hacienda to him by Valdes.. W. after the delivery of the said documents.I. the result would be that the payment would have had to be made. in fixing those ten days in the letter Exhibit J. the purchaser Borck would not be obliged to make payment to the vendor Valdes until seven days after the execution of the deed of conveyance and the transfer of the property to the former that is. The letter Exhibit K in fact begins with these words: "To prevent any misunderstanding. feared. that is. DEAR SIR: To prevent any misunderstanding. these might have been found by the purchaser to be satisfactory. counting from the date of the delivery of the documents. the latter should find such documents in good order and satisfactory. Exhibit G. Exhibit K. Exhibit G and J. and as a period of ten days was fixed for the said payment. As may also be seen by the very terms employed by the-plaintiff in this letter. the plaintiff Borck stated to 79 . Attorney-in-fact for Benito Legarda Manila. in connection with article 1500. for the payment. But supposing that as appears to be the case. that the payment should be in cash. Exhibit J.t1912.by the defendant Valdes to the plaintiff Borck of all the documents relative to the hacienda. clearly acknowledges. Very respectfully. given to him by Valdes by means of the document Exhibit E. I wish to advise you that the purchase price of the Hacienda Nagtahan is ready to be paid over to you. that is. According to the admission of the plaintiff Borck in his complaint. in the letter of January 19th. 1912. BORCK. that. and in making therein the tender of payment band in renewing this tender in the letter. for example. not ten days. according to the terms of said letter Exhibit J. that there should be an interval of said ten days between the delivery and inspection of the said titles and the determination of whether they were satisfactory or not. the plaintiff. to prove what he had intended to accomplish by means of the latter. it had been the purpose of the plaintiff Borck. and of the further condition that. in accepting. of the Civil Code. and request you to notify me whenever it is convenient for you to place at my disposal for inspection the title deed and papers in connection with said estate. and related to the other two previous letters. it might also have happened that on the third day after the delivery of the titles. P. and it is evident that such a payment would not be in cash. for the simple reason that. he had made the tender of payment of the price for the Nagtajan Hacienda in such a manner that it could not be understood to have been in accordance with the agreement entered into between himself and Valdes. to avoid that misunderstanding. he takes it for granted that there was or might be some misunderstanding between himself and the defendant Valdes with)respect to the tender made by him of the price of the estate. not until the expiration of the period of ten days counting from the date of the delivery of the documents to‚the purchaser. and I request you to notify me whenever it is convenient for you to place at my disposal for inspection the title deed and papers in connection with said estate." In the said letter Exhibit K. that in the two previous letters. to wit.

and the delivery of the price was also subordinate to the period of the ten days. net to you. or. meters of land. I offer to purchase said property for the sum of three hundred and seven thousand (307.000 (which according to his previous letter. and G. YOURS. The same objection was also made by counsel for the defendant Valdes in behalf of his client. dated January 23. and the mention made in this same letter. Among these documents is found Exhibit F. if so. K. Exhibit K. the court stated as a reason for the omission that this Exhibit F was unsigned. for their identification and in order that Valdes might state to the court whether he had received the originals and. The record shows that when Exhibit F and Exhibits G. he had agreed to pay for the hacienda. for it is virtually said therein that the price of P307.the defendant Valdes that the purchase price for the hacienda was ready to be paid over to hi. L. cash. but this delivery of the price was subordinated to the delivery requested by the plaintiff to those titles and other documents. c. and M. defendant merely said in reply that he had received three originals from Borck and two originals from Beaumont (p. in which motion they signed as one of the error of the said judgment the fact that no notice whatever had been taken therein of the said Exhibit F. and in ruling on the defendants' motion for a new trial. Respectfully.. SIR: In reference to our negotiations regarding the Hacienda Nagtahan at Manila. might have been actually delivered. could be based on its because. L. the court reserved his decision thereon and in the judgment appealed from made no mention as to the contents of said document‚Exhibit F. although the said letter. but not that of‚Exhibit F. after he had been asked the first four questions by Attorney Hartford Beaumont. including the four just referred to. payable the first day of May 1912 or before and with delivery of a Torrens title free of all encumbrances as taxes and other debts. 14 of the transcription of the stenographic notes). DR. that the purchase price of the estate was ready to be paid over to the latter. inadmissible.000) pesos P. M.‚and to the plaintiff's finding such documents satisfactory. ten days after the delivery to him of the documents relative to the estate and their having been found by him to be satisfactory) was already held in readiness by the plaintiff for delivery to the defendant. that is. consisting of about 1. mentioned in the said letter Exhibit J. the latter made the following statement: "I would like to interrupt the witness at this moment in order to present all the Exhibits A to M. no right whatever could be predicated thereon.. and it was. were presented in evidence. and K. and also others marked from A to M. So that neither in the letter Exhibit K is any specific offer of payment made by the plaintiff Borck to the defendant Valdes. the plaintiff already had in readiness for that purpose. of the price stipulated in the document Exhibit E to be paid "at open and in cash. BENITO VALDES." notwithstanding its being said therein that the plaintiff had the money ready to be turned over to the defendant. except in connection with the previous Exhibit J. which defendants claimed to be one of the their most important proofs. said documents Exhibits E. City. and the court said 80 . either in favor‚of or against the plaintiff. On said documents being presented in evidence at the trial. besides the fact that no conclusion. where they were. or to the payment itself. K. Exhibit F.000 sq. is a result of it. the defendants objected to their admission. what amounts to the same thing. J. Upon the plaintiff Borck's testifying at the trial as witness. Exhibit J. property of Mr. Benito Legarda. inasmuch as the letter Exhibit K does not state when Borck was to deliver to Valdes the price which. and exhibited the originals of Exhibits C. The notification contained in this letter written by Borck to Valdes. show that this last letter. according to this same letter. relates to the one that preceded it. were shown to the defendant Valdes by the plaintiff's counsel Beaumont.. and requested to be notified by Valdes when it would be convenient for him to place at the plaintiff's disposal for inspection the title deed and papers in connection with said estate. immediately after the notification. 1912. G. The letter Exhibit K can have no meaning„whatever in that part thereof where reference is made to»the offer of payment of the price of the hacienda. which were identified by the previous witness. which reads as follows: MANILA. 194 San Sebastian." Counsel for the defendant Legarda objected to the admission of the said documents on the ground that they were incompetent. of the inspection which the plaintiff wished to make of the titles which he desired should be delivered to him for this purpose. unidentified and was not attested by anyone. January 17. The plaintiff Borck having been presented as a witness. nor any liability. J.993. immaterial and irrelevant. therefore.

he wrote on the same date. and call you attention to the fact that it has the same date. ROSS. the plaintiff answered the questions put to him with respect to Exhibit F in the following manner as found in the transcription of the stenographic notes in English(p. which we shall mention later on. they are prepared to make you a firm offer of the amount above named. that as he was not a business man and was not acquainted with that kind of business. explained the reason why Exhibit F bore the same date as Exhibit O..000 square meters. as Exhibit O. 1. As soon as I got the offer." Connecting the contents of this document Exhibit O with those of the previous Exhibit F. referring to the said document on its being shown to him by his attorney. However. January 17.that he would reserve his decision (pp. although he stated with reference to the letter he had received from Borck. after having given attention to other exhibits among which was Exhibit O. and at other times sent to him the letters themselves. Legarda. I conclude it as soon as possible. on coming to Exhibit F. Valdes the letter. Exhibit O. During the examination of plaintiff Borck. Manila. It is true that although the document Exhibit J is unsigned because it is a copy of the letter addressed on that same date to Valdes by Borck. I made my acceptance to Dr. Valdes. who called his attention to the fact that it has the same date. Esq. Because I don't believe in hanging back with my business. It is the desire of our clients to have an opportunity to investigate the legality of_the title and leases at the earliest practicable moment.993. from the law firm of Bruce. Q. as has already been seen. January 17. P380. as above quoted. referring to the negotiations between them regarding the said Nagtajan Hacienda. he made his acceptance to Dr." that he "concluded it as soon as possible. in which Attorney Beaumont plied him with questions in regard to the aforementioned documents. in answering the questions put to him by his own attorney. are prepared to make an offer for the purchase of the same at the price named by you. to wit. the plaintiff Borck. as Exhibit O. BRUCE LAWRENCE. is in the same condition. AND BLOCK. it is clearly understood that on Borck's receiving the letter of January 17m 1912. in which these gentlemen stated that they were prepared to make an offer for the purchase of the Hacienda Nagtajan at the price of P380. notwithstanding that Exhibit F was not identified by Valdes. Lawrence. However. the aforementioned letter of January 23. W. beginning with Exhibit A and showed him the documents themselves. and to make a deposit of a reasonable amount as an evidence of good faith. Valdes. 1912. Valdes' option. said that Exhibit F was his acceptance of Dr. saying that "he did not believe in hanging‹back with his business. and taking into account the testimony given by Borck. that it contains substantially and area represented. to Dr. to wit. relative to the said exhibits. January 17. This is may acceptance of the option of Dr. I beg to advise you that our clients. Valdes. and that the existing leases upon certain portions of the said property are found to be in proper form.000. Very truly yours. BORCK. he offered 81 . from which testimony of Valdes it is concluded that he was not in the habit of keeping the originals he received from Borck. is unsigned but the document Exhibit J. and ask you to state the circumstances under which Exhibit O was signed — A. a copy of which is Exhibit F. and signed by James Ross. January 17. 61 on the record): Q. and in answering the next question. after taking notes of their contents. cash. provided that there is good titled to the property." Exhibit O is as follows: MANILA. 1912." and that "as soon as he got the offer. Now I will show you Exhibit F. Ross and Block. notwithstanding that Exhibit F was not identified by Valdes. in which. the plaintiff Borck. Valdes kept the original in his possession and he did not present the original of Exhibit Fibut only the other letters before mentioned. "JAMES ROSS. and asked him to state the circumstances under which Exhibit O was signed. he sometimes read the letters and. transmitted their substance to Mr. How does it happen that it has the same date as Exhibit O? — A. DEAR SIR: Referring to our recent conversation regarding_the proposed purchase by clients of ours of the property known as the Hacienda Nagtajan. after investigation of the physical conditions of the property. as has already been seen. The document Exhibit F. namely. and they have authorized us to say that if the conditions are satisfactory with regard to these matters.000 cash. as has been seen. 24 and 25 of the record).

understood to be P307. James Ross of this city for the property in question and for the price of P380. This rejection cannot be warranted by the fact that the defendants themselves opposed its admission. In fact. was for the period of three months. . of the latter explicitly said so in stating that letter was his acceptance of Dr. for the reasons which would presently appear. in the paragraph of that brief signed by the plaintiff's attorney there is a restatement of what the plaintiff had said in his testimony. on making further explanations in the matter. for the assessed valuation of the property. Borck received a written offer (Exhibit O) for the property from Mr.000 and thereupon on the same day wrote Dr. 1912. mentioned in the said brief. 56. 1912 (Exhibit F) was Borck's acceptance of the option or offer of sale made to him by the defendant Valdes in his letter of December 4. as they were not bound by the documents Exhibits A and E. . Valdes the letter which appears as Exhibit T (pp.000. payable the first day of May 1912. Valdes. No question arises as to the validity of this acceptance for reasons which will presently appear. the plaintiff explaining why he had written said letter. the plaintiff to be furnished with a Torrens title free of all encumbrances. THE ACCEPTANCE. It is hardly necessary now to show that said letter of January 17. and although the defendant Valdes did not present the original of the said letter Exhibit F. 1911. on the understanding that. which page containes Exhibit F. 169 of the record). James Ross of this city for the price of P380. such as taxes and other debts. on account of the same date both letters bore. 1912. for the latter also opposed the admission of all the documents presented by the plaintiff. mentioned in the preceding paragraph transcribed from the brief. nevertheless the trial court admitted some of those documents and considered them for the purpose of drawing his conclusions in the judgment rendered. Valdes' option. it would disappear after a consideration of the following quotation taken from the plaintiff's written brief file before the lower court rendered judgment. delivery to be made to him to a Torrens title free of all encumbrance. even though this was not stated in the document. in not taking it into consideration in the judgment appealed from. that failure itself so to state 82 . or before. for. cash and net. from December 4.954 and payment was to be made in cash. from Mr. payable on or before the first day of May. offers to purchase said property for the sum of P307. there can be no doubt whatever that the original of the said Exhibit F was transmitted to Valdes by the plaintiff Borck. perhaps because it was one of those which he did not keep in his possession. The offer of sale or option of purchase contained in the document Exhibit E. a written offer Exhibit O. in which mention is made of the said brief and of the questions discussed therein said brief is found on pages 190 to 206 of the record and is signed. the plaintiff Borck. referring in the letter. appears the following: 3. as soon as he received the officer. As may be seen. such as taxes and other debts. the one as principal and the other as agent. January 17.000. by the plaintiff's attorneys. he wrote on the same day the letter of Dr. incompetent and irrelevant. for the plaintiff Borck himself admitted in his testimony at the trial that the letter Exhibit F was his acceptance of said option. from the said law firm. In this same brief the statement was also made that no question had arisen as to the validity of this acceptance. of the record). that as soon as he received. on January 17. the plaintiff Borck. he transmitted or made known his acceptance to Dr. We do not think there could be a better identification of the letter Exhibit F than that made by it sown writer. for. On page 195 thereof. contained in the letter Exhibit O. consequently. to with. if there were still any doubt whatever about this. It is to be noted that Exhibit T.000. not believing in hanging back with his business and desiring to conclude it as soon as possible. such documents were immaterial.000. 1911 (Exhibit E)._the date of this latter exhibit. as shown by the fact that in this paragraph Exhibit T is referred to as being found on page 56 of the record. On the 17th of January. The trial court therefore erred in not admitting in evidence‚said document Exhibit F and. Exhibit F.to purchase this property for P307." Furthermore. and on page 169 of the record. Valdes that appears as Exhibit T (pp. Valdes option. 1912. For this reason the plaintiff Borck stated in his testimony that the said letter Exhibit F was his acceptance of Dr. on referring to the relation between said Exhibit F and the Exhibit C. cash and net. being also that of the Exhibit O. Valdes. 169. is the same Exhibit F. Aitken and Beaumont. which contains a copy of the same Exhibit F. 56. to the negotiations between himself and Valdes regarding the Nagtajan Hacienda belonging to Benito Legarda. Mr. hand saying: "As soon as I got the offer. though subsequently at the trial it was fixed by agreement of the parties at P306. . which was erroneously marked with the letter T in the said paragraph. I made my acceptance to Dr. for he admitted in his testimony that he wrote this letter.

in accepting the offer of sale. in connection with article 1500.created the understanding that the price was to be paid in cash when delivery of the property was made. as might suit him. This is evidently not an offer to pay "immediately and in cash. that is. G. 1912. in accordance with article 1462 of the same code. within a period which could as well be ten days as twenty or thirty of more days from the time Valdes should put at the plaintiff's disposal to be inspected. the last day of the said three months. 1912. and this evidently is an offer of payment in installments. within the three months which ended on the said 4th day of March. for the simple reason that. the execution of the deed of sale is equivalent to the delivery of the thing which is the object of the contract. and‚k. or before. the payment would not be in cash if it were not made on the same 19th day of January. but as. and as in the letter Exhibit G. 1912. J. gave the plaintiff a three months' option for the purchase of the property. such payment would‚have to be made at the time of the delivery of the thing sold. the letter of January 17. 1912. that a payment made on or before the 4th of March would have been a payment in cash. to with. if this was required by Exhibit E. the plaintiff Borck. that is. moreover. 1911. was three months from December 4." as stated in his allegation set forth in the complaint. 1912. and. to effect the said payment. in making the allegation we considered at the beginning of this decision. and were postponed until some other later day. and he also so testified at«the trial. whereby the plaintiff virtually gave himself five months from the date of the offer of sale or option of purchase. this necessarily allowed the plaintiff them for the payment until this last date. The lower court in the judgment appealed from says that as the document Exhibit E. the titles and other documents relative to the said hacienda. Duly considering the documents Exhibits F. in accordance with the provisions of article 1462. saying. did not make an offer to pay the price "immediately and in cash. and the time that payment would be made not having been fixed in the said document Exhibit E. the plaintiff said that he would pay before the expiration of the said period. he reserved to himself the right to make the payment on the first day of May. for. and February 28th of the same year.‚the time during which the plaintiff Borck could make use of the power or the right granted by him by Valdes to arrange for the purchase of. that in the letter. 1912 (on January 19. that is. two months after the termination of the option or of the offer. when he stated in his testimony that the payment was to be made in cash upon exhibition of the documents. that is. although the deed of conveyance of the property in his favor should have been executed by the defendant Valdes on any date within the period of the option. it is seen that in the said documents the plaintiff Borck offered to pay to the defendant Valdes the said price. March 4. in reference to the conditions of the payment of the purchase price. 1912. finally. that "the conditions were not discussed. and the plaintiff should find them satisfactory and the proper deed of conveyance should. So that it may be said with all the more reason that in relation to the other offers of payment contained in the documents F. as the law provides. for example) the result would be that the proper deed of sale being consequently executed in his favor on the said date of January 19. 1912. may it be understood that the defendant granted to the plaintiff the period for payment until the very last day. by virtue of the said documents. in accepting the option that the latter had granted him for the purchase of the Nagtajan Hacienda. 1912. it coincided with it. be executed in his favor by Valdes. pursuant to article 1500 of the Civil Code. 1912. the statements made by the plaintiff Borck in the letter of January 17." nor is it a payment in cash. rather. on the contrary. J. 1912. that is. therefore. the period for the purchase being three months. The plaintiff Borck recognized this in his complaint. addressed by him to the defendant Valdes. G. the court adding. if Borck purchased it on any date prior to March 4. nor such a payment as the plaintiff Borck himself understood it to be. or until March 4." Now then. it is stated that payment of the net amount would be made in cash on_the first day of May. It is true that the period granted by the defendant Valdes to the plaintiff for purchasing the property. 19 and 23. because the payment was to be made in cash on exhibition of the documents. and K. 1912. that he accepted in writing the said offer in conformity with its terms and offered to pay to the said Valdes. 1912. on or before March 4. of the Civil Code. Exhibit F. but not because this period expired on March 4. that i. In short. and not an "immediate and cash" payment. on March 4. of the date of January 19. or the offer of sale of the said hacienda defendant made to the plaintiff. 1912. dated December 4. and to purchase in fact. in no manner could this have modified the option. it is impossible to confound the period of the option granted to the 83 . which would be. in the document Exhibit F. 1912. the said property. in consequence thereof. with respect to the payment of the price therof. "immediately and in cash" the price stipulated. afterwards within the terms of three months from the same date of December 4. first within the period of five months from December 4. 1911. a period which expired. or on any date prior thereto.

. If the holder does so elect. 159 Pa. citing McMillan vs. and from that time they are binding. This is the payment in cash to which the law refers in the sale of real estate in cases where the time for making payment has not been fixed. in no manner modified the option or offer of sale contained in the document Exhibit E.) An offer of a bargain by one person to another.) Promises are binding in just so far as they are accepted in the explicit terms in which they are made. 363. are in accordance with good faith. would have been a cash payment. of September 26. because there at no time exists the requisite mutual assent to the same thing in the same senses. Civil Code. by this means. .) An option is an unaccepted offer.. 1911. of the date of January 19. 220. unless it be accepted by the latter. or departure from. of November 25. vs. 1912. but also with regard to all the consequences which. 5000. of the Nagtajan Hacienda. 46 Mo. Wheaton.) There is no contract unless. from December 4. to make the payment he did not have a single day after the date on which the proper deed of sale would have been executed in his favor. 225. as aforesaid. he was to pay the price at the very moment the said deed was executed. unless the same be agreed to by the person who made it. with the period for the payment of it price. for only thus may the indispensable consent of the parties exist for the perfection of the contract. invalidates the offer. although there still might have been lacking one or two months of the three months' period of the said option. and without variance of any sort between it and the proposal. Philadelphia Co.) In order that an acceptance of proposition may be operative it must be unequivocal. within which to make the purchase. against the will of the promisor. J. The letter of December 4.) Contracts are perfected by mere consent. so understood when he stated in his testimony. and law. 1258. in stating that the payment would be made on or before March 4. 1262. 6. the owner is no longer bound by his offer. Borck. what amounts to the same thing.. an offer of sale or a proposal of sale on the partof the defendant Valdes to the plaintiff Borck. contained. had he purchased it. 1. and the plaintiff himself. . Consent is shown by the concurrence of the offer and the acceptance of the thing and the cause which are to constitute the contract. of the 84 . it not being lawful to alter. use. Such proposal or offer was an expression of the will only of the defendant Valdes. of the same code. unconditional. he must give notice to the other party.. 4 Wheaton. (words and Phrases. 1871. if the holder elects to accept them within… the time limited. not only with regard to the fulfillment of what has been expressly stipulated. the conditions imposed by him (Decision of the supreme court of Spain. In order that such a proposal might have the force of a contract. but that on the contrary it coincided therewith. for the assessed valuation of the same. Any qualification or. (Bruner et al. The plaintiff Borck had three months. 1911. It states the terms and conditions on which the owner is willing to sell or lease his land. (Art. manifested to the plaintiff Borck. vol. will not be regarded as a complete contract. par.plaintiff Borck for the purchase of the Nagtajan Hacienda. 1911. Henshaw. as the conditions for the payment had not–been discussed. Civil Code. (Art. An absolute acceptance of a proposal. Exhibit G. it was necessary that the plaintiff Borck's will should have been expressed in harmony with all the terms of the said proposal. imposes no obligation upon the former. 1858). 28 Atl. payment was to be made in cash on exhibition of the documents. on the execution of the proper deed of sale of the property in his favor. G. and the lower court erred in holding that the plaintiff Borck's letter. and K. p. the plaintiff Borck accepted the offer of sale made to hi. If an acceptance is not made within the time fixed. 1912. also in holding that a payment made on or before March 4. 142. (Eliason et al. and the accepted offer thereupon becomes a valid and binding contract. Exhibit E. according to their character. or. that.) As already seen while we were considering the documents Exhibits F. . . effective during the period of three months counting from the said date. 1261. vs. because. 1912. according to the terms in which the offer was made. as we have before said. It is therefore evident was not fixed therein. those terms. (Art. the property would have been delivered to his. coupled with any qualification or condition. among other requisites. (Decision of the same court. and the option is at an end. there is consent of the contracting parties. required the payment to be made in cash. dated December 4. or the option of purchase given him in document Exhibit E by the defendant Valdes. the document Exhibit E.

G. in the first of them. As the power of attorney conferred by Benito Legarda upon Benito Valdes was explicit and positive. and also as the terms of the option granted by Valdes to Borck. consequently. as the plaintiff made the said documents an integral part of the complaint as the grounds thereof. the proposal or offer of sale made by the defendant Valdes to the plaintiff Borck. the form of payment. Valdes. the form in which the payment should be made. therefore. any indemnity whatever for such nonfulfillment. there was variance from the moment in which according to said terms. was improper. as the offer of sale of the Nagtajan Hacienda. that is. for the assessed valuation of the same. within an indefinite period which could as well be ten days as twenty or thirty or more. and K. in accordance with the provision of law and the principles laid down in the decisions above cited. than. and the offer of payment was equivocal inasmuch as. 1912. to wit. of the Nagtajan Hacienda belonging to Benito Legarda.) and the lower court did not err in not taking that testimony into consideration in his judgment. Legarda. Proc. as the plaintiff Borck himself admitted and the defendant Valdes positively stated in his testimony. and. and whose names appear at the beginning of this decision. in the document Exhibit E. the fulfillment of that offer. the plaintiff Borck made the offer to pay the said price. In conclusion. furthermore. because. 1911. or. Valdes'. the testimony introduced by the defendant Valdes to prove that said offer of sale made by him to Borck was subject to the approval of his. 19 and 23. The expression of Borck's will was not in accordance with all the terms of Valdes' proposal. and that as Valdes did not assent to the modification introduced by Borck in the offer of sale made by this defendant in regard to one of its terms. in consequence thereof. a copy of which was attached to the complaint. or the option of purchase granted by the former to the latter. Exhibits F. and the person who accepted it. in the other two documents. to with. the said offer became null and void. Consequently the trial court did not err by making no finding in the judgment on those two points. while this payment was to be paid in cash. within the period of five months from December 14. within a period limited in those letters. the acceptance of the said proposal on Borck's part was not unequivocal and without variance of any sort between it and the proposal. to sell and convey all kinds of real estate at such prices and on such conditions as Valdes might deem proper. therefore. in the second. and Borck deviated from the terms of the proposition with regard to the form of payment and the record does not show that Valdes assented to such variance. 85 . but his acceptance was not in accordance with the condition with regard to the payment of the price of the property. it was made to depend on certain acts as a basis for fixing the period in which the said payment should have to be made. did not constitute a perfect contract and. and finally. It is. the payment of the price should be made on or before the 1st of May and on or before the 3d of March.Nagtajan Hacienda. by the last two letters. J. under which the offer or the option was made for. within the period of three months from the same date. nor. in finding otherwise in the three conclusions of law contained in the judgment appealed from which were mentioned at the beginning of this decision and on which. in the same sense with respect to the form of payment. made by Valdes to Borck. the latter's promise was not accepted by the former in the specific terms. respectively. with respect to the Nagtajan Hacienda. and K. in short. finally. and. there was no mutual conformity between the person who made the proposal or offer. evident that. The lower court erred. the other defendant. 1911. the deed of conveyance should have been executed in his favor by the defendant Valdes. was not converted into a perfect and binding contract for the. or the option of purchase thereof granted by the former to the latter by the letter of December 4. are clear. in the first two letters. in view of the terms in which the payment was offered by Borck in his said letters of January 17. and also a provided by law. or of the administrators of the estate left by Legarda at his death which occurred during the course of these proceedings. the pronouncement made in that judgment was founded. J. finally. according to the document Exhibit A. Borck. Code Civ. So that there was no concurrence of the offer and the acceptance as to one of the conditions related to the cause of the contract. G. or of the offer of sale made by the former to the latter in the document Exhibit E. what amounts to the same thing. counting from the date when the muniments of title relative to the said hacienda should have been placed at his disposal to be inspected and he should have found them satisfactory and. Likewise the evidence presented by the defendant Valdes in an endeavor to prove that said offer of sale was obtained from him by the plaintiff Borck by means of fraud and deceit. Borck has no right to demand of the defendant Valdes and of the latter's principal. for the reason that the time was not fixed in said offer or option when the payment should be made in the aforesaid four documents Exhibits F. principal was improper (sections 103 and 285. and. in which it was made. Exhibit E.

c) Declaring as cancelled any and all transfer certificates of title that might have been issued in favor of defendant Ramirez over said Lot No. For the foregoing reasons the judgment appealed from is reversed and we absolve the defendants from the complaint. vs. Mesa Heights Subdivision. and Claudio Ramirez. Leonardo Abola for appellee Caludio R... which is wholly in accordance with the terms of the said offer. H) or under the same terms given to defendant Ramirez. M.consequently. J: In Civil Case No. Venturanza. No. substituted by Lucille E. Tuason & Co." the Court of First Instance of Rizal. rendered its decision dated January 25. 22. INC.. as damages 86 . Branch IV. was not binding upon the defendants Valdes and Legarda or the plaintiff Borck. J. No special finding is made with respect to those of this second instance.00.1962. Antonio B. 1969. Lucille E. jointly and severally. there can be no obligation demandable in law by virtue of the stipulations contained in said document. Mendoza & Papa for appellee J.R.. Venturanza over Lot 22.. So ordered. Inc. Inc. versus J.. executed by defendant corporation in favor of its co. judgment is hereby rendered in favor of the plaintiff and against the defendants. G. represented by Gregorio Araneta. Inc. RAMIREZ. as follows: a) Declaring the Contract to Sell No. the dispositive part of which reads: IN VIEW OF THE FOREGOING. d) Ordering the defendants. and the action prosecuted by the plaintiff for that purpose in these proceedings in improper. Alcera for appellant. b) Ordering the defendantcorporations to execute a Contract to Sell in favor of the substituted plaintiff Dr. under the same terms and conditions of their offer to the plaintiffs as contained in the letter of Gregorio Araneta.defendant Ramirez on April 2. Lucille E.. Araneta. M. The costs of the first instance shall be imposed upon the plaintiff. by reason of the lack of the mutual assent of the parties concerned therein. Quezon City. Q-6363 entitled "Florencia Cronies. Inc.000. Inc. 1962 (Exh. and CLAUDIO R. FERNANDEZ. 10879 Exhibit 3-company. L-35272 August 26. representative of J. M.. Block 461 of the Sta. as NULL and VOID. to Florencia Cronico of March 20. plaintiff. substituted by LUCILLE E. to pay the plaintiff (Dr. TUASON & CO. 1977 FLORENCIA CRONICO. respondents-appellees. Ramirez. Tuason & Co. VENTURANZA. defendants. Venturanza) the sum of P160. Tuason & Co.. M. petitioner-appellant.

IV THE HONORABLE COURT OF APPEALS ERRED IN REVERSING THE TRIAL COURT AND DISMISSING THE COMPLAINT. In March. March. as attorney's fees. 1-2) The facts. THE DEFENDANT COMPANY'S LETTER-OFFER TO HER DATED MARCH 20. M.00 every month thereafter until the lot in question is sold and delivered to plaintiff (Dr. The occupants thereof who also had priority rights to buy the land informed Claudio Ramirez. about the intended sale. defendant-appellant Claudio Ramirez also learned that the lot in question was being sold by the appellant company. Juanita Semilla and Pedro Fernandez. Inc. p. 1962 BY MEANS OF IRREGULAR AND PREMATURE DELIVERY. plus the sum of P2. R. e) Ordering defendants. 44479R. who were the occupants of the said Lot No. located at the Northwestern corner of Quezon Boulevard and Gregorio Araneta. 19) The plaintiff. They personally talked to Benjamin F. 49-50) The defendants J. 22 expressed their willingness to waive their rights although-Pedro Fernandez reserved a condition that a small portion of the land whereon his house stands be sold to him. proposing to buy Lot No. No. Venturanza. are: Appellant J. On March 8. Tuason & Co. Inc. Mesa Heights Subdivision. In the first week of March. Lucille E. 1969. p. f) To pay the costs. 1962.representing the rents derived from the property in question up to December 2. (Rollo. 69. 1968. January 25.000. Ramirez appealed to the Court of Appeals which promulgated its decision on April 21. Venturanza. Inc. and Claudio R. 1962. Tuason & Co. jointly and severally. 31. plaintiff Florencia Cronico offered to buy the lot from the appellant company with the help of Mary E.appellant Ramirez sent separate individual letters to 87 .. Bautista. Block 461. pp. the appellant company's attorney-infact. IT IS SO ORDERED Quezon City. M. filed with this Court a petition for certiorari to review the decision of the Court of Appeals * assigning the following errors: I THE HONORABLE COURT OF APPEALS ERRED IN. 1972 reversing the judgment appealed from and dismissing the complaint with costs against the plaintiff-appellee. p. p. as found by the Court of Appeals.00. hereinafter referred to as appellant company was the registered owner of Lot No.000. 49235 of the registry of Deeds of said city. In the same month. She was required to present proofs to show her rights to the lot. Florencia Cronico substituted by Lucille E. Florencia Cronico exhibited certain documents showing her priority rights to buy the lot. Petitioner's Brief. Sta. s/t WALFRIDO DE LOS ANGELES J u dge (Rollo. Venturanza) the sum of P10. Quezon City and embraced by Transfer Certificate of Title No. Manager of the Real Estate Department of Gregorio Araneta. 22. III THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT PLAINTIFF CRONICO IS NOT PRINCIPALLY NOR SUBSIDIARILY OBLIGED UNDER THE CONTRACT TO SELL (EXH. to pay plaintiff (Dr. Joint Record on Appeal. (Rollo. 1962. 1962. plaintiff Cronico and defendant. Decision in CA-G. pp. II THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT THE RECORDS DO NOT SHOW THAT DEFENDANT COMPANY'S LETTER-OFFER OR UNILATERAL PROMISE TO SELL W AS SUPPORTED BY A CONSIDERATION OTHER THAN THE SELLING PRICE. 3-Company) AND HENCE MAY NOT BRING SUIT TO ANNUL THE SAME. Philippines.HOLDING THAT FLORENCIA CRONICO OBTAINED. Venturanza). 22.74.

Tuason & Co. plaintiff Florencia Cronico lodged in the Court of First Instance of Rizal (Quezon City Branch) a complaint against the defendants-appellants J. 1962. 1962. was available for sale under the conditions therein set forth and that the said lot was being offered for sale on a first come first serve basis. plaintiff Cronies and Mary E. 1962. Jose E.00 subject to the terms and conditions therein set forth.m. Venturanza went to the post office in Manila and she was able to get the letter at about 3:30 in the afternoon of the same date. 22. Inc. Appellant Ramirez proceeded to the office of Benjamin Bautista in the same morning stating that he accepted the conditions stated in the appellant company's letter. Head of the Real Estate Department of said company. On March 22. Atty. 1962. M. Sta.00 to cover the down payment for the lot. They were Bonifacio Chung and Angeles Henson. M. on March 27. Benjamin Bautista advised appellant Ramirez to wait for the decision of Gregorio Araneta II. Escolta. 1962. 1962. wherein it stated that Lot 22. 1962. Block 461. 1962. the appellant company sent separate reply letters to prospective buyers including plaintiff Cronies and defendant-appellant Ramirez. Mesa Heights Subdivision.. appellant Ramirez presented his letter to the appellant company confirming his verbal acceptance of the terms and conditions in connection with the sale. between 10:00 and 11:00 a. However. the appellant company received a letter from Atty. Godofredo Asuncion in behalf of Florencia Cronies requesting that the lot subject of litigation be 'sold to her.572.. This triggered the instant suit. March 23. returned.572 was enclosed in the letter to cover the down payment for said lot. On March 20. the J. Since she had no money.896. however. Manila. the price and other terms and conditions of the contract to sell. 1962. appellant Ramirez received from the post office at San Francisco del Monte. Two others intimated their desire to buying the lot.appellant company wherein they expressed their desire to purchase the land and requested information concerning the area. and Claudio R. On March 31. the reply letter of the appellant company dated March 20. Venturanza went directly to the office of Gregorio Araneta Inc. Ramirez executed a contract to sell whereby the appellant company agreed to sell to appellant Ramirez the lot in question for a total price of P167. Tuason & Co. Quezon City. plaintiff Cronies and Mary E. Benjamin Bautista did not accept the cheek.1962. She tendered a check to cover the down payment which was. It so happened that plaintiff Cronico went to the appellant company's office on March 21. plaintiff Cronies requested Mary E. Patangco in behalf of appellant Ramirez wrote the appellant company requesting the early execution of the proper contract to sell over Lot No. They were dropped in the Manila Post Office at 11:00 in the morning of March 21. Meanwhile. the appellant company sent a letter to the plaintiff-appellee informing her that it had decided to sell the lot in question to appellant Ramirez. On April 28. and Claudio Ramirez. The main purpose of the said suit is to annul and set aside the contract 88 . subsequently lost their interest in said lot. and she was informed that the reply letter of the appellant company to prospective buyers of the same lot had been mailed. 1962 by registered mail. With this information.. After she got the letter. On April 4.. A check in the amount of P33. Inc. He advised plaintiff Cronies that it is Gregorio Araneta II who would decide whose offer to buy may be accepts after the appellant company receives the registry return cards attached to the registered letters sent to the offerors. however. The request was favorably considered. and presented the letter to Benjamin Bautista. Venturanza to issue a check in the amount of P33. On April 2. Both. The next day.

So Claudio Ramirez filed his answer reiterating in his affirmative defenses that since the plaintiffappellee is not a party to the contract to sell executed by him and the defendant company. On November 19. Claudio R. p. filed its answer to the complaint with cross claim against its co-defendant Claudio Ramirez and Luisa Patangco.71) Anent the first error assigned. the petitioner contends that "No less than the chief of the general service section of the Manila post office. The respondent. Lucille E. Gaspar Bautista. M. 1962 stating that Lot 22. 21) The petitioner also averred that the capability of the plaintiff. that the reply letters of the appellant company were already placed in the mails on March 21." (Rollo.. Petitioner's Brief. 18). plaintiff together with Dr. On March 23. Venturanza. 1968. Sta. representing J. 74. 1962 at 11:00 o'clock in the morning. He contends that the action for the annulment of contract may only be instituted by those who are parties thereto or those who are thereby obliged principally or subsidiarily.. And that "Anyway. (Rollo. immediately went to the Manila post office and claimed the registered letter addressed to her without waiting for the ordinary course for registered mails to be delivered. p. pp. The court granted the substitution of the party plaintiff by Dr. 1962 that the respondent company received a letter from Atty. Lucille E. 89 . Tuason & Co. Lucille E. head of the Real Estate Department of Gregorio Araneta Inc. plaintiff Florencia Cronico has no right whatsoever to demand the annulment of said contract. It is a fact that the petitioner. the respondent company wrote said petitioner that it had decided to sell the lot in question to the respondent Ramirez. Mesa Heights Subdivision by virtue of a deed of assignment she executed on July 5.to sell executed by and between appellant company and appellant Ramirez. Florencia Cronies. The motion to dismiss was denied. Venturanza as the former had transferred to the latter whatever rights and interests which she may have over Lot 22. Ramirez. Sta. received on March 22. 1968. p. Venturanza filed a motion for substitution for party plaintiff whereby plaintiff Florencia Cronico expressed her willingness to be substituted by Dr. Inc. 1962. Ramirez. the rule of the fittest and without lawlessness should govern. Tuason & Co. 1962 in the morning the reply letter of the respondent company dated March 20. Mesa Heights Subdivision was available for sale under the conditions set forth on the basis of "first come first served". Florencia Cronico to purchase the land in question was not raised as an issue in the answer of the defendant company and was developed as an afterthought during the trial. p." (Rollo. The petitioner took delivery of the registered letter addressed to her at the entry section of the Manila post office. acting through Gregorio Araneta Inc. On the part of defendant Claudio Ramirez. proceeded to the office of Benjamin Bautista on the same date and manifested that he was accepting the conditions stated in the respondent company's letter. While this procedure may be tolerated by the postal authorities. It was only on March 27. Claudio R. Florencia Cronico upon being tipped by Benjamin Bautista. Block 261. Hence.. Petitioner's Brief. Decision of Court of Appeals. According to Claudio Ramirez such action to annul a deed of sale can not prosper against third persons as they are not principally or subsidiarily obligated thereby. M. Block 461. On May 30. testified before the trial court that the means by which plaintiff Cronico received her letter is very regular. Gregorio Araneta. p. 1. the manner by which the offerees were to receive their letters was not announced by the offeror to the contestant such that they could not be bound thereby. and that was Cronies who proved her diligence and resourcefullness over Claudio Ramirez. The enclosed cheek to cover the down payment was returned to petitioner Cronico and on April 4. speaking on the regularity of plaintiff Cronico's receipt of the letter. requesting that the lot subject of litigation be sold to her. 31. Godofredo Asuncion in behalf of petitioner. the act of the petitioner in taking delivery of her letter at the entry section of the Manila post office without waiting for said letter to be delivered to her in due course of mail is a violation of the "first come first served" condition imposed by the respondent J. he filed a motion to dismiss on the ground that the complaint states no cause of action against him. 74. The respondent. respondent Ramirez presented his letter to the respondent company confirming his verbal acceptance of the terms and conditions in connection with the sale. 1962. 1962. Inc.

Decision of the Court of Appeal p. plaintiff-appellee falls short of the yardstick. Tuason & Co. daughter of Mary E. (Sanchez vs. Article 1479. The respondent. Sanvictores 4 SCRA 123." (Rollo. confirmed in writing his verbal acceptance of the terms and conditions of the sale of the lot in question. Venturanza. It is apparent that petitioner. realtors are given the right to choose their buyers so as to avoid delinquent payments of monthly installments which may result in costly court litigations. Ramirez. The petitioner maintains that the contract to sell (Exhibit 3) executed by the respondent company in favor of the respondent. did not have the capability to pay and that she acted only as a mere front of the Venturanzas. it was Mary E. Florencia cronico was substituted by her assignee Lucille E. Claudio R. (Deudor vs. Claudio R. Florencia Cronico has no consideration separate from the selling price of said lot. In fact. the said petitioner had established the onerous cause or consideration apart from the selling price of the lot. Inc. requires the concurrence of the condition that the promise be "supported by a consideration distinct from the price..In view of the foregoing circumstances. Florencia Cronies. 42. p. Ramirez. 31-32) The foregoing clause cannot ' by any stretch of the imagination be considered as a clause "pour autrui" or for the benefit of the petitioner. Petitioner's Brief. has not established the existence of a consideration distinct from the price of the lot in question. as stated above. Inc. It is also to be noted that in the trial court. 45 SCRA 368. first served" Moreover. arguendo. The contention of the petitioner that she has become the obligee or creditor of the respondent company because she was the first to comply 90 . it was only on March 27. we concur in the finding of the Court of Appeals that "Viewing the case from the standpoint of regularity of notice. Florencia Cronico.00 which was rejected by the respondent company. Venturanza who drew the check in the amount of P33. Florencia Cronico that the promise to sell is supported by a consideration as to her because she had established her link as successor of Gregorio Venturanza who bought the lot from Juan Ramos who in turn acquired said lot from Pedro Deudor. The said stipulation is for the benefit of the respondent company. Exhibit R-1. As correctly pointed out by the Court of Appeals. 1962 that the respondent company received a letter from counsel of the petitioner requesting that the lot subject of this litigation be sold to her. that Clause Seventh of the Compromise Agreement constitutes a valid consideration of the promise to sell apart from the selling price. The petitioner then argues that since Clause Seventh of the Compromise Agreement between the respondent company and the Deudors. 2 SCRA 129 and J.. Venturanza. M. The petitioner is not "obliged principally or subsidiarily" by the contract to sell executed between the respondent company and the respondent Claudio R. Tuason & Co. 126) Hence. come. In order that a unilateral promise may be binding upon the promisor.00 a month as her salary from her employment and there was no showing that she had sources of income other than her job. Accordingly.572. vs. et al. had on March 23. Granting. she had violated the condition of "first. 372-373) The petitioner. The contention of petitioner. The stipulation does not confer any right arising from the contract that may be enforced by the petitioner against any of the parties thereto.M. the promisee can not compel the promisor to comply with the promise. Neither does it impose any obligation arising from the contract that may be enforced by any of the parties thereto against the petitioner. (Rollo. The promisee has the burden of proving such consideration. obligated the respondent company to sell to the buyers of the Deudors 'listed in Annex B thereof. and Juan Ramos was the purchaser of the lot from Pedro Deudor with such right to buy from the defendant company under a new contract with the latter. The petitioner cannot claim that she had accepted the promise before it was withdrawn because. p. it appears that the Compromise Agreement upon which the petitioner Cronico predicates her right to buy the lot in question has been rescinded and set aside. which reads: b) that the buyer Claudio Ramirez has been fully informed by the company of all the circumstances relative to the offer of Florencia Cronico to buy said lot and that he agrees and binds himself to hold the company absolutely free and harmless from all claims and damages to said Florencia Cronico in connection with this sale of the lot to him.12) The Court of Appeals entertained serious doubts as to the financial capability of petitioner Florencia Cronico to purchase the property because she was receiving only the amount of P150. the promise of the respondent company to sell the lot in question to the petitioner. pp. when petitioner Cronico tried to pay the down payment for the purchase of the land. J. Rigos. 1962. Civil Code of the Philippines.. 74. contains a stipulation for her benefit. Ramirez. unless the former establishes the existence of said distinct consideration.

Inc. Bitty G. The bank applied for the extrajudicial foreclosure of the mortgage. without pronouncement as to costs. Oscar A. 73573 May 23.C. J. On 22 November 1979 respondent bank file a petition for a writ of possession. and denied the motion for the reconsideration of the 4 June 1985 decision. INC. THE INTERMEDIATE APPELLATE COURT. 69539 1 which. The court rejected the 91 . 44479-R is hereby affirmed. first served" by taking delivery of the reply letter of the respondent company in the entry section of the Manila post office and of the fact that her formal letter of acceptance was only received by the respondent company on March 27. Petitioners. No.R. petitioners. the decision of the Court of Appeals in CA-G.945. respondents. reversed the decision of the then Court of First Instance of Pangasinan.00 on 12 December 1979. CV No. the sheriff issued a Final Deed of Sale on 15 February 1977. Since no redemption was made by petitioners within the two-year period. we find that the Court of Appeals has not committed any of the errors assigned in the brief of the petitioner. WHEREFORE.000. however.00. a copy of which was furnished the petitioners by registered mail. They submit one principal issue: whether or not the conclusion drawn by the Intermediate Appellate Court from proven facts is correct.-G. Benzon for private respondents.R. Jose P. SO ORDERED.. 1962. which petitioners later opposed on the ground that they had consigned the redemption money of P4. petitioners filed with this Court the instant petition to seek reversal thereof.000. THE RURAL BANK OF AGUILAR. but the latter denied it.with the terms of the letter-offer has no merit. Her so-called acceptance has no effect because she violated the condition of "first come. respectively. 2 The following facts are not disputed: On 12 October 1970 petitioners executed a real estate mortgage in favor of respondent bank as security for a loan of P2. Branch II. The certificate of sale.11. Villamor for petitioners.R. Petitioners failed to pay the loan on due date. JR. vs. 15573. At the foreclosure sale on 11 December 1974 the respondent bank was the highest and winning bidder with a bid of P2. which expired on 29 January 1977. DAVIDE. In view of all the foregoing. claimed that they were granted by respondent bank an extension of the redemption period. A certificate of sale was executed in its favor by the sheriff and the same was registered with the Office of the Register of Deeds on 29 January 1975. No. G. 1991 SPOUSES TRINIDAD AND EPIFANIO NATINO. of 1 December 1981 in Civil Case No. expressly provided that the redemption period shall be two years from the registration thereof. AND THE PROVINCIAL SHERIFF EX-OFFICIO OF PANGASINAN. Viliran for Rural Bank of Aguilar.:p Unsatisfied with the decision of 4 June 1985 and the resolution of 23 December 1985 of the then Intermediate Appellate Court (IAC) in A.

the obligation shall be deemed to be one with a period.opposition and issued the writ of possession. 1180 of the Civil Code of the Philippines. the very evidence of the defendant bank shows that there was indeed an extension of the period to redeem the property. and from whom she had to hire trucks. under Article 1197 for the Court to fix the term in order that the condition may be fulfilled. If indeed. 1975 was 2 years. 1977. and Mr. subject to the provisions of Article 1197. and from that 92 . to prevent its execution. 844). The period should have terminated on January 29. Cabigao vs. in its Decision of 1 December 1981. Jing Zarate and Mr. Acting Manager of the Bank and also board members Dr. The statutory period of redemption granted the mortgagor in the certificate of sale registered on January 29. Salgado. The case was docketed as Civil Case No. petitioners instituted with the then Court of First Instance of Pangasinan a complaint against respondent bank and the Ex-Officio Provincial Sheriff for the annulment of the aforementioned final deed of sale and for the issuance of a writ of preliminary injunction. would apply. Furthermore. Hence. However. 218). which provides: Art. That agreement or contract entered into between the President and Manager of the bank was not in writing is of no moment since under Article 1315 of the Civil Code. This does not mean that the condition was exclusively dependent of the will of the plaintiffs. In their complaint petitioners alleged that the final deed of sale was prematurely issued since they were granted an extension of time to redeem the property. the defendant bank should have presented evidence rebutting the plaintiffs' evidence. loan clerk. The presumption is that they exercised ordinary care of their concerns (Sc. would not have made any move or offer to redeem the property within the redemption period. made the following findings and conclusion: xxx xxx xxx From the bank's evidence. 1180. for they had already promised payment. acting as its agents to extend the period for redemption for the plaintiffs. "contracts are perfected by mere consent. This created an obligation with a period under Art. Madrid. The plaintiffs' evidence has shown that there was an agreement between them and the defendant bank through its personnel and its president and manager. But it did not. However. Rule 131. the trial court. the plaintiffs made no such offer during the redemption period. When the debtor binds himself to pay when his means permit him to do so. Rosario. 15573 which was raffled to Branch II thereof. the Sheriff's Certificate of Final sale was only executed on February 15. 1977 and registered only on November 14. However. 93 Phil. 5(e) Rule 131 of the Rules of Court. the presumption that if their testimony were produced. In resolving the issue of extension of the redemption period. Such extension of nearly 3 years strengthens the plaintiffs' claim that indeed. 1979 which registration date is the effective date of the confirmation of the sale which cuts off redemption. the plaintiffs were not given a specific time to pay and redeem but were given by the President and Manager of the bank such time when their means permit them to do so. it is difficult to believe that the plaintiffs who are personally known to the president and manager herself. While the plaintiff testified that the tender was made to Mr. If therefore became necessary. Omega. there was an agreement to extend the redemption date. it would be adverse to the defendant bank under Sec. none of them were presented to rebut plaintiffs' evidence. 5 (d). Lim 50 Phil. Any action to recover before this is done is considered premature (Patents vs. Rules of Court.

respondent bank assigned the following errors: -ITHE LOWER COURT ERRED IN NOT HOLDING THAT THE OFFERS BY THE APPELLEES TO THE APPELLANTS WERE MADE AFTER THE PERIOD OF REDEMPTION HAD ALREADY EXPIRED AND AS A MATTER OF FACT. The agreement does not novate the original contract of mortgage but only changes one of its conditions.moment the parties are bound not only to the fulfillment of what has been expressly stipulated but also to all the consequences which according to their nature. 3 and on the basis thereof. Hence. only applies to executory contracts. with 1% interest per month from 11 December 1974 to 14 December 1979. (c) order petitioners to pay the respondent bank.00 as attorney's fees and the costs. restore petitioners to the property and to deliver to them a certificate of redemption. and to pay petitioners the sum of P2. 21 SCRA 246). together with any amount representing assessment or taxes which the bank may have paid after 11 December 1974. (d) order the Bank to receive and credit the petitioners with such amounts. morals or good customs or prejudicial to a third person with a right recognized by law. may be in keeping with good faith. public policy. the bank had already partially performed its obligation thereunder by extending the period redemption from January 29." The defendant's claim that the agreement must be in writing citing the ruling in the case of Pornellosa vs. the purchase price. usage and law. that which concerns the period of redemption.R. -IIITHE LOWER COURT ERRED IN HOLDING THAT THE PREPONDERANCE OF EVIDENCE FAVORS THE APPELLEES DESPITE THE FACT THAT THE ONLY EVIDENCE PRESENTED BY THEM IS THE SOLE TESTIMONY OF EPIFANIO NATINO. -IITHE LOWER COURT ERRED IN HOLDING THAT THE APPELLANTS GRANTED THE APPELLEES AN EXTENSION OF THE PERIOD FOR THE REDEMPTION OF THE PROPERTY WHICH WAS SOLD DURING THE FORECLOSURE SALE. WHICH IS NOT ONLY UNCORROBORATED. BUT IS EVEN CONTRARY TO THE IMPORT OF HIS DECLARATIONS AND ADMISSIONS MADE IN OPEN COURT. 1 SCRA 375. 4 Respondent bank appealed from said Decision to the then Intermediate Appellate Court which docketed the appeal as C.11. (b) fix the period of redemption to ninety (90) days from receipt of the decision by petitioners. 43 Phil. WERE MADE ONLY AFTER THE EXECUTION OF THE DEED OF FINAL SALE BY THE SHERIFF. 69539. within ninety (90) days from receipt of the decision the amount of P2. 1979. Olegario. since the right of the mortgagee to demand compliance within the 2 year period of redemption maybe waived. (Inigo vs. In support of its appeal. The period of redemption may be extended by the parties under special circumstances (Lichauco vs. CV No. the period for redemption by the plaintiffs still exists but has to be set. 1977 to November 14. NOT ONLY BY DOCUMENTARY EVIDENCE. AS AGAINST THE TESTIMONY OF THE APPELLANTS' WITNESS WHICH IS CORROBORATED. Not being in order. decreed to (a) annul the Sheriffs Final Deed of Sale. Land Tenure Administration. BUT EVEN BY THE IMPORT OF PLAINTIFF-APPELLEES' TESTIMONY." None of the inhibitions enumerated are present in this case.-G.A. the action of the defendant bank in securing the Sheriffs Final Sale prior to the fixing of the period within which the plaintiffs had to pay was not in order by reason of the extension of the period of redemption without a term.000. not to those either totally or partially performed. In this case. This the parties may do. with interest thereon at 1% per month up to 14 December 1979. 540. 93 . unless the waiver is contrary to the public order. Estate of Maloto. 542). dated 15 February 1977 and its registration of 17 March 1979.945.

-IVTHE LOWER COURT ERRED IN NOT REJECTING THE TESTIMONY OF PLAINTIFF-APPELLEE WHICH DID NOT PROVE AN OFFER TO REDEEM WITHIN THE REGLEMENTARY PERIOD IN AN AUTHENTIC MANNER AS REQUIRED BY THE LAW, RULES AND JURISPRUDENCE. -VTHE LOWER COURT ERRED IN NOT REJECTING THE TESTIMONY OF PLAINTIFF-APPELLEE ON THE ALLEGED EXTENSION OF THE REDEMPTION PERIOD INASMUCH AS IT IS NOT IN A PUBLIC DOCUMENT OR AT LEAST IN AN AUTHENTIC WRITING. -VITHE LOWER COURT ERRED IN APPLYING ARTICLES 1180 AND 1197 OF THE CIVIL CODE, BOTH OF WHICH HAS NO RELEVANCE OR MATERIALITY TO THE CASE AT BAR. -VIIASSUMING ARGUENDO THAT SOME OFFICERS OR EMPLOYEES OF THE APPELLANT BANK MANIFESTED TO THE PLAINTIFF-APPELLEE THAT THEY CAN RECOVER THE LAND IN QUESTION, AS TESTIFIED BY THE PLAINTIFF-APPELLEE, THE LOWER COURT ERRED IN HOLDING THAT SUCH OFFICERS ACTED AS AGENTS OF THE APPELLANT-BANK. CONSEQUENTLY, THE LOWER COURT ERRED IN NOT HOLDING THAT ONLY THE ACTION BY THE BOARD OF DIRECTORS OF THE BANK CAN BIND THE LATTER. -VIIITHE LOWER COURT ERRED IN HOLDING THAT THE EXECUTION OF THE DEED OF FINAL SALE WAS NOT IN ORDER AND IN HOLDING THAT THE APPELLEES MAY STILL REDEEM THE PROPERTY BY PAYING THE PURCHASE PRICE PLUS 1% INTEREST PER MONTH, DESPITE THE LAPSE OF THE PERIOD OF REDEMPTION. -IXTHE LOWER COURT ERRED IN NOT DECIDING THE CASE IN FAVOR OF

THE APPELLANTS AND CONSEQUENTLY ERRED IN NOT AWARDING DAMAGES TO THE APPELLANTS HEREIN. 5 Herein petitioners, as appellees, did not file their Brief. In its Decision of 4 June 1985, the Intermediate Appellate Court disposed of the assigned errors as follows: xxx xxx xxx The bank has assigned eight (8) errors in the decision but the determinants are the first and the second. But before going into their merits We must take note of the failure of the appellees to file their brief. Appellees did not file any motion for reconsideration. It has to be stated there that, generally, appellee's failure to file brief is considered as equivalent to a confession of error, warranting, although not necessarily requiring a reversal, but any doubt entertained by the appellate court as to what disposition should be made of the case will be resolved against the appellee (4 CJS 1832, cited in Francisco, the Revised Rules of Court Civil Procedure, Vol. III, p. 638) Re the first error— THE LOWER COURT ERRED IN NOT HOLDING THAT THE OFFERS BY THE APPELLEES TO THE APPELLANTS WERE MADE AFTER THE PERIOD OF REDEMPTION HAD ALREADY EXPIRED AND AS A MATTER OF FACT, WERE MADE ONLY AFTER THE EXECUTION OF THE DEED OF FINAL SALE BY THE SHERIFF. It will take better proofs than appellees' mere declaration for the Court to believe that they had tendered the redemption money within the redemption period which was refused by the bank. There would have been no valid reason for a refusal; it is an obligation
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imposed by law on every purchaser at public auction that admits of redemption, to accept tender of redemption money. And should there be refusal, the correlative duty of the mortgagor is clear: he must deposit the money with the sheriff. The evidence does not show that appellees complied with this duty. All that was shown by way of compliance was the deposit made with the Clerk of Court of the sum of P4,000.00. This deposit is a belated and last ditch attempt to exercise a right that had long expired. It was made only on December 12, 1979, or after the redemption period of two (2) years from January 29, 1977 when the sheriffs certificate of sale was registered and after sheriff's final sale which was registered on November 14, 1979. And, it is clear that the late deposit was utilized to defeat the bank's vested right which it sought to enforce by its petition for a writ of possession. The lower court correctly ruled against any validity to it. The right to redeem becomes functus officio on the date of its expiry, and its exercise after the period is not really one of redemption but a repurchase. Distinction must be made because redemption is by force of law; the purchaser at public auction is bound to accept redemption. Repurchase however of foreclosed property, after redemption period, imposes no such obligation. After expiry, the purchaser may or may not re-sell the property but no law will compel him to do so, And, he is not bound by the bid price; it is entirely within his discretion to set a higher price, for after all, the property already belongs to him as owner. This brings Us to the second error— THE LOWER COURT ERRED IN HOLDING THAT THE APPELLANTS GRANTED THE APPELLEES AN EXTENSION OF THE

PERIOD FOR THE REDEMPTION OF THE PROPERTY WHICH WAS SOLD DURING THE FORECLOSURE SALE. Appellees' main premise is the alleged assurances of the bank's officers that they could redeem the property. From the testimony of Epifanio Natino, however, it is clear that these assurances were given before expiry of redemption (tsn, pp. 15 & 16). Such assurances were not at all necessary since the right to redeem was still in existence. Those assurances however could not and did not extend beyond the redemption period. It seems clear from testimony elicited on cross-examination of the president and manager of the bank that the latter offered to re-sell the property for P30,000.00 but after the petition for a writ of possession had already been filed, and well after expiry of the period to redeem. Appellants failed to accept the offer; they deposited only P4,000.00. There was therefore no meeting of the minds, and accordingly, appellants may no longer be heard. 6 and in the light thereof, REVERSED and SET ASIDE the appealed decision. Their motion to reconsider the same having been denied in the resolution of 23 December 1985, 7 petitioners have come to Us on appeal by certiorari raising the sole issue stated in the beginning of this decision. We find the petition to be devoid of merit. Petitioners have failed to demonstrate that the conclusion made by the respondent Intermediate Appellate Court from the proven facts is wrong. We agree with said Court, and, therefore, set aside the contrary conclusion of the trial court, that the attempts to redeem the property were done after the expiration of the redemption period and that no extension of that period was granted to petitioners. The contrary conclusion made by the trial court is drawn from inferences which are not supported by adequate or sufficient facts or is based on erroneous assumptions. We note that its decision is remarkably silent as to the dates when petitioner Epifanio Natino went to the respondent
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bank to talk with a bank personnel to offer to pay the loan. If indeed the offer was made within the redemption period, but the Bank refused to accept the redemption money, petitioners should have made the tender to the sheriff who made the sale and who then had the duty to accept the tender and execute the certificate of redemption. (Enage vs. Vda. de Hijos de Escano, 38 Phil. 657, cited in II MORAN, Comments on the Rules of Court, 1979 Ed., pp. 326-327). There was no such tender to the Sheriff. Again, if indeed this occurred during the redemption period, then, as correctly pointed out by respondent IAC, it was not necessary to ask for extension of the period to redeem. In respect to the alleged assurance given by Mrs. Brodeth, the President and Manager of the Bank, sometime in May of 1978 to the effect that petitioners can redeem the property as soon as they have the money, it is obvious that this took place after the expiration of the redemption period. As correctly pointed out by the respondent IAC, this could only relate to the matter of resale of the property, not redemption. Furthermore, even assuming for the sake of argument that Mrs. Brodeth gave the assurance, the same could bind the bank only if its Board of Directors approved or ratified it. No evidence was offered to prove such action by the Board. Moreover, Mrs. Brodeth denied that during that meeting in May 1978 she made the assurance; according to her petitioner Epifanio neither mentioned the loan nor offered to redeem, although earlier he was told that to 'redeem" the property he should pay P30,000.00. The latter statement supports the conclusion of respondent IAC that this was the Bank's offer for the re-sell (not redemption of the property), which, logically took place after the expiration of the redemption period. Even if Mrs. Brodeth is to be understood to have promised to allow the petitioners to buy the property at any time they have the money, the Bank was not bound by the promise not only because it was not approved or ratified by the Board of Directors but also because, and more decisively, it was a promise unsupported by a consideration distinct from the re-purchase price. The second paragraph of Article 1479 of the Civil Code expressly provides: xxx xxx xxx An accepted unilateral. promise to buy or to sell a determinate thing for a price certain is binding upon the promissory if the promise is

supported by a consideration distinct from the price. Thus in Rural Bank of Parañaque Inc. vs. Remolado, et al., 8 a commitment by the bank to resell a property, within a specified period, although accepted by the party in whose favor it was made, was considered an option not supported by a consideration distinct from the price and, therefore, not binding upon the promissor. Pursuant to Southwestern Sugar and Molasses Co. vs. Atlantic Gulf and Pacific Company, 9 it was void. WHEREFORE, the instant petition is DISMISSED, with costs against the Petitioners. SO ORDERED.

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petitioner.15 representing unrealized profits. petitioner sent to respondent a letter of the following tenor: Sir (s) /Madam: We are pleased to make you herewith the following firm offer. There are other details to which reference shall not be made. It merely raises the point that the acceptance only created an option. .48 Ct. "was a promise to sell a determinate thing for a price certain. INC. talls at $7. 300 Ctns. We are looking forward to receive your valued order and remain . Ayway. except when the option is 97 . he had backed out after accepting. Atkins Kroll & Co.. says petitioner. Kroll & Co. 12 brief of petitioner. For its failure to deliver one thousand cartons of sardines. However.S. Castro for respondent. 300 Ctns. Petitioner. because the "firm offer" Exh. On the copntrary Exh. "the undersigned buyer has immediately filed an application for import license . 1951. The offer Exh. talls at $6. So much so that B. in presenting its case before this Court petitioner does not dispute such timely acceptance. subject to reply by September 23.). A." (Emphasis Ours. Ponciano T. The argument. Cua Hian Tek could be sued.240. petitioner was sued. Shipmet: Durig September/October from US Ports. vs. Luneta brand Sardines in Tomato Sauce 100/5-oz.. No. lacking consideration. B accepted "the firm offer for the sale" and adds. It could be withdrawn before acceptance. Ovals at $8. Very truly yours.A. J.25 Ctn. as they touch the question whether the acceptance had been handed on time. Such assumption is a mistake.: Review of a Court of Appeals' decision. Inasmuch as there was no consideration to support the promise to sell distinct from the price. Indeed. The Court of first instance and the Court of Appeals1 found that B. 1479 aforequoted.. CUA HIAN TEK. Cal.G. Upon its acceptance by respondent. and after trial was ordered by the Manila court of first instance to Pay damages. L-9871 January 31. which it had sold to B. however. respondent. Sa Frasisco. by refusing to get the sardines and/or to pay for their price. U.. Price(s): All prices C ad F Manila Cosular Fees of $6. because a bilateral cotract to sell and to buy was created upon acceptance. 1479 of the New Civil Code "an accepted unilatateral promise to buy or to sell a determinate thing for a price certain is binding upon the promisor if the promise is supported by a consideration distinct from the price. insists the offer was a mere offer of option. Carrascoso and Janda for petitioner. Cua Hian Tek accepted the offer unconditionally and delivered his letter of acceptance Exh. there was no consideration for it.00 to be added. Supplier: Atkins. it follows that under Art. ART. When the offerer has showed the offeree a certain period to accept. Luntea brand Sardines Natural 48/15 oz.2 Yet the letter Exh. which was not enforceable for lack of consideration because in accordance with Art. 1951: Quantity and Commodity: 400 Ctns. petitioner argues. There was no such contract of sale. 1324. maifestly assumes that only a unilateral promise arose when the offeree accepted. B. the word "option" is found neither in the offer nor in the acceptance. but only an option to buy. B on September 21. Ross Selph. was a continuing offer to sell until September 23. Luneta brand Sardines in Tomato Sauce 48/15-oz. which on appeal was reduced by the Court of Appeals to P3.). which.25 Ct. In our opinion implies more than that: it implies the legal obligation to keep open for the time specified. the promise is not binding on the petitioner even if it was accepted by respondent. failed to deliver the commodities it had offered for sale. A." (p. 1951. the offer may be withdrawn at any time before acceptance by communicating such withdrawal. KROLL and CO. A did not by itself produce the legal obligation of keeping the offer open up ot Septmber 23. . due to shortage of catch of sardines by the packers in California.R. because it is admitted. Simple are the facts of this case: Dated September 13. and on that issue of Court of Appeals definitely found for plaintiff. BENGZON. the offer became an accepted unilateral promise to sell a determinate thing for price certain. "an option is nothing more than a continuing offer" for a specified time. had no obligatory force. Cua Hian Tek. 1958 ATKINS.

and of this acceptance the offerer had knowledge before said offer was withdrawn. If the option is given without a consideration. He is free either to buy or not to later. when a party deliberately adopts a certain theory. One additional observation should be made before the closing this opinion. Barrios. (77 Corpus Juris Secundum p. the seller's failure to comply therewith gave around to an award for damages. he will not be permitted to change his theory on appeal because. Consequently. . 68 Phil. 46 Phil. and the case is tried and decided upon that theory in the court below. an option is unilateral: a promise to sell3 at the price fixed whenever the offeree should decide to exercise his option within the specified time. A granted an option which is not binding for lack of consideration. it was bilalteral contract of sale. After accepting the promise and before he exercises his option. 461. it is essential that it be within the issues made by the parties in their pleadings. an offer to sell. even supposing that Exh. acceptance is made before a withdrawal. The concurrence of both acts—the offer and the acceptance—could at all events have generated a contract.founded upon a consideration. that the option contract was not valid for lack of consideration. which is not binding until accepted. American Express Company vs. to permit him to do so. (Rules of Court by Moran—1957 Ed. Javier. and it is hereby affirmed. 652. 207. as somnething paid or promissed. it constitutes a binding contract of sale. the authorities hold that . as contended by the defendants. 44 Phil. unless such provision or agreement is supported by an independent consideration. It was not a mere option then. Dacasa. A Change of theory in the appellate courts is not permitted. (77 Corpus Juris Secundum p. This optionwithout-consideration idea was never mentioned in the answer. See also 27 Ruling Case Law 339 and cases cited. if none there was before (atrs. even though the option was not supported by a sufficient consideration. (n) (New Civil Code. Vol. upon accepeting herein petitioner's offer a bilateral promise to sell and to buy ensued. or allows the offeree a certain time within which to accept it. Furthermore. 331. it is a mere offer of a contract of sale. It can be taken for granted. 465.) . Lastly. would be unfair to the adverse party. In order that a question may be raised on appeal. however. He did not just get the right subsequently to buy or not to buy. at least.). the holder of the option is not bound to buy. 1254 and 1262 of the Civil Code). Serra. however. 98 . . San Agustin vs. I p. 424. Consequently.). But it was.). Ordinarily an offer to buy or sell may be withdrawn or countermanded before accepatnce. Toribio vs. (Zayco vs. which was accepted by letter. and the respondent ipso facto assumed the obligations of a purchaser. 55 Phil. We must therefore hold. Natividad.15amount which petitioner does not dispute in this final instance. And as no legal excuse has been proven. 38 Phil. 480. as the lower courts have held that there was a contract of sale between the parties.). If. which has been fixed by the Court of Appeals at P3.240. with cost against petitioner. . The defense in the court of first instance rested on the proposition or propositions that the offer had not been precedent had not been fulfilled. the decision under review should be.715 citing Agoncillo vs. . even though the offer provides that it will not be withdrawn or countermanded. 636. In this case.