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

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

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

11 On 2 November 1973. 23 During the trial. PWCC wrote another letter (Exhibit "3") 7 to YKS in reply to the latter's letter of 15 August 1973. Per its By-Laws (Exhibit "8"). 6 Unfortunately.000 bags for it did not send its boat or truck to PWCC's plant. PWCC reminded YKS of its (PWCC's) 5 July 1973 letter (Exhibit "1") and told the latter that PWCC "only committed to you and which you correspondingly paid 10.YKS accepted without protest both the Delivery and Official Receipts. shall be given to the board of directors of defendant Corporation. 13 As of 7 December 1973. PWCC had delivered only 9. "has the power to execute and sign. In its Answer with Counterclaim 17 filed on 1 July 1974. While the records reveal that YKS received this reply also on 21 August 1973 (Exhibit "3" "A"). no copy of the said 4 August 1973 letter of YKS was presented in evidence. bag net FOB Asturias. Cebu. 5064." subject to the qualification that "all the president's actuations. (h) YKS is solely to blame for the failure to take complete delivery of 10.000. subject only to the declared objects and purpose of the corporation and the existing provisions of law. no cause of action. Cebu. was lured into signing Exhibit "A". since no one would sign a receipt for it. YKS sent to PWCC a letter (Exhibit "D") as a follow-up to the 2 November 1973 telegram. the trial court conducted a pre-trial. and (i) YKS has. On 4 August 1973. 2 and 3. Cebu.00. PWCC wrote a letter (Exhibit "2") to YKS in answer to the latter's 4 August 1973 letter stating that it is "withdrawing or taking delivery of not less than 10. Henry Yao. . The complaint 16 was based on Exhibit "A" and was docketed as Civil Case No.000 bags of white cement.000 bags were sold to it without any terms or conditions. 21 Issues having been joined. On 3 November 1973." In said reply. 1973. the Chairman of the Board. 15 On 4 March 1974.030 bags of white cement." (b) Mr. exemplary damages in the sum of P500. Maglana was not authorized to make the offer and sign the contract in behalf of the corporation. Likewise.775 bags of white cement.000 bags of white cement on August 6-7. PWCC sent an answer (Exhibit "7") to the aforementioned letter of 9 February 1974. it was likewise stated for the record "that the corporation is a semi-subsidiary of the government because of the NIDC participation in the same.30 to P24. 8 it still denied having received it. Enclosed in the reply was a copy of Exhibit "2". copies of which were attached to the Answer as Annexes 1. On 21 August 1973.000. 22 On that occasion. for the last time. but under a separate contract prepared by the Board. but this was returned to sender as unclaimed. not under Exhibit "A". 24 Among the powers of the President is "to operate and conduct the business of the corporation according to his own judgment and .000 bags of white cement of which 4. . the original was left at the latter's office and this fact was duly noted in Exhibit "1" (Exhibit "l-A").150 bags were already delivered to you as of August 11. PWCC asks for moral damages in the amount of not less than P10. PWCC reiterated the unenforceability of Exhibit "A". (7) To enter into (sic) agreement or contract of any kind with any person in the name and for and in behalf of the corporation through its President.30 per 94 lbs." Furthermore. (f) the rejection by the Board of Exhibit "A" was made known to YKS through various letters sent to it. wrote a letter 9 to PWCC as a follow-up to the letter of 15 August 1973. as corporate commitments are made through it. Henry Yao sent a letter (Exhibit "G") to PWCC calling the latter's attention to the statement of delivery dated 24 August 1973. 10 On 12 September 1973. Maglana. its President and Chairman. the parties admitted that according to the By-Laws of PWCC. it was established that the original thereof was shown to Mr. at P24. PWCC presented evidence to prove that Exhibit "A" is not binding upon it because Mr. who is also the President of the corporation. 18 (g) YKS knew. YKS wrote PWCC a letter (Exhibit "H") requesting. YKS insisted on the delivery of 45. thru M/V Taurus. per Delivery Order 19 and Official Receipt 20 issued by PWCC. hence Exhibit "A" was never consummated and is not enforceable against PWCC. (e) it agreed to sell 10. therefore. all contracts or agreements which the corporation enters into. 1973 at Asturias. that only 10.00 and attorney's fees in the sum of P10. YKS sent a telegram (Exhibit "C") 12 to PWCC insisting on the full compliance with the terms of Exhibit "A" and informing the latter that it is exercising the option therein stipulated.00. YKS. In its Counterclaim. through Henry Yao.30 per bag FOB Asturias. prior to and after he had signed and executed said contracts. (d) the latter disapproved it. only the Board of Directors has the power .000. 14 On 27 February 1974. (c) such signing was subject to the condition that Exhibit "A" be approved by the Board of Directors of PWCC. While YKS denied having received a copy of Exhibit "1". YKS filed its Answer to the Counterclaim. On 9 February 1974. for and in behalf of the corporation. On 10 September 1973. On 24 July 1974. particularly the price change from P23. and that all contracts of the corporation should meet the approval of the NIDC and/or the PNB Board because of an exposure and financial involvement of around P10 million therein. YKS filed with the then Court of First Instance of Leyte a complaint for Specific Performance with Damages against PWCC. no copy of the so-called 15 August 1973 letter was presented in evidence. compliance by the latter with its obligation under Exhibit "A". PWCC denied under oath the material averments in the complaint and alleged that: (a) YKS "has no legal personality to sue having no legal personality even by fiction to represent itself.

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

Letter dated August 21. with cash financial exposure of some P10. . Maglana's signing the letter-offer prepared for him in the Solidbank was made clearly upon the condition that it was subject to the approval of the board of directors of defendant corporation. for failure to deny under oath the following actionable documents in support of defendant's counterclaim: 1. Lilles et al. "A") entered into by the President and Chairman of the Board of Directors Constancio B. the agreement is unenforceable (Art. the judgment appealed from is REVERSED and set aside. That the contract (Exh.000. Exhibit "A". actuation ratified by the Board. then we will deposit your check of P243. not only the due execution and genuiness (sic) of said documents.000. Board of Liquidators vs.000. and contracts entered into through. 1317 and 1403 (1). vs." (Annex "I" to defendant's Answer). Rules of Court). 2. 36 We gave due course 37 to the petition after private respondent filed its Comment 38 and required the parties . which was totally disapproved by defendant corporation's board of directors. 1403 (1). Letter of defendant to plaintiff dated August 4. Having no cause of action against defendant corporation. when he threatened legal action. That Sec. (Rule 8 Sec. 20 SCRA 987). 1. 2. We see no justification. . Law. the articles of incorporation and the ByLaws or from a resolution of the Board (Vicente vs. Second. petitioner filed the instant petition based on the following grounds: 1. it is helpful to bring out some preliminary facts. Geraldez. That the option to renew the contract as contained in Exhibit "A" is enforceable. plaintiff is deemed to have admitted. Civil Code). 28. on the 10. 4. 3. Such conclusion is based on its findings. And because Maglana was not authorized by the Board of Directors of defendant corporation nor was his. Archbishop of Manila.. "A") was never novated nor superceded (sic) by a subsequent contract. per instruction of the Board. We find consistency herein because according to the Corporation Law.000 bags of white cement of which 4. we will not hear from you but you will withdraw cement at P24. Fourth. 1973. Rule 9 of the said Rules with regards (sic) to denying under oath refers only to allegations of usury. 43 O-G.00 exemplary damages. 52 SCRA 227.000. While it may be true that Maglana is President of defendant corporation nowhere in the Articles of Incorporation nor in the By-Laws of said corporation was he empowered to enter into any contract all by himself and bind the corporation without first securing the authority and consent of the Board of Directors. for the court a quo's awards in its favor. was an unauthorized contract (Arts. Plaintiff is ordered to pay defendant corporation P25. Kalaw. Raquiza et al.00 attorney's fees. Receipt from plaintiff (sic) P243.000.000. PNB is a government financial institution whose Board is chairmaned (sic) by the Minister of National Defense.150 bags were already delivered to you as of August 1. the defendant corporation is supervised and principally financed by the National Investment and Development Corporation (NIDC). 1973 that defendant "only committed to you and which you accordingly paid 10. insofar as defendant corporation is concerned. all corporate commitments and business are conducted by. to defendant's Answer).00 in payment of 10. Third. Rule 8 of the Rules of Court only applies when the adverse party appear (sic) to be a party to the instrument but not to one who is not a party to the instrument and Sec. 1974. 5. . and P10. Corp. therefore. Letter to stores dated August 21. What Henry Yao and Maglana agreed upon as embodied in Exhibit "A". 1973 (Annex "3" to defendant's Answer). Sec. 1973. 34 Its motion for reconsideration having been denied by the respondent Court in its resolution 35 dated 15 April 1980. to wit: Before resolving the issue.WHEREFORE. 8. a subsidiary investment of the Philippine National Bank (PNB).000 bags of white cement delivered to plaintiff was not by reason of the letter contract. 3224).30 per bag (Annex "5". All of the foregoing documents tend to prove that the letter-offer.00 check was considered by both parties as payment of the 10. 3.00.000. This fact is very material to the issue of whether defendant corporations president can bind the corporation with his own act. was rejected by defendant corporation's Board of Directors and plaintiff was duly notified thereof and that the P243.000 bags of cement under a separate transaction.00 dated June 7.30 per bag from our plant. 1973 issued by the Producers Bank of the Philippines. First. clearly stating that "If within ten (10) days from date hereof. and the By-Laws of defendant corporation. Maglana in behalf of the respondent corporation binds the said corporation. 13 CA Rep. That the contract (Exh. 1973" (Annex "2" of defendant's Answer). 1. Exh "I" or "8"). the express authority of the Board of Directors (Sec. A corporate officers power as an agent must be sought from the law. Civil Code. Whatever authority Maglana may have must be derived from the Board of Directors of defendant corporation. Gana vs. 8. The resolution contained in defendant's letter to plaintiff dated July 5. Plaintiff's complaint is dismissed with costs. 343. Rules of Court) but also the allegations therein (Rule 9.000 bags of white cement at P24. 4. 1973 to plaintiff reiterating defendant's letter of August 4. As proof of which plaintiff did not complain nor protest until February 9. It clearly results from the foregoing that the judgment appealed from is untenable. plaintiff is not entitled to any relief. Exhibit "A".

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

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

000. by its acts and through acquiescence. and forthwith notified petitioner of its decision that "If within ten (10) days from date hereof we will not hear from you but you will withdraw cement at P24. and sets forth what he claims to be the facts. the above quoted rule is not applicable. An accepted unilateral promise to buy or to sell a determinate thing for a price certain is binding upon the promissor if the promise is supported by a consideration distinct from the price. it can not validly bind the private respondent.000. How to contest genuineness of such documents — When an action or defense is founded upon a written instrument. as something paid or promised. In any event.30 per bag from our plant. that Exhibit "A" is a valid contract binding upon the private respondent. practically laid aside the by-laws requirement of prior approval. No one may contract in the name of another without being authorized by the latter. Section 8.000. before it is revoked by the other contracting party. then we will deposit your check of P243. A contract entered into in the name of another by one who has no authority or legal representation. this case is without any consideration Article 1324 of the Civil Code expressly provides that: When the offerer has allowed the offeree a certain period to accept. unless it is ratified. the offer may be withdrawn at any time before acceptance by communicating such withdrawal. 8. Accordingly. while Article 1749 of the same Code provides: A promise to buy and sell a determinate thing for a price certain is reciprocally demandable.000 bags of white cement. has been execrated. except when the option is founded upon a consideration. 58 The fourth ground is. shall be unenforceable. The second ground is based on a wrong premise. It assumes. meritorious. 1317. the genuineness and due execution of the instrument shall be deemed admitted unless the adverse party." 57 Petitioner received the copy of this notification and thereafter accepted without any protest the Delivery Receipt covering the 10. to be a party to the instrument or when compliance with an order for an inspection of the original instrument is refused. but this provision does not apply when the adverse party does not appear. The respondent Court thus correctly ruled that petitioner had in fact agreed to a new transaction involving only 10. Maglana as payment for 10.000 bags and the Official Receipt for the P243. stand in view of the above disquisitions on the first to the third grounds of the petition. It is clear that the petitioner is not a party to any of the documents attached to the private respondent's Answer.00. But that board itself. however. erred in holding otherwise. copied in or attached in the corresponding pleading as provided in the preceding section. The inevitable conclusion then is that Exhibit "A" is an unenforceable contract under Article 1317 of the Civil Code which provides as follows: Art. at the same time. Under the given circumstances.NACOCO's behalf without prior board approval. treated as an entirely different contract. If the by-laws were to be literally followed. The third ground must likewise fail. contrary to Our conclusion above. Exhibit "A" being unenforceable. the challenged decision must. per instruction of the Board. even if it were accepted. the option to renew it would have no leg to stand on. under oath. the Kalaw contracts are valid corporate acts. expressly or impliedly. or unless he has by law a right to represent him. specifically denies them.00 received Mr. the board should give its stamp of prior approval on all corporate contracts. by the person on whose behalf it. It was effectively disapproved and rejected by the Board of Directors which.000 bags of white cement. 59 While the respondent Court. or who has acted beyond his powers. considered the amount of P243. nevertheless. CA AFFIRMED . the option granted in. The river cannot rise higher than its source. Rule 8 of the Rules of Court provides: Sec. Thus. 1973 issued by the Producers Bank of the Philippines.00 dated June 7.

except the pending ejectment proceeding. 1990. 2. Courts may render summary judgment when there is no genuine issue as to any material fact and the moving party is entitled to a judgment as a matter of law (Garcia vs. the VENDORS hereby sells. 176 SCRA 815). the Cu Unjieng spouses executed a Deed of Sale (Annex D.000. plaintiffs wrote them on October 24. defendants need not offer the property to the plaintiffs if the purchase price is higher than Eleven Million Pesos. 1986. executors. All requisites obtaining. The Supreme Court denied the appeal on May 6. On July 1. then the plaintiffs has the option to purchase the property or of first refusal. 1987 with the same request. there was no meeting of the minds between the parties concerning the sale of the property. Petition) transferring the property in question to herein petitioner Buen Realty and Development Corporation. defendants filed a motion for summary judgment which was granted by the lower court. judgment is hereby rendered in favor of the defendants and against the plaintiffs summarily dismissing the complaint subject to the aforementioned condition that if the defendants subsequently decide to offer their property for sale for a purchase price of Eleven Million Pesos or lower. however. 1991 "for insufficiency in form and substances" (Annex H. After the issues were joined. TCT No. Thus the dispositive portion of the decision states: WHEREFORE. Summary judgment for defendants was properly granted. 1986 asking that they specify the terms and conditions of the offer to sell. WHEREFORE. 21123 was pending consideration by this Court. The trial court found that defendants' offer to sell was never accepted by the plaintiffs for the reason that the parties did not agree upon the terms and conditions of the proposed sale. Bobby Cu Unjieng offered a price of P6-million while plaintiffs made a counter offer of P5-million. that when plaintiffs did not receive any reply. defendants informed plaintiffs that they are offering to sell the premises and are giving them priority to acquire the same. 195816 was issued in the name of petitioner on December 3. in lieu thereof. considering the mercurial and uncertain forces in our market economy today. registration fees for the transfer of title in his favor and other expenses incidental to the sale of abovedescribed property including capital gains tax and accrued real estate taxes. CV No. finding the appeal unmeritorious.R. No pronouncement as to costs. that since defendants failed to specify the terms and conditions of the offer to sell and because of information received that defendants were about to sell the property. Defendants filed their answer denying the material allegations of the complaint and interposing a special defense of lack of cause of action. Petition). On November 15. there was no contract of sale at all. that in reply to defendant's letter. transfers and conveys for and in favor of the VENDEE. 1990 (penned by Justice Segundino G. that plaintiffs thereafter asked the defendants to put their offer in writing to which request defendants acceded.00). the decision of the court a quo is legally justifiable. Absent such requirement.R. they sent another letter dated January 28. The decision of this Court was brought to the Supreme Court by petition for review on certiorari. We find no reason not to grant the same right of first refusal to herein appellants in the event that the subject property is sold for a price in excess of Eleven Million pesos. Mendoza and Fernando A. That the VENDEE shall pay the Documentary Stamp Tax. plaintiffs appealed to this Court in CA-G. . 1987 a Second Amended Complaint for Specific Performance was filed by Ang Yu Asuncion and Keh Tiong. In a decision promulgated on September 21. CV No. petitioner as the new owner of the subject property wrote a letter to the lessees demanding that the latter vacate the premises. subject to the following terms and conditions: 1. this Court affirmed with modification the lower court's judgment. 630-638 Ongpin Street. plaintiffs were compelled to file the complaint to compel defendants to sell the property to them. while CA-G.. that during the negotiations. the judgment appealed from is hereby AFFIRMED. hence. that on several occasions before October 9. Santiago). plaintiffs will have the right of first refusal. otherwise. Branch 31. among others. moral and exemplary damages will likewise fail as there exists no justifiable ground for its award. 1990. 21123. As a consequence of the sale. Binondo. Manila in Civil Case No. that plaintiffs are tenants or lessees of residential and commercial spaces owned by defendants described as Nos. Aggrieved by the decision. Chua and concurred in by Justices Vicente V. the claim for specific performance will not lie. alleging. 87-41058. the above-described property with all the improvements found therein including all the rights and interest in the said property free from all liens and encumbrances of whatever nature. the lower court ruled that should the defendants subsequently offer their property for sale at a price of P11-million or below. Appellants' demand for actual. that they have occupied said spaces since 1935 and have been religiously paying the rental and complying with all the conditions of the lease contract. TCT No. 105254/T-881 in the name of the Cu Unjieng spouses was cancelled and. Manila. Nonetheless. but subject to the following modification: The court a quo in the aforestated decision gave the plaintiffs-appellants the right of first refusal only if the property is sold for a purchase price of Eleven Million pesos or lower. holding: In resume. 1991. his heirs.000. against Bobby Cu Unjieng. Rose Cu Unjieng and Jose Tan before the Regional Trial Court. Court of Appeals. receipt of which in full is hereby acknowledged. That for and in consideration of the sum of FIFTEEN MILLION PESOS (P15.ANG YU ASUNCION v CA On July 29. et al. administrators or assigns.

the dispositive portion of which reads: WHEREFORE. 87-41058 as modified by the Court of Appeals in CA-G. finally.000. and elevated to the Supreme Court upon the petition for review and that the same was denied by the highest tribunal in its resolution dated May 6. to do or not to do). and considering the mercurial and uncertain forces in our market economy today. 1991 of the Decision in Civil Case No. to do or not to do (Art. viz: (a) The vinculum juris or juridical tie which is the efficient cause established by the various sources of obligations (law. carried over on TCT No. 8741058 annotated on TCT No. Antonio Albano. 21123. CV No. Keh Tiong and Arthur Go for the consideration of P15 Million pesos in recognition of plaintiffs' right of first refusal and that a new Transfer Certificate of Title be issued in favor of the buyer. 1991 the corresponding writ of execution (Annex C. A contract undergoes various stages that include its negotiation or preparation. to give something or to render some service (Art. 1156. is hereby set aside as having been executed in bad faith. the concurrence of offer and acceptance. WHEREFORE. on appeal to it by private respondent. The gist of the motion is that the Decision of the Court dated September 21. Civil Code). It is the observation of the Court that this property in dispute was the subject of theNotice of Lis Pendens and that the modified decision of this Court promulgated by the Court of Appeals which had become final to the effect that should the defendants decide to offer the property for sale for a price of P11 Million or lower. L-97276.e.R. required to be observed (to give. A contract which is consensual as to perfection is so established upon a mere meeting of minds. Civil Code). and (c) the subject-persons who. Keh Tiong and Arthur Go. 1991. Among the sources of an obligation is a contract (Art. stating that the aforesaid modified decision had already become final and executory. Petition) was issued. the lessees wrote a reply to petitioner stating that petitioner brought the property subject to the notice of lis pendens regarding Civil Case No. 1305. Negotiation covers the period from the time the prospective contracting parties indicate interest in the contract to the time the contract is concluded (perfected). We affirm the decision of the appellate court. 1991. For ready reference. 1990 as modified by the Court of Appeals in its decision in CA G. at the time of the latter's purchase of the property on 15 November 1991 from the Cu Unjiengs. 1157. the appellate court. with respect to the other. contracts. are the active (obligee) and the passive (obligor) subjects.000.R. which is a meeting of minds between two persons whereby one binds himself. there was an Entry of Judgment by the Supreme Court as of June 6. Anacleto Magno respectively were duly notified in today's consideration of the motion as evidenced by the rubber stamp and signatures upon the copy of the Motion for Execution. on the object and on the cause thereof. A contract which requires. to cancel and set aside the title already issued in favor of Buen Realty Corporation which was previously executed between the latter and defendants and to register the new title in favor of the aforesaid plaintiffs Ang Yu Asuncion. let there be Writ of Execution issue in the above-entitled case directing the Deputy Sheriff Ramon Enriquez of this Court to implement said Writ of Execution ordering the defendants among others to comply with the aforesaid Order of this Court within a period of one (1) week from receipt of this Order and for defendants to execute the necessary Deed of Sale of the property in litigation in favor of the plaintiffs Ang Yu Asuncion. 105254/T-881 in the name of the Cu Unjiengs. defendants are hereby ordered to execute the necessary Deed of Sale of the property in litigation in favor of plaintiffs Ang Yu Asuncion. On August 30. September 27. petitioners contend that Buen Realty can be held bound by the writ of execution by virtue of the notice of lis pendens. The perfection of the contract takes place upon the concurrence of the essential elements thereof. 1991 in G.00 and ordering the Register of Deeds of the City of Manila.R. viewed from the demandability of the obligation. a purchase option and a contract to sell.. 1 On 04 December 1991. 1991 respondent Judge issued another order. set aside and declared without force and effect the above questioned orders of the court a quo. The lessees filed a Motion for Execution dated August 27. had now become final and executory. A not too recent development in real estate transactions is the adoption of such arrangements as the right of first refusal. (b) the object which is the prestation or conduct. 195816 issued in the name of Buen Realty. in . An obligation is a juridical necessity to give. On the same day. In this petition for review on certiorari.On July 16. its perfection and. we might point out some fundamental precepts that may find some relevance to this discussion. Keh Tiong and Arthur Go for the consideration of P15. On September 22. delicts and quasi-delicts). its consummation. i. The obligation is constituted upon the concurrence of the essential elements thereof. Both defendants Bobby Cu Unjieng and Rose Cu Unjieng represented by Atty. Petition) quoted as follows: Presented before the Court is a Motion for Execution filed by plaintiff represented by Atty. Vicente Sison and Atty. All previous transactions involving the same property notwithstanding the issuance of another title to Buen Realty Corporation. the same right of first refusal to herein plaintiffs/appellants in the event that the subject property is sold for a price in excess of Eleven Million pesos or more. CV-21123. Civil Code). As a consequence. No. respondent Judge issued an order (Annex A. 1991. quasi-contracts.

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

among other things. The consequence of such a declaration entails no more than what has heretofore been said. that the right of first refusal would be inconsequential for. however. 11 It is not to say. there was nothing in said decision 13 that decreed the execution of a deed of sale between the Cu Unjiengs and respondent lessees. like here. An option or an offer would require. an unjustified disregard thereof. It is likewise quite obvious to us that the decision in Civil Case No. Civil Code). CA. since there is none to execute. for instance. 87-41058. the circumstances expressed in Article 19 12 of the Civil Code. among other laws of general application. Prior thereto. 87-41058 could not have decreed at the time the execution of any deed of sale between the Cu Unjiengs and petitioners. 87-41058. it cannot be deemed a perfected contract of sale under Article 1458 of the Civil Code. Neither can the right of first refusal. 87-41058 are matters that must be independently addressed in appropriate proceedings. CV-21123. Furthermore. or possibly of an offer under Article 1319 9 of the same Code. would be dependent not only on the grantor's eventual intention to enter into a binding juridical relation with another but also on terms. has observed: Finally. The final judgment in Civil Case No. or the cancellation of title in the name of petitioner (Limpin vs. let alone ousted from the ownership and possession of the property.R. 1482. Pamantasan ng Lungsod ng Maynila vs. has acted in good faith or bad faith and whether or not it should. or the fixing of the price of the sale. without first being duly afforded its day in court. in any case. the so-called "right of first refusal" is an innovative juridical relation. it can at best be so described as merely belonging to a class of preparatory juridical relations governed not by contracts (since the essential elements to establish the vinculum juris would still be indefinite and inconclusive) but by. In fine. it must be stressed. 143 SCRA 311. be considered bound to respect the registration of the lis pendens in Civil Case No. 147 SCRA 516. the questioned writ of execution is in variance with the decision of the trial court as modified by this Court. Needless to point out. later affirmed in CA-G. in this regard. the alleged purchaser of the property. Buen Realty. As already stated. but an action for damages in a proper forum for the purpose. can warrant a recovery for damages. including the price. Even on the premise that such right of first refusal has been decreed under a final judgment. the remedy is not a writ of execution on the judgment. understood in its normal concept. IAC. per se be brought within the purview of an option under the second paragraph of Article 1479. In the law on sales. its breach cannot justify correspondingly an issuance of a writ of execution under a judgment that merely recognizes its existence. aforequoted. IAC. has merely accorded a "right of first refusal" in favor of petitioners. the pertinent scattered provisions of the Civil Code on human conduct. as it is here so conveyed to us. the exercise of the right. that obviously are yet to be later firmed up. The Court of Appeals. Pastor vs. 87-41058. while the object might be made determinate. such as already intimated above.contract of sale that can evidence its perfection (Art. cannot be held subject to the writ of execution issued by respondent Judge. CA. not having been impleaded in Civil Case No. 137 SCRA 730. if. however. We are also unable to agree with petitioners that the Court of Appeals has erred in holding that the writ of execution varies the terms of the judgment in Civil Case No. 122 SCRA 885). given. In a right of first refusal. CA AFFIRMED . whether private respondent Buen Realty Development Corporation. petitioners are aggrieved by the failure of private respondents to honor the right of first refusal. 10 a clear certainty on both the object and the cause or consideration of the envisioned contract. nor would it sanction an action for specific performance without thereby negating the indispensable element of consensuality in the perfection of contracts. De Guzman vs.

shall not be more than ONE MILLION FIVE HUNDRED THOUSAND PESOS (P1.00) and. but the spouses Apeles supposedly ignored Enrico’s manifestation. Following the pre-trial conference.[10] On 8 October 2002. The lot has an area of 360. The spouses Apeles likewise presented several official documents bearing her genuine signatures to reveal their remarkable discrepancy from the signature appearing in the disputed lease contract. pursuant to a Special Power of Attorney executed by the latter in favor of the former on 24 January 1979. the date when Luz allegedly signed the said Contract. that the said purchase price. Without heeding the demand of the spouses Apeles.60 square meters. 253990 issued by the Registry of Deeds of Quezon City in the names of the spouses Apeles. the LESSOR upon receipt of the purchase price/total consideration as fixed or agreed upon less the total amount of monthly rentals paid the LESSEE during the 3-year lease period shall execute the appropriate Deed to SELL. the RTC rendered a Decision in Civil Case No. trial on the merits ensued before the RTC. retracted his prior declaration that the said Contract was signed by Luz on 26 January 1996. the spouses Apeles leased the subject property to Arturo Eulogio (Arturo). she was in the United States of America. docketed as Civil Case No. [9] After the spouses Apeles established by documentary evidence that Luz was not in the country at the time the Contract of Lease with Option to Purchase was executed. Luz Apeles was authorized to enter into the same as the attorney-in-fact of her husband. Enrico’s cause of action is founded on paragraph 5 of the Contract of Lease with Option to Purchase vesting him with the right to acquire ownership of the subject property after paying the agreed amount of consideration. This prompted Enrico to seek recourse from the barangay for the enforcement of his right to purchase the subject property. free from all liens and encumbrances. and posited that Luz’s signature thereon was a forgery. successors and assigns. 4.5 Million. Q-99-36834. Quezon City. Instead. in rebuttal. He narrated that he and Luz entered into the Contract of Lease with Option to Purchase on 26 January 1987. Enrico averred that Luz signed the Contract after she arrived in the Philippines on 30 May 1987. the spouses Apeles and Enrico allegedly entered into a Contract of Lease [6] with Option to Purchase involving the subject property. The contract purportedly afforded Enrico. To buttress their contention. Upon Arturo’s death. his son Enrico succeeded as lessor of the subject property. with Luz signing the said Contract at Enrico’s office in Timog Avenue. Clemente. the spouses Apeles offered as evidence Luz’s Philippine Passport which showed that on 26 January 1987. the barangay issued to Enrico a Certificate to File Action. should the LESSEE exercise his option to buy it on or before the expiration of the 3-year lease period. That the purchase price or total consideration of the house and lot subject of this Contract of Lease shall. Hence. it was already notarized. The Contract was notarized on the same day as evidenced by the Certification on the Notary Public’s Report issued by the Clerk of Court of the RTC of Manila. 5.[8] On the other hand. Enrico instituted on 23 February 1999 a Complaint for Specific Performance with Damages against the spouses Apeles before the RTC. Quezon City (subject property). 87 Timog Avenue. Enrico himself testified as the sole witness for his side. That if the LESSEE shall give oral or written notice to the LESSOR on or before the expiry date of the 3-year lease period stipulated herein of his desire to exercise his option to buy or purchase the house and lot herein leased. his heirs. Before the expiration of the three-year lease period provided in the lease contract. Enrico was engaged in the business of buying and selling imported cars. TRANSFER and CONVEY the house and lot subject of this Contract in favor of the LESSEE. The spouses Apeles maintained that they did not intend to sell the subject property.[5] On 6 January 1987. [7] In a letter dated 26 January 1997 to Enrico. Enrico. That this Contract shall be effective commencing from January 26. Enrico further related that after Luz signed the lease contract.EULOGIO v Spouses EPELES The real property in question consists of a house and lot situated at No. covered by Transfer Certificate of Title No. that the monthly rentals paid by the LESSEE to the LESSOR during the 3-year lease period shall form part of or be deducted from the purchase price or total consideration as may hereafter be mutually fixed or agreed upon by the LESSOR and the LESSEE.500. and by the time the document was returned to him. provided further. as it is hereby agreed. she took it with her for notarization. Enrico’s father.[4] In 1979. but despite several notices. The pertinent provisions of the Contract of Lease are reproduced below: 3. together with all the fixtures and accessories therein. Since none of .000. Q-99-36834 in favor of Enrico. the option to purchase the subject property for a price not exceeding P1. According to the said lease contract. before the expiration of the three-year lease period. be fixed or agreed upon by the LESSOR and the LESSEE. Provided. the spouses Apeles demanded that he pay his rental arrears from January 1991 to December 1996 and he vacate the subject property since it would be needed by the spouses Apeles themselves. The LESSOR hereby gives the LESSEE under this Contract of Lease the right and option to buy the subject house and lot within the said 3-year lease period. Enrico used the subject property as his residence and place of business. the spouses Apeles failed to appear before the barangay for settlement proceedings. 1987 and shall remain valid and binding for THREE (3) YEARS from the said date. the spouses Apeles denied that Luz signed the Contract of Lease with Option to Purchase. Enrico exercised his option to purchase the subject property by communicating verbally and in writing to Luz his willingness to pay the agreed purchase price.

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

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

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

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