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BALUYOT v.

CA1
Facts: Petitioners are residents of Brgy.
Cruz-na-Ligas,
Diliman,
Quezon
City. They claimed that they and their
ascendants have been in open, peaceful,
adverse and continuous possession in the
concept of an owner since time
immemorial a parcel of land known as
1

3. ID.; ID.; INTENDED


BENEFICIARIES HAVE CAUSE
OF ACTIONS AGAINST THE
PARTIES TO THE DEED OF
DONATION. -While,
admittedly,
petitioners were not parties to the
deed of donation, they anchor their
right to seek its enforcement upon
their allegation that they are intended
beneficiaries of the donation to the
Quezon City government. Art. 1311,
second paragraph, of the Civil Code
provides: If a contract should contain
some stipulation in favor of a third
person, he may demand its fulfillment
provided he communicated his
acceptance to the obligor before its
revocation. A mere incidental benefit
or interest of a person is not
sufficient. The contracting parties
must have clearly and deliberately
conferred a favor upon a third person.

4. CIVIL LAW; OBLIGATIONS AND


CONTRACTS;
STIPULATION POUR
AUTRUI; REQUISITES. Under
this provision of the Civil Code, the
following requisites must be present
in order to have a stipulation pour
autrui: (1) there must be a stipulation
in favor of a third person; (2) the
stipulation must be a part, not the
whole of the contract; (3) the
contracting parties must have clearly
and deliberately conferred a favor
upon a third person, not a mere

Sitio Libis of the said Barangay with the


total
land
area
of
42
hectares. Consequently, the said land was
the subject of Land Registration Case No.
3151 before Branch 100 of the Regional
Trial Court of Quezon City wherein the
petitioner prayed, among others, that the
said area shall be excluded from the
technical description in the Certificate of
Title of the University of the Philippines
(UP) and to restrain UP from donating the
said area to the Quezon City
Government. As part of settlement for the
dismissal of the said case, UP made an
assurance that an area of 15.8379 hectares
of the land to be donated in favor of
Quezon City Government shall be
subdivided and distributed for the benefits
of the petitioners. Subsequently, a Deed
of
Conditional
Donation
was
executed. The Quezon City Government
immediately prepared for ground works,
in compliance with the conditions
therein. However, UP President Jose
Abueva failed to deliver the Certificate of
Title covering the said.property to enable
the Quezon City Government to register
the Deed of Donation. Upon expiration of
the eighteen months period for alleged
non-compliance of the Quezon City
Government with the terms and
conditions, Mr. Abueva revoked the Deed
of Donation. The petitioners filed an
action for specific performance with
preliminary injunction against the UP and
the Quezon City Government. The trial
judge denied the motion to dismiss filed
incidental benefit or interest; (4) the
third person must have communicated
his acceptance to the obligor before
its revocation; and (5) neither of the
contracting parties bears the legal
representation or authorization of the
third party.

by the respondents. However, in a


petition for certiorari filed by respondents
before the Court of Appeals, the appellate
court ordered the dismissal of the case.
Hence, this petition.
Issue: W/N petitioners have the right to
seek the enforcement of the deed of
donation.
Held: If a contract should contain some
stipulation in favor of a third person, he
may demand its fulfillment provided he
communicated his acceptance to the
obligor before its revocation. A mere
incidental benefit or interest of a person is
not sufficient. The contracting parties
must have clearly and deliberately
conferred a favor upon a third person.
Under this provision of the Civil Code, the
following requisites must be present in
order to have a stipulation pour autrui:[15]
(1) there must be a stipulation in
favor of a third person;
(2) the stipulation must be a part,
not the whole of the contract;
(3) the contracting parties must
have clearly and deliberately
conferred a favor upon a third
person, not a mere incidental
benefit or interest;
(4) the third person must have
communicated his acceptance
to the obligor before its
revocation; and
(5) neither of the contracting
parties bears the legal
representation or authorization
of the third party.

The allegations in the following


paragraphs of the amended complaint are
sufficient to bring petitioners action
within the purview of the second
paragraph
of
Art.
1311
on
stipulations pour autrui:
1. Paragraph 17, that the deed of donation
contains a stipulation that the Quezon City
government, as donee, is required to
transfer to qualified residents of Cruz-naLigas, by way of donations, the lots
occupied by them;
2. The same paragraph, that this
stipulation
is
part
of
conditions and obligations
imposed by UP, as donor,
upon the Quezon City
government, as donee;
3. Paragraphs 15 and 16, that the
intent of the parties to the
deed of donation was to
confer
a
favor
upon
petitioners by transferring to
the latter the lots occupied by
them;
4. Paragraph 19, that conferences
were held between the parties
to convince UP to surrender
the certificates of title to the
city government, implying
that the donation had been
accepted by petitioners by
demanding
fulfillment
thereof[16] and that private
respondents were aware of
such acceptance; and
5. All the allegations considered
together from which it can be
fairly inferred that neither of
private respondents acted in
representation of the other;
each
of
the
private
respondents had its own
obligations, in view of

conferring a
petitioners.

favor

upon

The amended complaint further alleges


that respondent UP has an obligation to
transfer the subject parcel of land to the
city government so that the latter can in
turn comply with its obligations to make
improvements on the land and thereafter
transfer the same to petitioners but that, in
breach of this obligation, UP failed to
deliver the title to the land to the city
government and then revoked the deed of
donation after the latter failed to fulfill its
obligations within the time allowed in the
contract.
For the purpose of determining the
sufficiency of petitioners cause of action,
these allegations of the amended
complaint must be deemed to be
hypothetically true. So assuming the truth
of the allegations, we hold that petitioners
have a cause of action against UP. Thus,
in Kauffman v. National Bank,[17] where
the facts were
Stated in bare simplicity the admitted facts
show that the defendant bank for a
valuable consideration paid by the
Philippine Fiber and Produce Company
agreed on October 9, 1918, to cause a sum
of money to be paid to the plaintiff in New
York City; and the question is whether the
plaintiff can maintain an action against the
bank for the non performance of said
undertaking. In other words, is the lack of
privity with the contract on the part of the
plaintiff fatal to the maintenance of an
action by him?[18]
it was held:
In the light of the conclusions thus stated,
the right of the plaintiff to maintain the
present action is clear enough; for it is
undeniable that the banks promise to

cause a definite sum of money to be paid


to the plaintiff in New York City is a
stipulation in his favor within the meaning
of the paragraph above quoted; and the
circumstances under which that promise
was given disclose an evident intention on
the part of the contracting parties that the
plaintiff should have that money upon
demand in New York City. The
recognition of this unqualified right in the
plaintiff to receive the money implies in
our opinion the right in him to maintain an
action to recover it; and indeed if the
provision in question were not applicable
to the facts now before us, it would be
difficult to conceive of a case arising
under it.
It will be noted that under the paragraph
cited a third person seeking to enforce
compliance with a stipulation in his favor
must signify his acceptance before it has
been revoked. In this case the plaintiff
clearly signified his acceptance to the
bank by demanding payment; and
although the Philippine National Bank had
already directed its New York agency to
withhold payment when this demand was
made, the rights of the plaintiff cannot be
considered to have been prejudiced by that
fact. The word revoked, as there used,
must be understood to imply revocation
by the mutual consent of the contracting
parties, or at least by direction of the party
purchasing the exchange.[19]
It is hardly necessary to state that our
conclusion that petitioners complaint
states a cause of action against
respondents is in no wise a ruling on the
merits. That is for the trial court to
determine in light of respondent UPs
defense that the donation to the Quezon
City government, upon which petitioners
rely, has been validly revoked.

Respondents contend, however, that the


trial court has already found that the
donation (on which petitioners base their
action) has already been revoked. This
contention has no merit. The trial courts
ruling on this point was made in
connection with petitioners application
for a writ of preliminary injunction to stop
respondent
UP
from
ejecting
petitioners. The trial court denied
injunction on the ground that the donation
had already been revoked and therefore
petitioners had no clear legal right to be
protected. It is evident that the trial
courts ruling on this question was only
tentative, without prejudice to the final
resolution of the question after the
presentation by the parties of their
evidence.
INTEGRATED PACKAGING v. CA
Facts: Integrated Packaging entered into a
contract with Fil-Anchor for the latter to
deliver to the former reams of printing
paper on different dates. In the stipulation
of the parties for the delivery of the reams
of printing paper, it was agreed in the
standard operating practice of the parties
that the materials were to be paid within a
minimum of thirty days and maximum of
ninety days from delivery. The agreement
also provided for the delivery of printing
paper on different dates and a separate
price has been agreed upon for each
delivery. Thereafter, Integrated Packaging
also entered into a contract with
Philippine
Appliance
Corporation
(Philacor) to print three volumes of
"Philacor Cultural Books" with a
minimum of 300,000 copies at a price of
P10.00 per copy or a total cost of
P3,000,000.00.
As of July 30, 1979, private respondent
had delivered to petitioner 1,097 reams of

printing paper out of the total 3,450 reams


stated in the agreement. Petitioner alleged
it wrote private respondent to immediately
deliver the balance because further delay
would greatly prejudice petitioner. From
June 5, 1980 and until July 23, 1981,
private respondent delivered again to
petitioner various quantities of printing
paper
amounting
to
P766,101.70.
However,
petitioner
encountered
difficulties paying private respondent said
amount. Accordingly, private respondent
made a formal demand upon petitioner to
settle the outstanding account. On July 23
and 31, 1981 and August 27, 1981,
petitioner made partial payments totalling
P97,200.00 which was applied to its back
accounts covered by delivery invoices
dated September 29-30, 1980 and October
1-2, 1980.[3]
Meanwhile, petitioner entered into an
additional printing contract with Philacor.
Unfortunately, petitioner failed to fully
comply with its contract with Philacor for
the printing of books VIII, IX, X and XI.
Thus, Philacor demanded compensation
from petitioner for the delay and damage
it suffered on account of petitioners
failure.
On August 14, 1981, private respondent
filed with the Regional Trial Court of
Caloocan City a collection suit against
petitioner for the sum of P766,101.70,
representing the unpaid purchase price of
printing paper bought by petitioner on
credit.
In its answer, petitioner denied the
material allegations of the complaint. By
way of counterclaim, petitioner alleged
that private respondent was able to deliver
only 1,097 reams of printing paper which
was short of 2,875 reams, in total
disregard of their agreement; that private

respondent failed to deliver the balance of


the printing paper despite demand
therefor, hence, petitioner suffered actual
damages and failed to realize expected
profits; and that petitioners complaint
was prematurely filed.
After filing its reply and answer to the
counterclaim, private respondent moved
for admission of its supplemental
complaint, which was granted. In said
supplemental
complaint,
private
respondent alleged that subsequent to the
enumerated purchase invoices in the
original complaint, petitioner made
additional purchases of printing paper on
credit amounting to P94,200.00. Private
respondent also averred that petitioner
failed and refused to pay its outstanding
obligation although it made partial
payments in the amount of P97,200.00
which was applied to back accounts, thus,
reducing petitioners indebtedness to
P763,101.70.
The TC ruled that were it not for the
failure or delay of private respondent to
deliver printing paper, petitioner could
have sold books to Philacor and realized
profit of P790,324.30 from the sale. It
further ruled that petitioner suffered a
dislocation of business on account of loss
of contracts and goodwill as a result of
private respondents violation of its
obligation, for which the award of moral
damages was justified.

As correctly held by the appellate court,


private respondent cannot be held liable
under the contracts entered into by
petitioner
with
Philacor.
Private
respondent is not a party to said
agreements. It is also not a contract pour
autrui. Aforesaid contracts could not
affect third persons like private respondent
because of the basic civil law principle of
relativity of contracts which provides that
contracts can only bind the parties who
entered into it, and it cannot favor or
prejudice a third person,[10] even if he is
aware of such contract and has acted with
knowledge thereof.[11]
Indeed, the order agreement entered into
by petitioner and private respondent has
not been shown as having a direct bearing
on the contracts of petitioner with
Philacor. As pointed out by private
respondent and not refuted by petitioner,
the paper specified in the order agreement
between petitioner and private respondent
are markedly different from the paper
involved in the contracts of petitioner with
Philacor.[12] Furthermore, the demand
made by Philacor upon petitioner for the
latter to comply with its printing contract
is dated February 15, 1984, which is
clearly made long after private respondent
had filed its complaint on August 14,
1981. This demand relates to contracts
with Philacor dated April 12, 1983 and
May 13, 1983, which were entered into by
petitioner after private respondent filed
the instant case.

The CA reversed the ruling of the TC.


Issue: W/N Fil-Anchor should be held
liable for petitioners breach of contract
with Philacor.
Held: This claim is manifestly devoid of
merit.

To recapitulate, private respondent did not


violate the order agreement it had with
petitioner. Likewise, private respondent
could not be held liable for petitioners
breach of contract with Philacor. It
follows that there is no basis to hold
private respondent liable for damages.
Accordingly, the appellate court did not

err in deleting the damages awarded by


the trial court to petitioner.
A&C MINIMART v. CA
Facts: A&C Minimart entered into a
contract of lease with the spouses
Bonifacio. It appears however that the
land where the leased building was
located is currently subject to litigation of
who should be the rightful owners of the
subject property. The parties in the case
are the spouses Sevilla, the spouses
Bonifacio and the Villareals. The Court
however had already upheld the
ownership of the Villareals of the subject
property which was later sold in public
auction and bought by the latter.
A&C Minimart on the other hand stopped
paying rentals upon knowing that the
Bonifacios were not the rightful owners of
the subject property.
Upon motion of the
Villareals,
the Paraaque RTC, Branch 194, issued a
Writ of Execution requiring petitioner to
deposit in Land Bank Account No. 18310166-91 the amount of P3,186,154.68,
plus 12% yearly interest, computed from
the date of petitioners receipt of the
demand letter on 25 June 1999.[17]
On 4 November 2003, respondents filed a
Motion for Recomputation of the amount
of rentals as the writ of execution
allegedly did not conform to the Decision
dated 1
October
2003. Respondents
claimed that the computation should
include a monthly interest of 3% on the
total amount of rental and other charges
not paid on time, in accordance with
paragraph 6(g) of the Contract of Lease,
dated 22 January 1998, between petitioner
and Teresita Bonifacio, to wit:

g) To pay the LESSOR


three (3%) percent interest
per month on the total
amount of rental and other
charges not paid on time
under this contract with
said
amount
accruing
automatically upon default
without necessity of any
demand.[18]
Respondents anchored their claim on the
Amended Decision dated 1 October 2003,
and the Writ of Execution dated 27
October 2003, in Civil Cases No. 02-0538
to 40, which both used the phrase in
accordance with the Lease Contract,
when referring to the monthly rentals due
and were to be deposited in the bank by
the petitioner.
Issue: W/N A&C Minimart can be held
liable to pay 3% interest per month on the
total amount of rental and other charges
not paid on time to the Villareals.
Held: Petitioner argues that respondents
are not entitled to the 3% penalty
stipulated under the Lease Contract
dated 22 January 1998, which becomes
payable to thelessor whenever the
petitioner incurs delay in the payment of
its rentals. This argument is well-taken.
It is a well-known rule that a contractual
obligation or liability, or an action excontractu, must be founded upon a
contract, oral or written, either express or
implied. If there is no contract, there is no
corresponding liability and no cause of
action may arise therefrom.[22] This is
provided for in Article 1311 of the Civil
Code:
Article
1311. Contracts
take effect only between

the parties, their assigns


and heirs, except in case
where the rights and
obligations arising from the
contract
are
not
transmissible
by
their
nature, or by stipulation or
by provision of law. The
heir is not liable beyond the
value of the property he
received from the decedent.
The Lease Contract dated 22 January
1998, was executed between the
spouses Bonifacio and petitioner. It is
undisputed that none of the respondents
had taken part, directly or indirectly, in the
contract in question. Respondents also did
not enter into contract with either the
lessee or the lessor, as to an assignment of
any right under the Lease Contract in
question. The Lease Contract, including
the stipulation for the 3% penalty interest,
was
bilateral
between
petitioner
and TeresitaBonifacio. Respondents claim
ownership over the subject property, but
not as a successor-in-interest of the
spouses Bonifacios. They purchased the
property in an execution sale from the
spouses Sevilla. Thus, respondents cannot
succeed to any contractual rights which
may accrue to the spouses Bonifacio.
Contracts produce an effect as between the
parties who execute them. A contract
cannot be binding upon and cannot be
enforced by one who is not party to
it. Although the respondents were
adjudged to be entitled to rentals accruing
from 2 March 1999, until the time the
petitioner vacated the premises, the
obligation to pay rent was not derived
from the Lease Contract dated 22 January
1998, but from a quasi-contract. Article
2142 of the Civil Code reads:

Art. 2142. Certain lawful,


voluntary and unilateral
acts give rise to the
juridical relation of quasicontract to the end that no
one shall be unjustly
enriched or benefited at the
expense of another.
In the present case, the spouses Bonifacio,
who were named as the lessors in the
Lease
Contracts,
dated 3
August
1992 and 22 January 1998, are already
adjudged not to be the real owners of the
subject property. In Civil Case No. 902551, Branch 63 of the Makati RTC
declared that the Deed of Sale, executed
on 17
June
1986,
between
the
spouses Bonifacio and
the
spouses Sevilla was a forgery and, hence,
did not validly transfer ownership to the
spouses Bonifacio. At present, there is a
pending appeal before the Supreme Court
docketed as G.R. No. 150824, which
would determine who between the
respondents and the spouses Sevilla are
the rightful owners of the property.
Since the spouses Bonifacio are not the
owners of the subject property, they
cannot unjustly benefit from it by
collecting rent which should accrue to the
rightful owners of the same. Hence,
the Makati RTC, Branch 132, had set up a
bank account where the rent due on the
subject property should be deposited and
kept in trust for the real owners thereto.
LLENADO v. LLENADO
Facts: The predecessors-in-interest of
both
petitioners
(Winifreda)
and
respondents (Eduardo and Jorge) entered
into a contract of lease with each other.

Orlando derived his contract of lease from


Romeo, who entered into a contract of
lease with Eduardo and Jorges father
(Cornelio). In the contract of lease
between the parties, it was stipulated that
such contract can be transmitted to their
heirs, with the option of the lessee to
renew for a given number of years the
lease of the subject property.
After Orlandos death, Cornelio (the
lessor) sold the subject leased properties
to his sons Eduardo and Jorge. After his
death Eduardo and Jorge ordered Wiifreda
to vacate the property, but the latter
refused. This prompted the brothers to file
an unlawful detainer case against
Winifreda.
Winifreda argued that the transfer and
conveyance of the subject lot by Cornelio
in favor of respondents Eduardo and
Jorge, was fraudulent and in bad faith
considering that the March 31, 1978
Agreement provided that while the lease is
in force, the subject lot cannot be sold,
transferred or conveyed to any third party;
that the period of the lease was until
December 3, 1987 with the option to
renew granted to Orlando; that the subject
lot was transferred and conveyed to
respondents Eduardo and Jorge on January
29, 1987 when the lease was in full force
and effect making the sale null and void;
that Cornelio verbally promised Orlando
that in case he (Cornelio) decides to sell
the subject lot, Orlando or his heirs shall
have first priority or option to buy the
subject lot so as not to prejudice Orlandos
business and because Orlando is the
owner of the property adjacent to the
subject lot; and that this promise was
wantonly disregarded when Cornelio sold
the said lot to respondents Jorge and
Eduardo.

In their Answer,[12] respondents


Eduardo and Jorge claimed that they
bought the subject lot from their father,
Cornelio, for value and in good faith; that
the lease agreement and its supplement
were not annotated at the back of the
mother title of the subject lot and do not
bind them; that said agreements are
personal only to Cornelio and Orlando;
that the lease expired upon the death of
Orlando on November 7, 1983; that they
were not aware of any verbal promise to
sell the subject lot granted by Cornelio to
Orlando and, even if there was, said
option to buy is unenforceable under the
statute of frauds.
Issue: W/N the sale of the subject lot by
Cornelio to his sons, respondents Eduardo
and Jorge, is invalid for (1) violating the
prohibitory clause in the lease agreement
between Cornelio, as lessor-owner, and
Orlando, as lessee; and (2) contravening
the right of first refusal of Orlando over
the subject lot.
Held: It is not disputed that the lease
agreement contained an option to renew
and a prohibition on the sale of the subject
lot in favor of third persons while the
lease is in force. Petitioner claims that
when Cornelio sold the subject lot to
respondents Eduardo and Jorge the lease
was in full force and effect, thus, the sale
violated the prohibitory clause rendering it
invalid. In resolving this issue, it is
necessary to determine whether the lease
agreement was in force at the time of the
subject sale and, if it was in force, whether
the violation of the prohibitory clause
invalidated the sale.
Under Article 1311 of the Civil Code, the
heirs are bound by the contracts entered
into by their predecessors-in-interest
except when the rights and obligations
therein are not transmissible by their

nature, by stipulation or by provision of


law. A contract of lease is, therefore,
generally transmissible to the heirs of the
lessor or lessee. It involves a property
right and, as such, the death of a party
does not excuse non-performance of the
contract.[29] The rights and obligations
pass to the heirs of the deceased and the
heir of the deceased lessor is bound to
respect the period of the lease.[30] The
same principle applies to the option to
renew the lease. As a general rule,
covenants to renew a lease are not
personal but will run with the land.
[31]
Consequently,
the
successors-ininterest of the lessee are entitled to the
benefits, while that of the lessor are
burdened with the duties and obligations,
which said covenants conferred and
imposed on the original parties.
The foregoing principles apply with
greater force in this case because the
parties expressly stipulated in the March
31, 1978 Agreement that Romeo, as
lessee, shall transfer all his rights and
interests under the lease contract with
option to renew in favor of the party of
the Third Part (Orlando), the latters heirs,
successors and assigns[32] indicating the
clear intent to allow the transmissibility of
all the rights and interests of Orlando
under the lease contract unto his heirs,
successors or assigns. Accordingly, the
rights and obligations under the lease
contract with option to renew were
transmitted from Orlando to his heirs upon
his death onNovember 7, 1983.
It does not follow, however, that the lease
subsisted at the time of the sale of the
subject
lot
on January
29,
1987. When Orlando died on November
7, 1983, the lease contract was set to
expire 26 days later or on December 3,
1983, unless renewed by Orlandos heirs

for another four years. While the option


to renew is an enforceable right, it must
necessarily be first exercised to be given
effect.[33] As
the
Court
explained
in Dioquino v. Intermediate Appellate
Court:[34]
A clause found in an agreement
relative to the renewal of the
lease agreement at the option of
the lessee gives the latter an
enforceable right to renew the
contract in which the clause is
found for such time as provided
for. The
agreement
is
understood as being in favor of
the lessee, and the latter is
authorized to renew the contract
and to continue to occupy the
leased property after notifying
the lessor to that effect. A
lessors covenant or agreement
to renew gives a privilege to the
tenant, but is nevertheless an
executory contract, and until the
tenant
has
exercised
the
privilege by way of some
affirmative act, he cannot be
held for the additional term. In
the absence of a stipulation in
the lease requiring notice of the
exercise of an option or an
election to renew to be given
within a certain time before the
expiration of the lease, which of
course, the lessee must comply
with, the general rule is that a
lessee must exercise an option or
election to renew his lease
and notify the lessor thereof
before, or at least at the time of
the expiration of his original
term, unless there is a waiver or
special circumstances warranting
equitable relief.

There is no dispute that in the


instant case, the lessees (private
respondents) were granted the
option to renew the lease for
another five (5) years after the
termination of the original period
of fifteen years. Yet, there was
never any positive act on the part
of private respondents before or
after the termination of the
original period to show their
exercise of such option. The
silence of the lessees after the
termination of the original period
cannot be taken to mean that
they opted to renew the contract
by virtue of the promise by the
lessor, as stated in the original
contract of lease, to allow them
to renew. Neither can the
exercise of the option to renew
be inferred from their persistence
to remain in the premises despite
petitioners demand for them to
vacate. x x x.[35]
Similarly, the election of the option to
renew the lease in this case cannot be
inferred from petitioner Wenifredas
continued possession of the subject lot and
operation of the gasoline station even after
the death of Orlando on November 7,
1983 and the expiration of the lease
contract on December 3, 1983. In the
unlawful detainer case against petitioner
Wenifreda and in the subject complaint for
annulment of conveyance, respondents
consistently maintained that after the
death of Orlando, the lease was terminated
and that they permitted petitioner
Wenifreda and her children to remain in
possession of the subject property out of
tolerance and respect for the close blood
relationship between Cornelio and
Orlando. It was incumbent, therefore,

upon petitioner as the plaintiff with the


burden of proof during the trial below to
establish by some positive act that
Orlando or his heirs exercised the option
to renew the lease. After going over the
records of this case, we find no evidence,
testimonial or documentary, of such nature
was presented before the trial court to
prove that Orlando or his heirs exercised
the option to renew prior to or at the time
of the expiration of the lease on December
3, 1983. In particular, the testimony of
petitioner Wenifreda is wanting in detail
as to the events surrounding the
implementation of the subject lease
agreement after the death of Orlando and
any overt acts to establish the renewal of
said lease.
Given the foregoing, it becomes
unnecessary to resolve the issue on
whether the violation of the prohibitory
clause invalidated the sale and conferred
ownership over the subject lot to
Orlandos heirs, who are mere lessees,
considering that at the time of said sale on
January 29, 1987 the lease agreement had
long been terminated for failure of
Orlando or his heirs to validly renew the
same. As a result, there was no obstacle
to the sale of the subject lot by Cornelio to
respondents Eduardo and Jorge as the
prohibitory clause under the lease contract
was no longer in force.
PNB v. DEE
Facts: Some time in July 1994,
respondent Teresita Tan Dee (Dee) bought
from respondent Prime East Properties
Inc.5 (PEPI) on an installment basis a
residential lot located in Binangonan,
Rizal, with an area of 204 square
meters6 and
covered
by
Transfer
Certificate of Title (TCT) No. 619608.
Subsequently, PEPI assigned its rights

over a 213,093sq m property on August


1996 to respondent Armed Forces of the
PhilippinesRetirement and Separation
Benefits System, Inc. (AFPRSBS),
which included the property purchased by
Dee.
Thereafter, or on September 10, 1996,
PEPI obtained a P205,000,000.00 loan
from petitioner Philippine National Bank
(petitioner), secured by a mortgage over
several properties, including Dees
property. The mortgage was cleared by the
Housing and Land Use Regulatory Board
(HLURB) on September 18,1996.
After Dees full payment of the purchase
price, a deed of sale was executed by
respondents PEPI and AFPRSBS on July
1998 in Dees favor. Consequently, Dee
sought from the petitioner the delivery of
the owners duplicate title over the
property, to no avail. Thus, she filed with
the HLURB a complaint for specific
performance to compel delivery of TCT
No. 619608 by the petitioner, PEPI and
AFPRSBS, among others.
The petitioner claims that it has a valid
mortgage over Dees property, which was
part of the property mortgaged by PEPI to
it to secure its loan obligation, and that
Dee and PEPI are bound by such
mortgage. The petitioner also argues that
it is not privy to the transactions between
the subdivision project buyers and PEPI,
and has no obligation to perform any of
their respective undertakings under their
contract.
Respondent AFPRSBS, meanwhile,
contends that it cannot be compelled to
pay or settle the obligation under the
mortgage contract between PEPI and the
petitioner as it is merely an investor in the
subdivision project and is not privy to the
mortgage.

Issue: W/N PNB is bound to respect the


transactions between PEPI and Dee.
Held:Yes. The petition must be DENIED.
The petitioner is correct in arguing that it
is not obliged to perform any of the
undertaking of respondent PEPI and AFP
RSBS in its transactions with Dee because
it is not a privy thereto. The basic
principle of relativity of contracts is that
contracts can only bind the parties who
entered into it,23 and cannot favor or
prejudice a third person, even if he is
aware of such contract and has acted with
knowledge thereof.24 Where there is no
privity of contract, there is likewise no
obligation
or
liability
to
speak
25
about. cralawred
The petitioner, however, is not being
tasked to undertake the obligations of
PEPI and AFPRSBS. In this case, there
are two phases involved in the
transactions between respondents PEPI
and Dee the first phase is the contract to
sell, which eventually became the second
phase, the absolute sale, after Dees full
payment of the purchase price. In a
contract of sale, the parties obligations
are plain and simple. The law obliges the
vendor to transfer the ownership of and to
deliver the thing that is the object of
sale.26 On the other hand, the principal
obligation of a vendee is to pay the full
purchase price at the agreed time. 27 Based
on the final contract of sale between them,
the obligation of PEPI, as owners and
vendors of Lot 12, Block 21A, Village
East Executive Homes, is to transfer the
ownership of and to deliver Lot 12, Block
21A to Dee, who, in turn, shall pay, and
has in fact paid, the full purchase price of
the property. There is nothing in the
decision of the HLURB, as affirmed by
the OP and the CA, which shows that the
petitioner is being ordered to assume the

obligation of any of the respondents.


There is also nothing in the HLURB
decision, which validates the petitioners
claim that the mortgage has been nullified.
The order of cancellation/release of the
mortgage is simply a consequence of
Dees full payment of the purchase price,
as mandated by Section 25 of P.D. No.
957, to wit:chanRoblesvirtualLawlibrary
Sec. 25. Issuance of Title. The owner or
developer shall deliver the title of the lot
or unit to the buyer upon full payment of
the lot or unit. No fee, except those
required for the registration of the deed of
sale in the Registry of Deeds, shall be
collected for the issuance of such title. In
the event a mortgage over the lot or unit is
outstanding at the time of the issuance of
the title to the buyer, the owner or
developer shall redeem the mortgage or
the corresponding portion thereof within
six months from such issuance in order
that the title over any fully paid lot or unit
may be secured and delivered to the buyer
in accordance herewith.
It must be stressed that the mortgage
contract between PEPI and the petitioner
is merely an accessory contract to the
principal threeyear loan takeout from the
petitioner by PEPI for its expansion
project. It need not be belaboured that [a]
mortgage is an accessory undertaking to
secure the fulfillment of a principal
obligation,28 and it does not affect the
ownership of the property as it is nothing
more than a lien thereon serving as
security
for
a
debt.29
Note that at the time PEPI mortgaged the
property to the petitioner, the prevailing
contract between respondents PEPI and
Dee was still the Contract to Sell, as Dee
was yet to fully pay the purchase price of
the property. On this point, PEPI was
acting fully well within its right when it
mortgaged the property to the petitioner,

for in a contract to sell, ownership is


retained by the seller and is not to pass
until full payment of the purchase
price.30 In other words, at the time of the
mortgage, PEPI was still the owner of the
property. Thus, in China Banking
Corporation v. Spouses Lozada,31 the
Court affirmed the right of the
owner/developer to mortgage the property
subject of development, to wit: [P.D.]
No. 957 cannot totally prevent the owner
or developer from mortgaging the
subdivision lot or condominium unit when
the title thereto still resides in the owner
or developer awaiting the full payment of
the purchase price by the installment
buyer.32 Moreover, the mortgage bore the
clearance of the HLURB, in compliance
with Section 18 of P.D. No. 957, which
provides that [n]o mortgage on any unit
or lot shall be made by the owner or
developer without prior written approval
of
the
[HLURB].
Nevertheless, despite the apparent validity
of the mortgage between the petitioner
and PEPI, the former is still bound to
respect
the
transactions
between
respondents PEPI and Dee. The petitioner
was well aware that the properties
mortgaged by PEPI were also the subject
of existing contracts to sell with other
buyers. While it may be that the petitioner
is protected by Act No. 3135, as amended,
it cannot claim any superior right as
against the installment buyers. This is
because the contract between the
respondents is protected by P.D. No. 957,
a social justice measure enacted primarily
to protect innocent lot buyers.33 Thus,
in Luzon
Development
Bank
v.
34
Enriquez, the Court reiterated the rule
that a bank dealing with a property that is
already subject of a contract to sell and is
protected by the provisions of P.D. No.
957, is bound by the contract to sell.35

However, the transferee BANK is bound


by the Contract to Sell and has to respect
Enriquezs rights thereunder. This is
because the Contract to Sell, involving a
subdivision lot, is covered and protected
by
PD
957.
x
x
x.
x

x x x Under these circumstances, the


BANK knew or should have known of the
possibility and risk that the assigned
properties were already covered by
existing contracts to sell in favor of
subdivision lot buyers. As observed by the
Court in another case involving a bank
regarding a subdivision lot that was
already subject of a contract to sell with a
third party:chanRoblesvirtualLawlibrary
[The Bank] should have considered that
it was dealing with a property subject of a
real estate development project. A
reasonable person, particularly a financial
institution x x x, should have been aware
that, to finance the project, funds other
than those obtained from the loan could
have been used to serve the purpose, albeit
partially. Hence, there was a need to verify
whether any part of the property was
already intended to be the subject of any
other contract involving buyers or
potential buyers. In granting the loan, [the
Bank] should not have been content
merely with a clean title, considering the
presence of circumstances indicating the
need for a thorough investigation of the
existence of buyers x x x. Wanting in care
and prudence, the [Bank] cannot be
deemed to be an innocent mortgagee. x x
x36 (Citation omitted)cha
SOLER v. CA
Facts: Petitioner Jazmin Soler is a Fine
Arts graduate of the University of Sto.
Tomas, Manila. She is a well known

licensed professional interior designer. In


November 1986, her friend Rosario Pardo
asked her to talk to Nida Lopez, who was
manager of the COMBANK Ermita
Branch for they were planning to renovate
the branch offices.[2]
Even prior to November 1986, petitioner
and Nida Lopez knew each other because
of
Rosario
Pardo,
the
latters
sister. During their meeting, petitioner
was hesitant to accept the job because of
her many out of town commitments, and
also considering that Ms. Lopez was
asking that the designs be submitted by
December 1986, which was such a short
notice. Ms. Lopez insisted, however,
because she really wanted petitioner to do
the design for renovation. Petitioner
acceded to the request. Ms. Lopez
assured her that she would be
compensated for her services. Petitioner
even told Ms. Lopez that her professional
fee was ten thousand pesos (P10,000.00),
to which Ms. Lopez acceded.[3]
During the November 1986 meeting
between petitioner and Ms. Lopez, there
were discussions as to what was to be
renovated, which included a provision for
a conference room, a change in the
carpeting and wall paper, provisions for
bookshelves, a clerical area in the second
floor, dressing up the kitchen, change of
the ceiling and renovation of the tellers
booth. Ms. Lopez again assured petitioner
that the bank would pay her fees.[4]
After a few days, petitioner requested for
the blueprint of the building so that the
proper design, plans and specifications
could be given to Ms. Lopez in time for
the board meeting in December
1986. Petitioner then asked her draftsman
Jackie Barcelon to go to the jobsite to
make the proper measurements using the
blue print. Petitioner also did her research
on the designs and individual drawings of

what the bank wanted. Petitioner hired


Engineer Ortanez to make the electrical
layout, architects Frison Cruz and De
Mesa to do the drafting. For the services
rendered by these individuals, petitioner
paid the engineer P4,000.00, architects
Cruz and de Mesa P5,000.00 and
architect Barcelon P6,000.00. Petitioner
also contacted the suppliers of the
wallpaper and the sash makers for their
quotation. So come December 1986, the
lay out and the design were submitted to
Ms. Lopez. She even told petitioner that
she liked the designs.[5]
Subsequently,
petitioner
repeatedly
demanded payment for her services but
Ms. Lopez just ignored the demands. In
February 1987, by chance petitioner and
Ms. Lopez saw each other in a concert at
the
Cultural
Center
of
the
Philippines. Petitioner inquired about the
payment
for her services,
Ms.
Lopez curtly replied that she was not
entitled to it because her designs did not
conform to the banks policy of having a
standard design, and that there was no
agreement between her and the bank.[6]
To settle the controversy, petitioner
referred the matter to her lawyers, who
wrote Ms. Lopez on May 20, 1987,
demanding payment for her professional
fees in the amount of P10,000.00 which
Ms. Lopez ignored. Hence, on June 18,
1987, the lawyers wrote Ms. Lopez once
again demanding the return of the
blueprint copies petitioner submitted
which Ms. Lopez refused to return.[7]
On October 13, 1987, petitioner filed at
the Regional Trial Court of Pasig, Branch
153 a complaint against COMBANK and
Ms. Lopez for collection of professional
fees and damages.
Issues: 1.) W/N there was a perfected
contract between petitioner Jazmin Soler

and respondents COMBANK and Nida


Lopez
2.) Nida Lopez, the manager of the bank
branch, had authority to bind the bank in
the transaction.
Held: The discussions between petitioner
and Ms. Lopez was to the effect that she
had authority to engage the services of
petitioner. During their meeting, she even
gave petitioner specifications as to what
was to be renovated in the branch
premises and when petitioners requested
for the blueprints of the building, Ms.
Lopez supplied the same.
Ms. Lopez was aware that petitioner hired
the services of people to help her come up
with the designs for the December, 1986
board meeting of the bank. Ms. Lopez
even insisted that the designs be rushed in
time for presentation to the bank. With all
these discussion and transactions, it was
apparent to petitioner that Ms. Lopez
indeed had authority to engage the
services of petitioner.
The next issue is whether there was a
perfected contract between petitioner and
the Bank.
A contract is a meeting of the minds
between two persons whereby one binds
himself to give something or to render
some service to bind himself to give
something to render some service to
another for consideration. There is no
contract unless the following requisites
concur: 1. Consent of the contracting
parties; 2. Object certain which is the
subject matter of the contract; and 3.
Cause of the obligation which is
established.
A contract undergoes three stages:
(a) preparation, conception, or
generation, which is the
period of negotiation and

bargaining, ending at the


moment of agreement of the
parties;
(b) perfection or birth of the
contract, which is the moment
when the parties come to
agree on the terms of the
contract; and
(c) consummation or death,
which is the fulfillment or
performance of the terms
agreed upon in the contract.
In the case at bar, there was a perfected
oral contract. When Ms. Lopez and
petitioner met in November 1986, and
discussed the details of the work, the first
stage of the contract commenced. When
they agreed to the payment of the ten
thousand
pesos
(P10,000.00)
as
professional fees of petitioner and that she
should give the designs before the
December 1986 board meeting of the
bank, the second stage of the contract
proceeded, and when finally petitioner
gave the designs to Ms. Lopez, the
contract was consummated.
Petitioner believed that once she
submitted the designs she would be paid
her professional fees. Ms. Lopez assured
petitioner that she would be paid.
It is familiar doctrine that if a corporation
knowingly permits one of its officers, or
any other agent, to act within the scope of
an apparent authority, it holds him out to
the public as possessing the power to do
those acts; and thus, the corporation will,
as against anyone who has in good faith
dealt with it through such agent, be
estopped from denying the agents
authority.
Also, petitioner may be paid on the basis
of quantum meruit. It is essential for the
proper operation of the principle that there

is an acceptance of the benefits by one


sought to be charged for the services
rendered
under
circumstances
as
reasonably to notify him that the lawyer
performing the task was expecting to be
paid compensation therefor. The doctrine
of quantum meruit is a device to prevent
undue enrichment based on the equitable
postulate that it is unjust for a person to
retain benefit without paying for it.
We note that the designs petitioner
submitted to Ms. Lopez were not
returned. Ms. Lopez, an officer of the
bank as branch manager used such designs
for presentation to the board of the
bank. Thus, the designs were in fact
useful to Ms. Lopez for she did not appear
to the board without any designs at the
time of the deadline set by the board.
DUARTE v. DURAN
Facts: This petition arose from a suit[5] for
collection of sum of money filed by
respondent
Miguel
Samuel
A.E.
Duran[6] against petitioner Elena Jane Duarte
with
Branch 5 of the Municipal Trial Court in
Cities (MTCC), Cebu.
According to respondent, on February 14,
2002, he offered to sell a laptop computer for
the sum of P15,000.00 to petitioner thru the
help of a common friend, Josephine Dy (Dy).
[7]
Since petitioner was undecided, respondent
left the laptop with petitioner for two days.
[8]
On February 16, 2002, petitioner told
respondent that she was willing to buy the
laptop on installment.[9] Respondent agreed;
thus, petitioner gave P5,000.00 as initial
payment and promised to pay P3,000.00 on
February 18, 2002 and P7,000.00 on March
15, 2002.[10] On February 18, 2002, petitioner
gave her second installment of P3,000.00 to
Dy, who
signed
the
handwritten
receipt[11] allegedly made by petitioner as

proof of payment.[12] But when Dy returned


to get the remaining balance on March 15,
2002, petitioner offered to pay only P2,000.00
claiming that the laptop was only
worthP10,000.00.[13] Due to the refusal of
petitioner to pay the remaining balance,
respondent thru counsel sent petitioner a
demand letter dated July 29, 2002.[14]
Petitioner, however, denied writing the receipt
dated February 18, 2002,[15] and receiving the
demand letter dated July 29, 2002.
[16]
Petitioner claimed that there was no
contract of sale.[17] Petitioner said that Dy
offered to sell respondents laptop but because
petitioner was not interested in buying it, Dy
asked if petitioner could instead lend
respondent the amount of P5,000.00.
[18]
Petitioner agreed and in turn, Dy left the
laptop with petitioner.[19] On February 18,
2002, Dy came to get the laptop but petitioner
refused to give it back because the loan was
not yet paid.[20] Dy then asked petitioner to
lend an additional amount of P3,000.00 to
respondent who allegedly was in dire need of
money.[21] Petitioner gave the money under
agreement that the amounts she lent to
respondent would be considered as partial
payments for the laptop in case she decides to
buy it.[22] Sometime in the first week of
March 2002, petitioner informed respondent
that she has finally decided not to buy the
laptop.[23] Respondent, however, refused to
pay and insisted that petitioner purchase the
laptop instead.
Petitioner likewise denies the existence of a
contract of sale, insisting that the laptop was
not sold to her but was given as a security for
respondents debt. To prove that there was
no contract of sale, petitioner calls attention
to respondents failure to present a written
contract of sale.[44] She claims that under the
Statute of Frauds, a contract of sale to be
enforceable must be in writing.[45] She also
imputes error on the part of the CA in giving
weight and credence to the receipt dated

February 18, 2002 and the demand letter


dated July 29, 2002.[46] She claims that the
receipt dated February 18, 2002, which she
denies having written, is not an actionable
document; thus, there was no need for her to
deny under oath its genuineness and due
execution.[47] Furthermore, she claims that
her denial of the receipt of the demand letter
dated July 29, 2002 shifted the burden upon
respondent to prove that the letter was indeed
received by her.
Respondent defends the ruling of the CA by
arguing that the receipt dated February 18,
2002 is an actionable document, and thus,
petitioners failure to deny under oath its
genuineness and due execution constitutes an
admission thereof.[52] In addition, petitioners
denial of the receipt of the demand letter
dated July 29, 2002 cannot overcome the
presumption that the said letter was received
in the regular course of mail. [53] Respondent
likewise points out that the Statute of Frauds
does not apply in the instant case.
Issue: W/N there was a perfected contract
of sale between the parties.
Held:
There was a contract of sale between
the parties
As to whether there was a contract of sale
between the parties, we hold that there was,
and the absence of a written contract of sale
does not mean otherwise. A contract of sale
is perfected the moment the parties agree
upon the object of the sale, the price, and the
terms of payment.[60] Once perfected, the
parties are bound by it whether the contract is
verbal or in writing because no form is
required.[61] Contrary to the view of
petitioner, the Statute of Frauds does not apply
in the present case as this provision applies
only to executory, and not to completed,
executed or partially executed contracts.[62] In
this case, the contract of sale had been

partially executed because the possession of


the laptop was already transferred to petitioner
and the partial payments had been made by
her. Thus, the absence of a written contract is
not fatal to respondents case. Respondent
only needed to show by a preponderance of
evidence that there was an oral contract of
sale, which he did by submitting in evidence
his own affidavit, the affidavit of his witness
Dy, the receipt dated February 18, 2002 and
the demand letter dated July 29, 2002.
As regards the receipt dated February 18,
2002, we agree with petitioner that it is not an
actionable document. Hence, there was no
need for her to deny its genuineness and due
execution under oath. Nonetheless, we find no
error on the part of the CA in giving full
weight and credence to it since it corroborates
the testimonies of respondent and his witness
Dy that there was an oral contract of sale
between the parties.
With regard to petitioners denial of the
receipt of the demand letter dated July 29,
2002, we believe that this did not overturn the
presumption of regularity that the letter was
delivered and received by the addressee in the
regular course of the mail considering that
respondent was able to present the
postmasters certification[63] stating that the
letter was indeed sent to the address of
petitioner. Bare denial of receipt of a mail
cannot prevail over the certification of the
postmaster, whose official duty is to send
notices of registered mail.[64]
As we see it then, the evidence submitted by
respondent weigh more than petitioners bare
denials. Other than her denials, no other
evidence was submitted by petitioner to prove
that the laptop was not sold but was only
given as security for respondents loan. What
adds doubt to her story is the fact that from the
first week of March 2002, the time she
allegedly decided not to buy the laptop, up to

the time the instant case was filed against her,


she did not exert any effort to recover from
respondent the payment of the alleged
loan. Her inaction leads us to conclude that
the alleged loan was a mere afterthought.
All told, no error can be attributed to the CA
in finding that there was a contract of sale
between the parties
ROBERN DEVELOPMENT v.
PEOPLES LANDLESS
Facts:
Issue: W/N there was a perfected contract
of sale between PELA and Al-Amanah,
the resolution of which will decide
whether the sale of the lot to Robern
should be sustained or not.
Held: We shall first briefly address some
matters raised by PELA.
PELAs contention that Robern cannot
assail the alleged sale between PELA and
Al-Amanah is untenable. Robern is one of
the parties who claim title to the disputed
lot. As such, it is a real party in interest
since it stands to be benefited or injured
by the judgment.45
Petitioners failure to attach the material
portions of the record that would support
the allegations in the Petition is not fatal.
We ruled in F.A.T. Kee Computer
Systems, Inc. v. Online Networks
International, Inc.,46 thus:
x x x However, such a requirement failure
to attach material portions of the record
was not meant to be an ironclad rule such
that the failure to follow the same would
merit the outright dismissal of the petition.
In accordance with Section 7 of Rule 45,
the Supreme Court may require or allow

the filing of such pleadings, briefs,


memoranda or documents as it may deem
necessary within such periods and under
such conditions as it may consider
appropriate. More importantly, Section 8
of Rule 45 declares that [i]f the petition is
given due course, the Supreme Court may
require the elevation of the complete
record of the case or specified parts
thereof within fifteen (15) days from
notice. x x x47
Anent the statement of the courts below
that there was an apparent perfection of
contract (of sale) between Al-Amanah and
PELA, we hold that the same is strictly
confined to the resolution of whether a
writ of preliminary injunction should issue
since the PELA members were then about
to be evicted. PELA should not rely on
such statement as the same is not decisive
of the rights of the parties and the merits
of this case.
We shall now delve into the crucial issue
of whether there was a perfected contract
of sale between PELA and Al-Amanah.
Essential Elements of a Contract of Sale
A contract of sale is perfected at the
moment there is a meeting of minds upon
the thing which is the object of the
contract and upon the price.48 Thus, for a
contract of sale to be valid, all of the
following essential elements must concur:
"a) consent or meeting of the minds; b)
determinate subject matter; and c) price
certain in money or its equivalent."49
In the case at bench, there is no
controversy anent the determinate subject
matter, i.e., the 2,000-square meter lot.
This leaves us to resolve whether there
was a concurrence of the remaining
elements.

As for the price, fixing it can never be left


to the decision of only one of the
contracting parties.50 "But a price fixed by
one of the contracting parties, if accepted
by the other, gives rise to a perfected
sale."51
As regards consent, "when there is merely
an offer by one party without acceptance
of the other, there is no contract."52 The
decision to accept a bidders proposal
must
be
communicated
to
the
53
bidder. However, a binding contract may
exist between the parties whose minds
have met, although they did not affix their
signatures to any written document,54 as
acceptance may be expressed or
implied.55 It "can be inferred from the
contemporaneous and subsequent acts of
the contracting parties."56 Thus, we held:
x x x The rule is that except where a
formal acceptance is so required, although
the acceptance must be affirmatively and
clearly made and must be evidenced by
some acts or conduct communicated to the
offeror, it may be made either in a formal
or an informal manner, and may be shown
by acts, conduct, or words of the
accepting party that clearly manifest a
present intention or determination to
accept the offer to buy or sell. Thus,
acceptance may be shown by the acts,
conduct, or words of a party recognizing
the existence of the contract of sale.57
There is no perfected contract of sale
between PELA and Al-Amanah for want
of consent and agreement on the price.
After scrutinizing the testimonial and
documentary evidence in the records of
the case, we find no proof of a perfected
contract of sale between Al-Amanah and
PELA. The parties did not agree on the

price and no consent was given, whether


express or implied.
When PELA Secretary Florida Ramos
(Ramos) testified, she referred to the
March 18, 1993 letter which PELA sent to
Al-Amanah as the document supposedly
embodying the perfected contract of
sale.58 However, we find that the March
18, 1993 letter referred to was merely an
offer to buy, viz:
March 18, 1993
The Manager
Islamic Bank
Davao Branch
Davao City
Sir/Madam:
This has reference to the offer made by
Messrs. Alejandro Padilla, Leonardo
Labora, Boy Bartiana, Francisco Paig, and
Mr. Asterio Aki for the purchase of the
acquired asset of the bank with an area of
2,000 square meters and covered by T.C.T.
No. T-138914, portions of which are
occupied by their houses. These occupants
have formed and registered a group of x x
x landless families who have occupied
shoulders of National Highways, to be
able to raise an amount that would meet
the approval of the Bank as the
consideration for the purchase of the
property. The group which is known as
PELA or Peoples Landless Association, is
offering the bank the amount of THREE
HUNDRED
THOUSAND
PESOS
(P300,000.00) for the whole 2,000 sq.
meters. Of this amount the buyers will pay
a down payment of ONE HUNDRED
FIFTY
THOUSAND
PESOS
(P150,000.00) and the balance payable in
one (1) year.

According to the plan of PELA, about 24


landless families can be accommodated in
the property. We hope the Bank can help
these families own even a small plot for
their shelter. This would be in line with
the governments program of housing
which the present administration promised
to put in high gear this year.59 (Emphasis
supplied)
Neither can the note written by the bank
that
"subject
offer
has
been
acknowledged/received but processing to
take effect upon putting up of the partial
amount of P150,000.00 on or before April
15, 1993" be construed as acceptance of
PELAs offer to buy. Taken at face value,
the annotation simply means that the bank
merely acknowledged receipt of PELAs
letter-offer. Furthermore, by processing,
Al-Amanah only meant that it will act on
the offer, i.e., it still has to evaluate
whether PELAs offer is acceptable. Until
and unless Al-Amanah accepts, there is as
yet no perfected contract of sale. Notably
here, the bank never signified its
approval or acceptance of the offer.
We cannot agree with the CAs
ratiocination that receipt of the amount,
coupled with the phrase written on the
four receipts as "deposit on sale of TCT
No. 138914," signified a tacit acceptance
by Al-Amanah of PELAs offer. For sure,
the money PELA gave was not in the
concept of an earnest money. Besides, as
testified to by then OIC Dalig, it is the
usual practice of Al-Amanah to require
submission of a bid deposit which is
acknowledged by way of bank receipts
before it entertains offers. Thus:
Atty. Bolcan:

Now, as far as you can remember, these


receipts state that these are partial
deposits, what do you mean by that?

Q: In this case since the plaintiffs made a


deposit x x x they were properly
entertained, correct?

WITNESS:

A: Yes because it is under negotiation,


now while their offer price is below the
selling price of the bank.61

A: x x x, we normally request an offeror


to submit or make deposit, actually the
bank does not entertain any offer without
any deposit and just like that, during my
time x x x in buying the property for those
interested the bank does not entertain any
offer unless they make a deposit.

The absence of a perfected contract of sale


was further buttressed by the testimony of
PELA Secretary Ramos on cross
examination, viz:
Atty. Rabor:

xxxx
Q: Why do you issue receipts as officerin-charge stating only partial deposits?
A: Because there was no sale, there was
no consu[m]mated sale, so any amount
which you will give as a deposit will be
accepted by the bank for the offer and that
if their offer will be disapproved we will
return the deposit because their offer was
very low and this might be disapproved by
the head office in Manila.60
xxxx

Since it was x x x hard earned money you


did not require the Amanah Bank when
you gave that P150,000.00 to reduce your
agreement into writing regarding the sale
of this property?
A: I insisted but she will not issue that.62
xxxx
Atty. Bolcan:
Now, on April 15, 1993 when the deposit
was made, you were present?

Atty. Taasan:

A: Yes, sir.

Do you confirm that based on the interest


of the plaintiff to acquire the property they
made a deposit with said bank, as
evidenced by the receipts that were shown
to you by your counsel, correct?

Q: Now, after making the deposit of One


Hundred Fifty Thousand (P150,000.00)
Pesos on April 15, 1993 did you not
request for the bank to execute a
document to prove that actually you are
buying the property?

A: Yes, sir.
Q: And according to you, the bank does
not entertain any offer to buy the property
without deposits?

A: I even said to the OIC or the manager


that maam, now that you have received
our money, where is our paper that we
were the ones to buy that property, sir.

A: Yes, sir.

Q: To whom are you referring to?

A: Febe Dalig, the OIC, sir.


Q: And this OIC Febe Dalig informed you
that the Offer on your part to buy the
property is subject for approval by the
head office in Manila, is that correct?

Q: Who will eventually approve the offer


made by the interested persons to buy the
property?
A: We have a committee in Manila to
approve the sale of the property.

A: Yes she told me that it would be subject


to approval in Manila x x x.

Q: Do you have any idea who will


approve the offer of the property?

Q: And later on you were informed by the


bank that your offer was not accepted by
the head office in Manila, is that correct?

A: I have no idea but the president, rather


it consists of the president I think and then
signed also by the vice-president and
some officers in the office, sir.

A: She did not inform us but we kept on


following it up with their office and she
told us that it did not arrive yet,
sir.63 (Emphasis supplied)
PELA Secretary Ramos testimony thus
corroborated OIC Daligs consistent stand
that it is the Head Office which will
decide whether Al-Amanah would accept
PELAs offer:
Atty. Bolcan:
And now, if there are interested persons
making offer x x x what would you do?
A: Well, we have to screen the offer
before we forward the offer to Manila for
approval because
Court:
What would you do before you forward
that to Manila?
A: We will be screening the offer x x x.
Atty. Bolcan:
And you said that it is referred to Manila?
A: Yes, sir.

xxxx
Q: Now, in case of offers of the property
of the bank, x x x the officer-in-charge of
the bank, Al-Amanah Bank branch,
usually refers this matter to the head office
in Manila?
A: Yes, sir.
Q: And it is the head office that will
decide whether the offer will be approved
or not?
A: Yes as head of the branch, we have to
forward the offer whether it was
acceptable or not.64
It is thus undisputed, and PELA even
acknowledges, that OIC Dalig made it
clear that the acceptance of the offer,
notwithstanding the deposit, is subject to
the approval of the Head Office.
Recognizing the corporate nature of the
bank and that the power to sell its real
properties is lodged in the higher
authorities,65 she never falsely represented
to the bidders that she has authority to sell
the banks property. And regardless of
PELAs insistence that she execute a
written agreement of the sale, she refused

and told PELA to wait for the decision of


the Head Office, making it clear that she
has no authority to execute any deed of
sale.
Contracts undergo three stages: "a)
negotiation which begins from the time
the prospective contracting parties
indicate interest in the contract and ends at
the moment of their agreement[; b)
perfection or birth, x x x which takes place
when the parties agree upon all the
essential elements of the contract x x x;
and c) consummation, which occurs when
the parties fulfill or perform the terms
agreed upon, culminating in the
extinguishment thereof."66
In the case at bench, the transaction
between Al-Amanah and PELA remained
in the negotiation stage. The offer never
materialized into a perfected sale, for no
oral
or
documentary
evidence
categorically proves that Al-Amanah
expressed
amenability
to
the
offered P300,000.00
purchase
price.
Before the lapse of the 1-year period
PELA had set to pay the remaining
balance, Al-Amanah expressly rejected
its offered purchase price, although it took
the latter around seven months to inform
the former and this entitled PELA to
award of damages.67 Al-Amanahs act of
selling the lot to another buyer is the final
nail in the coffin of the negotiation with
PELA. Clearly, there is no double sale,
thus, we find no reason to disturb the
consummated sale between Al-Amanah
and Robern.
At this juncture, it is well to stress that AlAmanahs Petition before this Court
docketed as G.R. No. 173437 was already
denied with finality on December 4, 2006.
Hence, we see no reason to disturb

paragraph 6 of the CAs Decision ordering


Al-Amanah to pay damages to PELA.