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Topic: Breach of Obligations >> Modes of Breach - Mora Solvendi (Vasquez v Ayala

Spouses Vasquez entered into a Memorandum of Agreement (MOA) with Ayala
Corporation for their share of stocks in Conduit Development. The main assets
of Conduit is the 49.9 hectare of land (divided into Village 1, 2 and 3 of the Don
Vicente Village) being developed by Conduit. The development was undertaken
by G.P. Construction and Development.
The MOA was signed on April 23, 1981, the Closing of the agreement was to
happen 4 weeks after the signing. According to the MOA, Ayala intends to
complete its development plan 3 years after the date of the agreement. Also,
that Ayala agreed to give the petitioners a first option to purchase the
developed lots at the prevailing market price at the time of the purchase.
After the execution of the MOA, Ayala suspended the work on Village 1. Ayala
then received a letter from Lancer General Builder, informing that they were
claiming the amount of P1,509,558.80 as the subcontractor of GP. On March 22,
1982, GP not being able to reach an amicable settlement with Lancer, Lancer
sued GP Construction, Conduit and Ayala. GP then filed a cross-claim against
Ayala. Both Lance and GP tried to enjoin Ayala for the development of the
property. The suit was only terminated on February 19, 1987, after Ayala paid
both GP and Lancer.
The Vasquez spouses, believing that Ayala was obligated to sell them the lots 3
years after the agreement, sent reminder letters of the approaching so-called
deadline. Also, Engr. Turla (an authorized agent of the Vasquez) sent a letter to
Ayala stating that they expected the development of Phase 1 to be completed
by Feb 19, 1990, 3 years after the legal problems with the previous contractor
was settled. By early 1990, Ayala was able to finish the developments and
offered the lots to the Vasquez at the prevailing price in 1990.
The Vasquez rejected the offer and insisted to pay the 1984 price (the original
date of the supposed 3 year develop period given by Ayala after the agreement)
Ayala argues that the MOA only gives the petitioners a first right of refusal and
can therefore not demand Ayala to sell the property at the 1984 price.
Issue: 1. WON Ayala committed or merely expressed intent to develop the
property within 3 years of the signing of the MOA
2. WON the MOA can properly be construed as an option contract or a right of
first refusal
3. WON the Vasquez spouse can compel Ayala to sell them the property at
the 1984 price
The MOA specifically said The Buyer hereby commits that it will develop the
Remaining Property into a first class residential subdivision of the same class as
its New Alabang Subdivision, and that it intends to complete the first phase
under its amended development plan within 3 years from the date of this
Agreement Also, under Art 1169 of the NCC, obligations whose fulfillment a day
certain has been fixed shall be demandable only when that day comes.
While the first phrase uses the word commits in reference to the development
itself, the word intends was used in relation to the development of the property
within 3 years. It is then unmistakable that Ayala merely expressed their
intention in completing the development within 3 years.
An option is a preparatory contract which one party grants another, for a fixed
period and at a determined price, the privilege to buy or sell, or to decide
whether or not to enter into a principal contract. In a right of first refusal, while
the object might be determinate, the exercise of the right would be independent
not only on the grantors eventual intention to enter into a binding juridical
relation with another but also on terms, including the price, that are yet to be
firmed up.
The Court held that the MOA is a mere right of first refusal and not an option
contract. The phrase at the prevailing market price at the time of the
purchase connotes that there is no definite period.
Since it has been established that the MOA is a mere right of first refusal, the
Vasquez spouses cannot compel Ayala to sell them the property at the 1984
price. The moment they rejected the offer, petitioners lost their right to
purchase the property.
The petition is Denied.