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Subject: Sales Ruling:

Topic: Sale distinguished from Piece of Work


Citation: Dino vs. CA, G.R. No. 113564, June 20, 2001 Yes. As this Court ruled in Engineering & Machinery Corporation v. Court of
Appeals, et al., "a contract for a piece of work, labor and materials may be
distinguished from a contract of sale by the inquiry as to whether the thing
Facts: transferred is one not in existence and which would never have existed but for
the order of the person desiring it. In such case, the contract is one for a piece
Petitioners spouses Dino, doing business under the trade name "Candy Claire of work, not a sale. On the other hand, if the thing subject of the contract
Fashion Garment" are engaged in the business of manufacturing and selling would have existed and been the subject of a sale to some other person even
shirts. Respondent Sio is part owner and general manager of a manufacturing if the order had not been given then the contract is one of sale. The contract
corporation doing business under the trade name "Universal Toy Master between the petitioners and respondent stipulated that respondent would
Manufacturing." manufacture upon order of the petitioners 20,000 pieces of vinyl frogs and
20,000 pieces of vinyl moose heads according to the samples specified and
Petitioners and respondent Sio entered into a contract whereby the latter approved by the petitioners.
would manufacture for the petitioners 20,000 pieces of vinyl frogs and 20,000
pieces of vinyl moose heads at P7.00 per piece in accordance with the Respondent Sio did not ordinarily manufacture these products, but only upon
sample approved by the petitioners. These frogs and moose heads were to be order of the petitioners and at the price agreed upon. Clearly, the contract
attached to the shirts petitioners would manufacture and sell. executed by and between the petitioners and the respondent was a contract
for a piece of work.
Respondent Sio delivered in several installments the 40,000 pieces of frogs and
moose heads. The last delivery was made on September 28, 1988. Petitioner
fully paid the agreed price. Subsequently, petitioners returned to respondent Subject: Sales
29,772 pieces of frogs and moose heads for failing to comply with the Topic: Requisite for a valid Price
approved sample. The return was made on different dates: the initial one on Citation: Mapalo vs. Mapalo, 17 SCRA 114
December 12, 1988 consisting of 1,720 pieces, the second on January 11,
1989, and the last on January 17, 1989.
Facts:
Petitioners then demanded from the respondent a refund of the purchase
price of the returned goods in the amount of P208, 404.00. As respondent Sio The spouses Miguel Mapalo and Candida Quiba were registered owners of a
refused to pay, petitioners filed on July 24, 1989 an action for collection of a 1,635-square-meter residential land with OCT No. 46503. Said spouses-owners,
sum of money in the Regional Trial Court of Manila, Branch 38 where it ruled in out of love and affection for Maximo Mapalo a brother of Miguel who was
favor of the petitioners. about to get married decided to donate the eastern half of the land to
him. O.C.T. No. 46503 was delivered. However, on October 15, 1936, they were
Respondent Sio sought recourse in the Court of Appeals. In its April 30, 1993 deceived into signing a deed of absolute sale over the entire land in his favor.
decision, the appellate court affirmed the trial court decision. Respondent Their signatures thereto were procured by fraud, that is, they were made to
then filed a Motion for Reconsideration and a Supplemental Motion for believe by Maximo Mapalo and by the attorney who acted as notary public
Reconsideration alleging therein that the petitioners' action for collection of who "translated" the document, that the same was a deed of donation in
sum of money based on a breach of warranty had already prescribed. On Maximo's favor covering one-half (the eastern half) of their land. Although the
January 24, 1994, the respondent court reversed its decision and dismissed document of sale stated a consideration of Five Hundred (P500.00) Pesos, the
petitioners' Complaint for having been filed beyond the prescriptive period. aforesaid spouses did not receive anything of value for the land.

On March 15, 1938, Maximo Magpalo registered the deed of sale in his favor
Issue: and obtained in his name TCT No. 12829 over the entire land. Thirteen years
later, he sold for P2,500.00 said entire land in favor of the Narcisos. The sale
Whether or not the contract executed by and between the petitioners and was in turn registered and TCT No. 11350 was issued for the whole land in their
the respondent was a contract for a piece of work. names.
On March 15, 1938, not known to them, Maximo Mapalo registered the deed
of sale in his favor and obtained in his name TCT No. 12829 over the entire Whether or not the sale of the entire land in favor of Maximo Mapalo is void?
land. On October 20, 1951, he sold for P2,500.00 said entire land in favor of the
Narcisos. The sale to the Narcisos was in turn registered on November 5, 1951
and TCT No. 11350 was issued for the whole land in their names. Ruling:

The Narcisos took possession only of the eastern portion of the land in 1951, Yes. The rule under the Civil Code, again be it the old or the new, is that
after the sale in their favor was made. On February 7, 1952 they filed suit contracts without a cause or consideration produce no effect whatsoever.
against the Mapalo and Quiba spouses in the CFI of Pangasinan (Civil Case Nonetheless, under the Old Civil Code, the statement of a false consideration
No. 1191) to be declared owners of the entire land, for possession of its renders the contract voidable; unless it is proven that it is supported by
western portion; for damages; and for rentals. another real and licit consideration. And it is further provided by the Old Civil
Code that the action for annulment of a contract on the ground of falsity of
The Mapalo spouses filed their answer with a counterclaim on March 17, 1965, consideration shall last four years, the term to run from the date of the
seeking cancellation of the TCT of the Narcisos as to the western half of the consummation of the contract.
land, on the grounds that their (Mapalo spouses) signatures to the deed of
sale of 1936 was procured by fraud and that the Narcisos were buyers in bad Accordingly, since the deed of sale of 1936 is governed by the Old Civil Code,
faith. They asked for reconveyance to them of the western portion of the land it should be asked whether its case is one wherein there is no consideration, or
and issuance of a TCT in their names as to said portion. They also filed their one with a statement of a false consideration. If the former, it is void and
own complaint in the CFI of Pangasinan against Narcisos and Maximo inexistent; if the latter, only voidable, under the Old Civil Code. As observed
Mapalo. They asked that the deeds of sale of 1936 and of 1951 over the land earlier, the deed of sale of 1936 stated that it had for its consideration Five
in question be declared null and void as to the western half of said land. Hundred (P500.00) Pesos. In fact, however, said consideration was totally
absent. The problem, therefore, is whether a deed which states a
CFI Ruling: consideration that in fact did not exist, is a contract without consideration,
and therefore void ab initio, or a contract with a false consideration, and
The CFI dismissed the complaint in Civil Case No.1191, declared TCT No. 12829 therefore, at least under the Old Civil Code, voidable.
issued in favor of Maximo Mapalo as regards the western half portion of the
land covered therein as null and void and without legal force and effect, and Therefore, the ruling of this Court in Ocejo, Perez & Co. vs. Flores, 40 Phil. 921, is
declared TCT No. 11350 in the names of the Narcisos insofar as the western squarely applicable herein. In that case we ruled that a contract of purchase
half portion of the land covered therein is concerned as null and void. and sale is null and void and produces no effect whatsoever where the same
is without cause or consideration in that the purchase price which appears
CA Ruling: thereon as paid has in fact never been paid by the purchaser to the vendor.
The CA reversed the judgment of the CFI, solely on the ground that the
consent of the Mapalo spouses to the deed of sale of 1936 having been Needless to add, the inexistence of a contract is permanent and incurable
obtained by fraud, the same was voidable, not void ab initio, and, therefore, and cannot be the subject of prescription.
the action to annul the same, within four years from notice of the fraud, had
long prescribed. It reckoned said notice of the fraud from the date of
registration of the sale on March 15, 1938. The CFI and the CA are therefore Subject: Sales
unanimous that the spouses Mapalo and Quiba were definitely the victims of Topic: Requisite for a valid Price
fraud. It was only on prescription that they lost in the CA. Citation: Bagnas vs. CA, 176 SCRA 159
Hence, this petition.
Facts:
The petitioners contended that the document purporting to sell the entire land
in favor of Maximo Mapalo, is void, not merely voidable, as to the western Hilario Mateum of Kawit, Cavite, died on 11 March 1964, single, without
portion of the land for being absolutely simulated or fictitious. ascendants or descendants, and survived only by collateral relatives, of whom
Isaac, Encarnacion, Silvestre, Maximina, and Sixto Bagnas, and Agatona
Encarnacion, his first cousins, were the nearest. Mateum left no will, no debts,
Issue: and an estate consisting of 29 parcels of land in Kawit and Imus, Cavite, 10 of
which are involved in the case. On 3 April 1964, Rosa L. Retonil, Teofilo Issue:
Encarnacion and Jose B. Nambayan, themselves collateral relatives of
Mateum though more remote in degree, registered with the Registry of Deeds Whether or not there was a valid consideration and contract of sale.
for the Province of Cavite 2 deeds of sale purportedly executed by Mateum in
their favor covering 10 parcels of land. Both deeds were in Tagalog, save for
the English descriptions of the lands conveyed under one of them; and each Ruling:
recited the reconsideration of the sale to be P1, services rendered and to be
rendered for Mateums benefit. One deed was dated 6 February 1963 and No. Under the Civil Code of the Philippines, Article 1409, paragraph 3,
covered 5 parcels of land, and the other was dated 4 March 1963, covering 5 Contracts, with a cause that did not exist at the time of the transaction are in
other parcels, both, therefore, antedating Mateums death by more than a existent and void from the beginning. The same is true of contracts stating a
year. It is asserted by the Bagnas, et.al., but denied by Retonil, et.al., that said false cause (consideration) unless the persons interested in upholding the
sales notwithstanding, Mateum continued in the possession of the lands contract should prove that there is another true and lawful consideration
purportedly conveyed until his death, that he remained the declared owner therefor. (Article 1353).
thereof and that the tax payments thereon continued to be paid in his name.
Whatever the truth, however, is not crucial; what is not disputed is that on the The Armentia ruling does not reject, and is not to be construed as rejecting,
strength of the deeds of sale, Retonil, et.al. were able to secure title in their the Concepcion and Solis rulings (Concepcion vs. Sta. Ana, 87 Phil. 787 and
favor over 3 of the 10 parcels of land conveyed thereby. Solis vs. Chua Pua Hermanos, 50 Phil. 536) as outrightly erroneous. On the
contrary, those rulings undoubtedly read and applied correctly the law extant
On 22 May 1964, Bagnas et.al. commenced suit against Retonil, et.al. in the in their time: Article 1276 of the Civil Code of 1889 under which the statement
CFI Cavite, seeking annulment of the deeds of sale as fictitious, fraudulent or of a false cause in a contract rendered it voidable only, not void ab initio. The
falsified, or, alternatively, as donations void for want of acceptance fact that the law as it is now (during the time of Armentia) no longer deems
embodied in a public instrument. Claiming ownership pro indiviso of the lands contracts with a false cause, or which are absolutely simulated or fictitious,
subject of the deeds by virtue of being intestate heirs of Hilario Mateum, merely voidable, but declares them void, i.e., inexistent (nulo) unless it is
Bagnas, et. al. prayed for recovery of ownership and possession of said lands, shown that they are supported by another true and lawful cause or
accounting of the fruits thereof and damages. Although the complaint consideration.
originally sought recovery of all the 29 parcels of land left by Mateum, at the
pre-trial the parties agreed that the controversy be limited to the 10 parcels Upon the consideration alone that the apparent gross, not to say enormous,
subject of the questioned sales, and the Trial Court ordered the exclusion of disproportion between the stipulated price in each deed of P1 plus
the 19 other parcels from the action. Of the 10 parcels which remained in unspecified and unquantilled services and the undisputably valuable real
litigation, 9 were assessed for purposes of taxation at values aggregating estate allegedly sold (worth at least P10,500.00 going only by assessments for
P10,500.00. The record does not disclose the assessed value of the tenth tax purposes which, it is well-known, are notoriously low indicators of actual
parcel, which has an area of 1,443 sq.ms. Retonil, et.al. denied the allegations. value) plainly and unquestionably demonstrates that they state a false and
After Bagnas, et.al. had presented their evidence, Retonil, et.al. filed a motion fictitious consideration, and no other true and lawful cause having been
for dismissal in effect, a demurrer to the evidence reasserting the shown, the Court finds both said deeds, insofar as they purport to be sales, not
defense set up in their answer that Bagnas, et.al., as mere collateral relatives merely voidable, but void ab initio.
of Hilario Mateum had no right to impugn the latters disposition of his
properties by means of the questioned conveyances and submitting,
additionally, that no evidence of fraud tainting said transfers had been Subject: Sales
presented. The Trial Court granted the motion to dismiss, holding on the Topic: Requisite for a valid Price
authority of Armentia vs. Patriarca, that Bagnas, et.al., as mere collateral Citation: Velasco vs. CA 51 SCRA 439
relatives, not forced heirs, of Hilario Mateum, could not legally question the
disposition made by said deceased during his life time, regardless of whether,
as a matter of objective reality, said dispositions were valid or not; and that Facts:
Bagnas, et.al.s evidence of alleged fraud was insufficient, the fact that the
deeds of sale each stated a consideration of only P1 not being in itself A suit for specific performance filed by Lorenzo Velasco against the
evidence of fraud or simulation. Magdalena Estate (Civil Case 7761) on the allegation that on 29 November
1962, Velasco and the Magdalena Estate had entered into a contract of sale
by virtue of which Magdalena Estate offered to sell Velasco, to which the
latter agreed to buy, a parcel of land with an area of 2,059 sq.ms. (Lot 15, 1969, the Velascos allegedly sent to the CA and to counsel for Magdalena
Block 7, Psd-6129,) located at No. 39 corner 6th Street and Pacific Avenue, Estate, by registered mail allegedly deposited personally by its mailing clerk,
New Manila, Quezon City, for the total purchase price of P100,000.00. Velasco one Juanito D. Quiachon, at the Makati Post Office, a Motion for Extension of
alleged that he was to give a down payment of P10,000.00 to be followed by Time to File Printed Record on Appeal. The extension of time was sought on
P20,000.00 and the balance of P70,000.00 would be paid in installments, the the ground of mechanical failures of the printing machines, and the
equal monthly amortization of which was to be determined as soon as the voluminous printing job now pending with the Vera Printing Press.
P30,000.00 down payment had been completed. He further alleged that he
paid the downpayment on 29 November 1962 (Receipt 207848) and that On 10 February 1969, the Velascos filed their printed record on appeal in the
when on 8 January 1964 he tendered to the payment of the additional CA. Thereafter, the Velascos received from Magdalena Estate a motion filed
P20,000.00 to complete the P30,000.00, Magdalena Estate refused to accept on 8 February 1969 praying for the dismissal of the appeal on the ground that
and that eventually it likewise refused to execute a formal deed of sale the Velascos had failed to file their printed record on appeal on time. The CA,
obviously agreed upon. Velasco demanded P25,000.00 exemplary damages, on 25 February 1969, denied the Magdalena Estates motion to dismiss,
P2,000.00 actual damages and P7,000.00 attorneys fees. Magdalena Estate granted the Velascos motion for 30-day extension from 15 January 1969, and
denied that it has had any direct-dealings, much less, contractual relations admitted the latters printed record on appeal. On 11 March 1969,
with the Lorenzo Velasco regarding the property in question, and contends Magdalena Estate prayed for a reconsideration of said resolution. The
that the alleged contract described in the document attached to the Velascos opposed the motion for reconsideration and submitted to the CA
complaint is entirely unenforceable under the Statute of Frauds; that the truth the registry receipts (0215 and 0216), both stamped 15 January 1969, which
of the matter is that a portion of the property in question was being leased by were issued by the receiving clerk of the registry section of the Makati Post
a certain Socorro Velasco who, on 29 November 1962, went to the office of Office covering the mails for the disputed motion for extension of time to file
Magdalena Estate indicated her desire to purchase the lot; that the latter their printed record on appeal and the affidavit of its mailing clerk. After
indicated its willingness to sell the property to her at the price of P100,000.00 several other pleadings and manifestations relative to the motion for
under the condition that a down payment of P30,000.00 be made, P20,000.00 reconsideration and on 28 June 1969, the CA promulgated a resolution
of which was to be paid on 31 November 1962, and that the balance of granting the motion for reconsideration and ordered Atty. Patrocinio Corpuz
P70,000.00 including interest at 9% per annum was to be paid on installments (Velascos counsel) to show cause within 10 days from notice why he should
for a period of 10 years at the rate of P5,381.32 on June 30 and December of not be suspended from the practice of his profession for deceit, falsehood
every year until the same shall have been fully paid; that on 29 November and violation of his sworn duty to the Court, and directed the Provincial Fiscal
1962, Socorro Velasco offered to pay P10,000.00 as initial payment instead of of Rizal to conduct the necessary investigation against Juanito D. Quiachon of
the agreed P20,000.00 but because the amount was short of the alleged the Salonga, Ordoez, Yap, Sicat & Associates Law Office and Flaviano O.
P20,000.00 the same was accepted merely as deposit and upon request of Malindog, a letter carrier at the Makati Post Office, and to file the appropriate
Socorro Velasco the receipt was made in the name of her brother-in-law criminal action against them (it appears that Malindog postmark the letters 15
,Lorenzo Velasco; that Socorro Velasco failed to complete the down payment January 1969 on 7 February 1969 at the request of Quiachon). On 5
of P30,000.00 and neither has she paid any installments on the balance of September 1969, the CA promulgated another resolution, denying the motion
P70,000.00 up to the present time; that it was only on 8 January 1964 that for reconsideration of the Velascos but, at the same time, accepting as
Socorro Velasco tendered payment of P20,000.00, which offer Magdalena satisfactory the explanation of Atty. Corpuz why he should not be suspended
Estate refused to accept because it had considered the offer to sell rescinded from the practice of the legal profession.
on account of her failure to complete the down payment on or before 31
December 1962. On 3 November 1968, the CFI Quezon City rendered a On 20 September 1969, the First Assistant Fiscal of Rizal notified the Court of
decision, dismissing the complaint filed by Lorenzo and Socorro Velasco Appeals that he had found a prima facie case against Malindog and would
against the Magdalena Estate, Inc. for the purpose of compelling specific file the corresponding information for falsification of public documents against
performance by Magdalena Estate of an alleged deed of sale of a parcel of him, but dismissed the complaint against Quiachon for lack of sufficient
residential land in favor of the Velascos. The basis for the dismissal of the evidence.
complaint was that the alleged purchase and sale agreement was not
perfected. A petition for certiorari and mandamus was filed by the Velascos against the
resolution of the Court of Appeals dated 28 June 1969 in CA-GR 42376, which
On 18 November 1968, after the perfection of their appeal to the Court of ordered the dismissal of the appeal interposed by them from a decision of the
Appeals, the Velascos received a notice from the said court requiring them to CFI Quezon City on the ground that they had failed seasonably to file their
file their printed record on appeal within 60 days from receipt of said notice. printed record on appeal.
This 60-day term was to expire on 17 January 1969. Allegedly on 15 January
25, 1967. As owner thereof, she declared the land for taxation purposes. She
Issue: religiously paid its realty taxes. She mortgaged the land to Aklan Development
Bank to secure payment of a loan.
Whether or not there was a perfected contract of sale.
In 1967, defendant Glenda and her father, Melquiades Barraca came to her
residence asking for help. They were borrowing one-half of land donated to
Ruling: her so that defendant Glenda could obtain a loan from the bank to buy a
dental chair. They proposed that she signs an alleged sale over the said
No contract of sale was perfected because the minds of the parties did not portion of land.
meet in regard to the manner of payment. The material averments
contained in Velascos complaint themselves disclose a lack of complete Acceding to their request, she signed on August 12, 1967 a prepared Deed of
agreement in regard to the manner of payment of the lot in question. The Absolute Sale which they brought along with them, covering the land in
complaint states pertinently that plaintiff and defendant further agreed that question without any money involved. There was no monetary consideration
the total down payment shall be P30,000.00, including the P10,000.00 partial in exchange for the Deed. She did not also appear before the Notary Public
payment mentioned in paragraph 3 hereof, and that upon completion of the Edilberto Miralles when the Deed was allegedly acknowledged by her on
said down payment of P30,000.00, the balance of P70,000.00 shall be paid by November 9, 1967.
the plaintiff to the defendant in 10 years from November 29, 1962; and that
the time within which the full down payment of the P30,000.00 was to be A month thereafter, plaintiff inquired from her uncle, Melquiades Barracca if
completed was not specified by the parties but the defendant was duly they have obtained the loan. The latter informed her that they did not push
compensated during the said time prior to completion of the down payment through with the loan because the bank's interest therefore was high. With her
of P30,000.00 by way of lease rentals on the house existing thereon which was uncle's answer, plaintiff inquired about the Deed of Absolute Sale. Her uncle
earlier leased by defendant to the plaintiffs sister-in-law, Socorro J. Velasco, replied that they crumpled the Deed of Absolute Sale and threw it away.
and which were duly paid to the defendant by checks drawn by plaintiff. The Knowing that the Deed of Absolute Sale was already thrown away, plaintiff
Velascos themselves admit that they and Magdalena Estate still had to meet did not bother anymore about the document she thought that there was no
and agree on how and when the down payment and the installment more transaction. Besides, she is also in actual possession of the land and has
payments were to be paid. Such being the situation, it cannot be said that a even mortgaged the same.
definite and firm sales agreement between the parties had been perfected
over the lot in question. In 1974, plaintiff transferred her residence from Nabas, Aklan, to Antipolo City
where she has been residing up to the present time. From the time she signed
A definite agreement on the manner of payment of the purchase price is an the Deed of Absolute Sale in August, 1967 up to the present time of her
essential element in the formation of a binding and enforceable contract of change of residence to Antipolo City, defendant Glenda never demanded
sale. In the present case, the Velascos delivered to Magdalena Estate the sum actual possession of the land in question, except when the latter filed on May
of P10,000 as part of the downpayment that they had to pay cannot be 30, 1996 a case for unlawful detainer against her. Following the filing of the
considered as sufficient proof of the perfection of any purchase and sale ejectment case, she learned for the first time that the Deed of Absolute Sale
agreement between the parties under article 1482 of the new Civil Code, as was registered on May 25, 1991 and was not thrown away contrary to what
the Velascos themselves admit that some essential matter (the terms of Melquiades Barraca told her. Moreover, she and Melquiades Barraca did not
payment) still had to be mutually covenanted. talk anymore about the Deed of Absolute Sale. That was also the first time she
learned that the land in question is now declared for taxation purposes in the
name of defendant Glenda.
Subject: Sales
Topic: Requisite for a valid Price On May 30, 1996, herein defendant Glenda filed a complaint for unlawful
Citation: Formaran vs. Ong, 700 SCRA 758 detainer against the plaintiff before the 7thMunicipal Circuit Trial Court of
Ibajay-Nabas, Ibajay, Aklan, docketed there in as Civil Case No. 183. The case
was decided on September 2, 1997, in favor of herein defendant Glenda;
Facts: ordering the herein plaintiff to vacate the land in question.

Petitioner owns a parcel of land which was donated to her intervivosby [her]
uncle and aunt, spouses Melquiades Barraca and Praxedes Casidsid on June
Petitioner filed on action for annulment of the Deed of Sale (Civil Case No.
5398) against respondents before the Regional Trial Court (RTC), of Kalibo, While the Deed of Absolute Sale was notarized, it cannot justify the conclusion
Aklan, Branch 5. that the sale is a true conveyance to which the parties are irrevocably and
undeniably bound. Although the notarization of Deed of Absolute Sale, vests
On December 3, 1999, the trial court rendered a Decision in favor of petitioner in its favor the presumption of regularity, it does not validate nor did make
and against the respondent by declaring the Deed of Absolute Sale null and binding an instrument never intend, in the first place, to have any binding
void for being an absolutely simulated contract and for want of consideration; legal effect upon the parties thereto.
declaring the petitioner as the lawful owner entitled to the possession of the
land in question; as well as ordering (a) the cancellation of respondent
Glenda's Tax Declaration No. 1031, and (b) respondents to pay petitioner Subject: Sales
P25,000.00 for attorney's fees and litigation expenses. Topic: Perfection of Contract of Sale
Citation: Xentrex Automotive Inc. vs. CA, G.R. No. 121559 (1998)
Respondents coursed an appeal to the CA. The CA, on August 30, 2007,
reversed and set aside the Decision of the trial court and ordered petitioner to
vacate the land in question and restore the same to respondents. Facts:
Hence, the present petition. Petitioner is a dealer of motor vehicles. On October 25, 1991, private
respondents went to petitioner to purchase a brand new car, a 1991 Nissan
Sentra Super Saloon A/T model, valued at P494,000.00. Private respondents,
Issue: made an initial deposit of P50,000.00; petitioner issued the corresponding
official receipt (O.R. No. 6504). The balance was to be paid thru bank
Whether or not there was a valid contract of sale. financing. Pending the processing of their application for financing, private
respondents paid an additional P200,000.00. to petitioner which was covered
by another receipt (O.R. NO. 6547). Eventually, due to the slow pace in the
Ruling: processing of their application for financing, private respondents decided to
pay the remaining balance on November 6, 1991 by tendering a check in the
No. The Court believes and so holds that the subject Deed of Sale is indeed amount of P250,000.00. As it turned out however, to private respondent's
simulated, as it is: (1) totally devoid of consideration; (2) it was executed on shock and disppointment, the car had already been sold to another buyer
August 12, 1967, less than two months from the time the subject land was without their knowledge, prompting them to send a demand letter to
donated to petitioner on June 25, 1967 by no less than the parents of petitioner asking the latter to comply with its obligation to deliver the car. Their
respondent Glenda Ong; (3) on May 18, 1978, petitioner mortgaged the land demand inheeded, private respondents (plaintiffs below) filed a suit for
to the Aklan Development Bank for a P23,000.00 loan; (4) from the time of the breach of contract and damages before the Regional Trial Court of Dagupan
alleged sale, petitioner has been in actual possession of the subject land; (5) City, Branch 42. Denying any liability, petitioner (defendant below) alleged
the alleged sale was registered on May 25, 1991 or about twenty four (24) that the complaint stated no cause of action. After trial, judgment was
years after execution; (6) respondent Glenda Ong never introduced any rendered by the trial court in private respondents' favor. On appeal by
improvement on the subject land; and (7) petitioner's house stood on a part of petitioner, theCourt of Appeals affirmed the decision of the trial court.
the subject land. These are facts and circumstances which may be
considered badges of bad faith that tip the balance in favor of petitioner. It is petitioner's main contention that both the trial and the appellate courts
erred in adjusting it liable for breach of contract and damages. Petitioner
The amplitude of foregoing undisputed facts and circumstances clearly shows argues that there was no perfected contract of sale between the parties due
that the sale of the land in question was purely simulated. It is void from the to private respondents' failure to comply with their obligation to pay the
very beginning (Article 1346, New Civil Code). If the sale was legitimate, purchase price of the car in full. Thus, petitioner asserts that it has no obligation
defendant Glenda should have immediately taken possession of the land, to deliver the car to private respondents and therefore could not be held
declared in her name for taxation purposes, registered the sale, paid realty liable for breach of contract of sales as confirmed by the findings of the trial
taxes, introduced improvements therein and should not have allowed plaintiff court and in turn affirmed by the court of Appeals; hence, petitioner should
to mortgage the land. These omissions properly militated against defendant be held liable for breach of contract for failing to deliver the car to them.
Glenda's submission that the sale was legitimate and the consideration was
paid.
Issue: of Sabesaje, who died in 1956. They never received their agreed 10% and 15%
commission on the sales of copra and abaca, respectively. Sabesajes suit,
Whether or not there was a perfected contract of sale. they countered, was intended merely to harass, preempt and forestall
Dalions threat to sue for these unpaid commissions. The trial court rendered its
decision on 17 January 1984, ordering Dalion to deliver to Sabesaje the parcel
Ruling: of land subject of the case and to execute the corresponding formal deed of
conveyance in a public document in favor of Sabesaje (or in case of default,
Yes. Undoubtedly, there was a perfected contract of sale between the the deed shall be executed in their behalf by the Provincial Sheriff or his
petitioner and private respondents as confirmed by the trial court when it deputy), ordering Dalion to pay Sabesaje the amount of P2,000 as attorney
found that "by accepting a deposit of P50,000.00 and by pulling out a unit of fees and P500 as litigation fees, and to pay the costs.
Philippine Nissan 1.6 cc Sentra Automatic (Flamingo red), defendant obliged
itself to sell to the plaintiffs a determinate thing of a price certain in money From the adverse decision of the trial court, Dalion appealed, assigning errors
which was P494,000.00". Resultantly, petitioner committed a breach of some of which, however, were disregarded by the appellate court, not
contract when it allowed the unit in question to be sold to another buyer to having been raised in the trial court. On 26 May 1987, the Court of Appeals
the prejudice of private respondents. affirmed in toto the ruling of the trial court, upholding the validity of the sale of
a parcel of land by Segundo Dalion in favor of Ruperto Sabesaje, Jr. Hence,
Article 1475 of the New Civil Code is very explicit the "the contract of sale is the petition.
perfected at the moment there is a meeting of the minds upon the thing
which is the object of the contract and upon the price. From that moment,
Issue:
the parties may reciprocally demand performance, subject to the provision of
the law governing the form of contracts." Contrary, therefore, to petitioner's Whether or not public document is necessary for the perfection of the
assertion, both the trial court and the Court of Appeals did not commit contract of sale.
reversible error in declaring that there was indeed a perfected contract of
sale and that petitioner breached the same when it failed to deliver the car to
private respondents. Ruling:

No. The provision of Article 1358 on the necessity of a public document (i.e.
acts and contracts which have for their object the creation, transmission,
Subject: Sales modification or extinction of real rights over immovable property must appear
Topic: Perfection of Contract of Sale in a public instrument) is only for convenience, not for validity or
Citation: Dalion vs. CA, G.R. No. 78903, February 28, 1990 enforceability. It is not a requirement for the validity of a contract of sale of a
parcel of land that this be embodied in a public instrument.

Facts: A contract of sale is a consensual contract, which means that the sale is
perfected by mere consent. No particular form is required for its validity. Upon
On 28 May 1973, Ruperto Sabesaje Jr. sued to recover ownership of a parcel perfection of the contract, the parties may reciprocally demand performance
of land (located at Panyawan, Sogod, Southern Leyte; TCT 11148, with an (Art. 1475) i.e., the vendee may compel transfer of ownership of the object of
area of 8947 sq.ms., assessed at P180), based on a private document of the sale, and the vendor may require the vendee to pay the thing sold (Art.
absolute sale, dated 1 July 1965, allegedly executed by Segundo Dalion, who, 1458).
however denied the fact of sale, contending that the document sued upon is
fictitious, his signature thereon, a forgery, and that subject land is conjugal A sale of a real property may be in a private instrument, but that contract is
property, which he and his wife (Epifania Sabesaje-Dalion) acquired in 1960
valid and binding between the parties upon its perfection. And a party may
from Saturnina Sabesaje as evidenced by the Escritura de Venta Absoluta.
compel the other party to execute a public instrument embodying their
The spouses denied claims of Sabesaje that after executing a deed of sale
over the parcel of land, they had pleaded with Sabesaje, their relative, to be contract affecting real rights once the contract appearing in a private
allowed to administer the land because Dalion did not have any means of instrument has been perfected.
livelihood. They admitted, however, administering since 1958, 5 parcels of land
in Sogod, Southern Leyte, which belonged to Leonardo Sabesaje, grandfather
claimed that she could only be entitled to the return of any amount received
Subject: Sales by respondent spouses. In the alternative, they argued that petitioner had lost
Topic: Option Money/Option Contract and Earnest Money her option to buy the property for failure to comply with the terms and
Citation: Limson vs. CA, 357 SCRA 209 conditions of the agreement as embodied in the receipt issued therefor.

Facts: Issue:

Petitioner Lourdes Ong Limson alleged that in July 1978 respondent spouses Whether or not there was a perfected contract to sell between petitioner and
Lorenzo de Vera and Asuncion Santos-de Vera, through their agent Marcosa respondent spouses.
Sanchez, offered to sell to petitioner a parcel of land consisting of 48, 260
square meters, more or less, situated in Barrio San Dionisio, Paraaque, Metro
Manila; that respondent spouses informed her that they were the owners of Ruling:
the subject property; that on 31 July 1978 she agreed to buy the property at
the price of P34.00 per square meter and gave the sum of P20,000.00 to No. A scrutiny of the facts as well as the evidence of the parties
respondent spouses as "earnest money;" that respondent spouses signed a overwhelmingly leads to the conclusion that the agreement between the
receipt therefor and gave her a 10-day option period to purchase the parties was a contract of option and not a contract to sell.
property; that respondent Lorenzo de Vera then informed her that the subject
property was mortgaged to Emilio Ramos and Isidro Ramos; that respondent An option, as used in the law of sales, is a continuing offer or contract by
Lorenzo de Vera asked her to pay the balance of the purchase price to which the owner sitpulates with another that the latter shall have the right to
enable him and his wife to settle their obligation with the Ramoses. buy the property at a fixed price within a time certain, or under, or in
compliance with, certain terms and conditions, or which gives to the owner of
Petitioner also averred that she agreed to meet respondent spouses and the the property the right to sell or demand a sale. It is also sometimes called an
Ramoses on 5 August 1978 at the Office of the Registry of deeds of Makati, "unaccepted offer." An option is not itself a purchase, but merely secures the
Metro Manila, to consummate the transaction but due to the failure of privilege to buy. It is not a sale of property but a sale of right to purchase. It is
respondent Asuncion Santos-de Vera and the Ramoses to appear, no simply a contract by which the owner of property agrees with another person
transaction was formalized. In a second meeting scheduled on 11 August that he shall have the right to buy his property at a fixed price within a certain
1978 she claimed that she was willing and ready to pay the balance of the time. He does not sell his land; he does not then agree to sell it; but he does
purchase price but the transaction again did not materialize as respondent not sell something, i.e., the right or privilege to buy at the election or option of
spouses failed to pay the back taxes of subject property. Subsequently, on 23 the other party. Its distinguishing characteristic is that it imposes no binding
August 1978 petitioner allegedly gave respondent Lorenzo de Vera three (3) obligation on the person holding the option, aside from the consideration for
checks in the total amount of P36, 170.00 for the settlement of the back taxes the offer. Until acceptance, it is not, properly speaking, a contract, and does
of the property and for the payment of the quitclaims of the three (3) tenants not vest, transfer, or agree to transfer, any title to, or any interest or right in the
of subject land. The amount was purportedly considered part of purchase subject matter, but is merely a contract by which the owner of the property
price and respondent Lorenzo de Vera signed the receipts therefor. gives the optionee the right or privilege of accepting the offer and buying the
property on certain terms.
Petitioner alleged that on 5 September 1978 she was surprised to learn from
the agent of respondent spouses that the property was the subject of a The consideration of P20,000.00 paid by petitioner to respondent spouses was
negotiation for the sale to respondent Sunvar Realty Development referred to as "earnest money." However, a careful examination of the words
Corporation (SUNVAR) represented by respondent Tomas Cuenca, Jr. On 15 used indicated that the money is not earnest money but option money.
September 1978 petitioner discovered that although respondent spouses "Earnest money" and "option money" are not the same but distinguished thus;
purchased the property from the Ramoses on 20 March 1970 it was only on 15 (a) earnest money is part of the purchase price, while option money is the
September 1978 that TCT No. S-72946 covering the property was issued to money given as a distinct consideration for an option contract; (b) earnest
respondent spouses. money given only where there is already a sale, while option money applies to
a sale not yet perfected; and, (c) when earnest money is given, the buyer is
On the other hand, respondents SUNVAR and Cuenca, alleged that petitioner bound to pay the balance, while when the would-be buyer gives option
was not the proper party in interest and/or had no cause of action against money, he is not required to buy, but may even forfeit it depending on the
them. But, even assuming that petitioner was the proper party in interest, they terms of the option. There is nothing in the Receipt which indicates that the
P20,000.00 was part of the purchase price. Moreover, it was not shown that
there was a perfected sale between the parties where earnest money was A complaint for specific performance was filed against the petitioner and the
given. latter filed a motion to dismiss the complaint because the alleged exclusive
option of the respondents lacked a consideration separate and distinct from
Doubtless, the agreement between respondent spouses and petitioner was the purchase price and was thus unenforceable; the complaint did not allege
an "option contract" or what is sometimes called an "unaccepted offer." a cause of action because there was no meeting of the mind between the
During the option period the agreement was not converted into a bilateral parties and therefore the contact of sale was not perfected.
promise to sell and to buy where both respondent spouses and petitioner
were then reciprocally bound to comply with their respective undertakings as The trial court granted the petitioners motion and dismissed the action. The
petitioner did not timely, affirmatively and clearly accept the offer of respondents filed a motion for reconsideration but were denied by the trial
respondent spouses. court. The respondents elevated the matter to the Court of Appeals and the
latter reversed the decision of the trial court and held that a valid contract of
On 11 August 1978 the option period expired and the exclusive right of sale had been complied with.
petitioner to buy the property of respondent spouses ceased. The subsequent
meetings and negotiations, specifically on 11 and 23 August 1978, between Petitioner filed a motion for reconsideration but was denied.
the parties only showed the desire of respondent spouses to sell their property
to petitioner. Also, on 14 September 1978 when respondent spouses sent a Issue:
telegram to petitioner demanding full payment of the purchase price on even
date simply demonstrated an inclination to give her preference to buy subject Whether or not there was a perfected contract of sale between the parties.
property. Collectively, these instances did not indicate that petitioner still had
the exclusive right to purchase subject property. Verily, the commencement
of negotiations between respondent spouses and respondent SUNVAR clearly Ruling:
manifested that their offer to sell subject property to petitioner was no longer
The decision of the appellate court was reversed and the respondents
exclusive to her. complaint was dismissed.

It is not the giving of earnest money, but the proof of the concurrence of all
Subject: Sales the essential elements of the contract of sale which establishes the existence
Topic: Option Money/Option Contract and Earnest Money of a perfected sale.
Citation: San Miguel Properties vs. Huang, 336 SCRA 737
The P1 million earnest-deposit could not have been given as earnest money
because at the time when petitioner accepted the terms of respondents
Facts: offer, their contract had not yet been perfected. This is evident from the
following conditions attached by respondents to their letter.
San Miguel Properties offered two parcels of land for sale and the offer was
made to an agent of the respondents. An earnest-deposit of P1 million was The first condition for an option period of 30 days sufficiently shows that a sale
offered by the respondents and was accepted by the petitioners authorized was never perfected. As petitioner correctly points out, acceptance of this
officer subject to certain terms. condition did not give rise to a perfected sale but merely to an option or an
accepted unilateral promise on the part of respondents to buy the subject
Petitioner, through its executive officer, wrote the respondents lawyer that properties within 30 days from the date of acceptance of the offer. Such
because the parties failed to agree on the terms and conditions of the sale option giving respondents the exclusive right to buy the properties within the
despite the extension granted by the petitioner, the latter was returning the period agreed upon is separate and distinct from the contract of sale which
earnest-deposit. the parties may enter. All that respondents had was just the option to buy the
properties which privilege was not, however, exercised by them because
The respondents demanded execution of a deed of sale covering the there was a failure to agree on the terms of payment. No contract of sale
properties and attempted to return the earnest-deposit but petitioner may thus be enforced by respondents.
refused on the ground that the option to purchase had already expired.
Even the option secured by respondents from petitioner was fatally defective. The option shall be exercised by a written notice to the LESSOR
Under the second paragraph of Art. 1479, an accepted unilateral promise to at any time within the option period and the document of sale
buy or sell a determinate thing for a price certain is binding upon the promisor over the afore-described properties has to be consummated
only if the promise is supported by a distinct consideration. Consideration in an within the month immediately following the month when the LESSEE
option contract may be anything of value, unlike in sale where it must be the exercised his option under this contract.
price certain in money or its equivalent. There is no showing here of any
consideration for the option. Lacking any proof of such consideration, the Approximately three weeks before the expiration of the lease contract, SIHI
option is unenforceable. notified the Carceller of the termination of the lease agreement and the
remaining time he could exercise the right to purchase, thus he must submit
Equally compelling as proof of the absence of a perfected sale is the second his decision on January 20, 1986. In a letter dated January 15, 1986, which
condition that, during the option period, the parties would negotiate the terms was received by SIHI only on January 29, petitioner requested for a six-
and conditions of the purchase. The stages of a contract of sale are as month extension of the lease contract, alleging that he needs ample time to
follows: (1) negotiation, covering the period from the time the prospective raise the funds needed to buy the properties. He also averred that he had
contracting parties indicate interest in the contract to the time the contract is already made a substantial investment on the contract, and that he was
perfected; (2) perfection, which takes place upon the concurrence of the always punctual in the payment of the rentals.
essential elements of the sale which are the meeting of the minds of the
parties as to the object of the contract and upon the price; and (3) The request, however, was disproved by SIHI, and offered to lease the same
consummation, which begins when the parties perform their respective properties to Carceller at P30,000 a month for one year. It also informed
undertakings under the contract of sale, culminating in the extinguishment the latter its intention to offer the properties for sale to the general public.
thereof.
On February 18, 1986, Carceller again notified SIHI of its intention to
In the present case, the parties never got past the negotiation stage. The exercise his option to purchase and he made arrangements to make
alleged indubitable evidence of a perfected sale cited by the appellate downpayment in the amount of P360,000. But on February 20, SIHI again
court was nothing more than offers and counter-offers which did not amount denied Carcellers offer, stating that the period to exercise the option
(January 30)had already elapsed. It ordered petitioner to vacate the
to any final arrangement containing the essential elements of a contract of
premises within 10 days of notice, with rental and penalty due.
sale. While the parties already agreed on the real properties which were the
objects of the sale and on the purchase price, the fact remains that they When Carceller filed an action for specific performance and damages,
failed to arrive at mutually acceptable terms of payment, despite the 45-day both the RTC and the Court of Appeals ruled in favor of him. They
extension given by petitioner. ordered SIHI to execute a deed of sale in favor of Carceller, and ordered that
the amount of payment must be according to the prevailing market price to
be determined by the trial court.

Subject: Sales
Topic: Option Money/Option Contract and Earnest Money Issue:
Citation: Carceller vs. CA, 302 SCRA 718
Whether or not the petitioner is allowed to exercise his right to purchase the
leased premises despite the alleged delay in giving the required notice to
Facts: private respondent.

State Investment Houses, Inc. (SIHI) owned two parcels of land with
improvements in Bulacao Cebu City. In 1985, SIHI and Carceller entered into Ruling:
a lease contract with option to purchase at a monthly rental of P10,000
for a period of 18 months from August 1, 1984 to January 30, 1986. The Yes, petitioner has the right and was not in delay.
contract stipulated that Carceller as LESSEE had an exclusive right, option
and privilege to purchase within the lease period the properties for the Petitioners letter to SIHI on January 15, 1986 was fair notice of his intent
aggregate amount of P1,8000,000 with the following conditions: to exercise the option, despite request for the extension of the lease contract.
He acted with honesty and good faith.
The evidence is consistent with the parties primary intent in executing the Subject: Sales
lease contract. The reasonableness of the result obtained should also be Topic: Option Money/Option Contract and Earnest Money
considered. SIHI urgently needed to dispose the leased premises as soon as Citation: Tuazon vs, Del Rosario, G.R. No. 168325, December 8, 2010
possible due to its insolvent status. It was eager for petitioner to purchase the
premises by reminding him of the short time left to exercise his right to buy. It
was even ready to sell it to the general public in case petitioner did not Facts:
exercise his option.
Respondent was the owner of a parcel of land, previously covered by Transfer
Petitioner, on the other hand, was also indubitably determined to acquire the Certificate of Title. Petitioner and Lourdes executed a Contract of Lease over
property. He already introduced permanent improvements thereon, and the abovementioned parcel of land for a period of three years. During the
obtained an P8,000,000 loan from Technology Resources Center to pay the effectivity of the lease, Lourdes sent a letter to Roberto where she offered to
purchase price in one single payment, thereby decreasing the interest he sell to the latter subject parcel of land. She pegged the price and gave him
needed to pay. two years to decide on the said offer.

Note that by contract SIHI had given petitioner 4 periods: Four months after the expiration of the Contract of Lease, Lourdes sold subject
a. the option to purchase the property for P1,800,000.00 within parcel of land to her only child, Catalina Suarez-De Leon, her son-in-law
the lease period, that is, until January 30, 1986; Wilfredo De Leon, and her two grandsons, Miguel Luis S. De Leon and Rommel
b. the option to be exercised within the option period by written S. De Leon (the De Leons), for a total consideration of only P2,750,000.00 as
notice at anytime; evidenced by a Deed of Absolute Sale7 executed by the parties. TCT No.
c. the document of sale...to be consummated within the month 177986 was then issued by the Registry of Deeds of Quezon City in the name
immediately following the month when petitioner exercises the of the De Leons.
option; and
d. the payment in equal installments of the purchase price over a The new owners through their attorney-in-fact, Guillerma S. Silva, notified
period of 60 months. Roberto to vacate the premises. Roberto refused hence, the De Leons filed a
complaint for Unlawful Detainer before the Metropolitan Trial Court (MeTC) of
In the Courts opinion, petitioners letter of January 15, 1986 and his formal Quezon City against him. On August 30, 2000, the MeTC rendered a Decision
exercise of the option on February 18, 1986 were within a reasonable ordering Roberto to vacate the property for non-payment of rentals and
time-frame consistent with periods given and the known intent of the expiration of the contract.
parties to the agreement.
On November 8, 2000, while the ejectment case was on appeal, Roberto filed
In Tuason Jr. vs. De Asis, if a lessee fails to exercise his option to buy in a lease with the RTC of Quezon City a Complaint for Annulment of Deed of Absolute
contract with right to purchase, he loses the right to buy the property on Sale, Reconveyance, Damages and Application for Preliminary Injunction
the terms and conditions set in the offer. Petitioner could not insist on buying against Lourdes and the De Leons. On November 13, 2000, Roberto filed a
the property based on the price agreed upon in the lease agreement, even if Notice of Lis Pendens with the Registry of Deeds of Quezon City.
his option to purchase was recognized. On the other hand, SIHI could not take
advantage of the situation to increase the selling price of the property to 90% On January 8, 2001, respondents filed An Answer with Counterclaim praying
of the original price. that the Complaint be dismissed for lack of cause of action. They claimed that
the filing of such case was a mere leverage of Roberto against them because
Such leap in the price quoted would show an opportunistic intent to of the favorable Decision issued by the MeTC in the ejectment case.
exploit the situation as SIHI knew for a fact that petitioner badly needed the
property for his business and that he could afford to pay such higher amount On September 17, 2001, the RTC issued an Order declaring Lourdes and the
De Leons in default for their failure to appear before the court for the second
after having secured an P8 Million loan from the TRC. If the courts were
time despite notice. Upon a Motion for Reconsideration, the trial court in an
to allow SIHI to take advantage of the situation, the result would have been Order15 dated October 19, 2001 set aside its Order of default.
an injustice to petitioner, because SIHI would be unjustly enriched at his
expense. After trial, the court a quo rendered a Decision declaring the Deed of
Absolute Sale made by Lourdes in favor of the De Leons as valid and binding.
The offer made by Lourdes to Roberto did not ripen into a contract to sell consideration, the offeror may withdraw his offer by communicating such
because the price offered by the former was not acceptable to the latter. The withdrawal to the offeree at anytime before acceptance; if it is founded upon
offer made by Lourdes is no longer binding and effective at the time she a consideration, the offeror cannot withdraw his offer before the lapse of the
decided to sell the subject lot to the De Leons because the same was not period agreed upon. The second paragraph of Article 1479 declares that an
accepted by Roberto. Thus, in a Decision dated November 18, 2002, the trial accepted unilateral promise to buy or to sell a determinate thing for a price
court dismissed the complaint. certain is binding upon the promissor if the promise is supported by a
consideration distinct from the price.
On May 30, 2005, the CA issued its Decision dismissing Robertos appeal and
affirming the Decision of the RTC. In this case, it is undisputed that Roberto did not accept the terms stated in
the letter ofLourdesas he negotiated for a much lower price. Robertos act of
Hence, this Petition for Review on Certiorari. negotiating for a much lower price was a counter-offer and is therefore not an
acceptance of the offer ofLourdes.Article 1319 of the Civil Code
Roberto claims that Lourdes violated his right to buy subject property under provides:Consentis manifested by the meeting of the offer and the
the principle of "right of first refusal" by not giving him "notice" and the acceptance upon the thing and the cause which are to constitute the
opportunity to buy the property under the same terms and conditions or contract. The offer must be certain and theacceptance absolute. A Qualified
specifically based on the much lower price paid by the De Leons. Roberto Acceptance Constitutes A counter-offer.
further contends that he is enforcing his "right of first refusal" based on
Equatorial Realty Development, Inc. v. Mayfair Theater, Inc.18 which is the The counter-offer of Roberto for a much lower price was not accepted
leading case on the "right of first refusal." byLourdes. There is therefore no contract that was perfected between them
with regard to the sale of subject property.Roberto, thus, does not have any
On the other hand, respondents posit that this case is not covered by the right to demand that the property be sold to him at the price for which it was
principle of "right of first refusal" but an unaccepted unilateral promise to sell sold to the De Leons neither does he have the right to demand that said sale
or, at best, a contract of option which was not perfected. The letter of Lourdes to the De Leons be annulled.
to Roberto clearly embodies an option contract as it grants the latter only two
years to exercise the option to buy the subject property at a price certain of Moreover, even if the offer ofLourdeswas accepted by Roberto, still the former
P37,541,000.00. As an option contract, the said letter would have been is not bound thereby because of the absence of a consideration distinct and
binding upon Lourdes without need of any consideration, had Roberto separate from the price.The argument of Roberto that the separate
accepted the offer. But in this case there was no acceptance made neither consideration was the liberality on the part of Lourdes Cannot Stand.A perusal
was there a distinct consideration for the option contract. of the letter-offer of Lourdes would show that what drove her to offer the
property to Roberto was her immediate need for funds as she was already
very old.Offering the property to Roberto was not an act of liberality on the
Issue: part of Lourdes but was a simple matter of convenience and practicality as
he was the one most likely to buy the property at that time as he was then
Whether or not Lourdes violated Robertos right to buy the subject property leasing the same.
under the principle of right of first refusal by not giving him notice and the
opportunity to buy the property under the same terms and conditions. The petition for review on certiorari is DENIED.

Ruling:
Subject: Sales
No. An option contract is entirely different and distinct from a right of first Topic: Option Money/Option Contract and Earnest Money
refusal in that in the former, the option granted to the offeree is for a fixed Citation: Villamor vs. CA, 202 SCRA 607
period and at a determined price.Lacking these two essential requisites, what
is involved is only a right of first refusal.
Facts:
It is clear from the provision of Article 1324 that there is a great difference
between the effect of an option which is without a consideration from one On July 1971, Macaria Labingisa Reyes sold a portion of 300 square meters of
which is founded upon a consideration. If the option is without any the lot to the Spouses Julio and Marina and Villamor for the total amount of
P21,000.00. On November 11, 1971, Macaria executed a "Deed of Option" in
favor of Villamor in which the remaining 300 square meter portion (TCT No. property and the payment thereof could be made indefinitely and render
39934) of the lot would be sold to Villamor under certain conditions, one of uncertain the status of the land. The failure of either party to demand
which: performance of the obligation of the other for an unreasonable length of time
renders the contract ineffective.
That the only reason why the Spouses-vendees Julio Villamor and
Marina V. Villamor, agreed to buy the said one-half portion at the Under Article 1144 (1) of the Civil Code, actions upon written contract must be
above-stated price of about P70.00 per square meter, is because I, brought within ten (10) years. The Deed of Option was executed on
and my husband Roberto Reyes, have agreed to sell and convey to November 11, 1971. The acceptance, as already mentioned, was also
them the remaining one-half portion still owned by me xxx , whenever accepted in the same instrument. The complaint in this case was filed by the
the need of such sale arises, either on our part or on the part of the petitioners on July 13, 1987, seventeen (17) years from the time of the
spouses (Julio) Villamor and Marina V. Villamor, at the same price of execution of the contract. Hence, the right of action had prescribed. There
P70.00 per square meter, excluding whatever improvement may be were allegations by the petitioners that they demanded from the private
found the thereon. respondents as early as 1984 the enforcement of their rights under the
contract. Still, it was beyond the ten (10) years period prescribed by the Civil
According to Macaria, when her husband, Roberto Reyes, retired in 1984, they Code.
offered to repurchase the lot sold by them to the Villamor spouses but Marina
Villamor refused and reminded them instead that the Deed of Option in fact
gave them the option to purchase the remaining portion of the lot. Subject: Sales
Topic: Option Money/Option Contract and Earnest Money
The Villamors, on the other hand, claimed that they had expressed their desire Citation: Bible Baptist Church vs. CA, 444 SCRA 399
to purchase the remaining 300 square meter portion of the lot but the Reyeses
had been ignoring them. Thus, on July 13, 1987, after conciliation proceedings
in the barangay level failed, they filed a complaint for specific performance Facts:
against the Reyeses.
On June 7, 1985, petitioner Bible Baptist Church entered into a contract of
Trial Court decided in favour of the Villamors, but this was reversed by the CA. lease with respondents Mr. & Mrs. Elmer Tito Medina Villanueva who owns the
Present case is a petition for review on certiorari of the CAs decision. subject property located at No. 2436 Leon Guinto St., Malate, Manila. The
pertinent stipulations in the lease contract were:

Issue: 2. That the lease shall take effect on June 7, 1985 and shall be for the
period of Fifteen (15) years.
Whether or not there was a valid Deed of Option. 4. That upon signing of the LEASE AGREEMENT, the LESSEE shall pay the
sum of Eighty Four Thousand Pesos (P84,000.00) Philippine Currency.
Said sum is to be paid directly to the Rural Bank, Valenzuela, Bulacan
Ruling: for the purpose of redemption of said property which is mortgaged by
the LESSOR.
Yes. While the Deed of Option was valid, it already lapsed. It is of judicial 8. That the LESSEE has the option to buy the leased premises during
notice that the price of real estate in Metro Manila is continuously on the rise. the Fifteen (15) years of the lease. If the LESSEE decides to purchase
To allow the petitioner to demand the delivery of the property subject of this the premises the terms will be:
case thirteen (13) years or seventeen (17) years after the execution of the
deed at the price of only P70.00 per square meter is iniquitous. For reasons also A) A selling Price of One Million Eight Hundred Thousand Pesos
of equity and in consideration of the fact that the private respondents have (P1.8 million), Philippine Currency. B) A down payment
no other decent place to live, this Court, in the exercise of its equity jurisdiction agreed upon by both parties.
is not inclined to grant petitioners' prayer. C) The balance of the selling price may be paid at the rate of
One Hundred Twenty Thousand Pesos (P120,000.00), Philippine
The Deed of Option did not provide for the period within which the parties Currency, per year.
may demand the performance of their respective undertakings in the
instrument. The parties could not have contemplated that the delivery of the
Petitioner seeks to buy the leased premises from the spouses Villanueva, under period of one year, at P7,000 per month. Thus, for the entire period of June
the option given to them. Petitioners claim that they (Baptist Church) agreed 1985 to May 1986, petitioner Baptist Churchs monthly rent had already been
to advance the large amount needed for the rescue of the property but, in paid for, such that it only again commenced paying the rentals in June 1986.
exchange, it asked the Villanuevas to grant it a long term lease and an option This is shown by the testimony of petitioner Pastor Belmonte where he states
to buy the property for P1.8 million. However, the respondents did not agree that the P84,000 was advance rental equivalent to monthly rent of P7,000 for
saying that there is no separate consideration. one year, such that for the entire year from 1985 to 1986 the Baptist Church
In this hand, the petitioners argue that there is a consideration the did not pay monthly rent.
consideration supporting the option was their agreement to pay off the
Villanuevas P84,000 loan with the bank, thereby freeing the subject property First, this Court cannot find that petitioner Baptist Church parted with anything
from the mortgage encumbrance. That they would not have agreed to of value, aside from the amount of P84,000 which was in fact eventually
advance such a large amount as it did to rescue the property from bank utilized as rental payments. Second, there is no document that contains an
foreclosure had it not been given an enforceable option to buy that went agreement between the parties that petitioner Baptist Churchs supposed
with the lease agreement. rescue of the mortgaged property was the consideration which the parties
contemplated in support of the option clause in the contract. As previously
The Baptist Church states that true, the Baptist Church did not pay a separate stated, the amount advanced had been fully utilized as rental payments over
and specific sum of money to cover the option alone. But the P84,000 it paid a period of one year. While the Villanuevas may have them to thank for
the Villanuevas in advance should be deemed consideration for the one extending the payment at a time of need, this is not the separate
contract they entered into the lease with option to buy. Petitioners further insist consideration contemplated by law.
that a consideration need not be a separate sum of money. They posit that
their act of advancing the money to rescue the property from mortgage and This Court also notes that in the present case both the Regional Trial Court and
impending foreclosure should be enough consideration to support the option. the Court of Appeals agree that the option was not founded upon a separate
and distinct consideration and that, hence, respondents Villanuevas cannot
On the other hand, Respondents argue that the amount of P84,000 has been be compelled to sell their property to petitioner Baptist Church.
fully exhausted and utilized by their occupation of the premises and there is
no separate consideration to speak of which could support the option. Having found that the option to buy granted to the petitioner Baptist Church
The RTC and CA agree with the respondent. was not founded upon a separate consideration, and hence, not
enforceable against respondents, this Court finds no need to discuss whether
a price certain had been fixed as the purchase price.
Issue:
WHEREFORE, the Decision and Resolution of the Court of Appeals subject of
Whether or not there is a separate consideration that would render the option the petition are hereby AFFIRMED.
contract valid and binding.

Ruling:

Yes. An option contract, to be valid and binding, needs to be supported by a


separate consideration. The consideration need not be monetary but could
consist of other things or undertakings. However, if the consideration is not
monetary, these must be things or undertakings of value, in view of the
onerous nature of the contract of option. Furthermore, when a consideration
for an option contract is not monetary, said consideration must be clearly
specified as such in the option contract or clause.

Petitioners cannot insist that the P84,000 they paid in order to release the
Villanuevas property from the mortgage should be deemed the separate
consideration to support the contract of option. It must be pointed out that
said amount was in fact apportioned into monthly rentals spread over a