G.R. No.
165420               June 30, 2005 and his wife, Eugenia, allowed Natividad and Ceferino to occupy the
CONCEPCION R. AINZA, substituted by her legal heirs, DR.
NATIVIDAD A. TULIAO, CORAZON A. JALECO and LILIA A.
OLAYON, petitioners,
vs.
SPOUSES ANTONIO PADUA and EUGENIA PADUA, respondents.
DECISION
YNARES-SANTIAGO, J.:
This petition for review on certiorari assails the February 24, 2004
decision of the Court of Appeals in CA-G.R. CV No. 70239,1 and its
September 28, 2004 resolution, denying reconsideration thereof.2
In her complaint for partition of real property, annulment of titles with
damages,3 Concepcion Ainza (Concepcion) alleged that respondent-
spouses Eugenia (Eugenia) and Antonio Padua (Antonio) owned a
216.40 sq. m. lot with an unfinished residential house located at No. 85-
A Durian corner Pajo Sts., Barangay Quirino 2-C, Project 2, Quezon
City, covered by Transfer Certificate of Title No. 271935. Sometime in
April 1987, she bought one-half of an undivided portion of the property
from her daughter, Eugenia and the latter’s husband, Antonio, for One
Hundred Thousand Pesos (P100,000.00).
No Deed of Absolute Sale was executed to evidence the transaction,
but cash payment was received by the respondents, and ownership
was transferred to Concepcion through physical delivery to her
attorney-in-fact and daughter, Natividad Tuliao (Natividad). Concepcion
authorized Natividad and the latter’s husband, Ceferino Tuliao
(Ceferino) to occupy the premises, and make improvements on the
unfinished building.
Thereafter, Concepcion alleged that without her consent, respondents
caused the subdivision of the property into three portions and registered
it in their names under TCT Nos. N-155122, N-155123 and N-155124 in
violation of the restrictions annotated at the back of the title.
On the other hand, Antonio averred that he bought the property in 1980
and introduced improvements thereon. Between 1989 and 1990, he
premises temporarily. In 1994, they caused the subdivision of the
property and three (3) separate titles were issued.
Thereafter, Antonio requested Natividad to vacate the premises but the
latter refused and claimed that Concepcion owned the property. Antonio
thus filed an ejectment suit on April 1, 1999. Concepcion, represented
by Natividad, also filed on May 4, 1999 a civil case for partition of real
property and annulment of titles with damages.
Antonio claimed that his wife, Eugenia, admitted that Concepcion
offered to buy one third (1/3) of the property who gave her small
amounts over several years which totaled P100,000.00 by 1987 and for
which she signed a receipt.
On January 9, 2001, the Regional Trial Court of Quezon City, Branch
85, rendered judgment4 in favor of Concepcion, the dispositive portion
of which states:
WHEREFORE, premises considered, judgment is hereby rendered in
favor of the plaintiff and against the defendants and ordering:
1. the subdivision of the subject property between the said
plaintiff and defendants in equal shares with one-half of the
property, including the portion occupied by the spouses
Severino and Natividad Tuliao to be awarded to the plaintiff;
2. the cancellation of Transfer Certificates of Title Nos. N-
155122, N-155123, N-155124 of the Registry of Deeds of
Quezon City;
3. the defendants to pay to the plaintiff P50,000.00 as attorney’s
fees.
SO ORDERED.5
The trial court upheld the sale between Eugenia and Concepcion. It
ruled that the sale was consummated when both contracting parties
complied with their respective obligations. Eugenia transferred
possession by delivering the property to Concepcion who in turn paid
the purchase price. It also declared that the transfer of the property did
not violate the Statute of Frauds because a fully executed contract does
not fall within its coverage.
On appeal by the respondents, the Court of Appeals reversed the
decision of the trial court, and declared the sale null and void. Applying
Article 124 of the Family Code, the Court of Appeals ruled that since the
subject property is conjugal, the written consent of Antonio must be
obtained for the sale to be valid. It also ordered the spouses Padua to
return the amount of P100,000.00 to petitioners plus interest.6
The sole issue for resolution in this petition for review is whether there
was a valid contract of sale between Eugenia and Concepcion.
A contract of sale is perfected by mere consent, upon a meeting of the
minds on the offer and the acceptance thereof based on subject matter,
price and terms of payment.7
In this case, there was a perfected contract of sale between Eugenia
and Concepcion. The records show that Eugenia offered to sell a
portion of the property to Concepcion, who accepted the offer and
agreed to pay P100,000.00 as consideration. The contract of sale was
consummated when both parties fully complied with their respective
obligations. Eugenia delivered the property to Concepcion, who in turn,
paid Eugenia the price of One Hundred Thousand Pesos
(P100,000.00), as evidenced by the receipt which reads:
R E C E I P T
Received the amount of ONE HUNDRED THOUSAND PESOS
(P100,000.00) as payment for the lot on 85-A Durian St., Project 2,
Quezon City, from Mrs. Concepcion R. Ainza, on April, 1987.
_______(Sgd.)______
Mrs.. Eugenia A. Padua8
The verbal contract of sale between Eugenia and Concepcion did not
violate the provisions of the Statute of Frauds that a contract for the
sale of real property shall be unenforceable unless the contract or some
note or memorandum of the sale is in writing and subscribed by the
party charged or his agent.9 When a verbal contract has been
completed, executed or partially consummated, as in this case, its
enforceability will not be barred by the Statute of Frauds, which applies
only to an executory agreement.10 Thus, where one party has performed
his obligation, oral evidence will be admitted to prove the agreement.11
In the instant case, the oral contract of sale between Eugenia and
Concepcion was evidenced by a receipt signed by Eugenia. Antonio
also stated that his wife admitted to him that she sold the property to
Concepcion.
It is undisputed that the subject property was conjugal and sold by
Eugenia in April 1987 or prior to the effectivity of the Family Code on
August 3, 1988, Article 254 of which repealed Title V, Book I of the Civil
Code provisions on the property relations between husband and wife.
However, Article 256 thereof limited its retroactive effect only to cases
where it would not prejudice or impair vested or acquired rights in
accordance with the Civil Code or other laws. In the case at bar, vested
rights of Concepcion will be impaired or prejudiced by the application of
the Family Code; hence, the provisions of the Civil Code should be
applied.
In Felipe v. Heirs of Aldon, et al.,12 the legal effect of a sale of conjugal
properties by the wife without the consent of the husband was clarified,
to wit:
The legal ground which deserves attention is the legal effect of a sale of
lands belonging to the conjugal partnership made by the wife without
the consent of the husband.
It is useful at this point to re-state some elementary rules: The husband
is the administrator of the conjugal partnership. (Art. 165, Civil Code)
Subject to certain exceptions, the husband cannot alienate or encumber
any real property of the conjugal partnership without the wife’s consent.
(Art. 166, Idem.) And the wife cannot bind the conjugal partnership
without the husband’s consent, except in cases provided by law. (Art.
172, Idem.).
In the instant case, Gimena, the wife, sold lands belonging to the
conjugal partnership without the consent of the husband and the sale is
not covered by the phrase "except in cases provided by law." The Court
of Appeals described the sale as "invalid" – a term which is imprecise
when used in relation to contracts because the Civil Code uses specific
names in designating defective contracts, namely: rescissible (Arts.
1380 et seq.), voidable (Arts. 1390 et seq.), unenforceable (Arts.
1403, et seq.), and void or inexistent (Arts. 1409 et seq.).
1awphi1.zw+
The sale made by Gimena is certainly a defective contract but of
what category? The answer: it is a voidable contract.
According to Art. 1390 of the Civil Code, among the voidable contracts
are "[T]hose where one of the parties is incapable of giving consent to
the contract." (Par. 1.) In the instant case Gimena had no capacity to
give consent to the contract of sale. The capacity to give consent
belonged not even to the husband alone but to both spouses.
The view that the contract made by Gimena is a voidable contract
is supported by the legal provision that contracts entered by the
husband without the consent of the wife when such consent is
required, are annullable at her instance during the marriage and
within ten years from the transaction questioned. (Art. 173, Civil
Code).
Gimena’s contract is not rescissible for in such a contract all the
essential elements are untainted but Gimena’s consent was tainted.
Neither can the contract be classified as unenforceable because it does
not fit any of those described in Art. 1403 of the Civil Code. And finally,
the contract cannot be void or inexistent because it is not one of those
mentioned in Art. 1409 of the Civil Code. By process of elimination, it
must perforce be a voidable contract.
The voidable contract of Gimena was subject to annulment by her
husband only during the marriage because he was the victim who had
an interest in the contract. Gimena, who was the party responsible for
the defect, could not ask for its annulment. Their children could not
likewise seek the annulment of the contract while the marriage
subsisted because they merely had an inchoate right to the lands sold.
(Emphasis supplied)
The consent of both Eugenia and Antonio is necessary for the sale of
the conjugal property to be valid. Antonio’s consent cannot be
presumed.13 Except for the self-serving testimony of petitioner
Natividad, there is no evidence that Antonio participated or consented
to the sale of the conjugal property. Eugenia alone is incapable of
giving consent to the contract. Therefore, in the absence of Antonio’s
consent, the disposition made by Eugenia is voidable.14
The contract of sale between Eugenia and Concepcion being an oral
contract, the action to annul the same must be commenced within six
years from the time the right of action accrued.15 Eugenia sold the
property in April 1987 hence Antonio should have asked the courts to
annul the sale on or before April 1993. No action was commenced by
Antonio to annul the sale, hence his right to seek its annulment was
extinguished by prescription.
Even assuming that the ten (10)-year prescriptive period under Art. 173
should apply, Antonio is still barred from instituting an action to annul
the sale because since April 1987, more than ten (10) years had
already lapsed without any such action being filed.
In sum, the sale of the conjugal property by Eugenia without the
consent of her husband is voidable. It is binding unless annulled.
Antonio failed to exercise his right to ask for the annulment within the
prescribed period, hence, he is now barred from questioning the validity
of the sale between his wife and Concepcion.
WHEREFORE, the petition is GRANTED. The decision dated February
24, 2004 of the Court of Appeals in CA-G.R. CV No. 70239 and its
resolution dated September 28, 2004 are REVERSED and SET ASIDE.
The decision dated January 9, 2001 of the Regional Trial Court of
Quezon City, Branch 85, in Civil Case No. Q-99-37529, is
REINSTATED.
SO ORDERED.
G.R. No. 199648               January 28, 2015
FIRST OPTIMA REALTY CORPORATION, Petitioner,
vs.
SECURITRON SECURITY SERVICES, INC., Respondent.
DECISION
DEL CASTILLO, J.:
In a potential sale transaction, the prior payment of earnest money even
before the property owner can agree to sell his property is irregular, and
cannot be used to bind the owner to the obligations of a seller under an
otherwise perfected contract of sale; to cite a well-worn cliche, the
carriage cannot be placed before the horse. The property owner-
prospective seller may not be legally obliged to enter into a sale with a
prospective buyer through the latter's employment of questionable
practices which prevent the owner from freely giving his consent to the
transaction; this constitutes a palpable transgression of the prospective
seller's rights of ownership over his property, an anomaly which the
Court will certainly not condone.
This Petition for Review on Certiorari  seeks to set aside: 1) the
1 Gentlemen:
September 30, 2011 Decision  of the Court of Appeals (CA) in CA-G.R.
2
CV No. 93715 affirming the February 16, 2009 Decision' of the Regional
Trial Court (RTC) of Pasay City, Branch 115 in Civil Case No. 06-0492
CFM; and 2) the CA’s December 9, 2011 Resolution  denying the
4 property at the corner of Layug St., & Lim-An St., Pasay City as per
herein petitioner’s Motion for Reconsideration  of the assailed judgment.
5 TCT No. 125318 with an area of 256 sq. m. at 6,000.00/ sq. m. for a
Factual Antecedents
Petitioner First Optima Realty Corporation is a domestic corporation
engaged in the real estate business. It is the registered owner of a 256-
square meter parcel of land with improvements located in Pasay City,
covered by Transfer Certificate of Title No. 125318 (the subject
property).  Respondent Securitron Security Services, Inc., on the other
6 ANTONIO S. ELEAZAR
hand, is a domestic corporation with offices located beside the subject
property.
Looking to expand its business and add toits existing offices,
respondent – through its General Manager, Antonio Eleazar (Eleazar) –
sent a December 9, 2004 Letter  addressed to petitioner – through its
7
Executive Vice-President, Carolina T. Young (Young) – offering to
purchase the subject property at ₱6,000.00 per square meter. A series
of telephone calls ensued, but only between Eleazar and Young’s
secretary;  Eleazar likewise personally negotiated with a certain Maria
8
Remoso (Remoso), who was an employee of petitioner.  At this point,
9
Eleazar was unable to personally negotiate with Young or the
petitioner’s board of directors.
Sometime thereafter, Eleazar personally went to petitioner’s office
offering to pay for the subject property in cash, which he already
brought with him. However, Young declined to accept payment, saying
that she still needed to secure her sister’s advice on the matter.  She
10
likewise informed Eleazar that prior approval of petitioner’s Board of
Directors was required for the transaction, to which remark Eleazar
replied that respondent shall instead await such approval. 11
On February 4, 2005, respondent sent a Letter  of even date to
12
petitioner. It was accompanied by Philippine National Bank Check No.
24677 (the subject check), issued for ₱100,000.00 and made payable
to petitioner. The letter states thus:
As agreed upon, we are making a deposit of ONE HUNDRED
THOUSAND PESOS (Php 100,000.00) as earnest money for your
total of ONE MILLION FIVE HUNDRED THIRTY SIX THOUSAND
PESOS (Php 1,536,000.00).
Full payment upon clearing of the tenants at said property and signing
of the Deed of Sale.
(signed)
13
Despite the delicate nature of the matter and large amount involved,
respondent did not deliver the letter and check directly to Young or her
office; instead, they were coursed through an ordinary receiving
clerk/receptionist of the petitioner, who thus received the same and
therefor issued and signed Provisional Receipt No. 33430.  The said
14
receipt reads:
Received from x x x Antonio Eleazar x x x the sum of Pesos One
Hundred Thousand x x x
IN PAYMENT OF THE FOLLOWING x x x
Earnest money or Partial payment of
Pasay Property Layug & Lim-an St. x x x.
Note: This is issued to transactions not
yet cleared but subsequently an OfficialReceipt will be issued. x
xx 15
The check was eventually deposited with and credited to petitioner’s
bank account.
Thereafter, respondent through counsel demanded in writing that
petitioner proceed with the sale of the property.  In a March 3, 2006
16
Letter  addressed to respondent’s counsel, petitioner wrote back:
17
Dear Atty. De Jesus:
Anent your letter dated January 16, 2006 received on February 20,
2006, please be informed of the following:
1. It was your client SECURITRON SECURITY SERVICES,
INC. represented by Mr. Antonio Eleazar who offered to buy our
property located at corner Layug and Lim-An St., Pasay City;
2. It tendered an earnest money despite the fact that we are still
undecided to sell the said property;
3. Our Board of Directors failed to pass a resolution to date
whether it agrees to sell the property;
4. We have no Contract for the earnest money nor Contract to
Sell the said property with your client;
Considering therefore the above as well as due to haste and demands
which we feel [are forms] of intimidation and harassment, we regret to
inform you that we are now incline (sic) not to accept your offer to buy
our property. Please inform your client to coordinate with us for the
refund of this (sic) money.
Very truly yours,
(signed)
CAROLINA T. YOUNG
Executive Vice[-]President 18
Ruling of the Regional Trial Court of Pasay City
On April 18, 2006, respondent filed with the Pasay RTC a civil case
against petitioner for specific performance with damages to compel the
latter to consummate the supposed sale of the subject property.
Docketed as Civil Case No. 06-0492 CFM and assigned to Branch 115
of the Pasay RTC, the Complaint  is predicated on the claim that since
19
a perfected contract of sale arose between the parties after negotiations
were conducted and respondent paid the ₱100,000.00 supposed
earnest money – which petitioner accepted, the latter should be
compelled to sell the subject property to the former. Thus, respondent
prayed that petitioner be ordered to comply with its obligation as seller,
accept the balance of the purchase price, and execute the
corresponding deed of sale in respondent’s favor; and that petitioner be
made to pay ₱200,000.00 damages for its breach and delay in the
performance of its obligations, ₱200,000.00 by way of attorney's fees,
and costs of suit.
In its Answer with Compulsory Counterclaim,  petitioner argued that it
20
never agreed to sell the subject property; that its board of directors did
not authorize the sale thereof to respondent, as no corresponding board
resolution to such effect was issued; that the respondent’s ₱100,000.00
check payment cannot be considered as earnest money for the subject
property, since said payment was merely coursed through petitioner’s
receiving clerk, who was forced to accept the same; and that
respondent was simply motivated by a desire to acquire the subject
property at any cost. Thus, petitioner prayed for the dismissal of the
case and, by way of counterclaim, it sought the payment of moral
damages in the amount of ₱200,000.00; exemplary damages in the
amount of ₱100,000.00; and attorney’s fees and costs of suit.
In a Reply,  respondent countered that authorization by petitioner’s
21
Board of Directors was not necessary since it is a real estate
corporation principally engaged in the buying and selling of real
property; that respondent did not force nor intimidate petitioner’s
receiving clerk into accepting the February 4, 2005 letter and check for
₱100,000.00; that petitioner’s acceptance of the check and its failure –
for more than a year – to return respondent’s payment amounts to
estoppel and a ratification of the sale; and that petitioner is not entitled
to its counterclaim.
After due proceedings were taken, the Pasay RTC issued its Decision
dated February 16, 2009, decreeing as follows:
WHEREFORE, defendant First Optima Realty Corporation is directed to
comply with its obligation by accepting the remaining balance of One
Million Five Hundred Thirty-Six Thousand Pesos and Ninety-Nine
Centavos (₱1,536,000.99), and executing the corresponding deed of
sale in favor of the plaintiff Securitron Security Services, Inc. over the
subject parcel of land.
No costs.
SO ORDERED. 22
In ruling for the respondent, the trial court held that petitioner’s
acceptance of ₱100,000.00 earnest money indicated the existence of a
perfected contract of sale between the parties; that there is no showing
that when respondent gave the February 4, 2005 letter and check to
petitioner’s receiving clerk, the latter was harassed or forced to accept
the same; and that for the sale of the subject property, no resolution of
petitioner’s board of directors was required since Young was "free to
represent" the corporation in negotiating with respondent for the sale
thereof. Ruling of the Court of Appeals
Petitioner filed an appeal with the CA. Docketed as CA-G.R. CV No.
93715, the appeal made out a case that no earnest money can be
considered to have been paid to petitioner as the supposed payment
was received by a mere receiving clerk, who was not authorized to
accept the same; that the required board of directors resolution
authorizing the sale of corporate assets cannot be dispensed with in the
case of petitioner; that whatever negotiations were held between the
parties only concerned the possible sale, not the sale itself, of the
subject property; that without the written authority of petitioner’s board
of directors, Young cannot enter into a sale of its corporate property;
and finally, that there was no meeting of the minds between the parties
in the first place.
On September 30, 2011, the CA issued the assailed Decision affirming
the trial court’s February 16, 2009Decision, pronouncing thus:
Article 1318 of the Civil Code declares that no contract exists 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 established.
A careful perusal of the records of the case show[s] that there was
indeed a negotiation between the parties as regards the sale of the
subject property, their disagreement lies on whether they have arrived
on an agreement regarding said sale. Plaintiff-appellee avers that the
parties have already agreed on the sale and the price for it and the
payment of earnest money and the remaining balance upon clearing of
the property of unwanted tenants. Defendant-appellant on the other
hand disputes the same and insists that there was no concrete
agreement between the parties.
Upon a careful consideration of the arguments of the parties and the
records of the case, we are more inclined to sustain the arguments of
the plaintiff-appellee and affirm the findings of the trial court that there
was indeed a perfected contract of sale between the parties. The
following instances militate against the claim of the defendant-appellant:
First. The letter of the plaintiff-appellee dated February 4, 2005
reiterating their agreement as to the sale of the realty for the
consideration of Php 1,536,000.00 was not disputed nor replied to by
the defendant-appellant, the said letter also provides for the payment of
the earnest money of Php 100,000.00 and the full payment upon the
clearing of the property of unwanted tenants, if the defendant-appellant
did not really agree on the sale of the property it could have easily
replied to the said letter informing the plaintiff-appellee that it is not
selling the property or that the matter will be decided first by the board
of directors, defendant-appellant’s silence or inaction on said letter
shows its conformity or consent thereto; Second. In addition to the
aforementioned letter, defendant-appellant’s acceptance of the earnest
money and the issuance of a provisional receipt clearly shows that
there was indeed an agreement between the parties and we do not
subscribe to the argument of the defendant-appellant that the check
was merely forced upon its employee and the contents of the receipt
was just dictated by the plaintiff-appellee’s employee because common
sense dictates that a person would not issue a receipt for a check with
a huge amount if she does not know what that is for and similarly would
not issue [a] receipt which would bind her employer if she does not
have prior instructions to do [so] from her superiors; Third. The said
check for earnest money was deposited in the bank by defendant-
appellant and not until after one year did it offer to return the same.
Defendant-appellant cannot claim lack of knowledge of the payment of
the check since there was a letter for it, and it is just incredible that a
big amount of money was deposited in [its] account [without knowing]
about it [or] investigat[ing] what [it was] for. We are more inclined to
believe that their inaction for more than one year on the earnest money
paid was due to the fact that after the payment of earnest money the
place should be cleared of unwanted tenants before the full amount of
the purchase price will be paid as agreed upon as shown in the letter
sent by the plaintiff-appellee.
As stated above the presence of defendant-appellant’s consent and,
corollarily, the existence of a perfected contract between the parties are
evidenced by the payment and receipt of Php 100,000.00 as earnest
money by the contracting parties’ x x x. Under the law on sales,
specifically Article 1482 of the Civil Code, it provides that whenever
earnest money is given in a contract of sale, it shall be considered as
part of the price and proof of the perfection of the contract. Although the
presumption is not conclusive, as the parties may treat the earnest
money differently, there is nothing alleged in the present case that
would give rise to a contrary presumption.
We also do not find merit in the contention of the defendant-appellant
that there is a need for a board resolution for them to sell the subject
property since it is a corporation, a juridical entity which acts only thru
the board of directors. While we agree that said rule is correct, we must
also point out that said rule is the general rule for all corporations [but] a
corporation [whose main business is buying and selling real estate] like
herein defendant-appellant, is not required to have a board resolution
for the sale of the realty in the ordinary course of business, thus
defendant-appellant’s claim deserves scant consideration.
Furthermore, the High Court has held that "a corporate officer or agent
may represent and bind the corporation in transactions with third
persons to the extent that the authority to do so has been conferred
upon him, and this includes powers which have been intentionally
conferred, and also such powers as, in the usual course of the
particular business, are incidental to, or may be implied from, the
powers intentionally conferred, powers added by custom and usage, as
usually pertaining to the particular officer or agent, and such apparent
powers as the corporation has caused persons dealing with the officer
or agent to believe that it was conferred."
In the case at bench, it is not disputed and in fact was admitted by the
defendant-appellant that Ms. Young, the Executive Vice-President was
authorized to negotiate for the possible sale of the subject parcel of
land. Therefore, Ms. Young can represent and bind defendant-appellant
in the transaction.
Moreover, plaintiff-appellee can assume that Ms. Young, by virtue of
her position, was authorized to sell the property of the corporation.
Selling of realty is not foreign to [an] executive vice[-]president’s
function, and the real estate sale was shown to be a normal business
activity of defendant-appellant since its primary business is the buy and
sell of real estate. Unmistakably, its Executive Vice-President is cloaked
with actual or apparent authority to buy or sell real property, an activity
which falls within the scope of her general authority.
Furthermore, assuming arguendo that a board resolution was indeed
needed for the sale of the subject property, the defendant-appellant is
estopped from raising it now since, [it] did not inform the plaintiff-
appellee of the same, and the latter deal (sic) with them in good faith.
Also it must be stressed that the plaintiff-appellee negotiated with one
of the top officer (sic) of the company thus, any requirement on the said
sale must have been known to Ms. Young and she should have
informed the plaintiff-appellee of the same.
In view of the foregoing we do not find any reason to deviate from the
findings of the trial court, the parties entered into the contract freely,
thus they must perform their obligation faithfully. Defendant-appellant’s
unjustified refusal to perform its part of the agreement constitutes bad
faith and the court will not tolerate the same.
WHEREFORE, premises considered, the Decision of the Regional Trial
Court of Pasay City Branch 115, in Civil Case No. 06-0492 CFM is
hereby AFFIRMED.
SO ORDERED. 23
Petitioner moved for reconsideration,  but in a December 9, 2011
24
Resolution, the CA held its ground. Hence, the present Petition.
Issues
In an October 9,2013 Resolution,  this Court resolved to give due
25
course to the Petition, which raises the following issues:
I was subject to approval and issuance of the corresponding official
THE HONORABLE COURT OF APPEALS ERRED ON A QUESTION
OF LAW WHEN IT RULED THAT THE MONEY RESPONDENT
DELIVERED TO PETITIONER WAS EARNEST MONEY THEREBY
PROVIDING A PERFECTED CONTRACT OF SALE.
II
THE HONORABLE COURT OF APPEALS ERRED ON A QUESTION
OF LAW WHEN IT RULED THAT THE TIME THAT LAPSED IN
RETURNING THE MONEY AND IN REPLYING TO THE LETTER IS
PROOF OF ACCEPTANCE OF EARNEST MONEY.
III
THE HONORABLE COURT OF APPEALS COMMITTED SERIOUS
AND GRAVE ERROR WHEN IT IGNOREDTHE RESERVATION IN
THE PROVISIONAL RECEIPT – "Note: This is issued to transactions
not yet cleared but subsequently an Official Receipt will be issued."26
Petitioner’s Arguments
In its Petition and Reply  seeking to reverse and set aside the assailed
27
CA dispositions and in effect to dismiss Civil Case No. 06-0492 CFM,
petitioner argues that respondent failed to prove its case that a contract
of sale was perfected between the parties. It particularly notes that,
contrary to the CA’s ruling, respondent’s delivery of the February 4,
2005 letter and check; petitioner’s failure to respond to said letter;
petitioner’s supposed acceptance of the check by depositing the same
in its account; and its failure to return the same after more than one
year from its tender – these circumstances do not at all prove that a
contract of sale was perfected between the parties. It claims that there
was never an agreement in the first place between them concerning the
sale of the subject property, much less the payment of earnest money
therefor; that during trial, Eleazar himself admitted that the check was
merely a "deposit";  that the February 4, 2005 letter and check were
28
delivered not to Young, but to a mere receiving clerk of petitioner who
knew nothing about the supposed transaction and was simply obliged
to accept the same without the prerogative to reject them; that the
acceptance of respondent’s supposed payment was not cleared and
receipt as noted in Provisional Receipt No. 33430; that respondent
intentionally delivered the letter and check in the manner that it did in
order to bind petitioner to the supposed sale with or without the latter’s
consent; that petitioner could not be faulted for receiving the check and
for depositing the same as a matter of operational procedure with
respect to checks received in the course of its day-to-day business.
Petitioner argues that ultimately, it cannot be said that it gave its
consent to any transaction with respondent or to the payment made by
the latter. Respondent’s letter and check constitute merely an offer
which required petitioner’s acceptance in order to give rise to a
perfected sale; "[o]therwise, a buyer can easily bind any unsuspecting
seller to a contract of sale by merely devising a way that prevents the
latter from acting on the communicated offer." 29
Petitioner thus theorizes that since it had no perfected agreement with
the respondent, the latter’s check should be treated not as earnest
money, but as mere guarantee, deposit or option money to prevent the
prospective seller from backing out from the sale,  since the payment of
30
any consideration acquires the character of earnest money only after a
perfected sale between the parties has been arrived at. 31
Respondent’s Arguments
In its Comment,  respondent counters that petitioner’s case typifies a
32
situation where the seller has had an undue change of mind and
desires to escape the legal consequences attendant to a perfected
contract of sale. It reiterates the appellate court’s pronouncements that
petitioner’s failure to reply to respondent’s February 4, 2005 letter
indicates its consent to the sale; that its acceptance of the check as
earnest money and the issuance of the provisional receipt prove that
there is a prior agreement between the parties; that the deposit of the
check in petitioner’s account and failure to timely return the money to
respondent militates against petitioner’s claim of lack of knowledge and
consent. Rather they indicate petitioner’s decision to sell subject
property as agreed. Respondent adds that contrary to petitioner’s claim,
negotiations were in fact held between the parties after it sent its
December 9, 2004 letter-offer, which negotiations precisely culminated
in the preparation and issuance of the February4, 2005 letter; that
petitioner’s failure to reply to its February 4, 2005 letter meant that it
was amenable to respondent’s terms; that the issuance of a provisional
receipt does not prevent the perfection of the agreement between the
parties, since earnest money was already paid; and that petitioner
cannot pretend to be ignorant of respondent’s check payment, as it
involved a large sum of money that was deposited in the former’s bank
account.
Our Ruling
The Court grants the Petition. The trial and appellate courts erred
materially in deciding the case; they overlooked important facts that
should change the complexion and outcome of the case.
It cannot be denied that there were negotiations between the parties
conducted after the respondent’s December 9, 2004 letter-offer and
prior to the February 4, 2005 letter. These negotiations culminated in a
meeting between Eleazar and Young whereby the latter declined to
enter into an agreement and accept cash payment then being tendered
by the former. Instead, Young informed Eleazar during said meeting
that she still had to confer with her sister and petitioner’s board of
directors; in turn, Eleazar told Young that respondent shall await the
necessary approval.
Thus, the trial and appellate courts failed to appreciate that
respondent’s offer to purchase the subject property was never accepted
by the petitioner at any instance, even after negotiations were held
between them. Thus, as between them, there is no sale to speak of.
"When there is merely an offer by one party without acceptance of the
other, there is no contract."  To borrow a pronouncement in a
33
previously decided case,
The stages of a contract of sale are: (1) negotiation, starting from the
time the prospective contracting parties indicate interest in the contract
to the time the contract is perfected; (2) perfection, which takes place
upon the concurrence of the essential elements of the sale; and (3)
consummation, which commences when the parties perform their
respective undertakings under the contract of sale, culminating in the
extinguishment of the contract.
In the present case, the parties never got past the negotiation stage.
Nothing shows that the parties had agreed on any final arrangement
containing the essential elements of a contract of sale, namely, (1)
consent or the meeting of the minds of the parties; (2) object or subject
matter of the contract; and (3) price or consideration of the sale. 34
Respondent’s subsequent sending of the February 4, 2005 letter and
check to petitioner – without awaiting the approval of petitioner’s board
of directors and Young’s decision, or without making a new offer –
constitutes a mere reiteration of its original offer which was already
rejected previously; thus, petitioner was under no obligation to reply to
the February 4, 2005 letter. It would be absurd to require a party to
reject the very same offer each and every time it is made; otherwise, a
perfected contract of sale could simply arise from the failure to reject
the same offer made for the hundredth time.  Thus, said letter cannot
1âwphi1
be considered as evidence of a perfected sale, which does not exist in
the first place; no binding obligation on the part of the petitioner to sell
its property arose as a consequence. The letter made no new offer
replacing the first which was rejected.
Since there is no perfected sale between the parties, respondent had
no obligation to make payment through the check; nor did it possess
the right to deliver earnest money to petitioner in order to bind the latter
to a sale. As contemplated under Art. 1482 of the Civil Code, "there
must first be a perfected contract of sale before we can speak of
earnest money."  "Where the parties merely exchanged offers and
35
counter-offers, no contract is perfected since they did not yet give their
consent to such offers. Earnest money applies to a perfected sale." 36
This Court is inclined to accept petitioner’s explanation that since the
check was mixed up with all other checks and correspondence sent to
and received by the corporation during the course of its daily
operations, Young could not have timely discovered respondent’s check
payment; petitioner’s failure to return the purported earnest money
cannot mean that it agreed to respondent’s offer.
Besides, respondent’s payment of supposed earnest money was made
under dubious circumstances and in disregard of sound business
practice and common sense. Indeed, respondent must be faulted for
taking such a course of action that is irregular and extraordinary:
common sense and logic dictate that if any payment is made under the
supposed sale transaction, it should have been made directly to Young
or coursed directly through her office, since she is the officer directly
responsible for negotiating the sale, as far as respondent is concerned
and considering the amount of money involved; no other ranking officer
of petitioner can be expected to know of the ongoing talks covering the
subject property. Respondent already knew, from Eleazar’s previous
meeting with Young, that it could only effectively deal with her; more
than that, it should know that corporations work only through the proper
channels. By acting the way it did – coursing the February 4, 2005 letter
and check through petitioner’s mere receiving clerk or receptionist
instead of directly with Young’s office, respondent placed itself under
grave suspicion of putting into effect a premeditated plan to unduly bind
petitioner to its rejected offer, in a manner which it could not achieve
through negotiation and employing normal business practices. It
impresses the Court that respondent attempted to secure the consent
needed for the sale by depositing part of the purchase price and under
the false pretense that an agreement was already arrived at, even
though there was none. Respondent achieved the desired effect up to
this point, but the Court will not be fooled.
Thus, as between respondent’s irregular and improper actions and
petitioner’s failure to timely return the ₱100,000.00 purported earnest
money, this Court sides with petitioner. In a manner of speaking,
respondent cannot fault petitioner for not making a refund since it is
equally to blame for making such payment under false pretenses and
irregular circumstances, and with improper motives. Parties must come
to court with clean hands, as it were.
In a potential sale transaction, the prior payment of earnest money even
before the property owner can agree to sell his property is irregular, and
cannot be used to bind the owner to the obligations of a seller under an
otherwise perfected contract of sale; to cite a well-worn cliché, the
carriage cannot be placed before the horse. The property owner-
prospective seller may not be legally obliged to enter into a sale with a
prospective buyer through the latter’s employment of questionable
practices which prevent the owner from freely giving his consent to the
transaction; this constitutes a palpable transgression of the prospective
seller’s rights of ownership over his property, an anomaly which the
Court will certainly not condone. An agreement where the prior free
consent of one party thereto is withheld or suppressed will be struck
down, and the Court shall always endeavor to protect a property
owner’s rights against devious practices that put his property in danger
of being lost or unduly disposed without his prior knowledge or consent.
As this ponente has held before, "[t]his Court cannot presume the
existence of a sale of land, absent any direct proof of it."
37
Nor will respondent's supposed payment be 'treated as a deposit or
guarantee; its actions will not be dignified and must be called for what
they are: they were done irregularly and with a view to acquiring the
subject property against petitioner's consent.
Finally, since there is nothing in legal contemplation which petitioner
must perform particularly for the respondent, it should follow that Civil
Case No. 06-0492 CFM for specific performance with damages is left
with no leg. to stand on; it must be dismissed.
With the foregoing view, there is no need to resolve the other specific
issues and arguments raised by the petitioner, as they do not materially
affect the rights and obligations of the parties - the Court having
declared that no agreement exists between them; nor do they have the
effect of altering the outcome of the case.
WHEREFORE, the Petition is GRANTED. The September 30, 2011
Decision and December 9, 2011 Resolution of the Court of Appeals in
CA-G.R. CV No. 93715, as well as the February 16, 2009 Decision of
the Regional Trial Court of Pasay City, Branch 115 in Civil Case No. 06-
0492 CFM are REVERSED and SET ASIDE. Civil Case No. 06-0492
CFM is ordered DISMISSED. , Petitioner First Optima Realty
Corporation is ordered to REFUND the amount of ₱100,000.00 to
respondent Securitron Security Services, Inc. without interest, unless
petitioner has done so during the course of the proceedings.
SO ORDERED.
G.R. No. 182769               February 1, 2012
BANK OF THE PHILIPPINE ISLANDS, AS SUCCESSOR-IN-INTEREST
OF FAR EAST BANK & TRUST COMPANY, Petitioner,
vs.
CYNTHIA L. REYES, Respondent.
DECISION
LEONARDO-DE CASTRO, J.:
This is a petition for review on certiorari under Rule 45 of the 1997 Rules of
Civil Procedure of the Decision dated April 30, 2008 of the Court of
1 
Appeals in CA-G.R. CV No. 88004, entitled "Bank of the Philippine Islands,
as successor-in-interest of Far East Bank & Trust Company vs. Cynthia L.
Reyes" which reversed the Decision dated November 3, 2005 of the
2 
Regional Trial Court (RTC) of Makati City, Branch 148 in Civil Case No. 03-
180.
The background facts of this case, as summed by the trial court, follow:
This is an action for sum of money filed [b]y [p]laintiff Bank of the Philippine
Islands, hereinafter referred to as BPI, as successor-in-interest of Far East
Bank & Trust Company, referred hereto as Far East Bank, against
defendant Cynthia L. Reyes, hereinafter referred to as defendant Reyes.
As alleged in the Complaint, defendant Reyes borrowed, renewed and
received from Far East Bank the principal of Twenty Million Nine Hundred
Thousand Pesos [sic] (₱20,950,000.00). In support of such allegation, four
promissory notes were presented during the course of the trial of the case.
As security for the obligation, defendant Reyes executed Real Estate
Mortgage Agreements involving twenty[-]two (22) parcels of land. When
the debt became due and demandable, the defendant failed to settle her
obligation and the plaintiff was constrained to foreclose the properties. As
alleged, after due publication, the mortgaged properties were sold at public
auction on December 20, 2001 by the Office of the Clerk of Court & Ex-
Officio Sheriff of the Regional Trial Court of Malolos, Bulacan.
At the public auction, the mortgaged properties were awarded to BPI in
consideration of its highest bid price amounting to Nine Million Thirty[-]Two
Thousand Nine Hundred Sixty Pesos (₱9,032,960.00). On said date, the
obligation already reached Thirty Million Forty (sic) Hundred Twenty
Thousand Forty[-]One & 67/100 Pesos (₱30,420,041.67), inclusive of
interest but excluding attorney’s fees, publication and other charges. After
applying the proceeds of the public auction to the outstanding obligation,
there remains to be a deficiency and defendant Reyes is still indebted, as
of January 20, 2003, to the plaintiff in the amount of ₱24,545,094.67,
broken down as follows:
Principal ₱19,700,000.00
Unsatisfied Interest 2,244,694.67
Interest 2,383,700.00
Penalty 216,700.00
TOTAL ₱24,545,094.67
Also included in the prayer of the plaintiff is the payment of attorney’s fees
of at least Five Hundred Thousand Pesos and the cost of suit.
In the Answer, the defendant claims that based on the plaintiff’s appraisal
of the properties mortgaged to Far East Bank, the twenty[-]two properties
fetched a total appraisal value of ₱47,436,000.00 as of January 6, 1998.
This appraisal value is evidenced by the Appraisal, which is attached as
Annex 1 of the Answer. Considering the appraisal value and the
outstanding obligation of the defendant, it appears that the mortgaged
properties sold during the public auction are more than enough as payment
to the outstanding obligation of the defendant. 3
Subsequently, upon petitioner’s motion, the trial court issued an
Order dated October 6, 2005 recognizing Asset Pool A (SPV-AMC), Inc. as
4 
substitute plaintiff in lieu of petitioner.
After due trial, the trial court rendered its Decision dated November 3,
2005, the dispositive portion of which states:
WHEREFORE, premises considered, judgment is hereby rendered in favor
of plaintiff BANK OF THE PHILIPPINE ISLANDS, as successor-in-interest
of Far East Bank & Trust Company, and against defendant CYNTHIA L.
REYES. Accordingly, the defendant is ordered:
1. To pay the plaintiff the amount of Php22,083,700.00,
representing said defendant’s outstanding obligation, plus interest
 at the rate of twelve percent (12%) per annum, computed from
January 20, 2003 until the whole amount is fully paid;
2. To pay plaintiff the amount of Php200,000.00 as attorney’s fees;
3. Costs of suit against the defendant. 5
Respondent filed a motion for reconsideration but the same was denied by
the trial court through an Order dated January 9, 2006.
6  acquired the mortgaged property at the foreclosure sale worth ₱47,536,000
An appeal with the Court of Appeals was filed by respondent. This resulted
in a reversal of the trial court’s judgment via an April 30, 2008 Decision by
the Court of Appeals, the dispositive portion of which states:
WHEREFORE, the instant appeal is GRANTED. The assailed Decision
dated November 3, 2005 is hereby REVERSED AND SET ASIDE. 7 foreclosure sale was null and void;
Aggrieved, petitioner filed the instant petition in which the following issues
were put into consideration:
A. WHETHER OR NOT THERE WAS DEFICIENCY WHEN
RESPONDENT’S PROPERTY WHICH SHE SUPPOSEDLY
VALUED AT ₱47,536,000.00 WAS SOLD AT THE EXTRA-
JUDICIAL FORECLOSURE SALE AT ONLY [₱9,032,960.00] BY
PETITIONER;
B. WHETHER OR NOT RESPONDENT’S PROPERTY WAS
OVERVALUED WHEN IT WAS MORTGAGED TO FEBTC/BPI;
C. WHETHER OR NOT RESPONDENT CAN RAISE THE ISSUE
ON THE NULLITY OF THE EXTRA-JUDICIAL FORECLOSURE
SALE IN AN ACTION FILED BY THE PETITIONER (CREDITOR-
MORTGAGEE) FOR THE RECOVERY OF DEFICIENCY AND
FOR THE FIRST TIME ON APPEAL;
D. WHETHER OR NOT THE PRICE OF ₱9,032,960.00 FOR
RESPONDENT’S PROPERTY AT THE EXTRAJUDICIAL
FORECLOSURE SALE WAS UNCONCIONABLE OR SHOCKING
TO THE CONSCIENCE OR GROSSLY INADEQUATE.
E. WHETHER OR NOT THE PETITION RAISES QUESTIONS OF
LAW AND THE QUESTIONS OF FACT RAISED FALL WITHIN
THE EXCEPTIONS TO THE RULE THAT ONLY QUESTIONS OF
LAW MAY BE REVIEWED BY THIS HONORABLE COURT
UNDER RULE 45 OF THE RULES OF COURT. 8
On the other hand, respondent submits the following issues:
Whether or not the Court of Appeals erred in ruling that there exists no
deficiency owed by mortgagor-debtor as the mortgagee-creditor bank
at only ₱9,032,960;
Whether or not the Court of Appeals erred in ruling that the properties of
the respondent were not overvalued at ₱47,536,000;
Whether or not the Court of Appeals erred in entertaining the issue that the
Whether or not the Court of Appeals erred in ruling that the purchase price
of ₱9,032,000 at the foreclosure sale of respondent’s mortgaged properties
was unconscionable or grossly inadequate. 9
After consideration of the issues and arguments raised by the opposing
sides, the Court finds the petition meritorious.
Stripped of surplusage, the singular issue in this case is whether or not
petitioner is entitled to recover the unpaid balance or deficiency from
respondent despite the fact that respondent’s property, which were
appraised by petitioner’s predecessor-in-interest at ₱47,536,000.00, was
sold and later bought by petitioner in an extrajudicial foreclosure sale for
only ₱9,032,960.00 in order to satisfy respondent’s outstanding obligation
to petitioner which, at the time of the sale, amounted to ₱30,420,041.67
inclusive of interest but excluding attorney’s fees, publication and other
charges.
There is no dispute with regard to the total amount of the outstanding loan
obligation that respondent owed to petitioner at the time of the extrajudicial
foreclosure sale of the property subject of the real estate mortgage.
Likewise, it is uncontested that by subtracting the amount obtained at the
sale of the property, a loan balance still remains. Petitioner merely
contends that, contrary to the ruling of the Court of Appeals, it has the right
to collect from the respondent the remainder of her obligation after
deducting the amount obtained from the extrajudicial foreclosure sale. On
the other hand, respondent avers that since petitioner’s predecessor’s own
valuation of the subject property shows that its value is more than the
amount of respondent’s outstanding obligation, then respondent cannot be
held liable for the balance especially because it was petitioner who bought
the property at the foreclosure sale.
In the recent case of BPI Family Savings Bank, Inc. v. Avenido, we 10  petitioners to refuse to pay the remaining balance of their
reiterated the well-entrenched rule that a creditor is not precluded from
recovering any unpaid balance on the principal obligation if the extrajudicial
foreclosure sale of the property subject of the real estate mortgage results
in a deficiency, to wit:
It is settled that if "the proceeds of the sale are insufficient to cover the debt
in an extrajudicial foreclosure of mortgage, the mortgagee is entitled to
claim the deficiency from the debtor. While Act No. 3135, as amended,
does not discuss the mortgagee’s right to recover the deficiency, neither
does it contain any provision expressly or impliedly prohibiting recovery. If
the legislature had intended to deny the creditor the right to sue for any
deficiency resulting from the foreclosure of a security given to guarantee an
obligation, the law would expressly so provide. Absent such a provision in
Act No. 3135, as amended, the creditor is not precluded from taking action
to recover any unpaid balance on the principal obligation simply because
he chose to extrajudicially foreclose the real estate mortgage." 11
Furthermore, we have also ruled in Suico Rattan & Buri Interiors, Inc. v.
Court of Appeals that, in deference to the rule that a mortgage is simply a
12 
security and cannot be considered payment of an outstanding obligation,
the creditor is not barred from recovering the deficiency even if it bought
the mortgaged property at the extrajudicial foreclosure sale at a lower price
than its market value notwithstanding the fact that said value is more than
or equal to the total amount of the debtor’s obligation. We quote from the
relevant portion of said decision:
Hence, it is wrong for petitioners to conclude that when respondent bank
supposedly bought the foreclosed properties at a very low price, the latter
effectively prevented the former from satisfying their whole obligation.
Petitioners still had the option of either redeeming the properties and,
thereafter, selling the same for a price which corresponds to what they
claim as the properties’ actual market value or by simply selling their right
to redeem for a price which is equivalent to the difference between the
supposed market value of the said properties and the price obtained during
the foreclosure sale. In either case, petitioners will be able to recoup the
loss they claim to have suffered by reason of the inadequate price obtained
at the auction sale and, thus, enable them to settle their obligation with
respondent bank. Moreover, petitioners are not justified in concluding that
they should be considered as having paid their obligations in full since
respondent bank was the one who acquired the mortgaged properties and
that the price it paid was very inadequate. The fact that it is respondent
bank, as the mortgagee, which eventually acquired the mortgaged
properties and that the bid price was low is not a valid reason for
obligation. Settled is the rule that a mortgage is simply a security and
not a satisfaction of indebtedness. (Emphases supplied.)
13 
We are aware of our earlier pronouncements in Cometa v. Court of
Appeals and in Rosales v. Court of Appeals which were cited by the Court
14  15 
of Appeals in its assailed April 30, 2008 Decision, wherein we declared that
a sale price which is equivalent to more or less twelve percent (12%) of the
value of the property is shockingly low, unconscionable and grossly
inadequate, thus, warranting a nullification of the foreclosure sale. In both
cases, we declared that where the inadequacy of the price is purely
shocking to the conscience, such that the mind revolts at it and such that a
reasonable man would neither directly nor indirectly be likely to consent to
it, the sale shall be declared null and void. On the other hand, we are
likewise reminded of our ruling in Cortes v. Intermediate Appellate
Court and in Ponce De Leon v. Rehabilitation Finance
16 
Corporation wherein we upheld the validity of foreclosure sales in which
17 
the property subject thereof were sold at 11% and 17%, respectively, of
their value.
In the case at bar, the winning bid price of ₱9,032,960.00 is nineteen
percent (19%) of the appraised value of the property subject of the
extrajudicial foreclosure sale that is pegged at ₱47,536,000.00 which
amount, notably, is only an arbitrary valuation made by the appraising
officers of petitioner’s predecessor-in-interest ostensibly for loan purposes
only. Unsettled questions arise over the correctness of this valuation in
light of conflicting evidence on record.
Notwithstanding the doubtful validity of the valuation of the property at
issue, the resolution of which is a question of fact that we are precluded
from addressing at this juncture of the litigation, and confronted by the
divergent jurisprudential benchmarks which define what can be considered
as shockingly or unconscionably low price in a sale of property, we,
nevertheless, proceed to adjudicate this case on an aspect in which it is
most plain and unambiguous – that it involves a forced sale with a right of
redemption.
Throughout a long line of jurisprudence, we have declared that unlike in an
ordinary sale, inadequacy of the price at a forced sale is immaterial and
does not nullify a sale since, in a forced sale, a low price is more beneficial in the foreclosure proceedings nor did she prove that a better price could
to the mortgage debtor for it makes redemption of the property easier. 18
be had for her property under the circumstances.

In the early case of The National Loan and Investment Board v.
Meneses, we also had the occasion to state that:
19 
As to the inadequacy of the price of the sale, this court has repeatedly
held that the fact that a property is sold at public auction for a price lower
than its alleged value, is not of itself sufficient to annul said sale, where
there has been strict compliance with all the requisites marked out by
law to obtain the highest possible price, and where there is no
showing that a better price is obtainable. (Government of the
Philippines vs. De Asis, G. R. No. 45483, April 12, 1939; Guerrero vs.
Thus, even if we assume that the valuation of the property at issue is
correct, we still hold that the inadequacy of the price at which it was sold at
public auction does not invalidate the foreclosure sale.
Even if we are so inclined out of sympathy for respondent’s plight, neither
could we temper respondent’s liability to the petitioner on the ground of
equity. We are barred by our own often repeated admonition that equity,
which has been aptly described as "justice outside legality," is applied only
in the absence of, and never against, statutory law or judicial rules of
procedure. The law and jurisprudence on the matter is clear enough to
24 

Guerrero, 57 Phil., 442; La Urbana vs. Belando, 54 Phil., 930; Bank of the close the door on a recourse to equity.
Philippine Islands v . Green, 52 Phil., 491.) (Emphases supplied.)
20 

In Hulst v. PR Builders, Inc., we further elaborated on this principle:
21 
[G]ross inadequacy of price does not nullify an execution sale. In an
ordinary sale, for reason of equity, a transaction may be invalidated on the
ground of inadequacy of price, or when such inadequacy shocks one’s
Moreover, we fail to see any unjust enrichment resulting from upholding the
validity of the foreclosure sale and of the right of the petitioner to collect
any deficiency from respondent. Unjust enrichment exists "when a person
unjustly retains a benefit to the loss of another, or when a person retains
money or property of another against the fundamental principles of justice,
equity and good governance." As discussed above, there is a strong legal
25 

conscience as to justify the courts to interfere; such does not follow when basis for petitioner’s claim against respondent for the balance of her loan
the law gives the owner the right to redeem as when a sale is made at obligation.
public auction, upon the theory that the lesser the price, the easier it is for
the owner to effect redemption. When there is a right to redeem, WHEREFORE, premises considered, the petition is hereby GRANTED.
inadequacy of price should not be material because the judgment The assailed Decision dated April 30, 2008 of the Court of Appeals in CA-
debtor may re-acquire the property or else sell his right to redeem G.R. CV No. 88004 is REVERSED and SET ASIDE. The RTC’s November
and thus recover any loss he claims to have suffered by reason of the 3, 2005 Decision in Civil Case No. 03-180 is hereby REINSTATED.
price obtained at the execution sale. Thus, respondent stood to gain
rather than be harmed by the low sale value of the auctioned SO ORDERED.
properties because it possesses the right of redemption. x x
x (Emphasis supplied.)
22 
1âwphi1

It bears also to stress that the mode of forced sale utilized by petitioner
was an extrajudicial foreclosure of real estate mortgage which is governed
by Act No. 3135, as amended. An examination of the said law reveals
nothing to the effect that there should be a minimum bid price or that the
winning bid should be equal to the appraised value of the foreclosed
property or to the amount owed by the mortgage debtor. What is clearly
provided, however, is that a mortgage debtor is given the opportunity to
redeem the foreclosed property "within the term of one year from and after
the date of sale." In the case at bar, other than the mere inadequacy of the
23 

bid price at the foreclosure sale, respondent did not allege any irregularity