ft_policitacion and perfection stage cases

7/29/2019 FT_Policitacion and Perfection Stage Cases

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LAW ON SALES | POLICITACION AND PERFEC

POLICITACION

FIRST DIVISION

MANILA METAL CONTAINER G.R. No. 166862CORPORATION,

Petitioner,REYNALDO C. TOLENTINO,

Intervenor,- versus -

PHILIPPINE NATIONAL BANK,Respondent,

DMCI-PROJECT DEVELOPERS, Promulgated:INC.,

Intervenor. December 20,2006x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x

D E C I S I O N

CALLEJO, SR., J.:

Before us is a petition for review on certiorariof the Decision[1] of the Court ofAppeals (CA) in CA-G.R. No. 46153 which affirmed the decision [2] of the Regional Trial Court(RTC), Branch 71, Pasig City, in Civil Case No. 58551, and its Resolution[3] denying themotion for reconsideration filed by petitioner Manila Metal Container Corporation (MMCC).

The Antecedents

Petitioner was the owner of a 8,015 square meter parcel of land located inMandaluyong (now a City), Metro Manila. The property was covered by Transfer Certificateof Title (TCT) No. 332098 of the Registry of Deeds of Rizal. To secure a P900,000.00 loan ithad obtained from respondent Philippine National Bank (PNB), petitioner executed a realestate mortgage over the lot. Respondent PNB later granted petitioner a new creditaccommodation of P1,000,000.00; and, on November 16, 1973, petitioner executed anAmendment[4] of Real Estate Mortgage over its property. On March 31, 1981, petitionersecured another loan of P653,000.00 from respondent PNB, payable in quarterlyinstallments of P32,650.00, plus interests and other charges. [5]

On August 5, 1982, respondent PNB filed a petition for extrajudicial foreclosureof the real estate mortgage and sought to have the property sold at public auction forP911,532.21, petitioners outstanding obligation to respondent PNB as of June 30, 1982, [6]plus interests and attorneys fees.

After due notice and publication, the property was sold at public auction onSeptember 28, 1982 where respondent PNB was declared the winning bidder for

P1,000,000.00. The Certificate of Sale[7] issued in its favor was registered with the Office ofthe Register of Deeds of Rizal, and was annotated at the dorsal portion of the title onFebruary 17, 1983. Thus, the period to redeem the property was to expire on February 17,1984.

Petitioner sent a letter dated August 25, 1983 to respondent PNB, requesting that itbe granted an extension of time to redeem/repurchase the property.[8] In its reply dated

August 30, 1983, respondent PNB informed petitioner that the request had been referred toits Pasay City Branch for appropriate action and recommendation.[9]

In a letter[10] dated February 10, 1984, petitioner reiterated its request for a oneyear extension from February 17, 1984 within which to redeem/repurchase the property oninstallment basis. It reiterated its request to repurchase the property on installment.[11]Meanwhile, some PNB Pasay City Branch personnel informed petitioner that as a matter ofpolicy, the bank does not accept partial redemption.[12]

Since petitioner failed to redeem the property, the Register of Deeds cancelledTCT No. 32098 on June 1, 1984, and issued a new title in favor of respondent PNB. [13]Petitioners offers had not yet been acted upon by respondent PNB.

Meanwhile, the Special Assets Management Department (SAMD) had prepareda statement of account, and as of June 25, 1984 petitioners obligation amounted toP1,574,560.47. This included the bid price of P1,056,924.50, interest, advances ofinsurance premiums, advances on realty taxes, registration expenses, miscellaneousexpenses and publication cost.[14] When apprised of the statement of account, petitionerremitted P725,000.00 to respondent PNB as deposit to repurchase, and Official ReceiptNo. 978191 was issued to it. [15]

In the meantime, the SAMD recommended to the management of respondentPNB that petitioner be allowed to repurchase the property for P1,574,560.00. In a letterdated November 14, 1984, the PNB management informed petitioner that it was rejecting theoffer and the recommendation of the SAMD. It was suggested that petitioner purchase theproperty for P2,660,000.00, its minimum market value. Respondent PNB gave petitioneruntil December 15, 1984 to act on the proposal; otherwise, its P725,000.00deposit would be returned and the property would be sold to other interested buyers.[16]

Petitioner, however, did not agree to respondent PNBs proposal. Instead, itwrote another letter dated December 12, 1984 requesting for a reconsideration. Respondent

PNB replied in a letter dated December 28, 1984, wherein it reiterated its proposal thatpetitioner purchase the property for P2,660,000.00. PNB again informed petitioner that itwould return the deposit should petitioner desire to withdraw its offer to purchase theproperty.[17] On February 25, 1985, petitioner, through counsel, requested that PNBreconsider its letter dated December 28, 1984. Petitioner declared that it had already agreedto the SAMDs offer to purchase the property for P1,574,560.47, and that was why it hadpaid P725,000.00. Petitioner warned respondent PNB that it would seek judicial recourseshould PNB insist on the position.[18]

On June 4, 1985, respondent PNB informed petitioner that the PNB Board ofDirectors had accepted petitioners offer to purchase the property, but forP1,931,389.53 incash less the P725,000.00 already deposited with it. [19] On page two of the letter was aspace above the typewritten name of petitioners President, Pablo Gabriel, where he was toaffix his signature. However, Pablo Gabriel did not conform to the letter but merely indicatedtherein that he had received it.[20] Petitioner did not respond, so PNB requested petitioner ina letter dated June 30, 1988 to submit an amended offer to repurchase.

Petitioner rejected respondents proposal in a letter dated July 14, 1988. It

maintained that respondent PNB had agreed to sell the property for P1,574,560.47, and thatsince its P725,000.00 downpayment had been accepted, respondent PNB was proscribedfrom increasing the purchase price of the property.[21] Petitioner averred that it had a netbalance payable in the amount of P643,452.34. Respondent PNB, however, rejectedpetitioners offer to pay the balance ofP643,452.34 in a letter dated August 1, 1989.[22]

On August 28, 1989, petitioner filed a complaint against respondent PNB forAnnulment of Mortgage and Mortgage Foreclosure, Delivery of Title, o r Specific

Performance with Damages. To support its cause of action for specific perfoalleged the following:

34. As early as June 25, 1984, PNB had accepted the downpayment from Manila Metal in the substantial amount ofP725,000.00 for the redemption/repurchase price ofP1,574,560.47 as approved by its SMAD and considering thereliance made by Manila Metal and the long time that haselapsed, the approval of the higher management of the Bankto confirm the agreement of its SMAD is clearly a potestativecondition which cannot legally prejudice Manila Metal whichhas acted and relied on the approval of SMAD. The Bankcannot take advantage of a condition which is entirely

dependent upon its own will after accepting and benefitingfrom the substantial payment made by Manila Metal.

35. PNB approved the repurchase price of P1,574,560.47 forwhich it accepted P725,000.00 from Manila Metal. PNBcannot take advantage of its own delay and long inaction indemanding a higher amount based on unilateral computationof interest rate without the consent of Manila Metal.

Petitioner later filed an amended complaint and supported its claim forwith the following arguments:

36. That in order to protect itself against the wrongful andmalicious acts of the defendant Bank, plaintiff is constrainedto engage the services of counsel at an agreed fee ofP50,000.00 and to incur litigation expenses of at leastP30,000.00, which the defendant PNB should be condemnedto pay the plaintiff Manila Metal.

37. That by reason of the wrongful and malicious actuations ofdefendant PNB, plaintiff Manila Metal suffered besmirchedreputation for which defendant PNB is liable for moraldamages of at least P50,000.00.

38. That for the wrongful and malicious act of defendant PNBwhich are highly reprehensible, exemplary damages shouldbe awarded in favor of the plaintiff by way of example orcorrection for the public good of at least P30,000.00.[23]

Petitioner prayed that, after due proceedings, judgment be rendered thus:

a) Declaring the Amended Real Estate Mortgage (Annex A) nulland void and without any legal force and effect.

b) Declaring defendants acts of extra-judicially foreclosing themortgage over plaintiffs property and setting it for auctionsale null and void.

c) Ordering the defendant Register of Deeds to cancel the newtitle issued in the name of PNB ( TCT NO. 43792) coveringthe property described in paragraph 4 of the Complaint, toreinstate TCT No. 37025 in the name of Manila Metal and to


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cancel the annotation of the mortgage in question at the backof the TCT No. 37025 described in paragraph 4 of thisComplaint.

d) Ordering the defendant PNB to return and/or deliver physicalpossession of the TCT No. 37025 described in paragraph 4of this Complaint to the plaintiff Manila Metal.

e) Ordering the defendant PNB to pay the plaintiff ManilaMetals actual damages, moral and exemplary damages inthe aggregate amount of not less than P80,000.00 asmay be warranted by the evidence and fixed by thisHonorable Court in the exercise of its sound discretion, andattorneys fees of P50,000.00 and litigation expenses of atleast P30,000.00 as may be proved during the trial, and costsof suit.

Plaintiff likewise prays for such further reliefs whichmay be deemed just and equitable in the premises.[24]

In its Answer to the complaint, respondent PNB averred, as a special andaffirmative defense, that it had acquired ownership over the property after the period toredeem had elapsed. It claimed that no contract of sale was perfected between it andpetitioner after the period to redeem the property had expired.

During pre-trial, the parties agreed to submit the case for decision, based ontheir stipulation of facts. [25] The parties agreed to limit the issues to the following:

1. Whether or not the June 4, 1985 letter of the defendantapproving/accepting plaintiffs offer to purchase the propertyis still valid and legally enforceable.

2. Whether or not the plaintiff has waived its right to purchasethe property when it failed to conform with the conditions setforth by the defendant in its letter dated June 4, 1985.

3. Whether or not there is a perfected contract of sale betweenthe parties.[26]

While the case was pending, respondent PNB demanded, on September 20,1989, that petitioner vacate the property within 15 days from notice, [27] but petitionersrefused to do so.

On March 18, 1993, petitioner offered to repurchase the property forP3,500,000.00.[28] The offer was however rejected by respondent PNB, in a letter dated April13, 1993. According to it, the prevailing market value of the property was approximatelyP30,000,000.00, and as a matter of policy, it could not sell the property for less than itsmarket value.[29] On June 21, 1993, petitioner offered to purchase the property for

P4,250,000.00 in cash.[30]

The offer was again rejected by respondent PNB on September13, 1993.[31]

On May 31, 1994, the trial court rendered judgment dismissing the amendedcomplaint and respondent PNBs counterclaim. It ordered respondent PNB to refund theP725,000.00 deposit petitioner had made. [32] The trial court ruled that there was noperfected contract of sale between the parties; hence, petitioner had no cause of action forspecific performance against respondent. The trial court declared that respondent had

rejected petitioners offer to repurchase the property. Petitioner, in turn, rejected the termsand conditions contained in the June 4, 1985 letter of the SAMD. While petitioner hadoffered to repurchase the property per its letter of July 14, 1988, the amount of P643,422.34was way below the P1,206,389.53 which respondent PNB had demanded. It further declaredthat the P725,000.00 remitted by petitioner to respondent PNB on June 4, 1985 was adeposit, and not a downpayment or earnest money.

On appeal to the CA, petitioner made the following allegations:

ITHE LOWER COURT ERRED IN RULING THAT DEFENDANT-

APPELLEES LETTER DATED 4 JUNE 1985APPROVING/ACCEPTING PLAINTIFF-APPELLANTS OFFER TOPURCHASE THE SUBJECT PROPERTY IS NOT VALID ANDENFORCEABLE.

IITHE LOWER COURT ERRED IN RULING THAT THERE WAS NOPERFECTED CONTRACT OF SALE BETWEEN PLAINTIFF-APPELLANT AND DEFENDANT-APPELLEE.

IIITHE LOWER COURT ERRED IN RULING THAT PLAINTIFF-APPELLLANT WAIVED ITS RIGHT TO PURCHASE THESUBJECT PROPERTY WHEN IT FAILED TO CONFORM WITHCONDITIONS SET FORTH BY DEFENDANT-APPELLEE IN ITSLETTER DATED 4 JUNE 1985.

IVTHE LOWER COURT ERRED IN DISREGARDING THE FACTTHAT IT WAS THE DEFENDANT-APPELLEE WHICH RENDERED

IT DIFFICULT IF NOT IMPOSSIBLE FOR PLAINTIFF-APPELLANTTO COMPLETE THE BALANCE OF THEIR PURCHASE PRICE.

VTHE LOWER COURT ERRED IN DISREGARDING THE FACTTHAT THERE WAS NO VALID RESCISSION OR CANCELLATIONOF SUBJECT CONTRACT OF REPURCHASE.

VITHE LOWER COURT ERRED IN DECLARING THAT PLAINTIFFFAILED AND REFUSED TO SUBMIT THE AMENDEDREPURCHASE OFFER.

VIITHE LOWER COURT ERRED IN DISMISSING THE AMENDEDCOMPLAINT OF PLAINTIFF-APPELLANT.

VIII

THE LOWER COURT ERRED IN NOT AWARDING PLAINTIFF-APPELLANT ACTUAL, MORAL AND EXEMPLARY DAMAGES,ATTOTRNEYS FEES AND LITIGATION EXPENSES.[33]Meanwhile, on June 17, 1993, petitioners Board of Directors approved

Resolution No. 3-004, where it waived, assigned and transferred its rights over the propertycovered by TCT No. 33099 and TCT No. 37025 in favor of Bayani Gabriel, one of itsDirectors.[34] Thereafter, Bayani Gabriel executed a Deed of Assignment over 51% of theownership and management of the property in favor of Reynaldo Tolentino, who later moved

for leave to intervene as plaintiff-appellant. On July 14, 1993, the CA issued agranting the motion,[35] and likewise granted the motion of Reynaldo Tolentino spetitioner MMCC, as plaintiff-appellant, and his motion to withdraw as intervenor.[3

The CA rendered judgment on May 11, 2000 affirming the decisRTC.[37] It declared that petitioner obviously never agreed to the selling price prrespondent PNB (P1,931,389.53) since petitioner had kept on insisting that the sshould be lowered to P1,574,560.47. Clearly therefore, there was no meeting obetween the parties as to the price or consideration of the sale.

The CA ratiocinated that petitioners original offer to purchase tproperty had not been accepted by respondent PNB. In fact, it made a counter-ofits June 4, 1985 letter specifically on the selling price; petitioner did not agree to thoffer; and the negotiations did not prosper. Moreover, petitioner did not pay the the purchase price within the sixty-day period set in the June 4, 1985 letter of rPNB. Consequently, there was no perfected contract of sale, and as such, thecontract to rescind.

According to the appellate court, the claim for damages and the cowere correctly dismissed by the court a quo for no evidence was presented to Respondent PNBs letter dated June 30, 1988 cannot revive the failed negotiationthe parties. Respondent PNB merely asked petitioner to submit an amenderepurchase. While petitioner reiterated its request for a lower selling price anbalance of the repurchase be reduced, however, respondent rejected the proposadated August 1, 1989.

Petitioner filed a motion for reconsideration, which the CA likewise den

Thus, petitioner filed the instant petition for review on certiorari, allegin

I. THE COURT OF APPEALS ERRED ON A QUESTION

OF LAW WHEN IT RULED THAT THERE IS NOPERFECTED CONTRACT OF SALE BETWEEN THEPETITIONER AND RESPONDENT.

II. THE COURT OF APPEALS ERRED ON A QUESTIONOF LAW WHEN IT RULED THAT THE AMOUNT OFPHP725,000.00 PAID BY THE PETITIONER IS NOTAN EARNEST MONEY.

III. THE COURT OF APPEALS ERRED ON A QUESTIONOF LAW WHEN IT RULED THAT THE FAILURE OFTHE PETITIONER-APPELLANT TO SIGNIFY ITSCONFORMITY TO THE TERMS CONTAINED INPNBS JUNE 4, 1985 LETTER MEANS THAT THEREWAS NO VALID AND LEGALLY ENFORCEABLECONTRACT OF SALE BETWEEN THE PARTIES.

IV. THE COURT OF APPEALS ERRED ON A QUESTION

OF LAW THAT NON-PAYMENT OF THEPETITIONER-APPELLANT OF THE BALANCE OFTHE OFFERED PRICE IN THE LETTER OF PNBDATED JUNE 4, 1985, WITHIN SIXTY (60) DAYSFROM NOTICE OF APPROVAL CONSTITUTES NOVALID AND LEGALLY ENFORCEABLE CONTRACTOF SALE BETWEEN THE PARTIES.


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V. THE COURT OF APPEALS SERIOUSLY ERREDWHEN IT HELD THAT THE LETTERS OFPETITIONER-APPELLANT DATED MARCH 18, 1993AND JUNE 21, 1993, OFFERING TO BUY THESUBJECT PROPERTY AT DIFFERENT AMOUNTWERE PROOF THAT THERE IS NO PERFECTEDCONTRACT OF SALE.[38]

The threshold issue is whether or not petitioner and respondent PNB hadentered into a perfected contract for petitioner to repurchase the property from respondent.

Petitioner maintains that it had accepted respondents offer made through theSAMD, to sell the property for P1,574,560.00. When the acceptance was made in its letterdated June 25, 1984; it then deposited P725,000.00 with the SAMD as partial payment,evidenced by Receipt No. 978194 which respondent had issued. Petitioner avers that theSAMDs acceptance of the deposit amounted to an acceptance of its offer to repurchase.Moreover, as gleaned from the letter of SAMD dated June 4, 1985, the PNB Board ofDirectors had approved petitioners offer to purchase the property. It claims that this was thesuspensive condition, the fulfillment of which gave rise to the contract. Respondent could nolonger unilaterally withdraw its offer to sell the property for P1,574,560.47, since theacceptance of the offer resulted in a perfected contract of sale; it was obliged to remit torespondent the balance of the original purchase price of P1,574,560.47, while respondentwas obliged to transfer ownership and deliver the property to petitioner, conformably withArticle 1159 of the New Civil Code.

Petitioner posits that respondent was proscribed from increasing the interestrate after it had accepted respondents offer to sell the property for P1,574,560.00.Consequently, respondent could no longer validly make a counter-offer of P1,931,789.88 forthe purchase of the property. It likewise maintains that, although the P725,000.00 wasconsidered as deposit for the repurchase of the property in the receipt issued by the

SAMD, the amount constitutes earnest money as contemplated in Article 1482 of the NewCivil Code. Petitioner cites the rulings of this Court in Villonco v. Bormaheco[39] and Topaciov. Court of Appeals.[40]

Petitioner avers that its failure to append its conformity to the June 4, 1984 letterof respondent and its failure to pay the balance of the price as fixed by respondent within the60-day period from notice was to protest respondents breach of its obligation to petitioner. Itdid not amount to a rejection of respondents offer to sell the property since respondent wasmerely seeking to enforce its right to pay the balance of P1,570,564.47. In any event,respondent had the option either to accept the balance of the offered price or to cause therescission of the contract.

Petitioners letters dated March 18, 1993 and June 21, 1993 to respondentduring the pendency of the case in the RTC were merely to compromise the pending lawsuit,they did not constitute separate offers to repurchase the property. Such offer to compromiseshould not be taken against it, in accordance with Section 27, Rule 130 of the Revised Rulesof Court.

For its part, respondent contends that the parties never graduated from thenegotiation stage as they could not agree on the amount of the repurchase price ofthe property. All that transpired was an exchange of proposals and counter-proposals,nothing more. It insists that a definite agreement on the amount and manner of payment ofthe price are essential elements in the formation of a binding and enforceable contract ofsale. There was no such agreement in this case. Primarily, the concept of suspensivecondition signifies a future and uncertain event upon the fulfillment of which the obligationbecomes effective. It clearly presupposes the existence of a valid and binding agreement,

the effectivity of which is subordinated to its fulfillment. Since there is no perfected contractin the first place, there is no basis for the application of the principles governing suspensiveconditions.

According to respondent, the Statement of Account prepared by SAMD as ofJune 25, 1984 cannot be classified as a counter-offer; it is simply a recital of its totalmonetary claims against petitioner. Moreover, the amount stated therein could not likewisebe considered as the counter-offer since as admitted by petitioner, it was onlyrecommendation which was subject to approval of the PNB Board of Directors.

Neither can the receipt by the SAMD of P725,000.00 be regarded as evidenceof a perfected sale contract. As gleaned from the parties Stipulation of Facts during theproceedings in the court a quo, the amount is merely an acknowledgment of the receipt ofP725,000.00 as deposit to repurchase the property. The deposit of P725,000.00 wasaccepted by respondent on the condition that the purchase price would still be approved byits Board of Directors. Respondent maintains that its acceptance of the amount wasqualified by that condition, thus not absolute. Pending such approval, it cannot be legallyclaimed that respondent is already bound by any contract of sale with petitioner.

According to respondent, petitioner knew that the SAMD has no capacity to bindrespondent and that its authority is limited to administering, managing and preserving theproperties and other special assets of PNB. The SAMD does not have the power to sell,encumber, dispose of, or otherwise alienate the assets, since the power to do so mustemanate from its Board of Directors. The SAMD was not authorized by respondents Boardto enter into contracts of sale with third persons involving corporate assets. There isabsolutely nothing on record that respondent authorized the SAMD, or made it appear topetitioner that it represented itself as having such authority.

Respondent reiterates that SAMD had informed petitioner that its offer torepurchase had been approved by the Board subject to the condition, among others, thatthe selling price shall be the total banks claim as of documentation date x x x payable in

cash (P725,000.00 already deposited) within 60 days from notice of approval. A newStatement of Account was attached therein indicating the total banks claim to beP1,931,389.53 less deposit of P725,000.00, or P1,206,389.00. Furthermore, whilerespondents Board of Directors accepted petitioners offer to repurchase the property, theacceptance was qualified, in that it required a higher sale price and subject to specifiedterms and conditions enumerated therein. This qualified acceptance was in effect a counter-offer, necessitating petitioners acceptance in return.

The Ruling of the Court

The ruling of the appellate court that there was no perfected contract of salebetween the parties on June 4, 1985 is correct.

A contract is a meeting of minds between two persons whereby one bindshimself, with respect to the other, to give something or to render some service. [41] UnderArticle 1318 of the New Civil Code, there is no contract unless the following requisitesconcur:

(1) Consent of the contracting parties;(2) Object certain which is the subject matter

of the contract;

(3) Cause of the obligation which isestablished.

Contracts are perfected by mere consent which is manifested by the the offer and the acceptance upon the thing and the cause which are to concontract.[42] Once perfected, they bind other contracting parties and the obligatiotherefrom have the form of law between the parties and should be complied wifaith. The parties are bound not only to the fulfillment of what has been expresslybut also to the consequences which, according to their nature, may be in keepingfaith, usage and law.[43]

By the contract of sale, one of the contracting parties obligates himself to townership of and deliver a determinate thing, and the other to pay therefor a pricemoney or its equivalent.[44] The absence of any of the essential elements will nexistence of a perfected contract of sale. As the Court ruled in Boston BPhilippines v. Manalo:[45]

A definite agreement as to the price is an essentialelement of a binding agreement to sell personal or real propertybecause it seriously affects the rights and obligations of the parties.Price is an essential element in the formation of a binding andenforceable contract of sale. The fixing of the price can never beleft to the decision of one of the contracting parties. But a pricefixed by one of the contracting parties, if accepted by the other,gives rise to a perfected sale. [46]

A contract of sale is consensual in nature and is perfected upon merof the minds. When there is merely an offer by one party without acceptance ofthere is no contract. [47] When the contract of sale is not perfected, it cannindependent source of obligation, serve as a binding juridical relation between the

In San Miguel Properties Philippines, Inc. v. Huang,[49] the Court rulestages of a contract of sale are as follows: (1) negotiation, covering the period fro

the prospective contracting parties indicate interest in the contract to the time the perfected; (2)perfection, which takes place upon the concurrence of the essentiaof the sale which are the meeting of the minds of the parties as to the object of thand upon the price; and (3) consummation, which begins when the parties perespective undertakings under the contract of sale, culminating in the extingthereof.

A negotiation is formally initiated by an offer, which, however, must beAt any time prior to the perfection of the contract, either negotiating party maynegotiation. At this stage, the offer may be withdrawn; the withdrawal iimmediately after its manifestation. To convert the offer into a contract, the accepbe absolute and must not qualify the terms of the offer; it must be plain, ununconditional and without variance of any sort from the proposal. InAdelfa Propv. Court of Appeals,[51] the Court ruled that:

x x x The rule is that except where a formal acceptanceis so required, although the acceptance must be affirmatively andclearly made and must be evidenced by some acts or conductcommunicated to the offeror, it may be shown by acts, conduct, or

words of the accepting party that clearly manifest a presentintention or determination to accept the offer to buy or sell. Thus,acceptance may be shown by the acts, conduct, or words of a partyrecognizing the existence of the contract of sale.[52]

A qualified acceptance or one that involves a new proposal constitutes a coand a rejection of the original offer. A counter-offer is considered in law, a rejectoriginal offer and an attempt to end the negotiation between the parties on


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basis.[53] Consequently, when something is desired which is not exactly what is proposed inthe offer, such acceptance is not sufficient to guarantee consent because any modification orvariation from the terms of the offer annuls the offer. [54] The acceptance must be identical inall respects with that of the offer so as to produce consent or meeting of the minds.

In this case, petitioner had until February 17, 1984 within which to redeem theproperty. However, since it lacked the resources, it requested for more time toredeem/repurchase the property under such terms and conditions agreed upon by theparties.[55] The request, which was made through a letter dated August 25, 1983, wasreferred to the respondents main branch for appropriate action.[56] Before respondent couldact on the request, petitioner again wrote respondent as follows:

1. Upon approval of our request, we will pay your goodselves ONEHUNDRED & FIFTY THOUSAND PESOS (P150,000.00);

2. Within six months from date of approval of our request, we willpay another FOUR HUNDRED FIFTY THOUSAND PESOS(P450,000.00); and

3. The remaining balance together with the interest and otherexpenses that will be incurred will be paid within the last sixmonths of the one year grave period requested for.[57]

When the petitioner was told that respondent did not allow partial redemption,[58]it sent aletter to respondents President reiterating its offer to purchase the property.[59] There was noresponse to petitioners letters dated February 10 and 15, 1984.

The statement of account prepared by the SAMD stating that the net claim ofrespondent as of June 25, 1984 was P1,574,560.47 cannot be considered an unqualifiedacceptance to petitioners offer to purchase the property. The statement is but a computationof the amount which petitioner was obliged to pay in case respondent would later agree tosell the property, including interests, advances on insurance premium, advances on realtytaxes, publication cost, registration expenses and miscellaneous expenses.

There is no evidence that the SAMD was authorized by respondents Board ofDirectors to accept petitioners offer and sell the property for P1,574,560.47. Anyacceptance by the SAMD of petitioners offer would not bind respondent. As this Court ruledinAF Realty Development, Inc. vs. Diesehuan Freight Services, Inc.:[60]

Section 23 of the Corporation Code expressly provides that thecorporate powers of all corporations shall be exercised by the boardof directors. Just as a natural person may authorize another to docertain acts in his behalf, so may the board of directors of acorporation validly delegate some of its functions to individualofficers or agents appointed by it. Thus, contracts or acts of acorporation must be made either by the board of directors or by acorporate agent duly authorized by the board. Absent such validdelegation/authorization, the rule is that the declarations of an

individual director relating to the affairs of the corporation, but not inthe course of, or connected with the performance of authorizedduties of such director, are held not binding on the corporation.

Thus, a corporation can only execute its powers and transact its businessthrough its Board of Directors and through its officers and agents when authorized by aboard resolution or its by-laws. [61]

It appears that the SAMD had prepared a recommendation for respondent toaccept petitioners offer to repurchase the property even beyond the one -year period; itrecommended that petitioner be allowed to redeem the property and pay P1,574,560.00 asthe purchase price. Respondent later approved the recommendation that the property besold to petitioner. But instead of the P1,574,560.47 recommended by the SAMD and towhich petitioner had previously conformed, respondent set the purchase price atP2,660,000.00. In fine, respondents acceptance of petitioners offer was qualified, hencecan be at most considered as a counter-offer. If petitioner had accepted this counter-offer, aperfected contract of sale would have arisen; as it turns out, however, petitioner merelysought to have the counter-offer reconsidered. This request for reconsideration would laterbe rejected by respondent.

We do not agree with petitioners content ion that the P725,000.00 it hadremitted to respondent was earnest money which could be considered as proof of theperfection of a contract of sale under Article 1482 of the New Civil Code. The provisionreads:

ART. 1482. Whenever earnest money is given in acontract of sale, it shall be considered as part of the price and asproof of the perfection of the contract.

This contention is likewise negated by the stipulation of facts which the partiesentered into in the trial court:

8. On June 8, 1984, the Special Assets ManagementDepartment (SAMD) of PNB prepared an updated Statement of

Account showing MMCCs total liability to PNB as of June 25, 1984to be P1,574,560.47 and recommended this amount as therepurchase price of the subject property.

9. On June 25, 1984, MMCC paid P725,000.00 to PNBas deposit to repurchase the property. The deposit of P725,000was accepted by PNB on the condition that the purchase priceis still subject to the approval of the PNB Board.[62]

Thus, the P725,000.00 was merely a deposit to be applied as part of thepurchase price of the property, in the event that respondent would approve therecommendation of SAMD for respondent to accept petitioners offer to purchase theproperty for P1,574,560.47. Unless and until the respondent accepted the offer on theseterms, no perfected contract of sale would arise. Absent proof of the concurrence of all theessential elements of a contract of sale, the giving of earnest money cannot establish theexistence of a perfected contract of sale.[63]

It appears that, per its letter to petitioner dated June 4, 1985, the respondenthad decided to accept the offer to purchase the property for P1,931,389.53. However,this amounted to an amendment of respondents qualified acceptance, or an amendedcounter-offer, because while the respondent lowered the purchase price, it still declared that

its acceptance was subject to the following terms and conditions:1. That the selling price shall be the total Banks claim as of documentation date(pls. see attached statement of account as of 5-31-85), payable in cash (P725,000.00already deposited) within sixty (60) days from notice of approval;

2. The Bank sells only whatever rights, interests andparticipation it may have in the property and you are

charged with full knowledge of the nature and extent ofsaid rights, interests and participation and waive your rightto warranty against eviction.

3. All taxes and other government imposts due or to becomedue on the property, as well as expenses including costs ofdocuments and science stamps, transfer fees, etc., to beincurred in connection with the execution and registrationof all covering documents shall be borne by you;

4. That you shall undertake at your own expense and accountthe ejectment of the occupants of the property subject ofthe sale, if there are any;

5. That upon your failure to pay the balance of the purchaseprice within sixty (60) days from receipt of advice acceptingyour offer, your deposit shall be forfeited and the Bank isthenceforth authorized to sell the property to otherinterested parties.

6. That the sale shall be subject to such other terms andconditions that the Legal Department may impose toprotect the interest of the Bank.[64]

It appears that although respondent requested petitioner to confamended counter-offer, petitioner refused and instead requested respondent to its amended counter-offer. Petitioners request was ultimately rejected and roffered to refund its P725,000.00 deposit.

In sum, then, there was no perfected contract of sale between petrespondent over the subject property.

IN LIGHT OF ALL THE FOREGOING, the petition is DENIED.The assailed decision is AFFIRMED. Costs against petitioner Manila Metal Corporation.

SO ORDERED.


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OPTION CONTRACT

HERMINIO TAYAG, petitioner, vs. AMANCIA LACSON, ROSENDO LACSON, ANTONIOLACSON, JUAN LACSON, TEODISIA LACSON-ESPINOSA and THE COURTOF APPEALS, respondents.

D E C I S I O N

CALLEJO, SR., J.:

Before us is a petition for review on certiorariof the Decision[1] and the Resolution[2] ofrespondent Court of Appeals in CA-G.R. SP No. 44883.

The Case for the Petitioner

Respondents Angelica Tiotuyco Vda. de Lacson,[3] and her children Amancia,Antonio, Juan, and Teodosia, all surnamed Lacson, were the registered owners of threeparcels of land located in Mabalacat, Pampanga, covered by Transfer Certificates of Title(TCT) Nos. 35922-R, 35923-R, and 35925-R, registered in the Register of Deeds of SanFernando, Pampanga. The properties, which were tenanted agricultural lands, [4] wereadministered by Renato Espinosa for the owner.

On March 17, 1996, a group of original farmers/tillers, namely, Julio Tiamson, RenatoGozun, Rosita Hernandez, Bienvenido Tongol, Alfonso Flores, Norma Quiambao, Rosita

Tolentino, Jose Sosa, Francisco Tolentino, Sr., Emiliano Laxamana, Ruben Torres, MelitonAllanigue, Dominga Laxamana, Felicencia de Leon, Emiliano Ramos, and another group,namely, Felino G. Tolentino, Rica Gozun, Perla Gozun, Benigno Tolentino, RodolfoQuiambao, Roman Laxamana, Eddie San Luis, Ricardo Hernandez, Nicenciana Miranda,Jose Gozun, Alfredo Sosa, Jose Tiamson, Augusto Tolentino, Sixto Hernandez, AlexQuiambao, Isidro Tolentino, Ceferino de Leon, Alberto Hernandez, Orlando Flores, andAurelio Flores,[5] individually executed in favor of the petitioner separate Deeds ofAssignment[6] in which the assignees assigned to the petitioner their respective rights astenants/tillers of the landholdings possessed and tilled by them for and in consideration ofP50.00 per square meter. The said amount was made payable when the legal impedimentsto the sale of the property to the petitioner no longer existed. The petitioner was alsogranted the exclusive right to buy the property if and when the respondents, with theconcurrence of the defendants-tenants, agreed to sell the property. In the interim, thepetitioner gave varied sums of money to the tenants as partial payments, and the latterissued receipts for the said amounts.

On July 24, 1996, the petitioner called a meeting of the defendants-tenants to workout the implementation of the terms of their separate agreements.[7] However, on August 8,

1996, the defendants-tenants, through Joven Mariano, wrote the petitioner stating that theywere not attending the meeting and instead gave notice of their collective decision to sell alltheir rights and interests, as tenants/lessees, over the landholding to the respondents. [8]Explaining their reasons for their collective decision, they wrote as follows:

Kami ay nagtiwala sa inyo, naging tapat at nanindigan sa lahat ngating napagkasunduan, hindi tumanggap ng ibang buyer o ahente, pero siniraninyo ang aming pagtitiwala sa pamamagitan ng demanda ninyo at

pagbibigay ng problema sa amin na hindi naman nagbenta ng lupa.

Kaya kami ay nagpulong at nagpasya na ibenta na lang ang amingkarapatan o ang aming lupang sinasaka sa landowner o sa mga pamilyangLacson, dahil ayaw naming magkaroon ng problema.

Kaya kung ang sasabihin ninyong itoy katangahan, lalo sigurongmagiging katangahan kung ibebenta pa namin sa inyo ang aming lupangsinasaka, kaya pasensya na lang Mister Tayag. Dahil sinira ninyo ang aming

pagtitiwala at katapatan.[9]

On August 19, 1996, the petitioner filed a complaint with the Regional Trial Court ofSan Fernando, Pampanga, Branch 44, against the defendants-tenants, as well as therespondents, for the court to fix a period within which to pay the agreed purchase price of

P50.00 per square meter to the defendants, as provided for in the Deeds of Assignment.The petitioner also prayed for a writ of preliminary injunction against the defendants and therespondents therein.[10] The case was docketed as Civil Case No. 10910.

In his complaint, the petitioner alleged, inter alia, the following:

4. That defendants Julio Tiamson, Renato Gozun, RositaHernandez, Bienvenido Tongol, Alfonso Flores, Norma Quiambao, RositaTolentino, Jose Sosa, Francisco Tolentino, Sr., Emiliano Laxamana, RubenTorres, Meliton Allanigue, Dominga Laxamana, Felicencia de Leon,Emiliano Ramos are original farmers or direct tillers of landholdings overparcels of lands covered by Transfer Certificate of Title Nos. 35922-R,35923-R and 35925-R which are registered in the names of defendantsLACSONS; while defendants Felino G. Tolentino, Rica Gozun, Perla Gozun,Benigno Tolentino, Rodolfo Quiambao, Roman Laxamana, Eddie SanLuis, Alfredo Gozun, Jose Tiamson, Augusto Tolentino, Sixto Hernandez,Alex Quiambao, Isidro Tolentino, Ceferino de Leon, Alberto Hernandez, andAurelio Flores are sub-tenants over the same parcel of land.

5. That on March 17, 1996 the defendants TIAMSON, et al.,entered into Deeds of Assignment with the plaintiff by which the defendantsassigned all their rights and interests on their landholdings to the plaintiff andthat on the same date (March 17, 1996), the defendants received from theplaintiff partial payments in the amounts corresponding to their names.Subsequent payments were also received:

1st PAYMENT 2nd PAYMENT CHECK NO. TOTAL

1.JulioTiamson - - -- - -

P20,000

P10,621.54

231281

P 30,621.54

2. RenatoGozun - - - -- -

P10,0

96,000

106,000.00

00

[son of Felix Gozun (deceased)]

3. RositaHernandez -- - -

P 5,00014,374.24

231274

P 1

4.BienvenidoTongol - - -

P 10,00014,465.90

231285

2

[Son of Abundio Tongol (deceased)]

5. AlfonsoFlores - - - - --

P30,000

26,648.40

231271

5

6. NormaQuiambao - -- -

P10,000

41,501.10

231279

5

7. RositaTolentino - - -- -

P10,0

00

22,126.08

23128

4

3

8. Jose Sosa- - - - - - - - -

P10,

14,861.31

23129

2


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000

1

9. FranciscoTolentino, Sr.

P10,000

24,237.62

231283

34,237.62

10. EmilianoLaxamana - -

P10,000

------

------

------

11. RubenTorres - - - - --

P10,000

P33,587.31

------

P 43,587.31

[Son of Mariano Torres (deceased)]

12. MelitonAllanigue

P10,000

12,944.77

231269

P 22,944.77

13. DomingaLaxamana

P5,

000

22,269.02

231275

27,269.02

14.Felicencia deLeon

10

------

----

------

,000

--

15. EmilianoRamos

5,000

18,869.60

231280

23,869.60

16. Felino G.Tolentino

10,000

------

------

------

17. RicaGozun

5,000

------

------

------

18. PerlaGozun

1

0,000

------

------

------

19. BenignoTolentino

10,000

------

------

------

20. RodolfoQuiambao

10

,000

------

------

------

21. RomanLaxamana 1

-----

--

------

0,000

- ----

22. EddieSan Luis

10,000

------

------

23. RicardoHernandez

10,000

------

------

24.NicencianaMiranda

10,000

------

------

25. JoseGozun

10,000

------

------

26. AlfredoSosa

5,000

------

------

27. JoseTiamson

10,000

------

------


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28. AugustoTolentino

5,000

------

------

------

29. SixtoHernandez

10,0

00

------

------

------

30. AlexQuiambao

10,000

------

------

------

31. IsidroTolentino

10,00

0

------

------

------

32. Ceferinode Leon

------

11,378.70

231270

------

33. AlbertoHernandez

10,000

------

------

------

34. OrlandoFlorez

10,00

------

------

------

0

35. AurelioFlores

10,000

------

------

------

6. That on July 24, 1996, the plaintiff wrote the defendantsTIAMSON, et al., inviting them for a meeting regarding thenegotiations/implementations of the terms of their Deeds of Assignment;

7. That on August 8, 1996, the defendants TIAMSON, et al.,through Joven Mariano, replied that they are no longer willing to pursue withthe negotiations, and instead they gave notice to the plaintiff that they will sellall their rights and interests to the registered owners (defendants LACSONS).

A copy of the letter is hereto attached as Annex A etc.;

8. That the defendants TIAMSON, et. al., have no right to dealwith the defendants LACSON or with any third persons while their contractswith the plaintiff are subsisting; defendants LACSONS are inducing or haveinduced the defendants TIAMSON, et. al., to violate their contracts with theplaintiff;

9. That by reason of the malicious acts of all the defendants,plaintiff suffered moral damages in the forms of mental anguish, mentaltorture and serious anxiety which in the sum of P500,000.00 for whichdefendants should be held liable jointly and severally.[11]

In support of his plea for injunctive relief, the petitioner, as plaintiff, also alleged thefollowing in his complaint:

11. That to maintain the status quo, the defendants TIAMSON,et al., should be restrained from rescinding their contracts with the plaintiff,and the defendants LACSONS should also be restrained from accepting anyoffer of sale or alienation with the defendants TIAMSON, et al., in whateverform, the latters rights and interests in the properties mentioned in paragraph4 hereof; further, the LACSONS should be restrained fromencumbering/alienating the subject properties covered by TCT No. 35922-R,35923-R and TCT No. 35925-R, Registry of Deeds of San Fernando,Pampanga;

12. That the defendants TIAMSON, et al., threaten to rescindtheir contracts with the plaintiff and are also bent on selling/alienating theirrights and interests over the subject properties to their co-defendants(LACSONS) or any other persons to the damage and prejudice of the plaintiffwho already invested much money, efforts and time in the said transactions;

13. That the plaintiff is entitled to the reliefs being demanded inthe complaint;

14. That to prevent irreparable damages and prejudice to theplaintiff, as the latter has no speedy and adequate remedy under the ordinarycourse of law, it is essential that a Writ of Preliminary Injunction be issuedenjoining and restraining the defendants TIAMSON, et al., from rescinding

their contracts with the plaintiff and from selling/alienating their propertiesthe LACSONS or other persons;

15. That the plaintiff is willing and able to put up a reasonabond to answer for the damages which the defendants would suffer shothe injunction prayed for and granted be found without basis. [12]

The petitioner prayed, that after the proceedings, judgment be rendered as

1. Pending the hearing, a Writ of Preliminary Injunctionissued prohibiting, enjoining and restraining defendants Julio TiamsRenato Gozun, Rosita Hernandez, Bienvenido Tongol, Alfonso Flores, NorQuiambao, Rosita Tolentino, Jose Sosa, Francisco Tolentino Sr., EmiliaLaxamana, Ruben Torres, Meliton Allanigue, Dominga Laxamana, Felicen

de Leon, Emiliano Ramos, Felino G. Tolentino, Rica Gozun, Perla GozBenigno Tolentino, Rodolfo Quiambao, Roman Laxamana, Eddie San LRicardo Hernandez, Nicenciana Miranda, Jose Gozun, Alfredo Sosa, JoTiamson, Augusto Tolentino, Ceferino de Leon, Alberto Hernandez, OrlanFlores, and Aurelio Flores from rescinding their contracts with the plaintiff afrom alienating their rights and interest over the aforementioned propertiefavor of defendants LACSONS or any other third persons; and prohibiting defendants LACSONS from encumbering/alienating TCT Nos. 3592235923-R and 35925-R of the Registry of Deeds of San Fernando, Pampan

2. And pending the hearing of the Prayer for a WritPreliminary Injunction, it is prayed that a restraining order be issurestraining the aforementioned defendants (TIAMSON, et al.) from rescindtheir contracts with the plaintiff and from alienating the subject propertiesthe defendants LACSONS or any third persons; further, restraining aenjoining the defendants LACSONS from encumbering/selling the propercovered by TCT Nos. 35922-R, 35923-R, and 35925-R of the RegistryDeeds of San Fernando, Pampanga.

3. Fixing the period within which plaintiff shall pay the balaof the purchase price to the defendants TIAMSON, et al., after the lapslegal impediment, if any.

4. Making the Writ of Preliminary Injunction permanent;

5. Ordering the defendants to pay the plaintiff the sumP500,000.00 as moral damages;

6. Ordering the defendants to pay the plaintiff attorneys feethe sum of P100,000.00 plus litigation expenses of P50,000.00;

Plaintiff prays for such other relief as may be just and equitable unthe premises.[13]

In their answer to the complaint, the respondents as defendants asserted tdefendant Angelica Vda. de Lacson had died on April 24, 1993; (b) twelve of the dwere tenants/lessees of respondents, but the tenancy status of the rest of the dwas uncertain; (c) they never induced the defendants Tiamson to violate their conthe petitioner; and, (d) being merely tenants-tillers, the defendants-tenants had enter into any transactions involving their properties without their knowledge andThey also averred that the transfers or assignments of leasehold rights maddefendants-tenants to the petitioner is contrary to Presidential Decree (P.D.) NRepublic Act No. 6657, the Comprehensive Agrarian Reform Program (CARrespondents interposed counterclaims for damages against the petitioner as plaint

The defendants-tenants Tiamson, et al., alleged in their answer with count


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damages, that the money each of them received from the petitioner were in the form ofloans, and that they were deceived into signing the deeds of assignment:

a) That all the foregoing allegations in the Answer are hereby repleadedand incorporated in so far as they are material and relevant herein;

b) That the defendants Tiamson, et al., in so far as the Deeds ofAssignment are concern[ed] never knew that what they did sign is aDeed of Assignment. What they knew was that they were made to signa document that will serve as a receipt for the loan granted [to] them bythe plaintiff;

c) That the Deeds of Assignment were signed through the employment offraud, deceit and false pretenses of plaintiff and made the defendants

believe that what they sign[ed] was a mere receipt for amounts receivedby way of loans;

d) That the documents signed in blank were filled up and completed afterthe defendants Tiamson, et al., signed the documents and theircompletion and accomplishment was done in the absence of saiddefendants and, worst of all, defendants were not provided a copythereof;

e) That as completed, the Deeds of Assignment reflected that thedefendants Tiamson, et al., did assign all their rights and interests in theproperties or landholdings they were tilling in favor of the plaintiff. That ifthis is so, assuming arguendo that the documents were voluntarilyexecuted, the defendants Tiamson, et al., do not have any right totransfer their interest in the landholdings they are tilling as they have noright whatsoever in the landholdings, the landholdings belong to their co-defendants, Lacson, et al., and therefore, the contract is null and void;

f) That while it is admitted that the defendants Tiamson, et al., received

sums of money from plaintiffs, the same were received as approvedloans granted by plaintiff to the defendants Tiamson, et al., and not aspart consideration of the alleged Deeds of Assignment; and by wayof:[15]

At the hearing of the petitioners plea for a writ of preliminary injunction, therespondents counsel failed to appear. In support of his plea for a writ of preliminaryinjunction, the petitioner adduced in evidence the Deeds of Assignment, [16] the receipts[17]issued by the defendants-tenants for the amounts they received from him; and the letter[18]the petitioner received from the defendants-tenants. The petitioner then rested his case.

The respondents, thereafter, filed a Comment/Motion to dismiss/deny the petitionersplea for injunctive relief on the following grounds: (a) the Deeds of Assignment executed bythe defendants-tenants were contrary to public policy and P.D. No. 27 and Rep. Act No.6657; (b) the petitioner failed to prove that the respondents induced the defendants-tenantsto renege on their obligations under the Deeds of Assignment; (c) not being privy to thesaid deeds, the respondents are not bound by the said deeds; and, (d) the respondents hadthe absolute right to sell and dispose of their property and to encumber the same and cannot

be enjoined from doing so by the trial court.The petitioner opposed the motion, contending that it was premature for the trial court

to resolve his plea for injunctive relief, before the respondents and the defendants-tenantsadduced evidence in opposition thereto, to afford the petitioner a chance to adduce rebuttalevidence and prove his entitlement to a writ of preliminary injunction. The respondentsreplied that it was the burden of the petitioner to establish the requisites of a writ ofpreliminary injunction without any evidence on their part, and that they were not bound to

adduce any evidence in opposition to the petitioners plea for a writ of preliminary injunction.

On February 13, 1997, the court issued an Order[19] denying the motion of therespondents for being premature. It directed the hearing to proceed for the respondents toadduce their evidence. The court ruled that the petitioner, on the basis of the materialallegations of the complaint, was entitled to injunctive relief. It also held that before the courtcould resolve the petitioners plea for injunctive relief, there was need for a hearing to enablethe respondents and the defendants-tenants to adduce evidence to controvert that of thepetitioner. The respondents filed a motion for reconsideration, which the court denied in itsOrder dated April 16, 1997. The trial court ruled that on the face of the averments of thecomplaint, the pleadings of the parties and the evidence adduced by the petitioner, the latterwas entitled to injunctive relief unless the respondents and the defendants-tenants adducedcontroverting evidence.

The respondents, the petitioners therein, filed a petition for certiorari in the Court ofAppeals for the nullification of the February 13, 1997 and April 16, 1997 Orders of the trialcourt. The case was docketed as CA-G.R. SP No. 44883. The petitioners therein prayed intheir petition that:

1. An order be issued declaring the orders of respondent court datedFebruary 13, 1997 and April 16, 1997 as null and void;

2. An order be issued directing the respondent court to issue an orderdenying the application of respondent Herminio Tayag for the issuanceof a Writ of Preliminary Injunction and/or restraining order.

3. In the meantime, a Writ of Preliminary Injunction be issued against therespondent court, prohibiting it from issuing its own writ of injunctionagainst Petitioners, and thereafter making said injunction to be issued bythis Court permanent.

Such other orders as may be deemed just & equitable under thepremises also prayed for.[20]

The respondents asserted that the Deeds of Assignment executed by the assigneesin favor of the petitioner were contrary to paragraph 13 of P.D. No. 27 and the secondparagraph of Section 70 of Rep. Act No. 6657, and, as such, could not be enforced by thepetitioner for being null and void. The respondents also claimed that the enforcement of thedeeds of assignment was subject to a supervening condition:

3. That this exclusive and absolute right given to the assignee shall beexercised only when no legal impediments exist to the lot to effect thesmooth transfer of lawful ownership of the lot/property in the name of theASSIGNEE. [21]

The respondents argued that until such condition took place, the petitioner would notacquire any right to enforce the deeds by injunctive relief. Furthermore, the petitioners pleain his complaint before the trial court, to fix a period within which to pay the balance of theamounts due to the tenants under said deeds after the lapse of any legal impediment,assumed that the deeds were valid, when, in fact and in law, they were not. According to therespondents, they were not parties to the deeds of assignment; hence, they were not boundby the said deeds. The issuance of a writ of preliminary injunction would restrict and impedethe exercise of their right to dispose of their property, as provided for in Article 428 of theNew Civil Code. They asserted that the petitioner had no cause of action against them andthe defendants-tenants.

On April 17, 1998, the Court of Appeals rendered its decision against the petitioner,annulling and setting aside the assailed orders of the trial court; and permanently enjoiningthe said trial court from proceeding with Civil Case No. 10901. The decretal portion of thedecision reads as follows:

However, even if private respondent is denied of the injunctive rehe demands in the lower court still he could avail of other course of actionorder to protect his interest such as the institution of a simple civil casecollection of money against TIAMSON, et al.

For all the foregoing considerations, the orders dated 13 Februa1997 and 16 April 1997 are hereby NULLIFIED and ordered SET ASIDE having been issued with grave abuse of discretion amounting to lackexcess of jurisdiction. Accordingly, public respondent is permanently enjoifrom proceeding with the case designated as Civil Case No. 10901.[22]

The CA ruled that the respondents could not be enjoined from alienatinencumbering their property, especially so since they were not privies to theassignment executed by the defendants-tenants. The defendants-tenants we

owners of the portions of the landholdings respectively tilled by them; as such,nothing to assign to the petitioner. Finally, the CA ruled that the deeds of aexecuted by the defendants-tenants were contrary to P.D. No. 27 and Rep. Act No

On August 4, 1998, the CA issued a Resolution denying the petitioners reconsideration.[23]

Hence, the petitioner filed his petition for review on certiorari before tcontending as follows:

I

A MERE ALLEGATION IN THE ANSWER OF TTENANTS COULD NOT BE USED AS EVIDENCE OR BASIS FOR ANCONCLUSION, AS THIS ALLEGATION, IS STILL THE SUBJECT TRIAL IN THE LOWER COURT (RTC).[24]

II

THE COURT OF APPEALS CANNOT ENJOIN THEARING OF A PETITION FOR PRELIMINARY INJUNCTION ATTIME WHEN THE LOWER COURT (RTC) IS STILL RECEIVIEVIDENCE PRECISELY TO DETERMINE WHETHER OR NOT TWRIT OF PRELIMINARY INJUNCTION BEING PRAYED FOR TAYAG SHOULD BE GRANTED OR NOT.[25]

III

THE COURT OF APPEALS CANNOT USE FACTS NIN EVIDENCE, TO SUPPORT ITS CONCLUSION THAT THE TENAN

ARE NOT YET AWARDEES OF THE LAND REFORM.[26]

IV

THE COURT OF APPEALS CANNOT CAUSE TPERMANENT STOPPAGE OF THE ENTIRE PROCEEDINGS BELOINCLUDING THE TRIAL ON THE MERITS OF THE CACONSIDERING THAT THE ISSUE INVOLVED ONLY THE PROPRIE

OF MAINTAINING THE STATUS QUO. [27]V

THE COURT OF APPEALS CANNOT INCLUDE IN DECISION THE CASE OF THE OTHER 35 TENANTS WHO DO NQUESTION THE JURISDICTION OF THE LOWER COURT (RTOVER THE CASE AND WHO ARE IN FACT STILL PRESENTIN


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THEIR EVIDENCE TO OPPOSE THE INJUNCTION PRAYED FOR,AND TO PROVE AT THE SAME TIME THE COUNTER-CLAIMS THEYFILED AGAINST THE PETITIONER.[28]

VI

THE LOWER COURT (RTC) HAS JURISDICTION OVERTHE CASE FILED BY TAYAG FOR FIXING OF PERIOD UNDER ART.1197 OF THE NEW CIVIL CODE AND FOR DAMAGES AGAINSTTHE LACSONS UNDER ART. 1314 OF THE SAME CODE. THIS CASECANNOT BE SUPPRESSED OR RENDERED NUGATORYUNCEREMONIOUSLY.[29]

The petitioner faults the Court of Appeals for permanently enjoining the trial court

from proceeding with Civil Case No. 10910. He opines that the same was too drastic,tantamount to a dismissal of the case. He argues that at that stage, it was premature for theappellate court to determine the merits of the case since no evidentiary hearing thereon wasconducted by the trial court. This, the Court of Appeals cannot do, since neither party movedfor the dismissal of Civil Case No. 10910. The petitioner points out that the Court ofAppeals, in making its findings, went beyond the issue raised by the private respondents,namely, whether or not the trial court committed a grave abuse of discretion amounting toexcess or lack of jurisdiction when it denied the respondents motion for the denial/dismissalof the petitioners plea for a writ of preliminary injunction. He, likewise, points out that theappellate court erroneously presumed that the leaseholders were not DAR awardees andthat the deeds of assignment were contrary to law. He contends that leasehold tenants arenot prohibited from conveying or waiving their leasehold rights in his favor. He insists thatthere is nothing illegal with his contracts with the leaseholders, since the same shall beeffected only when there are no more legal impediments.

At bottom, the petitioner contends that, at that stage, it was premature for theappellate court to determine the merits of his case since no evidentiary hearing on the meritsof his complaint had yet been conducted by the trial court.

The Comment/Motion of theRespondents to Dismiss/DenyPetitioners Plea for a Writof Preliminary InjunctionWas Not Premature.

Contrary to the ruling of the trial court, the motion of the respondents to dismiss/denythe petitioners plea for a writ of preliminary injunction after the petitioner had adduced hisevidence, testimonial and documentary, and had rested his case on the incident, was properand timely. It bears stressing that the petitioner had the burden to prove his right to a writ ofpreliminary injunction. He may rely solely on the material allegations of his complaint oradduce evidence in support thereof. The petitioner adduced his evidence to support his pleafor a writ of preliminary injunction against the respondents and the defendants-tenants andrested his case on the said incident. The respondents then had three options: (a) file amotion to deny/dismiss the motion on the ground that the petitioner failed to discharge hisburden to prove the factual and legal basis for his plea for a writ of preliminary injunctionand, if the trial court denies his motion, for them to adduce evidence in opposition to thepetitioners plea; (b) forgo their motion and adduce testimonial and/or documentary evidence

in opposition to the petitioners plea for a writ of preliminary injunction; or, (c) waive their rightto adduce evidence and submit the incident for consideration on the basis of the pleadings ofthe parties and the evidence of the petitioner. The respondents opted not to adduce anyevidence, and instead filed a motion to deny or dismiss the petitioners plea for a writ ofpreliminary injunction against them, on their claim that the petitioner failed to prove hisentitlement thereto. The trial court cannot compel the respondents to adduce evidence inopposition to the petitioners plea if the respondents opt to waive their right to adduce suchevidence. Thus, the trial court should have resolved the respondents motion even without

the latters opposition and the presentation of evidence thereon.

The RTC Committed a GraveAbuse of Discretion Amountingto Excess or Lack of Jurisdictionin Issuing its February 13, 1997and April 16, 1997 Orders

In its February 13, 1997 Order, the trial court ruled that the petitioner was entitled to awrit of preliminary injunction against the respondents on the basis of the material avermentsof the complaint. In its April 16, 1997 Order, the trial court denied the respondents motionfor reconsideration of the previous order, on its finding that the petitioner was entitled to awrit of preliminary injunction based on the material allegations of his complaint, the evidenceon record, the pleadings of the parties, as well as the applicable laws:

For the record, the Court denied the LACSONSCOMMENT/MOTION on the basis of the facts culled from the evidencepresented, the pleadings and the law applicable unswayed by the partisan orpersonal interests, public opinion or fear of criticism (Canon 3, Rule 3.02,Code of Judicial Ethics). [30]

Section 3, Rule 58 of the Rules of Court, as amended, enumerates the grounds forthe issuance of a writ of preliminary injunction, thus:

(a) That the applicant is entitled to the relief demanded, and the whole orpart of such relief consists in restraining the commission or continuanceof the act or acts complained of, or in requiring the performance of an actor acts, either for a limited period or perpetually;

(b) That the commission, continuance or non-performance of the act or actscomplained of during the litigation would probably work injustice to theapplicant; or

(c) That a party, court, agency or a person is doing, threatening, or isattempting to do, or is procuring or suffering to be done, some act or actsprobably in violation of the rights of the applicant respecting the subjectof the action or proceeding, and tending to render the judgmentineffectual.

A preliminary injunction is an extraordinary event calculated to preserve or maintainthe status quo of things ante litem and is generally availed of to prevent actual or threatenedacts, until the merits of the case can be heard. Injunction is accepted as the strong arm ofequity or a transcendent remedy.[31] While generally the grant of a writ of preliminaryinjunction rests on the sound discretion of the trial court taking cognizance of the case,extreme caution must be observed in the exercise of such discretion.[32] Indeed, in Olalia v.Hizon,[33] we held:

It has been consistently held that there is no power the exercise ofwhich is more delicate, which requires greater caution, deliberation and sounddiscretion, or more dangerous in a doubtful case, than the issuance of aninjunction. It is the strong arm of equity that should never be extended unlessto cases of great injury, where courts of law cannot afford an adequate orcommensurate remedy in damages.

Every court should remember that an injunction is a limitation upon thefreedom of action of the defendant and should not be granted lightly orprecipitately. It should be granted only when the court is fully satisfied thatthe law permits it and the emergency demands it.[34]

The very foundation of the jurisdiction to issue writ of injunction rests in the existence

of a cause of action and in the probability of irreparable injury, inadequacy of compensation and the prevention of the multiplicity of suits. Where facts are nobring the case within these conditions, the relief of injunction should be refused.[35]

For the court to issue a writ of preliminary injunction, the petitioner was buestablish the following: (1) a right in esse or a clear and unmistakable right to be(2) a violation of that right; (3) that there is an urgent and permanent act anecessity for the writ to prevent serious damage. [36] Thus, in the absence of a right, the issuance of the injunctive writ constitutes a grave abuse of discretion. complainants right is doubtful or disputed, injunction is not proper. Injunpreservative remedy aimed at protecting substantial rights and interests. It is noto protect contingent or future rights. The possibility of irreparable damage withoadequate existing rights is not a ground for injunction. [37]

We have reviewed the pleadings of the parties and found that, as contendrespondents, the petitioner failed to establish the essential requisites for the issuwrit of preliminary injunction. Hence, the trial court committed a grave abuse of itsamounting to excess or lack of jurisdiction in denying the respondents comment/well as their motion for reconsideration.

First. The trial court cannot enjoin the respondents, at the instance of thefrom selling, disposing of and encumbering their property. As the registered owproperty, the respondents have the right to enjoy and dispose of their property wother limitations than those established by law, in accordance with Article 428 oCode. The right to dispose of the property is the power of the owner to sell, transfer, and even destroy the property. Ownership also includes the right to rpossession of the property from any other person to whom the owner has not tsuch property, by the appropriate action for restitution, with the fruits, and for indefor damages.[38] The right of ownership of the respondents is not, of course, abslimited by those set forth by law, such as the agrarian reform laws. Under Article New Civil Code, the respondents may enter into contracts covering their proanother under such terms and conditions as they may deem beneficial provided th

contrary to law, morals, good conduct, public order or public policy.The respondents cannot be enjoined from selling or encumbering the

simply and merely because they had executed Deeds of Assignment in favpetitioner, obliging themselves to assign and transfer their rights or interests as afarmers/laborers/sub-tenants over the landholding, and granting the petitioner theright to buy the property subject to the occurrence of certain conditions. The rewere not parties to the said deeds. There is no evidence that the respondenexpressly or impliedly, to the said deeds or to the terms and conditions set forIndeed, they assailed the validity of the said deeds on their claim that the scontrary to the letter and spirit of P.D. No. 27 and Rep. Act No. 6657. The petitadmitted when he testified that he did not know any of the respondents, and that met any of them before he filed his complaint in the RTC. He did not even know those whom he had impleaded as defendant, Angelica Vda. de Lacson, was alread

Q: But you have not met any of these Lacsons?

A: Not yet, sir.

Q: Do you know that two (2) of the defendants are residents of the UnStates?

A: I do not know, sir.

Q: You do not know also that Angela Tiotuvie (sic) Vda. de Lacson halready been dead?

A: I am aware of that, sir.[39]


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We are one with the Court of Appeals in its ruling that:

We cannot see our way clear on how or why injunction should lieagainst petitioners. As owners of the lands being tilled by TIAMSON, et al.,petitioners, under the law, have the right to enjoy and dispose of the same.Thus, they have the right to possess the lands, as well as the right toencumber or alienate them. This principle of law notwithstanding, privaterespondent in the lower court sought to restrain the petitioners fromencumbering and/or alienating the properties covered by TCT No. 35922-R,35923-R and TCT No. 35925-R of the Registry of Deeds of San Fernando,Pampanga. This cannot be allowed to prosper since it would constitute alimitation or restriction, not otherwise established by law on their right ofownership, more so considering that petitioners were not even privy to thealleged transaction between private respondent and TIAMSON,et al.[40]

Second. A reading the averments of the complaint will show that the petitionerclearly has no cause of action against the respondents for the principal relief prayed fortherein, for the trial court to fix a period within which to pay to each of the defendants-tenantsthe balance of the P50.00 per square meter, the consideration under the Deeds ofAssignment executed by the defendants-tenants. The respondents are not parties or priviesto the deeds of assignment. The matter of the period for the petitioner to pay the balance ofthe said amount to each of the defendants-tenants is an issue between them, the parties tothe deed.

Third. On the face of the complaint, the action of the petitioner against therespondents and the defendants-tenants has no legal basis. Under the Deeds ofAssignment, the obligation of the petitioner to pay to each of the defendants-tenants thebalance of the purchase price was conditioned on the occurrence of the following events: (a)the respondents agree to sell their property to the petitioner; (b) the legal impediments to thesale of the landholding to the petitioner no longer exist; and, (c) the petitioner decides to buythe property. When he testified, the petitioner admitted that the legal impediments referredto in the deeds were (a) the respondents refusal to sell their property; and, (b) the lack of

approval of the Department of Agrarian Reform:Q : There is no specific agreement prior to the execution of those

documents as when they will pay?

A : We agreed to that, that I will pay them when there are no legalimpediment, sir.

Q : Many of the documents are unlattered (sic) and you want to convey tothis Honorable Court that prior to the execution of these documentsyou have those tentative agreement for instance that the amount orthe cost of the price is to be paid when there are no legal impediment,you are using the word legal impediment, do you know the meaningof that?

A : When there are (sic) no more legal impediment exist, sir.

Q : Did you make how (sic) to the effect that the meaning of that phrasethat you used the unlettered defendants?

A : We have agreed to that, sir.

ATTY. OCAMPO:

May I ask, Your Honor, that the witness please answer my question notto answer in the way he wanted it.

COURT:

Just answer the question, Mr. Tayag.

WITNESS:

Yes, Your Honor.

ATTY. OCAMPO:

Q : Did you explain to them?

A : Yes, sir.

Q : What did you tell them?

A : I explain[ed] to them, sir, that the legal impediment then especially if

the Lacsons will not agree to sell their shares to me or to us it wouldbe hard to (sic) me to pay them in full. And those covered by DAR. Iexplain[ed] to them and it was clearly stated in the title that there is [a]prohibited period of time before you can sell the property. I explainedevery detail to them.[41]

It is only upon the occurrence of the foregoing conditions that the petitioner would beobliged to pay to the defendants-tenants the balance of the P50.00 per square meter underthe deeds of assignment. Thus:

2. That in case the ASSIGNOR and LANDOWNER will mutuallyagree to sell the said lot to the ASSIGNEE, who is given an exclusive andabsolute right to buy the lot, the ASSIGNOR shall receive the sum of FIFTYPESOS (P50.00) per square meter as consideration of the total area actuallytilled and possessed by the ASSIGNOR, less whatever amount received bythe ASSIGNOR including commissions, taxes and all allowable deductionsrelative to the sale of the subject properties.

3. That this exclusive and absolute right given to the ASSIGNEE shall

be exercised only when no legal impediments exist to the lot to effect thesmooth transfer of lawful ownership of the lot/property in the name of theASSIGNEE;

4. That the ASSIGNOR will remain in peaceful possession over thesaid property and shall enjoy the fruits/earnings and/or harvest of the said lotuntil such time that full payment of the agreed purchase price had been madeby the ASSIGNEE.[42]

There is no showing in the petitioners complaint that the respondents had agreed tosell their property, and that the legal impediments to the agreement no longer existed. Thepetitioner and the defendants-tenants had yet to submit the Deeds of Assignment to theDepartment of Agrarian Reform which, in turn, had to act on and approve or disapprove thesame. In fact, as alleged by the petitioner in his complaint, he was yet to meet with thedefendants-tenants to discuss the implementation of the deeds of assignment. Unless anduntil the Department of Agrarian Reform approved the said deeds, if at all, the petitioner hadno right to enforce the same in a court of law by asking the trial court to fix a period withinwhich to pay the balance of the purchase price and praying for injunctive relief.

We do not agree with the contention of the petitioner that the deeds of assignmentexecuted by the defendants-tenants are perfected option contracts.[43] An option is a contractby which the owner of the property agrees with another person that he shall have the right tobuy his property at a fixed price within a certain time. It is a condition offered or contract bywhich the owner stipulates with another that the latter shall have the right to buy the propertyat a fixed price within a certain time, or under, or in compliance with certain terms andconditions, or which gives to the owner of the property the right to sell or demand a sale. It

imposes no binding obligation on the person holding the option, aside from the confor the offer. Until accepted, it is not, properly speaking, treated as a contract.[44] Tparty gets in praesenti, not lands, not an agreement that he shall have the landright to call for and receive lands if he elects.[45] An option contract is a separate acontract from which the parties may enter into upon the conjunction of the option.[4

In this case, the defendants-tenants-subtenants, under the deeds of asgranted to the petitioner not only an option but the exclusive right to buy the landhothe grantors were merely the defendants-tenants, and not the respondents, the owners of the property. Not being the registered owners of the property, the dtenants could not legally grant to the petitioner the option, much less the exclusibuy the property. As the Latin saying goes, NEMO DAT QUOD NON HABET.

Fourth. The petitioner impleaded the respondents as parties-defendant

his allegation that the latter induced or are inducing the defendants-tenants to vdeeds of assignment, contrary to the provisions of Article 1314 of the New Civil Creads:

Art. 1314. Any third person who induces another to violate contract shall be liable for damages to the other contracting party.

InSo Ping Bun v. Court of Appeals,[47] we held that for the said law to applypleader is burdened to prove the following: (1) the existence of a valid contract; (2)knowledge by the third person of the existence of the contract; and (3) interferencethird person in the contractual relation without legal justification.

Where there was no malice in the interference of a contract, and the impulsones conduct lies in a proper business interest rather than in wrongful motives, a pcannot be a malicious interferer. Where the alleged interferer is financially interessuch interest motivates his conduct, it cannot be said that he is an officious or maliintermeddler.[48]

In fine, one who is not a party to a contract and who interferes thereon is nonecessarily an officious or malicious intermeddler. The only evidence adduced bypetitioner to prove his claim is the letter from the defendants-tenants informing himhad decided to sell their rights and interests over the landholding to the respondenof honoring their obligation under the deeds of assignment because, according to tpetitioner harassed those tenants who did not want to execute deeds of assignmefavor, and because the said defendants-tenants did not want to have any problem respondents who could cause their eviction for executing with the petitioner the deeassignment as the said deeds are in violation of P.D. No. 27 and Rep. Act No. 665defendants-tenants did not allege therein that the respondents induced them to brecontracts with the petitioner. The petitioner himself admitted when he testified thatthat the respondents induced the defendants-assignees to violate contracts with hbased merely on what he heard, thus:

Q: Going to your last statement that the Lacsons induces (sic) defendants, did you see that the Lacsons were inducing defendants?

A: I heard and sometime in [the] first week of August, sir, they went inbarrio (sic). As a matter of fact, that is the reason why they sent letter that they will sell it to the Lacsons.

Q: Incidentally, do you knew (sic) these Lacsons individually?

A: No, sir, it was only Mr. Espinosa who I knew (sic) personally, alleged negotiator and has the authority to sell the property.[50]

Even if the respondents received an offer from the defendants-tenants to atransfer their rights and interests on the landholding, the respondents cannot be
http://www.supremecourt.gov.ph/jurisprudence/1999/sept99/120554.HTMhttp://www.supremecourt.gov.ph/jurisprudence/1999/sept99/120554.HTMhttp://www.supremecourt.gov.ph/jurisprudence/1999/sept99/120554.HTMhttp://www.supremecourt.gov.ph/jurisprudence/1999/sept99/120554.HTMhttp://www.supremecourt.gov.ph/jurisprudence/1999/sept99/120554.HTM


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from entertaining the said offer, or even negotiating with the defendants-tenants. Therespondents could not even be expected to warn the defendants-tenants for executing thesaid deeds in violation of P.D. No. 27 and Rep. Act No. 6657. Under Section 22 of the latterlaw, beneficiaries under P.D. No. 27 who have culpably sold, disposed of, or abandonedtheir land, are disqualified from becoming beneficiaries.

From the pleadings of the petitioner, it is quite evident that his purpose in having thedefendants-tenants execute the Deeds of Assignment in his favor was to acquire thelandholding without any tenants thereon, in the event that the respondents agreed to sell theproperty to him. The petitioner knew that under Section 11 of Rep. Act No. 3844, if therespondents agreed to sell the property, the defendants-tenants shall have preferential rightto buy the same under reasonable terms and conditions:

SECTION 11. Lessees Right of Pre-emption. In case the

agricultural lessor desires to sell the landholding, the agricultural lessee shallhave the preferential right to buy the same under reasonable terms andconditions: Provided, That the entire landholding offered for sale must be pre-empted by the Land Authority if the landowner so desires, unless the majorityof the lessees object to such acquisition: Provided, further, That where thereare two or more agricultural lessees, each shall be entitled to said preferentialright only to the extent of the area actually cultivated by him. [51]

Under Section 12 of the law, if the property was sold to a third person without theknowledge of the tenants thereon, the latter shall have the right to redeem the same at areasonable price and consideration. By assigning their rights and interests on thelandholding under the deeds of assignment in favor of the petitioner, the defendants-tenantsthereby waived, in favor of the petitioner, who is not a beneficiary under Section 22 of Rep.Act No. 6657, their rights of preemption or redemption under Rep. Act No. 3844. Thedefendants-tenants would then have to vacate the property in favor of the petitioner upon fullpayment of the purchase price. Instead of acquiring ownership of the portions of thelandholding respectively tilled by them, the defendants-tenants would again become landlessfor a measly sum of P50.00 per square meter. The petitioners scheme is subversive, not

only of public policy, but also of the letter and spirit of the agrarian laws. That the scheme ofthe petitioner had yet to take effect in the future or ten years hence is not a justification. Therespondents may well argue that the agrarian laws had been violated by the defendants-tenants and the petitioner by the mere execution of the deeds of assignment. In fact, thepetitioner has implemented the deeds by paying the defendants-tenants amounts of moneyand even sought their immediate implementation by setting a meeting with the defendants-tenants. In fine, the petitioner would not wait for ten years to evict the defendants-tenants.For him, time is of the essence.

The Appellate Court ErredIn Permanently EnjoiningThe Regional Trial CourtFrom Continuing with theProceedings in Civil CaseNo. 10910.

We agree with the petitioners contention that the appellate court erred when itpermanently enjoined the RTC from continuing with the proceedings in Civil Case No.10910. The only issue before the appellate court was whether or not the trial court

committed a grave abuse of discretion amounting to excess or lack of jurisdiction in denyingthe respondents motion to deny or dismiss the petitioners plea for a w rit of preliminaryinjunction. Not one of the parties prayed to permanently enjoin the trial court from furtherproceeding with Civil Case No. 10910 or to dismiss the complaint. It bears stressing that thepetitioner may still amend his complaint, and the respondents and the defendants-tenantsmay file motions to dismiss the complaint. By permanently enjoining the trial court fromproceeding with Civil Case No. 10910, the appellate court acted arbitrarily and effectivelydismissed the complaint motu proprio, including the counterclaims of the respondents and

that of the defendants-tenants. The defendants-tenants were even deprived of their right toprove their special and affirmative defenses.

IN LIGHT OF ALL THE FOREGOING , the petition is PARTIALLY GRANTED. TheDecision of the Court of Appeals nullifying the February 13, 1996 and April 16, 1997 Ordersof the RTC is AFFIRMED. The writ of injunction issued by the Court of Appeals permanentlyenjoining the RTC from further proceeding with Civil Case No. 10910 is hereby LIFTED andSET ASIDE. The Regional Trial Court of Mabalacat, Pampanga, Branch 44, is ORDEREDto continue with the proceedings in Civil Case No. 10910 as provided for by the Rules ofCourt, as amended.

SO ORDERED.

POLYTECHNIC UNIVERSITYOF THE PHILIPPINES,

Petitioner,

- versus -

GOLDEN HORIZON REALTYCORPORATION,

Respondent.

x------------------------------------------x

NATIONAL DEVELOPMENTCOMPANY,

Petitioner,

- versus -

GOLDEN HORIZON REALTYCORPORATION,

Respondent.x-----------------------------------------------------------------------------------------x

DECISION

VILLARAMA, JR., J.:

The above-titled consolidated petitions filed under Rule 45 of the 1997 Rules ofCivil Procedure, as amended, seek to reverse the Decision[1] dated June 25, 2008 andResolution dated August 22, 2008 of the Court of Appeals (CA) in CA-G.R. CV No. 84399which affirmed the Decision[2] dated November 25, 2004 of the Regional Trial Court (RTC)of Makati City, Branch 144 in Civil Case No. 88-2238.

The undisputed facts are as follows:

Petitioner National Development Company (NDC) is a government- owned andcontrolled corporation, created under Commonwealth Act No. 182, as amended by Com. ActNo. 311 and Presidential Decree (P.D.) No. 668. Petitioner Polytechnic University of thePhilippines (PUP) is a public, non-sectarian, non-profit educational institution created in 1978by virtue of P.D. No. 1341.

In the early sixties, NDC had in its disposal a ten (10)-hectare properalong Pureza St., Sta. Mesa, Manila. The estate was popularly known as Compound and covered by Transfer Certificate of Title Nos. 92885, 110301 and 14

On September 7, 1977, NDC entered into a Contract of Lease (C-3Golden Horizon Realty Corporation (GHRC) over a portion of the property, with 2,407 square meters for a period of ten (10) years, renewable for another ten (10)mutual consent of the parties.[3]

On May 4, 1978, a second Contract of Lease (C-12-78) was executeNDC and GHRC covering 3,222.80 square meters, also renewable upconsent after the expiration of the ten (10)-year lease period. In addition,

lessee was granted the option to purchase the area leased, the price to be and determined at the time the option to purchase is exercised.[4]

Under the lease agreements, GHRC was obliged to construct aexpense buildings of strong material at no less than the stipulated cost, aimprovements which shall automatically belong to the NDC as lessor upon the exthe lease period. Accordingly, GHRC introduced permanent improvements and strrequired by the terms of the contract. After the completion of the industrial compfor which GHRC spent P5 million, it was leased to various

ft_policitacion and perfection stage cases

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