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G.R. No. 166862 December 20, 2006

MANILA METAL CONTAINER CORPORATION,petitioner,REYNALDO C. TOLENTINO,intervenor,vs.

PHILIPPINE NATIONAL BANK,respondent,DMCI-PROJECT DEVELOPERS, INC.,intervenor.

D E C I S I O N

CALLEJO, SR., J.:

Before us is a petition for review on certiorariof the Decision1of the Court of Appeals (CA)

in CA-G.R. No. 46153 which affirmed the decision2of the Regional Trial Court (RTC),

Branch 71, Pasig City, in Civil Case No. 58551, and its Resolutio n3denying the motion 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 in Mandaluyong (now

a City), Metro Manila. The property was covered by Transfer Certificate of Title (TCT) No.332098 of the Registry of Deeds of Rizal. To secure a P900,000.00 loan it had obtained from

respondent Philippine National Bank (PNB), petitioner executed a real estate mortgage over

the lot. Respondent PNB later granted petitioner a new credit accommodation

of P1,000,000.00; and, on November 16, 1973, petitioner executed an Amendment4of Real

Estate Mortgage over its property. On March 31, 1981, petitioner secured another loan

of P653,000.00 from respondent PNB, payable in quarterly installments of P32,650.00, plus

interests and other charges.5

On August 5, 1982, respondent PNB filed a petition for extrajudicial foreclosure of the real

estate mortgage and sought to have the property sold at public auction for P911,532.21,

petitioner's outstanding obligation to respondent PNB as of June 30, 1982,6plus interests andattorney's fees.

After due notice and publication, the property was sold at public auction on September 28,

1982 where respondent PNB was declared the winning bidder for P1,000,000.00. The

Certificate of Sale7issued in its favor was registered with the Office of the Register of Deeds

of Rizal, and was annotated at the dorsal portion of the title on February 17, 1983. Thus, theperiod to redeem the property was to expire on February 17, 1984.

Petitioner sent a letter dated August 25, 1983 to respondent PNB, requesting that it be grantedan extension of time to redeem/repurchase the property.8In its reply dated August 30, 1983,

respondent PNB informed petitioner that the request had been referred to its Pasay CityBranch for appropriate action and recommendation.9

In a letter10dated February 10, 1984, petitioner reiterated its request for a one year extension

from February 17, 1984 within which to redeem/repurchase the property on installment basis.

It reiterated its request to repurchase the property on installment.11Meanwhile, some PNB

Pasay City Branch personnel informed petitioner that as a matter of policy, the bank does notaccept "partial redemption."12

Since petitioner failed to redeem the property, the Register of Deeds cancelled TCT No. 32098on June 1, 1984, and issued a new title in favor of respondent PNB .13Petitioner's offers had

not yet been acted upon by respondent PNB.

Meanwhile, the Special Assets Management Department (SAMD) had prepared a statement of

account, and as of June 25, 1984 petitioner's obligation amounted to P1,574,560.47. This

included the bid price of P1,056,924.50, interest, advances of insurance premiums, advances

on realty taxes, registration expenses, miscellaneous expenses and publication cost.14When

apprised of the statement of account, petitioner remitted P725,000.00 to respondent PNB as

"deposit to repurchase," and Official Receipt No. 978191 was issued to it.15

In the meantime, the SAMD recommended to the management of respondent PNB that

petitioner be allowed to repurchase the property for P1,574,560.00. In a letter dated November

14, 1984, the PNB management informed petitioner that it was rejecting the offer and the

recommendation of the SAMD. It was suggested that petitioner purchase the property

for P2,660,000.00, its minimum market value. Respondent PNB gave peti tioner until

December 15, 1984 to act on the proposal; otherwise, its P725,000.00 deposit would be

returned and the property would be sold to other interested buyers.16

Petitioner, however, did not agree to respondent PNB's proposal. Instead, it wrote another

letter dated December 12, 1984 requesting for a reconsideration. Respondent PNB replied in aletter dated December 28, 1984, wherein it reiterated its proposal that petitioner purchase the

property for P2,660,000.00. PNB again informed petitioner that it would return the deposit

should petitioner desire to withdraw its offer to purchase the property .17On February 25,1985, petitioner, through counsel, requested that PNB reconsider its letter dated December 28,

1984. Petitioner declared that it had already agreed to the SAMD's offer to purchase the

property forP1,574,560.47, and that was why it had paid P725,000.00. Petitioner warned

respondent PNB that it would seek judicial recourse should PNB insist on the position.18

On June 4, 1985, respondent PNB informed petitioner that the PNB Board of Directors had

accepted petitioner's offer to purchase the property, but for P1,931,389.53 in cash less

the P725,000.00 already deposited with it.19On page two of the letter was a space above the

typewritten name of petitioner's President, Pablo Gabriel, where he was to affix his signature.

However, Pablo Gabriel did not conform to the letter but merely indicated therein that he had

received it.20Petitioner did not respond, so PNB requested petitioner in a letter dated June 30,1988 to submit an amended offer to repurchase.

Petitioner rejected respondent's 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 that since

its P725,000.00 downpayment had been accepted, respondent PNB was proscribed from
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increasing the purchase price of the property.21Petitioner averred that it had a net balance

payable in the amount of P643,452.34. Respondent PNB, however, rejected petitioner's offer

to pay the balance of P643,452.34 in a letter dated August 1, 1989.22

On August 28, 1989, petitioner filed a complaint against respondent PNB for "Annulment of

Mortgage and Mortgage Foreclosure, Delivery of Title, or Specific Performance withDamages." To support its cause of action for specific performance, it alleged the following:

34. As early as June 25, 1984, PNB had accepted the down payment from Manila

Metal in the substantial amount of P725,000.00 for the redemption/repurchase price

of P1,574,560.47 as approved by its SMAD and considering the reliance made by

Manila Metal and the long time that has elapsed, the approval of the highermanagement of the Bank to confirm the agreement of its SMAD is clearly a

potestative condition which cannot legally prejudice Manila Metal which has acted

and relied on the approval of SMAD. The Bank cannot take advantage of a

condition which is entirely dependent upon its own will after accepting and

benefiting from the substantial payment made by Manila Metal.

35. PNB approved the repurchase price of P1,574,560.47 for which it

accepted P725,000.00 from Manila Metal. PNB cannot take advantage of its own

delay and long inaction in demanding a higher amount based on unilateralcomputation of interest rate without the consent of Manila Metal.

Petitioner later filed an amended complaint and supported its claim for damages with the

following arguments:

36. That in order to protect itself against the wrongful and malicious acts of the

defendant Bank, plaintiff is constrained to engage the services of counsel at an

agreed fee of P50,000.00 and to incur litigation expenses of at least P30,000.00,

which the defendant PNB should be condemned to pay the plaintiff Manila Metal.

37. That by reason of the wrongful and malicious actuations of defendant PNB,

plaintiff Manila Metal suffered besmirched reputation for which defendant PNB is

liable for moral damages of at least P50,000.00.

38. That for the wrongful and malicious act of defendant PNB which are highly

reprehensible, exemplary damages should be awarded in favor of the plaintiff byway of example or correction for the public good of at least P30,000.00.23

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

a) Declaring the Amended Real Estate Mortgage (Annex "A") null and void and

without any legal force and effect.

b) Declaring defendant's acts of extra-judicially foreclosing the mortgage overplaintiff's property and setting it for auction sale null and void.

c) Ordering the defendant Register of Deeds to cancel the new title issued in the

name of PNB (TCT NO. 43792) covering the property described in paragraph 4 of

the Complaint, to reinstate TCT No. 37025 in the name of Manila Metal and to

cancel the annotation of the mortgage in question at the back of the TCT

No.37025 described in paragraph 4 of this Complaint.

d) Ordering the defendant PNB to return and/or deliver physical possession of the

TCT No. 37025described in paragraph 4 of this Complaint to the plaintiff ManilaMetal.

e) Ordering the defendant PNB to pay the plaintiff Manila Metal's actual damages,

moral and exemplary damages in the aggregate amount of not less than P80,000.00

as may be warranted by the evidence and fixed by this Honorable Court in the

exercise of its sound discretion, and attorney's fees of P50,000.00 and litigation

expenses of at least P30,000.00 as may be proved during the trial, and costs of suit.

Plaintiff likewise prays for such further reliefs which may be deemed just andequitable in the premises.24

In its Answer to the complaint, respondent PNB averred, as a special and affirmative defense,

that it had acquired ownership over the property after the period to redeem had elapsed. It

claimed that no contract of sale was perfected between it and petitioner after the period toredeem the property had expired.

During pre-trial, the parties agreed to submit the case for decision, based on their stipulation offacts.25The parties agreed to limit the issues to the following:

1. Whether or not the June 4, 1985 letter of the defendant approving/acceptingplaintiff's offer to purchase the property is still valid and legally enforceable.

2. Whether or not the plaintiff has waived its right to purchase the property when it

failed to conform with the conditions set forth by the defendant in its letter dated

June 4, 1985.

3. Whether or not there is a perfected contract of sale between the parties.26

While the case was pending, respondent PNB demanded, on September 20, 1989, thatpetitioner vacate the property within 15 days from notice,27but petitioners refused to do so.

On March 18, 1993, petitioner offered to repurchase the property for P3,500,000.00 .28The

offer was however rejected by respondent PNB, in a letter dated April 13, 1993. According to

it, the prevailing market value of the property was approximately P30,000,000.00, and as a

matter of policy, it could not sell the property for less than its market value .29On June 21,

1993, petitioner offered to purchase the property for P4,250,000.00 in cash.30The offer was

again rejected by respondent PNB on September 13, 1993.31

On May 31, 1994, the trial court rendered judgment dismissing the amended complaint andrespondent PNB's counterclaim. It ordered respondent PNB to refund the P725,000.00 deposit
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petitioner had made.32The trial court ruled that there was no perfected contract of sale

between the parties; hence, petitioner had no cause of action for specific performance against

respondent. The trial court declared that respondent had rejected petitioner's offer to

repurchase the property. Petitioner, in turn, rejected the terms and conditions contained in the

June 4, 1985 letter of the SAMD. While petitioner had offered to repurchase the property per

its letter of July 14, 1988, the amount of P643,422.34 was way below the P1,206,389.53 which

respondent PNB had demanded. It further declared that the P725,000.00 remitted by petitioner

to respondent PNB on June 4, 1985 was a "deposit," and not a downpayment or earnestmoney.

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

I

THE LOWER COURT ERRED IN RULING THAT DEFENDANT-APPELLEE'S

LETTER DATED 4 JUNE 1985 APPROVING/ACCEPTING PLAINTIFF-

APPELLANT'S OFFER TO PURCHASE THE SUBJECT PROPERTY IS NOTVALID AND ENFORCEABLE.

II

THE LOWER COURT ERRED IN RULING THAT THERE WAS NOPERFECTED CONTRACT OF SALE BETWEEN PLAINTIFF-APPELLANT

AND DEFENDANT-APPELLEE.

III

THE LOWER COURT ERRED IN RULING THAT PLAINTIFF-APPELLLANT

WAIVED ITS RIGHT TO PURCHASE THE SUBJECT PROPERTY WHEN ITFAILED TO CONFORM WITH CONDITIONS SET FORTH BY DEFENDANT-APPELLEE IN ITS LETTER DATED 4 JUNE 1985.

IV

THE LOWER COURT ERRED IN DISREGARDING THE FACT THAT IT WASTHE DEFENDANT-APPELLEE WHICH RENDERED IT DIFFICULT IF NOT

IMPOSSIBLE FOR PLAINTIFF-APPELLANT TO COMPLETE THE BALANCEOF THEIR PURCHASE PRICE.

V

THE LOWER COURT ERRED IN DISREGARDING THE FACT THAT THERE

WAS NO VALID RESCISSION OR CANCELLATION OF SUBJECTCONTRACT OF REPURCHASE.

VI

THE LOWER COURT ERRED IN DECLARING THAT PLAINTIFF FAILEDAND REFUSED TO SUBMIT THE AMENDED REPURCHASE OFFER.

VII

THE LOWER COURT ERRED IN DISMISSING THE AMENDED COMPLAINTOF PLAINTIFF-APPELLANT.

VIII

THE LOWER COURT ERRED IN NOT AWARDING PLAINTIFF-APPELLANT

ACTUAL, MORAL AND EXEMPLARY DAMAGES, ATTOTRNEY'S FEESAND LITIGATION EXPENSES.33

Meanwhile, on June 17, 1993, petitioner's Board of Directors approved Resolution No. 3-004,

where it waived, assigned and transferred its rights over the property covered by TCT No.

33099 and TCT No. 37025 in favor of Bayani Gabriel, one of its Directors .34Thereafter,Bayani Gabriel executed a Deed of Assignment over 51% of the ownership 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 a resolution granting the motion,35and

likewise granted the motion of Reynaldo Tolentino substituting petitioner MMCC, as plaint iff-

appellant, and his motion to withdraw as intervenor.36

The CA rendered judgment on May 11, 2000 affirming the decision of the RTC .37It declared

that petitioner obviously never agreed to the selling price proposed by respondent PNB

(P1,931,389.53) since petitioner had kept on insisting that the selling price should be lowered

to P1,574,560.47. Clearly therefore, there was no meeting of the minds between the parties as

to the price or consideration of the sale.

The CA ratiocinated that petitioner's original offer to purchase the subject property had not

been accepted by respondent PNB. In fact, it made a counter-offer through its June 4, 1985

letter specifically on the selling price; petitioner did not agree to the counter-offer; and the

negotiations did not prosper. Moreover, petitioner did not pay the balance of the purchase

price within the sixty-day period set in the June 4, 1985 letter of respondent PNB.

Consequently, there was no perfected contract of sale, and as such, there was no contract torescind.

According to the appellate court, the claim for damages and the counterclaim were correctly

dismissed by the court a quo for no evidence was presented to support it. Respondent PNB's

letter dated June 30, 1988 cannot revive the failed negotiations between the parties.Respondent PNB merely asked petitioner to submit an amended offer to repurchase. While

petitioner reiterated its request for a lower selling price and that the balance of the repurchase

be reduced, however, respondent rejected the proposal in a letter dated August 1, 1989.

Petitioner filed a motion for reconsideration, which the CA likewise denied.

Thus, petitioner filed the instant petition for review on certiorari, alleging that:
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I. THE COURT OF APPEALS ERRED ON A QUESTION OF LAW WHEN IT

RULED THAT THERE IS NO PERFECTED CONTRACT OF SALE BETWEENTHE PETITIONER AND RESPONDENT.

II. THE COURT OF APPEALS ERRED ON A QUESTION OF LAW WHEN IT

RULED THAT THE AMOUNT OF PHP725,000.00 PAID BY THE PETITIONERIS NOT AN EARNEST MONEY.

III. THE COURT OF APPEALS ERRED ON A QUESTION OF LAW WHEN IT

RULED THAT THE FAILURE OF THE PETITIONER-APPELLANT TOSIGNIFY ITS CONFORMITY TO THE TERMS CONTAINED IN PNB'S JUNE 4,

1985 LETTER MEANS THAT THERE WAS NO VALID AND LEGALLYENFORCEABLE CONTRACT OF SALE BETWEEN THE PARTIES.

IV. THE COURT OF APPEALS ERRED ON A QUESTION OF LAW THAT

NON-PAYMENT OF THE PETITIONER-APPELLANT OF THE BALANCE OF

THE OFFERED PRICE IN THE LETTER OF PNB DATED JUNE 4, 1985,

WITHIN SIXTY (60) DAYS FROM NOTICE OF APPROVAL CONSTITUTES

NO VALID AND LEGALLY ENFORCEABLE CONTRACT OF SALEBETWEEN THE PARTIES.

V. THE COURT OF APPEALS SERIOUSLY ERRED WHEN IT HELD THATTHE LETTERS OF PETITIONER-APPELLANT DATED MARCH 18, 1993 AND

JUNE 21, 1993, OFFERING TO BUY THE SUBJECT PROPERTY AT

DIFFERENT AMOUNT WERE PROOF THAT THERE IS NO PERFECTEDCONTRACT OF SALE.38

The threshold issue is whether or not petitioner and respondent PNB had entered into aperfected contract for petitioner to repurchase the property from respondent.

Petitioner maintains that it had accepted respondent's offer made through the SAMD, to sellthe property forP1,574,560.00. When the acceptance was made in its letter dated 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 the SAMD's acceptance of the

deposit amounted to an acceptance of its offer to repurchase. Moreover, as gleaned from theletter of SAMD dated June 4, 1985, the PNB Board of Directors had approved petitioner's

offer to purchase the property. It claims that this was the suspensive condition, the fulfillment

of which gave rise to the contract. Respondent could no longer unilaterally withdraw its offer

to sell the property for P1,574,560.47, since the acceptance of the offer resulted in a perfected

contract of sale; it was obliged to remit to respondent the balance of the original purchase

price of P1,574,560.47, while respondent was obliged to transfer ownership and deliver the

property to petitioner, conformably with Article 1159 of the New Civil Code.

Petitioner posits that respondent was proscribed from increasing the interest rate after it had

accepted respondent's 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 for the purchase of the

property. It likewise maintains that, although theP725,000.00 was considered 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 New Civil Code. Petitioner cites therulings of this Court in Villonco v. Bormaheco39and Topacio v. Court of Appeals.40

Petitioner avers that its failure to append its conformity to the June 4, 1984 letter of respondent

and its failure to pay the balance of the price as fixed by respondent within the 60-day period

from notice was to protest respondent's breach of its obligation to petitioner. It did not amount

to a rejection of respondent's offer to sell the property since respondent was merely 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 the rescission of the contract.

Petitioner's letters dated March 18, 1993 and June 21, 1993 to respondent during the pendency

of the case in the RTC were merely to compromise the pending lawsuit, they did not constituteseparate offers to repurchase the property. Such offer to compromise should not be takenagainst it, in accordance with Section 27, Rule 130 of the Revised Rules of Court.

For its part, respondent contends that the parties never graduated from the "negotiation stage"

as they could not agree on the amount of the repurchase price of the 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 of the price are essential elements in

the formation of a binding and enforceable contract of sale. There was no such agreement in

this case. Primarily, the concept of "suspensive condition" signifies a future and uncertainevent upon the fulfillment of which the obligation becomes effective. It clearly presupposes

the existence of a valid and binding agreement, the effectivity of which is subordinated to itsfulfillment. Since there is no perfected contract in the first place, there is no basis for theapplication of the principles governing "suspensive conditions."

According to respondent, the Statement of Account prepared by SAMD as of June 25, 1984

cannot be classified as a counter-offer; it is simply a recital of its total monetary claims against

petitioner. Moreover, the amount stated therein could not likewise be considered as the

counter-offer since as admitted by petitioner, it was only recommendation which was subjectto approval of the PNB Board of Directors.

Neither can the receipt by the SAMD of P725,000.00 be regarded as evidence of a perfected

sale contract. As gleaned from the parties' Stipulation of Factsduring the proceedings in the

court a quo, the amount is merely an acknowledgment of the receipt of P725,000.00 as deposit

to repurchase the property. The deposit of P725,000.00 was accepted by respondent on the

condition that the purchase price would still be approved by its Board of Directors.

Respondent maintains that its acceptance of the amount was qualified by that condition, thus

not absolute. Pending such approval, it cannot be legally claimed that respondent is already

bound by any contract of sale with petitioner.

According to respondent, petitioner knew that the SAMD has no capacity to bind respondent

and that its authority is limited to administering, managing and preserving the properties 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 must emanate from its Board ofDirectors. The SAMD was not authorized by respondent's Board to enter into contracts of sale

with third persons involving corporate assets. There is absolutely nothing on record that

respondent authorized the SAMD, or made it appear to petitioner that it represented itself ashaving such authority.
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Respondent reiterates that SAMD had informed petitioner that its offer to repurchase had been

approved by the Board subject to the condition, among others, "that the selling price shall be

the total bank's claim as of documentation date x x x payable in cash (P725,000.00 already

deposited)

within 60 days from notice of approval." A new Statement of Account was attached therein

indicating the total bank's claim to be P1,931,389.53 less deposit of P725,000.00,

or P1,206,389.00. Furthermore, while respondent's Board of Directors accepted petitioner's

offer to repurchase the property, the acceptance was qualified, in that it required a higher sale

price and subject to specified terms and conditions enumerated therein. This qualifiedacceptance was in effect a counter-offer, necessitating petitioner's acceptance in return.

The Ruling of the Court

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

A contract is a meeting of minds between two persons whereby one binds himself, with

respect to the other, to give something or to render some service .41Under Article 1318 of theNew Civil Code, there is no contract unless the following requisites concur:

(1) Consent of the contracting parties;

(2) Object certain which is the subject matter of the contract;

(3) Cause of the obligation which is established.

Contracts are perfected by mere consent which is manifested by the meeting of the offer and

the acceptance upon the thing and the cause which are to constitute the contract .42Once

perfected, they bind other contracting parties and the obligations arising therefrom have the

form of law between the parties and should be complied with in good faith. The parties are

bound not only to the fulfillment of what has been expressly stipulated but also to the

consequences which, according to their nature, may be in keeping with good faith, usage andlaw.43

By the contract of sale, one of the contracting parties obligates himself to transfer the

ownership of and deliver a determinate thing, and the other to pay therefor a price certain in

money or its equivalent.44The absence of any of the essential elements will negate theexistence of a perfected contract of sale. As the Court ruled inBoston Bank of the Philippines

v. Manalo:45

A definite agreement as to the price is an essential element of a binding agreement

to sell personal or real property because it seriously affects the rights and obligations

of the parties. Price is an essential element in the formation of a binding and

enforceable contract of sale. The fixing of the price can never be left to the decision

of one of the contracting parties. But a price fixed 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 mere meeting of the minds.

When there is merely an offer by one party without acceptance of the other, there is no

contract.47When the contract of sale is not perfected, it cannot, as an independent source of

obligation, serve as a binding juridical relation between the parties.48

In San Miguel Properties Philippines, Inc. v. Huang,49the Court ruled that the stages of a

contract of sale are as follows: (1) negotiation, covering the period from the time the

prospective contracting parties indicate interest in the contract to the time the contract isperfected; (2)perfection, which takes place upon the concurrence of the essential elements of

the sale which are the meeting of the minds of the parties as to the object of the contract andupon the price; and (3) consummation, which begins when the parties perform their respectiveundertakings under the contract of sale, culminating in the extinguishment thereof.

A negotiation is formally initiated by an offer, which, however, must be certain .50At any time

prior to the perfection of the contract, either negotiating party may stop the negotiation. At this

stage, the offer may be withdrawn; the withdrawal is effective immediately after its

manifestation. To convert the offer into a contract, the acceptance must be absolute and must

not qualify the terms of the offer; it must be plain, unequivocal, unconditional and without

variance of any sort from the proposal. In Adelfa Properties, Inc. v. Court of Appeals,51theCourt ruled that:

x x x The rule is that except where a formal acceptance is so required, although the

acceptance must be affirmatively and clearly made and must be evidenced by someacts or conduct communicated to the offeror, it may be shown by acts, conduct, orwords of the accepting party that clearly manifest a present intention or

determination to accept the offer to buy or sell. Thus, acceptance may be shown by

the acts, conduct, or words of a party recognizing the existence of the contract ofsale.52

A qualified acceptance or one that involves a new proposal constitutes a counter-offer and a

rejection of the original offer. A counter-offer is considered in law, a rejection of the original

offer and an attempt to end the negotiation between the parties on a differentbasis.53Consequently, when something is desired which is not exactly what is proposed in the

offer, such acceptance is not sufficient to guarantee consent because any modification or

variation from the terms of the offer annuls the offer.54The acceptance must be identical in all

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 the property.

However, since it lacked the resources, it requested for more time to redeem/repurchase the

property under such terms and conditions agreed upon by the parties.55The request, which wasmade through a letter dated August 25, 1983, was referred to the respondent's main branch for

appropriate action.56Before respondent could act on the request, petitioner again wroterespondent as follows:

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

2. Within six months from date of approval of our request, we will pay anotherFOUR HUNDRED FIFTY THOUSAND PESOS (P450,000.00); and
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3. The remaining balance together with the interest and other expenses that will be

incurred will be paid within the last six months of the one year grave periodrequested for.57

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

The statement of account prepared by the SAMD stating that the net claim of respondent as of

June 25, 1984 wasP1,574,560.47 cannot be considered an unqualified acceptance to

petitioner's offer to purchase the property. The statement is but a computation of the amount

which petitioner was obliged to pay in case respondent would later agree to sell the property,including interests, advances on insurance premium, advances on realty taxes, publicationcost, registration expenses and miscellaneous expenses.

There is no evidence that the SAMD was authorized by respondent's Board of Directors to

accept petitioner's offer and sell the property for P1,574,560.47. Any acceptance by the

SAMD of petitioner's offer would not bind respondent. As this Court ruled inAF RealtyDevelopment, Inc. vs. Diesehuan Freight Services, Inc.:60

Section 23 of the Corporation Code expressly provides that the corporate powers of

all corporations shall be exercised by the board of directors. Just as a natural personmay authorize another to do certain acts in his behalf, so may the board of directors

of a corporation validly delegate some of its functions to individual officers or

agents appointed by it. Thus, contracts or acts of a corporation must be made eitherby the board of directors or by a corporate agent duly authorized by the board.

Absent such valid delegation/authorization, the rule is that the declarations of an

individual director relating to the affairs of the corporation, but not in the course of,

or connected with the performance of authorized duties of such director, are held notbinding on the corporation.

Thus, a corporation can only execute its powers and transact its business through its Board of

Directors and through its officers and agents when authorized by a board resolution or its by-laws.61

It appears that the SAMD had prepared a recommendation for respondent to accept petitioner's

offer to repurchase the property even beyond the one-year period; it recommended that

petitioner be allowed to redeem the property and pay P1,574,560.00 as the purchase price.

Respondent later approved the recommendation that the property be sold to petitioner. But

instead of the P1,574,560.47 recommended by the SAMD and to which petit ioner had

previously conformed, respondent set the purchase price at P2,660,000.00. In fine,

respondent's acceptance of petitioner's offer was qualified, hence can be at most considered as

a counter-offer. If petitioner had accepted this counter-offer, a perfected contract of sale would

have arisen; as it turns out, however, petitioner merely sought to have the counter-offerreconsidered. This request for reconsideration would later be rejected by respondent.

We do not agree with petitioner's contention that the P725,000.00 it had remitted to

respondent was "earnest money" which could be considered as proof of the perfection of acontract of sale under Article 1482 of the New Civil Code. The provision reads:

ART. 1482. Whenever earnest money is given in a contract of sale, it shall beconsidered as part of the price and as proof of the perfection of the contract.

This contention is likewise negated by the stipulation of facts which the parties entered into inthe trial court:

8. On June 8, 1984, the Special Assets Management Department (SAMD) of PNB

prepared an updated Statement of Account showing MMCC's total liability to PNB

as of June 25, 1984 to be P1,574,560.47 and recommended this amount as the

repurchase price of the subject property.

9. On June 25, 1984, MMCC paid P725,000.00 to PNB as deposit to repurchase the

property. The deposit of P725,000 was accepted by PNB on the conditi on that thepur chase pri ce is stil l subject to the approval of th e PNB Board.62

Thus, the P725,000.00 was merely a deposit to be applied as part of the purchase price of the

property, in the event that respondent would approve the recommendation of SAMD for

respondent to accept petitioner's offer to purchase the property for P1,574,560.47. Unless and

until the respondent accepted the offer on these terms, no perfected contract of sale wouldarise. Absent proof of the concurrence of all the essential elements of a contract of sale, the

giving of earnest money cannot establish the existence of a perfected contract of sale.63

It appears that, per its letter to petitioner dated June 4, 1985, the respondent had decided to

accept the offer to purchase the property for P1,931,389.53. However, this amounted to an

amendment of respondent's qualified acceptance, or an amended counter-offer, because while

the respondent lowered the purchase price, it still declared that its acceptance was subject tothe following terms and conditions:

1. That the selling price shall be the total Bank's 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 and participation it may have in the

property and you are charged with full knowledge of the nature and extent of said

rights, interests and participation and waive your right to warranty against eviction.

3. All taxes and other government imposts due or to become due on the property, aswell as expenses including costs of documents and science stamps, transfer fees,

etc., to be incurred in connection with the execution and registration of all coveringdocuments shall be borne by you;

4. That you shall undertake at your own expense and account the ejectment of the

occupants of the property subject of the sale, if there are any;

5. That upon your failure to pay the balance of the purchase price within sixty (60)

days from receipt of advice accepting your offer, your deposit shall be forfeited and

the Bank is thenceforth authorized to sell the property to other interested parties.
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6. That the sale shall be subject to such other terms and conditions that the LegalDepartment may impose to protect the interest of the Bank.64

It appears that although respondent requested petitioner to conform to its amended counter-

offer, petitioner refused and instead requested respondent to reconsider its amended counter-

offer. Petitioner's request was ultimately rejected and respondent offered to refundits P725,000.00 deposit.

In sum, then, there was no perfected contract of sale between petitioner and respondent over

the subject property.

IN LIGHT OF ALL THE FOREGOING, the petition is DENIED.

The assailed decision is AFFIRMED. Costs against petitioner Manila Metal ContainerCorporation.

SO ORDERED.
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[G.R. No. 124791. February 10, 1999]

JOSE RAMON CARCELLER, petitioner, vs. COURT OF APPEALS and STATEINVESTMENT HOUSES, INC., respondents.

D E C I S I O N

QUISUMBING,J.:

Before us is a petition for review of the Decisio n[1]dated September 21, 1995 of the

Court of Appeals[2]in CA - G. R. CV No. 37520, as well as its Resolutio n[3]dated April 25,

1996, denying both parties motion for partial reconsideration or clarification. The assailed

decision affirmed with modification the judgment[4]of the Regional Trial Court of Cebu City,

Branch 5, in Civil Case No. CEB 4700, and disposed of the controversy as follows:

However, We do not find it just that the appellee, in exercising his option to buy, should pay

appellant SIHI only P1,800,000.00. In fairness to appellant SIHI,the purchase price must be

based on the prevailing market price of real property in Bulacao, Cebu City. (Emphasissupplied)

The factual background of this case is quite simple.

Private respondent State Investment Houses, Inc. (SIHI) is the registered owner of two

(2) parcels of land with a total area of 9,774 square meters, including all the improvements

thereon, located at Bulacao, Cebu City, covered by Transfer Certificate of Titles Nos. T-89152

and T-89153 of the Registry of Deeds of Cebu City.

On January 10, 1985, petitioner and SIHI entered into a lease contract with option to

purchase[5]over said two parcels of land, at a monthly rental of Ten Thousand (P10,000.00)pesos for a period of eighteen (18) months, beginning on August 1, 1984 until January 30,

1986. The pertinent portion of the lease contract subject of the dispute reads in part:

4. As part of the consideration of this agreement, the LESSOR hereby grants unto the

LESSEE the exclusive right, option and privilege to purchase, within the lease period, theleased premises thereon for the aggregate amount ofP1,800,000.00 payable as follows:

a. Upon the signing of the Deed of Sale, the LESSEE shall immediately pay P360,000.00.

b. The balance of P1,440,000.00 shall be paid in equal installments of P41,425.87 over sixty

(60) consecutive months computed with interest at 24% per annum on the diminishingbalance; Provided, that the LESSEE shall have the right to accelerate payments at anytime in

which event the stipulated interest for the remaining installments shall no longer be imposed.

x . . The option shall be exercised by a written notice to the LESSOR at anytime within the

option period and the document of sale over the afore-described properties has to be

consummated within the month immediately following the month when the LESSEEexercised his option under this contract.[6]

On January 7, 1986, or approximately three (3) weeks before the expiration of the lease

contract, SIHI notified petitioner of the impending termination of the lease agreement, and of

the short period of time left within which he could still validly exercise the option. It likewise

requested petitioner to advise them of his decision on the option, on or before January 20,

1986.[7]

In a letter dated January 15, 1986, which was received by SIHI on January 29, 1986,

petitioner requested for a six-month extension of the lease contract, alleging that he needs

ample time to raise sufficient funds in order to exercise the option. To support his request,

petitioner averred that he had already made a substantial investment on the property, and had

been punctual in paying his monthly rentals.[8]

On February 14, 1986, SIHI notified petitioner that his request was disapproved.

Nevertheless, it offered to lease the same property to petitioner at the rate of Thirty Thousand

(P30,000.00) pesos a month, for a period of one (1) year. It further informed the petitioner of

its decision to offer for sale said leased property to the general public.[9]

On February 18, 1986, petitioner notified SIHI of his decision to exercise the option to

purchase the property and at the same time he made arrangements for the payment of the

downpayment thereon in the amount of Three Hundred Sixty Thousand (P360,000.00)pesos.[10]

On February 20, 1986, SIHI sent another letter to petitioner, reiterating its previous

stand on the latters offer, stressing that the period within which the option should have been

exercised had already lapsed. SIHI asked petitioner to vacate the property within ten (10) daysfrom notice, and to pay rental and penalty due.[11]

Hence, on February 28, 1986, a complaint for specific performance and damages[12]was

filed by petitioner against SIHI before the Regional Trial Court of Cebu City, to compel the

latter to honor its commitment and execute the corresponding deed of sale.

After trial, the court a quopromulgated its decision dated April 1, 1991, the dispositive

portion of which reads:

In the light of the foregoing considerations, the Court hereby renders judgment in Civil CaseNo. CEB 4700, ordering the defendant to execute a deed of sale in favor of the plaintiff,

covering the parcels of land together with all the improvements thereon, covered by TransferCertificates of Title Nos. 89152 and 89153 of the Registry of Deeds of Cebu City, in

accordance with the lease contract executed on January 10, 1984 between the plaintiff and thedefendant, but the purchase price may be by one shot payment ofP1,800,000.00; and the

defendant to pay attorneys fee ofP20,000.00.

No damages awarded.[13]

Not satisfied with the judgment, SIHI elevated the case to the Court of Appeals by way

of a petition for review.

On September 21, 1995, respondent court rendered its decision, affirming the trialcourts judgment, but modified the basis for assessing the purchase price. While respondent

court affirmed appellees option to buy the property, i t added that, the purchase price must be

based on the prevailing market price of real property in Bulacao, Cebu City.[14]
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augmenting his capital. He averred that he applied for a loan since he planned to pay the

purchase price in one single payment, instead of paying in installment, which would entail the

payment of additional interest at the rate of 24% per annum, compared to 7% per annum

interest for the TRC loan. His letter earlier requesting extension was premised, in fact, on his

need for time to secure the needed financing through a TRC loan.

In contractual relations, the law allows the parties reasonable leeway on the terms of

their agreement, which is the law between them.[21]Note that by contract SIHI had given

petitioner 4 periods: (a) the option to purchase the property for P1,800,000.00 within the lease

period, that is, until January 30, 1986; (b) the option to be exercised within the option period

by written notice at anytime; (c) the document of sale...to be consummated within the monthimmediately following the month when petitioner exercises the option; and (d) the payment

in equal installments of the purchase price over a period of 60 months. In our view,

petitioners letter of January 15, 1986 and his formal exercise of the option on February 18,1986 were within a reasonable time-frame consistent with periods given and the known intent

of the parties to the agreement dated January 10, 1985. A contrary view would be harsh and

inequituous indeed.

In Tuason, Jr., etc. vs. De Asis,[22]this Court opined that in a contract of lease, if thelessor makes an offer to the lessee to purchase the property on or before the termination of the

lease, and the lessee fails to accept or make the purchase on time, the lessee losses the right to

buy the property later on the terms and conditions set in the offer. Thus, on one hand,petitioner herein could not insist on buying the said property based on the price agreed upon in

the lease agreement, even if his option to purchase it is recognized. On the other hand, SIHI

could not take advantage of the situation to increase the selling price of said property by nearly

90% of the original price. Such leap in the price quoted would show an opportunistic intent to

exploit the situation as SIHI knew for a fact that petitioner badly needed the property for his

business and that he could afford to pay such higher amount after having secured an P8

Million loan from the TRC. If the courts were to allow SIHI to take advantage of the

situation, the result would have been an injustice to petitioner, because SIHI would be unjustly

enriched at his expense. Courts of law, being also courts of equity, may not countenance such

grossly unfair results without doing violence to its solemn obligation to administer fair and

equal justice for all.

WHEREFORE, the appealed decision of respondent court, insofar as it affirms thejudgment of the trial court in granting petitioner the opportunity to exercise the option to

purchase the subject property, is hereby AFFIRMED. However the purchase price should be

based on the fair market value of real property in Bulacao, Cebu City, as of February 1986,when the contract would have been consummated. Further, petitioner is hereby ordered to pay

private respondent SIHI legal interest on the said purchase price beginning February 1986 upto the time it is actually paid, as well as the taxes due on said property, considering that

petitioner have enjoyed the beneficial use of said property. The case is hereby remanded to

Regional Trial Court of Cebu, Branch 5, for further proceedings to determine promptly the fair

market value of said real property as of February 1986, in Bulacao, Cebu City.

Costs against private respondent.

SO ORDERED.
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G.R. No. 134971 March 25, 2004

HERMINIO TAYAG,petitioner,vs.

AMANCIA LACSON, ROSENDO LACSON, ANTONIO LACSON, JUAN LACSON,TEODISIA LACSON-ESPINOSA and THE COURT OF APPEALS,respondents.

D E C I S I O N

CALLEJO, SR., J.:

Before us is a petition for review on certiorari of the Decision1and the Resolution2ofrespondent Court of Appeals in CA-G.R. SP No. 44883.

The Case for the Petitioner

Respondents Angelica Tiotuyco Vda. de Lacson,3and her children Amancia, Antonio, Juan,

and Teodosia, all surnamed Lacson, were the registered owners of three parcels 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 San Fernando, Pampanga. The

properties, which were tenanted agricultural lands,4were administered by Renato Espinosa for

the owner.

On March 17, 1996, a group of original farmers/till ers, namely, Julio Tiamson, Renato Gozun,

Rosita Hernandez, Bienvenido Tongol, Alfonso Flores, Norma Quiambao, Rosita Tolentino,

Jose Sosa, Francisco Tolentino, Sr., Emiliano Laxamana, Ruben Torres, Meliton Allanigue,Dominga Laxamana, Felicencia de Leon, Emiliano Ramos, and another group, namely, Felino

G. Tolentino, Rica Gozun, Perla Gozun, Benigno Tolentino, Rodolfo Quiambao, Roman

Laxamana, Eddie San Luis, Ricardo Hernandez, Nicenciana Miranda, Jose Gozun, AlfredoSosa, Jose Tiamson, Augusto Tolentino, Sixto Hernandez, Alex Quiambao, Isidro Tolentino,

Ceferino de Leon, Alberto Hernandez, Orlando Flores, and Aurelio Flores, 5individually

executed in favor of the petitioner separate Deeds of Assignment6 in which the assignees

assigned to the petitioner their respective rights as tenants/tillers of the landholdings possessed

and tilled by them for and in consideration of P50.00 per square meter. The said amount was

made payable "when the legal impediments to the sale of the property to the petitioner nolonger existed." The petitioner was also granted the exclusive right to buy the property if and

when the respondents, with the concurrence of the defendants-tenants, agreed to sell the

property. In the interim, the petitioner gave varied sums of money to the tenants as partialpayments, and the latter issued receipts for the said amounts.

On July 24, 1996, the petitioner called a meeting of the defendants-tenants to work out the

implementation of the terms of their separate agreements.7However, on August 8, 1996, the

defendants-tenants, through Joven Mariano, wrote the petitioner stating that they were notattending the meeting and instead gave notice of their collective decision to sell all their rights

and interests, as tenants/lessees, over the landholding to the respondents. 8Explaining theirreasons for their collective decision, they wrote as follows:

Kami ay nagtiwala sa inyo, naging tapat at nanindigan sa lahat ng ating napagkasunduan, hindi

tumanggap ng ibang buyer o ahente, pero sinira ninyo ang aming pagtitiwala sa pamamagitanng 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 aming karapatan o ang aming

lupang sinasaka sa landowner o sa mga pamilyang Lacson, dahil ayaw naming magkaroon ngproblema.

Kaya kung ang sasabihin ninyong itoy katangahan, lalo sigurong magiging katangahan kung

ibebenta pa namin sa inyo ang aming lupang sinasaka, 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 of San

Fernando, Pampanga, Branch 44, against the defendants-tenants, as well as the respondents,

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 the respondentstherein.10The 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, Rosita Hernandez, BienvenidoTongol, Alfonso Flores, Norma Quiambao, Rosita Tolentino, Jose Sosa, Francisco

Tolentino, Sr., Emiliano Laxamana, Ruben Torres, Meliton Allanigue, Dominga

Laxamana, Felicencia de Leon, Emiliano Ramos are original farmers or direct tillers

of landholdings over parcels of lands covered by Transfer Certificate of Title Nos.

35922-R, 35923-R and 35925-R which are registered in the names of defendants

LACSONS; while defendants Felino G. Tolentino, Rica Gozun, Perla Gozun,

Benigno Tolentino, Rodolfo Quiambao, Roman Laxamana, Eddie San Luis, Alfredo

Gozun, Jose Tiamson, Augusto Tolentino, Sixto Hernandez, Alex Quiambao, IsidroTolentino, Ceferino de Leon, Alberto Hernandez, and Aurelio 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 defendants assigned all their rights andinterests on their landholdings to the plaintiff and that on the same date (March 17,

1996), the defendants received from the plaintiff partial payments in the amounts

corresponding to their names. Subsequent payments were also received:

1stPAYMENT

2ndPAYMENT

CHECKNO.

TOTAL

1.Julio Tiamson - - - - -

-P 20,000 P 10,621.54 231281

P

30,621.54

2. Renato Gozun - - - -

- -

[son of Felix Gozun(deceased)]

P 10,000 96,000 106,000.00


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3. Rosita Hernandez - -

- -P 5,000 14,374.24 231274

P

19,374.24

4. Bienvenido Tongol -

- -

[Son of Abundio

Tongol (deceased)]

P 10,000 14,465.90 231285 24,465.90

5. Alfonso Flores - - - -

- -

P 30,000 26,648.40 231271 56,648.40

6. Norma Quiambao - -

- -P 10,000 41,501.10 231279 51,501.10

7. Rosita Tolentino - - -

- -P 10,000 22,126.08 231284 32,126.08

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

-P 10,000 14,861.31 231291 24,861.31

9. Francisco Tolentino,

Sr.P 10,000 24,237.62 231283 34,237.62

10. Emiliano Laxamana

- - P 10,000 ------ ------ ------

11. Ruben Torres - - - -

- -

[Son of Mariano Torres

(deceased)]

P 10,000 P 33,587.31 ------P

43,587.31

12. Meliton Allanigue P 10,000 12,944.77 231269P

22,944.77

13. Dominga

LaxamanaP 5,000 22,269.02 231275 27,269.02

14. Felicencia de Leon 10,000 ------ ------ ------

15. Emiliano Ramos 5,000 18,869.60 231280 23,869.60

16. Felino G. Tolentino 10,000 ------ ------ ------

17. Rica Gozun 5,000 ------ ------ ------

18. Perla Gozun 10,000 ------ ------ ------

19. Benigno Tolentino 10,000 ------ ------ ------

20. Rodolfo Quiambao 10,000 ------ ------ ------

21. Roman Laxamana 10,000 ------ ------ ------

22. Eddie San Luis 10,000 ------ ------ ------

23. Ricardo Hernandez 10,000 ------ ------ ------

24. Nicenciana

Miranda10,000 ------ ------ ------

25. Jose Gozun 10,000 ------ ------ ------

26. Alfredo Sosa 5,000 ------ ------ ------

27. Jose Tiamson 10,000 ------ ------ ------

28. Augusto Tolentino 5,000 ------ ------ ------

29. Sixto Hernandez 10,000 ------ ------ ------

30. Alex Quiambao 10,000 ------ ------ ------

31. Isidro Tolentino 10,000 ------ ------ ------

32. Ceferino de Leon ------ 11,378.70 231270 ------

33. Alberto Hernandez 10,000 ------ ------ ------

34. Orlando Florez 10,000 ------ ------ ------

35. Aurelio Flores 10,000 ------ ------ ------

6. That on July 24, 1996, the plaintiff wrote the defendants TIAMSON, et al.,

inviting them for a meeting regarding the negotiations/implementations of the termsof 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 with the negotiations, andinstead they gave notice to the plaintiff that they will sell all 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 deal with the defendants

LACSON or with any third persons while their contracts with the plaintiff are

subsisting; defendants LACSONS are inducing or have induced the defendantsTIAMSON, et. al., to violate their contracts with the plaintiff;

9. That by reason of the malicious acts of all the defendants, plaintiff suffered moral

damages in the forms of mental anguish, mental torture and serious anxiety which in

the sum of P500,000.00 for which defendants should be held liable jointly andseverally.11


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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 any offer of sale or alienation

with the defendants TIAMSON, et al., in whatever form, the latters rights and

interests in the properties mentioned in paragraph 4 hereof; further, the LACSONSshould be restrained from encumbering/alienating the subject properties covered by

TCT No. 35922-R, 35923-R and TCT No. 35925-R, Registry of Deeds of SanFernando, Pampanga;

12. That the defendants TIAMSON, et al., threaten to rescind their contracts with the

plaintiff and are also bent on selling/alienating their rights and interests over the

subject properties to their co-defendants (LACSONS) or any other persons to the

damage and prejudice of the plaintiff who already invested much money, efforts and

time in the said transactions;

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

14. That to prevent irreparable damages and prejudice to the plaintiff, as the latter

has no speedy and adequate remedy under the ordinary course of law, it is essentialthat a Writ of Preliminary Injunction be issued enjoining and restraining the

defendants TIAMSON, et al., from rescinding their contracts with the plaintiff and

from selling/alienating their properties to the LACSONS or other persons;

15. That the plaintiff is willing and able to put up a reasonable bond to answer for

the damages which the defendants would suffer should the injunction prayed for andgranted be found without basis.12

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

1. Pending the hearing, a Writ of Preliminary Injunction be issued prohibiting,

enjoining and restraining defendants Julio Tiamson, Renato Gozun, Rosita

Hernandez, Bienvenido Tongol, Alfonso Flores, Norma Quiambao, RositaTolentino, Jose Sosa, Francisco Tolentino Sr., Emiliano Laxamana, Ruben Torres,

Meliton Allanigue, Dominga Laxamana, Felicencia de Leon, Emiliano Ramos,

Felino G. Tolentino, Rica Gozun, Perla Gozun, Benigno Tolentino, Rodolfo

Quiambao, Roman Laxamana, Eddie San Luis, Ricardo Hernandez, Nicenciana

Miranda, Jose Gozun, Alfredo Sosa, Jose Tiamson, Augusto Tolentino, Ceferino de

Leon, Alberto Hernandez, Orlando Flores, and Aurelio Flores from rescinding their

contracts with the plaintiff and from alienating their rights and interest over the

aforementioned properties in favor of defendants LACSONS or any other thirdpersons; and prohibiting the defendants LACSONS from encumbering/alienating

TCT Nos. 35922-R, 35923-R and 35925-R of the Registry of Deeds of SanFernando, Pampanga.

2. And pending the hearing of the Prayer for a Writ of Preliminary Injunction, it isprayed that a restraining order be issued restraining the aforementioned defendants

(TIAMSON, et al.) from rescinding their contracts with the plaintiff and from

alienating the subject properties to the defendants LACSONS or any third persons;

further, restraining and enjoining the defendants LACSONS from

encumbering/selling the properties covered by TCT Nos. 35922-R, 35923-R, and

35925-R of the Registry of Deeds of San Fernando, Pampanga.

3. Fixing the period within which plaintiff shall pay the balance of the purchaseprice to the defendants TIAMSON, et al., after the lapse of legal impediment, if any.

4. Making the Writ of Preliminary Injunction permanent;

5. Ordering the defendants to pay the plaintiff the sum of P500,000.00 as moraldamages;

6. Ordering the defendants to pay the plaintiff attorneys fees in the sum ofP100,000.00 plus litigation expenses of P50,000.00;

Plaintiff prays for such other relief as may be just and equitable under the premises.13

In their answer to the complaint, the respondents as defendants asserted that (a) the defendant

Angelica Vda. de Lacson had died on April 24, 1993; (b) twelve of the defendants were

tenants/lessees of respondents, but the tenancy status of the rest of the defendants wasuncertain; (c) they never induced the defendants Tiamson to violate their contracts with the

petitioner; and, (d) being merely tenants-t illers, the defendants-tenants had no right to enter

into any transactions involving their properties without their knowledge and consent. They

also averred that the transfers or assignments of leasehold rights made by the defendants-

tenants to the petitioner is contrary to Presidential Decree (P.D.) No. 27 and Republic Act No.

6657, the Comprehensive Agrarian Reform Program (CARP).14The respondents interposedcounterclaims for damages against the petitioner as plaintiff.

The defendants-tenants Tiamson, et al., alleged in their answer with counterclaim for damages,

that the money each of them received from the petitioner were in the form of loans, and that

they were deceived into signing the deeds of assignment:

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

b) That the defendants Tiamson, et al., in so far as the Deeds of Assignment areconcern[ed] never knew that what they did sign is a Deed of Assignment. What they

knew was that they were made to sign a document that will serve as a receipt for the

loan granted [to] them by the plaintiff;

c) That the Deeds of Assignment were signed through the employment of fraud,

deceit and false pretenses of plaintiff and made the defendants believe that what theysign[ed] was a mere receipt for amounts received by way of loans;

d) That the documents signed in blank were filled up and completed after thedefendants Tiamson, et al., signed the documents and their completion and


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accomplishment was done in the absence of said defendants and, worst of all,defendants were not provided a copy thereof;

e) That as completed, the Deeds of Assignment reflected that the defendants

Tiamson, et al., did assign all their rights and interests in the properties or

landholdings they were tilling in favor of the plaintiff. That if this is so, assuming

arguendo that the documents were voluntarily executed, the defendants Tiamson, et

al., do not have any right to transfer their interest in the landholdings they are tillingas they have no right 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 ofmoney from plaintiffs, the same were received as approved loans granted by

plaintiff to the defendants Tiamson, et al., and not as part consideration of thealleged Deeds of Assignment; and by way of: 15

At the hearing of the petitioners plea for a writ of preliminary injunction, the respondents

counsel failed to appear. In support of his plea for a writ of preliminary injunction, the

petitioner adduced in evidence the Deeds of Assignment,16the receipts17issued by the

defendants-tenants for the amounts they received from him; and the letter18 the petitionerreceived from the defendants-tenants. The petitioner then rested his case.

The respondents, thereafter, filed a Comment/Motion to dismiss/deny the petitioners plea for

injunctive relief on the following grounds: (a) the Deeds of Assignment executed by the

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-tenants to renege on

their obligations under the "Deeds of Assignment;" (c) not being privy to the said deeds, the

respondents are not bound by the said deeds; and, (d) the respondents had the absolute right to

sell and dispose of their property and to encumber the same and cannot be enjoined fromdoing 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 rebuttal

evidence and prove his entitlement to a writ of preliminary injunction. The respondents replied

that it was the burden of the petitioner to establish the requisites of a writ of preliminaryinjunction without any evidence on their part, and that they were not bound to adduce anyevidence in opposition to the petitioners plea for a writ of preliminary injunction.

On February 13,

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