sales part iv-v

7/28/2019 SALES Part IV-V

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SALES

IV. FORMATION/PERFECTION OF CONTRACT OF SALE (NCC 1475)

A. Option contract

Adelfa Properties vs. CA [G.R. No. 111238. January 25, 1995.]

Second Division, Regalado (J): 3 concurring

Facts: Rosario Jimenez‐Castaneda, Salud Jimenez and their brothers, Jose andDominador Jimenez, were the registered co‐owners of a parcel of land consisting of

17,710 sq. ms (TCT 309773) situated in Barrio Culasi, Las Piñas, Metro Manila. On

28 July 1988, Jose and Dominador Jimenez sold their share consisting of 1/2 of

said parcel of land, specifically the eastern portion thereof, to Adelfa Properties

pursuant to a “Kasulatan sa Bilihan ng Lupa.” Subsequently, a “ConfirmatoryExtrajudicial Partition Agreement” was executed by the Jimenezes, wherein the

eastern portion of the subject lot, with an area of 8,855 sq. ms. was adjudicated toJose and Dominador Jimenez, while the western portion was allocated to Rosario

and Salud Jimenez. Thereafter, Adelfa Properties expressed interest in buying the

western portion of the property from Rosario and Salud.

Accordingly, on 25 November 1989, an “Exclusive Option to Purchase” was executed

between the parties with the condition that the selling price shall be P2,856,150,

that the option money of P50,000 shall be credited as partial payment upon the

consummation of sale, that the balance is to be paid on or before 30 November

1989, and that in case of default by Adelfa Properties to pay the balance, the option

is cancelled and 50% of the option money shall be forfeited and the other 50%

refunded upon the sale of the property to a third party, and that all expensesincluding capital gains tax, cost of documentary stamps are for the account of the

vendors and the expenses for the registration of the deed of sale for the account of

Adelfa properties.

Considering, however, that the owner’s copy of the certificate of title issued to SaludJimenez had been lost, a petition for the re‐issuance of a new owner’s copy of said

certificate of title was filed in court through Atty. Bayani L. Bernardo. Eventually, a

new owner’s copy of the certificate of title was issued but it remained in thepossession of Atty. Bernardo until he turned it over to Adelfa Properties, Inc.

Before Adelfa Properties could make payment, it received summons on 29November 1989, together with a copy of a complaint filed by the nephews and

nieces of Rosario and Salud against the latter, Jose and Dominador Jimenez, and

Adelfa Properties in the RTC Makati (Civil Case 89‐5541), for annulment of the deed

of sale in favor of Household Corporation and recovery of ownership of the property

covered by TCT 309773. As a consequence, in a letter dated 29 November 1989,

Adelfa Properties informed Rosario and Salud that it would hold payment of the full



purchase price and suggested that the latter settle the case with their nephews and

nieces, adding that “if possible, although 30 November 1989 is a holiday, we will be

waiting for you and said plaintiffs at our office up to 7:00 p.m.” Another letter of the

same tenor and of even date was sent by Adelfa Properties to Jose and Dominador

Jimenez. Salud Jimenez refused to heed the suggestion of Adelfa Properties and

attributed the suspension of payment of the purchase price to “lack of word of honor.” On 7 December 1989, Adelfa Properties caused to be annotated on the title

of the lot its option contract with Salud and Rosario, and its contract of sale with

Jose and Dominador Jimenez, as Entry No. 1437‐4 and entry No. 1438‐4,

respectively. On 14 December 1989, Rosario and Salud sent Francisca Jimenez to seeAtty. Bernardo, in his capacity as Adelfa Properties’ counsel, and to inform the latter

that they were cancelling the transaction. In turn, Atty. Bernardo offered to pay the

purchase price provided that P500,000.00 be deducted therefrom for the settlement

of the civil case. This was rejected by Rosario and Salud. On 22 December 1989, Atty.

Bernardo wrote Rosario and Salud on the same matter but this time reducing theamount from P500,000.00 to P300,000.00, and this was also rejected by the latter.

On 23 February 1990, the RTC dismissed Civil Case 89‐5541.

On 28 February 1990, Adelfa Properties caused to be annotated anew on TCT

309773 the exclusive option to purchase as Entry 4442‐4.On the same day, 28

February 1990, Rosario and Salud executed a Deed of Conditional Sale in favor of

Emylene Chua over the same parcel of land for P3,029,250.00, of which

P1,500,000.00 was paid to the former on said date, with the balance to be paid upon

the transfer of title to the specified 1/2 portion. On 16 April 1990, Atty. Bernardo

wrote Rosario and Salud informing the latter that in view of the dismissal of the case

against them, Adelfa Properties was willing to pay the purchase price, and he

requested that the corresponding deed of absolute sale be executed. This wasignored by Rosario and Salud.

On 27 July 1990, Jimenez’ counsel sent a letter to Adelfa Properties enclosingtherein a check for P25,000.00 representing the refund of 50% of the option money

paid under the exclusive option to purchase. Rosario and Salud then requestedAdelfa Properties to return the owner’s duplicate copy of the certificate of title of

Salud Jimenez. Adelfa Properties failed to surrender the certificate of title.

Rosario and Salud Jimenez filed Civil Case 7532 in the RTC Pasay City (Branch 113)

for annulment of contract with damages, praying, among others, that the exclusive

option to purchase be declared null and void; that Adelfa Properties be ordered toreturn the owner’s duplicate certificate of title; and that the annotation of the option

contract on TCT 309773 be cancelled. Emylene Chua, the subsequent purchaser of

the lot, filed a complaint in intervention. On 5 September 1991, the trial court

rendered judgment holding that the agreement entered into by the parties was

merely an option contract, and declaring that the suspension of payment by Adelfa

Properties constituted a counter‐offer which, therefore, was tantamount to a

rejection of the option. It likewise ruled that Adelfa Properties could not validly



suspend payment in favor of Rosario and Salud on the ground that the vindicatory

action filed by the latter’s kin did not involve the western portion of the land

covered by the contract between the parties, but the eastern portion thereof which

was the subject of the sale between Adelfa Properties and the brothers Jose and

Dominador Jimenez. The trial court then directed the cancellation of the exclusive

option to purchase, declared the sale to intervenor Emylene Chua as valid andbinding, and ordered Adelfa Properties to pay damages and attorney’s fees to

Rosario and Salud, with costs.

On appeal, the Court of appeals affirmed in toto the decision of the court a quo (CA‐GR 34767) and held that the failure of petitioner to pay the purchase price within

the period agreed upon was tantamount to an election by petitioner not to buy the

property; that the suspension of payment constituted an imposition of a condition

which was actually a counter‐offer amounting to a rejection of the option; and that

Article 1590 of the Civil Code on suspension of payments applies only to a contract of sale or a contract to sell, but not to an option contract which it opined was the

nature of the document subject of the case at bar. Said appellate court similarlyupheld the validity of the deed of conditional sale executed by Rosario and Salud in

favor of intervenor Emylene Chua. Hence, the petition for review on certiorari.

The Supreme Court affirmed the assailed judgment of the Court of Appeals in CA‐GR

CV 34767, with modificatory premises.

1. Agreement between parties a contract to sell and not an option contract or a

contract of sale

The alleged option contract is a contract to sell, rather than a contract of sale. The

distinction between the two is important for in contract of sale, the title passes tothe vendee upon the delivery of the thing sold; whereas in a contract to sell, by

agreement the ownership is reserved in the vendor and is not to pass until the

full payment of the price. In a contract of sale, the vendor has lost and cannot recover ownership until and unless the contract is resolved or rescinded; whereas

in a contract to sell, title is retained by the vendor until the full payment of the price,such payment being a positive suspensive condition and failure of which is not a

breach but an event that prevents the obligation of the vendor to convey title from

becoming effective. Thus, a deed of sale is considered absolute in nature wherethere is neither a stipulation in the deed that title to the property sold is reserved in

the seller until the full payment of the price, nor one giving the vendor the right to

unilaterally resolve the contract the moment the buyer fails to pay within a fixedperiod.

2. Intent not to transfer ownership need not be expressed

The parties never intended to transfer ownership to Adelfa Properties to completion

of payment of the purchase price, this is inferred by the fact that the exclusive

option to purchase, although it provided for automatic rescission of the contract and



partial forfeiture of the amount already paid in case of default, does not mention

that Adelfa Properties is obliged to return possession or ownership of the

property as a consequence of non‐payment. There is no stipulation anent reversion

or reconveyance of the property in the event that petitioner does not comply with

its obligation. With the absence of such a stipulation, it may legally be inferred that

there was an implied agreement that ownership shall not pass to the purchaser untilhe had fully paid the price. Article 1478 of the Civil Code does not require that such

a stipulation be expressly made.

Consequently, an implied stipulation to that effect is considered valid and bindingand enforceable between the parties. A contract which contains this kind of

stipulation is considered a contract to sell. Moreover, that the parties really

intended to execute a contract to sell is bolstered by the fact that the deed of

absolute sale would have been issued only upon the payment of the balance of the

purchase price, as may be gleaned from Adelfa Properties’ letter dated 16 April1990 wherein it informed the vendors that it “is now ready and willing to pay you

simultaneously with the execution of the corresponding deed of absolute sale.”

3. No actual or constructive delivery of property to indicate contract of sale;

Circumstances negate presumption of possession of title is to be understood as

delivery

It has not been shown that there was delivery of the property, actual or

constructive, made. The exclusive option to purchase is not contained in a public

instrument the execution of which would have beenconsidered equivalent to

delivery. Neither did Adelfa Properties take actual, physical possession of the

property at any given time. It is true that after the reconstitution of the certificate of

title, it remained in the possession of Atty. Bayani L. Bernardo, Adelfa’s counsel.Normally, under the law, such possession by the vendee is to be understood as a

delivery. However, Rosario and Salud explained that there was really no intention

on their part to deliver the title to Adelfa Properties with the purpose of transferringownership to it.

They claim that Atty. Bernardo had possession of the title only because he was their

counsel in the petition for reconstitution. The court found no reason not to believe

said explanation, aside from the fact that such contention was never refuted orcontradicted by Adelfa Properties.

4. Perfected contract to sell

The controverted document should legally be considered as a perfected contract to

sell, and not “strictly an option contract.”

5. Contract interpreted to ascertain intent of parties; Title not controlling if text

shows otherwise



The important task in contract interpretation is always the ascertainment of the

intention of the contracting parties and that task is to be discharged by looking to

the words they used to project that intention in their contract, all the words not just

a particular word or two, and words in context not words standing alone. Moreover,

judging from the subsequent acts of the parties which will hereinafter be discussed,

it is undeniable that the intention of the parties was to enter into a contract to sell.In addition, the title of a contract does not necessarily determine its true nature.

Hence, the fact that the document under discussion is entitled “Exclusive Option to

Purchase” is not controlling where the text thereof shows that it is a contract to

sell.

6. Option defined

As used in the law on sales, an option is a continuing offer or contract by which 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

and conditions, or which gives to the owner of the property the right to sell ordemand a sale. It is also sometimes called an “unaccepted offer.” An option is not of

itself a purchase, but merely secures the privilege to buy. It is not a sale of property

but a sale of the right to purchase.

It is simply a contract by which the owner of property agrees with another person

that he shall have the right to buy his property at a fixed price within a certain time.

He does not sell his land; he does not then agree to sell it; but he does sell

something, that is, the right or privilege to buy at the election or option of the other

party. Its distinguishing characteristic is that it imposes no binding obligation on the

person holding the option, aside from the consideration for the offer. Until

acceptance, it is not, properly speaking, a contract, and does not vest, transfer, oragree to transfer, any title to, or any interest or right in the subject matter, but is

merely a contract by which the owner of property gives the optionee the right or

privilege of accepting the offer and buying the property on certain terms.

7. Contract defined

A contract, like a contract to sell, involves a meeting of minds between two persons

whereby one binds himself, with respect to the other, to give something or to rendersome service. Contracts, in general, 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. The offer must be certain and theacceptance absolute.

8. Distinction between an option and a contract of sale

The distinction between an “option” and a contract of sale is that an option is an

unaccepted offer. It states the terms and conditions on which the owner is willing to

sell his land, if the holder elects to accept them within the time limited. If the holder



does so elect, he must give notice to the other party, and the accepted offer

thereupon becomes a valid and binding contract. If an acceptance is not made within

the time fixed, the owner is no longer bound by his offer, and the option is at an end.

A contract of sale, on the other hand, fixes definitely the relative rights and

obligations of both parties at the time of its execution. The offer and the acceptance

are concurrent, since the minds of the contracting parties meet in the terms of theagreement.

9. Acceptance; formal or informal

Except where a formal acceptance is so required, although the acceptance must be

affirmatively and clearly made and must be evidenced by some acts or conduct

communicated to the offeror, it may be made either in a formal or an informal

manner, and may be shown by acts, conduct, or words of the accepting party

that clearly manifest a present intention or determination to accept the offer to buyor sell. Thus, acceptance may be shown by the acts, conduct, or words of a party

recognizing the existence of the contract of sale. In the present case, a perusal of thecontract involved, as well as the oral and documentary evidence presented by the

parties, readily shows that there is indeed a concurrence of Adelfa’s offer to buy and

the Jimenezes’ acceptance thereof.

10. Contract clear, only performance of obligations required of parties

The offer to buy a specific piece of land was definite and certain, while the

acceptance thereof was absolute and without any condition or qualification. The

agreement as to the object, the price of the property, and the terms of payment was

clear and well‐defined. No other significance could be given to such acts that than

that they were meant to finalize and perfect the transaction. The parties even went beyond the basic requirements of the law by stipulating that “all expenses including

the corresponding capital gains tax, cost of documentary stamps are for the account

of the vendors, and expenses for the registration of the deed of sale in the Registryof Deeds are for the account of Adelfa Properties, Inc.” Hence, there was nothing left

to be done except the performance of the respective obligations of the parties.

11. No counter‐offer

The offer of Adelfa Properties to deduct P500,000.00, (later reduced to

P300,000.00) from thepurchase price for the settlement of the civil case was not a

counter‐offer. There already existed a perfected contract between the parties at thetime the alleged counter‐offer was made. Thus, any new offer by a party becomes

binding only when it is accepted by the other. In the case of the Jimenezes, they

actually refused to concur in said offer of petitioner, by reason of which the original

terms of the contract continued to be enforceable. At any rate, the same cannot be

considered a counter‐offer for the simple reason that Adelfa Properties’ sole

purpose was to settle the civil case in order that it could already comply with its

obligation. In fact, it was even indicative of a desire by Adelfa Properties to



immediately comply therewith, except that it was being prevented from doing so

because of the filing of the civil case which, it believed in good faith, rendered

compliance improbable at that time. In addition, no inference can be drawn from

that suggestion given by Adelfa Properties that it was totally abandoning the

original contract.

12. Test to determine contract as a “contract of sale or purchase” or mere “option”

The test in determining whether a contract is a “contract of sale or purchase” or a

mere “option” is whether or not the agreement could be specifically enforced. Thereis no doubt that Adelfa’s obligation to pay the purchase price is specific, definite and

certain, and consequently binding and enforceable. Had the Jimenezes chosen to

enforce the contract, they could have specifically compelled Adelfa to pay the

balance of P2,806,150.00. This is distinctly made manifest in the contract itself as an

integral stipulation, compliance with which could legally and definitely bedemanded from petitioner as a consequence.

13. Option agreement

An agreement is only an “option” when no obligation rests on the party to make any

payment except such as may be agreed on between the parties as consideration to

support the option until he has made up his mind within the time specified. An

option, and not a contract to purchase, is effected by an agreement to sell real estate

for payments to be made within specified time and providing for forfeiture of money

paid upon failure to make payment, where the purchaser does not agree to

purchase, to make payment, or to bind himself in any way other than the forfeiture

of the payments made. This is not a case where no right is as yet created nor an

obligation declared, as where something further remains to be done before thebuyer and seller obligate themselves.

14. Contract not an option contract; “Balance”

While there is jurisprudence to the effect that a contract which provides that theinitial payment shall be totally forfeited in case of default in payment is to be

considered as an option contract, the contract executed between the parties is an

option contract, for the reason that the parties were already contemplating thepayment of the balance of the purchase price, and were not merely quoting an

agreed value for the property. The term “balance,” connotes a remainder or

something remaining from the original total sum already agreed upon.

15. When earnest money given in a contract of sale

Whenever earnest money is given in a contract of sale, it shall be considered as part

of the price and as proof of the perfection of the contract. It constitutes an advance

payment and must, therefore, be deducted from the total price. Also, earnest money

is given by the buyer to the seller to bind the bargain.



16. Distinctions between earnest and option money

There are clear distinctions between earnest money and option money, viz.: (a)

earnest money is part of the purchase price, while option money is the money given

as a distinct consideration for an option contract; (b) earnest money is given only

where there is already a sale, while option money applies to a sale not yet perfected;and (c) when earnest money is given, the buyer is bound to pay the balance, while

when the would‐be buyer gives option money, he is not required to buy.

17. Article 1590, New Civil Code

Article 1590 of the Civil Code provides “Should the vendee be disturbed in the

possession orownership of the thing acquired, or should he have reasonable

grounds to fear such disturbance, by a vindicatory action or a foreclosure of

mortgage, he may suspend the payment of the price until the vendor has caused thedisturbance or danger to cease, unless the latter gives security for the return of the

price in a proper case, or it has been stipulated that, notwithstanding any suchcontingency, the vendee shall be bound to make the payment. A mere act of trespass

shall not authorize the suspension of the payment of the price.” As the agreement

between the parties was not an option contract but a perfected contract to sell; and

therefore, Article 1590 would properly apply.

18. Adelfa Properties justified in suspending payment of balance by reason of

vindicatory action filed against it

In Civil Case 89‐5541, it is easily discernible that, although the complaint prayed for

the annulment only of the contract of sale executed between Adelfa Properties and

the Jimenez brothers, the same likewise prayed for the recovery of therein Jimenez’share in that parcel of land specifically covered by TCT 309773.

In other words, the Jimenezes were claiming to be co‐owners of the entire parcel of land described in TCT 309773, and not only of a portion thereof nor did their

claim pertain exclusively to the eastern half adjudicated to the Jimenez brothers.Therefore, Adelfa Properties was justified in suspending payment of the balance of

the purchase price by reason of the aforesaid vindicatory action filed against it. The

assurance made by the Jimenezes that Adelfa Properties did not have to worryabout the case because it was pure and simple harassment is not the kind of

guaranty contemplated under the exceptive clause in Article 1590 wherein the

vendor is bound to make payment even with the existence of a vindicatory action if the vendee should give a security for the return of the price.

19. Jimenezes may no longer be compelled to sell and deliver subject property

Be that as it may, and the validity of the suspension of payment notwithstanding, the

Jimenezes may no longer be compelled to sell and deliver the subject property to

Adelfa Properties for two reasons, that is Adelfa’s failure to duly effect the



consignation of the purchase price after the disturbance had ceased; and,

secondarily, the fact that the contract to sell had been validly rescinded by the

Jimenezes.

20. Tender and consignation required in discharge of obligation (eg. Contract to

sell); Different in cases involving exercise of right or privilege

The mere sending of a letter by the vendee expressing the intention to pay, without

the accompanying payment, is not considered a valid tender of payment. Besides, a

mere tender of payment is not sufficient to compel the Jimenezes to deliver theproperty and execute the deed of absolute sale. It is consignation which is essential

in order to extinguish Adelfa Properties’ obligation to pay the balance of the

purchase price. The rule is different in case of an option contract or in legal

redemption or in a sale with right to repurchase, wherein consignation is not

necessary because these cases involve an exercise of a right or privilege (to buy,redeem or repurchase) rather than the discharge of an obligation, hence tender of

payment would be sufficient to preserve the right or privilege. This is because theprovisions on consignation are not applicable when there is no obligation to pay. A

contract to sell involves the performance of an obligation, not merely the exercise of

a privilege or a right. Consequently, performance or payment may be effected not by

tender of payment alone but by both tender and consignation.

21. Adelfa no longer had right to suspend payment after dismissal of civil case

against it

Adelfa Properties no longer had the right to suspend payment after the disturbance

ceased with the dismissal of the civil case filed against it. Necessarily, therefore, its

obligation to pay the balance again arose and resumed after it received notice of such dismissal. Unfortunately, Adelfa failed to seasonably make payment, as in fact it

has failed to do so up to the present time, or even to deposit the money with the trial

court when this case was originally filed therein.

22. Rescission in a contract to sell

Article 1592 of the Civil Code which requires rescission either by judicial action or

notarial act is not applicable to a contract to sell. Furthermore, judicial action forrescission of a contract is not necessary where the contract provides for automatic

rescission in case of breach, as in the contract involved in the present controversy.

By Adelfa’s failure to comply with its obligation, the Jimenezes elected to resort toand did announce the rescission of the contract through its letter to Adelfa dated 27

July 1990. That written notice of rescission is deemed sufficient under the

circumstances.

23. Resolution of reciprocal contracts may be made extrajudicially, unless impugned

in court



It was held in University of the Philippines vs. De los Angeles, etc. that the right to

rescind is not absolute, being ever subject to scrutiny and review by the proper

court. However, this rule applies to a situation where the extrajudicial rescission is

contested by the defaulting party. In other words, resolution of reciprocal contracts

may be made extrajudicially unless successfully impugned in court. If the debtor

impugns the declaration, it shall be subject to judicial determination. Otherwise, if said party does not oppose it, the extrajudicial rescission shall have legal effect. In

the present case, although Adelfa Properties was duly furnished and did receive a

written notice of rescission which specified the grounds therefore, it failed to reply

thereto or protest against it. Its silence thereon suggests an admission of theveracity and validity of Jimenezes’ claim.

24. Adelfa estopped

Furthermore, the initiative of instituting suit was transferred from the rescinder tothe defaulter by virtue of the automatic rescission clause in the contract. But then,

aside from the lackadaisical manner with which Adelfa Properties treated theJimenezes’ letter of cancellation, it utterly failed to seriously seek redress from the

court for the enforcement of its alleged rights under the contract. If the Jimenezes

had not taken the initiative of filing Civil Case 7532, evidently Adelfa had no

intention to take any legal action to compel specific performance from the former.

By such cavalier disregard, it has been effectively estopped from seeking the

affirmative relief it desires but which it had theretofore disdained.

Atkins Kroll & Co. vs. Cu Hian Tek102 Phil 984January 1958

FACTS:

On September 13, 1951, petitioner Atkins Kroll & Co. (Atkins) sent a letter torespondent B. Cu Hian Tek (Hian Tek) offering (a) 400 cartons of Luneta brandSardines in Tomato Sauce 48 / 15-oz. Ovals at $8.25 per carton, (b) 300 cartonsof Luneta brand Sardines Natural 48/15 oz. talls at $6.25 per carton, and (c)300 cartons of Luneta brand Sardines in Tomato Sauce 100/5-oz. talls at $7.48per carton, with all of the offers subject to reply by September 23, 1951. HianTek unconditionally accepted the said offer through a letter delivered onSeptember 21, 1951, but Atkins failed to deliver the commodities due to theshortage of catch of sardines by the packers in California.

Hian Tek, therefore, filed an action for damages in the CFI of Manila whichgranted the same in his favor. Upon Atkins’ appeal, the Court of Appealsaffirmed said decision but reduced the damages to P3,240.15 representingunrealized profits. Atkins herein contends that there was no such contract ofsale but only an option to buy, which was not enforceable for lack of



consideration because it is provided under the 2nd paragraph of Article 1479 ofthe New Civil Code that "an accepted unilatateral promise to buy or to sell adeterminate thing for a price certain is binding upon the promisor if thepromise is supported by a consideration distinct from the price.” Atkins alsoinsisted that the offer was a mere offer of option, because the "firm offer" was

a continuing offer to sell until September 23.

Was there a contract of sale between the parties or only a unilateral promiseto buy?

COURT RULING:

The Supreme Court held that there was a contract of sale between the parties.Petitioner’s argument assumed that only a unilateral promise arose when therespondent accepted the offer, which is incorrect because a bilateral contractto sell and to buy was created upon respondent’s acceptance.

Had B. Cua Hian Tek backed out after accepting, by refusing to get the sardinesand / or to pay for their price, he could also be sued. But his letter-reply toAtkins indicated that he accepted "the firm offer for the sale" and that "theundersigned buyer has immediately filed an application for import license.”After accepting the promise and before he exercises his option, the holder ofthe option is not bound to buy. In this case at bar, however, upon respondent’sacceptance of herein petitioner's offer, a bilateral promise to sell and to buyensued, and the respondent had immediately assumed the obligations of apurchaser.

Ang Yu Asuncion vs. CA

238 SCRA 602 | 1994 FACTS

On July 29, 1987, a Second Amended Complaint forSpecific Performance was filed by

Ang Yu Asuncion and Keh Tiong, et al., against Bobby Cu Unjieng and Jose Tan before the

Regional Trial Court of Manila. The plaintiffs were tenants or lessees of residential and

commercial spaces owned by defendants in Binondo, Manila. On several conditions

defendants informed the plaintiffs that they are offering to sell the premises and are giving

them priority to acquire the same. During negotiations, Bobby Cu Unjieng offered a price of

P6‐ million while plaintiffs made a counter of offer of P5‐ million. Plaintiff thereafter asked

the defendants to put their offer in writing to which the defendants acceded. In reply to

defendants’ letter, plaintiffs wrote, asking that they specify the terms and conditions of the

offer to sell. When the plaintiffs did not receive any reply, they sent another letter with the

same request.Since defendants failed to specify the terms and conditions of the offer to sell

and because of information received that the defendants were about to sell the property,



plaintiffs were compelled to file the complaint to compel defendants to sell the property to

them. The court dismissed the complaint on the ground that the parties did not agree upon

the terms and conditions of the proposed sale, hence, there was no contact of sale at

all. On November 15, 1990, the Cu Unjieng spouses executed a Deed of Sale transferring the

property in question to Buen Realty and Development Corporation. Buen Realty, as the new

owner of the subject property, wrote to the lessees demanding the latter to vacate thepremises. In its reply, it stated that Buen Realty and Development Corporation brought the

property subject tothe notice of lis pendens. ISSUE

Can Buen Realty be bound by the writ of execution by virtue of the notice of lis

pendens? RULING

No. An obligation is a juridical necessity to give, to do or not to do (Art. 1156, Civil

Code). The obligation is upon the concurrence of the essential elements thereof, viz: (a)

thevinculum juris or juridical tie which is the efficient cause established by the various

sources of obligations; (b) the object which is the prestation or conduct, required to

observed; and (c) thesubject‐persons who, viewed demandability of the obligation are the

active (oblige) and the passive (obligor) subjects. Among the sources of an obligation is a

contract (Art. 1157), which 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. A contract

undergoes various stages that include its negotiation or preparation, its perfection and,

finally, its consummation. Until the contract is perfected, it cannot, as an independent

source of obligation, serve as a binding juridical relation. In sales, particularly, to which the

case at bench belongs, the contract is perfected when a person, called the seller, obligates

himself, for a price certain, to deliver and to transfer ownership of a thing or right to

another, called the buyer, over which the latter agrees. The registration of lis pendens must

be independently addressed in appropriate proceedings.Therefore, Buen Realty cannot be

held subject to the writ of execution issued by the respondent Judge, let alone ousted from

the ownership and possession of the property, without first being duly afforded its day in

court.

G. R. No. 155043: Arturo Abalos vs Dr. Galicano Macatangay Jr 30 September 2004, 439 scra 649Sales – Option – Earnest Money

Arturo and Esther Abalos are husband and wife. They own a parcel of land inMakati. On June 2, 1988, Arturo, armed with a purported Special Power of

Attorney, executed a Receipt and Memorandum of Agreement in favor of Galicano in which Arturo acknowledged he received a P5k check from Galicanoas earnest money to be deducted from the purchase price and that Arturo bindshimself to sell the land to Galicano within 30 days from receipt of the P5k. The



purchase price agreed upon was P1.3 M. The P5k check was dishonored due toinsufficiency.

Apparently, Esther and Arturo have a rocky relationship. Esther executed a SPAin favor of her sister and that she is selling her share in the conjugal property to

Galicano. It was alleged that that the RMOA is not valid for Esther’s signaturewas not affixed thereto. And that Esther never executed a SPA in favor of Arturo.Galicano informed the couple that he has prepared a check to cover theremainder of the amount that needs to be paid for the land. He demanded thatthe land be delivered to him. But the spouses failed to deliver the land. Galicanosued the spouses.

ISSUE: Whether or not there was a contract of sale between Arturo andGalicano. Whether or not the subsequent agreement between Galicano andEsther is binding and that it cured the defect of the earlier contract between

Arturo and Galicano.

HELD: No. No matter how the RMOA is looked upon, the same cannot be valid. At best, the agreement between Arturo and Galicano is a mere grant of privilegeto purchase to Galicano. The promise to sell is not binding to Arturo for there wasactually no consideration distinct from the price. Be it noted that the partiesconsidered the P5k as an earnest money to be deducted from the purchaseprice.

Taking arguendo that it was a bilateral promise to buy and sell, the same is stillnot binding for Galicano failed to render a payment of legal tender. A check is nota legal tender.

Taking arguendo that the P5k was an earnest money which supposedlyperfected a contract of sale, the RMOA is still not valid for Esther’s signature wasnot affixed. The property is conjugal and under the Family Code, the spouses’consents are required. Further, the earnest money here is not actually theearnest money contemplated under Article 1482 under the Civil Code.

The subsequent agreement between Esther and Galicano did not ratify theearlier transaction between Arturo and Galicano. A void contract can never beratified.

Riviera

EQUATORIAL REALTY V. MAYFAIR (November 21, 1996)

FACTS:

Petitioner Carmelo and Bauermann Inc. leased its parcel of land with 2-storey building to

respondent Mayfair Theater Inc.



They entered a contract which provides that if the LESSOR should desire to sell the leased

premises, the LESSEE shall be given 30-days exclusive option to purchase the same.

Carmelo informed Mayfair that it will sell the property to Equatorial. Mayfair made known its

interest to buy the property but only to the extent of the leased premises.

Notwithstanding Mayfair’s intention, Carmelo sold the property to Equatorial.

ISSUE:

WON the sale of the property to Equatorial is valid.

HELD:

The sale of the property should be rescinded because Mayfair has the right of first refusal. Both

Equatorial and Carmelo are in bad faith because they knew of the stipulation in the contract

regarding the right of first refusal.

The stipulation is a not an option contract but a right of first refusal and as such the requirement

of a separate consideration for the option, has no applicability in the instant case. The

consideration is built in the reciprocal obligation of the parties.

In reciprocal contract, the obligation or promise of each party is the consideration for that of the

other. (Promise to lease in return of the right to first refusal)

With regard to the impossibility of performance, only Carmelo can be blamed for not including the

entire property in the right of first refusal. Court held that Mayfair may not have the option to buy

the property. Not only the leased area but the entire property.

Bible Baptist Church vs CA

Subject: Sales

Doctrine: Option Contract

Facts:

On June 7, 1985, petitioner Bible Baptist Church entered into a contract of lease with

respondents Mr. & Mrs. Elmer Tito Medina Villanueva who own the subject property located

at No. 2436 Leon Guinto St., Malate, Manila. The pertinent stipulations in the lease contract

were:

2. That the lease shall take effect on June 7, 1985 and shall be for the period of Fifteen (15) years.

4. That upon signing of the LEASE AGREEMENT, the LESSEE shall pay the sum of

Eighty Four Thousand Pesos (P84,000.00) Philippine Currency. Said sum is to be

paid directly to the Rural Bank, Valenzuela, Bulacan for the purpose of redemption of

said property which is mortgaged by the LESSOR.

8. That the LESSEE has the option to buy the leased premises during the Fifteen (15) years of



the lease. If the LESSEE decides to purchase the premises the terms will be:

A) A selling Price of One Million Eight Hundred Thousand Pesos (P1.8 million),

Philippine Currency. B) A down payment agreed upon by both parties. C) The

balance of the selling price may be paid at the rate of One Hundred Twenty

Thousand Pesos (P120,000.00), Philippine Currency, per year.

Petitioner seeks to buy the leased premises from the spouses Villanueva, under the option

given to them. Petitioners claim that they (Baptist Church) agreed to advance the large

amount needed for the rescue of the property but, in exchange, it asked the Villanuevas to

grant it a long term lease and an option to buy the property for P1.8 million. However, the

respondents did not agree saying that there is no separate consideration.

In this hand, the petitioners argue that there is a consideration — the consideration

supporting the option was their agreement to pay off the Villanuevas P84,000 loan with the

bank, thereby freeing the subject property from the mortgage encumbrance. That they would

not have agreed to advance such a large amount as it did to rescue the property from bank

foreclosure had it not been given an enforceable option to buy that went with the lease

agreement.

The Baptist Church states that [t]rue, the Baptist Church did not pay a separate and specific

sum of money to cover the option alone. But the P84,000 it paid the Villanuevas in advance

should be deemed consideration for the one contract they entered into the lease with option

to buy. Petitioners further insist that a consideration need not be a separate sum of money.

They posit that their act of advancing the money to rescue the property from mortgage and

impending foreclosure, should be enough consideration to support the option.

On the other hand, Respondents argue that the amount of P84,000 has been fully exhausted

and utilized by their occupation of the premises and there is no separate consideration to

speak of which could support the option.

The RTC and CA agree with the respondent.

ISSUE: WON there is a separate consideration that would render the option contract valid

and binding.

HELD: An option contract, to be valid and binding, needs to be supported by a separate

consideration. The consideration need not be monetary but could consist of other things or

undertakings. However, if the consideration is not monetary, these must be things or

undertakings of value, in view of the onerous nature of the contract of option. Furthermore,

when a consideration for an option contract is not monetary, said consideration must be

clearly specified as such in the option contract or clause.



Petitioners cannot insist that the P84,000 they paid in order to release the Villanuevas

property from the mortgage should be deemed the separate consideration to support the

contract of option. It must be pointed out that said amount was in fact apportioned into

monthly rentals spread over a period of one year, at P7,000 per month. Thus, for the entire

period of June 1985 to May 1986, petitioner Baptist Churchs monthly rent had already beenpaid for, such that it only again commenced paying the rentals in June 1986. This is shown

by the testimony of petitioner Pastor Belmonte where he states that the P84,000 was

advance rental equivalent to monthly rent of P7,000 for one year, such that for the entire

year from 1985 to 1986 the Baptist Church did not pay monthly rent.

First, this Court cannot find that petitioner Baptist Church parted with anything of value,

aside from the amount of P84,000 which was in fact eventually utilized as rental payments.

Second, there is no document that contains an agreement between the parties that petitioner

Baptist Churchs supposed rescue of the mortgaged property was the consideration which the

parties contemplated in support of the option clause in the contract. As previously stated, the

amount advanced had been fully utilized as rental payments over a period of one year. While

the Villanuevas may have them to thank for extending the payment at a time of need, this is

not the separate consideration contemplated by law.

This Court also notes that in the present case both the Regional Trial Court and the Court of

Appeals agree that the option was not founded upon a separate and distinct consideration

and that, hence, respondents Villanuevas cannot be compelled to sell their property to

petitioner Baptist Church.

Having found that the option to buy granted to the petitioner Baptist Church was not

founded upon a separate consideration, and hence, not enforceable against respondents, this

Court finds no need to discuss whether a price certain had been fixed as the purchase price.

WHEREFORE, the Decision and Resolution of the Court of Appeals subject of the petition

are hereby AFFIRMED.

F. EARNEST MONEY

LOURDES ONG LIMSON, petitioner, vs. COURT OF APPEALS,

SPOUSES LORENZO DE VERA and ASUNCION SANTOS-DE

VERA, TOMAS CUENCA, JR., and SUNVAR REALTY

DEVELOPMENT CORPORATION, respondents.



D E C I S I O N

BELLOSILLO, J .:

Filed under Rule 45 of the Rules of Court this Petition for Review on

Certiorari seeks to review, reverse and set aside the Decision[1] of the Court of Appeals dated 18 May 1998 reversing that of the Regional Trial Court dated 30

June 1993. The petition likewise assails the Resolution[2] of the appellate court

of 19 October 1998 denying petitioner’s Motion for Reconsideration.

Petitioner Lourdes Ong Limson, in her 14 May 1979 Complaint filed

before the trial court,[3] alleged that in July 1978 respondent spouses Lorenzo de

Vera and Asuncion Santos-de Vera, through their agent Marcosa Sanchez,offered to sell to petitioner a parcel of land consisting of 48,260 square meters,

more or less, situated in Barrio San Dionisio, Parañaque, Metro Manila; that

respondent spouses informed her that they were the owners of the subject

property; that on 31 July 1978 she agreed to buy the property at the priceof P34.00 per square meter and gave the sum of P20,000.00 to respondent

spouses as "earnest money;" that respondent spouses signed a receipt therefor

and gave her a 10-day option period to purchase the property; that respondentLorenzo de Vera then informed her that the subject property was mortgaged to

Emilio Ramos and Isidro Ramos; that respondent Lorenzo de Vera asked her to

pay the balance of the purchase price to enable him and his wife to settle their

obligation with the Ramoses.

Petitioner also averred that she agreed to meet respondent spouses and the

Ramoses on 5 August 1978 at the Office of the Registry of Deeds of Makati,Metro Manila, to consummate the transaction but due to the failure of

respondent Asuncion Santos-de Vera and the Ramoses to appear, no transaction

was formalized. In a second meeting scheduled on 11 August 1978 sheclaimed that she was willing and ready to pay the balance of the purchase price

but the transaction again did not materialize as respondent spouses failed to pay

the back taxes of subject property. Subsequently, on 23 August 1978 petitioner allegedly gave respondent Lorenzo de Vera three (3) checks in the total amount

of P36,170.00 for the settlement of the back taxes of the property and for the

payment of the quitclaims of the three (3) tenants of subject land. The amount

was purportedly considered part of the purchase price and respondent Lorenzode Vera signed the receipts therefor.

Petitioner alleged that on 5 September 1978 she was surprised to learn fromthe agent of respondent spouses that the property was the subject of a

negotiation for the sale to respondent Sunvar Realty Development Corporation

(SUNVAR) represented by respondent Tomas Cuenca, Jr. On 15 September

1978 petitioner discovered that although respondent spouses purchased the



property from the Ramoses on 20 March 1970 it was only on 15 September

1978 that TCT No. S-72946 covering the property was issued to respondentspouses. As a consequence, she filed on the same day an Affidavit of Adverse

Claim with the Office of the Registry of Deeds of Makati, Metro Manila, which

was annotated on TCT No. S-72946. She also claimed that on the same day

she informed respondent Cuenca of her "contract" to purchase the property.

The Deed of Sale between respondent spouses and respondent SUNVAR

was executed on 15 September 1978 and TCT No. S-72377 was issued in favor

of the latter on 26 September 1978 with the Adverse Claim of petitioner

annotated thereon. Petitioner claimed that when respondent spouses sold the

property in dispute to SUNVAR, her valid and legal right to purchase it was

ignored if not violated. Moreover, she maintained that SUNVAR was in badfaith as it knew of her "contract" to purchase the subject property from

respondent spouses.

Finally, for the alleged unlawful and unjust acts of respondent spouses,which caused her damage, prejudice and injury, petitioner claimed that the Deed

of Sale, should be annuled and TCT No. S-72377 in the name of respondent

SUNVAR canceled and TCT No. S-72946 restored. She also insisted thata Deed of Sale between her and respondent spouses be now executed upon her

payment of the balance of the purchase price agreed upon, plus damages and

attorney’s fees.

In their Answer [4] respondent spouses maintained that petitioner had no

sufficient cause of action against them; that she was not the real party in

interest; that the option to buy the property had long expired; that there was no perfected contract to sell between them; and, that petitioner had no legal

capacity to sue. Additionally, respondent spouses claimed actual, moral and

exemplary damages, and attorney’s fees against petitioner.

On the other hand, respondents SUNVAR and Cuenca, in

their Answer ,[5] alleged that petitioner was not the proper party in interest and/or

had no cause of action against them. But, even assuming that petitioner was the

proper party in interest, they claimed that she could only be entitled to the

return of any amount received by respondent spouses. In the alternative, they

argued that petitioner had lost her option to buy the property for failure tocomply with the terms and conditions of the agreement as embodied in the

receipt issued therefor. Moreover, they contended that at the time of the

execution of the Deed of Sale and the payment of consideration to respondent

spouses, they "did not know nor was informed" of petitioner’s interest or claimover the subject property. They claimed furthermore that it was only after the

signing of the Deed of Sale and the payment of the corresponding amounts to



respondent spouses that they came to know of the claim of petitioner as it was

only then that they were furnished copy of the title to the property wherethe Adverse Claim of petitioner was annotated. Consequently, they also

instituted a Cross-Claim against respondent spouses for bad faith in

encouraging the negotiations between them without telling them of the claim of

petitioner. The same respondents maintained that had they known of the claimof petitioner, they would not have initiated negotiations with respondent

spouses for the purchase of the property. Thus, they prayed for reimbursement

of all amounts and monies received from them by respondent spouses,

attorney’s fees and expenses for litigation in the event that the trial court should

annul the Deed of Sale and deprive them of their ownership and possession of

the subject land.

In their Answer to the Cross-Claim[6] of respondents SUNVAR and Cuenca,

respondent spouses insisted that they negotiated with the former only after the

expiration of the option period given to petitioner and her failure to complywith her commitments thereunder. Respondent spouses contended that they

acted legally and validly, in all honesty and good faith. According to them,

respondent SUNVAR made a verification of the title with the Office of theRegister of Deeds of Metro Manila District IV before the execution of the Deed

of Absolute Sale. Also, they claimed that the Cross-Claimwas barred by a

written waiver executed by respondent SUNVAR in their favor. Thus,respondent spouses prayed for actual damages for the unjustified filing of

the Cross-Claim, moral damages for the mental anguish and similar injuries

they suffered by reason thereof, exemplary damages "to prevent others from

emulating the bad example" of respondents SUNVAR and Cuenca, plusattorney’s fees.

After a protracted trial and reconstitution of the court records due to the firethat razed the Pasay City Hall on 18 January 1992, the Regional Trial Court

rendered its 30 June 1993 Decision[7] in favor of petitioner. It ordered (a) the

annulment and rescission of the Deed of Absolute Sale executed on 15September 1978 by respondent spouses in favor of respondent SUNVAR; (b)

the cancellation and revocation of TCT No. S-75377 of the Registry of Deeds,

Makati, Metro Manila, issued in the name of respondent Sunvar Realty

Development Corporation, and the restoration or reinstatement of TCT No. S-72946 of the same Registry issued in the name of respondent spouses; (c)

respondent spouses to execute a deed of sale conveying ownership of the

property covered by TCT No. S-72946 in favor of petitioner upon her payment

of the balance of the purchase price agreed upon; and, (d) respondent spouses

to pay petitioner P50,000.00 as and for attorney’s fees, and to pay the costs.



On appeal, the Court of Appeals completely reversed the decision of the

trial court. It ordered (a) the Register of Deeds of Makati City to liftthe Adverse Claim and such other encumbrances petitioner might have filed or

caused to be annotated on TCT No. S-75377; and, (b) petitioner to pay (1)

respondent SUNVAR P50,000.00 as nominal damages, P30,000.00 as

exemplary damages and P20,000 as attorney’s fees; (2) respondentspouses,P15,000.00 as nominal damages, P10,000.00 as exemplary damages

and P10,000.00 as attorney’s fees; and, (3) the costs.

Petitioner timely filed a Motion for Reconsideration which was denied by

the Court of Appeals on 19 October 1998. Hence, this petition.

At issue for resolution by the Court is the nature of the contract entered into

between petitioner Lourdes Ong Limson on one hand, and respondent spousesLorenzo de Vera and Asuncion Santos-de Vera on the other.

The main argument of petitioner is that there was a perfected contract tosell between her and respondent spouses. On the other hand, respondentspouses and respondents SUNVAR and Cuenca argue that what was perfected

between petitioner and respondent spouses was a mere option.

A scrutiny of the facts as well as the evidence of the partiesoverwhelmingly leads to the conclusion that the agreement between the parties

was acontract of option and not a contract to sell.

An option, as used in the law of sales, is a continuing offer or contract bywhich the owner stipulates with another that the latter shall have the right to

buy the property at a fixed price within a time certain, or under, or incompliance with, certain terms and conditions, or which gives to the owner of the property the right to sell or demand a sale. It is also sometimes called an

"unaccepted offer." An option is not of itself a purchase, but merely secures the

privilege to buy.[8] It is not a sale of property but a sale of the right to

purchase.[9] It is simply a contract by which the owner of property agrees with

another person that he shall have the right to buy his property at a fixed price

within a certain time. He does not sell his land; he does not then agree to sell

it; but he does sell something, i.e., the right or privilege to buy at the election or

option of the other party.[10] Its distinguishing characteristic is that it imposes no

binding obligation on the person holding the option, aside from theconsideration for the offer. Until acceptance, it is not, properly speaking, acontract, and does not vest, transfer, or agree to transfer, any title to, or any

interest or right in the subject matter, but is merely a contract by which the

owner of the property gives the optionee the right or privilege of accepting theoffer and buying the property on certain terms.[11]



On the other hand, a contract, like a contract to sell, involves the meeting of

minds between two persons whereby one binds himself, with respect to theother, to give something or to render some service.[12] Contracts, in general, are

perfected by mere consent,[13] which is manifested by the meeting of the offer

and the acceptance upon the thing and the cause which are to constitute the

contract. The offer must be certain and the acceptance absolute.[14]

The Receipt [15] that contains the contract between petitioner and respondent

spouses provides –

Received from Lourdes Limson the sum of Twenty Thousand Pesos

(P20,000.00) under Check No. 22391 dated July 31, 1978 as earnest money

with option to purchase a parcel of land owned by Lorenzo de Vera located at

Barrio San Dionisio, Municipality of Parañaque, Province of Rizal with an

area of forty eight thousand two hundred sixty square meters more or less at

the price of Thirty Four Pesos (P34.00)[16]

cash subject to the condition and stipulation that have been agreed upon by the buyer and me which will form

part of the receipt. Should the transaction of the property not materialize not

on the fault of the buyer, I obligate myself to return the full amount

of P20,000.00 earnest money with option to buy or forfeit on the fault of the

buyer. I guarantee to notify the buyer Lourdes Limson or her representative

and get her conformity should I sell or encumber this property to a third

person. This option to buy is good within ten (10) days until the absolute deed

of sale is finally signed by the parties or the failure of the buyer to comply with

the terms of the option to buy as herein attached.

In the interpretation of contracts, the ascertainment of the intention of the

contracting parties is to be discharged by looking to the words they used to

project that intention in their contract, all the words, not just a particular word

or two, and words in context, not words standing alone.[17] Theabove Receipt readily shows that respondent spouses and petitioner only entered

into a contract of option; a contract by which respondent spouses agreed with

petitioner that the latter shall have the right to buy the former’s property at afixed price of P34.00 per square meter within ten (10) days from 31 July

1978. Respondent spouses did not sell their property; they did not also agree to

sell it; but they sold something, i.e., the privilege to buy at the election or option of petitioner. The agreement imposed no binding obligation on

petitioner, aside from the consideration for the offer.

The consideration of P20,000.00 paid by petitioner to respondent spouseswas referred to as "earnest money." However, a careful examination of the

words used indicates that the money is not earnest money but option



money. "Earnest money" and "option money" are not the same but

distinguished thus: (a) earnest money is part of the purchase price, whileoption money is the money given as a distinct consideration for an option

contract; (b) earnest money is given only where there is already a sale, while

option money applies to a sale not yet perfected; and, (c) when earnest money

is given, the buyer is bound to pay the balance, while when the would-be buyer gives option money, he is not required to buy, [18] but may even forfeit it

depending on the terms of the option.

There is nothing in the Receipt which indicates that the P20,000.00 was

part of the purchase price. Moreover, it was not shown that there was a

perfected sale between the parties where earnest money was given. Finally,

when petitioner gave the "earnest money," the Receipt did not reveal that shewas bound to pay the balance of the purchase price. In fact, she could even

forfeit the money given if the terms of the option were not met. Thus,

theP20,000.00 could only be money given as consideration for the optioncontract. That the contract between the parties is one of option is buttressed by

the provision therein that should the transaction of the property not materialize

without fault of petitioner as buyer, respondent Lorenzo de Vera obligateshimself to return the full amount of P20,000.00 "earnest money" with option to

buy or forfeit the same on the fault of petitioner. It is further bolstered by the

provision therein that guarantees petitioner that she or her representative would be notified in case the subject property was sold or encumbered to a third

person. Finally, the Receipt provided for a period within which the option to

buy was to be exercised, i.e., "within ten (10) days" from 31 July 1978.

Doubtless, the agreement between respondent spouses and petitioner was

an "option contract" or what is sometimes called an "unaccepted offer." During

the option period the agreement was not converted into a bilateral promise tosell and to buy where both respondent spouses and petitioner were then

reciprocally bound to comply with their respective undertakings as petitioner

did not timely, affirmatively and clearly accept the offer of respondent spouses.

The rule is that except where a formal acceptance is not required, although

the acceptance must be affirmatively and clearly made and evidenced by some

acts or conduct communicated to the offeror, it may be made either in a formal

or an informal manner, and may be shown by acts, conduct or words by theaccepting party that clearly manifest a present intention or determination to

accept the offer to buy or sell. But there is nothing in the acts, conduct or

words of petitioner that clearly manifest a present intention or determination toaccept the offer to buy the property of respondent spouses within the 10-day

option period. The only occasion within the option period when petitioner

could have demonstrated her acceptance was on 5 August 1978 when,



bought subject property from respondent spouses in good faith, for value and

without knowledge of any flaw or defect in its title.

The appellate court awarded nominal and exemplary damages plus

attorney’s fees to respondent spouses and respondent SUNVAR. But nominal

damages are adjudicated to vindicate or recognize the right of the plaintiff thathas been violated or invaded by the defendant.[19] In the instant case, the Court

recognizes the rights of all the parties and finds no violation or invasion of the

rights of respondents by petitioner. Petitioner, in filing her complaint, only

seeks relief, in good faith, for what she believes she was entitled to and should

not be made to suffer therefor. Neither should exemplary damages be awarded

to respondents as they are imposed only by way of example or correction for

the public good and only in addition to the moral, temperate, liquidated or compensatory damages.[20] No such kinds of damages were awarded by the

Court of Appeals, only nominal, which was not justified in this case. Finally,

attorney’s fees could not also be recovered as the Court does not deem it justand equitable under the circumstances.

WHEREFORE, the petition is DENIED. The Decision of the Court of

Appeals ordering the Register of Deeds of Makati City to lift the adverse claimand such other encumbrances petitioner Lourdes Ong Limson may have filed or

caused to be annotated on TCT No. S-75377 is AFFIRMED, with the

MODIFICATION that the award of nominal and exemplary damages as well asattorney’s fees is DELETED.

SO ORDERED.

Mendoza, Quisumbing and Buena JJ., concur. De Leon, Jr., J., on leave.

San Miguel Properties vs. Huang (G.R. No. 137290)

It is not the giving of earnest money, but the proof of the concurrence of all the essentialelements of the contract of sale which establishes the existence of a perfected sale.

Was it an earnest deposit? NO. At the time when petitioner accepted the terms of respondents’offer of March 29, 1994, their contract had not yet been perfected. It does not satisfy Article

1482.

The stages of a contract of sale are as follows: (1) negotiation, (2) perfection, and (3)consummation. The alleged “indubitable evidence” of a perfected sale cited by the appellate courtwas nothing more than offers and counter-offers which did not amount to any final arrangementcontaining the essential elements of a contract of sale. While the parties already agreed on thereal properties which were the objects of the sale and on the purchase price, the fact remains thatthey failed to arrive at mutually acceptable terms of payment, despite the 45-day extension givenby petitioner.



There was also failure to agree on the manner of payment. The manner of payment of thepurchase price is an essential element before a valid and binding contract of sale can exist.Although the Civil Code does not expressly state that the minds of the parties must also meet onthe terms or manner of payment of the price, the same is needed, otherwise there is no sale.

Agreement on the manner of payment goes into the price such that a disagreement on themanner of payment is tantamount to a failure to agree on the price.



V. PARTIES TO A CONTRACT OF SALE

B. Sale between spouses

CORNELIA MATABUENA vs. PETRONILA CERVANTES

L-2877 (38 SCRA 284)

March 31, 1971

FACTS:

In 1956, herein appellant’s brother Felix Matabuena

donated a piece of lot to his common-law spouse, herein appellee

Petronila Cervantes. Felix and Petronila got married only in 1962 or

six years after the deed of donation was executed. Five months later,or September 13, 1962, Felix died. Thereafter, appellant Cornelia

Matabuena, by reason of being the only sister and nearest collateralrelative of the deceased, filed a claim over the property, by virtue of a

an affidavit of self-adjudication executed by her in 1962, had the landdeclared in her name and paid the estate and inheritance taxes

thereon. The lower court of Sorsogon declared that the donation was

valid inasmuch as it was made at the time when Felix and Petronila

were not yet spouses, rendering Article 133 of the Civil Code

inapplicable.

ISSUE: Whether or not the ban on donation between spouses during a

marriage applies to a common-law relationship.

HELD:

While Article 133 of the Civil Code considers as void a

donation between the spouses during marriage, policy consideration of

the most exigent character as well as the dictates of morality requires

that the same prohibition should apply to a common-law relationship.

As stated in Buenaventura vs. Bautista (50 OG 3679,1954), if the policy of the law is to prohibit donations in favor of the

other consort and his descendants because of fear of undue andimproper pressure and influence upon the donor, then there is every

reason to apply the same prohibitive policy to persons living together

as husband and wife without the benefit of nuptials.

The lack of validity of the donation by the deceased to

appellee does not necessarily result in appellant having exclusive right



to the disputed property. As a widow, Cervantes is entitled to one-half

of the inheritance, and the surviving sister to the other half.

Article 1001, Civil Code: Should brothers and sisters or

their children survive with the widow or widower, the latter shall be

entitled to one-half of the inheritance and the brothers and sisters ortheir children to the other half.

C. Special incapacity

4. Public officers and employees

Rubias v. Batiller

Facts:

Before the war with Japan, Francisco Militante filed an application forregistration of the parcel of land in question. After the war, the petition

was heard and denied. Pending appeal, Militante sold the land topetitioner, his son-in-law. Plaintiff filed an action for forcible entry against respondent. Defendant claims the complaint of the plaintiff doesnot state a cause of action, the truth of the matter being that he and hispredecessors-in-interest have always been in actual, open and

continuous possession since time immemorial under claim of ownershipof the portions of the lot in question.

Issue:

Whether or not the contract of sale between appellant and his father-in-law was void because it was made when plaintiff was counsel of hisfather-in-law in a land registration case involving the property indispute

Held:

The stipulated facts and exhibits of record indisputably establishedplaintiff's lack of cause of action and justified the outright dismissal of the complaint. Plaintiff's claim of ownership to the land in question waspredicated on the sale thereof made by his father-in- law in his favor, ata time when Militante's application for registration thereof had already



been dismissed by the Iloilo land registration court and was pendingappeal in the Court of Appeals.

Article 1491 of our Civil Code (like Article 1459 of the Spanish CivilCode) prohibits in its six paragraphs certain persons, by reason of the

relation of trust or their peculiar control over the property, fromacquiring such property in their trust or control either directly orindirectly and "even at a public or judicial auction," as follows: (1)guardians; (2) agents; (3) administrators; (4) public officers andemployees; judicial officers and employees, prosecuting attorneys, andlawyers; and (6) others especially disqualified by law. Fundamental consideration of public policy render void and inexistentsuch expressly prohibited purchase (e.g. by public officers andemployees of government property intrusted to them and by justices,

judges, fiscals and lawyers of property and rights in litigation and

submitted to or handled by them, under Article 1491, paragraphs (4) and(5) of our Civil Code) has been adopted in a new article of our CivilCode, viz, Article 1409 declaring such prohibited contracts as "inexistent and void from the beginning."

Indeed, the nullity of such prohibited contracts is definite andpermanent and cannot be cured by ratification. The public interest andpublic policy remain paramount and do not permit of compromise orratification. In his aspect, the permanent disqualification of public and

judicial officers and lawyers grounded on public policy differs from thefirst three cases of guardians, agents and administrators (Article 1491,

Civil Code), as to whose transactions it had been opined that they may be "ratified" by means of and in "the form of a new contact , in whichcases its validity shall be determined only by the circumstances at thetime the execution of such new contract. The causes of nullity whichhave ceased to exist cannot impair the validity of the new contract. Thus,the object which was illegal at the time of the first contract, may havealready become lawful at the time of the ratification or second contract;or the service which was impossible may have become possible; or theintention which could not be ascertained may have been clarified by theparties. The ratification or second contract would then be valid from its

execution; however, it does not retroact to the date of the first contract."

sales part iv-v

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