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1. Limketkai Sons Milling v.

CA
Facts: On 14 May 1976, Philippine Remnants Co., Inc. constituted the
Bank of the Philippine Islands (BPI) as its trustee to manage, administer,
and sell its real estate property. One such piece of property placed under
trust was the disputed lot, a 33,056-sq.ms. lot at Barrio Bagong Ilog,
Pasig (TCT 493122). On 23 June 1988, Pedro Revilla, Jr., a licensed real
estate broker was given formal authority by BPI to sell the lot for
P1,000.00 per sq.m. This arrangement was concurred in by the owners of
the Philippine Remnants. Broker Revilla contacted Alfonso Lim of
Limketkai Sons Milling (LSM) who agreed to buy the land. On 8 July 1988,
LSMs officials and Revilla were given permission to enter and view the
property they were buying (by Rolando V. Aromin, BPI Assistant VicePresident). On 9 July 1988, Revilla formally informed BPI that he had
procured a buyer, LSM. On 11 July 1988, LSMs officials, Alfonso Lim and
Albino Limketkai, went to BPI to confirm the sale. They were entertained
by Vice-President Merlin Albano and Asst. Vice-President Aromin. LSM
asked that the price of P1,000.00 per sq.m. be reduced to P900.00 while
Albano stated the price to be P1,100.00. The parties finally agreed that
the lot would be sold at P1,000.00 per sq.m. to be paid in cash. Since the
authority to sell was on a first come, first served and non-exclusive basis,
it may be mentioned at this juncture that there is no dispute over LSMs
being the first comer and the buyer to be first served. Notwithstanding
the final agreement to pay P1,000.00 per sq.m. on a cash basis, Alfonso
Lim asked if it was possible to pay on terms. The bank officials stated that
there was no harm in trying to ask for payment on terms because in
previous transactions, the same had been allowed. It was the
understanding, however, that should the term payment be disapproved,
then the price shall be paid in cash. It was Albano who dictated the terms
under which the installment payment may be approved, and acting
thereon, Alfonso Lim, on the same date, 11 July 1988, wrote BPI through
Merlin Albano embodying the payment initially of 10% and the remaining
90% within a period of 90 days. 2 or 3 days later, LSM learned that its
offer to pay on terms had been frozen. Alfonso Lim went to BPI on 18 July

1988 and tendered the full payment of P33,056,000.00 to Albano. The


payment was refused because Albano stated that the authority to sell
that particular piece of property in Pasig had been withdrawn from his
unit. The same check was tendered to BPI Vice-President Nelson Bona
who also refused to receive payment.
An action for specific performance with damages was thereupon filed on
25 August 1988 by LSM against BPI with the RTC Pasig (Branch 151). In
the course of the trial, BPI informed the trial court that it had sold the
property under litigation to National Book Store (NBS) on 14 July 1989.
The complaint was thus amended to include NBS. On 10 June 1991, the
trial court rendered judgment in favor of LSM; holding that there was a
perfected contract between LSM and BPI, and thus declared the Deed of
Sale involving the lot in Pasig in the name of BPI and in favor of NBS as
null and void; ordered the Register of Deeds of the Province of Rizal to
cancel the TCT which may have been issued in favor of NBS by virtue of
the said deed; ordered BPI upon receipt by it from LSM of the sum of
P33,056,000,00 to execute a Deed of Sale in favor of the latter of the said
property at the price of P1,000.00 per sq.m. and in default thereof, the
Clerk of Court is directed to execute the deed dated 14 July 1989; ordered
the Register of Deeds of Pasig, upon registration of the said deed,
whether executed by BPI or the Clerk of Court and payment of the
corresponding fees and charges, to cancel said TCT 493122 and to issue,
in lieu thereof, another transfer certificate of title in the name of LSM;
ordered BPI and NBS to pay in solidum to LSM the sums of
P10,000,000.00 as actual and consequential damages and P150,000.00
as attorneys fees and litigation expenses, both with interest at 12% per
annum from date of judgment; on the cross-claim by the bank against
NBS, ordered NBS to indemnify the bank of whatever BPI shall have paid
to LSM; dismissed the counterclaim of both BPI and NBS against LSM and
the cross-claim of NBS against BPI; with costs against BPI and NBS.
Upon elevation of the case to the Court of Appeals, the decision of the
trial court was reversed and the complaint dismissed on 12 August 1994.

It was held that no contract of sale was perfected because there was no
concurrence of the three requisites enumerated in Article 1318 of the
Civil Code. Hence, the petition.
The Supreme Court reversed and set aside the questioned judgment of
the Court of Appeals, and reinstated the 10 June 1991 judgment of
Branch 151 of the RTC of The National Capital Judicial Region stationed in
Pasig, Metro Manila except for the award of P10,000,000.00 damages,
which was deleted.

Facts: Phil. Remnants Co. constituted BPI to manage, administer


and sell its real property located in Pasig, Metro Manila. BPI gave
authority to real estate broker Pedro Revilla Jr. to sell the lot for
P1000 per square meter.
Revilla contacted Alfonso Lim of petitioner company who agreed to
buy the land and thereafter was allowed to view the land. Lim and
Alfonso LImketkai went to BPI to confirm the sale and both finally
agreed that the land would be sold for P1000 per square meter.
Notwithstanding the agreement, Alfonso asked BPI if it was possible
to pay in terms provided that in case the term is disapproved, the
price shall be paid in cash. Two or three days later, petitioner
learned that its offer to pay on terms had been frozen. Alfonso Lim
went to BPI on July 18, 1988 and tendered the full payment of
P33,056,000.00 to Albano. The payment was refused because
Albano stated that the authority to sell that particular piece of
property in Pasig had been withdrawn from his unit. An action for
specific performance with damages was thereupon filed on August
25, 1988 by petitioner against BPI. In the course of the trial, BPI
informed the trial court that it had sold the property under litigation
to NBS

ISSUE: WON there was a perfected contract of sale between


Limketkai Co. and BPI.
HELD: There was already a perfected contract of sale because both
parties already agreed to the sale of P1000/sq.m. Even if Lim tried
to negotiate for a payment in terms, it is clear that if it be
disapproved, the payment will be made in cash.
The perfection of the contract took place when Aromin and Albano,
acting for BPI, agreed to sell and Alfonso Lim with Albino Limketkai,
acting for petitioner Limketkai, agreed to buy the disputed lot at
P1,000.00 per square meter. Aside from this there was the earlier
agreement between petitioner and the authorized broker. There
was a concurrence of offer and acceptance, on the object, and on
the cause thereof.
The phases that a contract goes through may be summarized as
follows:
a. preparation, conception or generation, which is the period of
negotiation and bargaining, ending at the moment of agreement of
the parties;
b. perfection or birth of the contract, which is the moment when
the parties come to agree on the terms of the contract; and
c. consummation or death, which is the fulfillment or performance
of the terms agreed upon in the contract
2. Ang Yu Asuncion, et.al. vs. CA
Facts: On 29 July 1987 a Second Amended Complaint for Specific
Performance was filed by Ann Yu Asuncion, Arthur Go, and Keh Tiong
against Bobby Cu Unjieng, Rose Cu Unjieng and Jose Tan before the RTC
Manila (Branch 31, Civil Case 87-41058) alleging, among others, that the
former are tenants or lessees of residential and commercial spaces
owned by the latter described as 630-638 Ongpin Street, Binondo,

Manila; that they have occupied said spaces since 1935 and have been
religiously paying the rental and complying with all the conditions of the
lease contract; that on several occasions before 9 October 1986, the
latter informed the former that they are offering to sell the premises and
are giving them priority to acquire the same; that during the
negotiations, Bobby Cu Unjieng offered a price of P6-million while Ang Yu
Asuncion, et.al. (plaintiffs) made a counter offer of P5-million; that
plaintiffs thereafter asked Bobby Cu Unjieng, Rose Cu Unjueng and Jose
Tan (defendants) to put their offer in writing to which request defendants
acceded; that in reply to defendants letter, plaintiffs wrote them on 24
October 1986 asking that they specify the terms and conditions of the
offer to sell; that when plaintiffs did not receive any reply, they sent
another letter dated 28 January 1987 with the same request; that since
defendants failed to specify the terms and conditions of the offer to sell
and because of information received that defendants were about to sell
the property, plaintiffs were compelled to file the complaint to compel
defendants to sell the property to them. After the issues were joined,
defendants filed a motion for summary judgment which was granted by
the lower court. The trial court found that defendants offer to sell was
never accepted by the plaintiffs for the reason that the parties did not
agree upon the terms and conditions of the proposed sale, hence, there
was no contract of sale at all. Nonetheless, the lower court ruled that
should the defendants subsequently offer their property for sale at a
price of P11 million or below, plaintiffs will have the right of first refusal.
Aggrieved by the decision, plaintiffs appealed to the Court of Appeals
(CA-GR CV 21123). In a decision promulgated on 21 September 1990
(penned by Justice Segundino G. Chua and concurred in by Justices
Vicente V. Mendoza and Fernando A. Santiago), the appellate court
affirmed with modification the lower courts judgment, holding that there
was no meeting of the minds between the parties concerning the sale of
the property and thus, the claim for specific performance will not lie. The
appellate did not grant the appellants the right of first refusal in the
event the subject property is sold for a price in excess of P11 million.

The decision of the appellate court was brought to the Supreme Court by
petition for review on certiorari. The Supreme Court denied the appeal on
6 May 1991 for insufficiency in form and substances.
On 15 November 1990, while CA-GR CV 21123 was pending consideration
by the appellate court, the Cu Unjieng spouses executed a Deed of Sale
transferring the property in question to Buen Realty and Development
Corporation for P15 million. As a consequence of the sale, TCT 105254/T881 in the name of the Cu Unjieng spouses was cancelled and, in lieu
thereof, TCT 195816 was issued in the name of Buen Realty on 3
December 1990. On 1 July 1991, Buen Realty as the new owner of the
subject property wrote a letter to the lessees demanding that the latter
vacate the premises. On 16 July 1991, the lessees wrote a reply to Buen
Realty stating that petitioner brought the property subject to the notice of
lis pendens regarding Civil Case 87-41058 annotated on TCT 105254/T881 in the name of the Cu Unjiengs.
The lessees filed a Motion for Execution dated 27 August 1991 of the
Decision in Civil Case 87-41058 as modified by the Court of Appeals in
CA-GR CV 21123. On 30 August 1991, the Judge issued an order ordering
Cu Unkieng to execute the necessary Deed of Sale of the property in
litigation in favor of plaintiffs Ang Yu Asuncion, Keh Tiong and Arthur Go
for the consideration of P15 Million pesos in recognition of the latters
right of first refusal and that a new TCT be issued in favor of the buyer,
and thus, setting aside all previous transactions involving the same
property notwithstanding the issuance of another title to Buen Realty
Corporation, which was said to have been executed in bad faith. On 22
September 1991, the Judge issue another order directing the Deputy
Sheriff to implement the Writ of Execution ordering the defendants
among others to comply with the Order of the Court within a period of 1
week from receipt of this Order and for defendants to execute the
necessary Deed of Sale of the property in litigation in favor of the
plaintiffs Ang Yu Asuncion, Keh Tiong and Arthur Go for the consideration

of P15,000,000.00 and ordering the Register of Deeds of the City of


Manila, to cancel and set aside the title already issued in favor of Buen
Realty Corporation which was previously executed between the latter and
defendants and to register the new title in favor of the aforesaid plaintiffs
Ang Yu Asuncion, Keh Tiong and Arthur Go. On the same day, the
corresponding writ of execution was issued.
On 4 December 1991, the appellate court, on appeal to it by Buen Realty
(CA-GR SP 26345), set aside and declared without force and effect the
questioned orders of the court a quo. Hence, the petition for certiorari.
The Supreme Court upheld the decision of the Court of Appeals in
ultimately setting aside the questioned Orders, dated 30 August 1991
and 27 September 1991, of the court a quo; with costs against Ang Yu
Asuncion, et. al.
FACTS: The Unijeng spouses owned certain residential and commercial
spaces leased by Ang Yu. They offered to sell the said units to Ang Yu on
several occasions and for P6M. Ang Yu made a counter offer for P5M. The
Unijeng spouses asked Ang Yu to specify his terms in writing but the
latter failed to do so. They failed to arrive at any definite agreement.
When Ang Yu discovered that the spouses were planning to sell the
property to others, he sued them for specific performance. While the case
was pending, the spouses sold the units to Buen Realty for P15M.
ISSUE: W/N there was a perfected contract of sale between Unijeng and
Ang Yu
HELD: NO. There was no perfected contract of sale yet since there was
yet any meeting of the minds. Thus, there is no ground for specific
performance. During the negotiation stage, any party may withdraw the
offer madeespecially if it was not supported by any consideration.

An Option Contract of a Right of First Refusal is separate and distinct


from the actual contract of salewhich is the basis for specific
performance. The remedy available to Any Yu, in case the withdrawal was
made capriciously and arbitrarily, would be to sue on the basis of abuse
of right. In case there was an option contract, timely acceptance would
create an obligation to sell on the part of the vendor; but no such
circumstance attends in this case.
3. De la Cavada v. Diaz
Facts: On 15 November 1912, Antonio Diaz and Antonio Enriquez de la
Cavada entered into a contract of option for the latter to purchase the
formers hacienda at Pitogo, within the period necessary for the approval
and issuance of a Torrens title thereto by the Government for P30,000 in
cash or P40,000 with 6% interest per annum within 6 years with due
security, i.e. the 100 hectares of land in Pitogo, Tayabas; containing
20,000 coconut trees and 10,000 nipa-palm trees sold to Enriquez for
P70,000. Subsequently, Enriquez informed Diaz of his conformity with
the letter of option under the condition that he shall send a surveyor to
survey the said property, and to apply to the Government for a Torrens
title therefor, and, if the expenses incurred for the same should not
exceed P1,000, he shall pay the P500 and you the other P500; Provided,
however, that Diaz shall give the surveyor all necessary assistance during
his stay at the hacienda; and that he shall pay the purchase price to you
in conformity with our letter of option of this date, and after the Torrens
title shall have been officially approved. Soon after the execution of said
contract, and in part compliance with the terms thereof, Diaz presented 2
petitions in the Court of Land Registration (13909 and 13919), each for
the purpose of obtaining the registration of a part of the Hacienda de
Pitogo. Said petitions were granted, and each parcel was registered and
a certificate of title was issued for each part under the Torrens system to
Diaz. Later, and pretending to comply with the terms of said contract,
Diaz offered to transfer to Enriquez one of said parcels only, which was a
part of said hacienda. Enriquez refused to accept said certificate for a

part only of said hacienda upon the ground that it was only a part of
the Hacienda de Pitogo, and under the contract he was entitled to a
transfer to him a all said hacienda.
Raised in the lower court, Diaz theorized that the contract of sale of said
Hacienda de Pitogo included only 100 hectares, more or less, of said
hacienda, and that offering to convey to Enriquez a portion of said
hacienda, and that by offering to convey to Enriquez a portion of said
hacienda composed of 100 hectares, more or less, he thereby
complied with the terms of the contract. Enriquez theorized, on the other
hand, that he had purchased all of said hacienda, and that the same
contained, at least, 100 hectares, more or less. The lower court sustained
the contention of Enriquez, that the sale was a sale of the Hacienda de
Pitogo and not a sale of a part of it. The Court ordered Diaz, within 30
days from the date upon which this decision becomes final, convey to
Enriquez a good and sufficient title in fee simple to the Court of Land
Registration, upon payment or legal tender of payment by Enriquez of the
sum of P30,000 in cash, and upon Enriquez giving security approved by
this court for the payment within the term of 6 years from the date of the
conveyance for the additional sum of P40,000 with interest at the rate of
6% per annum. The Court further ordered and adjudged that in the event
of the failure of Diaz to execute the conveyance, Enriquez has and
recover judgment against him, Diaz, for the sum of P20,000, with interest
at the rate of 6% (6% per annum from the date upon which the
conveyance should have been made). From the judgment, Diaz appealed.
The Supreme Court affirmed the judgment of the lower court, with costs.

FACTS: Plaintiff Antonio dela Cavada and defendant Antonio Diaz


made a Contract of Option where the latter promised to sell to the
former hisHacienda de Pitogo located in Tayabas together with its
coconut and nipa palm trees for 30 and 70 thousand pesos
respectively. The contract provides that Dela Cavada has the right
to purchase the land until after Diaz acquires its Torrens title.

Diaz applied two land titles for the hacienda dividing it in two
parts. After the titles have been issued, Diaz offers to sell to Dela
Cavada only a portion of the entire hacienda.
ISSUE: WON Diaz is obliged to sell to Dela Cavada the entire
hacienda and not only a part of it.
HELD: A promise made by one party, if made in accordance with
the forms required by the law, may be a good consideration (causa)
for a promise made by another party. The contract is complete,
provided they have complied with the forms required by the law
and the consideration need not be paid at the time of the promise.
The plaintiff stood ready to comply with his part of the contract.
The defendant, even though he had obtained a registered title to
said parcel of land, refused to comply with his promise.
The contract was not, in fact, what is generally known as a
"contract of option." It differs very essentially from a contract of
option. An optional contract is a privilege existing in one person, for
which he had paid a consideration, which gives him the right to
buy, for example, certain merchandise of certain specified
property, from another person, if he chooses, at any time within the
agreed period, at a fixed price.
The contract is already in the perfected stage.
4. Carceller vs. Court of Appeals
FACTS: Carceller leased 2 parcels of land owned by State Investment
Houses (SIHI), the period being 18 months at P10,000/month rent. Under
the lease, SIHI guaranteed Carceller the exclusive right and option to
purchase the said lots within the lease period for the aggregate amount

of P1.8M. Around 3 weeks before the end of the lease period, SIHI
informed Carceller of the impending termination of the lease and the
short period left for him to purchase. He begged for an extension, but
SIHI refused. Nevertheless, SIHI offered the property to him for lease for
another year, but this time, it also offered it for sale to the public.
Carceller thus sued SIHI for specific performance to compel SIHI to
execute a Deed of Sale in his favor.
ISSUE: W/N Carceller may still exercise the option to purchase the
property
HELD: YES. Even if Carceller failed to purchase the property within the
said period, still equity must intervene. He had introduced substantial
improvements thereon; to rule against him would cause damage to him
and SIHI does not stand to gain much therefrom. SIHI clearly intended to
sell the lot to him considering that it was under financial distress, that is
constantly reminded him of the option and the impending deadline. The
delay of 18 days is not substantial. Carcellers letter to SIHI expressing
his intent to purchase the lot is fair notice of intent to exercise the option
despite the request for extension. Carceller should thus be allowed to buy
the lots.
5. Adelfa Properties vs. CA
Facts: Rosario Jimenez-Castaneda, Salud Jimenez and their brothers, Jose
and Dominador Jimenez, were the registered co-owners of a parcel of
land consisting of 17,710 sq. ms (TCT 309773) situated in Barrio Culasi,
Las Pias, 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 Confirmatory Extrajudicial 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 to Jose
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
expenses including 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 owners copy of the certificate of title issued to Salud Jimenez
had been lost, a petition for the re-issuance of a new owners copy of said
certificate of title was filed in court through Atty. Bayani L. Bernardo.
Eventually, a new owners copy of the certificate of title was issued but it
remained in the possession of Atty. Bernardo until he turned it over to
Adelfa Properties, Inc.
Before Adelfa Properties could make payment, it received summons on
29 November 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 see Atty. 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 the amount 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
was ignored by Rosario and Salud. On 27 July 1990, Jimenez counsel sent
a letter to Adelfa Properties enclosing therein 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 requested Adelfa
Properties to return the owners 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 to return the owners 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
latters 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 and binding, and ordered Adelfa Properties to pay damages
and attorneys 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 similarly upheld 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.

6. Villamor vs. CA
Facts: Macaria Labingisa Reyes was the owner of a 600-square meter lot
located at Baesa, Caloocan City (TCT [18431] 18938, Register of Deeds of
Rizal). In July 1971, Macaria sold a portion of 300 sq. ms. of the lot to the
Spouses Julio and Marina Villamor for the total amount of P21,000.00.
Earlier, Macaria borrowed P2,000.00 from the spouses which amount was
deducted from the total purchase price of the 300 sq. m. lot sold. The
portion sold to the Villamor spouses is now covered by TCT 39935 while
the remaining portion which is still in the name of Macaria Labingisa- is
covered by TCT 39934. On 11 November 1971, Macaria executed a Deed
of option in favor of Villamor in which the remaining 300 sq. m. portion
(TCT No. 39934) of the lot would be sold to Villamor under the conditions
stated therein. According to Macaria, when her husband, Roberto Reyes,
retired in 1984, they offered to repurchase the lot sold by them to the
Villamor spouses but Marina Villamor refused and reminded them instead
that the Deed of Option in fact gave them the option to purchase the
remaining portion of the lot. The Villamors, on the other hand, claimed
that they had expressed their desire to purchase the remaining 300 sq.
m. portion of the lot but the Reyes had been ignoring them.
On 13 July 1987, after conciliation proceedings in the barangay level
failed, the Villamors filed a complaint for specific performance against the
Reyes before the RTC Caloocan City (Branch 121, Civil Case C-12942). On
26 July 1989, judgment was rendered by the trial court in favor of the
Villamor spouses, ordering the Reyeses to sell the land to the Villamors,
to pay the the latter the sum of P3,000 as attorneys fees, and to pay the
cost of suit. The court dismissed the counterclaim for lack of merit.
Not satisfied with the decision of the trial court, the Reyes spouses
appealed to the Court of Appeals (CA-GR CV 24176). On 12 February
1991, the Court of Appeals rendered a decision reversing the decision of
the trial court and dismissing the complaint. The reversal of the trial
courts decision was premised on the finding of respondent court that the

Deed of Option is void for lack of consideration. The Villamor spouses


brought the petition for review on certiorari before the Supreme Court.
The Supreme Court denied the petition, affirmed the decision of the
appellate court for reasons cited in the decision, and dismissed the
complaint in Civil Case C-12942 on the ground of prescription and laches.
7. Soriano, et. al. v. Bautista, et. al.
Facts: Spouses Basilio Bautista and Sofia de Rosas are the absolute and
registered owners of a parcel of land, situated in Teresa, Rizal (OCT 3905,
Register of Deeds of Rizal). On 30 May 1956, the said spouses for and in
consideration on the sum of P1,800, signed a document entitled
Kasulatan Ng Sanglaan in favor of Ruperto Soriano and Olimpia de
Jesus. Simultaneously with the signing of the deed, the spouses Bautista
and de Rosas transferred the possession of the said land to Soriano and
de Jesus who have been and are still in possession of the said property
and have since that date been and are cultivating the said land and have
enjoyed and are still enjoying the produce thereof to the exclusion of all
other persons. Sometimes after 30 May 1956, the spouses Bautista and
de Rosas received from Soriano and de Jesus, the sum of P450.00
pursuant to the conditions agreed upon in the document for which no
receipt was issued and which was returned by the spouses sometime on
31 May 1958. On 13 May 1958, a certain Atty. Angel O. Ver wrote a letter
to the spouses Bautista informing the said spouses that his clients
Soriano and de Jesus have decided to buy the parcel of land in question
pursuant to paragraph 5 of the document in question (That it has
likewise been agreed that if the financial condition of the mortgagees will
permit, they may purchase said land absolutely on any date within the
two-year term of this mortgage at the agreed price of P3,900.00.). The
spouses in spite of the receipt of the letter refused to comply with the
demand contained therein.

On 31 May 1958, Soriano and de Jesus filed before the Trial Court Civil
Case 5023, praying that they be allowed to consign or deposit with the
Clerk of Court the sum of P1,650.00 as the balance of the purchase price
of the parcel of land in question. After due hearing, judgment be rendered
ordering Bautista and de Rosas to execute an absolute deed of sale of the
said property in their favor, plus damages.

Thereafter, lessee filed for an action for specific performance to compel the
execution of a deed of sale pursuant to the option to purchase and the receipt of the
partial consideration given to Alice Dizon and for the fixing of period to pay the
balance. Respondent Court of Appeals rendered a decision upholding the
jurisdiction of City Court and concluding that there was a perfected contract of sale
between the parties due to the said partial payment. Petitioners motion for
reconsideration was denied by the respondent Court.

On 9 June 1958, spouses Bautista and de Rosas filed a complaint against


Soriano and de Jesus, which case after hearing was dismissed for lack of
jurisdiction. On 5 August 1959, the spouses Bautista and de Rosas again
filed a case in the CFI against Soriano and de Jesus asking the Court to
order Soriano and de Jesus to accept the payment of the principal
obligation and release the mortgage and to make an accounting of the
harvest for the two harvest seasons (1956-1957). The two cases, were by
agreement of the parties assigned to one branch so that they can be
tried jointly. On 10 March 1959, the CFI Rizal, after a joint trial of both
cases, ordered Bautista and de Rosas to execute a deed of sale covering
the property in question in favor of Soriano and de Jesus upon payment
by the latter of P1,650.00 which is the balance of the price agreed upon,
i.e. P3,900.00, and the amount previously received by way of loan by the
said spouses from Soriano and de Jesus, to pay the sum of P500.00 by
way of attorneys fees, and to pay the costs.

Issue: Whether or not there is a perfected contract of sale?

The Supreme Court affirmed the judgment appealed from, with costs.
8. Dizon vs. Court of Appeals
On 1974, Private respondent Overland Express Lines, Inc (lessee) entered into a
Contract of Lease with Option to Buy with petitioners (lessors) involving a land
situated at Quezon City for one (1) year. During that period the respondent was
granted an option to purchase the land. 1976, for failure of lessee to pay the rentals
the petitioners filed an action for ejectment. The City Court rendered judgment
ordering lessee to vacate the leased premises and to pay the rentals in arrears and
damages with interests. Lessee filed a petition enjoining the enforcement of said
judgment and dismissal of the case for lack of jurisdiction. Such petition was denied.

Held: There was no perfected contract of sale between the parties. In herein case,
the lessee gave the money to Alice Dizon in an attempt to resurrect the lapsed
option.The basis for agency is representation and a person dealing with an agent is
put upon inquiry and must discover upon his peril the authority of the agent. Here,
there was no showing that petitioners consented to the act of Alice Dizon nor
authorized her to act on their behalf with regard to her transaction with the lessee.
Therefore, one of the essential elements for a contract of sale to be perfected is
lacking: consent.
9. Sanchez vs. Rigos
Facts: On 3 April 1961, Nicolas Sanchez and Severina Rigos executed an
instrument, entitled Option to Purchase, whereby Mrs. Rigos agreed,
promised and committed . . . to sell to Sanchez, for the sum of
P1,510.00, a parcel of land situated in the barrios of Abar and Sibot,
municipality of San Jose, province of Nueva Ecija, and more particularly
described in TCT NT-12528 of said province, within two (2) years from
said date with the understanding that said option shall be deemed
terminated and elapsed, if Sanchez shall fail to exercise his right to
buy the property within the stipulated period. Inasmuch as several
tenders of payment of the sum of P1,510.00, made by Sanchez within
said period, were rejected by Mrs. Rigos, on 12 March 1963, the former
deposited said amount with the CFI Nueva Ecija and commenced against
the latter the present action, for specific performance and damages. On
11 February 1964, after the filing of defendants answer, both parties,
assisted by their respective counsel, jointly moved for a judgment on the
pleadings. Accordingly, on 28 February 1964, the lower court rendered

judgment for Sanchez, ordering Mrs. Rigos to accept the sum judicially
consigned by him and to execute, in his favor, the requisite deed of
conveyance. Mrs. Rigos was, likewise, sentenced to pay P200.00, as
attorneys fees, and the costs. Hence, the appeal by Mrs. Rigos to the
Court of Appeals, which case was the certified by the latter court to the
Supreme Court upon the ground that it involves a question purely of law.
The Supreme Court affirmed the decision appealed from, with costs
against Severina Rigos.
10.

Montilla vs. CA [G.R. No. L-47968. May 9, 1988.]

Facts: On 27 April 1972, Emilio Aragon Jr. filed an action before the CFI
Iloilo to compel Lina Montilla to comply with a verbal contract to sell to
him a piece of land situated at Poblacion, Iloilo City, known as Lot 4 of the
Consolidated Subdivision plan (LRC) Psc-11605. In his complaint, Aragon
claimed that in the last week of June 1969, Montilla had orally offered to
sell the lot to him at a price of P57,650.00 (at the rate of P50 per sq. m.),
the price being payable at any time within a 3-year period from June,
1969 provided that Aragon constructed on the lot a house of strong
materials and paid a nominal monthly rental in the meantime; but
despite Aragons acceptance of the offer, fulfillment by him of the
specified conditions, and his seasonable tender of the purchase price,
Montilla had refused to comply with her obligation. In her answer Montilla
categorically denied ever having entered into such an agreement, and
set up the affirmative defenses of (1) unenforceability of the alleged
agreement under the Statute of Frauds; and (2) failure of the complaint to
state a cause of action, no allegation having been made therein of any
consideration for the promise to sell distinct and separate from the price,
as required by Article 1479 of the Civil Code. At Montillas instance, a
preliminary hearing was had on her affirmative defenses in accordance
with Section 6, Rule 16 of the Rules of Court, as if a motion to dismiss
had been filed. By Order dated 5 December 1972, the Court denied the
implicit motion to dismiss. After trial, the Court rendered judgment on 22

August 1974 sentencing Montilla to execute the requisite deed of


conveyance of Lot 4, covered by TCT T-29976 in favor of Aragon upon full
payment by him to Montilla of the total consideration thereof in the
aggregate sum of P57,650.00; to pay to Montilla P2,000.00 as attorneys
fees, and to pay the costs.
The decision was affirmed by the Court of Appeals. The latters
adjudgment has, in turn, been duly brought up to the Supreme Court by
Montilla, on appeal by certiorari under Rule 45 of the Rules of Court.
The Supreme Court reversed and set aside the Decision of the Court of
Appeals dated 18 January 1978 and that of the CFI dated 22 August 1974
thereby affirmed, and entered a new one dismissing Aragons complaint,
with costs against him.
11.
Yao Ka Sin Trading vs. Court of Appeals (209 SCRA
763)
12.

Nietes vs. Court of Appeals (46 SCRA 654)

FACTS: Nietes leased from Dr. Garcia the Angeles Educational Institute;
the contract contained an Option to Buy the land and school buildings
within the period of the lease. It also stipulated that the unused payment
will be applied to the purchase price of the school. Nietes paid Garcia
certain sums in excess of the rent, which Garcia acknowledged as
forming partial payment of the purchase price of the property. Later on,
Garcia, through counsel, wrote Nietes informing him of his decision to
rescind the contract due to certain violations of the contractsuch as
poor maintenance, lack of inventory of school equipment, and the use of
another name for the said school. Nietes replied by informing Garcia that
he decided to exercise his Option to Buy, but Garcia refused to sell.
Nietes thereafter deposited the balance of the price to Agro-Industrial
Bank, but he later withdrew the said amounts. CA ruled in favor of Garcia
stating that the full purchase price must be paid before the Option to Buy
may be exercised. Thus, Nietes brought the matter to the SC.

ISSUE: W/N actual payment is needed before one may exercise the
option to buy
HELD: NO. There is nothing in the contract that required Nietes to pay the
full price before he could exercise the option. It was sufficient that he
informed Garcia of his choice and that he was at that time ready to pay.
The exercise of the option need not be coupled with actual payment so
long as such payment is made upon the fulfillment of the owners
undertaking to deliver the property. This is based on the principle that
such option contracts involve reciprocal obligationsand one does not
incur delay if the other party fails or refuses to comply with his respective
obligation. That being the case, there was no need for Nietes to deposit
the said amountsand his withdrawal thereof does not affect his right.
13.

Vasquez vs. CA [G.R. No. 83759. July 12, 1991.]

Facts: On 21 September 1964, Vallejera and Olea sold the lot to Vasquez
and Gayaleno under a Deed of Sale for the amount of P9,000.00. The
Deed of Sale was duly ratified and notarized. On the same day and along
with the execution of the Deed of Sale, a separate instrument,
denominated as Right to Repurchase, was executed by the parties
granting the Vallejera and Olea the right to repurchase the lot for
P12,000.00, said document was likewise duly ratified and notarized. By
virtue of the sale, the Vasquez and Gayaleno secured TCT T-58898 in their
name. On 2 January 1969, Vallejera and Olea sold the same lot to Benito
Derrama, Jr., after securing Vasquez and Gayalenos title, for the sum of
P12,000.00. Upon the protestations of Vasquez and Gayaleno, assisted by
counsel, the said second sale was cancelled after the payment of
P12,000.00 by Vasquez and Gayaleno to Derrama.
On 15 January 1975, Spouses Martin Vallejera and Apolonia Olea filed an
action against Spouses Cirpriano Vasquez and Valeriana Gayaleno
seeking to redeem Lot 1860 of the Himamaylan Cadastre which was
previously sold by the former to the latter on 21 September 1964. Said
lot was registered in the name of Vallejera and Olea. On October 1959,

the same was leased by them to Vasquez and Gayalleno up to crop year
1966-67, which was extended to crop year 1968-69. After the execution
of the lease, Vasquez and Gayaleno took possession of the lot, up to now
and devoted the same to the cultivation of sugar. Vasquez and Gayeleno
resisted the action for redemption on the premise that the Right to
Repurchase is just an option to buy since it is not embodied in the same
document of sale but in a separate document, and since such option is
not supported by a consideration distinct from the price, said deed for
right to repurchase is not binding upon them. After trial, the RTC
Himamaylan, Negros Occidental (6th Judicial Region, Branch 56, Civil
Case 839) rendered judgment against Vasquez and Gayeleno, ordering
them to resell lot 1860 of the Himamaylan Cadastre to Vallejera and Olea
for the repurchase price of P24,000.00, which amount combines the price
paid for the first sale and the price paid by the former to Benito Derrama,
Jr. Vallejera and Gayeleno moved for, but were denied reconsideration.
Excepting thereto, they appealed.
The Court of Appeals affirmed the decision of the RTC Himamaylan,
Negros Occidental in Civil Case 839. In addition, the appellate court
ordered Vasquez and Gayeleno to pay the amount of P5,000.00 as
necessary and useful expenses in accordance with Article 1616 of the
Civil Code. Hence, the petition.
The Supreme Court granted the petition, reversed and set aside the
questioned decision and resolution of the Court of Appeals , and
dismissed the complaint in Civil Case 839 of the then CFI Negros
Occidental 12th Judicial District Branch 6; without costs.
FACTS: The Vallejera spouses sought to recover from Vasquez an
agricultural lot, which they previously sold to him. Along with the
previous execution of a Deed of Sale, the parties also executed a Right of
Repurchase allowing Vallejera to repurchase the said estate. Vasquez
resisted the redemption arguing that the option to buy was not supported
by any considerationand thus not binding upon him.

ISSUE: W/N there was a valid option contract


HELD: NO. It is apparent that the Right to Repurchase was not supported
by any consideration. Thus, in order for the doctrine under Sanchez v
Rigos to apply, giving rise to a valid contract of sale, it must be shown
that the promissee (Vallejera) accepted the right of repurchase before it
was withdrawn by Vasquez. In this case, no such acceptance was made.
The vendor a retro (Vallejera) must make actual and simultaneous tender
of payment and consignation. Mere expressions of readiness and
willingness to repurchase are insufficient. Their ineffectual acceptance
allowed Vasquez to withdraw the offer through his refusal to sell the lot.
Vasquez thus cannot be compelled to sell the lot.
14.

Equatorial Realty vs. Mayfair Theater

Facts: Carmelo & Bauermann Inc. (Carmelo) owned a parcel of land,


together with two 2-storey buildings constructed thereon located at Claro
M Recto Avenue, Manila (TCT 18529, Register of Deeds of Manila). On 1
June 1967, Carmelo entered into a contract of lease with Mayfair Theater
for the latters lease of a portion of Carmelos property, i.e. a portion of
the 2/F of the two-storey building with floor area of 1610 sq.ms. and the
second floor and mezzanine of the two-storey building situated at CM
Recto Avenue, Manila with a floor area of 150 sq.ms. for use by Mayfair as
a motion picture theater and for a term of 20 years. Mayfair thereafter
constructed on the leased property a movie house known as Maxim
Theatre. On 31 March 1969, Mayfair entered into a second contract of
lease with Carmelo for the lease of another portion of Carmelos property,
i.e. a portion of the 2/F of the two-storey building with floor area of 1064
sq.ms. and two store spaces at the ground floor and mezzanine of the
two-storey building situated at CM Recto Avenue, Manila with a floor area
of 300 sq.ms. and bearing street numbers 1871 and 1875 for similar use
as a movie theater and for a similar term of 20 years. Mayfair put up
another movie house known as Miramar Theatre on this leased property.

Both contracts of lease provide identically worded paragraph 8, which


reads That if the LESSOR should desire to sell the leased premises, the
lessee shall be given 30-days exclusive option to purchase the same. In
the event, however, that the leased premises is sold to someone other
than the Lessee, the lessor is bound and obligated, as it hereby binds and
obligates itself, to stipulate in the Deed of Sale thereof that the purchaser
shall recognize this lease and be bound by all the terms and conditions
thereof. Sometime in August 1974, Mr. Henry Pascal of Carmelo informed
Mr. Henry Yang, President of Mayfair, through a telephone conversation
that Carmelo was desirous of selling the entire Claro M. Recto property.
Mr. Pascal told Mr. Yang that a certain Jose Araneta was offering to buy
the whole property for US$1,200,000, and Mr. Pascal asked Mr. Yang if the
latter was willing to buy the property for P6 million to P7 million. Mr. Yang
replied that he would let Mr. Pascal know of his decision. On 23 August
1974, Mayfair replied through a letter confirming the correspondence
between Pascual and Yang and reiterating paragraph 8 of the two
contracts of lease. Carmelo did no reply to this letter. On 18 September
1974, Mayfair sent another letter to Carmelo purporting to express
interest in acquiring not only the leased premises but the entire building
and other improvements if the price is reasonable. However, both
Carmelo and Equatorial questioned the authenticity of the second letter.
Four years later, on 30 July 1978, Carmelo sold its entire CM. Recto
Avenue land and building, which included the leased premises housing
the Maxim and Miramar theatres, to Equatorial by virtue of a Deed of
Absolute Sale, for the total sum of P1,300,000.
In September 1978, Mayfair instituted the action for specific performance
and annulment of the sale of the leased premises to Equatorial. In its
Answer, Carmelo alleged as special and affirmative defense that it had
informed Mayfair of its desire to sell the entire CM. Recto Avenue property
and offered the same to Mayfair, but the latter answered that it was
interested only in buying the areas under lease, which was impossible
since the property was not a condominium; and that the option to
purchase invoked by Mayfair is null and void for lack of consideration.

Equatorial, in its Answer, pleaded as special and affirmative defense that


the option is void for lack of consideration and is unenforceable by reason
of its impossibility of performance because the leased premises could not
be sold separately from the other portions of the land and building. It
counterclaimed for cancellation of the contracts of lease, and for increase
of rentals in view of alleged supervening extraordinary devaluation of the
currency. Equatorial likewise cross-claimed against codefendant Carmelo
for indemnification in respect of Mayfairs claims. After assessing the
evidence, the court rendered decision dismissing the complaint with costs
against Mayfair; ordering Mayfair to pay Carmelo & Bauermann
P40,000.00 by way of attorneyss fees on its counterclaim; and ordering
Mayfair to pay Equatorial Realty P35,000.00 per month as reasonable
compensation for the use of areas not covered by the contracts of lease
from 31 July 1979 until Mayfair vacates said areas plus legal interest from
31 July 1978; P70,000.00 per month as reasonable compensation for the
use of the premises covered by the contracts of lease dated (1 June 1967
from 1 June 1987 until Mayfair vacates the premises plus legal interest
from 1 June 1987; P55,000.00 per month as reasonable compensation for
the use of the premises covered by the contract of lease dated 31 March
1969 from 30 March 1989 until Mayfair vacates the premises plus legal
interest from 30 March 1989; and P40,000.00 as attorneys fees; and
dismissing Equatorials crossclaim against Carmelo & Bauermann. The
trial court adjudged the identically worded paragraph 8 found in both
lease contracts to be an option clause which however cannot be deemed
to be binding on Carmelo because of lack of distinct consideration
therefor.
Mayfair taking exception to the decision of the trial court, appealed to the
Court of Appeals. The appellate court reversed the trial court and
rendered judgment reversing and setting aside the appealed Decision;
directing Mayfair to pay and return to Equatorial the amount of
P11,300,000.00 within 15 days from notice of this Decision, and ordering
Equatorial to accept such payment; directing Equatorial, upon payment of
the sum of P11,300,000, to execute the deeds and documents necessary

for the issuance and transfer of ownership to Mayfair of the lot registered
under TCT 17350, 118612, 60936, and 52571; and should Mayfair be
unable to pay the amount as adjudged, declaring the Deed of Absolute
Sale between Carmelo and Equatorial as valid and binding upon an the
parties. Hence, the petition for review.
The Supreme Court denied the petition for review of the decision of the
Court of Appeals (23 June 1992, in CA-GR CV 32918), declaring the Deed
of Absolute Sale between Equatorial and Carmelo as deemed rescinded;
ordering Carmelo to return to Equatorial the purchase price; directing
Equatorial to execute the deeds and documents necessary to return
ownership to Carmelo of the disputed lots; and ordering Carmelo to allow
Mayfair to buy the lots for P11,300,000.
FACTS: For its theaters, Mayfair was leasing a portion of the property in
CM Recto, which Carmelo owns. Under the lease agreement, if Carmelo
should decide to sell the leased premises, Mayfair shall be given 30 days
exclusive option to purchase the same. Carmelo, through Henry Yang,
informed the president of Mayfair that the former is interested in selling
the whole CM Recto propertyand that Araneta offered to purchase the
same for $1.2M. Mayfair twice replied through a letter of its intention to
exercise its right to repurchasebut Carmelo never replied. Thereafter,
Carmelo sold the entire property to Equatorial Realty for some P11M.
Thus, Mayfair instituted an action for specific performance and
annulment of the sale.
Carmelo alleges that the right, being an option contract, is void for lack of
consideration.
ISSUE: W/N the right to repurchase is an option contract and void for lack
of consideration
HELD: NO. The clause in the lease agreement was NOT an option
contract, but a RIGHT OF FIRST REFUSAL. It was premised on Carmelos

decision to sell the said property. It also did not contain a stipulation as to
the price of said property. The requirement of separate consideration
does not apply to a right of 1st refusal because consideration is already
an integral part of the lease. Carmelo violated such right by not affording
Mayfair a fair chance to negotiate. It abandoned the negotiations
arbitrarily.

Equatorial was likewise in bad faith; it was well aware of the right
conferred upon Mayfair because its lawyers had ample time to review the
contract. That being the case, the contract between Carmelo and
Equatorial is rescissible. Mayfair should be allowed to purchase the entire
property for the price offered by Equatorial. Rights of First Refusal are
also governed by the law on contracts, not the amorphous principles on
human relations.