Southwestern vs.

Atlantic Gulf

Facts:

March 24, 1953 Atlantic Gulf granted an option to Southwestern Company to buy its barge for PHP
30,000 to be exercised within a period of 90 day or until June 30, 1953. On May 11, 1953 Southwestern
Company conveyed its acceptance. On May 12, Atlantic Gulf stated that their understanding was that
the offer of option is to be a cash transaction and to be effected at the time the lighter is available. On
June 25 1953, Atlantic Gulf reiterated he unavailability of the barge.

In view of this, In June 27, 1953 Southwestern instituted an action against Atlantic Gulf to compel
specific performance. On June 29, 1953 Atlantic Gulf withdrew its offer of option with notice to
Southwestern Company. The lower court granted a judgement in favor of Southwestern Company.

Hence this appeal.

The contention of the appellant is that its agreement with Southwestern Company has no legal effect
because the same was made without any consideration distinct from the price.

The contention of appellee is that its agreement with Atlantic Gulf became binding upon acceptance
regardless of lack of consideration.

Issue: Whether or not an offer may be withdrawn if there is no consideration in support thereof distinct
from the price?

Ruling:

Yes. According to Article 1479 of the Civil Code the offer may be withdrawn if there is no consideration
in support thereof distinct from the price. A unilateral promise to buy or sell is only binding upon the
promisor when supported by a consideration distinct from the price. 1324 as general rule is modified by
1429.
Atkins vs. Cua

Facts: September 13, 1951 Atkins conveyed its offer subject to reply on September 23, 1951 to B Cua
Hian Tek which was accepted by the latter on September 21, 1951. Atkins Kroll and Co Inc failed to
deliver 1000 cartons of sardines to B Cua Hian Tek and was sued, and after trial was ordered to pay
damages.

Petitioner contends that there was no contract of sale but only an option to buy and also maintains that
upon acceptance by respondent the offer became an accepted unilateral promise to sell.

Issue: Whether or not acceptance of an offer constitutes a unilateral promise to sell?

Ruling:

The Supreme Court ruled that an acceptance of an offer does not constitute a unilateral promise to sell
but a bilateral contract to sell and buy so much so that if B Cua Hian Tek backed out after accepting by
refusing to get the sardines or to pay the price the latter could be sued.

Furthermore, an option is a unilateral promise to sell however whenever the offeree is still deciding to
exercise his option within the specified time and before he exercises his option, the holder of the
optionis not bound to buy. He is free either to buy or not to buy later. In this case, however, upon
accepting herein petitioner's offer a bilateral promise to sell and to buy ensued, and the respondent ipso
facto assumed the obligations of a purchaser. He did not just get the right subsequently to buy or not to
buy. It was not a mere option that he obtained but was bilateral contract of sale.

*no withdrawal of Atkins

Natino vs. IAC

Facts:

Petitioner spouses Trinidad and Epifanio Natino executed a real estate mortgage in favor of respondent
bank RURAL BANK OF AGUILAR as security for a loan. When petitioners failed to pay the loan on the due
date, an extrajudicial foreclosure of the mortgage was held with respondent bank as the winning bidder.
A certificate of sale was executed in its favor a copy of which was furnished to the petitioners
expressly providing that the redemption period shall be two years from the registration thereof. A Final
Deed of Sale was issued by the sheriff in lieu of petitioners failure to redeem. However, petitioners
claimed that they were granted by respondent bank an extension of the redemption period which based
on the testimony of Mrs. Brodeth, the President and Manager of the Bank, the offer was to resell the
property, not redemption.

Issue: Whether or not the bank is bound by the promise made by Mrs. Brodeth?

Ruling:

The right to redeem becomes after its expiration is not one of redemption but a repurchase. Distinction
must be made because redemption is by force of law; the purchaser at public auction is bound to accept
redemption. Repurchase however of foreclosed property, after redemption period, imposes no such
obligation. After expiry, the purchaser may or may not re-sell the property but no law will compel him to
do so. And, he is not bound by the bid price; it is entirely within his discretion to set a higher price, for
after all, the property already belongs to him as owner.

The Bank was not bound by the promise made by Mrs. Brodeth not only because it was not approved or
ratified by the Board of Directors but also because, and more decisively, it was a promise unsupported
by a consideration distinct from the re-purchase price. The second paragraph of Article 1479 of the Civil
Code expressly provides: . . ."An accepted unilateral promise to buy or to sell a determinate thing for a
price certain is binding upon the PROMISSOR if the promise is supported by a consideration distinct
from the price." Thus in Rural Bank of Paraaque Inc. vs. Remolado, et al., a commitment by the bank to
resell a property, within a specified period, although accepted by the party in whose favor it was made,
was considered an option not supported by a consideration distinct from the price and, therefore, not
binding upon the PROMISSOR. Pursuant to Southwestern Sugar and Molasses Co. vs. Atlantic Gulf and
Pacific Company, it was void.
Serra vs. CA

Facts:

A parcel of unregistered land owned by herein petitioner Federico Serra was the subject of a Contract
of Lease with Option to Buy with private respondent Rizal Commercial Banking Corporation (RCBC)
within a period of twenty-five (25) years commencing with the option to purchase the same within a
period of ten (10) years from the date of the signing of the contract at a price not greater than TWO
HUNDRED TEN PESOS (P210.00) per square meter. Pursuant to the contract, a building and other
improvements were constructed on the land and petitioner had the property registered three years
from the signing of the contract in compliance with the same. Soon, petitioner kept urging the manager
to effect the sale as per their agreement but it was only 9 years after that respondent bank decided to
exercise the option and inform the former. When the petitioner replied that he is no longer selling the
property, respondent filed a complaint for specific performance and damages. As defense, petitioner
alleged inter alia that the option was not supported by any consideration distinct from the price and
hence not binding upon him. The lower court rule in favor of petitioner but upon motion for
reconsideration, reversed its ruling and was subsequently affirmed by respondent appellate court.

Issue: Whether or not RCBC may compel Serra to sell?

Ruling:
In a unilateral promise to sell, where the debtor fails to withdraw the promise before the acceptance by
the creditor, the transaction becomes a bilateral contract to sell and to buy, because upon acceptance
by the creditor of the offer to sell by the debtor, there is already a meeting of the minds of the parties as
to the thing which is determinate and the price which is certain. In which case, the parties may then
reciprocally demand performance. The contract of lease with option to buy was perfected on May 20,
1975 the period of the option to buy being 10 years or until 1975 and the option to buy was exercised
on September 4, 1984 well within the period agreed upon hence demand for specific performance is
lawful.
Roman vs. Grimalt
Facts:

Petitioner Pedro Roman, the owner, and defendant Andres Grimalt, the purchaser, had been for several
days negotiating for the purchase of the schooner Santa Marina from the 13th to the 23d of June, 1904.
They agreed upon the sale of the vessel for the sum of 1,500 pesos, payable in three installments,
provided the title papers to the vessel were in proper form.The vessel was sunk in the bay on the
afternoon of the 25th of June, 1904, during a severe storm and before the owner had complied with the
condition exacted by the proposed purchaser. On the 30th of the same month, demand was made upon
the defendant for the payment of the purchase price of the vessel in the manner stipulated but
defendant failed to pay prompting petitioner to file the instant complaint.

Issue:

Whether or not Grimalt is liable for the purchase price?

Ruling:

Where no valid contract of sale exists it create no mutual rights or obligations by between the alleged
purchaser and seller, nor any label relation legal relation binding upon them.

The sale of the schooner was not perfected and the purchaser did not consent to the execution of the
deed of transfer for the reason that the title of the vessel was in the name of one Paulina Giron and not
in the name of Pedro Roman, the alleged owner. Roman promised, however, to perfect his title to the
vessel, but he failed to do so. The papers presented by him did not show that he was the owner of the
vessel. If no contract of sale was actually executed by the parties the loss of the vessel must be borne by
its owner and not by a party who only intended to purchase it and who was unable to do so on account
of failure on the part of the owner to show proper title to the vessel and thus enable them to draw up
the contract of sale.

The defendant was under no obligation to pay the price of the vessel, the purchase of which had not
been concluded. The conversations had between the parties and the letter written by defendant to
plaintiff did not establish a contract sufficient in itself to create reciprocal rights between the parties. It
follows, therefore, that article 1452 of the Civil Code relative to the injury or benefit of the thing sold
after a contract has been perfected and articles 1096 and 1182 of the same code relative to the
obligation to deliver a specified thing and the extinction of such obligation when the thing is either lost
or destroyed, are not applicable to the case at bar.

*Article 1452 is now 1480

Norkis vs CA

Facts: Private respondent Alberto Nepales bought from petitioner Norkis Distributors, Inc.s Bacolod
branch a brand new Yamaha Wonderbike. The price of P7,500.00 was payable by means of a Letter of
Guaranty from the Development Bank of the Philippines (DBP). Hence, credit was extended to Nepales
for the price of the motorcycle payable by DBP upon release of his motorcycle loan. As security for the
loan, Nepales executed a chattel mortgage on the motorcycle in favor of DBP. Branch Manager Labajo
then issued a sales invoice showing that the contract of sale of the motorcycle had been perfected. In
the meantime, however, the motorcycle remained in Norkis possession. Subsequently, the motorcycle
was registered in the Land Transportation Commission in the name of private respondent. The
motorcycle thereafter met an accident which became a total wreck and was returned and stored inside
Norkis warehouse. When private respondent demanded delivery of the motorcycle, petitioner failed to
do so prompting the latter to file an action for specific performance with damages. As defense,
petitioner averred that the motorcycle had already been delivered to private respondent before the
accident, hence, the risk of loss or damage had to be borne by him as owner of the unit. Both the lower
court and respondent court ruled in favor of private respondent hence this petition.
Issue:

Whether or not there had already been a transfer of ownership of the motorcycle to private respondent
at the time it was destroyed.
Ruling:

No. The issuance of a sales invoice does not prove transfer of ownership of the thing sold to the buyer.
An invoice is nothing more than a detailed statement of the nature, quantity and cost of the thing sold
and has been considered not a bill of sale. *The Court of Appeals correctly ruled that the purpose of the
execution of the sales invoice and the registration of the vehicle in the name of plaintiff-appellee with
the Land Registration Commission (Exhibit C) was not to transfer to Nepales the ownership and
dominion over the motorcycle, but only to comply with the requirements of the Development Bank of
the Philippines for processing private respondents motorcycle loan.

The critical factor in the different modes of effecting delivery, which gives legal effect to the act, is the
actual intention of the vendor to deliver, and its acceptance by the vendee. Without that intention,
there is no tradition.

*It is necessary that the vendor shall have had such control over the thing sold that, at the moment of
the sale, its material delivery could have been made. It is not enough to confer upon the purchaser the
ownership and the right of possession. The thing sold must be placed in his control under his material
tenancy and enjoyment. Article 1496 of the Civil Code which provides that "in the absence of an express
assumption of risk by the buyer, the things sold remain at seller's risk until the ownership thereof is
transferred to the buyer," is applicable to this case, for there was neither an actual nor constructive
delivery of the thing sold, hence, the risk of loss should be borne by the seller, Norkis, which was still the
owner and possessor of the motorcycle when it was wrecked. This is in accordance with the well-known
doctrine of res perit domino
Equatorial vs Mayfair

FACTS:
- Petitioners are Carmelo & Bauermann, Inc (owner/seller/lessor) Equatorial Realty Development, Inc
(buyer)
- Respondent is Mayfair Theater, Inc (lessee)
- Carmelo owned a parcel of land with two 2-storey buildings (covered by 4 land titles) at Recto
- In 1967, 2 portions of the property (covered by 2 titles) was leased to Mayfair for 20 years
- In 1978, Carmelo sold the entire Recto property to Equatorial for P11,300,000
- Mayfair petitioned for annulment of the sale on the ground that it was violative of Paragraph 8 of the
Contract of lease between respondent and Carmelo, 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.
- The Trial court ruled in favor of herein petitioners on the ground that Paragraph 8 was interpreted as an
option contract
- Mayfair appealed and the CA reversed the decision of the Trial court saying that Paragraph 8 should be
interpreted as a right of first refusal and not an option contract
ISSUES:
1. Whether Paragraph 8 constitutes an option contract clause or a right of first refusal
2. WON sale of property to Equatorial is valid

HELD:
SC ruled in favor of Mayfair ordering recission of the deed of sale and granting him right of first refusal to buy the
property at P11,300,000. The issues were held as follows:
1. RIGHT OF FIRST REFUSAL. The SC agreed with the CAs ruling that Paragraph 8 cannot constitute an
option clause (covered in Article 1324 & 1479 of the Civil Code) for the lack of definite purchasing price in
the agreement. Furthermore, the SC ruled that the stipulation in question was created to manifest a
reciprocal obligation to guard the interest of Mayfair in case of sale of the property: (1)to give him the
option to purchase the property or (2)to ensure that purchaser of the property shall recognize the lease
agreement earlier made. As such, Paragraph 8 is considered a right of first refusal.
2. NO. Both Carmelo and Equatorial acted in bad faith for entering into Contract of Sale knowing that
Paragraph 8 (right of first refusal) was agreed upon in the Contract of Lease and that Mayfair (another
party) was interested in the property in question