G.R. No. 97332 October 10, 1991 SPOUSES JULIO D. VILLAMOR AND MARINA VILLAMOR, petitioners, vs.

THE HON. COURT OF APPEALS AND SPOUSES MACARIA LABINGISA REYES AND ROBERTO REYES, respondents. Tranquilino F. Meris for petitioners. Agripino G. Morga for private respondents.

That the only reason why the Spouses-vendees Julio Villamor and Marina V. Villamor, agreed to buy the said one-half portion at the above-stated price of about P70.00 per square meter, is because I, and my husband Roberto Reyes, have agreed to sell and convey to them the remaining one-half portion still owned by me and now covered by TCT No. 39935 of the Register of Deeds for the City of Caloocan, whenever the need of such sale arises, either on our part or on the part of the spouses (Julio) Villamor and Marina V. Villamor, at the same price of P70.00 per square meter, excluding whatever improvement may be found the thereon; That I am willing to have this contract to sell inscribed on my aforesaid title as an encumbrance upon the property covered thereby, upon payment of the corresponding fees; and That we, Julio Villamor and Marina V. Villamor, hereby agree to, and accept, the above provisions of this Deed of Option.

MEDIALDEA, J.:p This is a petition for review on certiorari of the decision of the Court of Appeals in CA-G.R. No. 24176 entitled, "Spouses Julio Villamor and Marina Villamor, Plaintiffs-Appellees, versus Spouses Macaria Labing-isa Reyes and Roberto Reyes, DefendantsAppellants," which reversed the decision of the Regional Trial Court (Branch 121) at Caloocan City in Civil Case No. C-12942. The facts of the case are as follows: Macaria Labingisa Reyes was the owner of a 600-square meter lot located at Baesa, Caloocan City, as evidenced by Transfer Certificate of Title No. (18431) 18938, of the Register of Deeds of Rizal. In July 1971, Macaria sold a portion of 300 square meters of the lot to the Spouses Julio and Marina and 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 square meter lot sold. The portion sold to the Villamor spouses is now covered by TCT No. 39935 while the remaining portion which is still in the name of Macaria Labing-isa is covered by TCT No. 39934 (pars. 5 and 7, Complaint). On November 11, 1971, Macaria executed a "Deed of Option" in favor of Villamor in which the remaining 300 square meter portion (TCT No. 39934) of the lot would be sold to Villamor under the conditions stated therein. The document reads: DEED OF OPTION This Deed of Option, entered into in the City of Manila, Philippines, this 11th day of November, 1971, by and between Macaria Labing-isa, of age, married to Roberto Reyes, likewise of age, and both resideing on Reparo St., Baesa, Caloocan City, on the one hand, and on the other hand the spouses Julio Villamor and Marina V. Villamor, also of age and residing at No. 552 Reparo St., corner Baesa Road, Baesa, Caloocan City. WITNESSETH That, I Macaria Labingisa, am the owner in fee simple of a parcel of land with an area of 600 square meters, more or less, more particularly described in TCT No. (18431) 18938 of the Office of the Register of Deeds for the province of Rizal, issued in may name, I having inherited the same from my deceased parents, for which reason it is my paraphernal property; That I, with the conformity of my husband, Roberto Reyes, have sold one-half thereof to the aforesaid spouses Julio Villamor and Marina V. Villamor at the price of P70.00 per sq. meter, which was greatly higher than the actual reasonable prevailing value of lands in that place at the time, which portion, after segregation, is now covered by TCT No. 39935 of the Register of Deeds for the City of Caloocan, issued on August 17, 1971 in the name of the aforementioned spouses vendees; IN WITNESS WHEREOF, this Deed of Option is signed in the City of Manila, Philippines, by all the persons concerned, this 11th day of November, 1971. JULIO VILLAMOR MACARIA LABINGISA With My Conformity: MARINA VILLAMOR ROBERTO REYES Signed in the Presence Of: MARIANO Z. SUNIGA ROSALINDA S. EUGENIO ACKNOWLEDGMENT REPUBLIC OF THE PHILIPPINES) CITY OF MANILA ) S.S. At the City of Manila, on the 11th day of November, 1971, personally appeared before me Roberto Reyes, Macaria Labingisa, Julio Villamor and Marina Ventura-Villamor, known to me as the same persons who executed the foregoing Deed of Option, which consists of two (2) pages including the page whereon this acknowledgement is written, and signed at the left margin of the first page and at the bottom of the instrument by the parties and their witnesses, and sealed with my notarial seal, and said parties acknowledged to me that the same is their free act and deed. The Residence Certificates of the parties were exhibited to me as follows: Roberto Reyes, A-22494, issued at Manila on Jan. 27, 1971, and B502025, issued at Makati, Rizal on Feb. 18, 1971; Macaria Labingisa, A-3339130 and B-1266104, both issued at Caloocan City on April 15, 1971, their joint Tax Acct. Number being 3028-767-6; Julio Villamor, A-804, issued at Manila on Jan. 14, 1971, and B-138, issued at Manila on March 1, 1971; and Marina Ventura-Villamor, A-803, issued at Manila on Jan. 14, 1971, their joint Tax Acct. Number being 608-2026IO M. MALUBAY Notary Public Untl December 31, 1972 PTR No. 338203, Manila January 15, 1971

Doc. No. 1526; Page No. 24; Book No. 38; Series of 1971. (pp. 25-29, Rollo) 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 square meter portion of the lot but the Reyeses had been ignoring them. Thus, on July 13, 1987, after conciliation proceedings in the barangay level failed, they filed a complaint for specific performance against the Reyeses. On July 26, 1989, judgment was rendered by the trial court in favor of the Villamor spouses, the dispositive portion of which states: WHEREFORE, and (sic) in view of the foregoing, judgment is hereby rendered in favor of the plaintiffs and against the defendants ordering the defendant MACARIA LABING-ISA REYES and ROBERTO REYES, to sell unto the plaintiffs the land covered by T.C.T No. 39934 of the Register of Deeds of Caloocan City, to pay the plaintiffs the sum of P3,000.00 as and for attorney's fees and to pay the cost of suit. The counterclaim is hereby DISMISSED, for LACK OF MERIT. SO ORDERED. (pp. 24-25, Rollo) Not satisfied with the decision of the trial court, the Reyes spouses appealed to the Court of Appeals on the following assignment of errors: 1. HOLDING THAT THE DEED OF OPTION EXECUTED ON NOVEMBER 11, 1971 BETWEEN THE PLAINTIFFAPPELLEES AND DEFENDANT-APPELLANTS IS STILL VALID AND BINDING DESPITE THE LAPSE OF MORE THAN THIRTEEN (13) YEARS FROM THE EXECUTION OF THE CONTRACT; 2. FAILING TO CONSIDER THAT THE DEED OF OPTION CONTAINS OBSCURE WORDS AND STIPULATIONS WHICH SHOULD BE RESOLVED AGAINST THE PLAINTIFF-APPELLEES WHO UNILATERALLY DRAFTED AND PREPARED THE SAME; 3. HOLDING THAT THE DEED OF OPTION EXPRESSED THE TRUE INTENTION AND PURPOSE OF THE PARTIES DESPITE ADVERSE, CONTEMPORANEOUS AND SUBSEQUENT ACTS OF THE PLAINTIFF-APPELLEES; 4. FAILING TO PROTECT THE DEFENDANT-APPELLANTS ON ACCOUNT OF THEIR IGNORANCE PLACING THEM AT A DISADVANTAGE IN THE DEED OF OPTION; 5. FAILING TO CONSIDER THAT EQUITABLE CONSIDERATION TILT IN FAVOR OF THE DEFENDANTAPPELLANTS; and 6. HOLDING DEFENDANT-APPELLANTS LIABLE TO PAY PLAINTIFF-APPELLEES THE AMOUNT OF P3,000.00 FOR AND BY WAY OF ATTORNEY'S FEES. (pp. 31-32, Rollo)

On February 12, 1991, the Court of Appeals rendered a decision reversing the decision of the trial court and dismissing the complaint. The reversal of the trial court's 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 instant petition for review on certiorari on the following grounds: I. THE COURT OF APPEALS GRAVELY ERRED IN FINDING THAT THE PHRASE WHENEVER THE NEED FOR SUCH SALE ARISES ON OUR (PRIVATE RESPONDENT) PART OR ON THE PART OF THE SPOUSES JULIO D. VILLAMOR AND MARINA V. VILLAMOR' CONTAINED IN THE DEED OF OPTION DENOTES A SUSPENSIVE CONDITION; II. ASSUMING FOR THE SAKE OF ARGUMENT THAT THE QUESTIONED PHRASE IS INDEED A CONDITION, THE COURT OF APPEALS ERRED IN NOT FINDING, THAT THE SAID CONDITION HAD ALREADY BEEN FULFILLED; III. ASSUMING FOR THE SAKE OF ARGUMENT THAT THE QUESTIONED PHRASE IS INDEED A CONDITION, THE COURT OF APPEALS ERRED IN HOLDING THAT THE IMPOSITION OF SAID CONDITION PREVENTED THE PERFECTION OF THE CONTRACT OF SALE DESPITE THE EXPRESS OFFER AND ACCEPTANCE CONTAINED IN THE DEED OF OPTION; IV. THE COURT OF APPEALS ERRED IN FINDING THAT THE DEED OF OPTION IS VOID FOR LACK OF CONSIDERATION; V. THE COURT OF APPEALS ERRED IN HOLDING THAT A DISTINCT CONSIDERATION IS NECESSARY TO SUPPORT THE DEED OF OPTION DESPITE THE EXPRESS OFFER AND ACCEPTANCE CONTAINED THEREIN. (p. 12, Rollo) The pivotal issue to be resolved in this case is the validity of the Deed of Option whereby the private respondents agreed to sell their lot to petitioners "whenever the need of such sale arises, either on our part (private respondents) or on the part of Julio Villamor and Marina Villamor (petitioners)." The court a quo, rule that the Deed of Option was a valid written agreement between the parties and made the following conclusions: xxx xxx xxx It is interesting to state that the agreement between the parties are evidence by a writing, hence, the controverting oral testimonies of the herein defendants cannot be any better than the documentary evidence, which, in this case, is the Deed of Option (Exh. "A" and "A-a") The law provides that when the terms of an agreement have been reduced to writing it is to be considered as containing all such terms, and therefore, there can be, between the parties and their successors in interest no evidence of their terms of the agreement, other than the contents of the writing. ... (Section 7 Rule 130 Revised Rules of Court) Likewise, it is a general and most inflexible rule that wherever written instruments are appointed either by the requirements of law, or by the contract of the parties, to be the repositories and memorials of truth, any other evidence is excluded from being used, either as a substitute for such instruments, or to contradict or alter them. This is a matter both of principle and of policy; of principle because such instruments are in their nature and origin entitled to a much higher degree of credit than evidence of policy, because it would be attended with great mischief if those instruments upon which man's rights depended were liable to be impeached by loose collateral evidence. Where the terms of an agreement are reduced to writing, the document itself, being constituted by the parties as the expositor of their intentions, it is the only instrument of evidence in

respect of that agreement which the law will recognize so long as it exists for the purpose of evidence. (Starkie, EV, pp. 648, 655 cited in Kasheenath vs. Chundy, W.R. 68, cited in Francisco's Rules of Court, Vol. VII Part I p. 153) (Emphasis supplied, pp. 126-127, Records). The respondent appellate court, however, ruled that the said deed of option is void for lack of consideration. The appellate court made the following disquisitions: Plaintiff-appellees say they agreed to pay P70.00 per square meter for the portion purchased by them although the prevailing price at that time was only P25.00 in consideration of the option to buy the remainder of the land. This does not seem to be the case. In the first place, the deed of sale was never produced by them to prove their claim. Defendant-appellants testified that no copy of the deed of sale had ever been given to them by the plaintiff-appellees. In the second place, if this was really the condition of the prior sale, we see no reason why it should be reiterated in the Deed of Option. On the contrary, the alleged overprice paid by the plaintiff-appellees is given in the Deed as reason for the desire of the Villamors to acquire the land rather than as a consideration for the option given to them, although one might wonder why they took nearly 13 years to invoke their right if they really were in due need of the lot. At all events, the consideration needed to support a unilateral promise to sell is a dinstinct one, not something that is as uncertain as P70.00 per square meter which is allegedly 'greatly higher than the actual prevailing value of lands.' A sale must be for a price certain (Art. 1458). For how much the portion conveyed to the plaintiff-appellees was sold so that the balance could be considered the consideration for the promise to sell has not been shown, beyond a mere allegation that it was very much below P70.00 per square meter. The fact that plaintiff-appellees might have paid P18.00 per square meter for another land at the time of the sale to them of a portion of defendant-appellant's lot does not necessarily prove that the prevailing market price at the time of the sale was P18.00 per square meter. (In fact they claim it was P25.00). It is improbable that plaintiff-appellees should pay P52.00 per square meter for the privilege of buying when the value of the land itself was allegedly P18.00 per square meter. (pp. 34-35, Rollo) As expressed in Gonzales v. Trinidad, 67 Phil. 682, consideration is "the why of the contracts, the essential reason which moves the contracting parties to enter into the contract." The cause or the impelling reason on the part of private respondent executing the deed of option as appearing in the deed itself is the petitioner's having agreed to buy the 300 square meter portion of private respondents' land at P70.00 per square meter "which was greatly higher than the actual reasonable prevailing price." This cause or consideration is clear from the deed which stated: That the only reason why the spouses-vendees Julio Villamor and Marina V. Villamor agreed to buy the said one-half portion at the above stated price of about P70.00 per square meter, is because I, and my husband Roberto Reyes, have agreed to sell and convey to them the remaining one-half portion still owned by me ... (p. 26, Rollo) The respondent appellate court failed to give due consideration to petitioners' evidence which shows that in 1969 the Villamor spouses bough an adjacent lot from the brother of Macaria Labing-isa for only P18.00 per square meter which the private respondents did not rebut. Thus, expressed in terms of money, the consideration for the deed of option is the difference between the purchase price of the 300 square meter portion of the lot in 1971 (P70.00 per sq.m.) and the prevailing reasonable price of the same lot in 1971. Whatever it is, (P25.00 or P18.00) though not specifically stated in the deed of option, was ascertainable. Petitioner's allegedly paying P52.00 per square meter for the option may, as opined by the appellate court, be improbable but improbabilities does not invalidate a contract freely entered into by the parties.

The "deed of option" entered into by the parties in this case had unique features. Ordinarily, an optional contract is a privilege existing in one person, for which he had paid a consideration and which gives him the right to buy, for example, certain merchandise or certain specified property, from another person, if he chooses, at any time within the agreed period at a fixed price (Enriquez de la Cavada v. Diaz, 37 Phil. 982). If We look closely at the "deed of option" signed by the parties, We will notice that the first part covered the statement on the sale of the 300 square meter portion of the lot to Spouses Villamor at the price of P70.00 per square meter "which was higher than the actual reasonable prevailing value of the lands in that place at that time (of sale)." The second part stated that the only reason why the Villamor spouses agreed to buy the said lot at a much higher price is because the vendor (Reyeses) also agreed to sell to the Villamors the other half-portion of 300 square meters of the land. Had the deed stopped there, there would be no dispute that the deed is really an ordinary deed of option granting the Villamors the option to buy the remaining 300 square meter-half portion of the lot in consideration for their having agreed to buy the other half of the land for a much higher price. But, the "deed of option" went on and stated that the sale of the other half would be made "whenever the need of such sale arises, either on our (Reyeses) part or on the part of the Spouses Julio Villamor and Marina V. Villamor. It appears that while the option to buy was granted to the Villamors, the Reyeses were likewise granted an option to sell. In other words, it was not only the Villamors who were granted an option to buy for which they paid a consideration. The Reyeses as well were granted an option to sell should the need for such sale on their part arise. In the instant case, the option offered by private respondents had been accepted by the petitioner, the promise, in the same document. The acceptance of an offer to sell for a price certain created a bilateral contract to sell and buy and upon acceptance, the offer, ipso facto assumes obligations of a vendee (See Atkins, Kroll & Co. v. Cua Mian Tek, 102 Phil. 948). Demandabilitiy may be exercised at any time after the execution of the deed. In Sanchez v. Rigos, No. L-25494, June 14, 1972, 45 SCRA 368, 376, We held: In other words, since there may be no valid contract without a cause of consideration, the promisory is not bound by his promise and may, accordingly withdraw it. Pending notice of its withdrawal, his accepted promise partakes, however, of the nature of an offer to sell which, if accepted, results in a perfected contract of sale. A contract of sale is, under Article 1475 of the Civil Code, "perfected at the moment there is a meeting of minds upon the thing which is the object of the contract and upon the price. From that moment, the parties may reciprocally demand perform of contracts." Since there was, between the parties, a meeting of minds upon the object and the price, there was already a perfected contract of sale. What was, however, left to be done was for either party to demand from the other their respective undertakings under the contract. It may be demanded at any time either by the private respondents, who may compel the petitioners to pay for the property or the petitioners, who may compel the private respondents to deliver the property. However, the Deed of Option did not provide for the period within which the parties may demand the performance of their respective undertakings in the instrument. The parties could not have contemplated that the delivery of the property and the payment thereof could be made indefinitely and render uncertain the status of the land. The failure of either parties to demand performance of the obligation of the other for an unreasonable length of time renders the contract ineffective. Under Article 1144 (1) of the Civil Code, actions upon written contract must be brought within ten (10) years. The Deed of Option was executed on November 11, 1971. The acceptance, as already mentioned, was also accepted in the same instrument. The complaint in this case was filed by the petitioners on July 13, 1987, seventeen (17) years from the time of the execution of the contract. Hence, the right of action had prescribed. There were allegations by the petitioners that they demanded from the private respondents as early as 1984 the enforcement of their rights under the contract. Still, it was beyond the ten (10) years period prescribed by the Civil Code. In the case of Santos v. Ganayo, L-31854, September 9, 1982, 116 SCRA 431, this Court affirming and subscribing to the observations of the court a quo held, thus: ... Assuming that Rosa Ganayo, the oppositor herein, had the right based on the Agreement to Convey and Transfer as contained in Exhibits '1' and '1-A', her failure or the abandonment of her right to file an action against Pulmano Molintas when he was still a co-owner of the on-half (1/2) portion of the 10,000 square meters is now barred by laches and/or prescribed by law because she failed to bring such action

within ten (10) years from the date of the written agreement in 1941, pursuant to Art. 1144 of the New Civil Code, so that when she filed the adverse claim through her counsel in 1959 she had absolutely no more right whatsoever on the same, having been barred by laches. It is of judicial notice that the price of real estate in Metro Manila is continuously on the rise. To allow the petitioner to demand the delivery of the property subject of this case thirteen (13) years or seventeen (17) years after the execution of the deed at the price of only P70.00 per square meter is inequitous. For reasons also of equity and in consideration of the fact that the private respondents have no other decent place to live, this Court, in the exercise of its equity jurisdiction is not inclined to grant petitioners' prayer. ACCORDINGLY, the petition is DENIED. The decision of respondent appellate court is AFFIRMED for reasons cited in this decision. Judgement is rendered dismissing the complaint in Civil Case No. C-12942 on the ground of prescription and laches. SO ORDERED.

G.R. No. L-25494 June 14, 1972 NICOLAS SANCHEZ, plaintiff-appellee, vs. SEVERINA RIGOS, defendant-appellant. Santiago F. Bautista for plaintiff-appellee. Jesus G. Villamar for defendant-appellant.

The option did not impose upon plaintiff the obligation to purchase defendant's property. Annex A is not a "contract to buy and sell." It merely granted plaintiff an "option" to buy. And both parties so understood it, as indicated by the caption, "Option to Purchase," given by them to said instrument. Under the provisions thereof, the defendant "agreed, promised and committed" herself to sell the land therein described to the plaintiff for P1,510.00, but there is nothing in the contract to indicate that her aforementioned agreement, promise and undertaking is supported by a consideration "distinct from the price" stipulated for the sale of the land. Relying upon Article 1354 of our Civil Code, the lower court presumed the existence of said consideration, and this would seem to be the main factor that influenced its decision in plaintiff's favor. It should be noted, however, that: (1) Article 1354 applies to contracts in general, whereas the second paragraph of Article 1479 refers to "sales" in particular, and, more specifically, to "an accepted unilateral promise to buy or to sell." In other words, Article 1479 is controlling in the case at bar.

CONCEPCION, C.J.:p Appeal from a decision of the Court of First Instance of Nueva Ecija to the Court of Appeals, which certified the case to Us, upon the ground that it involves a question purely of law. The record shows that, on April 3, 1961, plaintiff Nicolas Sanchez and defendant Severina Rigos executed an instrument entitled "Option to Purchase," whereby Mrs. Rigos "agreed, promised and committed ... to sell" to Sanchez 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 Transfer Certificate of Title No. 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 Pl,510.00, made by Sanchez within said period, were rejected by Mrs. Rigos, on March 12, 1963, the former deposited said amount with the Court of First Instance of Nueva Ecija and commenced against the latter the present action, for specific performance and damages. After the filing of defendant's answer admitting some allegations of the complaint, denying other allegations thereof, and alleging, as special defense, that the contract between the parties "is a unilateral promise to sell, and the same being unsupported by any valuable consideration, by force of the New Civil Code, is null and void" on February 11, 1964, both parties, assisted by their respective counsel, jointly moved for a judgment on the pleadings. Accordingly, on February 28, 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 attorney's fees, and other costs. Hence, this appeal by Mrs. Rigos. This case admittedly hinges on the proper application of Article 1479 of our Civil Code, which provides: ART. 1479. A promise to buy and sell a determinate thing for a price certain is reciprocally demandable. 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. In his complaint, plaintiff alleges that, by virtue of the option under consideration, "defendant agreed and committed to sell" and "the plaintiff agreed and committed to buy" the land described in the option, copy of which was annexed to said pleading as Annex A thereof and is quoted on the margin. 1 Hence, plaintiff maintains that the promise contained in the contract is "reciprocally demandable," pursuant to the first paragraph of said Article 1479. Although defendant had really "agreed, promised and committed" herself to sell the land to the plaintiff, it is not true that the latter had, in turn, "agreed and committed himself " to buy said property. Said Annex A does not bear out plaintiff's allegation to this effect. What is more, since Annex A has been made "an integral part" of his complaint, the provisions of said instrument form part "and parcel" 2 of said pleading. (2) In order that said unilateral promise may be "binding upon the promisor, Article 1479 requires the concurrence of a condition, namely, that the promise be "supported by a consideration distinct from the price." Accordingly, the promisee can not compel the promisor to comply with the promise, unless the former establishes the existence of said distinct consideration. In other words, the promisee has the burden of proving such consideration. Plaintiff herein has not even alleged the existence thereof in his complaint. (3) Upon the other hand, defendant explicitly averred in her answer, and pleaded as a special defense, the absence of said consideration for her promise to sell and, by joining in the petition for a judgment on the pleadings, plaintiff has impliedly admitted the truth of said averment in defendant's answer. Indeed as early as March 14, 1908, it had been held, in Bauermann v. Casas, 3 that: One who prays for judgment on the pleadings without offering proof as to the truth of his own allegations, and without giving the opposing party an opportunity to introduce evidence, must be understood to admit the truth of all the material and relevant allegations of the opposing party, and to rest his motion for judgment on those allegations taken together with such of his own as are admitted in the pleadings. (La Yebana Company vs. Sevilla, 9 Phil. 210). (Emphasis supplied.) This view was reiterated in Evangelista v. De la Rosa 4 and Mercy's Incorporated v. Herminia Verde. 5 Squarely in point is Southwestern Sugar & Molasses Co. v. Atlantic Gulf & Pacific Co., 6 from which We quote: The main contention of appellant is that the option granted to appellee to sell to it barge No. 10 for the sum of P30,000 under the terms stated above has no legal effect because it is not supported by any consideration and in support thereof it invokes article 1479 of the new Civil Code. The article provides: "ART. 1479. A promise to buy and sell a determinate thing for a price certain is reciprocally demandable. An accepted unilateral promise to buy or sell a determinate thing for a price certain is binding upon the promisor if the promise is supported by a consideration distinct from the price." On the other hand, Appellee contends that, even granting that the "offer of option" is not supported by any consideration, that option became binding on appellant when the appellee gave notice to it of its acceptance, and that having accepted it within the period of option, the offer can no longer be

withdrawn and in any event such withdrawal is ineffective. In support this contention, appellee invokes article 1324 of the Civil Code which provides: "ART. 1324. When the offerer has allowed the offeree a certain period to accept, the offer may be withdrawn any time before acceptance by communicating such withdrawal, except when the option is founded upon consideration as something paid or promised." There is no question that under article 1479 of the new Civil Code "an option to sell," or "a promise to buy or to sell," as used in said article, to be valid must be "supported by a consideration distinct from the price." This is clearly inferred from the context of said article that a unilateral promise to buy or to sell, even if accepted, is only binding if supported by consideration. In other words, "an accepted unilateral promise can only have a binding effect if supported by a consideration which means that the option can still be withdrawn, even if accepted, if the same is not supported by any consideration. It is not disputed that the option is without consideration. It can therefore be withdrawn notwithstanding the acceptance of it by appellee. It is true that under article 1324 of the new Civil Code, the general rule regarding offer and acceptance is that, when the offerer gives to the offeree a certain period to accept, "the offer may be withdrawn at any time before acceptance" except when the option is founded upon consideration, but this general rule must be interpreted as modified by the provision of article 1479 above referred to, which applies to "a promise to buy and sell" specifically. As already stated, this rule requires that a promise to sell to be valid must be supported by a consideration distinct from the price. We are not oblivious of the existence of American authorities which hold that an offer, once accepted, cannot be withdrawn, regardless of whether it is supported or not by a consideration (12 Am. Jur. 528). These authorities, we note, uphold the general rule applicable to offer and acceptance as contained in our new Civil Code. But we are prevented from applying them in view of the specific provision embodied in article 1479. While under the "offer of option" in question appellant has assumed a clear obligation to sell its barge to appellee and the option has been exercised in accordance with its terms, and there appears to be no valid or justifiable reason for appellant to withdraw its offer, this Court cannot adopt a different attitude because the law on the matter is clear. Our imperative duty is to apply it unless modified by Congress. However, this Court itself, in the case of Atkins, Kroll and Co., Inc. v. Cua Hian Tek, 8 decided later that Southwestern Sugar & Molasses Co. v. Atlantic Gulf & Pacific Co., 9 saw no distinction between Articles 1324 and 1479 of the Civil Code and applied the former where a unilateral promise to sell similar to the one sued upon here was involved, treating such promise as an option which, although not binding as a contract in itself for lack of a separate consideration, nevertheless generated a bilateral contract of purchase and sale upon acceptance. Speaking through Associate Justice, later Chief Justice, Cesar Bengzon, this Court said: Furthermore, an option is unilateral: a promise to sell at the price fixed whenever the offeree should decide to exercise his option within the specified time. After accepting the promise and before he exercises his option, the holder of the option is 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 obligation of a purchaser. He did not just get the right subsequently to buy or not to buy. It was not a mere option then; it was a bilateral contract of sale. Lastly, even supposing that Exh. A granted an option which is not binding for lack of consideration, the authorities hold that:

"If the option is given without a consideration, it is a mere offer of a contract of sale, which is not binding until accepted. If, however, acceptance is made before a withdrawal, it constitutes a binding contract of sale, even though the option was not supported by a sufficient consideration. ... . (77 Corpus Juris Secundum, p. 652. See also 27 Ruling Case Law 339 and cases cited.) "It can be taken for granted, as contended by the defendant, that the option contract was not valid for lack of consideration. But it was, at least, an offer to sell, which was accepted by letter, and of the acceptance the offerer had knowledge before said offer was withdrawn. The concurrence of both acts the offer and the acceptance could at all events have generated a contract, if none there was before (arts. 1254 and 1262 of the Civil Code)." (Zayco vs. Serra, 44 Phil. 331.) In other words, since there may be no valid contract without a cause or consideration, the promisor is not bound by his promise and may, accordingly, withdraw it. Pending notice of its withdrawal, his accepted promise partakes, however, of the nature of an offer to sell which, if accepted, results in a perfected contract of sale. This view has the advantage of avoiding a conflict between Articles 1324 on the general principles on contracts and 1479 on sales of the Civil Code, in line with the cardinal rule of statutory construction that, in construing different provisions of one and the same law or code, such interpretation should be favored as will reconcile or harmonize said provisions and avoid a conflict between the same. Indeed, the presumption is that, in the process of drafting the Code, its author has maintained a consistent philosophy or position. Moreover, the decision in Southwestern Sugar & Molasses Co. v. Atlantic Gulf & Pacific Co., 10 holding that Art. 1324 is modified by Art. 1479 of the Civil Code, in effect, considers the latter as an exception to the former, and exceptions are not favored, unless the intention to the contrary is clear, and it is not so, insofar as said two (2) articles are concerned. What is more, the reference, in both the second paragraph of Art. 1479 and Art. 1324, to an option or promise supported by or founded upon a consideration, strongly suggests that the two (2) provisions intended to enforce or implement the same principle. Upon mature deliberation, the Court is of the considered opinion that it should, as it hereby reiterates the doctrine laid down in the Atkins, Kroll & Co. case, and that, insofar as inconsistent therewith, the view adhered to in the Southwestern Sugar & Molasses Co. case should be deemed abandoned or modified. WHEREFORE, the decision appealed from is hereby affirmed, with costs against defendant-appellant Severina Rigos. It is so ordered.

G.R. No. L-51824 February 7, 1992 PERCELINO DIAMANTE, petitioner, vs. HON. COURT OF APPEALS and GERARDO DEYPALUBUS, respondents. Hernandez, Velicaria, Vibar & Santiago for petitioner. Amancio B. Sorongon for private respondent.

On 11 December 1963, petitioner, contending that he has a valid twenty-year option to repurchase the subject property, requested the Bureau of Fisheries to nullify FLA No. 1372 insofar as the said property is concerned. On 18 December 1964, his letter-complaint was dismissed. Petitioner then sought a reconsideration of the dismissal; the same was denied on 29 April 1965. His appeal to the Secretary of the DANR was likewise dismissed on 30 October 1968. Again, on 20 November 1968, petitioner sought for a reconsideration; this time, however, he was successful. On 29 August 1969, the DANR Secretary granted his motion in an Order cancelling FLA No. 1372 and stating, inter alia, that: Evidently, the application as originally filed, could not be favorably acted upon by reason of the existing right of a third party over a portion thereof. It was only the submission of the deed of absolute sale which could eliminate the stumbling block to the approval of the transfer and the issuance of a permit or lease agreement. It was on the basis of this deed of sale, in fact, the one entitled "option to repurchase" executed barely a week from the execution of the deed of absolute sale, (which) reverted, in effect, the status of the land in question to what it was after the execution of the deed of sale with right to repurchase; that is, the land was again placed under an encumbrance in favor of a third party. Circumstantially, there is a ground (sic) to believe that the deed of absolute sale was executed merely with the end in view of circumventing the requirements for the approval of the transfer of leasehold rights of Diamante in favor of Deypalubos; and the subsequent execution of the "Option to Repurchase" was made to assure the maintenance of a vendor a retro's rights in favor of Diamante. There was, therefore, a misrepresentation of an essential or material fact committed by the lessee-appellee (Deypalubos) in his application for the permit and the lease agreement, without which the same could not have been issued. 1 The Secretary based his action on Section 20 of Fisheries Administrative Order No. 60, the second paragraph of which reads:

DAVIDE, JR., J.: Assailed in this petition for review is the Resolution of the respondent Court of Appeals dated 21 March 1979 in C.A.-G.R. No. SP-04866 setting aside its earlier decision therein, promulgated on 6 December 1978, which reversed the decision of the then Court of First Instance (now Regional Trial Court) of Iloilo City. The latter nullified the Orders of the Secretary of the Department of Agriculture and Natural Resources (DANR) dated 29 August 1969, 20 November 1969 and 21 April 1970, declared binding the Fishpond Lease Agreement (FLA) issued to private respondent and disallowed petitioner from repurchasing from private respondent a portion of the fishery lot located at Dumangas, Iloilo, covered by the FLA. The pleadings of the parties and the decision of the respondent Court disclose the factual antecedents of this case. A fishery lot, encompassing an area of 9.4 hectares and designated as Lot No. 518-A of the Cadastral Survey of Dumangas, Iloilo, was previously covered by Fishpond Permit No. F-2021 issued in the name of Anecita Dionio. Upon Anecita's death, her heirs, petitioner Diamante and Primitivo Dafeliz, inherited the property which they later divided between themselves; petitioner got 4.4. hectares while Dafeliz got 5 hectares. It is the petitioner's share that is the subject of the present controversy. Primitivo Dafeliz later sold his share to private respondent. On 21 May 1959, petitioner sold to private respondent his leasehold rights over the property in question for P8,000.00 with the right to repurchase the same within three (3) years from said date. On 16 August 1960, private respondent filed an application with the Bureau of Fisheries, dated 12 July 1960, for a fishpond permit and a fishpond lease agreement over the entire lot, submitting therewith the deeds of sale executed by Dafeliz and the petitioner. Pressed by urgent financial needs, petitioner, on 17 October 1960, sold all his remaining rights over the property in question to the private respondent for P4,000.00. On 25 October 1960, private respondent, with his wife's consent, executed in favor of the petitioner an Option to Repurchase the property in question within ten (10) years from said date, with a ten-year grace period. Private respondent submitted to the Bureau of Fisheries the definite deed of sale; he did not, however, submit the Option to Repurchase. Thereafter, on 2 August 1961, the Bureau of Fisheries issued to private respondent Fishpond Permit No. 4953-Q; on 17 December 1962, it approved FLA No. 1372 in the latter's favor.

Any and all of the statements made in the corresponding application shall be considered as essential conditions and parts of the permit or lease granted. Any false statements in the application of facts or any alteration, change or modification of any or all terms and conditions made therein shall ipso facto cause the cancellation of the permit or lease. Private respondent moved for a reconsideration of this last Order arguing that the DANR Secretary's previous Order of 30 October 1968 dismissing petitioner's letter-complaint had already become final on the ground that he (private respondent) was not served a copy of petitioner's 20 November 1968 motion for reconsideration. On 20 November 1969, private respondent's motion for reconsideration was denied; a second motion for reconsideration was likewise denied on 20 April 1970. On 5 May 1970, private respondent filed with the Court of First Instance of Iloilo City a special civil action for certiorari with preliminary injunction (docketed as Civil Case No. 8209), seeking to annul the Secretary's Orders of 20 April 1970, 20 November 1969 and 29 August 1969 on the ground that the Secretary: (1) gravely abused his discretion in not giving him the opportunity to be heard on the question of whether or not the Option to Repurchase was forged; and (2) has no jurisdiction to set aside FLA No. 1372 as the Order of the Bureau of Fisheries dismissing petitioner's 11 December 1963 letter-complaint had already become final. After issuing a temporary restraining order and a writ of preliminary injunction, the lower court tried the case jointly with Criminal Case No. 520 wherein both the petitioner and a certain Atty. Agustin Dioquino, the Notary Public who notarized the 25 October 1960 Option to Repurchase, were charged with falsification of a public document. After due trial, the lower court acquitted the accused in the criminal case and decided in favor of the private respondent in Civil Case No. 8209; the court ruled that: (1) the DANR Secretary abused his discretion in issuing the questioned Orders, (2) petitioner cannot repurchase the property in question as the Option to Repurchase is of doubtful validity, and (3) FLA No. 1372 in the name of private respondent is valid and binding.

Petitioner appealed to the respondent Court which, on 6 December 1978, reversed the decision of the trial court 2 on the ground that no grave abuse of discretion was committed by respondent Secretary inasmuch as private respondent was given the opportunity to be heard on his claim that the Option to Repurchase is spurious, and that the trial court merely indulged in conjectures in not upholding its validity. Said the respondent Court: With all the foregoing arguments appellee had exhaustively adduced to show the spuriousness of the deed of "Option to Repurchase", appellee can hardly complain of not having been given an opportunity to be heard, which is all that is necessary in relation to the requirement of notice and hearing in administrative proceedings. Moreover, appellee never asked for a formal hearing at the first opportunity that he had to do so, as when he filed his first motion for reconsideration. He asked for a formal hearing only in his second motion for reconsideration evidently as a mere afterthought, upon realizing that his arguments were futile without proofs to support them. The only remaining question, therefore, is whether the Secretary acted with grave abuse of discretion in giving weight to the alleged execution by appellee of the deed of Option to Repurchase, on the basis of the xerox copy of said deed as certified by the Notary Public, Agustin Dioquino. With such documentary evidence duly certified by the Notary Public, which is in effect an affirmation of the existence of the deed of "Option of Repurchase" (sic) and its due execution, the Secretary may not be said to have gravely abused his discretion in giving the document enough evidentiary weight to justify his action in applying the aforequoted provisions of Fisheries Adm. Order No. 60. This piece of evidence may be considered substantial enough to support the conclusion reached by the respondent Secretary, which is all that is necessary to sustain an administrative finding of fact (Ortua vs. Encarnacion, 59 Phil. 635; Ang Tibay vs. CIR, 69 Phil. 635; Ramos vs. The Sec. of Agriculture and Natural Resources, et al. L29097, Jan. 28, 1974, 55 SCRA 330). Reviewing courts do not re-examine the sufficiency of the evidence in an administrative case, if originally instituted as such, nor are they authorized to receive additional evidence that was not submitted to the administrative agency concerned. For common sense dictates that the question of whether the administrative agency abused its discretion in weighing evidence should be resolved solely on the basis of the proof that the administrative authorities had before them and no other (Timbancaya vs. Vicente, L-19100, Dec. 27, 1963, 9 SCRA 852). In the instant case the evidence presented for the first time before the court a quo could be considered only for the criminal case heard jointly with this case. The lower court's action of acquitting the notary public, Agustin Dioquino, and appellant Diamante in Criminal Case No. 520 for falsification of public document is in itself a finding that the alleged forgery has not been conclusively established. This finding is quite correct considering the admission of the NBI handwriting expert that admission of the NBI handwriting expert that he cannot make any finding on the question of whether appellee's signature on the deed of "Option to Repurchase" is forged or not, because of the lack of (sic) specimen signature of appellee for comparative examination. The Secretary may have such signature in the application papers of appellee on file with the former's office upon which to satisfy himself of (sic) the genuineness of appellee's signature. It would be strange, indeed, that appellee had not provided the NBI expert with a specimen of his signature when his purpose was to have an expert opinion that his signature on the questioned document is forged. On the other hand, as to the signature of his wife, the latter herself admitted the same to be her own. Thus Q There is a signature below the typewritten words "with my marital consent" and above the name Edelina Duyo, whose signature is this?

A That is my signature. (T.s.n., Crim. Case No. 520, April 5, 1971, p. 14). In not finding in favor of the perfect validity of the "Option to Repurchase," the court a quo merely indulged in conjectures. Thus, believing the testimony of appellee that the later (sic) could not have executed the deed of option to repurchase after spending allegedly P12,000.00, and that if there was really a verbal agreement upon the execution of the deed of absolute sale, as alleged by appellant, that appellant's right to repurchase, as was stipulated in the earlier deed of sale, shall be preserved, such agreement should have been embodied in the deed of sale of October 17, 1960 (Exh. D), the court doubted the genuineness of the deed of Option to Repurchase (sic). It is highly doubtful if appellee had spent P12,000.00 during the period from October 17, 1960 to October 25, 1960 when the deed of option was executed. Likewise, the right to repurchase could not have been embodied in the deed of absolute sale since, as the Secretary of DANR found, the purpose of the deed of absolute sale is to circumvent the law and insure the approval of appellee's application, as with his right to 4.4 hectares appearing to be subject to an encumbrance, his application would not have been given favorable action. Above all, the speculation and conjectures as indulged in by the court a quo cannot outweigh the probative effect of the document itself, a certified xerox copy thereof as issued by the Notary Public, the non-presentation of the original having been explained by its loss, as was the testimony of the same Notary Public, who justly won acquittal when charged with falsification of public document at the instance of appellee. The fact that the spaces for the document number, page and book numbers were not filled up in the photostatic copy presented by the representative of the Bureau of Records Management does not militate against the genuineness of the document. It simply means that the copy sent to the said Bureau happens to have those spaces unfilled up (sic). But the sending of a copy of the document to the Bureau of Records Management attests strongly to the existence of such document, the original of which was duly executed, complete with the aforesaid data duly indicated thereon, as shown by the xerox copy certified true by the Notary Public. Indeed, in the absence of positive and convincing proof of forgery, a public instrument executed with the intervention of a Notary Public must be held in high respect and accorded full integrity, if only upon the presumption of the regularity of official functions as in the nature of those upon the presumption of the regularity of official functions as in the nature of those of a notary public (Bautista vs. Dy Bun Chin, 49 OG 179; El Hogar Filipino vs. Olviga, 60 Phil. 17). Subsequently, the respondent Court, acting on private respondent's motion for reconsideration, promulgated on 21 March 1979 the challenged Resolution 3 setting aside the earlier decision and affirmed, in toto, the ruling of the trial court, thus: . . . the respondent (DANR) Secretary had gone beyond his statutory authority and had clearly acted in abuse of discretion in giving due weight to the alleged option to repurchase whose (sic) genuiness (sic) and due execution had been impugned and denied by petitioner-appellee (Deypalubos). While the certified true copy of the option to repurchase may have been the basis of the respondent Secretary in resolving the motion for reconsideration, the Court believes that he should have first ordered the presentation of evidence to resolve this factual issue considering the conflicting claims of the parties. As earlier pointed out, all that was submitted to the Bureau of Fisheries and consequently to the respondent Secretary, was a xerox copy of the questioned document which was certified to by a notary public to be a copy of a deed found in his notarial file which did not bear any specimen of the signatures of the contracting parties. And assuming that a certification made by a notary public as to the existence of a document should be deemed an affirmation that such document actually exists. Nevertheless, (sic) when such claim is impugned, the one who assails the existence of a document should be afforded the opportunity to prove such claim, because, at most, the presumption of regularity in the performance of

official duties is merely disputable and can be rebutted by convincing and positive evidence to the contrary. His motion for reconsideration having been denied, the petitioner filed the instant petition for review. Petitioner contends that the Rules of Court should not be strictly applied to administrative proceedings and that the findings of fact of administrative bodies, absent a showing of arbitrariness, should be accorded respect. While the petition has merit, petitioner's victory is hollow and illusory for, as shall hereafter be shown, even as We reverse the assailed resolution of the respondent Court of Appeals, the questioned decision of the Secretary must, nevertheless, be set aside on the basis of an erroneous conclusion of law with respect to the Option to Repurchase. The respondent Court correctly held in its decision of 6 December 1978 that the respondent Secretary provided the private respondent sufficient opportunity to question the authenticity of the Option to Repurchase and committed no grave abuse of discretion in holding that the same was in fact executed by private respondent. We thus find no sufficient legal and factual moorings for respondent Court's sudden turnabout in its resolution of 21 March 1979. That private respondent and his wife executed the Option to Repurchase in favor of petitioner on 25 October 1960 is beyond dispute. As determined by the respondent Court in its decision of 6 December 1978, private respondent's wife, Edelina Duyo, admitted having affixed her signature to the said document. Besides, the trial court itself in Criminal Case No. 520 which was jointly tried with the civil case, acquitted both the petitioners and the notary public, before whom the Option to Repurchase was acknowledged, of the crime of falsification of said document. We hold, however, that the respondent Secretary gravely erred in holding that private respondent's non-disclosure and suppression of the fact that 4.4 hectares of the area subject of the application is burdened with or encumbered by the Option to Repurchase constituted a falsehood or a misrepresentation of an essential or material fact which, under the second paragraph of Section 29 of Fisheries Administrative Order No. 60 earlier quoted, "shall ipso facto cause the cancellation of the permit or lease." In short, the Secretary was of the opinion that the Option to Repurchase was an encumbrance on the property which affected the absolute and exclusive character of private respondent's ownership over the 4.4 hectares sold to him by petitioner. This is a clear case of a misapplication of the law on conventional redemption and a misunderstanding of the effects of a right to repurchase granted subsequently in an instrument different from the original document of sale. Article 1601 of the Civil Code provides: Conventional redemption shall take place when the vendor reserves the right to repurchase the thing sold, with the obligation to comply with the provisions of article 1616 and other stipulations which may have been agreed upon. In Villarica, et al. vs. Court of Appeals, et al., 4 decided on 29 November 1968, or barely seven (7) days before the respondent Court promulgated its decision in this case, this Court, interpreting the above Article, held: The right of repurchase is not a right granted the vendor by the vendee in a subsequent instrument, but is a right reserved by the vendor in the same instrument of sale as one of the stipulations of the contract. Once the instrument of absolute sale is executed, the vendor can no longer reserve the right to repurchase, and any right thereafter granted the vendor by the vendee in a separate instrument cannot be a right of repurchase but some other right like the option to buy in the instant case. . . . In the earlier case of Ramos, et al. vs. Icasiano, et al., 5 decided in 1927, this Court had already ruled that "an agreement to repurchase becomes a promise to sell when made after the sale, because when the sale is made without such an agreement, the purchaser acquires the thing sold absolutely, and if he afterwards grants the vendor the right to repurchase, it is a new

contract entered into by the purchaser, as absolute owner already of the object. In that case the vendor has not reserved to himself the right to repurchase." In Vda. de Cruzo, et al. vs. Carriaga, et al., 6 this Court found another occasion to apply the foregoing principle. Hence, the Option to Repurchase executed by private respondent in the present case, was merely a promise to sell, which must be governed by Article 1479 of the Civil Code which reads as follows: Art. 1479. A promise to buy and sell a determinate thing for a price certain is reciprocally demandable. 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. A copy of the so-called Option to Repurchase is neither attached to the records nor quoted in any of the pleadings of the parties. This Court cannot, therefore, properly rule on whether the promise was accepted and a consideration distinct from the price, supports the option. Undoubtedly, in the absence of either or both acceptance and separate consideration, the promise to sell is not binding upon the promissor (private respondent). A unilateral promise to buy or sell is a mere offer, which is not converted into a contract except at the moment it is accepted. Acceptance is the act that gives life to a juridical obligation, because, before the promise is accepted, the promissor may withdraw it at any time. Upon acceptance, however, a bilateral contract to sell and to buy is created, and the offeree ipso facto assumes the obligations of a purchaser; the offeror, on the other hand, would be liable for damages if he fails to deliver the thing he had offered for sale. xxx xxx xxx . . . The contract of option is a separate and distinct contract from the contract which the parties may enter into upon the consummation of the option, and a consideration for an optional contract is just as important as the consideration for any other kind of contract. Thus, a distinction should be drawn between the consideration for the option to repurchase, and the consideration for the contract of repurchase itself. 7 Even if the promise was accepted, private respondent was not bound thereby in the absence of a distinct consideration. 8 It may be true that the foregoing issues were not squarely raised by the parties. Being, however, intertwined with the issue of the correctness of the decision of the respondent Secretary and, considering further that the determination of said issues is essential and indispensable for the rendition of a just decision in this case, this Court does not hesitate to rule on them. In Hernandez vs. Andal, 9 this Court held: If the appellants' assignment of error be not considered a direct challenge to the decision of the court below, we still believe that the objection takes a narrow view of practice and procedure contrary to the liberal spirit which pervades the Rules of Court. The first injunction of the new Rules (Rule 1, section 2) is that they "shall be liberally construed in order to promote their object and to assist the parties in obtaining just, speedy, and inexpensive determination of every action and proceeding." In line with the modern trends of procedure, we are told that, "while an assignment of error which is required by law or rule of court has been held essential to appellate review, and only those assigned will be considered, there are a number of cases which appear to accord to the appellate court a broad discretionary power to waive the lack of proper assignment of errors and consider errors not assigned. And an unassigned

error closely related to an error properly assigned, or upon which the determination of the question raised by the error properly assigned is dependent, will be considered by the appellate court notwithstanding the failure to assign it as error." (4 C.J.S., 1734; 3 C.J., 1341, footnote 77). At the least, the assignment of error, viewed in this light, authorizes us to examine and pass upon the decision of the court below. In Insular Life Assurance Co., Ltd. Employees Association-NATU vs. Insular Life Assurance Co., Ltd., 10 this Court ruled: . . . (t)he Supreme Court has ample authority to review and resolve matter not assigned and specified as errors by either of the parties in the appeal if it finds the consideration and determination of the same essential and indispensable in order to arrive at a just decision in the case. 11 This Court, thus, has the authority to waive the lack of proper assignment of errors if the unassigned errors closely relate to errors properly pinpointed out or if the unassigned errors refer to matters upon which the determination of the questions raised by the errors properly assigned depend. 12 The same also applies to issues not specifically raised by the parties. The Supreme Court, likewise, has broad discretionary power, in the resolution of a controversy, to take into consideration matters on record which the parties fail to submit to the Court as specific questions for determination. 13 Where the issues already raised also rest on other issues not specifically presented, as long as the latter issues bear relevance and close relation to the former and as long as they arise from matters on record, the Court has the authority to include them in its discussion of the controversy as well as to pass upon them. In brief, in those cases wherein questions not particularly raised by the parties surface as necessary for the complete adjudication of the rights and obligations of the parties and such questions fall within the issues already framed by the parties, the interests of justice dictate that the Court consider and resolve them. WHEREFORE, the instant petition is GRANTED. The Resolution of respondent Court of Appeals of 21 March 1979 in C.A.-G.R. No. SP-04866 and the Decision of the trial court in Civil Case No. 8209, insofar as they declare, for the reasons therein given, Fishpond Lease Agreement No. 1372, valid and binding, are hereby REVERSED and SET ASIDE. The challenged Orders of the respondent Secretary of Agriculture and Natural Resources of 29 August 1969, 20 November 1969 and 21 April 1970 are likewise REVERSED and SET ASIDE and Fishpond Lease Agreement No. 1372 is ordered REINSTATED.

G.R. No. 83759 July 12, 1991 SPOUSES CIPRIANO VASQUEZ and VALERIANA GAYANELO, petitioners, vs. HONORABLE COURT OF APPEALS and SPOUSES MARTIN VALLEJERA and APOLONIA OLEA, respondents. Dionisio C. Isidto for petitioners. Raymundo Lozada, Jr. for private respondents.

Defendants moved for, but were denied reconsideration. Excepting thereto, defendants-appealed, . . . (Rollo, pp. 44-45) The petition was given due course in a resolution dated February 12, 1990. The petitioners insist that they can not be compelled to resell Lot No. 1860 of the Himamaylan Cadastre. They contend that the nature of the sale over the said lot between them and the private respondents was that of an absolute deed of sale and that the right thereafter granted by them to the private respondents (Right to Repurchase, Exhibit "E") can only be either an option to buy or a mere promise on their part to resell the property. They opine that since the "RIGHT TO REPURCHASE" was not supported by any consideration distinct from the purchase price it is not valid and binding on the petitioners pursuant to Article 1479 of the Civil Code. The document denominated as "RIGHT TO REPURCHASE" (Exhibit E) provides:

GUTIERREZ, JR., J.:p RIGHT TO REPURCHASE This petition seeks to reverse the decision of the Court of Appeals which affirmed the earlier decision of the Regional Trial Court, 6th Judicial Region, Branch 56, Himamaylan, Negros Occidental in Civil Case No. 839 (for specific performance and damages) ordering the petitioners (defendants in the civil case) to resell Lot No. 1860 of the Cadastral Survey of Himamaylan, Negros Occidental to the respondents (plaintiffs in the civil case) upon payment by the latter of the amount of P24,000.00 as well as the appellate court's resolution denying a motion for reconsideration. In addition, the appellate court ordered the petitioners to pay the amount of P5,000.00 as necessary and useful expenses in accordance with Article 1616 of the Civil Code. The facts of the case are not in dispute. They are summarized by the appellate court as follows: On January 15, 1975, the plaintiffs-spouses (respondents herein) filed this action against the defendantsspouses (petitioners herein) seeking to redeem Lot No. 1860 of the Himamaylan Cadastre which was previously sold by plaintiffs to defendants on September 21, 1964. The said lot was registered in the name of plaintiffs. On October 1959, the same was leased by plaintiffs to the defendants up to crop year 1966-67, which was extended to crop year 1968-69. After the execution of the lease, defendants took possession of the lot, up to now and devoted the same to the cultivation of sugar. On September 21, 1964, the plaintiffs sold the lot to the defendants 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 (Exh. E), was executed by the parties granting plaintiffs the right to repurchase the lot for P12,000.00, said Exh. E likewise duly ratified and notarized. By virtue of the sale, defendants secured TCT No. T-58898 in their name. On January 2, 1969, plaintiffs sold the same lot to Benito Derrama, Jr., after securing the defendants' title, for the sum of P12,000.00. Upon the protestations of defendant, assisted by counsel, the said second sale was cancelled after the payment of P12,000.00 by the defendants to Derrama. Defendants resisted this action for redemption on the premise that Exh. E 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 court below rendered judgment against the defendants, ordering them to resell lot No. 1860 of the Himamaylan Cadastre to the plaintiffs for the repurchase price of P24,000.00, which amount combines the price paid for the first sale and the price paid by defendants to Benito Derrama, Jr. KNOW ALL MEN BY THESE PRESENTS: I, CIPRIANO VASQUEZ, . . ., do hereby grant the spouses Martin Vallejera and Apolonia Olea, their heirs and assigns, the right to repurchase said Lot No. 1860 for the sum of TWELVE THOUSAND PESOS (P12,000.00), Philippine Currency, within the period TEN (10) YEARS from the agricultural year 19691970 when my contract of lease over the property shall expire and until the agricultural year 1979-1980. IN WITNESS WHEREOF, I have hereunto signed my name at Binalbagan, Negros Occidental, this 21st day of September, 1964. SGD. CIPRIANO VASQUEZ SGD. VALERIANA G. VASQUEZ SGD. FRANCISCO SANICAS (Rollo, p. 47) The Court of Appeals, applying the principles laid down in the case of Sanchez v. Rigos, 45 SCRA 368 [1972] decided in favor of the private respondents. In the Sanchez case, plaintiff-appellee Nicolas Sanchez and defendant-appellant Severino Rigos executed a document entitled "Option to Purchase," whereby Mrs. Rigos "agreed, promised and committed . . . to sell" to Sanchez for the sum of P1,510.00, a registered parcel of land within 2 years from execution of the document with the condition that said option shall be deemed "terminated and lapsed," if "Sanchez shall fail to exercise his right to buy the property" within the stipulated period. In the same document, Sanchez" . . . hereby agree and conform with all the conditions set forth in the option to purchase executed in my favor, that I bind myself with all the terms and conditions." (Emphasis supplied) The notarized document was signed both by Sanchez and Rigos. After several tenders of payment of the agreed sum of P1,510.00 made by Sanchez within the stipulated period were rejected by Rigos, the former deposited said amount with the Court of First Instance of Nueva Ecija and filed an action for specific performance and damages against Rigos.

The lower court rendered judgment in favor of Sanchez and ordered Rigos to accept the sum judicially consigned and to execute in Sanchez' favor the requisite deed of conveyance. Rigos appealed the case to the Court of Appeals which certified to this Court on the ground that it involves a pure question of law. This Court after deliberating on two conflicting principles laid down in the cases of Southwestern Sugar and Molasses Co. v. Atlantic Gulf and Pacific Co., (97 Phil. 249 [1955]) and Atkins, Kroll & Co., Inc. v. Cua Hian Tek, 102 Phil. 948 [1958]) arrived at the conclusion that Article 1479 of the Civil Code which provides: Art. 1479. A promise to buy and sell a determinate thing for a price certain is reciprocally demandable. An accepted unilateral promise to buy or to sell a determinate thing for a price certain is binding upon the promissory if the promise is supported by a consideration distinct from the price. and Article 1324 thereof which provides: Art. 1324. When the offerer has allowed the offerer a certain period to accept, the offer may be withdrawn at any time before acceptance by communicating such withdrawal, except when the option is founded upon a consideration, as something paid or promised. should be reconciled and harmonized to avoid a conflict between the two provisions. In effect, the Court abandoned the ruling in the Southwestern Sugar and Molasses Co. case and reiterated the ruling in the Atkins, Kroll and Co. case, to wit: However, this Court itself, in the case of Atkins, Kroll and Co., Inc. v. Cua Hian Tek, (102 Phil. 948, 951952) decided later than Southwestern Sugar & Molasses Co. v. Atlantic Gulf & Pacific Co., (supra) saw no distinction between Articles 1324 and 1479 of the Civil Code and applied the former where a unilateral promise to sell similar to the one sued upon here was involved, treating such promise as an option which, although not binding as a contract in itself for lack of separate consideration, nevertheless generated a bilateral contract of purchase and sale upon acceptance. Speaking through Associate Justice, later Chief Justice, Cesar Bengzon, this Court said: Furthermore, an option is unilateral: a promise to sell at the price fixed whenever the offeree should decide to exercise his option within the specified time. After accepting the promise and before he exercises his option, the holder of the option is 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 obligation of a purchaser. He did not just get the right subsequently to buy or not to buy. It was not a mere option then; it was bilateral contract of sale. Lastly, even supposing that Exh. A granted an option which is not binding for lack of consideration, the authorities hold that If the option is given without a consideration, it is a mere offer of a contract of sale, which is not binding until accepted. If, however, acceptance is made before a withdrawal, it constitutes a binding contract of sale, even though the option was not supported by a sufficient consideration . . . (77 Corpus Juris Secundum p. 652. See also 27 Ruling Case Law 339 and cases cited.) This Court affirmed the lower court's decision although the promise to sell was not supported by a consideration distinct from the price. It was obvious that Sanchez, the promisee, accepted the option to buy before Rigos, the promisor, withdrew the

same. Under such circumstances, the option to purchase was converted into a bilateral contract of sale which bound both parties. In the instant case and contrary to the appellate court's finding, it is clear that the right to repurchase was not supported by a consideration distinct from the price. The rule is that the promisee has the burden of proving such consideration. Unfortunately, the private respondents, promisees in the right to repurchase failed to prove such consideration. They did not even allege the existence thereof in their complaint. (See Sanchez v. Rigos supra) Therefore, in order that the Sanchez case can be applied, the evidence must show that the private respondents accepted the right to repurchase. The record, however, does not show that the private respondents accepted the "Right to Repurchase" the land in question. We disagree with the appellate court's finding that the private respondents accepted the "right to repurchase" under the following circumstances: . . as evidenced by the annotation and registration of the same on the back of the transfer of certificate of title in the name of appellants. As vividly appearing therein, it was signed by appellant himself and witnessed by his wife so that for all intents and purposes the Vasquez spouses are estopped from disregarding its obvious purpose and intention." The annotation and registration of the right to repurchase at the back of the certificate of title of the petitioners can not be considered as acceptance of the right to repurchase. Annotation at the back of the certificate of title of registered land is for the purpose of binding purchasers of such registered land. Thus, we ruled in the case of Bel Air Village Association, Inc. v. Dionisio (174 SCRA 589 [1989]), citing Tanchoco v. Aquino (154 SCRA 1 [1987]), and Constantino v. Espiritu (45 SCRA 557 [1972]) that purchasers of a registered land are bound by the annotations found at the back of the certificate of title covering the subject parcel of land. In effect, the annotation of the right to repurchase found at the back of the certificate of title over the subject parcel of land of the private respondents only served as notice of the existence of such unilateral promise of the petitioners to resell the same to the private respondents. This, however, can not be equated with acceptance of such right to repurchase by the private respondent. Neither can the signature of the petitioners in the document called "right to repurchase" signify acceptance of the right to repurchase. The respondents did not sign the offer. Acceptance should be made by the promisee, in this case, the private respondents and not the promisors, the petitioners herein. It would be absurd to require the promisor of an option to buy to accept his own offer instead of the promisee to whom the option to buy is given. Furthermore, the actions of the private respondents (a) filing a complaint to compel re-sale and their demands for resale prior to filing of the complaint cannot be considered acceptance. As stated in Vda. de Zulueta v. Octaviano (121 SCRA 314 [1983]): And even granting, arguendo that the sale was a pacto de retro sale, the evidence shows that Olimpia, through her lawyer, opted to repurchase the land only on 16 February 1962, approximately two years beyond the stipulated period, that is not later than May, 1960. If Olimpia could not locate Aurelio, as she contends, and based on her allegation that the contract between her was one of sale with right to repurchase, neither, however, did she tender the redemption price to private respondent Isauro, but merely wrote him letters expressing her readiness to repurchase the property. It is clear that the mere sending of letters by the vendor expressing his desire to repurchase the property without accompanying tender of the redemption price fell short of the requirements of law. (Lee v. Court of Appeals, 68 SCRA 197 [1972]) Neither did petitioner make a judicial consignation of the repurchase price within the agreed period.

In a contract of sale with a right of repurchase, the redemptioner who may offer to make the repurchase on the option date of redemption should deposit the full amount in court . . . (Rumbaoa v. Arzaga, 84 Phil. 812 [1949]) To effectively exercise the right to repurchase the vendor a retro must make an actual and simultaneous tender of payment or consignation. (Catangcatang v. Legayada, 84 SCRA 51 [1978]) The private respondents' ineffectual acceptance of the option to buy validated the petitioner's refusal to sell the parcel which can be considered as a withdrawal of the option to buy. We agree with the petitioners that the case of Vda. de Zulueta v. Octaviano, (supra) is in point. Stripped of non-essentials the facts of the Zulueta case are as follows: On November 25, 1952 (Emphasis supplied) Olimpia Fernandez Vda. de Zulueta, the registered owner of a 5.5 hectare riceland sold the lot to private respondent Aurelio B. Octaviano for P8,600.00 subject to certain terms and conditions. The contract was an absolute and definite sale. On the same day, November 25, 1952, (Emphasis supplied) the vendee, Aurelio signed another document giving the vendor Zulueta the "option to repurchase" the property at anytime after May 1958 but not later than May 1960. When however, Zulueta tried to exercise her "option to buy" the property, Aurelio resisted the same prompting Zulueta to commence suit for recovery of ownership and possession of the property with the then Court of First Instance of Iloilo. The trial court ruled in favor of Zulueta. Upon appeal, however, the Court of Appeals reversed the trial court's decision. We affirmed the appellate court's decision and ruled: The nature of the transaction between Olimpia and Aurelio, from the context of Exhibit "E" is not a sale with right to repurchase. Conventional redemption takes place "when the vendor reserves the right to repurchase the thing sold, with the obligation to comply with the provisions of Article 1616 and other stipulations which may have been agreed upon. (Article 1601, Civil Code). In this case, there was no reservation made by the vendor, Olimpia, in the document Exhibit "E" the "option to repurchase" was contained in a subsequent document and was made by the vendee, Aurelio. Thus, it was more of an option to buy or a mere promise on the part of the vendee, Aurelio, to resell the property to the vendor, Olimpia. (10 Manresa, p. 311 cited in Padilla's Civil Code Annotated, Vol. V, 1974 ed., p. 467) As held in Villarica v. Court of Appeals (26 SCRA 189 [1968]): The right of repurchase is not a right granted the vendor by the vendee in a subsequent instrument, but is a right reserved by the vendor in the same instrument of sale as one of the stipulations of the contract. Once the instrument of absolute sale is executed, the vendor can no longer reserve the right to repurchase, and any right thereafter granted the vendor by the vendee in a separate instrument cannot be a right of repurchase but some other right like the option to buy in the instant case. . . (Emphasis supplied) The appellate court rejected the application of the Zulueta case by stating: . . . [A]s found by the trial court from which we quote with approval below, the said cases involve the lapse of several days for the execution of separate instruments after the execution of the deed of sale, while the instant case involves the execution of an instrument, separate as it is, but executed on the same day, and notarized by the same notary public, to wit:

A close examination of Exh. "E" reveals that although it is a separate document in itself, it is far different from the document which was pronounced as an option by the Supreme Court in the Villarica case. The option in the Villarica case was executed several days after the execution of the deed of sale. In the present case, Exh. "E" was executed and ratified by the same notary public and the Deed of Sale of Lot No. 1860 by the plaintiffs to the defendants were notarized by the same notary public and entered in the same page of the same notarial register . . . The latter case (Vda. de Zulueta v. Octaviano, supra), likewise involved the execution of the separate document after an intervention of several days and the question of laches was decided therein, which is not present in the instant case. That distinction is therefore crucial and We are of the opinion that the appellee's right to repurchase has been adequately provided for and reserved in conformity with Article 1601 of the Civil Code, which states: Conventional redemption shall take place when the vendor reserves the right to repurchase the thing sold, with the obligation to comply with the provision of Article 1616 and other stipulations which may have been agreed upon. (Rollo, pp. 46-47) Obviously, the appellate court's findings are not reflected in the cited decision. As in the instant case, the option to repurchase involved in the Zulueta case was executed in a separate document but on the same date that the deed of definite sale was executed. While it is true that this Court in the Zulueta case found Zulueta guilty of laches, this, however, was not the primary reason why this Court disallowed the redemption of the property by Zulueta. It is clear from the decision that the ruling in the Zulueta case was based mainly on the finding that the transaction between Zulueta and Octaviano was not a sale with right to repurchase and that the "option to repurchase was but an option to buy or a mere promise on the part of Octaviano to resell the property to Zulueta. In the instant case, since the transaction between the petitioners and private respondents was not a sale with right to repurchase, the private respondents cannot avail of Article 1601 of the Civil Code which provides for conventional redemption. WHEREFORE, the petition is GRANTED. The questioned decision and resolution of the Court of Appeals are hereby REVERSED and SET ASIDE. The complaint in Civil Case No. 839 of the then Court of First Instance of Negros Occidental 12th Judicial District Branch 6 is DISMISSED. No costs. SO ORDERED.

G.R. No. 109125 December 2, 1994 ANG YU ASUNCION, ARTHUR GO AND KEH TIONG, petitioners, vs. THE HON. COURT OF APPEALS and BUEN REALTY DEVELOPMENT CORPORATION, respondents. Antonio M. Albano for petitioners. Umali, Soriano & Associates for private respondent.

the option to purchase the property or of first refusal, otherwise, defendants need not offer the property to the plaintiffs if the purchase price is higher than Eleven Million Pesos. SO ORDERED. Aggrieved by the decision, plaintiffs appealed to this Court in CA-G.R. CV No. 21123. In a decision promulgated on September 21, 1990 (penned by Justice Segundino G. Chua and concurred in by Justices Vicente V. Mendoza and Fernando A. Santiago), this Court affirmed with modification the lower court's judgment, holding: In resume, there was no meeting of the minds between the parties concerning the sale of the property. Absent such requirement, the claim for specific performance will not lie. Appellants' demand for actual, moral and exemplary damages will likewise fail as there exists no justifiable ground for its award. Summary judgment for defendants was properly granted. Courts may render summary judgment when there is no genuine issue as to any material fact and the moving party is entitled to a judgment as a matter of law (Garcia vs. Court of Appeals, 176 SCRA 815). All requisites obtaining, the decision of the court a quo is legally justifiable. WHEREFORE, finding the appeal unmeritorious, the judgment appealed from is hereby AFFIRMED, but subject to the following modification: The court a quo in the aforestated decision gave the plaintiffs-appellants the right of first refusal only if the property is sold for a purchase price of Eleven Million pesos or lower; however, considering the mercurial and uncertain forces in our market economy today. We find no reason not to grant the same right of first refusal to herein appellants in the event that the subject property is sold for a price in excess of Eleven Million pesos. No pronouncement as to costs. SO ORDERED. The decision of this Court was brought to the Supreme Court by petition for review on certiorari. The Supreme Court denied the appeal on May 6, 1991 "for insufficiency in form and substances" (Annex H, Petition). On November 15, 1990, while CA-G.R. CV No. 21123 was pending consideration by this Court, the Cu Unjieng spouses executed a Deed of Sale (Annex D, Petition) transferring the property in question to herein petitioner Buen Realty and Development Corporation, subject to the following terms and conditions: 1. That for and in consideration of the sum of FIFTEEN MILLION PESOS (P15,000,000.00), receipt of which in full is hereby acknowledged, the VENDORS hereby sells, transfers and conveys for and in favor of the VENDEE, his heirs, executors, administrators or assigns, the above-described property with all the improvements found therein including all the rights and interest in the said property free from all liens and encumbrances of whatever nature, except the pending ejectment proceeding; 2. That the VENDEE shall pay the Documentary Stamp Tax, registration fees for the transfer of title in his favor and other expenses incidental to the sale of abovedescribed property including capital gains tax and accrued real estate taxes.

VITUG, J.: Assailed, in this petition for review, is the decision of the Court of Appeals, dated 04 December 1991, in CA-G.R. SP No. 26345 setting aside and declaring without force and effect the orders of execution of the trial court, dated 30 August 1991 and 27 September 1991, in Civil Case No. 87-41058. The antecedents are recited in good detail by the appellate court thusly: On July 29, 1987 a Second Amended Complaint for Specific Performance was filed by Ang Yu Asuncion and Keh Tiong, et al., against Bobby Cu Unjieng, Rose Cu Unjieng and Jose Tan before the Regional Trial Court, Branch 31, Manila in Civil Case No. 87-41058, alleging, among others, that plaintiffs are tenants or lessees of residential and commercial spaces owned by defendants described as Nos. 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 October 9, 1986, defendants informed plaintiffs 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 P6million while plaintiffs made a counter offer of P5-million; that plaintiffs thereafter asked the defendants to put their offer in writing to which request defendants acceded; that in reply to defendant's letter, plaintiffs wrote them on October 24, 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 January 28, 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. Defendants filed their answer denying the material allegations of the complaint and interposing a special defense of lack of cause of action. 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. Thus the dispositive portion of the decision states: WHEREFORE, judgment is hereby rendered in favor of the defendants and against the plaintiffs summarily dismissing the complaint subject to the aforementioned condition that if the defendants subsequently decide to offer their property for sale for a purchase price of Eleven Million Pesos or lower, then the plaintiffs has

As a consequence of the sale, TCT No. 105254/T-881 in the name of the Cu Unjieng spouses was cancelled and, in lieu thereof, TCT No. 195816 was issued in the name of petitioner on December 3, 1990. On July 1, 1991, petitioner as the new owner of the subject property wrote a letter to the lessees demanding that the latter vacate the premises. On July 16, 1991, the lessees wrote a reply to petitioner stating that petitioner brought the property subject to the notice of lis pendens regarding Civil Case No. 87-41058 annotated on TCT No. 105254/T881 in the name of the Cu Unjiengs. The lessees filed a Motion for Execution dated August 27, 1991 of the Decision in Civil Case No. 87-41058 as modified by the Court of Appeals in CA-G.R. CV No. 21123. On August 30, 1991, respondent Judge issued an order (Annex A, Petition) quoted as follows: Presented before the Court is a Motion for Execution filed by plaintiff represented by Atty. Antonio Albano. Both defendants Bobby Cu Unjieng and Rose Cu Unjieng represented by Atty. Vicente Sison and Atty. Anacleto Magno respectively were duly notified in today's consideration of the motion as evidenced by the rubber stamp and signatures upon the copy of the Motion for Execution. The gist of the motion is that the Decision of the Court dated September 21, 1990 as modified by the Court of Appeals in its decision in CA G.R. CV-21123, and elevated to the Supreme Court upon the petition for review and that the same was denied by the highest tribunal in its resolution dated May 6, 1991 in G.R. No. L-97276, had now become final and executory. As a consequence, there was an Entry of Judgment by the Supreme Court as of June 6, 1991, stating that the aforesaid modified decision had already become final and executory. It is the observation of the Court that this property in dispute was the subject of the Notice of Lis Pendens and that the modified decision of this Court promulgated by the Court of Appeals which had become final to the effect that should the defendants decide to offer the property for sale for a price of P11 Million or lower, and considering the mercurial and uncertain forces in our market economy today, the same right of first refusal to herein plaintiffs/appellants in the event that the subject property is sold for a price in excess of Eleven Million pesos or more. WHEREFORE, defendants are hereby ordered 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 plaintiffs' right of first refusal and that a new Transfer Certificate of Title be issued in favor of the buyer. All previous transactions involving the same property notwithstanding the issuance of another title to Buen Realty Corporation, is hereby set aside as having been executed in bad faith. SO ORDERED.

On September 22, 1991 respondent Judge issued another order, the dispositive portion of which reads: WHEREFORE, let there be Writ of Execution issue in the above-entitled case directing the Deputy Sheriff Ramon Enriquez of this Court to implement said Writ of Execution ordering the defendants among others to comply with the aforesaid Order of this Court within a period of one (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. SO ORDERED. On the same day, September 27, 1991 the corresponding writ of execution (Annex C, Petition) was issued. 1 On 04 December 1991, the appellate court, on appeal to it by private respondent, set aside and declared without force and effect the above questioned orders of the court a quo. In this petition for review on certiorari, petitioners contend that Buen Realty can be held bound by the writ of execution by virtue of the notice of lis pendens, carried over on TCT No. 195816 issued in the name of Buen Realty, at the time of the latter's purchase of the property on 15 November 1991 from the Cu Unjiengs. We affirm the decision of the appellate court. A not too recent development in real estate transactions is the adoption of such arrangements as the right of first refusal, a purchase option and a contract to sell. For ready reference, we might point out some fundamental precepts that may find some relevance to this discussion. An obligation is a juridical necessity to give, to do or not to do (Art. 1156, Civil Code). The obligation is constituted upon the concurrence of the essential elements thereof, viz: (a) The vinculum juris or juridical tie which is the efficient cause established by the various sources of obligations (law, contracts, quasi-contracts, delicts and quasi-delicts); (b) the object which is the prestation or conduct; required to be observed (to give, to do or not to do); and (c) the subject-persons who, viewed from the demandability of the obligation, are the active (obligee) and the passive (obligor) subjects. Among the sources of an obligation is a contract (Art. 1157, Civil Code), 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 (Art. 1305, Civil Code). A contract undergoes various stages that include its negotiation or preparation, its perfection and, finally, its consummation. Negotiation covers the period from the time the prospective contracting parties indicate interest in the contract to the time the contract is concluded (perfected). The perfection of the contract takes place upon the concurrence of the essential elements thereof. A contract which is consensual as to perfection is so established upon a mere meeting of minds, i.e., the concurrence of offer and acceptance, on the object and on the cause thereof. A contract which requires, in addition to the above, the delivery of the object of the agreement, as in a pledge or commodatum, is commonly referred to as a real contract. In a solemn contract, compliance with certain formalities prescribed by law, such as in a donation of real property, is essential in order to make the act valid, the prescribed form being thereby an essential element thereof. The stage of consummation begins when the parties perform their respective undertakings under the contract culminating in the extinguishment thereof.

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 topic for discussion about 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. Article 1458 of the Civil Code provides: Art. 1458. By the contract of sale one of the contracting parties obligates himself to transfer the ownership of and to deliver a determinate thing, and the other to pay therefor a price certain in money or its equivalent. A contract of sale may be absolute or conditional. When the sale is not absolute but conditional, such as in a "Contract to Sell" where invariably the ownership of the thing sold is retained until the fulfillment of a positive suspensive condition (normally, the full payment of the purchase price), the breach of the condition will prevent the obligation to convey title from acquiring an obligatory force. 2 In Dignos vs. Court of Appeals (158 SCRA 375), we have said that, although denominated a "Deed of Conditional Sale," a sale is still absolute where the contract is devoid of any proviso that title is reserved or the right to unilaterally rescind is stipulated, e.g., until or unless the price is paid. Ownership will then be transferred to the buyer upon actual or constructive delivery (e.g., by the execution of a public document) of the property sold. Where the condition is imposed upon the perfection of the contract itself, the failure of the condition would prevent such perfection. 3 If the condition is imposed on the obligation of a party which is not fulfilled, the other party may either waive the condition or refuse to proceed with the sale (Art. 1545, Civil Code). 4 An unconditional mutual promise to buy and sell, as long as the object is made determinate and the price is fixed, can be obligatory on the parties, and compliance therewith may accordingly be exacted. 5 An accepted unilateral promise which specifies the thing to be sold and the price to be paid, when coupled with a valuable consideration distinct and separate from the price, is what may properly be termed a perfected contract of option. This contract is legally binding, and in sales, it conforms with the second paragraph of Article 1479 of the Civil Code, viz: Art. 1479. . . . 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. (1451a) 6 Observe, however, that the option is not the contract of sale itself. 7 The optionee has the right, but not the obligation, to buy. Once the option is exercised timely, i.e., the offer is accepted before a breach of the option, a bilateral promise to sell and to buy ensues and both parties are then reciprocally bound to comply with their respective undertakings. 8 Let us elucidate a little. A negotiation is formally initiated by an offer. An imperfect promise (policitacion) is merely an offer. Public advertisements or solicitations and the like are ordinarily construed as mere invitations to make offers or only as proposals. These relations, until a contract is perfected, are not considered binding commitments. Thus, at any time prior to the perfection of the contract, either negotiating party may stop the negotiation. The offer, at this stage, may be withdrawn; the withdrawal is effective immediately after its manifestation, such as by its mailing and not necessarily when the offeree learns of the withdrawal (Laudico vs. Arias, 43 Phil. 270). Where a period is given to the offeree within which to accept the offer, the following rules generally govern: (1) If the period is not itself founded upon or supported by a consideration, the offeror is still free and has the right to withdraw the offer before its acceptance, or, if an acceptance has been made, before the offeror's coming to know of such fact, by communicating that withdrawal to the offeree (see Art. 1324, Civil Code; see also Atkins, Kroll & Co. vs. Cua, 102 Phil. 948, holding that this rule is applicable to a unilateral promise to sell under Art. 1479, modifying the previous decision in South Western Sugar vs. Atlantic Gulf, 97 Phil. 249; see also Art. 1319, Civil Code; Rural Bank of Paraaque, Inc., vs. Remolado, 135

SCRA 409; Sanchez vs. Rigos, 45 SCRA 368). The right to withdraw, however, must not be exercised whimsically or arbitrarily; otherwise, it could give rise to a damage claim under Article 19 of the Civil Code which ordains that "every person must, in the exercise of his rights and in the performance of his duties, act with justice, give everyone his due, and observe honesty and good faith." (2) If the period has a separate consideration, a contract of "option" is deemed perfected, and it would be a breach of that contract to withdraw the offer during the agreed period. The option, however, is an independent contract by itself, and it is to be distinguished from the projected main agreement (subject matter of the option) which is obviously yet to be concluded. If, in fact, the optioner-offeror withdraws the offer before its acceptance (exercise of the option) by the optionee-offeree, the latter may not sue for specific performance on the proposed contract ("object" of the option) since it has failed to reach its own stage of perfection. The optioner-offeror, however, renders himself liable for damages for breach of the option. In these cases, care should be taken of the real nature of the consideration given, for if, in fact, it has been intended to be part of the consideration for the main contract with a right of withdrawal on the part of the optionee, the main contract could be deemed perfected; a similar instance would be an "earnest money" in a contract of sale that can evidence its perfection (Art. 1482, Civil Code). In the law on sales, the so-called "right of first refusal" is an innovative juridical relation. Needless to point out, it cannot be deemed a perfected contract of sale under Article 1458 of the Civil Code. Neither can the right of first refusal, understood in its normal concept, per se be brought within the purview of an option under the second paragraph of Article 1479, aforequoted, or possibly of an offer under Article 1319 9 of the same Code. An option or an offer would require, among other things, 10 a clear certainty on both the object and the cause or consideration of the envisioned contract. In a right of first refusal, while the object might be made determinate, the exercise of the right, however, would be dependent not only on the grantor's eventual intention to enter into a binding juridical relation with another but also on terms, including the price, that obviously are yet to be later firmed up. Prior thereto, it can at best be so described as merely belonging to a class of preparatory juridical relations governed not by contracts (since the essential elements to establish the vinculum juris would still be indefinite and inconclusive) but by, among other laws of general application, the pertinent scattered provisions of the Civil Code on human conduct. Even on the premise that such right of first refusal has been decreed under a final judgment, like here, its breach cannot justify correspondingly an issuance of a writ of execution under a judgment that merely recognizes its existence, nor would it sanction an action for specific performance without thereby negating the indispensable element of consensuality in the perfection of contracts. 11 It is not to say, however, that the right of first refusal would be inconsequential for, such as already intimated above, an unjustified disregard thereof, given, for instance, the circumstances expressed in Article 19 12 of the Civil Code, can warrant a recovery for damages. The final judgment in Civil Case No. 87-41058, it must be stressed, has merely accorded a "right of first refusal" in favor of petitioners. The consequence of such a declaration entails no more than what has heretofore been said. In fine, if, as it is here so conveyed to us, petitioners are aggrieved by the failure of private respondents to honor the right of first refusal, the remedy is not a writ of execution on the judgment, since there is none to execute, but an action for damages in a proper forum for the purpose. Furthermore, whether private respondent Buen Realty Development Corporation, the alleged purchaser of the property, has acted in good faith or bad faith and whether or not it should, in any case, be considered bound to respect the registration of the lis pendens in Civil Case No. 87-41058 are matters that must be independently addressed in appropriate proceedings. Buen Realty, not having been impleaded in Civil Case No. 87-41058, cannot be held subject to the writ of execution issued by respondent Judge, let alone ousted from the ownership and possession of the property, without first being duly afforded its day in court. We are also unable to agree with petitioners that the Court of Appeals has erred in holding that the writ of execution varies the terms of the judgment in Civil Case No. 87-41058, later affirmed in CA-G.R. CV-21123. The Court of Appeals, in this regard, has observed:

Finally, the questioned writ of execution is in variance with the decision of the trial court as modified by this Court. As already stated, there was nothing in said decision 13 that decreed the execution of a deed of sale between the Cu Unjiengs and respondent lessees, or the fixing of the price of the sale, or the cancellation of title in the name of petitioner (Limpin vs. IAC, 147 SCRA 516; Pamantasan ng Lungsod ng Maynila vs. IAC, 143 SCRA 311; De Guzman vs. CA, 137 SCRA 730; Pastor vs. CA, 122 SCRA 885). It is likewise quite obvious to us that the decision in Civil Case No. 87-41058 could not have decreed at the time the execution of any deed of sale between the Cu Unjiengs and petitioners. WHEREFORE, we UPHOLD the Court of Appeals in ultimately setting aside the questioned Orders, dated 30 August 1991 and 27 September 1991, of the court a quo. Costs against petitioners. SO ORDERED.

G.R. No. 168325

December 8, 2010

ROBERTO D. TUAZON, Petitioner, vs. LOURDES Q. DEL ROSARIO-SUAREZ, CATALINA R. SUAREZ-DE LEON, WILFREDO DE LEON, MIGUEL LUIS S. DE LEON, ROMMEL LEE S. DE LEON, and GUILLERMA L. SANDICO-SILVA, as attorney-in-fact of the defendants, except Lourdes Q. Del RosarioSuarez, Respondents. DECISION DEL CASTILLO, J.: In a situation where the lessor makes an offer to sell to the lessee a certain property at a fixed price within a certain period, and the lessee fails to accept the offer or to purchase on time, then the lessee loses his right to buy the property and the owner can validly offer it to another. This Petition for Review on Certiorari1 assails the Decision2 dated May 30, 2005 of the Court of Appeals (CA) in CA-G.R. CV No. 78870, which affirmed the Decision3 dated November 18, 2002 of the Regional Trial Court (RTC), Branch 101, Quezon City in Civil Case No. Q-00-42338. Factual Antecedents

On January 8, 2001, respondents filed An Answer with Counterclaim12 praying that the Complaint be dismissed for lack of cause of action. They claimed that the filing of such case was a mere leverage of Roberto against them because of the favorable Decision issued by the MeTC in the ejectment case. On September 17, 2001, the RTC issued an Order13 declaring Lourdes and the De Leons in default for their failure to appear before the court for the second time despite notice. Upon a Motion for Reconsideration,14 the trial court in an Order15 dated October 19, 2001 set aside its Order of default. After trial, the court a quo rendered a Decision declaring the Deed of Absolute Sale made by Lourdes in favor of the De Leons as valid and binding. The offer made by Lourdes to Roberto did not ripen into a contract to sell because the price offered by the former was not acceptable to the latter. The offer made by Lourdes is no longer binding and effective at the time she decided to sell the subject lot to the De Leons because the same was not accepted by Roberto. Thus, in a Decision dated November 18, 2002, the trial court dismissed the complaint. Its dispositive portion reads: WHEREFORE, premises considered, judgment is hereby rendered dismissing the above-entitled Complaint for lack of merit, and ordering the Plaintiff to pay the Defendants, the following: 1. the amount of P30,000.00 as moral damages; 2. the amount of P30,000.00 as exemplary damages; 3. the amount of P30,000.00 as attorneys fees; and

Respondent Lourdes Q. Del Rosario-Suarez (Lourdes) was the owner of a parcel of land, containing more or less an area of 1,211 square meters located along Tandang Sora Street, Barangay Old Balara, Quezon City and previously covered by Transfer Certificate of Title (TCT) No. RT-561184 issued by the Registry of Deeds of Quezon City. On June 24, 1994, petitioner Roberto D. Tuazon (Roberto) and Lourdes executed a Contract of Lease5 over the abovementioned parcel of land for a period of three years. The lease commenced in March 1994 and ended in February 1997. During the effectivity of the lease, Lourdes sent a letter6 dated January 2, 1995 to Roberto where she offered to sell to the latter subject parcel of land. She pegged the price at P37,541,000.00 and gave him two years from January 2, 1995 to decide on the said offer. On June 19, 1997, or more than four months after the expiration of the Contract of Lease, Lourdes sold subject parcel of land to her only child, Catalina Suarez-De Leon, her son-in-law Wilfredo De Leon, and her two grandsons, Miguel Luis S. De Leon and Rommel S. De Leon (the De Leons), for a total consideration of only P2,750,000.00 as evidenced by a Deed of Absolute Sale7 executed by the parties. TCT No. 1779868 was then issued by the Registry of Deeds of Quezon City in the name of the De Leons. The new owners through their attorney-in-fact, Guillerma S. Silva, notified Roberto to vacate the premises. Roberto refused hence, the De Leons filed a complaint for Unlawful Detainer before the Metropolitan Trial Court (MeTC) of Quezon City against him. On August 30, 2000, the MeTC rendered a Decision9 ordering Roberto to vacate the property for non-payment of rentals and expiration of the contract. Ruling of the Regional Trial Court On November 8, 2000, while the ejectment case was on appeal, Roberto filed with the RTC of Quezon City a Complaint10 for Annulment of Deed of Absolute Sale, Reconveyance, Damages and Application for Preliminary Injunction against Lourdes and the De Leons. On November 13, 2000, Roberto filed a Notice of Lis Pendens11 with the Registry of Deeds of Quezon City.

4. cost of the litigation. SO ORDERED.16 Ruling of the Court of Appeals On May 30, 2005, the CA issued its Decision dismissing Robertos appeal and affirming the Decision of the RTC. Hence, this Petition for Review on Certiorari filed by Roberto advancing the following arguments: I. The Trial Court and the Court of Appeals had decided that the "Right of First Refusal" exists only within the parameters of an "Option to Buy", and did not exist when the property was sold later to a third person, under favorable terms and conditions which the former buyer can meet. II. What is the status or sanctions of an appellee in the Court of Appeals who has not filed or failed to file an appellees brief?17 Petitioners Arguments Roberto claims that Lourdes violated his right to buy subject property under

the principle of "right of first refusal" by not giving him "notice" and the opportunity to buy the property under the same terms and conditions or specifically based on the much lower price paid by the De Leons. Roberto further contends that he is enforcing his "right of first refusal" based on Equatorial Realty Development, Inc. v. Mayfair Theater, Inc.18 which is the leading case on the "right of first refusal." Respondents Arguments On the other hand, respondents posit that this case is not covered by the principle of "right of first refusal" but an unaccepted unilateral promise to sell or, at best, a contract of option which was not perfected. The letter of Lourdes to Roberto clearly embodies an option contract as it grants the latter only two years to exercise the option to buy the subject property at a price certain of P37,541,000.00. As an option contract, the said letter would have been binding upon Lourdes without need of any consideration, had Roberto accepted the offer. But in this case there was no acceptance made neither was there a distinct consideration for the option contract. Our Ruling The petition is without merit. This case involves an option contract and not a contract of a right of first refusal In Beaumont v. Prieto,19 the nature of an option contract is explained thus: In his Law Dictionary, edition of 1897, Bouvier defines an option as a contract, in the following language: A contract by virtue of which A, in consideration of the payment of a certain sum to B, acquires the privilege of buying from, or selling to, B certain securities or properties within a limited time at a specified price. (Story vs. Salamon, 71 N. Y., 420.) From Vol. 6, page 5001, of the work "Words and Phrases," citing the case of Ide vs. Leiser (24 Pac., 695; 10 Mont., 5; 24 Am. St. Rep., 17) the following quotation has been taken: An agreement in writing to give a person the option to purchase lands within a given time at a named price is neither a sale nor an agreement to sell. 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. The second party gets in praesenti, not lands, nor an agreement that he shall have lands, but he does get something of value; that is, the right to call for and receive lands if he elects. The owner parts with his right to sell his lands, except to the second party, for a limited period. The second party receives this right, or rather, from his point of view, he receives the right to elect to buy. But the two definitions above cited refer to the contract of option, or, what amounts to the same thing, to the case where there was cause or consideration for the obligation x x x. (Emphasis supplied.) On the other hand, in Ang Yu Asuncion v. Court of Appeals,20 an elucidation on the "right of first refusal" was made thus: In the law on sales, the so-called right of first refusal is an innovative juridical relation. Needless to point out, it cannot be deemed a perfected contract of sale under Article 1458 of the Civil Code. Neither can the right of first refusal, understood in its normal concept, per se be brought within the purview of an option under the second paragraph of Article 1479, aforequoted, or possibly of an offer under Article 1319 of the same Code. An option or an offer would require, among other things, a clear certainty on both the object and the cause or consideration of the envisioned contract. In a right of first refusal, while the

object might be made determinate, the exercise of the right, however, would be dependent not only on the grantor's eventual intention to enter into a binding juridical relation with another but also on terms, including the price, that obviously are yet to be later firmed up. Prior thereto, it can at best be so described as merely belonging to a class of preparatory juridical relations governed not by contracts (since the essential elements to establish the vinculum juris would still be indefinite and inconclusive) but by, among other laws of general application, the pertinent scattered provisions of the Civil Code on human conduct. Even on the premise that such right of first refusal has been decreed under a final judgment, like here, its breach cannot justify correspondingly an issuance of a writ of execution under a judgment that merely recognizes its existence, nor would it sanction an action for specific performance without thereby negating the indispensable element of consensuality in the perfection of contracts. It is not to say, however, that the right of first refusal would be inconsequential for, such as already intimated above, an unjustified disregard thereof, given, for instance, the circumstances expressed in Article 19 of the Civil Code, can warrant a recovery for damages. (Emphasis supplied.) From the foregoing, it is thus clear that an option contract is entirely different and distinct from a right of first refusal in that in the former, the option granted to the offeree is for a fixed period and at a determined price. Lacking these two essential requisites, what is involved is only a right of first refusal. In this case, the controversy is whether the letter of Lourdes to Roberto dated January 2, 1995 involved an option contract or a contract of a right of first refusal. In its entirety, the said letter-offer reads: 206 Valdes Street Josefa Subd. Balibago Angeles City 2009 January 2, 1995 Tuazon Const. Co. 986 Tandang Sora Quezon City Dear Mr. Tuazon, I received with great joy and happiness the big box of sweet grapes and ham, fit for a kings party. Thanks very much. I am getting very old (79 going 80 yrs. old) and wish to live in the U.S.A. with my only family. I need money to buy a house and lot and a farm with a little cash to start. I am offering you to buy my 1211 square meter at P37,541,000.00 you can pay me in dollars in the name of my daughter. I never offered it to anyone. Please shoulder the expenses for the transfer. I wish the Lord God will help you buy my lot easily and you will be very lucky forever in this place. You have all the time to decide when you can, but not for 2 years or more. I wish you long life, happiness, health, wealth and great fortune always! I hope the Lord God will help you be the recipient of multi-billion projects aid from other countries. Thank you, Lourdes Q. del Rosario vda de Suarez

It is clear that the above letter embodies an option contract as it grants Roberto a fixed period of only two years to buy the subject property at a price certain of P37,541,000.00. It being an option contract, the rules applicable are found in Articles 1324 and 1479 of the Civil Code which provide: Art. 1324. When the offerer has allowed the offeree a certain period to accept, the offer may be withdrawn at any time before acceptance by communicating such withdrawal, except when the option is founded upon a consideration, as something paid or promised. Art. 1479. A promise to buy and sell a determinate thing for a price certain is reciprocally demandable. 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. It is clear from the provision of Article 1324 that there is a great difference between the effect of an option which is without a consideration from one which is founded upon a consideration. If the option is without any consideration, the offeror may withdraw his offer by communicating such withdrawal to the offeree at anytime before acceptance; if it is founded upon a consideration, the offeror cannot withdraw his offer before the lapse of the period agreed upon. The second paragraph of Article 1479 declares that "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." Sanchez v. Rigos21 provided an interpretation of the said second paragraph of Article 1479 in relation to Article 1324. Thus: There is no question that under Article 1479 of the new Civil Code "an option to sell," or "a promise to buy or to sell," as used in said article, to be valid must be "supported by a consideration distinct from the price." This is clearly inferred from the context of said article that a unilateral promise to buy or to sell, even if accepted, is only binding if supported by consideration. In other words, "an accepted unilateral promise can only have a binding effect if supported by a consideration, which means that the option can still be withdrawn, even if accepted, if the same is not supported by any consideration. Hence, it is not disputed that the option is without consideration. It can therefore be withdrawn notwithstanding the acceptance made of it by appellee. It is true that under Article 1324 of the new Civil Code, the general rule regarding offer and acceptance is that, when the offerer gives to the offeree a certain period to accept, "the offer may be withdrawn at any time before acceptance" except when the option is founded upon consideration, but this general rule must be interpreted as modified by the provision of Article 1479 above referred to, which applies to "a promise to buy and sell" specifically. As already stated, this rule requires that a promise to sell to be valid must be supported by a consideration distinct from the price. In Diamante v. Court of Appeals,22 this Court further declared that: A unilateral promise to buy or sell is a mere offer, which is not converted into a contract except at the moment it is accepted. Acceptance is the act that gives life to a juridical obligation, because, before the promise is accepted, the promissor may withdraw it at any time. Upon acceptance, however, a bilateral contract to sell and to buy is created, and the offeree ipso facto assumes the obligations of a purchaser; the offeror, on the other hand, would be liable for damages if he fails to deliver the thing he had offered for sale. xxxx Even if the promise was accepted, private respondent was not bound thereby in the absence of a distinct consideration . (Emphasis ours.)

In this case, it is undisputed that Roberto did not accept the terms stated in the letter of Lourdes as he negotiated for a much lower price. Robertos act of negotiating for a much lower price was a counter-offer and is therefore not an acceptance of the offer of Lourdes. Article 1319 of the Civil Code provides: Consent 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. A qualified acceptance constitutes a counter-offer. (Emphasis supplied.) The counter-offer of Roberto for a much lower price was not accepted by Lourdes. There is therefore no contract that was perfected between them with regard to the sale of subject property. Roberto, thus, does not have any right to demand that the property be sold to him at the price for which it was sold to the De Leons neither does he have the right to demand that said sale to the De Leons be annulled. Equatorial Realty Development, Inc. v. Mayfair Theater, Inc. is not applicable here It is the position of Roberto that the facts of this case and that of Equatorial are similar in nearly all aspects. Roberto is a lessee of the property like Mayfair Theater in Equatorial. There was an offer made to Roberto by Lourdes during the effectivity of the contract of lease which was also the case in Equatorial. There were negotiations as to the price which did not bear fruit because Lourdes sold the property to the De Leons which was also the case in Equatorial wherein Carmelo and Bauermann sold the property to Equatorial. The existence of the lease of the property is known to the De Leons as they are related to Lourdes while in Equatorial, the lawyers of Equatorial studied the lease contract of Mayfair over the property. The property in this case was sold by Lourdes to the De Leons at a much lower price which is also the case in Equatorial where Carmelo and Bauerman sold to Equatorial at a lesser price. It is Robertos conclusion that as in the case of Equatorial, there was a violation of his right of first refusal and hence annulment or rescission of the Deed of Absolute Sale is the proper remedy. Robertos reliance in Equatorial is misplaced. Despite his claims, the facts in Equatorial radically differ from the facts of this case. Roberto overlooked the fact that in Equatorial, there was an express provision in the Contract of Lease that (i)f the LESSOR should desire to sell the leased properties, the LESSEE shall be given 30-days exclusive option to purchase the same. There is no such similar provision in the Contract of Lease between Roberto and Lourdes. What is involved here is a separate and distinct offer made by Lourdes through a letter dated January 2, 1995 wherein she is selling the leased property to Roberto for a definite price and which gave the latter a definite period for acceptance. Roberto was not given a right of first refusal. The letter-offer of Lourdes did not form part of the Lease Contract because it was made more than six months after the commencement of the lease. It is also very clear that in Equatorial, the property was sold within the lease period. In this case, the subject property was sold not only after the expiration of the period provided in the letter-offer of Lourdes but also after the effectivity of the Contract of Lease. Moreover, even if the offer of Lourdes was accepted by Roberto, still the former is not bound thereby because of the absence of a consideration distinct and separate from the price. The argument of Roberto that the separate consideration was the liberality on the part of Lourdes cannot stand. A perusal of the letter-offer of Lourdes would show that what drove her to offer the property to Roberto was her immediate need for funds as she was already very old. Offering the property to Roberto was not an act of liberality on the part of Lourdes but was a simple matter of convenience and practicality as he was the one most likely to buy the property at that time as he was then leasing the same.

All told, the facts of the case, as found by the RTC and the CA, do not support Robertos claims that the letter of Lourdes gave him a right of first refusal which is similar to the one given to Mayfair Theater in the case of Equatorial. Therefore, there is no justification to annul the deed of sale validly entered into by Lourdes with the De Leons. What is the effect of the failure of Lourdes to file her appellees brief at the CA? Lastly, Roberto argues that Lourdes should be sanctioned for her failure to file her appellees brief before the CA. Certainly, the appellees failure to file her brief would not mean that the case would be automatically decided against her. Under the circumstances, the prudent action on the part of the CA would be to deem Lourdes to have waived her right to file her appellees brief. De Leon v. Court of Appeals,23 is instructive when this Court decreed: On the second issue, we hold that the Court of Appeals did not commit grave abuse of discretion in considering the appeal submitted for decision. The proper remedy in case of denial of the motion to dismiss is to file the appellees brief and proceed with the appeal. Instead, petitioner opted to file a motion for reconsideration which, unfortunately, was pro forma. All the grounds raised therein have been discussed in the first resolution of the respondent Court of Appeals. There is no new ground raised that might warrant reversal of the resolution. A cursory perusal of the motion would readily show that it was a near verbatim repetition of the grounds stated in the motion to dismiss; hence, the filing of the motion for reconsideration did not suspend the period for filing the appellees brief. Petitioner was therefore properly deemed to have waived his right to file appellees brief. (Emphasis supplied.)lawphi1 In the above cited case, De Leon was the plaintiff in a Complaint for a sum of money in the RTC. He obtained a favorable judgment and so defendant went to the CA. The appeal of defendant-appellant was taken cognizance of by the CA but De Leon filed a Motion to Dismiss the Appeal with Motion to Suspend Period to file Appellees Brief. The CA denied the Motion to Dismiss. De Leon filed a Motion for Reconsideration which actually did not suspend the period to file the appellees brief. De Leon therefore failed to file his brief within the period specified by the rules and hence he was deemed by the CA to have waived his right to file appellees brief. The failure of the appellee to file his brief would not result to the rendition of a decision favorable to the appellant. The former is considered only to have waived his right to file the Appellees Brief. The CA has the jurisdiction to resolve the case based on the Appellants Brief and the records of the case forwarded by the RTC. The appeal is therefore considered submitted for decision and the CA properly acted on it. WHEREFORE, the instant petition for review on certiorari is DENIED. The assailed Decision of the Court of Appeals in CA-G.R. CV No. 78870, which affirmed the Decision dated November 18, 2002 of the Regional Trial Court, Branch 101, Quezon City in Civil Case No. Q-00-42338 is AFFIRMED. SO ORDERED.

G.R. No. 111538 February 26, 1997 PARAAQUE KINGS ENTERPRISES, INCORPORATED, petitioner, vs. COURT OF APPEALS, CATALINA L. SANTOS, represented by her attorney-in-fact, LUZ B. PROTACIO, and DAVID A. RAYMUNDO, respondents.

5. On August 6, 1979, Lee Ching Bing also assigned all his rights and interest in the leased property to Paraaque Kings Enterprises, Incorporated by virtue of a deed of assignment and with the conformity of defendant Santos, the same was duly registered, Xerox copy of the deed of assignment is hereto attached as Annex "L". 6. Paragraph 9 of the assigned leased (sic) contract provides among others that: "9. That in case the properties subject of the lease agreement are sold or encumbered, Lessors shall impose as a condition that the buyer or mortgagee thereof shall recognize and be bound by all the terms and conditions of this lease agreement and shall respect this Contract of Lease as if they are the LESSORS thereof and in case of sale, LESSEE shall have the first option or priority to buy the properties subject of the lease;" 7. On September 21, 1988, defendant Santos sold the eight parcels of land subject of the lease to defendant David Raymundo for a consideration of FIVE MILLION (P5,000,000.00) PESOS. The said sale was in contravention of the contract of lease, for the first option or priority to buy was not offered by defendant Santos to the plaintiff. Xerox copy of the deed of sale is hereto attached as Annex "M". 8. On March 5, 1989, defendant Santos wrote a letter to the plaintiff informing the same of the sale of the properties to defendant Raymundo, the said letter was personally handed by the attorney-in-fact of defendant Santos, Xerox copy of the letter is hereto attached as Annex "N". 9. Upon learning of this fact plaintiff's representative wrote a letter to defendant Santos, requesting her to rectify the error and consequently realizing the error, she had it reconveyed to her for the same consideration of FIVE MILLION (P5,000,000.00) PESOS. Xerox copies of the letter and the deed of reconveyance are hereto attached as Annexes "O" and "P". 10. Subsequently the property was offered for sale to plaintiff by the defendant for the sum of FIFTEEN MILLION (P15,000,000.00) PESOS. Plaintiff was given ten (10) days to make good of the offer, but therefore (sic) the said period expired another letter came from the counsel of defendant Santos, containing the same tenor of (sic) the former letter. Xerox copies of the letters are hereto attached as Annexes "Q" and "R". 11. On May 8, 1989, before the period given in the letter offering the properties for sale expired, plaintiff's counsel wrote counsel of defendant Santos offering to buy the properties for FIVE MILLION (P5,000,000.00) PESOS. Xerox copy of the letter is hereto attached as Annex "S". 12. On May 15, 1989, before they replied to the offer to purchase, another deed of sale was executed by defendant Santos (in favor of) defendant Raymundo for a consideration of NINE MILLION (P9,000,000.00) PESOS. Xerox copy of the second deed of sale is hereto attached as Annex "T". 13. Defendant Santos violated again paragraph 9 of the contract of lease by executing a second deed of sale to defendant Raymundo. 14. It was only on May 17, 1989, that defendant Santos replied to the letter of the plaintiff's offer to buy or two days after she sold her properties. In her reply she stated among others that the period has lapsed and the plaintiff is not a privy (sic) to the contract. Xerox copy of the letter is hereto attached as Annex "U".

PANGANIBAN, J.: Do allegations in a complaint showing violation of a contractual right of "first option or priority to buy the properties subject of the lease" constitute a valid cause of action? Is the grantee of such right entitled to be offered the same terms and conditions as those given to a third party who eventually bought such properties? In short, is such right of first refusal enforceable by an action for specific performance? These questions are answered in the affirmative by this Court in resolving this petition for review under Rule 45 of the Rules of Court challenging the Decision 1 of the Court of Appeals 2 promulgated on March 29, 1993, in CA-G.R. CV No. 34987 entitled "Paraaque Kings Enterprises, Inc. vs. Catalina L. Santos, et al.," which affirmed the order 3 of September 2, 1991, of the Regional Trial Court of Makati, Branch 57, 4 dismissing Civil Case No. 91-786 for lack of a valid cause of action. Facts of the Case On March 19, 1991, herein petitioner filed before the Regional Trial Court of Makati a complaint, 5 which is reproduced in full below: Plaintiff, by counsel, respectfully states that: 1. Plaintiff is a private corporation organized and existing under and by virtue of the laws of the Philippines, with principal place of business of (sic) Dr. A. Santos Avenue, Paraaque, Metro Manila, while defendant Catalina L. Santos, is of legal age, widow, with residence and postal address at 444 Plato Street, Ct., Stockton, California, USA, represented in this action by her attorney-in-fact, Luz B. Protacio, with residence and postal address at No, 12, San Antonio Street, Magallanes Village, Makati, Metro Manila, by virtue of a general power of attorney. Defendant David A. Raymundo, is of legal age, single, with residence and postal address at 1918 Kamias Street, Damarias Village, Makati, Metro Manila, where they (sic) may be served with summons and other court processes. Xerox copy of the general power of attorney is hereto attached as Annex "A". 2. Defendant Catalina L. Santos is the owner of eight (8) parcels of land located at (sic) Paraaque, Metro Manila with transfer certificate of title nos. S-19637, S-19638 and S-19643 to S-19648. Xerox copies of the said title (sic) are hereto attached as Annexes "B" to "I", respectively. 3. On November 28, 1977, a certain Frederick Chua leased the above-described property from defendant Catalina L. Santos, the said lease was registered in the Register of Deeds. Xerox copy of the lease is hereto attached as Annex "J". 4. On February 12, 1979, Frederick Chua assigned all his rights and interest and participation in the leased property to Lee Ching Bing, by virtue of a deed of assignment and with the conformity of defendant Santos, the said assignment was also registered. Xerox copy of the deed of assignment is hereto attached as Annex "K".

15. On June 28, 1989, counsel for plaintiff informed counsel of defendant Santos of the fact that plaintiff is the assignee of all rights and interest of the former lessor. Xerox copy of the letter is hereto attached as Annex "V". 16. On July 6, 1989, counsel for defendant Santos informed the plaintiff that the new owner is defendant Raymundo. Xerox copy of the letter is hereto attached as Annex "W". 17. From the preceding facts it is clear that the sale was simulated and that there was a collusion between the defendants in the sales of the leased properties, on the ground that when plaintiff wrote a letter to defendant Santos to rectify the error, she immediately have (sic) the property reconveyed it (sic) to her in a matter of twelve (12) days. 18. Defendants have the same counsel who represented both of them in their exchange of communication with plaintiff's counsel, a fact that led to the conclusion that a collusion exist (sic) between the defendants. 19. When the property was still registered in the name of defendant Santos, her collector of the rental of the leased properties was her brother-in-law David Santos and when it was transferred to defendant Raymundo the collector was still David Santos up to the month of June, 1990. Xerox copies of cash vouchers are hereto attached as Annexes "X" to "HH", respectively. 20. The purpose of this unholy alliance between defendants Santos and Raymundo is to mislead the plaintiff and make it appear that the price of the leased property is much higher than its actual value of FIVE MILLION (P5,000,000.00) PESOS, so that plaintiff would purchase the properties at a higher price. 21. Plaintiff has made considerable investments in the said leased property by erecting a two (2) storey, six (6) doors commercial building amounting to THREE MILLION (P3,000,000.00) PESOS. This considerable improvement was made on the belief that eventually the said premises shall be sold to the plaintiff. 22. As a consequence of this unlawful act of the defendants, plaintiff will incurr (sic) total loss of THREE MILLION (P3,000,000.00) PESOS as the actual cost of the building and as such defendants should be charged of the same amount for actual damages. 23. As a consequence of the collusion, evil design and illegal acts of the defendants, plaintiff in the process suffered mental anguish, sleepless nights, bismirched (sic) reputation which entitles plaintiff to moral damages in the amount of FIVE MILLION (P5,000,000.00) PESOS. 24. The defendants acted in a wanton, fraudulent, reckless, oppressive or malevolent manner and as a deterrent to the commission of similar acts, they should be made to answer for exemplary damages, the amount left to the discretion of the Court. 25. Plaintiff demanded from the defendants to rectify their unlawful acts that they committed, but defendants refused and failed to comply with plaintiffs just and valid and (sic) demands. Xerox copies of the demand letters are hereto attached as Annexes "KK" to "LL", respectively. 26. Despite repeated demands, defendants failed and refused without justifiable cause to satisfy plaintiff's claim, and was constrained to engaged (sic) the services of undersigned counsel to institute this action at a contract fee of P200,000.00, as and for attorney's fees, exclusive of cost and expenses of litigation.

PRAYER WHEREFORE, it is respectfully prayed, that judgment be rendered in favor of the plaintiff and against defendants and ordering that: a. The Deed of Sale between defendants dated May 15, 1989, be annulled and the leased properties be sold to the plaintiff in the amount of P5,000,000.00; b. Dependants (sic) pay plaintiff the sum of P3,000,000.00 as actual damages; c. Defendants pay the sum of P5,000,000.00 as moral damages; d. Defendants pay exemplary damages left to the discretion of the Court; e. Defendants pay the sum of not less than P200,000.00 as attorney's fees. Plaintiff further prays for other just and equitable reliefs plus cost of suit. Instead of filing their respective answers, respondents filed motions to dismiss anchored on the grounds of lack of cause of action, estoppel and laches. On September 2, 1991, the trial court issued the order dismissing the complaint for lack of a valid cause of action. It ratiocinated thus: Upon the very face of the plaintiff's Complaint itself, it therefore indubitably appears that the defendant Santos had verily complied with paragraph 9 of the Lease Agreement by twice offering the properties for sale to the plaintiff for ~1 5 M. The said offers, however, were plainly rejected by the plaintiff which scorned the said offer as "RIDICULOUS". There was therefore a definite refusal on the part of the plaintiff to accept the offer of defendant Santos. For in acquiring the said properties back to her name, and in so making the offers to sell both by herself (attorney-in-fact) and through her counsel, defendant Santos was indeed conscientiously complying with her obligation under paragraph 9 of the Lease Agreement. . . .. xxx xxx xxx This is indeed one instance where a Complaint, after barely commencing to create a cause of action, neutralized itself by its subsequent averments which erased or extinguished its earlier allegations of an impending wrong. Consequently, absent any actionable wrong in the very face of the Complaint itself, the plaintiffs subsequent protestations of collusion is bereft or devoid of any meaning or purpose. . . . . The inescapable result of the foregoing considerations point to no other conclusion than that the Complaint actually does not contain any valid cause of action and should therefore be as it is hereby

ordered DISMISSED. The Court finds no further need to consider the other grounds of estoppel and laches inasmuch as this resolution is sufficient to dispose the matter. 6 Petitioners appealed to the Court of Appeals which affirmed in toto the ruling of the trial court, and further reasoned that: . . . . Appellant's protestations that the P15 million price quoted by appellee Santos was reduced to P9 million when she later resold the leased properties to Raymundo has no valid legal moorings because appellant, as a prospective buyer, cannot dictate its own price and forcibly ram it against appellee Santos, as owner, to buy off her leased properties considering the total absence of any stipulation or agreement as to the price or as to how the price should be computed under paragraph 9 of the lease contract, . . . . 7 Petitioner moved for reconsideration but was denied in an order dated August 20, 1993. 8 Hence this petition. Subsequently, petitioner filed an "Urgent Motion for the Issuance of Restraining Order and/or Writ of Preliminary Injunction and to Hold Respondent David A. Raymundo in Contempt of Court." 9 The motion sought to enjoin respondent Raymundo and his counsel from pursuing the ejectment complaint filed before the barangay captain of San Isidro, Paraaque, Metro Manila; to direct the dismissal of said ejectment complaint or of any similar action that may have been filed; and to require respondent Raymundo to explain why he should not be held in contempt of court for forum-shopping. The ejectment suit initiated by respondent Raymundo against petitioner arose from the expiration of the lease contract covering the property subject of this case. The ejectment suit was decided in favor of Raymundo, and the entry of final judgment in respect thereof renders the said motion moot and academic. Issue The principal legal issue presented before us for resolution is whether the aforequoted complaint alleging breach of the contractual right of "first option or priority to buy" states a valid cause of action. Petitioner contends that the trial court as well as the appellate tribunal erred in dismissing the complaint because it in fact had not just one but at least three (3) valid causes of action, to wit: (1) breach of contract, (2) its right of first refusal founded in law, and (3) damages. Respondents Santos and Raymundo, in their separate comments, aver that the petition should be denied for not raising a question of law as the issue involved is purely factual whether respondent Santos complied with paragraph 9 of the lease agreement and for not having complied with Section 2, Rule 45 of the Rules of Court, requiring the filing of twelve (12) copies of the petitioner's brief. Both maintain that the complaint filed by petitioner before the Regional Trial Court of Makati stated no valid cause of action and that petitioner failed to substantiate its claim that the lower courts decided the same "in a way not in accord with law and applicable decisions of the Supreme Court"; or that the Court of Appeals has "sanctioned departure by a trial court from the accepted and usual course of judicial proceedings" so as to merit the exercise by this Court of the power of review under Rule 45 of the Rules of Court. Furthermore, they reiterate estoppel and laches as grounds for dismissal, claiming that petitioner's payment of rentals of the leased property to respondent Raymundo from June 15, 1989, to June 30, 1990, was an acknowledgment of the latter's status as new owner-lessor of said property, by virtue of which petitioner is deemed to have waived or abandoned its first option to purchase. Private respondents likewise contend that the deed of assignment of the lease agreement did not include the assignment of the option to purchase. Respondent Raymundo further avers that he was not privy to the contract of lease, being neither the lessor nor lessee adverted to therein, hence he could not be held liable for violation thereof. The Court's Ruling

Preliminary Issue: Failure to File Sufficient Copies of Brief We first dispose of the procedural issue raised by respondents, particularly petitioner's failure to file twelve (12) copies of its brief. We have ruled that when non-compliance with the Rules was not intended for delay or did not result in prejudice to the adverse party, dismissal of appeal on mere technicalities in cases where appeal is a matter of right may be stayed, in the exercise of the court's equity jurisdiction. 10 It does not appear that respondents were unduly prejudiced by petitioner's nonfeasance. Neither has it been shown that such failure was intentional. Main Issue: Validity of Cause of Action We do not agree with respondents' contention that the issue involved is purely factual. The principal legal question, as stated earlier, is whether the complaint filed by herein petitioner in the lower court states a valid cause of action. Since such question assumes the facts alleged in the complaint as true, it follows that the determination thereof is one of law, and not of facts. There is a question of law in a given case when the doubt or difference arises as to what the law is on a certain state of facts, and there is a question of fact when the doubt or difference arises as to the truth or the falsehood of alleged facts. 11 At the outset, petitioner concedes that when the ground for a motion to dismiss is lack of cause of action, such ground must appear on the face of the complaint; that to determine the sufficiency of a cause of action, only the facts alleged in the complaint and no others should be considered; and that the test of sufficiency of the facts alleged in a petition or complaint to constitute a cause of action is whether, admitting the facts alleged, the court could render a valid judgment upon the same in accordance with the prayer of the petition or complaint. A cause of action exists if the following elements are present: (1) a right in favor of the plaintiff by whatever means and under whatever law it arises or is created; (2) an obligation on the part of the named defendant to respect or not to violate such right, and (3) an act or omission on the part of such defendant violative of the right of plaintiff or constituting a breach of the obligation of defendant to the plaintiff for which the latter may maintain an action for recovery of damages. 12 In determining whether allegations of a complaint are sufficient to support a cause of action, it must be borne in mind that the complaint does not have to establish or allege facts proving the existence of a cause of action at the outset; this will have to be done at the trial on the merits of the case. To sustain a motion to dismiss for lack of cause of action, the complaint must show that the claim for relief does not exist, rather than that a claim has been defectively stated, or is ambiguous, indefinite or uncertain. 13 Equally important, a defendant moving to dismiss a complaint on the ground of lack of cause of action is regarded as having hypothetically admitted all the averments thereof. 14 A careful examination of the complaint reveals that it sufficiently alleges an actionable contractual breach on the part of private respondents. Under paragraph 9 of the contract of lease between respondent Santos and petitioner, the latter was granted the "first option or priority" to purchase the leased properties in case Santos decided to sell. If Santos never decided to sell at all, there can never be a breach, much less an enforcement of such "right." But on September 21, 1988, Santos sold said properties to Respondent Raymundo without first offering these to petitioner. Santos indeed realized her error, since she repurchased the properties after petitioner complained. Thereafter, she offered to sell the properties to petitioner for P15 million, which petitioner, however, rejected because of the "ridiculous" price. But Santos again appeared to have violated the same provision of the lease contract when she finally resold the properties to respondent Raymundo for only P9 million without first offering them to petitioner at such price. Whether there was actual breach which entitled petitioner to damages and/or other just or equitable relief, is a question which can better be resolved after trial on the merits where each party can present evidence to prove their respective allegations and defenses. 15 The trial and appellate courts based their decision to sustain respondents' motion to dismiss on the allegations of Paraaque Kings Enterprises that Santos had actually offered the subject properties for sale to it prior to the final sale in favor of

Raymundo, but that the offer was rejected. According to said courts, with such offer, Santos had verily complied with her obligation to grant the right of first refusal to petitioner. We hold, however, that in order to have full compliance with the contractual right granting petitioner the first option to purchase, the sale of the properties for the amount of P9 million, the price for which they were finally sold to respondent Raymundo, should have likewise been first offered to petitioner. The Court has made an extensive and lengthy discourse on the concept of, and obligations under, a right of first refusal in the case of Guzman, Bocaling & Co. vs. Bonnevie. 16 In that case, under a contract of lease, the lessees (Raul and Christopher Bonnevie) were given a "right of first priority" to purchase the leased property in case the lessor (Reynoso) decided to sell. The selling price quoted to the Bonnevies was 600,000.00 to be fully paid in cash, less a mortgage lien of P100,000.00. On the other hand, the selling price offered by Reynoso to and accepted by Guzman was only P400,000.00 of which P137,500.00 was to be paid in cash while the balance was to be paid only when the property was cleared of occupants. We held that even if the Bonnevies could not buy it at the price quoted (P600,000.00), nonetheless, Reynoso could not sell it to another for a lower price and under more favorable terms and conditions without first offering said favorable terms and price to the Bonnevies as well. Only if the Bonnevies failed to exercise their right of first priority could Reynoso thereafter lawfully sell the subject property to others, and only under the same terms and conditions previously offered to the Bonnevies. Of course, under their contract, they specifically stipulated that the Bonnevies could exercise the right of first priority, "all things and conditions being equal." This Court interpreted this proviso to mean that there should be identity of terms and conditions to be offered to the Bonnevies and all other prospective buyers, with the Bonnevies to enjoy the right of first priority. We hold that the same rule applies even without the same proviso if the right of first refusal (or the first option to buy) is not to be rendered illusory. From the foregoing, the basis of the right of first refusal* must be the current offer to sell of the seller or offer to purchase of any prospective buyer. Only after the optionee fails to exercise its right of first priority under the same terms and within the period contemplated, could the owner validly offer to sell the property to a third person, again, under the same terms as offered to the optionee. This principle was reiterated in the very recent case of Equatorial Realty vs. Mayfair Theater, Inc. 17 which was decided en banc. This Court upheld the right of first refusal of the lessee Mayfair, and rescinded the sale of the property by the lessor Carmelo to Equatorial Realty "considering that Mayfair, which had substantial interest over the subject property, was prejudiced by its sale to Equatorial without Carmelo conferring to Mayfair every opportunity to negotiate within the 30-day stipulated period" (emphasis supplied). In that case, two contracts of lease between Carmelo and Mayfair provided "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 initially offered to sell the leased property to Mayfair for six to seven million pesos. Mayfair indicated interest in purchasing the property though it invoked the 30-day period. Nothing was heard thereafter from Carmelo. Four years later, the latter sold its entire Recto Avenue property, including the leased premises, to Equatorial for P11,300,000.00 without priorly informing Mayfair. The Court held that both Carmelo and Equatorial acted in bad faith: Carmelo for knowingly violating the right of first option of Mayfair, and Equatorial for purchasing the property despite being aware of the contract stipulation. In addition to rescission of the contract of sale, the Court ordered Carmelo to allow Mayfair to buy the subject property at the same price of P11,300,000.00. No cause of action under P.D. 1517 Petitioner also invokes Presidential Decree No. 1517, or the Urban Land Reform Law, as another source of its right of first refusal. It claims to be covered under said law, being the "rightful occupant of the land and its structures" since it is the lawful lessee thereof by reason of contract. Under the lease contract, petitioner would have occupied the property for fourteen (14) years at the end of the contractual period.

Without probing into whether petitioner is rightfully a beneficiary under said law, suffice it to say that this Court has previously ruled that under Section 6 18 of P.D. 1517, "the terms and conditions of the sale in the exercise of the lessee's right of first refusal to purchase shall be determined by the Urban Zone Expropriation and Land Management Committee. Hence, . . . . certain prerequisites must be complied with by anyone who wishes to avail himself of the benefits of the decree." 19 There being no allegation in its complaint that the prerequisites were complied with, it is clear that the complaint did fail to state a cause of action on this ground. Deed of Assignment included the option to purchase Neither do we find merit in the contention of respondent Santos that the assignment of the lease contract to petitioner did not include the option to purchase. The provisions of the deeds of assignment with regard to matters assigned were very clear. Under the first assignment between Frederick Chua as assignor and Lee Ching Bing as assignee, it was expressly stated that: . . . . the ASSIGNOR hereby CEDES, TRANSFERS and ASSIGNS to herein ASSIGNEE, all his rights, interest and participation over said premises afore-described, . . . . 20 (emphasis supplied) And under the subsequent assignment executed between Lee Ching Bing as assignor and the petitioner, represented by its Vice President Vicenta Lo Chiong, as assignee, it was likewise expressly stipulated that; . . . . the ASSIGNOR hereby sells, transfers and assigns all his rights, interest and participation over said leased premises, . . . . 21 (emphasis supplied) One of such rights included in the contract of lease and, therefore, in the assignments of rights was the lessee's right of first option or priority to buy the properties subject of the lease, as provided in paragraph 9 of the assigned lease contract. The deed of assignment need not be very specific as to which rights and obligations were passed on to the assignee. It is understood in the general provision aforequoted that all specific rights and obligations contained in the contract of lease are those referred to as being assigned. Needless to state, respondent Santos gave her unqualified conformity to both assignments of rights. Respondent Raymundo privy to the Contract of Lease With respect to the contention of respondent Raymundo that he is not privy to the lease contract, not being the lessor nor the lessee referred to therein, he could thus not have violated its provisions, but he is nevertheless a proper party. Clearly, he stepped into the shoes of the owner-lessor of the land as, by virtue of his purchase, he assumed all the obligations of the lessor under the lease contract. Moreover, he received benefits in the form of rental payments. Furthermore, the complaint, as well as the petition, prayed for the annulment of the sale of the properties to him. Both pleadings also alleged collusion between him and respondent Santos which defeated the exercise by petitioner of its right of first refusal. In order then to accord complete relief to petitioner, respondent Raymundo was a necessary, if not indispensable, party to the case. 22 A favorable judgment for the petitioner will necessarily affect the rights of respondent Raymundo as the buyer of the property over which petitioner would like to assert its right of first option to buy. Having come to the conclusion that the complaint states a valid cause of action for breach of the right of first refusal and that the trial court should thus not have dismissed the complaint, we find no more need to pass upon the question of whether the complaint states a cause of action for damages or whether the complaint is barred by estoppel or laches. As these matters require presentation and/or determination of facts, they can be best resolved after trial on the merits.

While the lower courts erred in dismissing the complaint, private respondents, however, cannot be denied their day in court. While, in the resolution of a motion to dismiss, the truth of the facts alleged in the complaint are theoretically admitted, such admission is merely hypothetical and only for the purpose of resolving the motion. In case of denial, the movant is not to be deprived of the right to submit its own case and to submit evidence to rebut the allegations in the complaint. Neither will the grant of the motion by a trial court and the ultimate reversal thereof by an appellate court have the effect of stifling such right. 23 So too, the trial court should be given the opportunity to evaluate the evidence, apply the law and decree the proper remedy. Hence, we remand the instant case to the trial court to allow private respondents to have their day in court. WHEREFORE, the petition is GRANTED. The assailed decisions of the trial court and Court of Appeals are hereby REVERSED and SET ASIDE. The case is REMANDED to the Regional Trial Court of Makati for further proceedings. SO ORDERED.

G.R. No. 149734

November 19, 2004

Conduit plan, the 4 lots to be offered for sale to the Vasquez Spouses were in the first phase thereof or Village 1, in the Ayala plan which was formulated a year later, it was in the third phase, or Phase II-c. Under the MOA, the Vasquez spouses made several express warranties, as follows: "3.1. The SELLERS shall deliver to the BUYER: xxx DECISION 3.1.2. The true and complete list, certified by the Secretary and Treasurer of the Company showing: xxx

DR. DANIEL VAZQUEZ and MA. LUIZA M. VAZQUEZ, petitioners, vs. AYALA CORPORATION, respondent.

TINGA, J.: D. A list of all persons and/or entities with whom the Company has pending contracts, if any. The rise in value of four lots in one of the country's prime residential developments, Ayala Alabang Village in Muntinlupa City, over a period of six (6) years only, represents big money. The huge price difference lies at the heart of the present controversy. Petitioners insist that the lots should be sold to them at 1984 prices while respondent maintains that the prevailing market price in 1990 should be the selling price. Dr. Daniel Vazquez and Ma. Luisa Vazquez filed this Petition for Review on Certiorari dated October 11, 2001 assailing the Decision3 of the Court of Appeals dated September 6, 2001 which reversed the Decision4 of the Regional Trial Court (RTC) and dismissed their complaint for specific performance and damages against Ayala Corporation. Despite their disparate rulings, the RTC and the appellate court agree on the following antecedents:5 On April 23, 1981, spouses Daniel Vasquez and Ma. Luisa M. Vasquez (hereafter, Vasquez spouses) entered into a Memorandum of Agreement (MOA) with Ayala Corporation (hereafter, AYALA) with AYALA buying from the Vazquez spouses, all of the latter's shares of stock in Conduit Development, Inc. (hereafter, Conduit). The main asset of Conduit was a 49.9 hectare property in Ayala Alabang, Muntinlupa, which was then being developed by Conduit under a development plan where the land was divided into Villages 1, 2 and 3 of the "Don Vicente Village." The development was then being undertaken for Conduit by G.P. Construction and Development Corp. (hereafter, GP Construction). Under the MOA, Ayala was to develop the entire property, less what was defined as the "Retained Area" consisting of 18,736 square meters. This "Retained Area" was to be retained by the Vazquez spouses. The area to be developed by Ayala was called the "Remaining Area". In this "Remaining Area" were 4 lots adjacent to the "Retained Area" and Ayala agreed to offer these lots for sale to the Vazquez spouses at the prevailing price at the time of purchase. The relevant provisions of the MOA on this point are: "5.7. The BUYER hereby commits that it will develop the 'Remaining Property' into a first class residential subdivision of the same class as its New Alabang Subdivision, and that it intends to complete the first phase under its amended development plan within three (3) years from the date of this Agreement. x x x" 5.15. The BUYER agrees to give the SELLERS a first option to purchase four developed lots next to the "Retained Area" at the prevailing market price at the time of the purchase." The parties are agreed that the development plan referred to in paragraph 5.7 is not Conduit's development plan, but Ayala's amended development plan which was still to be formulated as of the time of the MOA. While in the
1 2

xxx 3.1.5. Audited financial statements of the Company as at Closing date. 4. Conditions Precedent All obligations of the BUYER under this Agreement are subject to fulfillment prior to or at the Closing, of the following conditions: 4.1. The representations and warranties by the SELLERS contained in this Agreement shall be true and correct at the time of Closing as though such representations and warranties were made at such time; and xxx 6. Representation and Warranties by the SELLERS The SELLERS jointly and severally represent and warrant to the BUYER that at the time of the execution of this Agreement and at the Closing: xxx 6.2.3. There are no actions, suits or proceedings pending, or to the knowledge of the SELLERS, threatened against or affecting the SELLERS with respect to the Shares or the Property; and 7. Additional Warranties by the SELLERS 7.1. With respect to the Audited Financial Statements required to be submitted at Closing in accordance with Par. 3.1.5 above, the SELLER jointly and severally warrant to the BUYER that: 7.1.1 The said Audited Financial Statements shall show that on the day of Closing, the Company shall own the "Remaining Property", free from all liens and encumbrances and that the Company shall have no obligation to any

party except for billings payable to GP Construction & Development Corporation and advances made by Daniel Vazquez for which BUYER shall be responsible in accordance with Par. 2 of this Agreement. 7.1.2 Except to the extent reflected or reserved in the Audited Financial Statements of the Company as of Closing, and those disclosed to BUYER, the Company as of the date thereof, has no liabilities of any nature whether accrued, absolute, contingent or otherwise, including, without limitation, tax liabilities due or to become due and whether incurred in respect of or measured in respect of the Company's income prior to Closing or arising out of transactions or state of facts existing prior thereto. 7.2 SELLERS do not know or have no reasonable ground to know of any basis for any assertion against the Company as at closing or any liability of any nature and in any amount not fully reflected or reserved against such Audited Financial Statements referred to above, and those disclosed to BUYER. xxx xxx xxx 7.6.3 Except as otherwise disclosed to the BUYER in writing on or before the Closing, the Company is not engaged in or a party to, or to the best of the knowledge of the SELLERS, threatened with, any legal action or other proceedings before any court or administrative body, nor do the SELLERS know or have reasonable grounds to know of any basis for any such action or proceeding or of any governmental investigation relative to the Company. 7.6.4 To the knowledge of the SELLERS, no default or breach exists in the due performance and observance by the Company of any term, covenant or condition of any instrument or agreement to which the company is a party or by which it is bound, and no condition exists which, with notice or lapse of time or both, will constitute such default or breach." After the execution of the MOA, Ayala caused the suspension of work on Village 1 of the Don Vicente Project. Ayala then received a letter from one Maximo Del Rosario of Lancer General Builder Corporation informing Ayala that he was claiming the amount of P1,509,558.80 as the subcontractor of G.P. Construction... G.P. Construction not being able to reach an amicable settlement with Lancer, on March 22, 1982, Lancer sued G.P. Construction, Conduit and Ayala in the then Court of First Instance of Manila in Civil Case No. 82-8598. G.P. Construction in turn filed a cross-claim against Ayala. G.P. Construction and Lancer both tried to enjoin Ayala from undertaking the development of the property. The suit was terminated only on February 19, 1987, when it was dismissed with prejudice after Ayala paid both Lancer and GP Construction the total of P4,686,113.39. Taking the position that Ayala was obligated to sell the 4 lots adjacent to the "Retained Area" within 3 years from the date of the MOA, the Vasquez spouses sent several "reminder" letters of the approaching so-called deadline. However, no demand after April 23, 1984, was ever made by the Vasquez spouses for Ayala to sell the 4 lots. On the contrary, one of the letters signed by their authorized agent, Engr. Eduardo Turla, categorically stated that they expected "development of Phase 1 to be completed by February 19, 1990, three years from the settlement of the legal problems with the previous contractor." By early 1990 Ayala finished the development of the vicinity of the 4 lots to be offered for sale. The four lots were then offered to be sold to the Vasquez spouses at the prevailing price in 1990. This was rejected by the Vasquez spouses who wanted to pay at 1984 prices, thereby leading to the suit below. After trial, the court a quo rendered its decision, the dispositive portion of which states: "THEREFORE, judgment is hereby rendered in favor of plaintiffs and against defendant, ordering defendant to sell to plaintiffs the relevant lots described in the Complaint in the Ayala Alabang Village at the price of P460.00 per square

meter amounting to P1,349,540.00; ordering defendant to reimburse to plaintiffs attorney's fees in the sum of P200,000.00 and to pay the cost of the suit." In its decision, the court a quo concluded that the Vasquez spouses were not obligated to disclose the potential claims of GP Construction, Lancer and Del Rosario; Ayala's accountants should have opened the records of Conduit to find out all claims; the warranty against suit is with respect to "the shares of the Property" and the Lancer suit does not affect the shares of stock sold to Ayala; Ayala was obligated to develop within 3 years; to say that Ayala was under no obligation to follow a time frame was to put the Vasquezes at Ayala's mercy; Ayala did not develop because of a slump in the real estate market; the MOA was drafted and prepared by the AYALA who should suffer its ambiguities; the option to purchase the 4 lots is valid because it was supported by consideration as the option is incorporated in the MOA where the parties had prestations to each other. [Emphasis supplied] Ayala Corporation filed an appeal, alleging that the trial court erred in holding that petitioners did not breach their warranties under the MOA6 dated April 23, 1981; that it was obliged to develop the land where the four (4) lots subject of the option to purchase are located within three (3) years from the date of the MOA; that it was in delay; and that the option to purchase was valid because it was incorporated in the MOA and the consideration therefor was the commitment by Ayala Corporation to petitioners embodied in the MOA. As previously mentioned, the Court of Appeals reversed the RTC Decision. According to the appellate court, Ayala Corporation was never informed beforehand of the existence of the Lancer claim. In fact, Ayala Corporation got a copy of the Lancer subcontract only on May 29, 1981 from G.P. Construction's lawyers. The Court of Appeals thus held that petitioners violated their warranties under the MOA when they failed to disclose Lancer's claims. Hence, even conceding that Ayala Corporation was obliged to develop and sell the four (4) lots in question within three (3) years from the date of the MOA, the obligation was suspended during the pendency of the case filed by Lancer. Interpreting the MOA's paragraph 5.7 above-quoted, the appellate court held that Ayala Corporation committed to develop the first phase of its own amended development plan and not Conduit's development plan. Nowhere does the MOA provide that Ayala Corporation shall follow Conduit's development plan nor is Ayala Corporation prohibited from changing the sequence of the phases of the property it will develop. Anent the question of delay, the Court of Appeals ruled that there was no delay as petitioners never made a demand for Ayala Corporation to sell the subject lots to them. According to the appellate court, what petitioners sent were mere reminder letters the last of which was dated prior to April 23, 1984 when the obligation was not yet demandable. At any rate, the Court of Appeals found that petitioners in fact waived the three (3)-year period when they sent a letter through their agent, Engr. Eduardo Turla, stating that they "expect that the development of Phase I will be completed by 19 February 1990, three years from the settlement of the legal problems with the previous contractor."7 The appellate court likewise ruled that paragraph 5.15 above-quoted is not an option contract but a right of first refusal there being no separate consideration therefor. Since petitioners refused Ayala Corporation's offer to sell the subject lots at the reduced 1990 price of P5,000.00 per square meter, they have effectively waived their right to buy the same. In the instant Petition, petitioners allege that the appellate court erred in ruling that they violated their warranties under the MOA; that Ayala Corporation was not obliged to develop the "Remaining Property" within three (3) years from the execution of the MOA; that Ayala was not in delay; and that paragraph 5.15 of the MOA is a mere right of first refusal. Additionally, petitioners insist that the Court should review the factual findings of the Court of Appeals as they are in conflict with those of the trial court. Ayala Corporation filed a Comment on the Petition8 dated March 26, 2002, contending that the petition raises questions of fact and seeks a review of evidence which is within the domain of the Court of Appeals. Ayala Corporation maintains that the subcontract between GP Construction, with whom Conduit contracted for the development of the property under a Construction Contract dated October 10, 1980, and Lancer was not disclosed by petitioners during the negotiations. Neither

was the liability for Lancer's claim included in the Audited Financial Statements submitted by petitioners after the signing of the MOA. These justify the conclusion that petitioners breached their warranties under the afore-quoted paragraphs of the MOA. Since the Lancer suit ended only in February 1989, the three (3)-year period within which Ayala Corporation committed to develop the property should only be counted thence. Thus, when it offered the subject lots to petitioners in 1990, Ayala Corporation was not yet in delay. In response to petitioners' contention that there was no action or proceeding against them at the time of the execution of the MOA on April 23, 1981, Ayala Corporation avers that the facts and circumstances which gave rise to the Lancer claim were already extant then. Petitioners warranted that their representations under the MOA shall be true and correct at the time of "Closing" which shall take place within four (4) weeks from the signing of the MOA.9 Since the MOA was signed on April 23, 1981, "Closing" was approximately the third week of May 1981. Hence, Lancer's claims, articulated in a letter which Ayala Corporation received on May 4, 1981, are among the liabilities warranted against under paragraph 7.1.2 of the MOA. Moreover, Ayala Corporation asserts that the warranties under the MOA are not just against suits but against all kinds of liabilities not reflected in the Audited Financial Statements. It cannot be faulted for relying on the express warranty that except for billings payable to GP Construction and advances made by petitioner Daniel Vazquez in the amount of P38,766.04, Conduit has no other liabilities. Hence, petitioners cannot claim that Ayala Corporation should have examined and investigated the Audited Financial Statements of Conduit and should now assume all its obligations and liabilities including the Lancer suit and the cross-claim of GP Construction. Furthermore, Ayala Corporation did not make a commitment to complete the development of the first phase of the property within three (3) years from the execution of the MOA. The provision refers to a mere declaration of intent to develop the first phase of its (Ayala Corporation's) own development plan and not Conduit's. True to its intention, Ayala Corporation did complete the development of the first phase (Phase II-A) of its amended development plan within three (3) years from the execution of the MOA. However, it is not obliged to develop the third phase (Phase II-C) where the subject lots are located within the same time frame because there is no contractual stipulation in the MOA therefor. It is free to decide on its own the period for the development of Phase II-C. If petitioners wanted to impose the same three (3)-year timetable upon the third phase of the amended development plan, they should have filed a suit to fix the time table in accordance with Article 119710 of the Civil Code. Having failed to do so, Ayala Corporation cannot be declared to have been in delay. Ayala Corporation further contends that no demand was made on it for the performance of its alleged obligation. The letter dated October 4, 1983 sent when petitioners were already aware of the Lancer suit did not demand the delivery of the subject lots by April 23, 1984. Instead, it requested Ayala Corporation to keep petitioners posted on the status of the case. Likewise, the letter dated March 4, 1984 was merely an inquiry as to the date when the development of Phase 1 will be completed. More importantly, their letter dated June 27, 1988 through Engr. Eduardo Turla expressed petitioners' expectation that Phase 1 will be completed by February 19, 1990. Lastly, Ayala Corporation maintains that paragraph 5.15 of the MOA is a right of first refusal and not an option contract.

Likewise, petitioners aver that although Ayala Corporation may change the sequence of its development plan, it is obliged under the MOA to develop the entire area where the subject lots are located in three (3) years. They also assert that demand was made on Ayala Corporation to comply with their obligation under the MOA. Apart from their reminder letters dated January 24, February 18 and March 5, 1984, they also sent a letter dated March 4, 1984 which they claim is a categorical demand for Ayala Corporation to comply with the provisions of the MOA. The parties were required to submit their respective memoranda in the Resolution12 dated November 18, 2002. In compliance with this directive, petitioners submitted their Memorandum13 dated February 14, 2003 on even date, while Ayala Corporation filed its Memorandum14 dated February 14, 2003 on February 17, 2003. We shall first dispose of the procedural question raised by the instant petition. It is well-settled that the jurisdiction of this Court in cases brought to it from the Court of Appeals by way of petition for review under Rule 45 is limited to reviewing or revising errors of law imputed to it, its findings of fact being conclusive on this Court as a matter of general principle. However, since in the instant case there is a conflict between the factual findings of the trial court and the appellate court, particularly as regards the issues of breach of warranty, obligation to develop and incurrence of delay, we have to consider the evidence on record and resolve such factual issues as an exception to the general rule.15 In any event, the submitted issue relating to the categorization of the right to purchase granted to petitioners under the MOA is legal in character. The next issue that presents itself is whether petitioners breached their warranties under the MOA when they failed to disclose the Lancer claim. The trial court declared they did not; the appellate court found otherwise. Ayala Corporation summarizes the clauses of the MOA which petitioners allegedly breached when they failed to disclose the Lancer claim: a) Clause 7.1.1. that Conduit shall not be obligated to anyone except to GP Construction for P38,766.04, and for advances made by Daniel Vazquez; b) Clause 7.1.2. that except as reflected in the audited financial statements Conduit had no other liabilities whether accrued, absolute, contingent or otherwise; c) Clause 7.2. that there is no basis for any assertion against Conduit of any liability of any value not reflected or reserved in the financial statements, and those disclosed to Ayala; d) Clause 7.6.3. that Conduit is not threatened with any legal action or other proceedings; and

Petitioners filed their Reply11 dated August 15, 2002 reiterating the arguments in their Petition and contending further that they did not violate their warranties under the MOA because the case was filed by Lancer only on April 1, 1982, eleven (11) months and eight (8) days after the signing of the MOA on April 23, 1981. Ayala Corporation admitted that it received Lancer's claim before the "Closing" date. It therefore had all the time to rescind the MOA. Not having done so, it can be concluded that Ayala Corporation itself did not consider the matter a violation of petitioners' warranty. Moreover, petitioners submitted the Audited Financial Statements of Conduit and allowed an acquisition audit to be conducted by Ayala Corporation. Thus, the latter bought Conduit with "open eyes." Petitioners also maintain that they had no knowledge of the impending case against Conduit at the time of the execution of the MOA. Further, the MOA makes Ayala Corporation liable for the payment of all billings of GP Construction. Since Lancer's claim was actually a claim against GP Construction being its sub-contractor, it is Ayala Corporation and not petitioners which is liable.

e) Clause 7.6.4. that Conduit had not breached any term, condition, or covenant of any instrument or agreement to which it is a party or by which it is bound.16 The Court is convinced that petitioners did not violate the foregoing warranties. The exchanges of communication between the parties indicate that petitioners substantially apprised Ayala Corporation of the Lancer claim or the possibility thereof during the period of negotiations for the sale of Conduit. In a letter17 dated March 5, 1984, petitioner Daniel Vazquez reminded Ayala Corporation's Mr. Adolfo Duarte (Mr. Duarte) that prior to the completion of the sale of Conduit, Ayala Corporation asked for and was given information that GP Construction sub-contracted, presumably to Lancer, a greater percentage of the project than it was allowed. Petitioners gave this

information to Ayala Corporation because the latter intimated a desire to "break the contract of Conduit with GP." Ayala Corporation did not deny this. In fact, Mr. Duarte's letter18 dated March 6, 1984 indicates that Ayala Corporation had knowledge of the Lancer subcontract prior to its acquisition of Conduit. Ayala Corporation even admitted that it "tried to explorelegal basis to discontinue the contract of Conduit with GP" but found this "not feasible when information surfaced about the tacit consent of Conduit to the sub-contracts of GP with Lancer." At the latest, Ayala Corporation came to know of the Lancer claim before the date of Closing of the MOA. Lancer's letter19 dated April 30, 1981 informing Ayala Corporation of its unsettled claim with GP Construction was received by Ayala Corporation on May 4, 1981, well before the "Closing"20 which occurred four (4) weeks after the date of signing of the MOA on April 23, 1981, or on May 23, 1981. The full text of the pertinent clauses of the MOA quoted hereunder likewise indicate that certain matters pertaining to the liabilities of Conduit were disclosed by petitioners to Ayala Corporation although the specifics thereof were no longer included in the MOA: 7.1.1 The said Audited Financial Statements shall show that on the day of Closing, the Company shall own the "Remaining Property", free from all liens and encumbrances and that the Company shall have no obligation to any party except for billings payable to GP Construction & Development Corporation and advances made by Daniel Vazquez for which BUYER shall be responsible in accordance with Paragraph 2 of this Agreement. 7.1.2 Except to the extent reflected or reserved in the Audited Financial Statements of the Company as of Closing, and those disclosed to BUYER, the Company as of the date hereof, has no liabilities of any nature whether accrued, absolute, contingent or otherwise, including, without limitation, tax liabilities due or to become due and whether incurred in respect of or measured in respect of the Company's income prior to Closing or arising out of transactions or state of facts existing prior thereto. 7.2 SELLERS do not know or have no reasonable ground to know of any basis for any assertion against the Company as at Closing of any liability of any nature and in any amount not fully reflected or reserved against such Audited Financial Statements referred to above, and those disclosed to BUYER. xxx xxx xxx 7.6.3 Except as otherwise disclosed to the BUYER in writing on or before the Closing, the Company is not engaged in or a party to, or to the best of the knowledge of the SELLERS, threatened with, any legal action or other proceedings before any court or administrative body, nor do the SELLERS know or have reasonable grounds to know of any basis for any such action or proceeding or of any governmental investigation relative to the Company. 7.6.4 To the knowledge of the SELLERS, no default or breach exists in the due performance and observance by the Company of any term, covenant or condition of any instrument or agreement to which the Company is a party or by which it is bound, and no condition exists which, with notice or lapse of time or both, will constitute such default or breach."21 [Emphasis supplied] Hence, petitioners' warranty that Conduit is not engaged in, a party to, or threatened with any legal action or proceeding is qualified by Ayala Corporation's actual knowledge of the Lancer claim which was disclosed to Ayala Corporation before the "Closing." At any rate, Ayala Corporation bound itself to pay all billings payable to GP Construction and the advances made by petitioner Daniel Vazquez. Specifically, under paragraph 2 of the MOA referred to in paragraph 7.1.1, Ayala Corporation undertook responsibility "for the payment of all billings of the contractor GP Construction & Development Corporation after the first

billing and any payments made by the company and/or SELLERS shall be reimbursed by BUYER on closing which advances to date is P1,159,012.87."22 The billings knowingly assumed by Ayala Corporation necessarily include the Lancer claim for which GP Construction is liable. Proof of this is Ayala Corporation's letter23 to GP Construction dated before "Closing" on May 4, 1981, informing the latter of Ayala Corporation's receipt of the Lancer claim embodied in the letter dated April 30, 1981, acknowledging that it is taking over the contractual responsibilities of Conduit, and requesting copies of all sub-contracts affecting the Conduit property. The pertinent excerpts of the letter read: In this connection, we wish to inform you that this morning we received a letter from Mr. Maximo D. Del Rosario, President of Lancer General Builders Corporation apprising us of the existence of subcontracts that they have with your corporation. They have also furnished us with a copy of their letter to you dated 30 April 1981. Since we are taking over the contractual responsibilities of Conduit Development, Inc., we believe that it is necessary, at this point in time, that you furnish us with copies of all your subcontracts affecting the property of Conduit, not only with Lancer General Builders Corporation, but all subcontracts with other parties as well24 Quite tellingly, Ayala Corporation even attached to its Pre-Trial Brief25 dated July 9, 1992 a copy of the letter26 dated May 28, 1981 of GP Construction's counsel addressed to Conduit furnishing the latter with copies of all sub-contract agreements entered into by GP Construction. Since it was addressed to Conduit, it can be presumed that it was the latter which gave Ayala Corporation a copy of the letter thereby disclosing to the latter the existence of the Lancer sub-contract. The ineluctable conclusion is that petitioners did not violate their warranties under the MOA. The Lancer sub-contract and claim were substantially disclosed to Ayala Corporation before the "Closing" date of the MOA. Ayala Corporation cannot disavow knowledge of the claim. Moreover, while in its correspondence with petitioners, Ayala Corporation did mention the filing of the Lancer suit as an obstacle to its development of the property, it never actually brought up nor sought redress for petitioners' alleged breach of warranty for failure to disclose the Lancer claim until it filed its Answer27 dated February 17, 1992. We now come to the correct interpretation of paragraph 5.7 of the MOA. Does this paragraph express a commitment or a mere intent on the part of Ayala Corporation to develop the property within three (3) years from date thereof? Paragraph 5.7 provides: 5.7. The BUYER hereby commits that it will develop the 'Remaining Property' into a first class residential subdivision of the same class as its New Alabang Subdivision, and that it intends to complete the first phase under its amended development plan within three (3) years from the date of this Agreement.28 Notably, while the first phrase of the paragraph uses the word "commits" in reference to the development of the "Remaining Property" into a first class residential subdivision, the second phrase uses the word "intends" in relation to the development of the first phase of the property within three (3) years from the date of the MOA. The variance in wording is significant. While "commit"29 connotes a pledge to do something, "intend"30 merely signifies a design or proposition. Atty. Leopoldo Francisco, former Vice President of Ayala Corporation's legal division who assisted in drafting the MOA, testified: COURT

You only ask what do you mean by that intent. Just answer on that point. ATTY. BLANCO Don't talk about standard. WITNESS A Well, the word intent here, your Honor, was used to emphasize the tentative character of the period of development because it will be noted that the sentence refers to and I quote "to complete the first phase under its amended development plan within three (3) years from the date of this agreement, at the time of the execution of this agreement, your Honor." That amended development plan was not yet in existence because the buyer had manifested to the seller that the buyer could amend the subdivision plan originally belonging to the seller to conform with its own standard of development and second, your Honor, (interrupted)31 It is thus unmistakable that this paragraph merely expresses an intention on Ayala Corporation's part to complete the first phase under its amended development plan within three (3) years from the execution of the MOA. Indeed, this paragraph is so plainly worded that to misunderstand its import is deplorable. More focal to the resolution of the instant case is paragraph 5.7's clear reference to the first phase of Ayala Corporation's amended development plan as the subject of the three (3)-year intended timeframe for development. Even petitioner Daniel Vazquez admitted on cross-examination that the paragraph refers not to Conduit's but to Ayala Corporation's development plan which was yet to be formulated when the MOA was executed: Q: Now, turning to Section 5.7 of this Memorandum of Agreement, it is stated as follows: "The Buyer hereby commits that to develop the remaining property into a first class residential subdivision of the same class as New Alabang Subdivision, and that they intend to complete the first phase under its amended development plan within three years from the date of this agreement." Now, my question to you, Dr. Vasquez is that there is no dispute that the amended development plan here is the amended development plan of Ayala? A: Yes, sir. Q: In other words, it is not Exhibit "D-5" which is the original plan of Conduit? A: No, it is not. Q: This Exhibit "D-5" was the plan that was being followed by GP Construction in 1981? A: Yes, sir. Q: And point of fact during your direct examination as of the date of the agreement, this amended development plan was still to be formulated by Ayala? A: Yes, sir.32

As correctly held by the appellate court, this admission is crucial because while the subject lots to be sold to petitioners were in the first phase of the Conduit development plan, they were in the third or last phase of the Ayala Corporation development plan. Hence, even assuming that paragraph 5.7 expresses a commitment on the part of Ayala Corporation to develop the first phase of its amended development plan within three (3) years from the execution of the MOA, there was no parallel commitment made as to the timeframe for the development of the third phase where the subject lots are located. Lest it be forgotten, the point of this petition is the alleged failure of Ayala Corporation to offer the subject lots for sale to petitioners within three (3) years from the execution of the MOA. It is not that Ayala Corporation committed or intended to develop the first phase of its amended development plan within three (3) years. Whether it did or did not is actually beside the point since the subject lots are not located in the first phase anyway. We now come to the issue of default or delay in the fulfillment of the obligation. Article 1169 of the Civil Code provides: Art. 1169. Those obliged to deliver or to do something incur in delay from the time the obligee judicially or extrajudicially demands from them the fulfillment of their obligation. However, the demand by the creditor shall not be necessary in order that delay may exist: (1) When the obligation or the law expressly so declares; or (2) When from the nature and the circumstances of the obligation it appears that the designation of the time when the thing is to be delivered or the service is to be rendered was a controlling motive for the establishment of the contract; or (3) When demand would be useless, as when the obligor has rendered it beyond his power to perform. In reciprocal obligations, neither party incurs in delay if the other does not comply or is not ready to comply in a proper manner with what is incumbent upon him. From the moment one of the parties fulfills his obligation, delay by the other begins. In order that the debtor may be in default it is necessary that the following requisites be present: (1) that the obligation be demandable and already liquidated; (2) that the debtor delays performance; and (3) that the creditor requires the performance judicially or extrajudicially.33 Under Article 1193 of the Civil Code, obligations for whose fulfillment a day certain has been fixed shall be demandable only when that day comes. However, no such day certain was fixed in the MOA. Petitioners, therefore, cannot demand performance after the three (3) year period fixed by the MOA for the development of the first phase of the property since this is not the same period contemplated for the development of the subject lots. Since the MOA does not specify a period for the development of the subject lots, petitioners should have petitioned the court to fix the period in accordance with Article 119734 of the Civil Code. As no such action was filed by petitioners, their complaint for specific performance was premature, the obligation not being demandable at that point. Accordingly, Ayala Corporation cannot likewise be said to have delayed performance of the obligation. Even assuming that the MOA imposes an obligation on Ayala Corporation to develop the subject lots within three (3) years from date thereof, Ayala Corporation could still not be held to have been in delay since no demand was made by petitioners for the performance of its obligation.

As found by the appellate court, petitioners' letters which dealt with the three (3)-year timetable were all dated prior to April 23, 1984, the date when the period was supposed to expire. In other words, the letters were sent before the obligation could become legally demandable. Moreover, the letters were mere reminders and not categorical demands to perform. More importantly, petitioners waived the three (3)-year period as evidenced by their agent, Engr. Eduardo Turla's letter to the effect that petitioners agreed that the three (3)-year period should be counted from the termination of the case filed by Lancer. The letter reads in part: I. Completion of Phase I As per the memorandum of Agreement also dated April 23, 1981, it was undertaken by your goodselves to complete the development of Phase I within three (3) years. Dr. & Mrs. Vazquez were made to understand that you were unable to accomplish this because of legal problems with the previous contractor. These legal problems were resolved as of February 19, 1987, and Dr. & Mrs. Vazquez therefore expect that the development of Phase I will be completed by February 19, 1990, three years from the settlement of the legal problems with the previous contractor. The reason for this is, as you know, that security-wise, Dr. & Mrs. Vazquez have been advised not to construct their residence till the surrounding area (which is Phase I) is developed and occupied. They have been anxious to build their residence for quite some time now, and would like to receive assurance from your goodselves regarding this, in compliance with the agreement. II. Option on the adjoining lots We have already written your goodselves regarding the intention of Dr. & Mrs. Vazquez to exercise their option to purchase the two lots on each side (a total of 4 lots) adjacent to their "Retained Area". They are concerned that although over a year has elapsed since the settlement of the legal problems, you have not presented them with the size, configuration, etc. of these lots. They would appreciate being provided with these at your earliest convenience.35 Manifestly, this letter expresses not only petitioners' acknowledgement that the delay in the development of Phase I was due to the legal problems with GP Construction, but also their acquiescence to the completion of the development of Phase I at the much later date of February 19, 1990. More importantly, by no stretch of semantic interpretation can it be construed as a categorical demand on Ayala Corporation to offer the subject lots for sale to petitioners as the letter merely articulates petitioners' desire to exercise their option to purchase the subject lots and concern over the fact that they have not been provided with the specifications of these lots. The letters of petitioners' children, Juan Miguel and Victoria Vazquez, dated January 23, 198436 and February 18, 198437 can also not be considered categorical demands on Ayala Corporation to develop the first phase of the property within the three (3)-year period much less to offer the subject lots for sale to petitioners. The letter dated January 23, 1984 reads in part: You will understand our interest in the completion of the roads to our property, since we cannot develop it till you have constructed the same. Allow us to remind you of our Memorandum of Agreement, as per which you committed to develop the roads to our property "as per the original plans of the company", and that 1. The back portion should have been developed before the front portion which has not been the case.

Even petitioner Daniel Vazquez' letter40 dated March 5, 1984 does not make out a categorical demand for Ayala Corporation to offer the subject lots for sale on or before April 23, 1984. The letter reads in part: and that we expect from your goodselves compliance with our Memorandum of Agreement, and a definite date as to when the road to our property and the development of Phase I will be completed.41 At best, petitioners' letters can only be construed as mere reminders which cannot be considered demands for performance because it must appear that the tolerance or benevolence of the creditor must have ended.42 The petition finally asks us to determine whether paragraph 5.15 of the MOA can properly be construed as an option contract or a right of first refusal. Paragraph 5.15 states: 5.15 The BUYER agrees to give the SELLERS first option to purchase four developed lots next to the "Retained Area" at the prevailing market price at the time of the purchase.43 The Court has clearly distinguished between an option contract and a right of first refusal. An option is a preparatory contract in which one party grants to another, for a fixed period and at a determined price, the privilege to buy or sell, or to decide whether or not to enter into a principal contract. It binds the party who has given the option not to enter into the principal contract with any other person during the period designated, and within that period, to enter into such contract with the one to whom the option was granted, if the latter should decide to use the option. It is a separate and distinct contract from that which the parties may enter into upon the consummation of the option. It must be supported by consideration.44 In a right of first refusal, on the other hand, while the object might be made determinate, the exercise of the right would be dependent not only on the grantor's eventual intention to enter into a binding juridical relation with another but also on terms, including the price, that are yet to be firmed up.45 Applied to the instant case, paragraph 5.15 is obviously a mere right of first refusal and not an option contract. Although the paragraph has a definite object, i.e., the sale of subject lots, the period within which they will be offered for sale to petitioners and, necessarily, the price for which the subject lots will be sold are not specified. The phrase "at the prevailing market price at the time of the purchase" connotes that there is no definite period within which Ayala Corporation is bound to reserve the subject lots for petitioners to exercise their privilege to purchase. Neither is there a fixed or determinable price at which the subject lots will be offered for sale. The price is considered certain if it may be determined with reference to another thing certain or if the determination thereof is left to the judgment of a specified person or persons.46 Further, paragraph 5.15 was inserted into the MOA to give petitioners the first crack to buy the subject lots at the price which Ayala Corporation would be willing to accept when it offers the subject lots for sale. It is not supported by an independent consideration. As such it is not governed by Articles 1324 and 1479 of the Civil Code, viz: Art. 1324. When the offeror has allowed the offeree a certain period to accept, the offer may be withdrawn at any time before acceptance by communicating such withdrawal, except when the option is founded upon a consideration, as something paid or promised. Art. 1479. A promise to buy and sell a determinate thing for a price certain is reciprocally demandable.

2. The whole project front and back portions be completed by 1984.38 The letter dated February 18, 1984 is similarly worded. It states: In this regard, we would like to remind you of Articles 5.7 and 5.9 of our Memorandum of Agreement which states respectively:39 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. Consequently, the "offer" may be withdrawn anytime by communicating the withdrawal to the other party.47

In this case, Ayala Corporation offered the subject lots for sale to petitioners at the price of P6,500.00/square meter, the prevailing market price for the property when the offer was made on June 18, 1990.48 Insisting on paying for the lots at the prevailing market price in 1984 of P460.00/square meter, petitioners rejected the offer. Ayala Corporation reduced the price to P5,000.00/square meter but again, petitioners rejected the offer and instead made a counter-offer in the amount of P2,000.00/square meter.49 Ayala Corporation rejected petitioners' counter-offer. With this rejection, petitioners lost their right to purchase the subject lots. It cannot, therefore, be said that Ayala Corporation breached petitioners' right of first refusal and should be compelled by an action for specific performance to sell the subject lots to petitioners at the prevailing market price in 1984. WHEREFORE, the instant petition is DENIED. No pronouncement as to costs. SO ORDERED.

G.R. No. 140182. April 12, 2005 TANAY RECREATION CENTER AND DEVELOPMENT CORP., Petitioners, vs. CATALINA MATIENZO FAUSTO* and ANUNCIACION FAUSTO PACUNAYEN, Respondents. DECISION AUSTRIA-MARTINEZ, J.: Petitioner Tanay Recreation Center and Development Corp. (TRCDC) is the lessee of a 3,090-square meter property located in Sitio Gayas, Tanay, Rizal, owned by Catalina Matienzo Fausto,1 under a Contract of Lease executed on August 1, 1971. On this property stands the Tanay Coliseum Cockpit operated by petitioner. The lease contract provided for a 20-year term, subject to renewal within sixty days prior to its expiration. The contract also provided that should Fausto decide to sell the property, petitioner shall have the "priority right" to purchase the same.2 On June 17, 1991, petitioner wrote Fausto informing her of its intention to renew the lease.3 However, it was Faustos daughter, respondent Anunciacion F. Pacunayen, who replied, asking that petitioner remove the improvements built thereon, as she is now the absolute owner of the property.4 It appears that Fausto had earlier sold the property to Pacunayen on August 8, 1990, for the sum of P10,000.00 under a "Kasulatan ng Bilihan Patuluyan ng Lupa,"5 and title has already been transferred in her name under Transfer Certificate of Title (TCT) No. M-35468.6 Despite efforts, the matter was not resolved. Hence, on September 4, 1991, petitioner filed an Amended Complaint for Annulment of Deed of Sale, Specific Performance with Damages, and Injunction, docketed as Civil Case No. 372-M.7 In her Answer, respondent claimed that petitioner is estopped from assailing the validity of the deed of sale as the latter acknowledged her ownership when it merely asked for a renewal of the lease. According to respondent, when they met to discuss the matter, petitioner did not demand for the exercise of its option to purchase the property, and it even asked for grace period to vacate the premises.8 After trial on the merits, the Regional Trial Court of Morong, Rizal (Branch 78), rendered judgment extending the period of the lease for another seven years from August 1, 1991 at a monthly rental of P10,000.00, and dismissed petitioners claim for damages.9 On appeal, docketed as CA-G.R. CV No. 43770, the Court of Appeals (CA) affirmed with modifications the trial courts judgment per its Decision dated June 14, 1999.10 The dispositive portion of the decision reads: WHEREFORE, the appealed decision is AFFIRMED AND ACCORDINGLY MODIFIED AS DISCUSSED. Furthermore, we resolved: 1.0. That TRCDC VACATE the leased premises immediately; 2.0. To GRANT the motion of Pacunayen to allow her to withdraw the amount of P320,000.00, deposited according to records, with this court. 3.0. To order TRCDC to MAKE THE NECESSARY ACCOUNTING regarding the amounts it had already deposited (for unpaid rentals for the extended period of seven [7] years of the contract of lease). In case it had not yet completed its deposit, to immediately pay the remaining balance to Pacunayen.

4.0. To order TRCDC to PAY the amount of P10,000.00 as monthly rental, with regard to its continued stay in the leased premises even after the expiration of the extended period of seven (7) years, computed from August 1, 1998, until it finally vacates therefrom. SO ORDERED.11 In arriving at the assailed decision, the CA acknowledged the priority right of TRCDC to purchase the property in question. However, the CA interpreted such right to mean that it shall be applicable only in case the property is sold to strangers and not to Faustos relative. The CA stated that "(T)o interpret it otherwise as to comprehend all sales including those made to relatives and to the compulsory heirs of the seller at that would be an absurdity," and "her (Faustos) only motive for such transfer was precisely one of preserving the property within her bloodline and that someone administer the property."12 The CA also ruled that petitioner already acknowledged the transfer of ownership and is deemed to have waived its right to purchase the property.13 The CA even further went on to rule that even if the sale is annulled, petitioner could not achieve anything because the property will be eventually transferred to Pacunayen after Faustos death.14 Petitioner filed a motion for reconsideration but it was denied per Resolution dated September 14, 1999.15 Dissatisfied, petitioner elevated the case to this Court on petition for review on certiorari, raising the following grounds: THE HONORABLE COURT OF APPEALS COMMITTED SERIOUS REVERSIBLE ERROR IN HOLDING THAT THE CONTRACTUAL STIPULATION GIVING PETITIONER THE PRIORITY RIGHT TO PURCHASE THE LEASED PREMISES SHALL ONLY APPLY IF THE LESSOR DECIDES TO SELL THE SAME TO STRANGERS; THE HONORABLE COURT OF APPEALS COMMITTED SERIOUS REVERSIBLE ERROR IN HOLDING THAT PETITIONERS PRIORITY RIGHT TO PURCHASE THE LEASED PREMISES IS INCONSEQUENTIAL.16 The principal bone of contention in this case refers to petitioners priority right to purchase, also referred to as the right of first refusal. Petitioners right of first refusal in this case is expressly provided for in the notarized "Contract of Lease" dated August 1, 1971, between Fausto and petitioner, to wit: 7. That should the LESSOR decide to sell the leased premises, the LESSEE shall have the priority right to purchase the same;17 When a lease contract contains a right of first refusal, the lessor is under a legal duty to the lessee not to sell to anybody at any price until after he has made an offer to sell to the latter at a certain price and the lessee has failed to accept it. The lessee has a right that the lessor's first offer shall be in his favor.18 Petitioners right of first refusal is an integral and indivisible part of the contract of lease and is inseparable from the whole contract. The consideration for the lease includes the consideration for the right of first refusal19 and is built into the reciprocal obligations of the parties. It was erroneous for the CA to rule that the right of first refusal does not apply when the property is sold to Faustos relative.20 When the terms of an agreement have been reduced to writing, it is considered as containing all the terms agreed upon. As such, there can be, between the parties and their successors in interest, no evidence of such terms other than the contents of the written agreement, except when it fails to express the true intent and agreement of the parties.21 In this case, the wording of the stipulation giving petitioner the right of first refusal is plain and unambiguous, and leaves no room for interpretation. It simply means that should Fausto decide to sell the leased property during the term of the lease, such sale should first be offered to petitioner. The stipulation does not provide for the qualification that such right may be exercised only when the sale is made to strangers or persons other than Faustos kin. Thus, under the terms of petitioners right of first refusal, Fausto has the legal duty to petitioner not to sell the property to anybody, even her relatives, at any price until after she has made an offer to sell to petitioner at a certain price and said offer was rejected by petitioner. Pursuant to their contract, it was essential

that Fausto should have first offered the property to petitioner before she sold it to respondent. It was only after petitioner failed to exercise its right of first priority could Fausto then lawfully sell the property to respondent. The rule is that a sale made in violation of a right of first refusal is valid. However, it may be rescinded, or, as in this case, may be the subject of an action for specific performance.22 In Riviera Filipina, Inc. vs. Court of Appeals,23 the Court discussed the concept and interpretation of the right of first refusal and the consequences of a breach thereof, to wit: . . . It all started in 1992 with Guzman, Bocaling & Co. v. Bonnevie where the Court held that a lease with a proviso granting the lessee the right of first priority "all things and conditions being equal" meant that there should be identity of the terms and conditions to be offered to the lessee and all other prospective buyers, with the lessee to enjoy the right of first priority. A deed of sale executed in favor of a third party who cannot be deemed a purchaser in good faith, and which is in violation of a right of first refusal granted to the lessee is not voidable under the Statute of Frauds but rescissible under Articles 1380 to 1381 (3) of the New Civil Code. Subsequently in 1994, in the case of Ang Yu Asuncion v. Court of Appeals, the Court en banc departed from the doctrine laid down in Guzman, Bocaling & Co. v. Bonnevie and refused to rescind a contract of sale which violated the right of first refusal. The Court held that the so-called "right of first refusal" cannot be deemed a perfected contract of sale under Article 1458 of the New Civil Code and, as such, a breach thereof decreed under a final judgment does not entitle the aggrieved party to a writ of execution of the judgment but to an action for damages in a proper forum for the purpose. In the 1996 case of Equatorial Realty Development, Inc. v. Mayfair Theater, Inc., the Court en banc reverted back to the doctrine in Guzman Bocaling & Co. v. Bonnevie stating that rescission is a relief allowed for the protection of one of the contracting parties and even third persons from all injury and damage the contract may cause or to protect some incompatible and preferred right by the contract. Thereafter in 1997, in Paraaque Kings Enterprises, Inc. v. Court of Appeals, the Court affirmed the nature of and the concomitant rights and obligations of parties under a right of first refusal. The Court, summarizing the rulings in Guzman, Bocaling & Co. v. Bonnevie and Equatorial Realty Development, Inc. v. Mayfair Theater, Inc., held that in order to have full compliance with the contractual right granting petitioner the first option to purchase, the sale of the properties for the price for which they were finally sold to a third person should have likewise been first offered to the former. Further, there should be identity of terms and conditions to be offered to the buyer holding a right of first refusal if such right is not to be rendered illusory. Lastly, the basis of the right of first refusal must be the current offer to sell of the seller or offer to purchase of any prospective buyer. The prevailing doctrine therefore, is that a right of first refusal means identity of terms and conditions to be offered to the lessee and all other prospective buyers and a contract of sale entered into in violation of a right of first refusal of another person, while valid, is rescissible.24 It was also incorrect for the CA to rule that it would be useless to annul the sale between Fausto and respondent because the property would still remain with respondent after the death of her mother by virtue of succession, as in fact, Fausto died in March 1996, and the property now belongs to respondent, being Faustos heir.25 For one, Fausto was bound by the terms and conditions of the lease contract. Under the right of first refusal clause, she was obligated to offer the property first to petitioner before selling it to anybody else. When she sold the property to respondent without offering it to petitioner, the sale while valid is rescissible so that petitioner may exercise its option under the contract. With the death of Fausto, whatever rights and obligations she had over the property, including her obligation under the lease contract, were transmitted to her heirs by way of succession, a mode of acquiring the property, rights and obligation of the decedent to the extent of the value of the inheritance of the heirs. Article 1311 of the Civil Code provides:

ART. 1311. Contracts take effect only between the parties, their assigns and heirs, except in case where the rights and obligations arising from the contract are not transmissible by their nature, or by stipulation or by provision of law. The heir is not liable beyond the value of the property he received from the decedent. A lease contract is not essentially personal in character.26 Thus, the rights and obligations therein are transmissible to the heirs. The general rule is that heirs are bound by contracts entered into by their predecessors-in-interest except when the rights and obligations arising therefrom are not transmissible by (1) their nature, (2) stipulation or (3) provision of law.27 In this case, the nature of the rights and obligations are, by their nature, transmissible. There is also neither contractual stipulation nor provision of law that makes the rights and obligations under the lease contract intransmissible. The lease contract between petitioner and Fausto is a property right, which is a right that passed on to respondent and the other heirs, if any, upon the death of Fausto. In DKC Holdings Corporation vs. Court of Appeals,28 the Court held that the Contract of Lease with Option to Buy entered into by the late Encarnacion Bartolome with DKC Holdings Corporation was binding upon her sole heir, Victor, even after her demise and it subsists even after her death. The Court ruled that: . . . Indeed, being an heir of Encarnacion, there is privity of interest between him and his deceased mother. He only succeeds to what rights his mother had and what is valid and binding against her is also valid and binding as against him . This is clear from Paraaque Kings Enterprises vs. Court of Appeals, where this Court rejected a similar defenseWith respect to the contention of respondent Raymundo that he is not privy to the lease contract, not being the lessor nor the lessee referred to therein, he could thus not have violated its provisions, but he is nevertheless a proper party. Clearly, he stepped into the shoes of the owner-lessor of the land as, by virtue of his purchase, he assumed all the obligations of the lessor under the lease contract. Moreover, he received benefits in the form of rental payments. Furthermore, the complaint, as well as the petition, prayed for the annulment of the sale of the properties to him. Both pleadings also alleged collusion between him and respondent Santos which defeated the exercise by petitioner of its right of first refusal. In order then to accord complete relief to petitioner, respondent Raymundo was a necessary, if not indispensable, party to the case. A favorable judgment for the petitioner will necessarily affect the rights of respondent Raymundo as the buyer of the property over which petitioner would like to assert its right of first option to buy.29 (Emphasis supplied) Likewise in this case, the contract of lease, with all its concomitant provisions, continues even after Faustos death and her heirs merely stepped into her shoes.30 Respondent, as an heir of Fausto, is therefore bound to fulfill all its terms and conditions. There is no personal act required from Fausto such that respondent cannot perform it. Faustos obligation to deliver possession of the property to petitioner upon the exercise by the latter of its right of first refusal may be performed by respondent and the other heirs, if any. Similarly, nonperformance is not excused by the death of the party when the other party has a property interest in the subject matter of the contract.31 The CA likewise found that petitioner acknowledged the legitimacy of the sale to respondent and it is now barred from exercising its right of first refusal. According to the appellate court: Second, when TRCDC, in a letter to Fausto, signified its intention to renew the lease contract, it was Pacunayen who answered the letter on June 19, 1991. In that letter Pacunayen demanded that TRCDC vacate the leased premises within sixty (60) days and informed it of her ownership of the leased premises. The pertinent portion of the letter reads: Furtherly, please be advised that the land is no longer under the absolute ownership of my mother and the undersigned is now the real and absolute owner of the land.

Instead of raising a howl over the contents of the letter, as would be its expected and natural reaction under the circumstances, TRCDC surprisingly kept silent about the whole thing. As we mentioned in the factual antecedents of this case, it even invited Pacunayen to its special board meeting particularly to discuss with her the renewal of the lease contract. Again, during that meeting, TRCDC did not mention anything that could be construed as challenging Pacunayens ownership of the leased premises. Neither did TRCDC assert its priority right to purchase the same against Pacunayen.32 The essential elements of estoppel are: (1) conduct of a party amounting to false representation or concealment of material facts or at least calculated to convey the impression that the facts are otherwise than, and inconsistent with, those which the party subsequently attempts to assert; (2) intent, or at least expectation, that this conduct shall be acted upon by, or at least influence, the other party; and (3) knowledge, actual or constructive, of the real facts.33 The records are bereft of any proposition that petitioner waived its right of first refusal under the contract such that it is now estopped from exercising the same. In a letter dated June 17, 1991, petitioner wrote to Fausto asking for a renewal of the term of lease.34 Petitioner cannot be faulted for merely seeking a renewal of the lease contract because obviously, it was working on the assumption that title to the property is still in Faustos name and the latter has the sole authority to decide on the fate of the property. Instead, it was respondent who replied, advising petitioner to remove all the improvements on the property, as the lease is to expire on the 1st of August 1991. Respondent also informed petitioner that her mother has already sold the property to her.35 In order to resolve the matter, a meeting was called among petitioners stockholders, including respondent, on July 27, 1991, where petitioner, again, proposed that the lease be renewed. Respondent, however, declined. While petitioner may have sought the renewal of the lease, it cannot be construed as a relinquishment of its right of first refusal. Estoppel must be intentional and unequivocal.36 Also, in the excerpts from the minutes of the special meeting, it was further stated that the possibility of a sale was likewise considered.37 But respondent also refused to sell the land, while the improvements, "if for sale shall be subject for appraisal."38 After respondent refused to sell the land, it was then that petitioner filed the complaint for annulment of sale, specific performance and damages.39 Petitioners acts of seeking all possible avenues for the amenable resolution of the conflict do not amount to an intentional and unequivocal abandonment of its right of first refusal. Respondent was well aware of petitioners right to priority of sale, and that the sale made to her by her mother was merely for her to be able to take charge of the latters affairs. As admitted by respondent in her Appellees Brief filed before the CA, viz.: After June 19, 1991, TRCDC invited Pacunayen to meeting with the officers of the corporation. . . . In the same meeting, Pacunayens attention was called to the provision of the Contract of Lease had by her mother with TRCDC, particularly paragraph 7 thereof, which states: 7. That should the lessor decide to sell the leased premises, the LESSEE shall have the priority right to purchase the same. Of course, in the meeting she had with the officers of TRCDC, Pacunayen explained that the sale made in her favor by her mother was just a formality so that she may have the proper representation with TRCDC in the absence of her parents, more so that her father had already passed away, and there was no malice in her mine (sic) and that of her mother, or any intention on their part to deceive TRCDC. All these notwithstanding, and for her to show their good faith in dealing with TRCDC, Pacunayen started the ground work to reconvey ownership over the whole land, now covered by Transfer Certificare (sic) of Title No. M-259, to and in the name of her mother (Fausto), but the latter was becoming sickly, old and weak, and they found no time to do it as early as they wanted to.40 (Emphasis supplied) Given the foregoing, the "Kasulatan ng Bilihan Patuluyan ng Lupa" dated August 8, 1990 between Fausto and respondent must be rescinded. Considering, however, that Fausto already died on March 16, 1996, during the pendency of this case with the CA, her heirs should have been substituted as respondents in this case. Considering further that the Court cannot declare respondent Pacunayen as the sole heir, as it is not the proper forum for that purpose, the right of petitioner may only be enforced against the heirs of the deceased Catalina Matienzo Fausto, represented by respondent Pacunayen.

In Paraaque Kings Enterprises, Inc. vs. Court of Appeals,41 it was ruled that the basis of the right of the first refusal must be the current offer to sell of the seller or offer to purchase of any prospective buyer. It is only after the grantee fails to exercise its right of first priority under the same terms and within the period contemplated, could the owner validly offer to sell the property to a third person, again, under the same terms as offered to the grantee. The circumstances of this case, however, dictate the application of a different ruling. An offer of the property to petitioner under identical terms and conditions of the offer previously given to respondent Pacunayen would be inequitable. The subject property was sold in 1990 to respondent Pacunayen for a measly sum of P10,000.00. Obviously, the value is in a small amount because the sale was between a mother and daughter. As admitted by said respondent, "the sale made in her favor by her mother was just a formality so that she may have the proper representation with TRCDC in the absence of her parents"42 Consequently, the offer to be made to petitioner in this case should be under reasonable terms and conditions, taking into account the fair market value of the property at the time it was sold to respondent. In its complaint, petitioner prayed for the cancellation of TCT No. M-35468 in the name of respondent Pacunayen,43 which was issued by the Register of Deeds of Morong on February 7, 1991.44 Under ordinary circumstances, this would be the logical effect of the rescission of the "Kasulatan ng Bilihan Patuluyan ng Lupa" between the deceased Fausto and respondent Pacunayen. However, the circumstances in this case are not ordinary. The buyer of the subject property is the sellers own daughter. If and when the title (TCT No. M-35468) in respondent Pacunayens name is cancelled and reinstated in Faustos name, and thereafter negotiations between petitioner and respondent Pacunayen for the purchase of the subject property break down, then the subject property will again revert to respondent Pacunayen as she appears to be one of Faustos heirs. This would certainly be a winding route to traverse. Sound reason therefore dictates that title should remain in the name of respondent Pacunayen, for and in behalf of the other heirs, if any, to be cancelled only when petitioner successfully exercises its right of first refusal and purchases the subject property. Petitioner further seeks the award of the following damages in its favor: (1) P100,000.00 as actual damages; (2) P1,100,000.00 as compensation for lost goodwill or reputation; (3) P100,000.00 as moral damages; (4) P100,000.00 as exemplary damages; (5) P50,000.00 as attorneys fees; (6) P1,000.00 appearance fee per hearing; and (7) the costs of suit.45 According to petitioner, respondents act in fencing the property led to the closure of the Tanay Coliseum Cockpit and petitioner was unable to conduct cockfights and generate income of not less than P100,000.00 until the end of September 1991, aside from the expected rentals from the cockpit space lessees in the amount of P11,000.00.46 Under Article 2199 of the Civil Code, it is provided that: Except as provided by law or by stipulation, one is entitled to an adequate compensation only for such pecuniary loss suffered by him as he has duly proved. Such compensation is referred to as actual or compensatory damages. (Emphasis supplied) The rule is that actual or compensatory damages cannot be presumed, but must be proved with reasonable degree of certainty. A court cannot rely on speculations, conjectures, or guesswork as to the fact and amount of damages, but must depend upon competent proof that they have been suffered by the injured party and on the best obtainable evidence of the actual amount thereof. It must point out specific facts, which could afford a basis for measuring whatever compensatory or actual damages are borne.47 In the present case, there is no question that the Tanay Coliseum Cockpit was closed for two months and TRCDC did not gain any income during said period. But there is nothing on record to substantiate petitioners claim that it was bound to lose some P111,000.00 from such closure. TRCDCs president, Ambrosio Sacramento, testified that they suffered income losses with the closure of the cockpit from August 2, 1991 until it re-opened on October 20, 1991.48 Mr. Sacramento, however, cannot state with certainty the amount of such unrealized income.49 Meanwhile, TRCDCs accountant, Merle Cruz, stated that based on the corporations financial statement for the years 1990 and 1991,50 they derived the amount of P120,000.00 as annual income from rent.51 From said financial statement, it is safe to presume that TRCDC generated a monthly income of P10,000.00 a month (P120,000.00 annual income divided by 12 months). At best therefore, whatever actual damages that petitioner suffered from the cockpits closure for a period of two months can be reasonably summed up only to P20,000.00.

Such award of damages shall earn interest at the legal rate of six percent (6%) per annum, which shall be computed from the time of the filing of the Complaint on August 22, 1991, until the finality of this decision. After the present decision becomes final and executory, the rate of interest shall increase to twelve percent (12%) per annum from such finality until its satisfaction, this interim period being deemed to be equivalent to a forbearance of credit.52 This is in accord with the guidelines laid down by the Court in Eastern Shipping Lines, Inc. vs. Court of Appeals,53 regarding the manner of computing legal interest, viz.: II. With regard particularly to an award of interest in the concept of actual and compensatory damages, the rate of interest, as well as the accrual thereof, is imposed, as follows: 1. When the obligation is breached, and it consists in the payment of a sum of money, i.e., a loan or forbearance of money, the interest due should be that which may have been stipulated in writing. Furthermore, the interest due shall itself earn legal interest from the time it is judicially demanded. In the absence of stipulation, the rate of interest shall be 12% per annum to be computed from default, i.e., from judicial or extrajudicial demand under and subject to the provisions of Article 1169 of the Civil Code. 2. When an obligation, not constituting a loan or forbearance of money, is breached, an interest on the amount of damages awarded may be imposed at the discretion of the court at the rate of 6% per annum. No interest, however, shall be adjudged on unliquidated claims or damages except when or until the demand can be established with reasonable certainty. Accordingly, where the demand is established with reasonable certainty, the interest shall begin to run from the time the claim is made judicially or extrajudicially (Art. 1169, Civil Code) but when such certainty cannot be so reasonably established at the time the demand is made, the interest shall begin to run only from the date the judgment of the court is made (at which time quantification of damages may be deemed to have been reasonably ascertained). The actual base for the computation of legal interest shall, in any case, be on the amount finally adjudged. 3. When the judgment of the court awarding a sum of money becomes final and executory, the rate of legal interest, whether the case falls under paragraph 1 or paragraph 2, above, shall be 12% per annum from such finality until its satisfaction, this interim period being deemed to be by then an equivalent to a forbearance of credit.54 Petitioner also claims the amount of P1,100,000.00 as compensation for lost goodwill or reputation. It alleged that "with the unjust and wrongful conduct of the defendants as above-described, plaintiff stands to lose its goodwill and reputation established for the past 20 years."55 An award of damages for loss of goodwill or reputation falls under actual or compensatory damages as provided in Article 2205 of the Civil Code, to wit: Art. 2205. Damages may be recovered: (1) For loss or impairment of earning capacity in cases of temporary or permanent personal injury; (2) For injury to the plaintiffs business standing or commercial credit. Even if it is not recoverable as compensatory damages, it may still be awarded in the concept of temperate or moderate damages.56 In arriving at a reasonable level of temperate damages to be awarded, trial courts are guided by the ruling that: . . . There are cases where from the nature of the case, definite proof of pecuniary loss cannot be offered, although the court is convinced that there has been such loss. For instance, injury to one's commercial credit or to the goodwill of a business firm is often hard to show certainty in terms of money. Should damages be denied for that reason? The judge should be empowered to calculate moderate damages in such cases, rather than that the plaintiff should suffer, without redress from the defendant's wrongful act. (Araneta v. Bank of America, 40 SCRA 144, 145)57

In this case, aside from the nebulous allegation of petitioner in its amended complaint, there is no evidence on record, whether testimonial or documentary, to adequately support such claim. Hence, it must be denied. Petitioners claim for moral damages must likewise be denied. The award of moral damages cannot be granted in favor of a corporation because, being an artificial person and having existence only in legal contemplation, it has no feelings, no emotions, no senses. It cannot, therefore, experience physical suffering and mental anguish, which can be experienced only by one having a nervous system.58 Petitioner being a corporation,59 the claim for moral damages must be denied. With regard to the claim for exemplary damages, it is a requisite in the grant thereof that the act of the offender must be accompanied by bad faith or done in wanton, fraudulent or malevolent manner.60 Moreover, where a party is not entitled to actual or moral damages, an award of exemplary damages is likewise baseless.61 In this case, petitioner failed to show that respondent acted in bad faith, or in wanton, fraudulent or malevolent manner. Petitioner likewise claims the amount of P50,000.00 as attorneys fees, the sum of P1,000.00 for every appearance of its counsel, plus costs of suit. It is well settled that no premium should be placed on the right to litigate and not every winning party is entitled to an automatic grant of attorney's fees. The party must show that he falls under one of the instances enumerated in Article 2208 of the Civil Code. In this case, since petitioner was compelled to engage the services of a lawyer and incurred expenses to protect its interest and right over the subject property, the award of attorneys fees is proper. However there are certain standards in fixing attorney's fees, to wit: (1) the amount and the character of the services rendered; (2) labor, time and trouble involved; (3) the nature and importance of the litigation and business in which the services were rendered; (4) the responsibility imposed; (5) the amount of money and the value of the property affected by the controversy or involved in the employment; (6) the skill and the experience called for in the performance of the services; (7) the professional character and the social standing of the attorney; and (8) the results secured, it being a recognized rule that an attorney may properly charge a much larger fee when it is contingent than when it is not.62 Considering the foregoing, the award of P10,000.00 as attorneys fees, including the costs of suit, is reasonable under the circumstances. WHEREFORE, the instant Petition for Review is PARTIALLY GRANTED. The Court of Appeals Decision dated June 14, 1999 in CAG.R. CV No. 43770 is MODIFIED as follows: (1) the "Kasulatan ng Bilihan Patuluyan ng Lupa" dated August 8, 1990 between Catalina Matienzo Fausto and respondent Anunciacion Fausto Pacunayen is hereby deemed rescinded; (2) The Heirs of the deceased Catalina Matienzo Fausto who are hereby deemed substituted as respondents, represented by respondent Anunciacion Fausto Pacunayen, are ORDERED to recognize the obligation of Catalina Matienzo Fausto under the Contract of Lease with respect to the priority right of petitioner Tanay Recreation Center and Development Corp. to purchase the subject property under reasonable terms and conditions; (3) Transfer Certificate of Title No. M-35468 shall remain in the name of respondent Anunciacion Fausto Pacunayen, which shall be cancelled in the event petitioner successfully purchases the subject property; (4) Respondent is ORDERED to pay petitioner Tanay Recreation Center and Development Corporation the amount of Twenty Thousand Pesos (P20,000.00) as actual damages, plus interest thereon at the legal rate of six percent (6%) per annum from the filing of the Complaint until the finality of this Decision. After this Decision becomes final and executory, the applicable rate shall be twelve percent (12%) per annum until its satisfaction; and, (5) Respondent is ORDERED to pay petitioner the amount of Ten Thousand Pesos (P10,000.00) as attorneys fees, and to pay the costs of suit.

(6) Let the case be remanded to the Regional Trial Court, Morong, Rizal (Branch 78) for further proceedings on the determination of the "reasonable terms and conditions" of the offer to sell by respondents to petitioner, without prejudice to possible mediation between the parties. The rest of the unaffected dispositive portion of the Court of Appeals Decision is AFFIRMED. SO ORDERED.

G.R. No. 106837 August 4, 1993 HENRY MACION and ANGELES MACION, petitioners, vs. HON. JAPAL M. GUIANI, in his capacity as Presiding Judge of the Regional Trial Court Branch 14, Cotabato City and DELA VIDA INSTITUTE represented by MS. JOSEPHINE LANZADERAS, respondents. Leonardo J. Rendon for petitioners. Mama Dalandag for private respondent Dela Vida Institute.

P2,000,000.00 only. 5 Other matters taken up in the letter were: De la Vida Institute would admit students and hold classes until July 6, 1992 but in case they (private respondent) fail to deliver the said amount, they would voluntarily vacate the premises and that "in the event that the bank and other lending institutions give its nod and approval to our loan and require the submission of other documents, you will give to us the Deed of Sale and Owner's copies of the Titles of the two (2) to t expedite release of the amount concerned." 6 On March 25, 1992, the trial court approved the compromise agreement dated February 6, 1992. Two (2) months after, private respondents, alleging that they had negotiated a loan from the Bank of the Philippine Islands, wrote letters dated May 19, 20 and 26 requesting petitioners to execute with them a contract to sell in their favor. On May 28, 1992, private respondent filed with the trial court an urgent motion for an order directing petitioners to execute a contract to sell in private respondent's favor in accordance with paragraph 7 of the compromise agreement. 7 On July 8, 1992, petitioners filed a motion for execution of judgement alleging that after a lapse of five (5) months from February 6, 1992, private respondent have failed to settle their obligations with petitioners. 8 In its order dated August 6, 1992, respondent judge denied the motion for execution and directed petitioners to execute the required contract to sell in favor of private respondent. Respondent judge opined that the proximate cause of private respondent's failure to comply with the compromise agreement was the refusal of petitioners to execute a contract to sell as required under the agreement. Respondent judge added that petitioners should have executed the contract to sell because anyway they would not be prejudiced since there was no transfer of ownership involved in a contract to sell. 9 Hence this instant petition for certiorari, with prayer for a temporary restraining order enjoining respondent judge from enforcing its August 6, 1992 order. On October 7, 1992, petitioners filed an Omnibus Urgent Motion praying that private respondent be ordered to consign with the court below P135,000.00 representing rentals from May 1991 to January 1992. In our resolution dated November 18, 1992, we granted said prayer. On March 9, 1992, private respondent consigned with the Office of the Clerk of Court the sum of P135,000.00. On March 29, 1993, petitioners filed with the lower court a motion to withdraw the consigned amount and on April 5, 1993, the trial court released the consigned amount to petitioners. 10 The issue in the case at bar is whether or not respondent judge committed grave abuse of discretion in ordering petitioner to execute a contract to sell in favor of private respondent. We dismiss the petition. The resolution of this case hinges on whether the compromise agreement gives private respondent-buyer the right to demand from petitioner-sellers the execution of a contract to sell in favor of the former. Apparently, paragraph 7 of the compromise agreement does not give such right to private respondent-buyer. To wit: 7. that if within the period of five (5) months from and after February 6, 1992, the plaintiff succeeds in obtaining funds for the purpose of settling their obligations with defendants in the total sum of P2,060,000.00 the latter shall oblige themselves to execute, sign and deliver to the former the corresponding Deed of Sale for the two (2) lots which is the subject of this case and turn-over to said plaintiff the owner's duplicate copy of TCT Nos. T-22004 and T-22005 of the Registry of Deeds for the City of Cotabato. (Italics provided).

ROMERO, J.: The subject of this litigation revolves around two (2) parcels of adjoining lots owned by petitioners which are the proposed extension sites of De La Vida Institute, an educational institution located in Cotabato City. On April 26, 1991, the petitioners and private respondent entered into a contract to sell under which terms, private respondent, as president of De la Vida Institute, assured petitioners that they would buy the said properties on or before July 31, 1991 in the amount of P1,750,000.00. In the meantime, petitioners surrendered the physical possession of the two lots to private respondent who promptly built an edifice worth P800,000.00. 1 But on July 31, 1991, the sale did not materialize. Consequently, petitioners filed a complaint for unlawful detainer against private respondent (MTCC Civil Case No. 2739). In retaliation, private respondent filed a complaint for reformation of the contract to sell executed on April 26, 1991 (Civil Case 592). 2 Afterwards, the parties met to settle their differences. On February 6, 1992, the parties entered into a compromise agreement which stipulated among others that petitioners would give private respondent five (5) months to raise the amount of P2,060,000.00; 3 that in the event of failure to raise the said amount within the designated period, private respondent would vacate the premises immediately. The compromise agreement, inter alia, provided: 6. that upon the execution of this agreement, the defendant will furnish the plaintiff with xerox copy of the land title for each lot which the latter may use for the purpose of providing information in securing a loan from any financing or banking institution of their choice. 7. that if within the period of five (5) months from and after February 6, 1992, the plaintiff succeeds in obtaining funds for the purpose of settling their obligations with defendants in the total sum of P2,060,000.00 the latter shall oblige themselves to execute, sign and deliver to the former the corresponding Deed of Sale for the two (2) lots which is the subject of this case and turn-over to said plaintiff the owner's duplicate copy of TCT Nos. T-22004 and T-22005 of the Registry of Deeds for the City of Cotabato. In affirmation of the compromise agreement, the Board of Trustees of De La Vida College passed thereafter a resolution expressing full support to the said agreement entered into between the parties. 4 On March 10, 1992, private respondent wrote petitioners that "the compromise agreement we have had in the presence of Judge Guiani is not the same as per attached xerox copy you gave us." In that letter, which essentially was a counter proposal, private respondent said that the price of P2,060,000.00 was higher than they were willing to pay in the amount of

From the aforecited paragraph, it is clear that the seller is obliged to execute a Deed of Sale and not a Contract to Sell upon payment of the full price of P2.06 million. Thereafter, the sellers would turn over to the buyers, respondents herein, the owner's duplicate copy of Transfer Certificate of Title Nos. T-22004 and T-22005. However, in the interpretation of the compromise agreement, we must delve in the contemporaneous and subsequent acts of the parties to fathom the real intention of the parties. 11 A review of the facts reveal that even prior to the signing of the compromise agreement and the filing of Civil Case No. 592 before the trial court, the parties had already entered into a contract to sell. Thereafter, when the transaction failed to materialize, the parties filed suits against each other; petitioners, their unlawful detainer case, and private respondent a complaint for reformation of contract, alleging that petitioners in fact had caused the preparation of the contract to sell dated April 26, 1991 with the understanding that the land would be used as a collateral in obtaining a loan with DBP. Said contract to sell was superseded by the compromise agreement entered into on February 6, 1992 containing the abovequoted paragraph. It must be recalled that private respondent was given five (5) months from February 6, 1992, i. e., on or before July 6, 1992 to secure the purchase price of the two (2) lots. We note that within the time frame agreed upon by the parties, private respondents wrote three (3) letters dated may 19, 20 and 26 requesting petitioners to execute a contract to sell in its favor. Under these factual circumstances, we opine that the compromise agreement must be interpreted as bestowing upon private respondent-buyer the power to demand a contract to sell from petitioner-sellers. Where the seller promised to execute a deed of absolute sale upon completing payment of the price, it is a contract to sell. 12 In the case at bar, the sale is still in the executory stage since the passing of title is subject to a suspensive condition, namely, that if private respondent is able to secure the needed funds to be used in the purchased of the two (2) lots owned by petitioners. A mere executory sale, one where the sellers merely promise to transfer the property at some future date, or where some conditions have to be fulfilled before the contract is converted from an executory to an executed one, does not pass ownership over the real estate being sold. 13 In our jurisdiction, it has been that an accepted bilateral promise to buy and sell is in a sense similar to, but not exactly the same, as a perfected contract of sale because there is already a meeting of minds upon the thing which is the object of the contract and upon the price. 14 But a contract of sale is consummated only upon the delivery and payment. It cannot be denied that the compromise agreement, having been signed by both parties, is tantamount to a bilateral promise to buy and sell a certain thing for a price certain. Hence, this gives the contracting parties rights in personam, such that each has the right to demand from the other the fulfillment of their respective undertakings. 15 Demandability may be exercised at any time after the execution of the Deed. 16 The order of respondent judge directing petitioners to issue a contract to sell does not place petitioners in any danger of losing their property without consideration, for, to repeat, in a contract to sell there is no immediate transfer of ownership. In contracts to sell, payment is a positive suspensive condition, failure of which does not constitute a breach but an event that prevents the obligation of the vendor to convey title from materializing, in accordance with Article 1184 of the Civil Code. 17 Petitioners as promisors were never obliged to convey title before the happening of the suspensive condition. In fact, nothing stood in the way of their selling the property to another after a unsuccessful demand for said price upon the expiration of the time agreed upon. Since the period given by the petitioners under the compromise agreement has already lapsed, we order the trial court to fix anew a period within which private respondents could secure the needed funds for the purchase of the land. 18 Moreover, considering that private respondents have only consigned rentals from May 1991 to January 1992 and have since accepted students for the present school year, it is only proper that they be ordered to deposit the monthly rentals collected thereafter with the trial court. WHEREFORE, the instant petition is DISMISSED. Petitioners are hereby ordered to EXECUTE a contract to sell in favor of private respondents. On the other hand, private respondent is ordered to DEPOSIT with the trial court current rentals pending

consummation of the transaction between the parties. The trial court is ordered to FIX anew the period within which private respondents may be given the opportunity to raise funds for the purchase of the two (2) adjoining lots owned by petitioners. SO ORDERED. Feliciano, Bidin, Melo and Vitug, JJ., concur.