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EQUATORIAL REALTY DEVELOPMENT, INC.

& CARMELO &


BAUERMANN, INC. vs. MAYFAIR THEATER, INC.
G.R. No. 106063 November 21, 1996
FACTS:
Carmelo entered into a contract with respondent for the latter to lease !"R#$"N
"% #&' ('C"N) %*""R of the two+store, b-ildin., sit-ated at C./. Recto ven-e,
/anila, with a 0oor area of 1,610 s1-are meters and #&' ('C"N) %*""R N)
/'22N$N' of the two+store, b-ildin., sit-ated at C./. Recto ven-e, /anila, with a
0oor area of 130 s1-are meters.
#he contract is set for the ne4t 20 ,ears.
2 ,ears later, the parties entered into ,et another contract involvin.5 !"R#$"N "%
#&' ('C"N) %*""R of the two+store, b-ildin., sit-ated at C./. Recto ven-e,
/anila, with a 0oor area of 1,610 s1-are meters and #&' ('C"N) %*""R N)
/'22N$N' of the two+store, b-ildin., sit-ated at C./. Recto ven-e, /anila, with a
0oor area of 130 s1-are meters.
(tip-lated in the contract was5 #hat if the *'(("R sho-ld desire to sell the leased
premises, the *'(('' shall be .iven 30+da,s e4cl-sive option to p-rchase the same.
$n the event, however, that the leased premises is sold to someone other than the
*'(('', the *'(("R is bo-nd and obli.ated, as it hereb, binds and obli.ates itself,
to stip-late in the )eed of (ale hereof that the p-rchaser shall reco.ni6e this lease
and be bo-nd b, all the terms and conditions thereof.
(ometime in 1978, Carmelo thro-.h /r. !ascal b, a telephone call told the
respondent that it is contemplatin. to sell the said propert, and that a certain 9ose
raneta is willin. to b-, the same for :(;1,200,000. $t also as<ed the respondent if
it=s willin. to the propert, for si4 to seven million pesos. Respondent thro-.h /r.
>an. told the petitioner that it wo-ld respond once a decision was made.
Respondent in its repl, mentioned a stip-lated part of the contract as to when
Carmelo wo-ld decide to sell the propert,. Carmelo did not repl,.
%o-r ,ears later, on 9-l, 30, 197?, Carmelo sold its entire C./. Recto ven-e land
and b-ildin., which incl-ded the leased premises ho-sin. the @/a4im@ and
@/iramar@ theatres, to '1-atorial b, virt-e of a )eed of bsol-te (ale, for the total
s-m of !11,300,000.00.
/a,fair instit-ted the action a 1-o for speciAc performance and ann-lment of the
sale of the leased premises to '1-atorial.
Carmelo=s defense5 as special and aBrmative defense CaD that it had informed
/a,fair of its desire to sell the entire C./. Recto ven-e propert, and oEered the
same to /a,fair, b-t the latter answered that it was interested onl, in b-,in. the
areas -nder lease, which was impossible since the propert, was not a
condomini-m5 and CbD that the option to p-rchase invo<ed b, /a,fair is n-ll and
void for lac< of consideration.
'1-itorial=s alle.ation5 that the option is void for lac< of consideration CsicD and is
-nenforceable b, reason of its impossibilit, of performance beca-se the leased
premises co-ld not be sold separatel, from the other portions of the land and
b-ildin.. $t co-nterclaimed for cancellation of the contracts of lease, and for
increase of rentals in view of alle.ed s-pervenin. e4traordinar, deval-ation of the
c-rrenc,. '1-atorial li<ewise cross+claimed a.ainst co+defendant Carmelo for
indemniAcation in respect of /a,fairFs claims.
#rial Co-rt rendered decision in favor of Carmelo and '1-itorial.
ISSUE:
Ghether or not the "!#$"N C*:(' $N #&' C"N#RC#( "% *'(' $( C#:**>
R$G&# "% %$R(# R'%:(* !R"H$("
HELD:
Ge a.ree with the respondent Co-rt of ppeals that the aforecited contract-al
stip-lation provides for a ri.ht of Arst ref-sal in favor of /a,fair. It is not an option
clause or an option contract. $t is a contract of a ri.ht of Arst ref-sal.
$n his *aw )ictionar,, edition of 1?97, Io-vier deAnes an option as a contract, in the
followin. lan.-a.eJ
contract b, virt-e of which , in consideration of the payment of a certain sum to
I, ac1-ires the privile.e of b-,in. from, or sellin. to I, certain sec-rities or
properties within a limited time at a speciAed price.
#he r-le so earl, established in this K-risdiction is that the deed of option or the
option cla-se in a contract, in order to be valid and enforceable, m-st, amon. other
thin.s, indicate the deAnite price at which the person .rantin. the option, is willin.
to sell
EQUATORIAL REALTY DEVELOPMENT, INC., vs. MAYFAIR
THEATER, INC.
LG.R. No. 133?79. November 21, 2001.M
FACTS:
/a,fair #heater, $nc. was a lessee of portions of a b-ildin. owned b, Carmelo
N Ia-ermann, $nc. #heir lease contracts of 20 ,ears C1. which covered a
portion of the second 0oor and me66anine of a two+store, b-ildin. with abo-t
1,610 s1-are meters of 0oor area, which respondent -sed as a movie ho-se
<nown as /a4im #heater 2. two store spaces on the .ro-nd 0oor and the
me66anine, with a combined 0oor area of abo-t 300 s1-are meters also -sed
as a movie ho-se O/iramar #heaterPD
*ease contracts contained a provision .rantin. /a,fair a ri.ht of Arst ref-sal
to p-rchase the s-bKect properties.
&owever, before the contracts ended, the s-bKect properties were sold for
!11,300 b, Carmelo to '1-atorial Realt, )evelopment, $nc.
#his prompted /a,fair to Ale a case for the ann-lment of the )eed of
bsol-te (ale between Carmelo and '1-atorial, speciAc performance and
dama.es.
$n 1996, the Co-rt r-led in fav! f Ma"fai!.
Iarel, Ave months after /a,fair had s-bmitted its /otion for '4ec-tion,
'1-atorial Aled an action for collection of s-m of mone, a.ainst /a,fair
claimin. pa,ment of rentals or reasonable compensation for the defendant=s
-se of the s-bKect premises after its lease contracts had e4pired.
/a4im #heater contract e4pired on /a, 31, 19?7, while the *ease Contract
coverin. the premises occ-pied b, /iramar #heater lapsed on /arch 31,
19?9.
#he lower co-rt deb-n<ed the claim of '1-atorial for -npaid bac< rentals,
holdin. that the rescission of the )eed of bsol-te (ale in the mother case did
not confer on '1-atorial an, vested or resid-al propriet, ri.hts, even in
e4pectanc,.
$t f-rther r-led that the Co-rt cate.oricall, stated that the )eed of bsol-te
(ale had been rescinded s-bKectin. the present complaint to res K-dicata.
&ence, '1-atorial Aled the present petition.

$((:'J whether '1-atorial was the owner of the s-bKect propert, and co-ld th-s
enKo, the fr-its or rentals therefrom
HELD: N".
CIVIL LA#$ PROPERTY$ CIVIL FRUIT OF O#NERSHIP$ RENTALS. Q Rent is a
civil fr-it that belon.s to the owner of the propert, prod-cin. it b, ri.ht of
accession. Conse1-entl, and ordinaril,, the rentals that fell d-e from the time of the
perfection of the sale to petitioner -ntil its rescission b, Anal K-d.ment sho-ld
belon. to the owner of the propert, d-rin. that period.
SALES$ O#NERSHIP OF THE THIN% SOLD IS TRANSFERRED, NOT BY
CONTRACT ALONE, BUT BY TRADITION OR DELIVERY. Q I, a contract of sale,
Oone of the contractin. parties obli.ates himself to transfer ownership of and to
deliver a determinate thin. and the other to pa, therefor a price certain in mone,
or its e1-ivalent.P "wnership of the thin. sold is a real ri.ht, which the b-,er
ac1-ires onl, -pon deliver, of the thin. to him Oin an, of the wa,s speciAed in
rticles 1897 to 1301, or in an, other manner si.nif,in. an a.reement that the
possession is transferred from the vendor to the vendee.P #his ri.ht is transferred,
not b, contract alone, b-t b, tradition or deliver,. Non n-dis pactis sed traditione
dominia rer-m transferant-r.
THERE IS DELIVERY #HEN THE THIN% SOLD IS PLACED UNDER THE
CONTROL AND POSSESSION OF THE VENDEE. Q L#Mhere is said to be deliver, if
and when the thin. sold Ois placed in the control and possession of the vendee.P
#h-s, it has been held that while the e4ec-tion of a p-blic instr-ment of sale is
reco.ni6ed b, law as e1-ivalent to the deliver, of the thin. sold, s-ch constr-ctive
or s,mbolic deliver,, bein. merel, pres-mptive, is deemed ne.ated b, the fail-re of
the vendee to ta<e act-al possession of the land sold. )eliver, has been described
as a composite act, a thin. in which both parties m-st Koin and the minds of both
parties conc-r. $t is an act b, which one part, parts with the title to and the
possession of the propert,, and the other ac1-ires the ri.ht to and the possession of
the same. $n its nat-ral sense, deliver, means somethin. in addition to the deliver,
of propert, or title5 it means transfer of possession. $n the *aw on (ales, deliver,
ma, be either act-al or constr-ctive, b-t both forms of deliver, contemplate Othe
absol-te .ivin. -p of the control and c-stod, of the propert, on the part of the
vendor, and the ass-mption of the same b, the vendee.P
ID.$ NOT PRESENT IN CASE AT BAR. Q L#Mheoreticall,, a rescissible contract is
valid -ntil rescinded. &owever, this .eneral principle is not decisive to the iss-e of
whether '1-atorial ever ac1-ired the ri.ht to collect rentals. Ghat is decisive is the
civil law r-le that ownership is ac1-ired, not b, mere a.reement, b-t b, tradition or
deliver,. :nder the fact-al environment of this controvers, as fo-nd b, this Co-rt in
the mother case, '1-atorial was never p-t in act-al and eEective control or
possession of the propert, beca-se of /a,fair=s timel, obKection.
ID.$ E&ECUTION OF CONTRACT OF SALE AS FORM OF CONSTRUCTIVE
DELIVERY HOLDS TRUE ONLY #HEN THERE IS NO IMPEDIMENT THAT MAY
PREVENT THE PASSIN% OF THE PROPERTY FROM THE VENDOR TO THE
VENDEE. Q %rom the pec-liar facts of this case, it is clear that petitioner never too<
act-al control and possession of the propert, sold, in view of respondent=s timel,
obKection to the sale and the contin-ed act-al possession of the propert,. #he
obKection too< the form of a co-rt action imp-.nin. the sale which, as we <now, was
rescinded b, a K-d.ment rendered b, this Co-rt in the mother case. $t has been held
that the e4ec-tion of a contract of sale as a form of constr-ctive deliver, is a le.al
Action. $t holds tr-e onl, when there is no impediment that ma, prevent the passin.
of the propert, from the hands of the vendor into those of the vendee. Ghen there
is s-ch impediment, OAction ,ields to realit, Q the deliver, has not been eEected.P
&ence, respondent=s opposition to the transfer of the propert, b, wa, of sale to
'1-atorial was a le.all, s-Bcient impediment that eEectivel, prevented the
passin. of the propert, into the latter=s hands.
ID.$ E&ECUTION OF PUBLIC INSTRUMENT %IVES RISE ONLY TO A PRIMA
FACIE PRESUMPTION OF DELIVERY. Q #he e4ec-tion of a p-blic instr-ment .ives
rise, . . . onl, to a prima facie pres-mption of deliver,. (-ch pres-mption is
destro,ed when the instr-ment itself e4presses or implies that deliver, was not
intended5 or when b, other means it is shown that s-ch deliver, was not eEected,
beca-se a third person was act-all, in possession of the thin.. $n the latter case,
the sale cannot be considered cons-mmated.
ID.$ OBLI%ATIONS AND CONTRACTS$ RESCISSIBLE CONTRACTS$ NOT ONLY
THE LAND AND BUILDIN% SOLD SHALL BE RETURNED TO THE SELLER BUT
ALSO THE RENTAL PAYMENTS PAID, IF ANY. Q L#Mhe point ma, be raised that
-nder rticle 1168 of the Civil Code, '1-atorial as b-,er ac1-ired a ri.ht to the
fr-its of the thin. sold from the time the obli.ation to deliver the propert, to
petitioner arose. #hat time arose -pon the perfection of the Contract of (ale on 9-l,
30, 197?, from which moment the laws provide that the parties to a sale ma,
reciprocall, demand performance. )oes this mean that despite the K-d.ment
rescindin. the sale, the ri.ht to the fr-its belon.ed to, and remained enforceable
b,, '1-atorialR rticle 13?3 of the Civil Code answers this 1-estion in the ne.ative,
beca-se OLrMescission creates the obli.ation to ret-rn the thin.s which were the
obKect of the contract, to.ether with their fr-its, and the price with its interest5 . . . .P
Not onl, the land and b-ildin. sold, b-t also the rental pa,ments paid, if an,, had to
be ret-rned b, the b-,er.
ID.$ SALES$ CONTRACT OF SALE$ RENTAL PAYMENTS MADE SHOULD NOT BE
CONSTRUED AS A RECO%NITION OF THE BUYER AS NE# ORDER BUT
MERELY TO AVOID IMMINENT EVICTION$ CASE AT BAR. Q #he fact that /a,fair
paid rentals to '1-atorial d-rin. the liti.ation sho-ld not be interpreted to mean
either act-al deliver, or ipso facto reco.nition of '1-atorial=s title. #he C Records
of the mother case show that '1-atorial Q as alle.ed b-,er of the disp-ted
properties and as alle.ed s-ccessor+in+interest of Carmelo=s ri.hts as lessor Q
s-bmitted two eKectment s-its a.ainst /a,fair. %iled in the /etropolitan #rial Co-rt
of /anila, the Arst was doc<eted as Civil Case No. 121370 on 9-l, 9, 19?75 and the
second, as Civil Case No. 131988 on /a, 2?, 1990. /a,fair event-all, won them
both. &owever, to be able to maintain ph,sical possession of the premises while
awaitin. the o-tcome of the mother case, it had no choice b-t to pa, the rentals.
#he rental pa,ments made b, /a,fair sho-ld not be constr-ed as a reco.nition of
'1-atorial as the new owner. #he, were made merel, to avoid imminent eviction.
STATUTORY CONSTRUCTION$ %ENERAL PROPOSITIONS DO NOT DECIDE
SPECIFIC CASES. Q s pointed o-t b, 9-stice &olmes, .eneral propositions do not
decide speciAc cases. Rather, Olaws are interpreted in the conte4t of the pec-liar
fact-al sit-ation of each case. 'ach case has its own 0esh and blood and cannot be
decided on the basis of isolated clinical classroom principles.P
CIVIL LA#$ SALES$ VALID FROM INCEPTION BUT 'UDICIALLY RESCINDED
BEFORE IT COULD BE CONSUMMATED$ CASE AT BAR. Q L#Mhe sale to
'1-atorial ma, have been valid from inception, b-t it was K-diciall, rescinded before
it co-ld be cons-mmated. !etitioner never ac1-ired ownership, not beca-se the
sale was void, as erroneo-sl, claimed b, the trial co-rt, b-t beca-se the sale was
not cons-mmated b, a le.all, eEective deliver, of the propert, sold.
ID.$ ID.$ BUYER IN BAD FAITH$ NOT ENTITLED TO ANY BENEFIT$ ENTITLED
SOLELY TO THE RETURN OF THE PURCHASE PRICE$ MUST BEAR ANY LOSS.
Q LMss-min. for the sa<e of ar.-ment that there was valid deliver,, petitioner is
not entitled to an, beneAts from the OrescindedP )eed of bsol-te (ale beca-se of
its bad faith. #his bein. the law of the mother case decided in 1996, it ma, no
lon.er be chan.ed beca-se it has lon. become Anal and e4ec-tor,. . . . #h-s,
petitioner was and still is entitled solel, to the ret-rn of the p-rchase price it paid to
Carmelo5 no more, no less. #his Co-rt has Arml, r-led in the mother case that
neither of them is entitled to an, consideration of e1-it,, as both Otoo<
-nconscientio-s advanta.e of /a,fair.P $n the mother case, this Co-rt cate.oricall,
denied the pa,ment of interest, a fr-it of ownership. I, the same to<en, rentals,
another fr-it of ownership, cannot be .ranted witho-t moc<in. this Co-rt=s en banc
)ecision, which has lon. become Anal. !etitioner=s claim of reasonable
compensation for respondent=s -se and occ-pation of the s-bKect propert, from the
time the lease e4pired cannot be co-ntenanced. $f it s-Eered an, loss, petitioner
m-st bear it in silence, since it had wro-.ht that loss -pon itself. "therwise, bad
faith wo-ld be rewarded instead of p-nished.
ID.$ ID.$ ID.$ ID.$ APPLICABLE IN CASE AT BAR. Q (-Bce it to sa, that, clearl,,
o-r r-lin. in the mother case bars petitioner from claimin. bac< rentals from
respondent. ltho-.h the co-rt a 1-o erred when it declared Ovoid from inceptionP
the )eed of bsol-te (ale between Carmelo and petitioner, o-r fore.oin. disc-ssion
s-pports the .rant of the /otion to )ismiss on the .ro-nd that o-r prior K-d.ment in
GR No. 106063 has alread, resolved the iss-e of bac< rentals. "n the basis of the
evidence presented d-rin. the hearin. of /a,fair=s /otion to )ismiss, the trial co-rt
fo-nd that the iss-e of ownership of the s-bKect propert, has been decided b, this
Co-rt in favor of /a,fair. . . . &ence, the trial co-rt decided the /otion to )ismiss on
the basis of res K-dicata, even if it erred in interpretin. the meanin. of OrescindedP
as e1-ivalent to Ovoid.P $n short, it r-led on the .ro-nd raised5 namel,, bar b, prior
K-d.ment. I, .rantin. the /otion, it disposed correctl,, even if its le.al reason for
n-llif,in. the sale was wron..