1 general principles
G.R. No. L-26872 July 25, 1975
VILLONCO REALTY COMPANY, plaintiff-appellee and EDITH PEREZ DE
TAGLE, intervenor-appellee, vs. BORMAHECO, INC., FRANCISCO N.
CERVANTES and ROSARIO N. CERVANTES, defendants-appellants. Meer, Meer
& Meer for plaintiff-appellee.
AQUINO, J.:
This action was instituted by Villonco Realty Company against Bormaheco, Inc.
and the spouses Francisco N. Cervantes and Rosario N. Cervantes for the
specific performance of a supposed contract for the sale of land and the
improvements thereon for one million four hundred thousand pesos. Edith
Perez de Tagle, as agent, intervened in order to recover her commission. The
lower court enforced the sale. Bormaheco, Inc. and the Cervantes spouses, as
supposed vendors, appealed.
This Court took cognizance of the appeal because the amount
involved is more than P200,000 and the appeal was perfected before Republic
Act No. 5440 took effect on September 9, 1968. The facts are as follows:
Francisco N. Cervantes and his wife, Rosario P. Navarra-Cervantes, are the
owners of lots 3, 15 and 16 located at 245 Buendia Avenue, Makati, Rizal with
a total area of three thousand five hundred square meters (TCT Nos. 43530,
43531 and 43532, Exh. A, A-1 and A-2). The lots were mortgaged to the
Development Bank of the Phil (DBP) on April 21, 1959 as security for a loan of
P441,000. The mortgage debt was fully paid on July 10, 1969.
Cervantes is the president of Bormaheco, Inc., a dealer and
importer of industrial and agricultural machinery. The entire lots are occupied
by the building, machinery and equipment of Bormaheco, Inc. and are
adjacent to the property of Villonco Realty Company situated at 219 Buendia
Avenue.
In the early part of February, 1964 there were negotiations for the
sale of the said lots and the improvements thereon between Romeo Villonco
of Villonco Realty Company "and Bormaheco, Inc., represented by its
president, Francisco N. Cervantes, through the intervention of Edith Perez de
Tagle, a real estate broker".
In the course of the negotiations, the brothers Romeo Villonco and
Teofilo Villonco conferred with Cervantes in his office to discuss the price and
terms of the sale. Later, Cervantes "went to see Villonco for the same reason
until some agreement" was arrived at. On a subsequent occasion, Cervantes,
accompanied by Edith Perez de Tagle, discussed again the terms of the sale
with Villonco.
During the negotiations, Villonco Realty Company assumed that
the lots belonged to Bormaheco, Inc. and that Cervantes was duly authorized
to sell the same. Cervantes did not disclose to the broker and to Villonco Realty
Company that the lots were conjugal properties of himself and his wife and
that they were mortgaged to the DBP.
Bormaheco, Inc., through Cervantes, made a written offer dated
February 12, 1964, to Romeo Villonco for the sale of the property. The offer
reads (Exh. B):
BORMAHECO, INC.
February 12,1964
Mr. Romeo Villonco
Villonco Building Buendia Avenue
Makati, Rizal.
Dear Mr. Villonco:
This is with reference to our telephone conversation this noon on the matter
of the sale of our property located at Buendia Avenue, with a total area of
3,500 sq. m., under the following conditions:
(1) That we are offering to sell to you the above property at the price of
P400.00 per square meter;
(2) That a deposit of P100,000.00 must be placed as earnest money on
the purchase of the above property which will become part payment of
the property in the event that the sale is consummated;
(3) That this sale is to be consummated only after I shall have also
consummated my purchase of another property located at Sta. Ana,
Manila;
(4) That if my negotiations with said property will not be consummated
by reason beyond my control, I will return to you your deposit of
P100,000 and the sale of my property to you will not also be
consummated; and
(5) That final negotiations on both properties can be definitely known
after 45 days.
If the above terms is (are) acceptable to your Board, please issue out the said
earnest money in favor of Bormaheco, Inc., and deliver the same thru the
bearer, Miss Edith Perez de Tagle.
Very truly yours,
SGD. FRANCISCO N. CERVANTES
President
The property mentioned in Bormaheco's letter was the land of the
National Shipyards & Steel Corporation (Nassco), with an area of twenty
thousand square meters, located at Punta, Sta. Ana, Manila. At the bidding
held on January 17, 1964 that land was awarded to Bormaheco, Inc., the
highest bidder, for the price of P552,000. The Nassco Board of Directors in its
resolution of February 18, 1964 authorized the General Manager to sign the
necessary contract (Exh. H).
On February 28, 1964, the Nassco Acting General Manager wrote a
letter to the Economic Coordinator, requesting approval of that resolution.
The Acting Economic Coordinator approved the resolution on March 24, 1964
(Exh. 1).
In the meanwhile, Bormaheco, Inc. and Villonco Realty Company
continued their negotiations for the sale of the Buendia Avenue property.
Cervantes and Teofilo Villonco had a final conference on February 27, 1964. As
a result of that conference Villonco Realty Company, through Teofilo Villonco,
in its letter of March 4, 1964 made a revised counter- offer (Romeo Villonco's
first counter-offer was dated February 24, 1964, Exh. C) for the purchase of
the property. The counter-offer was accepted by Cervantes as shown in Exhibit
D, which is quoted below:
VILLONCO REALTY COMPANY
V. R. C. Building
219 Buendia Avenue, Makati,
Rizal, Philippines
March 4, 1964
Mr. Francisco Cervantes.
Bormaheco, Inc.
245 Buendia Avenue
Makati, Rizal
Dear Mr. Cervantes:
In reference to the letter of Miss E. Perez de Tagle dated February 12th and 26,
1964 in respect to the terms and conditions on the purchase of your property
located at Buendia Ave., Makati, Rizal, with a total area of 3,500 sq. meters.,
we hereby revise our offer, as follows:
1. That the price of the property shall be P400.00 per sq. m., including
the improvements thereon;
2. That a deposit of P100,000.00 shall be given to you as earnest money
which will become as part payment in the event the sale is
consummated;
3. This sale shall be cancelled, only if your deal with another property in
Sta. Ana shall not be consummated and in such case, the P100,000-00
earnest money will be returned to us with a 10% interest p.a. However,
if our deal with you is finalized, said P100,000.00 will become as part
payment for the purchase of your property without interest:
4. The manner of payment shall be as follows:
a. P100,000.00 earnest money and 650,000.00 as part of the down
payment, or P750,000.00 as total down payment
b. The balance is payable as follows: P100,000.00 after 3 months
125,000.00 -do-
212,500.00 -do-
P650,000.00 Total
As regards to the other conditions which we have discussed during
our last conference on February 27, 1964, the same shall be finalized upon
preparation of the contract to sell.*
If the above terms and conditions are acceptable to you, kindly sign
your conformity hereunder. Enclosed is our check for ONE HUNDRED
THOUSAND (P100,000.00) PESOS, MBTC Check No. 448314, as earnest money.
Very truly yours,
VILLONCO REALTY COMPANY
(Sgd.) TEOFILO VILLONCO
CONFORME:
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BORMAHECO, INC.
(Sgd.) FRANCISCO CERVANTES
That this sale shall be subject to favorable consummation of a property in Sta.
Ana we are negotiating.
(Sgd.) FRANCISCO CERVANTES
The check for P100,000 (Exh. E) mentioned in the foregoing letter-
contract was delivered by Edith Perez de Tagle to Bormaheco, Inc. on March
4, 1964 and was received by Cervantes. In the voucher-receipt evidencing the
delivery the broker indicated in her handwriting that the earnest money was
"subject to the terms and conditions embodied in Bormaheco's letter" of
February 12 and Villonco Realty Company's letter of March 4, 1964 (Exh. E-1;
14 tsn).
Then, unexpectedly, in a letter dated March 30, 1964, or twenty-
six days after the signing of the contract of sale, Exhibit D, Cervantes returned
the earnest money, with interest amounting to P694.24 (at ten percent per
annum). Cervantes cited as an excuse the circumstance that "despite the lapse
of 45 days from February 12, 1964 there is no certainty yet" for the acquisition
of the Punta property (Exh. F; F-I and F-2). Villonco Realty Company refused to
accept the letter and the checks of Bormaheco, Inc. Cervantes sent them by
registered mail. When he rescinded the contract, he was already aware that
the Punta lot had been awarded to Bormaheco, Inc. (25-26 tsn).
Edith Perez de Tagle, the broker, in a letter to Cervantes dated
March 31, 1964 articulated her shock and surprise at Bormaheco's turnabout.
She reviewed the history of the deal and explained why Romeo Villonco could
not agree to the rescission of the sale (Exh. G).**
Cervantes in his letter of April 6, 1964, a reply to Miss Tagle's letter,
alleged that the forty-five day period had already expired and the sale to
Bormaheco, Inc. of the Punta property had not been consummated. Cervantes
said that his letter was a "manifestation that we are no longer interested to
sell" the Buendia Avenue property to Villonco Realty Company (Annex I of
Stipulation of Facts). The latter was furnished with a copy of that letter.
In a letter dated April 7, 1964 Villonco Realty Company returned
the two checks to Bormaheco, Inc., stating that the condition for the
cancellation of the contract had not arisen and at the same time announcing
that an action for breach of contract would be filed against Bormaheco, Inc.
(Annex G of Stipulation of Facts).
On that same date, April 7, 1964 Villonco Realty Company filed the
complaint (dated April 6) for specific performance against Bormaheco, Inc.
Also on that same date, April 7, at eight-forty-five in the morning, a notice of lis
pendens was annotated on the titles of the said lots.
Bormaheco, Inc. in its answers dated May 5 and 25, 1964 pleaded
the defense that the perfection of the contract of sale was subject to the
conditions (a) "that final acceptance or not shall be made after 45 days" (sic)
and (b) that Bormaheco, Inc. "acquires the Sta. Ana property".
On June 2, 1964 or during the pendency of this case, the Nassco
Acting General Manager wrote to Bormaheco, Inc., advising it that the Board
of Directors and the Economic Coordinator had approved the sale of the Punta
lot to Bormaheco, Inc. and requesting the latter to send its duly authorized
representative to the Nassco for the signing of the deed of sale (Exh. 1).
The deed of sale for the Punta land was executed on June 26, 1964.
Bormaheco, Inc. was represented by Cervantes (Exh. J. See Bormaheco, Inc. vs.
Abanes, L-28087, July 31, 1973, 52 SCRA 73).
In view of the disclosure in Bormaheco's amended answer that the
three lots were registered in the names of the Cervantes spouses and not in
the name of Bormaheco, Inc., Villonco Realty Company on July 21, 1964 filed
an amended complaint impleading the said spouses as defendants.
Bormaheco, Inc. and the Cervantes spouses filed separate answers.
As of January 15, 1965 Villonco, Realty Company had paid to the
Manufacturers' Bank & Trust Company the sum of P8,712.25 as interests on
the overdraft line of P100,000 and the sum of P27.39 as interests daily on the
same loan since January 16, 1965. (That overdraft line was later settled by
Villonco Realty Company on a date not mentioned in its manifestation of
February 19, 1975).
Villonco Realty Company had obligated itself to pay the sum of
P20,000 as attorney's fees to its lawyers. It claimed that it was damaged in the
sum of P10,000 a month from March 24, 1964 when the award of the Punta
lot to Bormaheco, Inc. was approved. On the other hand, Bormaheco, Inc.
claimed that it had sustained damages of P200,000 annually due to the notice
of lis pendens which had prevented it from constructing a multi-story building
on the three lots. (Pars. 18 and 19, Stipulation of Facts).1äwphï1.ñët
Miss Tagle testified that for her services Bormaheco, Inc., through
Cervantes, obligated itself to pay her a three percent commission on the price
of P1,400,000 or the amount of forty-two thousand pesos (14 tsn).
After trial, the lower court rendered a decision ordering the Cervantes spouses
to execute in favor of Bormaheco, Inc. a deed of conveyance for the three lots
in question and directing Bormaheco, Inc. (a) to convey the same lots to
Villonco Realty Company, (b) to pay the latter, as consequential damages, the
sum of P10,000 monthly from March 24, 1964 up to the consummation of the
sale, (c) to pay Edith Perez de Tagle the sum of P42,000 as broker's commission
and (d) pay P20,000 as to attorney's fees (Civil Case No. 8109).
Bormaheco, Inc. and the Cervantes spouses appealed. Their
principal contentions are (a) that no contract of sale was perfected because
Cervantes made a supposedly qualified acceptance of the revised offer
contained in Exhibit D, which acceptance amounted to a counter-offer, and
because the condition that Bormaheco, inc. would acquire the Punta land
within the forty-five-day period was not fulfilled; (2) that Bormaheco, Inc.
cannot be compelled to sell the land which belongs to the Cervantes spouses
and (3) that Francisco N. Cervantes did not bind the conjugal partnership and
his wife when, as president of Bormaheco, Inc., he entered into negotiations
with Villonco Realty Company regarding the said land.
We hold that the appeal, except as to the issue of damages, is
devoid of merit.
"By the contract of sale one of the contracting parties obligates
himself to transfer the ownership of and to deliver a determining thing, and
the other to pay therefor a price certain in money or its equivalent. A contract
of sale may be absolute or conditional" (Art. 1458, Civil Code).
"The contract of sale is 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 performance, subject
to the provisions of the law governing the form of contracts" (Art. 1475, Ibid.).
"Contracts are perfected by mere consent, and from that moment the parties
are bound not only to the fulfillment of what has been expressly stipulated but
also to all the consequences which, according to their nature, may be in
keeping with good faith, usage and law" (Art. 1315, Civil Code).
"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" (Art. 1319, Civil Code). "An acceptance may be
express or implied" (Art. 1320, Civil Code).
Bormaheco's acceptance of Villonco Realty Company's offer to
purchase the Buendia Avenue property, as shown in Teofilo Villonco's letter
dated March 4, 1964 (Exh. D), indubitably proves that there was a meeting of
minds upon the subject matter and consideration of the sale. Therefore, on
that date the sale was perfected. (Compare with McCullough vs. Aenlle & Co.,
3 Phil. 285; Goyena vs. Tambunting, 1 Phil. 490). Not only that Bormaheco's
acceptance of the part payment of one hundred ,thousand pesos shows that
the sale was conditionally consummated or partly executed subject to the
purchase by Bormaheco, Inc. of the Punta property. The nonconsummation of
that purchase would be a negative resolutory condition (Taylor vs. Uy Tieng
Piao, 43 Phil. 873).
On February 18, 1964 Bormaheco's bid for the Punta property was
already accepted by the Nassco which had authorized its General Manager to
sign the corresponding deed of sale. What was necessary only was the
approval of the sale by the Economic Coordinator and a request for that
approval was already pending in the office of that functionary on March 4,
1964.
Bormaheco, Inc. and the Cervantes spouses contend that the sale
was not perfected because Cervantes allegedly qualified his acceptance of
Villonco's revised offer and, therefore, his acceptance amounted to a counter-
offer which Villonco Realty Company should accept but no such acceptance
was ever transmitted to Bormaheco, Inc. which, therefore, could withdraw its
offer.
That contention is not well-taken. It should be stressed that there
is no evidence as to what changes were made by Cervantes in Villonco's
revised offer. And there is no evidence that Villonco Realty Company did not
assent to the supposed changes and that such assent was never made known
to Cervantes.
What the record reveals is that the broker, Miss Tagle, acted as
intermediary between the parties. It is safe to assume that the alleged changes
or qualifications made by Cervantes were approved by Villonco Realty
Company and that such approval was duly communicated to Cervantes or
Bormaheco, Inc. by the broker as shown by the fact that Villonco Realty
1 general principles
Company paid, and Bormaheco, Inc. accepted, the sum of P100,000 as earnest
money or down payment. That crucial fact implies that Cervantes was aware
that Villonco Realty Company had accepted the modifications which he had
made in Villonco's counter-offer. Had Villonco Realty Company not assented
to those insertions and annotations, then it would have stopped payment on
its check for P100,000. The fact that Villonco Realty Company allowed its check
to be cashed by Bormaheco, Inc. signifies that the company was in conformity
with the changes made by Cervantes and that Bormaheco, Inc. was aware of
that conformity. Had those insertions not been binding, then Bormaheco, Inc.
would not have paid interest at the rate of ten percent per annum, on the
earnest money of P100,000.
The truth is that the alleged changes or qualifications in the revised
counter — offer (Exh. D) are not material or are mere clarifications of what the
parties had previously agreed upon.
Thus, Cervantes' alleged insertion in his handwriting of the figure
and the words "12th and" in Villonco's counter-offer is the same as the
statement found in the voucher-receipt for the earnest money, which reads:
"subject to the terms and conditions embodied in Bormaheco's letter of Feb.
12, 1964 and your letter of March 4, 1964" (Exh. E-1).
Cervantes allegedly crossed out the word "Nassco" in paragraph 3
of Villonco's revised counter-offer and substituted for it the word "another"
so that the original phrase, "Nassco's property in Sta. Ana", was made to read
as "another property in Sta. Ana". That change is trivial. What Cervantes did
was merely to adhere to the wording of paragraph 3 of Bormaheco's original
offer (Exh. B) which mentions "another property located at Sta. Ana." His
obvious purpose was to avoid jeopardizing his negotiation with the Nassco for
the purchase of its Sta. Ana property by unduly publicizing it.
It is noteworthy that Cervantes, in his letter to the broker dated
April 6, 1964 (Annex 1) or after the Nassco property had been awarded to
Bormaheco, Inc., alluded to the "Nassco property". At that time, there was no
more need of concealing from the public that Bormaheco, Inc. was interested
in the Nassco property.
Similarly, Cervantes' alleged insertion of the letters "PA" ( per
annum) after the word "interest" in that same paragraph 3 of the revised
counter-offer (Exh. D) could not be categorized as a major alteration of that
counter-offer that prevented a meeting of the minds of the parties. It was
understood that the parties had contemplated a rate of ten percent per
annum since ten percent a month or semi-annually would be usurious.
Appellants Bormaheco, Inc. and Cervantes further contend that
Cervantes, in clarifying in the voucher for the earnest money of P100,000 that
Bormaheco's acceptance thereof was subject to the terms and conditions
embodied in Bormaheco's letter of February 12, 1964 and your (Villonco's)
letter of March 4, 1964" made Bormaheco's acceptance "qualified and
conditional".
That contention is not correct. There is no incompatibility between
Bormaheco's offer of February 12, 1964 (Exh. B) and Villonco's counter-offer
of March 4, 1964 (Exh. D). The revised counter-offer merely amplified
Bormaheco's original offer.
The controlling fact is that there was agreement between the
parties on the subject matter, the price and the mode of payment and that
part of the price was paid. "Whenever earnest money is given in a contract of
sale, it shall be considered as part of the price and as proof of the perfection
of the contract" (Art. 1482, Civil Code).
"It is true that an acceptance may contain a request for certain
changes in the terms of the offer and yet be a binding acceptance. 'So long as
it is clear that the meaning of the acceptance is positively and unequivocally
to accept the offer, whether such request is granted or not, a contract is
formed.' " (Stuart vs. Franklin Life Ins. Co., 165 Fed. 2nd 965, citing Sec. 79,
Williston on Contracts).
Thus, it was held that the vendor's change in a phrase of the offer
to purchase, which change does not essentially change the terms of the offer,
does not amount to a rejection of the offer and the tender of a counter-offer
(Stuart vs. Franklin Life Ins. Co., supra).
The instant case is not governed by the rulings laid down
in Beaumont vs. Prieto, 41 Phil. 670, 985, 63 L. Ed. 770, and Zayco vs. Serra, 44
Phil. 326. In those two cases the acceptance radically altered the offer and,
consequently, there was no meeting of the minds of the parties.
Thus, in the Zayco case, Salvador Serra offered to sell to Lorenzo
Zayco his sugar central for P1,000,000 on condition that the price be paid in
cash, or, if not paid in cash, the price would be payable within three years
provided security is given for the payment of the balance within three years
with interest. Zayco, instead of unconditionally accepting those terms,
countered that he was going to make a down payment of P100,000, that
Serra's mortgage obligation to the Philippine National Bank of P600,000 could
be transferred to Zayco's account and that he (plaintiff) would give a bond to
secure the payment of the balance of the price. It was held that the acceptance
was conditional or was a counter-offer which had to be accepted by Serra.
There was no such acceptance. Serra revoked his offer. Hence, there was no
perfected contract.
In the Beaumont case, Benito Valdes offered to sell to W Borck the Nagtahan
Hacienda owned by Benito Legarda, who had empowered Valdes to sell it.
Borck was given three months from December 4, 1911 to buy the hacienda for
P307,000. On January 17, 1912 Borck wrote to Valdes, offering to purchase the
hacienda for P307,000 payable on May 1, 1912. No reply was made to that
letter. Borck wrote other letters modifying his proposal. Legarda refused to
convey the property.
It was held that Borck's January 17th letter plainly departed from the terms of
the offer as to the time of payment and was a counter-offer which amounted
to a rejection of Valdes' original offer. A subsequent unconditional acceptance
could not revive that offer.
The instant case is different from Laudico and Harden vs. Arias Rodriguez, 43
Phil. 270 where the written offer to sell was revoked by the offer or before the
offeree's acceptance came to the offeror's knowledge.
Appellants' next contention is that the contract was not perfected because the
condition that Bormaheco, Inc. would acquire the Nassco land within forty-
five days from February 12, 1964 or on or before March 28, 1964 was not
fulfilled. This contention is tied up with the following letter of Bormaheco, Inc.
(Exh. F):
BORMAHECO, INC.
March 30, 1964
Villonco Realty Company
V.R.C. Building
219 Buendia Ave.,
Makati, Rizal
Gentlemen:
We are returning herewith your earnest money together with interest thereon
at 10% per annum. Please be informed that despite the lapse of the 45 days
from February 12, 1964 there is no certainty yet for us to acquire a substitute
property, hence the return of the earnest money as agreed upon.
Very truly yours,
SGD. FRANCISCO N. CERVANTES
President
Encl.: P.N.B. Check No. 112994 J
P.N.B. Check No. 112996J
That contention is predicated on the erroneous assumption that Bormaheco,
Inc. was to acquire the Nassco land within forty-five days or on or before
March 28, 1964.
The trial court ruled that the forty-five-day period was merely an estimate or
a forecast of how long it would take Bormaheco, Inc. to acquire the Nassco
property and it was not "a condition or a deadline set for the defendant
corporation to decide whether or not to go through with the sale of its Buendia
property".
The record does not support the theory of Bormaheco, Inc. and the Cervantes
spouses that the forty-five-day period was the time within which (a) the
Nassco property and two Pasong Tamo lots should be acquired, (b) when
Cervantes would secure his wife's consent to the sale of the three lots and (c)
when Bormaheco, Inc. had to decide what to do with the DBP encumbrance.
Cervantes in paragraph 3 of his offer of February 12, 1964 stated that the sale
of the Buendia lots would be consummated after he had consummated the
purchase of the Nassco property. Then, in paragraph 5 of the same offer he
stated "that final negotiations on both properties can be definitely
known after forty-five days" (See Exh. B).
It is deducible from the tenor of those statements that the
consummation of the sale of the Buendia lots to Villonco Realty Company was
conditioned on Bormaheco's acquisition of the Nassco land. But it was not
spelled out that such acquisition should be effected within forty-five days from
February 12, 1964. Had it been Cervantes' intention that the forty-five days
would be the period within which the Nassco land should be acquired by
Bormaheco, then he would have specified that period in paragraph 3 of his
offer so that paragraph would read in this wise: "That this sale is to be
consummated only after I shall have consummated my purchase of another
property located at Sta. Ana, Manila within forty-five days from the date
hereof ." He could have also specified that period in his "conforme" to
Villonco's counter-offer of March 4, 1964 (Exh. D) so that instead of merely
1 general principles
stating "that this sale shall be subject to favorable consummation of a property
in Sta. Ana we are negotiating" he could have said: "That this sale shall be
subject to favorable consummation within forty-five days from February 12,
1964 of a property in Sta. Ana we are negotiating".
No such specification was made. The term of forty-five days was
not a part of the condition that the Nassco property should be acquired. It is
clear that the statement "that final negotiations on both property can be
definitely known after 45 days" does not and cannot mean that Bormaheco,
Inc. should acquire the Nassco property within forty-five days from February
12, 1964 as pretended by Cervantes. It is simply a surmise that after forty-five
days (in fact when the forty-five day period should be computed is not clear)
it would be known whether Bormaheco, Inc. would be able to acquire the
Nassco property and whether it would be able to sell the Buendia property.
That aforementioned paragraph 5 does not even specify how long after the
forty-five days the outcome of the final negotiations would be known.
It is interesting to note that in paragraph 6 of Bormaheco's answer to the
amended complaint, which answer was verified by Cervantes, it was alleged
that Cervantes accepted Villonco's revised counter-offer of March 4, 1964
subject to the condition that "the final negotiations (acceptance) will have to
be made by defendant within 45 daysfrom said acceptance" (31 Record on
Appeal). If that were so, then the consummation of Bormaheco's purchase of
the Nassco property would be made within forty-five days from March 4, 1964.
What makes Bormaheco's stand more confusing and untenable is that in its
three answers it invariably articulated the incoherent and vague affirmative
defense that its acceptance of Villonco's revised counter-offer was
conditioned on the circumstance "that final acceptance or not shall be
made after 45 days" whatever that means. That affirmative defense is
inconsistent with the other aforequoted incoherent statement in its third
answer that "the final negotiations (acceptance) will have to be made by
defendant within 45 days from said acceptance" (31 Record on
Appeal).1äwphï1.ñët
Thus, Bormaheco's three answers and paragraph 5 of his offer of February 12,
1964 do not sustain at all its theory that the Nassco property should be
acquired on or before March 28, 1964. Its rescission or revocation of its
acceptance cannot be anchored on that theory which, as articulated in its
pleadings, is quite equivocal and unclear.
It should be underscored that the condition that Bormaheco, Inc. should
acquire the Nassco property was fulfilled. As admitted by the appellants, the
Nassco property was conveyed to Bormaheco, Inc. on June 26, 1964. As early
as January 17, 1964 the property was awarded to Bormaheco, Inc. as the
highest bidder. On February 18, 1964 the Nassco Board authorized its General
Manager to sell the property to Bormaheco, Inc. (Exh. H). The Economic
Coordinator approved the award on March 24, 1964. It is reasonable to
assume that had Cervantes been more assiduous in following up the
transaction, the Nassco property could have been transferred to Bormaheco,
Inc. on or before March 28, 1964, the supposed last day of the forty-five-day
period.
The appellants, in their fifth assignment of error, argue that Bormaheco, Inc.
cannot be required to sell the three lots in question because they are conjugal
properties of the Cervantes spouses. They aver that Cervantes in dealing with
the Villonco brothers acted as president of Bormaheco, Inc. and not in his
individual capacity and, therefore, he did not bind the conjugal partnership
nor Mrs. Cervantes who was allegedly opposed to the sale.
Those arguments are not sustainable. It should be remembered that
Cervantes, in rescinding the contract of sale and in returning the earnest
money, cited as an excuse the circumstance that there was no certainty in
Bormaheco's acquisition of the Nassco property (Exh. F and Annex 1). He did
not say that Mrs. Cervantes was opposed to the sale of the three lots. He did
not tell Villonco Realty Company that he could not bind the conjugal
partnership. In truth, he concealed the fact that the three lots were registered
"in the name of FRANCISCO CERVANTES, Filipino, of legal age, married to
Rosario P. Navarro, as owner thereof in fee simple". He certainly led the
Villonco brothers to believe that as president of Bormaheco, Inc. he could
dispose of the said lots. He inveigled the Villoncos into believing that he had
untrammelled control of Bormaheco, Inc., that Bormaheco, Inc. owned the
lots and that he was invested with adequate authority to sell the same.
Thus, in Bormaheco's offer of February 12, 1964, Cervantes first identified the
three lots as "our property" which "we are offering to sell ..." (Opening
paragraph and par. 1 of Exh. B). Whether the prounoun "we" refers to himself
and his wife or to Bormaheco, Inc. is not clear. Then, in paragraphs 3 and 4 of
the offer, he used the first person and said: "I shall have consummated my
purchase" of the Nassco property; "... my negotiations with said property" and
"I will return to you your deposit". Those expressions conveyed the impression
and generated the belief that the Villoncos did not have to deal with Mrs.
Cervantes nor with any other official of Bormaheco, Inc.
The pleadings disclose that Bormaheco, Inc. and Cervantes deliberately and
studiously avoided making the allegation that Cervantes was not authorized
by his wife to sell the three lots or that he acted merely as president of
Bormaheco, Inc. That defense was not interposed so as not to place Cervantes
in the ridiculous position of having acted under false pretenses when he
negotiated with the Villoncos for the sale of the three lots.
Villonco Realty Company, in paragraph 2 of its original complaint, alleged that
"on February 12, 1964, after some prior negotiations, the defendant
(Bormaheco, Inc.) made a formal offer to sell to the plaintiff the property of
the said defendant situated at the abovenamed address along Buendia
Avenue, Makati, Rizal, under the terms of the letter-offer, a copy of which is
hereto attached as Annex A hereof", now Exhibit B (2 Record on Appeal).
That paragraph 2 was not, repeat, was not denied by Bormaheco, Inc. in its
answer dated May 5, 1964. It did not traverse that paragraph 2. Hence, it was
deemed admitted. However, it filed an amended answer dated May 25, 1964
wherein it denied that it was the owner of the three lots. It revealed that the
three lots "belong and are registered in the names of the spouses Francisco N.
Cervantes and Rosario N. Cervantes."
The three answers of Bormaheco, Inc. contain the following affirmative
defense:
13. That defendant's insistence to finally decide on the proposed sale of the
land in question after 45 days had not only for its purpose the determination
of its acquisition of the said Sta. Ana (Nassco) property during the said period,
but also to negotiate with the actual and registered owner of the parcels of
land covered by T.C.T. Nos. 43530, 43531 and 43532 in question which plaintiff
was fully aware that the same were not in the name of the defendant (sic; Par.
18 of Answer to Amended Complaint, 10, 18 and 34, Record on Appeal).
In that affirmative defense, Bormaheco, Inc. pretended that it needed forty-
five days within which to acquire the Nassco property and "to negotiate" with
the registered owner of the three lots. The absurdity of that pretension stands
out in bold relief when it is borne in mind that the answers of Bormaheco, Inc.
were verified by Cervantes and that the registered owner of the three lots is
Cervantes himself. That affirmative defense means that Cervantes as
president of Bormaheco, Inc. needed forty-five days in order to "negotiate"
with himself (Cervantes).
The incongruous stance of the Cervantes spouses is also patent in their answer
to the amended complaint. In that answer they disclaimed knowledge or
information of certain allegations which were well-known to Cervantes as
president of Bormaheco, Inc. and which were admitted in Bormaheco's three
answers that were verified by Cervantes.
It is significant to note that Bormaheco, Inc. in its three answers, which were
verified by Cervantes, never pleaded as an affirmative defense that Mrs.
Cervantes opposed the sale of the three lots or that she did not authorize her
husband to sell those lots. Likewise, it should be noted that in their separate
answer the Cervantes spouses never pleaded as a defense that Mrs. Cervantes
was opposed to the sale of three lots or that Cervantes could not bind the
conjugal partnership. The appellants were at first hesitant to make it appear
that Cervantes had committed the skullduggery of trying to sell property which
he had no authority to alienate.
It was only during the trial on May 17, 1965 that Cervantes declared on the
witness stand that his wife was opposed to the sale of the three lots, a defense
which, as already stated, was never interposed in the three answers of
Bormaheco, Inc. and in the separate answer of the Cervantes spouses. That
same viewpoint was adopted in defendants' motion for reconsideration dated
November 20, 1965.
But that defense must have been an afterthought or was evolved post litem
motam since it was never disclosed in Cervantes' letter of rescission and in his
letter to Miss Tagle (Exh. F and Annex 1). Moreover, Mrs. Cervantes did not
testify at the trial to fortify that defense which had already been waived for
not having been pleaded (See sec. 2, Rule 9, Rules of Court).
Taking into account the situation of Cervantes vis-a-vis Bormaheco, Inc. and
his wife and the fact that the three lots were entirely occupied by Bormaheco's
building, machinery and equipment and were mortgaged to the DBP as
security for its obligation, and considering that appellants' vague affirmative
defenses do not include Mrs. Cervantes' alleged opposition to the sale, the
plea that Cervantes had no authority to sell the lots strains the rivets of
credibility (Cf. Papa and Delgado vs. Montenegro, 54 Phil. 331; Riobo vs.
Hontiveros, 21 Phil. 31).
1 general principles
"Obligations arising from contracts have the force of law between the
contracting parties and should be complied with in good faith" (Art. 1159, Civil
Code). Inasmuch as the sale was perfected and even partly executed,
Bormaheco, Inc., and the Cervantes spouses, as a matter of justice and good
faith, are bound to comply with their contractual commitments.
Parenthetically, it may be observed that much misunderstanding could have
been avoided had the broker and the buyer taken the trouble of making some
research in the Registry of Deeds and availing themselves of the services of a
competent lawyer in drafting the contract to sell.
Bormaheco, Inc. and the Cervantes spouses in their sixth assignment of error
assail the trial court's award to Villonco Realty Company of consequential
damage amounting to ten thousand pesos monthly from March 24, 1964
(when the Economic Coordinator approved the award of the Nassco property
to Bormaheco, Inc.) up to the consummation of the sale. The award was based
on paragraph 18 of the stipulation of facts wherein Villonco Realty Company
"submits that the delay in the consummation of the sale" has caused it to
suffer the aforementioned damages.
The appellants contend that statement in the stipulation of facts simply means
that Villonco Realty Company speculates that it has suffered damages but it
does not mean that the parties have agreed that Villonco Realty Company is
entitled to those damages.
Appellants' contention is correct. As rightly observed by their counsel, the
damages in question were not specifically pleaded and proven and were
"clearly conjectural and speculative".
However, appellants' view in their seventh assignment of error that the trial
court erred in ordering Bormaheco, Inc. to pay Villonco Realty Company the
sum of twenty thousand pesos as attorney's fees is not tenable. Under the
facts of the case, it is evident that Bormaheco, Inc. acted in gross and evident
bad faith in refusing to satisfy the valid and just demand of Villonco Realty
Company for specific performance. It compelled Villonco Realty Company to
incure expenses to protect its interest. Moreover, this is a case where it is just
and equitable that the plaintiff should recover attorney's fees (Art. 2208, Civil
Code).
The appellants in their eighth assignment of error impugn the trial court's
adjudication of forty-two thousand pesos as three percent broker's
commission to Miss Tagle. They allege that there is no evidence that
Bormaheco, Inc. engaged her services as a broker in the projected sale of the
three lots and the improvements thereon. That allegation is refuted by
paragraph 3 of the stipulation of facts and by the documentary evidence. It
was stipulated that Miss Tagle intervened in the negotiations for the sale of
the three lots. Cervantes in his original offer of February 12, 1964 apprised
Villonco Realty Company that the earnest money should be delivered to Miss
Tagle, the bearer of the letter-offer. See also Exhibit G and Annex I of the
stipulation of facts.
We hold that the trial court did not err in adjudging that Bormaheco, Inc.
should pay Miss Tagle her three percent commission.
WHEREFORE, the trial court's decision is modified as follows:
1. Within ten (10) days from the date the defendants-appellants receive notice
from the clerk of the lower court that the records of this case have been
received from this Court, the spouses Francisco N. Cervantes and Rosario P.
Navarra-Cervantes should execute a deed conveying to Bormaheco, Inc. their
three lots covered by Transfer Certificate of Title Nos. 43530, 43531 and 43532
of the Registry of Deeds of Rizal.
2. Within five (5) days from the execution of such deed of conveyance,
Bormaheco, Inc. should execute in favor of Villonco Realty Company, V. R. C.
Building, 219 Buendia Avenue, Makati, Rizal a registerable deed of sale for the
said three lots and all the improvements thereon, free from all lien and
encumbrances, at the price of four hundred pesos per square meter,
deducting from the total purchase price the sum of P100,000 previously paid
by Villonco Realty Company to Bormaheco, Inc.
3. Upon the execution of such deed of sale, Villonco Realty Company is
obligated to pay Bormaheco, Inc. the balance of the price in the sum of one
million three hundred thousand pesos (P1,300,000).
4. Bormaheco, Inc. is ordered (a) to pay Villonco Realty Company twenty
thousand pesos (P20,000) as attorney's fees and (b) to pay Edith Perez de Tagle
the sum of forty-two thousand pesos (P42,000) as commission. Costs against
the defendants-appellants.
SO ORDERED.
Makalintal, C.J, Castro. Fernando, Makasiar, Antonio, Esguerra, Muñoz Palma,
Concepcion Jr. and Martin, JJ., concur.
Teehankee, J., is on leave.
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.
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 P6-million 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 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
1 general principles
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
above-described property including capital gains tax and accrued real estate
taxes.
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/T-881 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
1 general principles
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 Parañaque, 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 13199 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 1912 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. 133638. April 15, 2005]
PERPETUA VDA. DE APE, petitioner, vs. THE HONORABLE COURT OF APPEALS
and GENOROSA CAWIT VDA. DE LUMAYNO, respondents.
DECISION
CHICO-NAZARIO, J.:
Before Us is a petition for review on certiorari of the Decision[1] of the Court of
Appeals in CA-G.R. CV No. 45886 entitled, Generosa Cawit de Lumayno,
accompanied by her husband Braulio Lumayno v. Fortunato Ape, including his
wife Perpetua de Ape.
The pertinent facts are as follows:
Cleopas Ape was the registered owner of a parcel of land particularly known
as Lot No. 2319 of the Escalante Cadastre of Negros Occidental and covered
by Original Certificate of Title (OCT) No. RP 1379 (RP-154 [300]).[2] Upon
Cleopas Apes death sometime in 1950, the property passed on to his wife,
Maria Ondoy, and their eleven (11) children, namely: Fortunato, Cornelio,
Bernalda, Bienvenido, Encarnacion, Loreta, Lourdes, Felicidad, Adela,
Dominador, and Angelina, all surnamed Ape.
1 general principles
On 15 March 1973, Generosa Cawit de Lumayno (private respondent herein),
joined by her husband, Braulio,[3] instituted a case for Specific Performance of
a Deed of Sale with Damages against Fortunato and his wife Perpetua
(petitioner herein) before the then Court of First Instance of Negros
Occidental. It was alleged in the complaint that on 11 April 1971, private
respondent and Fortunato entered into a contract of sale of land under which
for a consideration of P5,000.00, Fortunato agreed to sell his share in Lot No.
2319 to private respondent. The agreement was contained in a receipt
prepared by private respondents son-in-law, Andres Flores, at her behest. Said
receipt was attached to the complaint as Annex A thereof and later marked as
Exhibit G for private respondent. The receipt states:
April 11, 1971
TO WHOM IT MAY CONCERN:
This date received from Mrs. Generosa Cawit de Lumayno the sum of THIRTY
PESOS ONLY as Advance Payment of my share in Land Purchased, for FIVE
THOUSAND PESOS LOT #2319.
(Signed)
FORTUNATO APE
P30.00 WITNESS:
(Illegible) [4]
As private respondent wanted to register the claimed sale transaction, she
supposedly demanded that Fortunato execute the corresponding deed of sale
and to receive the balance of the consideration. However, Fortunato
unjustifiably refused to heed her demands. Private respondent, therefore,
prayed that Fortunato be ordered to execute and deliver to her a sufficient
and registrable deed of sale involving his one-eleventh (1/11) share or
participation in Lot No. 2319 of the Escalante Cadastre; to pay P5,000.00 in
damages; P500.00 reimbursement for litigation expenses as well as additional
P500.00 for every appeal made; P2,000.00 for attorneys fees; and to pay the
costs.[5]
Fortunato and petitioner denied the material allegations of the complaint and
claimed that Fortunato never sold his share in Lot No. 2319 to private
respondent and that his signature appearing on the purported receipt was
forged. By way of counterclaim, the defendants below maintained having
entered into a contract of lease with respondent involving Fortunatos portion
of Lot No. 2319. This purported lease contract commenced in 1960 and was
supposed to last until 1965 with an option for another five (5) years. The
annual lease rental was P100.00 which private respondent and her husband
allegedly paid on installment basis. Fortunato and petitioner also assailed
private respondent and her husbands continued possession of the rest of Lot
No. 2319 alleging that in the event they had acquired the shares of Fortunatos
co-owners by way of sale, he was invoking his right to redeem the same.
Finally, Fortunato and petitioner prayed that the lease contract between them
and respondent be ordered annulled; and that respondent be ordered to pay
them attorneys fees; moral damages; and exemplary damages.[6]
In their reply,[7] the private respondent and her husband alleged that they had
purchased from Fortunatos co-owners, as evidenced by various written
instruments,[8] their respective portions of Lot No. 2319. By virtue of these
sales, they insisted that Fortunato was no longer a co-owner of Lot No. 2319
thus, his right of redemption no longer existed.
Prior to the resolution of this case at the trial court level, Fortunato died and
was substituted in this action by his children named Salodada, Clarita, Narciso,
Romeo, Rodrigo, Marieta, Fortunato, Jr., and Salvador, all surnamed Ape.[9]
During the trial, private respondent testified that she and her husband
acquired the various portions of Lot No. 2319 belonging to Fortunatos co-
owners. Thereafter, her husband caused the annotation of an adverse claim
on the certificate of title of Lot No. 2319.[10]The annotation states:
Entry No. 123539 Adverse claim filed by Braulio Lumayno. Notice of adverse
claim filed by Braulio Lumayno affecting the lot described in this title to the
extent of 77511.93 square meters, more or less, the aggregate area of shares
sold to him on the basis of (alleged) sales in his possession. Doc. No. 157, Page
No. 33, Book No. XI, Series of 1967 of Alexander Cawit of Escalante, Neg. Occ.
Date of instrument. June 22, 1967 at 8:30 a.m. (SGD) FEDENCIORRAZ, Actg.
Register of Deeds.[11]
In addition, private respondent claimed that after the acquisition of those
shares, she and her husband had the whole Lot No. 2319 surveyed by a certain
Oscar Mascada who came up with a technical description of said piece of
land.[12] Significantly, private respondent alleged that Fortunato was present
when the survey was conducted.[13]
Also presented as evidence for private respondent were pictures taken of
some parts of Lot No. 2319 purportedly showing the land belonging to
Fortunato being bounded by a row of banana plants thereby separating it from
the rest of Lot No. 2319.[14]
As regards the circumstances surrounding the sale of Fortunatos portion of the
land, private respondent testified that Fortunato went to her store at the time
when their lease contract was about to expire. He allegedly demanded the
rental payment for his land but as she was no longer interested in renewing
their lease agreement, they agreed instead to enter into a contract of sale
which Fortunato acceded to provided private respondent bought his portion
of Lot No. 2319 for P5,000.00. Thereafter, she asked her son-in-law Flores to
prepare the aforementioned receipt. Flores read the document to Fortunato
and asked the latter whether he had any objection thereto. Fortunato then
went on to affix his signature on the receipt.
For her part, petitioner insisted that the entire Lot No. 2319 had not yet been
formally subdivided;[15] that on 11 April 1971 she and her husband went to
private respondents house to collect past rentals for their land then leased by
the former, however, they managed to collect only thirty pesos;[16] that private
respondent made her (petitioners) husband sign a receipt acknowledging the
receipt of said amount of money;[17] and that the contents of said receipt were
never explained to them.[18] She also stated in her testimony that her husband
was an illiterate and only learned how to write his name in order to be
employed in a sugar central.[19] As for private respondents purchase of the
shares owned by Fortunatos co-owners, petitioner maintained that neither
she nor her husband received any notice regarding those sales
transactions.[20] The testimony of petitioner was later on corroborated by her
daughter-in-law, Marietta Ape Dino.[21]
After due trial, the court a quo rendered a decision[22] dismissing both the
complaint and the counterclaim. The trial court likewise ordered that deeds or
documents representing the sales of the shares previously owned by
Fortunatos co-owners be registered and annotated on the existing certificate
of title of Lot No. 2319. According to the trial court, private respondent failed
to prove that she had actually paid the purchase price of P5,000.00 to
Fortunato and petitioner. Applying, therefore, the provision of Article 1350 of
the Civil Code,[23] the trial court concluded that private respondent did not
have the right to demand the delivery to her of the registrable deed of sale
over Fortunatos portion of the Lot No. 2319.
The trial court also rejected Fortunato and petitioners claim that they had the
right of redemption over the shares previously sold to private respondent and
the latters husband, reasoning as follows:
Defendants in their counterclaim invoke their right of legal redemption under
Article 1623 of the New Civil Code in view of the alleged sale of the undivided
portions of the lot in question by their co-heirs and co-owners as claimed by
the plaintiffs in their complaint. They have been informed by the plaintiff
about said sales upon the filing of the complaint in the instant case as far back
as March 14, 1973. Defendant themselves presented as their very own exhibits
copies of the respective deeds of sale or conveyance by their said co-heirs and
co-owners in favor of the plaintiffs or their predecessors-in-interest way back
on January 2, 1992 when they formally offered their exhibits in the instant
case; meaning, they themselves acquired possession of said documentary
exhibits even before they formally offered them in evidence. Under Art. 1623
of the New Civil Code, defendants have only THIRTY (30) DAYS counted from
their actual knowledge of the exact terms and conditions of the deeds of sale
or conveyance of their co-heirs and co-owners share within which to exercise
their right of legal redemption.[24]
Within the reglementary period, both parties filed their respective notices of
appeal before the trial court with petitioner and her children taking exception
to the finding of the trial court that the period within which they could invoke
their right of redemption had already lapsed.[25] For her part, private
respondent raised as errors the trial courts ruling that there was no contract
of sale between herself and Fortunato and the dismissal of their complaint for
specific performance.[26]
The Court of Appeals, in the decision now assailed before us, reversed and set
aside the trial courts dismissal of the private respondents complaint but
upheld the portion of the court a quos decision ordering the dismissal of
petitioner and her childrens counterclaim. The dispositive portion of the
appellate courts decision reads:
WHEREFORE, the decision dated March 11, 1994, is hereby REVERSED and SET
ASIDE insofar as the dismissal of plaintiffs-appellants complaint is concerned,
and another one is entered ordering the defendant-appellant Fortunato Ape
and/or his wife Perpetua de Ape and successors-in-interest to execute in favor
of plaintiff-appellant Generosa Cawit de Lumayno a Deed of Absolute Sale
involving the one-eleventh (1/11) share or participation of Fortunato Ape in
Lot No. 2319, Escalante Cadastre, containing an area of 12,527.19 square
1 general principles
meters, more or less, within (30) days from finality of this decision, and in case
of non-compliance with this Order, that the Clerk of Court of said court is
ordered to execute the deed on behalf of the vendor. The decision is
AFFIRMED insofar as the dismissal of defendants-appellants counterclaim is
concerned.
Without pronouncement as to costs.[27]
The Court of Appeals upheld private respondents position that Exhibit G had
all the earmarks of a valid contract of sale, thus:
Exhibit G is the best proof that the P5,000.00 representing the purchase price
of the 1/11th share of Fortunato Ape was not paid by the vendee on April 11,
1971, and/or up to the present, but that does not affect the binding force and
effect of the document. The vendee having paid the vendor an advance
payment of the agreed purchase price of the property, what the vendor can
exact from the vendee is full payment upon his execution of the final deed of
sale. As is shown, the vendee precisely instituted this action to compel the
vendor Fortunato Ape to execute the final document, after she was informed
that he would execute the same upon arrival of his daughter Bala from
Mindanao, but afterwards failed to live up to his contractual obligation (TSN,
pp. 11-13, June 10, 1992).
It is not right for the trial court to expect plaintiff-appellant to pay the balance
of the purchase price before the final deed is executed, or for her to deposit
the equivalent amount in court in the form of consignation. Consignation
comes into fore in the case of a creditor to whom tender of paymenthas been
made and refuses without just cause to accept it (Arts. 1256 and 1252, N.C.C.;
Querino vs. Pelarca, 29 SCRA 1). As vendee, plaintiff-appellant Generosa Cawit
de Lumayno does not fall within the purview of a debtor.
We, therefore, find and so hold that the trial court should have found that
exhibit G bears all the earmarks of a private deed of sale which is valid, binding
and enforceable between the parties, and that as a consequence of the failure
and refusal on the part of the vendor Fortunato Ape to live up to his
contractual obligation, he and/or his heirs and successors-in-interest can be
compelled to execute in favor of, and to deliver to the vendee, plaintiff-
appellant Generosa Cawit de Lumayno a registerable deed of absolute sale
involving his one-eleventh (1/11th) share or participation in Lot No. 2319,
Escalante Cadastre, containing an area of 12,527.19 square meters, more or
less, within 30 days from finality of this decision, and, in case of non-
compliance within said period, this Court appoints the Clerk of Court of the
trial court to execute on behalf of the vendor the said document.[28]
The Court of Appeals, however, affirmed the trial courts ruling on the issue of
petitioner and her childrens right of redemption. It ruled that Fortunatos
receipt of the Second Owners Duplicate of OCT (RP) 1379 (RP-154 ([300]),
containing the adverse claim of private respondent and her husband,
constituted a sufficient compliance with the written notice requirement of
Article 1623 of the Civil Code and the period of redemption under this
provision had long lapsed.
Aggrieved by the decision of the appellate court, petitioner is now before us
raising, essentially, the following issues: whether Fortunato was furnished
with a written notice of sale of the shares of his co-owners as required by
Article 1623 of the Civil Code; and whether the receipt signed by Fortunato
proves the existence of a contract of sale between him and private
respondent.
In her memorandum, petitioner claimed that the Court of Appeals erred in
sustaining the court a quos pronouncement that she could no longer redeem
the portion of Lot No. 2319 already acquired by private respondent for no
written notice of said sales was furnished them. According to her, the Court of
Appeals unduly expanded the scope of the law by equating Fortunatos receipt
of Second Owners Duplicate of OCT (RP) 1379 (RP-154 ([300]) with the written
notice requirement of Article 1623. In addition, she argued that Exhibit G could
not possibly be a contract of sale of Fortunatos share in Lot No. 2319 as said
document does not contain (a) definite agreement on the manner of payment
of the price.[29] Even assuming that Exhibit G is, indeed, a contract of sale
between private respondent and Fortunato, the latter did not have the
obligation to deliver to private respondent a registrable deed of sale in view
of private respondents own failure to pay the full purchase price of Fortunatos
portion of Lot No. 2319. Petitioner is also of the view that, at most, Exhibit G
merely contained a unilateral promise to sell which private respondent could
not enforce in the absence of a consideration distinct from the purchase price
of the land. Further, petitioner reiterated her claim that due to the illiteracy of
her husband, it was incumbent upon private respondent to show that the
contents of Exhibit G were fully explained to him. Finally, petitioner pointed
out that the Court of Appeals erred when it took into consideration the same
exhibit despite the fact that only its photocopy was presented before the
court.
On the other hand, private respondent argued that the annotation on the
second owners certificate over Lot No. 2319 constituted constructive notice to
the whole world of private respondents claim over the majority of said parcel
of land. Relying on our decision in the case of Cabrera v. Villanueva,[30] private
respondent insisted that when Fortunato received a copy of the second
owners certificate, he became fully aware of the contracts of sale entered into
between his co-owners on one hand and private respondent and her deceased
husband on the other.
Private respondent also averred that although (Lot No. 2319) was not actually
partitioned in a survey after the death of Cleopas Ape, the land was partitioned
in a hantal-hantal manner by the heirs. Each took and possessed specific
portion or premises as his/her share in land, farmed their respective portion
or premises, and improved them, each heir limiting his/her improvement
within the portion or premises which were his/her respective share.[31] Thus,
when private respondent and her husband purchased the other parts of Lot
No. 2319, it was no longer undivided as petitioner claims.
The petition is partly meritorious.
Article 1623 of the Civil Code provides:
The right of legal pre-emption or redemption shall not be exercised except
within thirty days from the notice in writing by the prospective vendor, or by
the vendor, as the case may be. The deed of sale shall not be recorded in the
Registry of Property, unless accompanied by an affidavit of the vendor that he
has given written notice thereof to all possible redemptioners.
Despite the plain language of the law, this Court has, over the years, been
tasked to interpret the written notice requirement of the above-quoted
provision. In the case Butte v. Manuel Uy & Sons, Inc.,[32] we declared that
In considering whether or not the offer to redeem was timely, we think that
the notice given by the vendee (buyer) should not be taken into account. The
text of Article 1623 clearly and expressly prescribes that the thirty days for
making the redemption are to be counted from notice in writing by the vendor.
Under the old law (Civ. Code of 1889, Art. 1524), it was immaterial who gave
the notice; so long as the redeeming co-owner learned of the alienation in
favor of the stranger, the redemption period began to run. It is thus apparent
that the Philippine legislature in Article 1623 deliberately selected a particular
method of giving notice, and that method must be deemed exclusive. (39 Am.
Jur., 237; Payne vs. State, 12 S.W. 2(d) 528). As ruled in Wampler vs. Lecompte,
150 Atl. 458 (affd. in 75 Law Ed. [U.S.] 275)
why these provisions were inserted in the statute we are not informed, but we
may assume until the contrary is shown, that a state of facts in respect thereto
existed, which warranted the legislature in so legislating.
The reasons for requiring that the notice should be given by the seller, and not
by the buyer, are easily divined. The seller of an undivided interest is in the
best position to know who are his co-owners that under the law must be
notified of the sale. Also, the notice by the seller removes all doubts as to fact
of the sale, its perfection; and its validity, the notice being a reaffirmation
thereof, so that the party notified need not entertain doubt that the seller may
still contest the alienation. This assurance would not exist if the notice should
be given by the buyer.[33]
The interpretation was somehow modified in the case of De Conejero, et al. v.
Court of Appeals, et al.[34] wherein it was pointed out that Article 1623 does
not prescribe a particular form of notice, nor any distinctive method for
notifying the redemptioner thus, as long as the redemptioner was notified in
writing of the sale and the particulars thereof, the redemption period starts to
run. This view was reiterated in Etcuban v. The Honorable Court of Appeals, et
al.,[35] Cabrera v. Villanueva,[36] Garcia, et al. v. Calaliman, et al.,[37]Distrito, et
al. v. The Honorable Court of Appeals, et al., [38] and Mariano, et al. v. Hon.
Court of Appeals, et al.[39]
However, in the case of Salatandol v. Retes,[40] wherein the plaintiffs were not
furnished any written notice of sale or a copy thereof by the vendor, this Court
again referred to the principle enunciated in the case of Butte. As observed by
Justice Vicente Mendoza, such reversion is only sound, thus:
Art. 1623 of the Civil Code is clear in requiring that the written notification
should come from the vendor or prospective vendor, not from any other
person. There is, therefore, no room for construction. Indeed, the principal
difference between Art. 1524 of the former Civil Code and Art. 1623 of the
present one is that the former did not specify who must give the notice,
whereas the present one expressly says the notice must be given by the
vendor. Effect must be given to this change in statutory language. [41]
In this case, the records are bereft of any indication that Fortunato was given
any written notice of prospective or consummated sale of the portions of Lot
1 general principles
No. 2319 by the vendors or would-be vendors. The thirty (30)-day redemption
period under the law, therefore, has not commenced to run.
Despite this, however, we still rule that petitioner could no longer invoke her
right to redeem from private respondent for the exercise of this right
presupposes the existence of a co-ownership at the time the conveyance is
made by a co-owner and when it is demanded by the other co-owner or co-
owners.[42] The regime of co-ownership exists when ownership of an undivided
thing or right belongs to different persons.[43] By the nature of a co-ownership,
a co-owner cannot point to specific portion of the property owned in common
as his own because his share therein remains intangible.[44] As legal
redemption is intended to minimize co-ownership,[45] once the property is
subdivided and distributed among the co-owners, the community ceases to
exist and there is no more reason to sustain any right of legal redemption.[46]
In this case, records reveal that although Lot No. 2319 has not yet been
formally subdivided, still, the particular portions belonging to the heirs of
Cleopas Ape had already been ascertained and they in fact took possession of
their respective parts. This can be deduced from the testimony of petitioner
herself, thus:
Q When the plaintiffs leased the share of your husband, were there any metes
and bounds?
A It was not formally subdivided. We have only a definite portion. (hantal-
hantal)
Q This hantal-hantal of your husband, was it also separate and distinct from
the hantal-hantal or the share of the brothers and sisters of your husband?
A Well, this property in question is a common property.
Q To the north, whose share was that which is adjacent to your husbands
assumed partition?
A I do not know what [does] this north [mean].
COURT
(To Witness)
Q To the place from where the sun rises, whose share was that?
A The shares of Cornelia, Loreta, Encarnacion and Adela.
Q How could you determine their own shares?
A They were residing in their respective assumed portions.
Q How about determining their respective boundaries?
A It could be determined by stakes and partly a row of banana plantations
planted by my son-in-law.
Q Who is this son-in-law you mentioned?
A Narciso Ape.
ATTY. CAWIT
(Continuing)
Q You said that there were stakes to determine the hantal-hantal of your
husband and the hantal-hantal of the other heirs, did I get you right?
ATTY. TAN
Admitted, Your Honor.
ATTY. CAWIT
Q Mrs. Ape, in 1960, Cleopas Ape was already dead, is that correct?
A Certainly, since he died in 1950.
Q By the manifestation of your counsel that the entire land (13 hectares) of
your father-in-law, Cleopas Ape, was leased to Generosa Lumayno, is this
correct?
A No, it is only the assumed portion of my husband [which] was leased to
Generosa Lumayno.
Q For clarification, it was only the share of your husband [which] was leased
to Generosa Cawit Lumayno?
A Yes.[47]
ATTY. CAWIT
Q My question: is that portion which you said was leased by your husband to
the Lumayno[s] and which was included to the lease by your mother-in-law to
the Lumayno[s], when the Lumayno[s] returned your husband[s] share, was
that the same premises that your husband leased to the Lumayno[s]?
A The same.
Q In re-possessing this portion of the land corresponding to the share of your
husband, did your husband demand that they should re-possess the land from
the Lumayno[s] or did the Lumayno[s] return them to your husband
voluntarily?
A They just returned to us without paying the rentals.
COURT
Q Was the return the result of your husbands request or just voluntarily they
returned it to your husband?
A No, sir, it was just returned voluntarily, and they abandoned the area but my
husband continued farming.[48]
Similarly telling of the partition is the stipulation of the parties during the pre-
trial wherein it was admitted that Lot No. 2319 had not been subdivided
nevertheless, Fortunato Ape had possessed a specific portion of the land
ostensibly corresponding to his share.[49]
From the foregoing, it is evident that the partition of Lot No. 2319 had already
been effected by the heirs of Cleopas Ape. Although the partition might have
been informal is of no moment for even an oral agreement of partition is valid
and binding upon the parties.[50]Likewise, the fact that the respective shares
of Cleopas Apes heirs are still embraced in one and the same certificate of title
and have not been technically apportioned does not make said portions less
determinable and identifiable from one another nor does it, in any way,
diminish the dominion of their respective owners.[51]
Turning now to the second issue of the existence of a contract of sale, we rule
that the records of this case betray the stance of private respondent that
Fortunato Ape entered into such an agreement with her.
A contract of sale is a consensual contract, thus, it is perfected by mere
consent of the parties. It is born from the moment there is a meeting of minds
upon the thing which is the object of the sale and upon the price.[52] Upon its
perfection, the parties may reciprocally demand performance, that is, the
vendee may compel the transfer of the ownership and to deliver the object of
the sale while the vendor may demand the vendee to pay the thing sold.[53] For
there to be a perfected contract of sale, however, the following elements must
be present: consent, object, and price in money or its equivalent. In the case
of Leonardo v. Court of Appeals, et al.,[54] we explained the element of
consent, to wit:
The essence of consent is the agreement of the parties on the terms of the
contract, the acceptance by one of the offer made by the other. It is the
concurrence of the minds of the parties on the object and the cause which
constitutes the contract. The area of agreement must extend to all points that
the parties deem material or there is no consent at all.
To be valid, consent must meet the following requisites: (a) it should be
intelligent, or with an exact notion of the matter to which it refers; (b) it should
be free and (c) it should be spontaneous. Intelligence in consent is vitiated by
error; freedom by violence, intimidation or undue influence; spontaneity by
fraud.[55]
In this jurisdiction, the general rule is that he who alleges fraud or mistake in
a transaction must substantiate his allegation as the presumption is that a
person takes ordinary care for his concerns and that private dealings have
been entered into fairly and regularly.[56] The exception to this rule is provided
for under Article 1332 of the Civil Code which provides that [w]hen one of the
parties is unable to read, or if the contract is in a language not understood by
him, and mistake or fraud is alleged, the person enforcing the contract must
show that the terms thereof have been fully explained to the former.
In this case, as private respondent is the one seeking to enforce the claimed
contract of sale, she bears the burden of proving that the terms of the
agreement were fully explained to Fortunato Ape who was an illiterate. This
she failed to do. While she claimed in her testimony that the contents of the
receipt were made clear to Fortunato, such allegation was debunked by
Andres Flores himself when the latter took the witness stand. According to
Flores:
ATTY. TAN
Q Mr. Witness, that receipt is in English, is it not?
A Yes, sir.
Q When you prepared that receipt, were you aware that Fortunato Ape doesnt
know how to read and write English?
A Yes, sir, I know.
Q Mr. Witness, you said you were present at the time of the signing of that
alleged receipt of P30.00, correct?
A Yes, sir.
Q Where, in what place was this receipt signed?
A At the store.
Q At the time of the signing of this receipt, were there other person[s] present
aside from you, your mother-in-law and Fortunato Ape?
A In the store, yes, sir.
Q When you signed that document of course you acted as witness upon
request of your mother-in-law?
A No, this portion, I was the one who prepared that document.
Q Without asking of (sic) your mother-in-law, you prepared that document or
it was your mother-in-law who requested you to prepare that document and
acted as witness?
1 general principles
A She requested me to prepare but does not instructed (sic) me to act as
witness. It was our opinion that whenever I prepared the document, I signed
it as a witness.
Q Did it not occur to you to ask other witness to act on the side of Fortunato
Ape who did not know how to read and write English?
A It occurred to me.
Q But you did not bother to request a person who is not related to your
mother-in-law, considering that Fortunato Ape did not know how to read and
write English?
A The one who represented Fortunato Ape doesnt know also how to read and
write English. One a maid.
Q You mentioned that there [was another] person inside the store, under your
previous statement, when the document was signed, there [was another]
person in the store aside from you, your mother-in-law and Fortunato Ape, is
not true?
A That is true, there is one person, but that person doesnt know how to read
also.
Q Of course, Mr. Witness, since it occurred to you that there was need for
other witness to sign that document for Fortunato Ape, is it not a fact that the
Municipal Building is very near your house?
A Quite (near).
Q But you could readily proceed to the Municipal Building and request one
who is knowledgeable in English to act as witness?
A I think there is no need for that small receipt. So I dont bother myself to go.
Q You did not consider that receipt very important because you said that small
receipt?
A Yes, I know.[57]
As can be gleaned from Floress testimony, while he was very much aware of
Fortunatos inability to read and write in the English language, he did not
bother to fully explain to the latter the substance of the receipt (Exhibit G). He
even dismissed the idea of asking somebody else to assist Fortunato
considering that a measly sum of thirty pesos was involved. Evidently, it did
not occur to Flores that the document he himself prepared pertains to the
transfer altogether of Fortunatos property to his mother-in-law. It is precisely
in situations such as this when the wisdom of Article 1332 of the Civil Code
readily becomes apparent which is to protect a party to a contract
disadvantaged by illiteracy, ignorance, mental weakness or some other
handicap.[58]
In sum, we hold that petitioner is no longer entitled to the right of redemption
under Article 1632 of the Civil Code as Lot No. 2319 had long been partitioned
among its co-owners. This Court likewise annuls the contract of sale between
Fortunato and private respondent on the ground of vitiated consent.
WHEREFORE, premises considered, the decision dated 25 March 1998 of the
Court of Appeals is hereby REVERSED and SET ASIDE and the decision dated 11
March 1994 of the Regional Trial Court, Branch 58, San Carlos City, Negros
Occidental, dismissing both the complaint and the counterclaim, is hereby
REINSTATED. No costs.
SO ORDERED.