POLYTECHNIC UNIVERSITY OF THE PHILIPPINES, petitioner, vs. COURT OF APPEALS and FIRESTONE CERAMICS, INC., respondents. [G.R. No.

143590. November 14, 2001] NATIONAL DEVELOPMENT CORPORATION, petitioner, vs. FIRESTONE CERAMICS, INC., respondents. DECISION BELLOSILLO, J.: A litigation is not simply a contest of litigants before the bar of public opinion; more than that, it is a pursuit of justice through legal and equitable means. To prevent the search for justice from evolving into a competition for public approval, society invests the judiciary with complete independence thereby insulating it from demands expressed through any medium, the press not excluded. Thus, if the court would merely reflect, and worse, succumb to the great pressures of the day, the end result, it is feared, would be a travesty of justice. In the early sixties, petitioner National Development Corporation (NDC), a government owned and controlled corporation created under CA 182 as amended by CA 311 and PD No. 668, had in its disposal a ten (10)hectare property located along Pureza St., Sta. Mesa, Manila. The estate was popularly known as the NDC compound and covered by Transfer Certificates of Title Nos. 92885, 110301 and 145470. Sometime in May 1965 private respondent Firestone Ceramics Inc. (FIRESTONE) manifested its desire to lease a portion of the property for its ceramic manufacturing business. On 24 August 1965 NDC and FIRESTONE entered into a contract of lease denominated as Contract No. C-30-65 covering a portion of the property measured at 2.90118 hectares for use as a manufacturing plant for a term of ten (10) years, renewable for another ten (10) years under the same terms and conditions. [1] In consequence of the agreement, FIRESTONE constructed on the leased premises several warehouses and other improvements needed for the fabrication of ceramic products. Three and a half (3-1/2) years later, or on 8 January 1969, FIRESTONE entered into a second contract of lease with NDC over the latter's four (4)-unit prefabricated reparation steel warehouse stored in Daliao, Davao. FIRESTONE agreed to ship the warehouse to Manila for eventual assembly within the NDC compound. The second contract, denominated as Contract No. C-26-68, was for similar use as a ceramic manufacturing plant and was agreed expressly to be "co-extensive with the lease of LESSEE with LESSOR on the 2.60 hectare-lot." [2] On 31 July 1974 the parties signed a similar contract concerning a six (6)-unit pre-fabricated steel warehouse which, as agreed upon by the parties, would expire on 2

December 1978. [3] Prior to the expiration of the aforementioned contract, FIRESTONE wrote NDC requesting for an extension of their lease agreement. Consequently on 29 November 1978 the Board of Directors of NDC adopted Resolution No. 11-78-117 extending the term of the lease, subject to several conditions among which was that in the event NDC "with the approval of higher authorities, decide to dispose and sell these properties including the lot, priority should be given to the LESSEE" [4] (underscoring supplied). On 22 December 1978, in pursuance of the resolution, the parties entered into a new agreement for a ten-year lease of the property, renewable for another ten (10) years, expressly granting FIRESTONE the first option to purchase the leased premises in the event that it decided "to dispose and sell these properties including the lot . . . . " [5] The contracts of lease conspicuously contain an identically worded provision requiring FIRESTONE to construct buildings and other improvements within the leased premises worth several hundred thousands of pesos. [6] The parties' lessor-lessee relationship went smoothly until early 1988 when FIRESTONE, cognizant of the impending expiration of their lease agreement with NDC, informed the latter through several letters and telephone calls that it was renewing its lease over the property. While its letter of 17 March 1988 was answered by Antonio A. Henson, General Manager of NDC, who promised immediate action on the matter, the rest of its communications remained unacknowledged. [7] FIRESTONE's predicament worsened when rumors of NDC's supposed plans to dispose of the subject property in favor of petitioner Polytechnic University of the Philippines (PUP) came to its knowledge. Forthwith, FIRESTONE served notice on NDC conveying its desire to purchase the property in the exercise of its contractual right of first refusal. Apprehensive that its interest in the property would be disregarded, FIRESTONE instituted an action for specific performance to compel NDC to sell the leased property in its favor. FIRESTONE averred that it was pre-empting the impending sale of the NDC compound to petitioner PUP in violation of its leasehold rights over the 2.60hectare [8] property and the warehouses thereon which would expire in 1999. FIRESTONE likewise prayed for the issuance of a writ of preliminary injunction to enjoin NDC from disposing of the property pending the settlement of the controversy. [9] In support of its complaint, FIRESTONE adduced in evidence a letter of Antonio A. Henson dated 15 July 1988 addressed to Mr. Jake C. Lagonera, Director and Special Assistant to Executive Secretary Catalino

Macaraeg, reviewing a proposed memorandum order submitted to then President Corazon C. Aquino transferring the whole NDC compound, including the leased property, in favor of petitioner PUP. Attached to the letter was a draft of the proposed memorandum order as well as a summary of existing leases on the subject property. The survey listed FIRESTONE as lessee of a portion of the property, placed at 29,000 [10] square meters, whose contract with NDC was set to expire on 31 December 1989 [11] renewable for another ten (10) years at the option of the lessee. The report expressly recognized FIRESTONE's right of first refusal to purchase the leased property "should the lessor decide to sell the same." [12] Meanwhile, on 21 February 1989 PUP moved to intervene and asserted its interest in the subject property, arguing that a "purchaser pendente lite of property which is subject of a litigation is entitled to intervene in the proceedings." [13] PUP referred to Memorandum Order No. 214 issued by then President Aquino ordering the transfer of the whole NDC compound to the National Government, which in turn would convey the aforementioned property in favor of PUP at acquisition cost. The issuance was supposedly made in recognition of PUP's status as the "Poor Man's University" as well as its serious need to extend its campus in order to accommodate the growing student population. The order of conveyance of the 10.31hectare property would automatically result in the cancellation of NDC's total obligation in favor of the National Government in the amount of P57,193,201.64. Convinced that PUP was a necessary party to the controversy that ought to be joined as party defendant in order to avoid multiplicity of suits, the trial court granted PUP's motion to intervene. FIRESTONE moved for reconsideration but was denied. On certiorari, the Court of Appeals affirmed the order of the trial court. FIRESTONE came to us on review but in a Resolution dated 11 July 1990 we upheld PUP's inclusion as partydefendant in the present controversy. Following the denial of its petition, FIRESTONE amended its complaint to include PUP and Executive Secretary Catalino Macaraeg, Jr., as party-defendants, and sought the annulment of Memorandum Order No. 214. FIRESTONE alleged that although Memorandum Order No. 214 was issued "subject to such liens/leases existing [on the subject property]," PUP disregarded and violated its existing lease by increasing the rental rate at P200,000.00 a month while demanding that it vacated the premises immediately. [14] FIRESTONE prayed that in the event Memorandum Order No. 214 was not declared unconstitutional, the property should be sold in its favor at the price for which it was sold to

PUP - P554.74 per square meter or for a total purchase price of P14,423,240.00. [15] Petitioner PUP, in its answer to the amended complaint, argued in essence that the lease contract covering the property had expired long before the institution of the complaint, and that further, the right of first refusal invoked by FIRESTONE applied solely to the six-unit prefabricated warehouse and not the lot upon which it stood. After trial on the merits, judgment was rendered declaring the contracts of lease executed between FIRESTONE and NDC covering the 2.60-hectare property and the warehouses constructed thereon valid and existing until 2 June 1999. PUP was ordered and directed to sell to FIRESTONE the "2.6 hectare leased premises or as may be determined by actual verification and survey of the actual size of the leased properties where plaintiff's fire brick factory is located" at P1,500.00 per square meter considering that, as admitted by FIRESTONE, such was the prevailing market price thereof. The trial court ruled that the contracts of lease executed between FIRESTONE and NDC were interrelated and inseparable because "each of them forms part of the integral system of plaintiff's brick manufacturing plant x x x if one of the leased premises will be taken apart or otherwise detached from the two others, the purpose of the lease as well as plaintiff's business operations would be rendered useless and inoperative." [16] It thus decreed that FIRESTONE could exercise its option to purchase the property until 2 June 1999 inasmuch as the 22 December 1978 contract embodied a covenant to renew the lease for another ten (10) years at the option of the lessee as well as an agreement giving the lessee the right of first refusal. The trial court also sustained the constitutionality of Memorandum Order No. 214 which was not per se hostile to FIRESTONE's property rights, but deplored as prejudicial thereto the "very manner with which defendants NDC and PUP interpreted and applied the same, ignoring in the process that plaintiff has existing contracts of lease protectable by express provisions in the Memorandum No. 214 itself." [17] It further explained that the questioned memorandum was issued "subject to such liens/leases existing thereon" [18] and petitioner PUP was under express instructions "to enter, occupy and take possession of the transferred property subject to such leases or liens and encumbrances that may be existing thereon" [19] (underscoring supplied). Petitioners PUP, NDC and the Executive Secretary separately filed their Notice of Appeal, but a few days thereafter, or on 3 September 1996, perhaps realizing

the groundlessness and the futility of it all, the Executive Secretary withdrew his appeal. [20] Subsequently, the Court of Appeals affirmed the decision of the trial court ordering the sale of the property in favor of FIRESTONE but deleted the award of attorney's fees in the amount of Three Hundred Thousand Pesos (P300,000.00). Accordingly, FIRESTONE was given a grace period of six (6) months from finality of the court's judgment within which to purchase the property in questioned in the exercise of its right of first refusal. The Court of Appeals observed that as there was a sale of the subject property, NDC could not excuse itself from its obligation TO OFFER THE PROPERTY FOR SALE FIRST TO FIRESTONE BEFORE IT COULD TO OTHER PARTIES. The Court of Appeals held: "NDC cannot look to Memorandum Order No. 214 to excuse or shield it from its contractual obligations to FIRESTONE. There is nothing therein that allows NDC to disavow or repudiate the solemn engagement that it freely and voluntarily undertook, or agreed to undertake." [21] PUP moved for reconsideration asserting that in ordering the sale of the property in favor of FIRESTONE the courts a quo unfairly created a contract to sell between the parties. It argued that the "court cannot substitute or decree its mind or consent for that of the parties in determining whether or not a contract (has been) perfected between PUP and NDC." [22] PUP further contended that since "a real property located in Sta. Mesa can readily command a sum of P10,000.00 per square (meter)," the lower court gravely erred in ordering the sale of the property at only P1,500.00 per square meter. PUP also advanced the theory that the enactment of Memorandum Order No. 214 amounted to a withdrawal of the option to purchase the property granted to FIRESTONE. NDC, for its part, vigorously contended that the contracts of lease executed between the parties had expired without being renewed by FIRESTONE; consequently, FIRESTONE was no longer entitled to any preferential right in the sale or disposition of the leased property. We do not see it the way PUP and NDC did. It is elementary that a party to a contract cannot unilaterally withdraw a right of first refusal that stands upon valuable consideration. That principle was clearly upheld by the Court of Appeals when it denied on 6 June 2000 the twin motions for reconsideration filed by PUP and NDC on the ground that the appellants failed to advance new arguments substantial enough to warrant a reversal of the Decision sought to be reconsidered. [23] On 28 June 2000 PUP filed an urgent motion for an additional period of fifteen (15) days from 29 June 2000 or until 14 July 2000 within which to file a

Petition for Review on Certiorari of the Decision of the Court of Appeals. On the last day of the extended period PUP filed its Petition for Review on Certiorari assailing the Decision of the Court of Appeals of 6 December 1999 as well as the Resolution of 6 June 2000 denying reconsideration thereof. PUP raised two issues: (a) whether the courts a quo erred when they "conjectured" that the transfer of the leased property from NDC to PUP amounted to a sale; and, (b) whether FIRESTONE can rightfully invoke its right of first refusal. Petitioner posited that if we were to place our imprimatur on the decisions of the courts a quo, "public welfare or specifically the constitutional priority accorded to education" would greatly be prejudiced. [24] Paradoxically, our paramount interest in education does not license us, or any party for that matter, to destroy the sanctity of binding obligations. Education may be prioritized for legislative or budgetary purposes, but we doubt if such importance can be used to confiscate private property such as FIRESTONE's right of first refusal. On 17 July 2000 we denied PUP's motion for extension of fifteen (15) days within which to appeal inasmuch as the aforesaid pleading lacked an affidavit of service of copies thereof on the Court of Appeals and the adverse party, as well as written explanation for not filing and serving the pleading personally. [25] Accordingly, on 26 July 2000 we issued a Resolution dismissing PUP's Petition for Review for having been filed out of time. PUP moved for reconsideration imploring a resolution or decision on the merits of its petition. Strangely, about the same time, several articles came out in the newspapers assailing the denial of the petition. The daily papers reported that we unreasonably dismissed PUP's petition on technical grounds, affirming in the process the decision of the trial court to sell the disputed property to the prejudice of the government in the amount of P1,000,000,000.00. [26] Counsel for petitioner PUP, alleged that the trial court and the Court of Appeals "have decided a question of substance in a way definitely not in accord with law or jurisprudence." [27] At the outset, let it be noted that the amount of P1,000,000,000.00 as reported in the papers was way too exaggerated, if not fantastic. We stress that NDC itself sold the whole 10.31-hectare property to PUP at only P57,193,201.64 which represents NDC's obligation to the national government that was, in exchange, written off. The price offered per square meter of the property was pegged at P554.74. FIRESTONE's leased premises would therefore be worth only P14,423,240.00. From any angle, this amount is

certainly far below the ballyhooed price of P1,000,000,000.00. On 4 October 2000 we granted PUP's Motion for Reconsideration to give it a chance to ventilate its right, if any it still had in the leased premises, thereby paving the way for a reinstatement of its Petition for Review. [28] In its appeal, PUP took to task the courts a quo for supposedly "substituting or decreeing its mind or consent for that of the parties (referring to NDC and PUP) in determining whether or not a contract of sale was perfected." PUP also argued that inasmuch as "it is the parties alone whose minds must meet in reference to the subject matter and cause," it concluded that it was error for the lower courts to have decreed the existence of a sale of the NDC compound thus allowing FIRESTONE to exercise its right of first refusal. On the other hand, NDC separately filed its own Petition for Review and advanced arguments which, in fine, centered on whether or not the transaction between petitioners NDC and PUP amounted to a sale considering that ownership of the property remained with the government. *29] Petitioner NDC introduced the novel proposition that if the parties involved are both government entities the transaction cannot be legally called a sale. In due course both petitions were consolidated. [30] We believe that the courts a quo did not hypothesize, much less conjure, the sale of the disputed property by NDC in favor of petitioner PUP. Aside from the fact that the intention of NDC and PUP to enter into a contract of sale was clearly expressed in the Memorandum Order No. 214, [31] a close perusal of the circumstances of this case strengthens the theory that the conveyance of the property from NDC to PUP was one of absolute sale, for a valuable consideration, and not a mere paper transfer as argued by petitioners. A contract of sale, as defined in the Civil Code, is a contract where one of the parties obligates himself to transfer the ownership of and to deliver a determinate thing to the other or others who shall pay therefore a sum certain in money or its equivalent. [32] It is therefore a general requisite for the existence of a valid and enforceable contract of sale that it be mutually obligatory, i.e., there should be a concurrence of the promise of the vendor to sell a determinate thing and the promise of the vendee to receive and pay for the property so delivered and transferred. The Civil Code provision is, in effect, a "catch-all" provision which effectively brings within its grasp a whole gamut of transfers whereby ownership of a thing is ceded for a consideration. Contrary to what petitioners PUP and NDC propose, there is not just one party involved in the questioned

transaction. Petitioners NDC and PUP have their respective charters and therefore each possesses a separate and distinct individual personality. [33] The inherent weakness of NDCs proposition that there was no sale as it was only the government which was involved in the transaction thus reveals itself. Tersely put, it is not necessary to write an extended dissertation on government owned and controlled corporations and their legal personalities. Beyond cavil, a government owned and controlled corporation has a personality of its own, distinct and separate from that of the government. [34] The intervention in the transaction of the Office of the President through the Executive Secretary did not change the independent existence of these entities. The involvement of the Office of the President was limited to brokering the consequent relationship between NDC and PUP. But the withdrawal of the appeal by the Executive Secretary is considered significant as he knew, after a review of the records, that the transaction was subject to existing liens and encumbrances, particularly the priority to purchase the leased premises in favor of FIRESTONE. True that there may be instances when a particular deed does not disclose the real intentions of the parties, but their action may nevertheless indicate that a binding obligation has been undertaken. Since the conduct of the parties to a contract may be sufficient to establish the existence of an agreement and the terms thereof, it becomes necessary for the courts to examine the contemporaneous behavior of the parties in establishing the existence of their contract. The preponderance of evidence shows that NDC sold to PUP the whole NDC compound, including the leased premises, without the knowledge much less consent of private respondent FIRESTONE which had a valid and existing right of first refusal. All three (3) essential elements of a valid sale, without which there can be no sale, were attendant in the "disposition" and "transfer" of the property from NDC to PUP - consent of the parties, determinate subject matter, and consideration therefor. Consent to the sale is obvious from the prefatory clauses of Memorandum Order No. 214 which explicitly states the acquiescence of the parties to the sale of the property WHEREAS, PUP has expressed its willingness to acquire said NDC properties and NDC has expressed its willingness to sell the properties to PUP (underscoring supplied). [35] Furthermore, the cancellation of NDC's liabilities in favor of the National Government in the amount of P57,193,201.64 constituted the "consideration" for the sale. As correctly observed by the Court of Appeals-

The defendants-appellants' interpretation that there was a mere transfer, and not a sale, apart from being specious sophistry and a mere play of words, is too strained and hairsplitting. For it is axiomatic that every sale imposes upon the vendor the obligation to transfer ownership as an essential element of the contract. Transfer of title or an agreement to transfer title for a price paid, or promised to be paid, is the very essence of sale (Kerr & Co. v. Lingad, 38 SCRA 524; Schmid & Oberly, Inc., v. RJL Martinez Fishing Corp., 166 SCRA 493). At whatever legal angle we view it, therefore, the inescapable fact remains that all the requisites of a valid sale were attendant in the transaction between codefendants-appellants NDC and PUP concerning the realities subject of the present suit. [36] What is more, the conduct of petitioner PUP immediately after the transaction is in itself an admission that there was a sale of the NDC compound in its favor. Thus, after the issuance of Memorandum Order No. 214 petitioner PUP asserted its ownership over the property by posting notices within the compound advising residents and occupants to vacate the premises. [37] In its Motion for Intervention petitioner PUP also admitted that its interest as a "purchaser pendente lite" would be better protected if it was joined as party-defendant in the controversy thereby confessing that it indeed purchased the property. In light of the foregoing disquisition, we now proceed to determine whether FIRESTONE should be allowed to exercise its right of first refusal over the property. Such right was expressly stated by NDC and FIRESTONE in par. XV of their third contract denominated as A-10-78 executed on 22 December 1978 which, as found by the courts a quo, was interrelated to and inseparable from their first contract denominated as C-30-65 executed on 24 August 1965 and their second contract denominated as C-26-68 executed on 8 January 1969. Thus Should the LESSOR desire to sell the leased premises during the term of this Agreement, or any extension thereof, the LESSOR shall first give to the LESSEE, which shall have the right of first option to purchase the leased premises subject to mutual agreement of both parties. [38] In the instant case, the right of first refusal is an integral and indivisible part of the contract of lease and is inseparable from the whole contract. The consideration for the right is built into the reciprocal obligations of the parties. Thus, it is not correct for petitioners to insist that there was no consideration paid by FIRESTONE to entitle it to the exercise of the right, inasmuch as the stipulation is part and parcel of the contract of lease

making the consideration for the lease the same as that for the option. It is a settled principle in civil law that when a lease contract contains a right of first refusal, the lessor is under a legal duty to the lessee not to sell to anybody at any price until after he has made an offer to sell to the latter at a certain price and the lessee has failed to accept it. [39] The lessee has a right that the lessor's first offer shall be in his favor. The option in this case was incorporated in the contracts of lease by NDC for the benefit of FIRESTONE which, in view of the total amount of its investments in the property, wanted to be assured that it would be given the first opportunity to buy the property at a price for which it would be offered. Consistent with their agreement, it was then implicit for NDC to have first offered the leased premises of 2.60 hectares to FIRESTONE prior to the sale in favor of PUP. Only if FIRESTONE failed to exercise its right of first priority could NDC lawfully sell the property to petitioner PUP. It now becomes apropos to ask whether the courts a quo were correct in fixing the proper consideration of the sale at P1,500.00 per square meter. In contracts of sale, the basis of the right of first refusal must be the current offer of the seller to sell or the offer to purchase of the prospective buyer. Only after the lessee-grantee fails to exercise its right under the same terms and within the period contemplated can the owner validly offer to sell the property to a third person, again, under the same terms as offered to the grantee. [40] It appearing that the whole NDC compound was sold to PUP for P554.74 per square meter, it would have been more proper for the courts below to have ordered the sale of the property also at the same price. However, since FIRESTONE never raised this as an issue, while on the other hand it admitted that the value of the property stood at P1,500.00 per square meter, then we see no compelling reason to modify the holdings of the courts a quo that the leased premises be sold at that price. Our attention is invited by petitioners to Ang Yu Asuncion v. CA [41] in concluding that if our holding in Ang Yu would be applied to the facts of this case then FIRESTONE's "option, if still subsisting, is not enforceable," the option being merely a preparatory contract which cannot be enforced. The contention has no merit. At the heels of Ang Yu came Equatorial Realty Development, Inc., v. Mayfair Theater, Inc., [42] where after much deliberation we declared, and so we hold, that a right of first refusal is neither "amorphous nor merely preparatory" and can be enforced and executed according to its terms. Thus, in Equatorial we ordered the rescission of the sale

which was made in violation of the lessee's right of first refusal and further ordered the sale of the leased property in favor of Mayfair Theater, as grantee of the right. Emphatically, we held that "(a right of first priority) should be enforced according to the law on contracts instead of the panoramic and indefinite rule on human relations." We then concluded that the execution of the right of first refusal consists in directing the grantor to comply with his obligation according to the terms at which he should have offered the property in favor of the grantee and at that price when the offer should have been made. One final word. Petitioner PUP should be cautioned against bidding for public sympathy by bewailing the dismissal of its petition before the press. Such advocacy is not likely to elicit the compassion of this Court or of any court for that matter. An entreaty for a favorable disposition of a case not made directly through pleadings and oral arguments before the courts do not persuade us, for as judges, we are ruled only by our forsworn duty to give justice where justice is due. WHEREFORE, the petitions in G.R. No. 143513 and G.R. No. 143590 are DENIED. Inasmuch as the first contract of lease fixed the area of the leased premises at 2.90118 hectares while the second contract placed it at 2.60 hectares, let a ground survey of the leased premises be immediately conducted by a duly licensed, registered surveyor at the expense of private respondent FIRESTONE CERAMICS, INC., within two (2) months from finality of the judgment in this case. Thereafter, private respondent FIRESTONE CERAMICS, INC., shall have six (6) months from receipt of the approved survey within which to exercise its right to purchase the leased property at P1,500.00 per square meter, and petitioner Polytechnic University of the Philippines is ordered to reconvey the property to FIRESTONE CERAMICS, INC., in the exercise of its right of first refusal upon payment of the purchase price thereof. SO ORDERED. [G.R. No. 177936, January 18, 2012] STARBRIGHT SALES ENTERPRISES, INC., PETITIONER, VS. PHILIPPINE REALTY CORPORATION, MSGR. DOMINGO A. CIRILOS, TROPICANA PROPERTIES AND DEVELOPMENT CORPORATION AND STANDARD REALTY CORPORATION, RESPONDENTS. DECISION ABAD, J.:

The present case involves a determination of the perfection of contract of sale. The Facts and the Case On April 17, 1988 Ramon Licup wrote Msgr. Domingo A. Cirilos, offering to buy three contiguous parcels of land in Paraaque that The Holy See and Philippine Realty Corporation (PRC) owned for P1,240.00 per square meter. Licup accepted the responsibility for removing the illegal settlers on the land and enclosed a check for P100,000.00 to "close the transaction."[1] He undertook to pay the balance of the purchase price upon presentation of the title for transfer and once the property has been cleared of its occupants. Msgr. Cirilos, representing The Holy See and PRC, signed his name on the conforme portion of the letter and accepted the check. But the check could not be encashed due to Licup's stop-order payment. Licup wrote Msgr. Cirilos on April 26, 1988, requesting that the titles to the land be instead transferred to petitioner Starbright Sales Enterprises, Inc. (SSE). He enclosed a new check for the same amount. SSE's representatives, Mr. and Mrs. Cu, did not sign the letter. On November 29, 1988 Msgr. Cirilos wrote SSE, requesting it to remove the occupants on the property and, should it decide not to do this, Msgr. Cirilos would return to it the P100,000.00 that he received. On January 24, 1989 SSE replied with an "updated proposal."[2] It would be willing to comply with Msgr. Cirilos' condition provided the purchase price is lowered to P1,150.00 per square meter. On January 26, 1989 Msgr. Cirilos wrote back, rejecting the "updated proposal." He said that other buyers were willing to acquire the property on an "as is, where is" basis at P1,400.00 per square meter. He gave SSE seven days within which to buy the property at P1,400.00 per square meter, otherwise, Msgr. Cirilos would take it that SSE has lost interest in the same. He enclosed a check for P100,000.00 in his letter as refund of what he earlier received. On February 4, 1989 SSE wrote Msgr. Cirilos that they already had a perfected contract of sale in the April 17, 1988 letter which he signed and that, consequently, he could no longer impose amendments such as the removal of the informal settlers at the buyer's expense and the increase in the purchase price.

SSE claimed that it got no reply from Msgr. Cirilos and that the next thing they knew, the land had been sold to Tropicana Properties on March 30, 1989. On May 15, 1989 SSE demanded rescission of that sale. Meanwhile, on August 4, 1989 Tropicana Properties sold the three parcels of land to Standard Realty. Its demand for rescission unheeded, SSE filed a complaint for annulment of sale and reconveyance with damages before the Regional Trial Court (RTC) of Makati, Branch 61, against The Holy See, PRC, Msgr. Cirilos, and Tropicana Properties in Civil Case 90-183. SSE amended its complaint on February 24, 1992, impleading Standard Realty as additional defendant. The Holy See sought dismissal of the case against it, claiming that as a foreign government, it cannot be sued without its consent. The RTC held otherwise but, on December 1, 1994,[3] the Court reversed the ruling of the RTC and ordered the case against The Holy See dismissed. By Order of January 26, 1996 the case was transferred to the Paraaque RTC, Branch 258. SSE alleged that Licup's original letter of April 17, 1988 to Msgr. Cirilos constituted a perfected contract. Licup even gave an earnest money of P100,000.00 to "close the transaction." His offer to rid the land of its occupants was a "mere gesture of accommodation if only to expedite the transfer of its title."[4] Further, SSE claimed that, in representing The Holy See and PRC, Msgr. Cirilos acted in bad faith when he set the price of the property at P1,400.00 per square meter when in truth, the property was sold to Tropicana Properties for only P760.68 per square meter. Msgr. Cirilos maintained, on the other hand, that based on their exchange of letters, no contract of sale was perfected between SSE and the parties he represented. And, only after the negotiations between them fell through did he sell the land to Tropicana Properties. In its Decision of February 14, 2000, the Paraaque RTC treated the April 17, 1988 letter between Licum and Msgr. Cirilos as a perfected contract of sale between the parties. Msgr. Cirilos attempted to change the terms of contract and return SSE's initial deposit but the parties reached no agreement regarding such change. Since such agreement was wanting, the original terms provided in the April 17, 1988 letter continued to bind the parties. On appeal to the Court of Appeals (CA), the latter rendered judgment on November 10, 2006,[5] reversing

the Paraaque RTC decision. The CA held that no perfected contract can be gleaned from the April 17, 1988 letter that SSE had relied on. Indeed, the subsequent exchange of letters between SSE and Msgr. Cirilos show that the parties were grappling with the terms of the sale. Msgr. Cirilos made no unconditional acceptance that would give rise to a perfected contract. As to the P100,000.00 given to Msgr. Cirilos, the CA considered it an option money that secured for SSE only the privilege to buy the property even if Licup called it a "deposit." The CA denied SSE's motion for reconsideration on May 2, 2007. The Issue Presented The only issue in this case is whether or not the CA erred in holding that no perfected contract of sale existed between SSE and the land owners, represented by Msgr. Cirilos. The Court's Ruling Three elements are needed to create a perfected contract: 1) the consent of the contracting parties; (2) an object certain which is the subject matter of the contract; and (3) the cause of the obligation which is established.[6] Under the law on sales, a contract of sale is perfected when the seller, obligates himself, for a price certain, to deliver and to transfer ownership of a thing or right to the buyer, over which the latter agrees.[7] From that moment, the parties may demand reciprocal performance. The Court believes that the April 17, 1988 letter between Licup and Msgr. Cirilos, the representative of the property's owners, constituted a perfected contract. When Msgr. Cirilos affixed his signature on that letter, he expressed his conformity to the terms of Licup's offer appearing on it. There was meeting of the minds as to the object and consideration of the contract. But when Licup ordered a stop-payment on his deposit and proposed in his April 26, 1988 letter to Msgr. Cirilos that the property be instead transferred to SSE, a subjective novation took place. A subjective novation results through substitution of the person of the debtor or through subrogation of a third person to the rights of the creditor. To accomplish a subjective novation through change in the person of the debtor, the old debtor needs to be expressly released from the obligation and the third person or new debtor needs to assume his place in the relation.[8]

Novation serves two functions - one is to extinguish an existing obligation, the other to substitute a new one in its place - requiring concurrence of four requisites: 1) a previous valid obligation; 2) an agreement of all parties concerned to a new contract; 3) the extinguishment of the old obligation; and 4) the birth of a valid new obligation.[9] Notably, Licup and Msgr. Cirilos affixed their signatures on the original agreement embodied in Licup's letter of April 26, 1988. No similar letter agreement can be found between SSE and Msgr. Cirilos. The proposed substitution of Licup by SSE opened the negotiation stage for a new contract of sale as between SSE and the owners. The succeeding exchange of letters between Mr. Stephen Cu, SSE's representative, and Msgr. Cirilos attests to an unfinished negotiation. Msgr. Cirilos referred to his discussion with SSE regarding the purchase as a "pending transaction."[10] Cu, on the other hand, regarded SSE's first letter to Msgr. Cirilos as an "updated proposal."[11] This proposal took up two issues: which party would undertake to evict the occupants on the property and how much must the consideration be for the property. These are clear indications that there was no meeting of the minds between the parties. As it turned out, the parties reached no consensus regarding these issues, thus producing no perfected sale between them. Parenthetically, Msgr. Cirilos did not act in bad faith when he sold the property to Tropicana even if it was for a lesser consideration. More than a month had passed since the last communication between the parties on February 4, 1989. It is not improbable for prospective buyers to offer to buy the property during that time. The P100,000.00 that was given to Msgr. Cirilos as "deposit" cannot be considered as earnest money. Where the parties merely exchanged offers and counter-offers, no contract is perfected since they did not yet give their consent to such offers.[12] Earnest money applies to a perfected sale. SSE cannot revert to the original terms stated in Licup's letter to Msgr. Cirilos dated April 17, 1988 since it was not privy to such contract. The parties to it were Licup and Msgr. Cirilos. Under the principle of relativity of contracts, contracts can only bind the parties who entered into it. It cannot favor or prejudice a third person.[13] Petitioner SSE cannot, therefore, impose

the terms Licup stated in his April 17, 1988 letter upon the owners. WHEREFORE, the Court DISMISSES the petition and AFFIRMS the Court of Appeals Decision dated November 10, 2006 in CA-G.R. CV 67366. MANILA METAL CONTAINER G.R. No. 166862 CORPORATION, Petitioner, Present: REYNALDO C. TOLENTINO, Intervenor, PANGANIBAN, C.J., Chairperson,* YNARES-SANTIAGO,** AUSTRIAMARTINEZ, - versus CALLEJO, SR., and CHICO-NAZARIO, JJ. PHILIPPINE NATIONAL BANK, Respondent, DMCI-PROJECT DEVELOPERS, Promulgated: INC., Intervenor. December 20, 2006 x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - ---------x DECISION CALLEJO, SR., J.:

Before us is a petition for review on certiorari of the Decision [1] of the Court of Appeals (CA) in CA-G.R. No. 46153 which affirmed the decision [2] of the Regional Trial Court (RTC), Branch 71, Pasig City, in Civil Case No. 58551, and its Resolution [3] denying the motion for reconsideration filed by petitioner Manila Metal Container Corporation (MMCC). The Antecedents Petitioner was the owner of a 8,015 square meter parcel of land located in Mandaluyong (now a City), Metro Manila. The property was covered by Transfer Certificate of Title (TCT) No. 332098 of the Registry of Deeds of Rizal. To secure a P900,000.00 loan it had obtained from respondent Philippine National Bank (PNB), petitioner executed a real estate mortgage over

the lot. Respondent PNB later granted petitioner a new credit accommodation of P1,000,000.00; and, on November 16, 1973, petitioner executed an Amendment [4] of Real Estate Mortgage over its property. On March 31, 1981, petitioner secured another loan of P653,000.00 from respondent PNB, payable in quarterly installments of P32,650.00, plus interests and other charges. [5] On August 5, 1982, respondent PNB filed a petition for extrajudicial foreclosure of the real estate mortgage and sought to have the property sold at public auction for P911,532.21, petitioners outstanding obligation to respondent PNB as of June 30, 1982, [6] plus interests and attorneys fees. After due notice and publication, the property was sold at public auction on September 28, 1982 where respondent PNB was declared the winning bidder for P1,000,000.00. The Certificate of Sale [7] issued in its favor was registered with the Office of the Register of Deeds of Rizal, and was annotated at the dorsal portion of the title on February 17, 1983. Thus, the period to redeem the property was to expire on February 17, 1984. Petitioner sent a letter dated August 25, 1983 to respondent PNB, requesting that it be granted an extension of time to redeem/repurchase the property. [8] In its reply dated August 30, 1983, respondent PNB informed petitioner that the request had been referred to its Pasay City Branch for appropriate action and recommendation. [9] In a letter [10] dated February 10, 1984, petitioner reiterated its request for a one year extension from February 17, 1984 within which to redeem/repurchase the property on installment basis. It reiterated its request to repurchase the property on installment. [11] Meanwhile, some PNB Pasay City Branch personnel informed petitioner that as a matter of policy, the bank does not accept partial redemption. *12+ Since petitioner failed to redeem the property, the Register of Deeds cancelled TCT No. 32098 on June 1, 1984, and issued a new title in favor of respondent PNB. *13+ Petitioners offers had not yet been acted upon by respondent PNB. Meanwhile, the Special Assets Management Department (SAMD) had prepared a statement of account, and as of June 25, 1984 petitioners obligation

amounted to P1,574,560.47. This included the bid price of P1,056,924.50, interest, advances of insurance premiums, advances on realty taxes, registration expenses, miscellaneous expenses and publication cost. [14] When apprised of the statement of account, petitioner remitted P725,000.00 to respondent PNB as deposit to repurchase, and Official Receipt No. 978191 was issued to it. [15] In the meantime, the SAMD recommended to the management of respondent PNB that petitioner be allowed to repurchase the property for P1,574,560.00. In a letter dated November 14, 1984, the PNB management informed petitioner that it was rejecting the offer and the recommendation of the SAMD. It was suggested that petitioner purchase the property for P2,660,000.00, its minimum market value. Respondent PNB gave petitioner until December 15, 1984 to act on the proposal; otherwise, its P725,000.00 deposit would be returned and the property would be sold to other interested buyers. [16] Petitioner, however, did not agree to respondent PNBs proposal. Instead, it wrote another letter dated December 12, 1984 requesting for a reconsideration. Respondent PNB replied in a letter dated December 28, 1984, wherein it reiterated its proposal that petitioner purchase the property for P2,660,000.00. PNB again informed petitioner that it would return the deposit should petitioner desire to withdraw its offer to purchase the property. [17] On February 25, 1985, petitioner, through counsel, requested that PNB reconsider its letter dated December 28, 1984. Petitioner declared that it had already agreed to the SAMDs offer to purchase the property for P1,574,560.47, and that was why it had paid P725,000.00. Petitioner warned respondent PNB that it would seek judicial recourse should PNB insist on the position. [18] On June 4, 1985, respondent PNB informed petitioner that the PNB Board of Directors had accepted petitioners offer to purchase the property, but for P1,931,389.53 in cash less the P725,000.00 already deposited with it. [19] On page two of the letter was a space above the typewritten name of petitioners President, Pablo Gabriel, where he was to affix his signature. However, Pablo Gabriel did not conform to the letter but merely indicated therein that he had received it. [20] Petitioner did not respond, so PNB requested petitioner in a letter dated June 30, 1988 to submit an amended offer to repurchase.

Petitioner rejected respondents proposal in a letter dated July 14, 1988. It maintained that respondent PNB had agreed to sell the property for P1,574,560.47, and that since its P725,000.00 downpayment had been accepted, respondent PNB was proscribed from increasing the purchase price of the property. [21] Petitioner averred that it had a net balance payable in the amount of P643,452.34. Respondent PNB, however, rejected petitioners offer to pay the balance of P643,452.34 in a letter dated August 1, 1989. [22] On August 28, 1989, petitioner filed a complaint against respondent PNB for Annulment of Mortgage and Mortgage Foreclosure, Delivery of Title, or Specific Performance with Damages. To support its cause of action for specific performance, it alleged the following: 34. As early as June 25, 1984, PNB had accepted the down payment from Manila Metal in the substantial amount of P725,000.00 for the redemption/repurchase price of P1,574,560.47 as approved by its SMAD and considering the reliance made by Manila Metal and the long time that has elapsed, the approval of the higher management of the Bank to confirm the agreement of its SMAD is clearly a potestative condition which cannot legally prejudice Manila Metal which has acted and relied on the approval of SMAD. The Bank cannot take advantage of a condition which is entirely dependent upon its own will after accepting and benefiting from the substantial payment made by Manila Metal. 35. PNB approved the repurchase price of P1,574,560.47 for which it accepted P725,000.00 from Manila Metal. PNB cannot take advantage of its own delay and long inaction in demanding a higher amount based on unilateral computation of interest rate without the consent of Manila Metal. Petitioner later filed an amended complaint and supported its claim for damages with the following arguments: 36. That in order to protect itself against the wrongful and malicious acts of the defendant Bank, plaintiff is constrained to engage the services of counsel at an agreed fee of P50,000.00 and to incur litigation expenses of at least P30,000.00, which the defendant PNB should be condemned to pay the plaintiff Manila Metal. 37. That by reason of the wrongful and malicious actuations of defendant PNB, plaintiff Manila Metal

suffered besmirched reputation for which defendant PNB is liable for moral damages of at least P50,000.00. 38. That for the wrongful and malicious act of defendant PNB which are highly reprehensible, exemplary damages should be awarded in favor of the plaintiff by way of example or correction for the public good of at least P30,000.00. [23]

Petitioner prayed that, after due proceedings, judgment be rendered in its favor, thus: a) Declaring the Amended Real Estate Mortgage (Annex A) null and void and without any legal force and effect. b) Declaring defendants acts of extra-judicially foreclosing the mortgage over plaintiffs property and setting it for auction sale null and void. c) Ordering the defendant Register of Deeds to cancel the new title issued in the name of PNB (TCT NO. 43792) covering the property described in paragraph 4 of the Complaint, to reinstate TCT No. 37025 in the name of Manila Metal and to cancel the annotation of the mortgage in question at the back of the TCT No. 37025 described in paragraph 4 of this Complaint. d) Ordering the defendant PNB to return and/or deliver physical possession of the TCT No. 37025 described in paragraph 4 of this Complaint to the plaintiff Manila Metal. e) Ordering the defendant PNB to pay the plaintiff Manila Metals actual damages, moral and exemplary damages in the aggregate amount of not less than P80,000.00 as may be warranted by the evidence and fixed by this Honorable Court in the exercise of its sound discretion, and attorneys fees of P50,000.00 and litigation expenses of at least P30,000.00 as may be proved during the trial, and costs of suit. Plaintiff likewise prays for such further reliefs which may be deemed just and equitable in the premises. [24] In its Answer to the complaint, respondent PNB averred, as a special and affirmative defense, that it had acquired ownership over the property after the period to redeem had elapsed. It claimed that no contract of sale was perfected between it and petitioner after the period to redeem the property had expired.

During pre-trial, the parties agreed to submit the case for decision, based on their stipulation of facts. [25] The parties agreed to limit the issues to the following: 1. Whether or not the June 4, 1985 letter of the defendant approving/accepting plaintiffs offer to purchase the property is still valid and legally enforceable. 2. Whether or not the plaintiff has waived its right to purchase the property when it failed to conform with the conditions set forth by the defendant in its letter dated June 4, 1985. 3. Whether or not there is a perfected contract of sale between the parties. [26]

1985 was a deposit, and not a downpayment or earnest money. On appeal to the CA, petitioner made the following allegations: I THE LOWER COURT ERRED IN RULING THAT DEFENDANT-APPELLEES LETTER DATED 4 JUNE 1985 APPROVING/ACCEPTING PLAINTIFF-APPELLANTS OFFER TO PURCHASE THE SUBJECT PROPERTY IS NOT VALID AND ENFORCEABLE. II THE LOWER COURT ERRED IN RULING THAT THERE WAS NO PERFECTED CONTRACT OF SALE BETWEEN PLAINTIFF-APPELLANT AND DEFENDANT-APPELLEE. III THE LOWER COURT ERRED IN RULING THAT PLAINTIFFAPPELLLANT WAIVED ITS RIGHT TO PURCHASE THE SUBJECT PROPERTY WHEN IT FAILED TO CONFORM WITH CONDITIONS SET FORTH BY DEFENDANTAPPELLEE IN ITS LETTER DATED 4 JUNE 1985. IV THE LOWER COURT ERRED IN DISREGARDING THE FACT THAT IT WAS THE DEFENDANT-APPELLEE WHICH RENDERED IT DIFFICULT IF NOT IMPOSSIBLE FOR PLAINTIFF-APPELLANT TO COMPLETE THE BALANCE OF THEIR PURCHASE PRICE. V THE LOWER COURT ERRED IN DISREGARDING THE FACT THAT THERE WAS NO VALID RESCISSION OR CANCELLATION OF SUBJECT CONTRACT OF REPURCHASE. VI THE LOWER COURT ERRED IN DECLARING THAT PLAINTIFF FAILED AND REFUSED TO SUBMIT THE AMENDED REPURCHASE OFFER. VII THE LOWER COURT ERRED IN DISMISSING THE AMENDED COMPLAINT OF PLAINTIFF-APPELLANT. VIII THE LOWER COURT ERRED IN NOT AWARDING PLAINTIFF-APPELLANT ACTUAL, MORAL AND EXEMPLARY DAMAGES, ATTOTRNEYS FEES AND LITIGATION EXPENSES. [33]

While the case was pending, respondent PNB demanded, on September 20, 1989, that petitioner vacate the property within 15 days from notice, [27] but petitioners refused to do so. On March 18, 1993, petitioner offered to repurchase the property for P3,500,000.00. [28] The offer was however rejected by respondent PNB, in a letter dated April 13, 1993. According to it, the prevailing market value of the property was approximately P30,000,000.00, and as a matter of policy, it could not sell the property for less than its market value. [29] On June 21, 1993, petitioner offered to purchase the property for P4,250,000.00 in cash. [30] The offer was again rejected by respondent PNB on September 13, 1993. [31] On May 31, 1994, the trial court rendered judgment dismissing the amended complaint and respondent PNBs counterclaim. It ordered respondent PNB to refund the P725,000.00 deposit petitioner had made. [32] The trial court ruled that there was no perfected contract of sale between the parties; hence, petitioner had no cause of action for specific performance against respondent. The trial court declared that respondent had rejected petitioners offer to repurchase the property. Petitioner, in turn, rejected the terms and conditions contained in the June 4, 1985 letter of the SAMD. While petitioner had offered to repurchase the property per its letter of July 14, 1988, the amount of P643,422.34 was way below the P1,206,389.53 which respondent PNB had demanded. It further declared that the P725,000.00 remitted by petitioner to respondent PNB on June 4,

Meanwhile, on June 17, 1993, petitioners Board of Directors approved Resolution No. 3-004, where it waived, assigned and transferred its rights over the property covered by TCT No. 33099 and TCT No. 37025 in favor of Bayani Gabriel, one of its Directors. [34] Thereafter, Bayani Gabriel executed a Deed of Assignment over 51% of the ownership and management of the property in favor of Reynaldo Tolentino, who later moved for leave to intervene as plaintiff-appellant. On July 14, 1993, the CA issued a resolution granting the motion, [35] and likewise granted the motion of Reynaldo Tolentino substituting petitioner MMCC, as plaintiff-appellant, and his motion to withdraw as intervenor. [36] The CA rendered judgment on May 11, 2000 affirming the decision of the RTC. [37] It declared that petitioner obviously never agreed to the selling price proposed by respondent PNB (P1,931,389.53) since petitioner had kept on insisting that the selling price should be lowered to P1,574,560.47. Clearly therefore, there was no meeting of the minds between the parties as to the price or consideration of the sale. The CA ratiocinated that petitioners original offer to purchase the subject property had not been accepted by respondent PNB. In fact, it made a counter-offer through its June 4, 1985 letter specifically on the selling price; petitioner did not agree to the counter-offer; and the negotiations did not prosper. Moreover, petitioner did not pay the balance of the purchase price within the sixty-day period set in the June 4, 1985 letter of respondent PNB. Consequently, there was no perfected contract of sale, and as such, there was no contract to rescind. According to the appellate court, the claim for damages and the counterclaim were correctly dismissed by the court a quo for no evidence was presented to support it. Respondent PNBs letter dated June 30, 1988 cannot revive the failed negotiations between the parties. Respondent PNB merely asked petitioner to submit an amended offer to repurchase. While petitioner reiterated its request for a lower selling price and that the balance of the repurchase be reduced, however, respondent rejected the proposal in a letter dated August 1, 1989. Petitioner filed a motion for reconsideration, which the CA likewise denied. Thus, petitioner filed the instant petition for review on certiorari, alleging that:

I. THE COURT OF APPEALS ERRED ON A QUESTION OF LAW WHEN IT RULED THAT THERE IS NO PERFECTED CONTRACT OF SALE BETWEEN THE PETITIONER AND RESPONDENT. II. THE COURT OF APPEALS ERRED ON A QUESTION OF LAW WHEN IT RULED THAT THE AMOUNT OF PHP725,000.00 PAID BY THE PETITIONER IS NOT AN EARNEST MONEY. III. THE COURT OF APPEALS ERRED ON A QUESTION OF LAW WHEN IT RULED THAT THE FAILURE OF THE PETITIONER-APPELLANT TO SIGNIFY ITS CONFORMITY TO THE TERMS CONTAINED IN PNBS JUNE 4, 1985 LETTER MEANS THAT THERE WAS NO VALID AND LEGALLY ENFORCEABLE CONTRACT OF SALE BETWEEN THE PARTIES. IV. THE COURT OF APPEALS ERRED ON A QUESTION OF LAW THAT NON-PAYMENT OF THE PETITIONERAPPELLANT OF THE BALANCE OF THE OFFERED PRICE IN THE LETTER OF PNB DATED JUNE 4, 1985, WITHIN SIXTY (60) DAYS FROM NOTICE OF APPROVAL CONSTITUTES NO VALID AND LEGALLY ENFORCEABLE CONTRACT OF SALE BETWEEN THE PARTIES. V. THE COURT OF APPEALS SERIOUSLY ERRED WHEN IT HELD THAT THE LETTERS OF PETITIONERAPPELLANT DATED MARCH 18, 1993 AND JUNE 21, 1993, OFFERING TO BUY THE SUBJECT PROPERTY AT DIFFERENT AMOUNT WERE PROOF THAT THERE IS NO PERFECTED CONTRACT OF SALE. [38]

The threshold issue is whether or not petitioner and respondent PNB had entered into a perfected contract for petitioner to repurchase the property from respondent. Petitioner maintains that it had accepted respondents offer made through the SAMD, to sell the property for P1,574,560.00. When the acceptance was made in its letter dated June 25, 1984; it then deposited P725,000.00 with the SAMD as partial payment, evidenced by Receipt No. 978194 which respondent had issued. Petitioner avers that the SAMDs acceptance of the deposit amounted to an acceptance of its offer to repurchase. Moreover, as gleaned from the letter of SAMD dated June 4, 1985, the PNB Board of Directors had approved petitioners offer to purchase the property. It claims that this was the suspensive condition, the fulfillment of which gave rise to the

contract. Respondent could no longer unilaterally withdraw its offer to sell the property for P1,574,560.47, since the acceptance of the offer resulted in a perfected contract of sale; it was obliged to remit to respondent the balance of the original purchase price of P1,574,560.47, while respondent was obliged to transfer ownership and deliver the property to petitioner, conformably with Article 1159 of the New Civil Code. Petitioner posits that respondent was proscribed from increasing the interest rate after it had accepted respondents offer to sell the property for P1,574,560.00. Consequently, respondent could no longer validly make a counter-offer of P1,931,789.88 for the purchase of the property. It likewise maintains that, although the P725,000.00 was considered as deposit for the repurchase of the property in the receipt issued by the SAMD, the amount constitutes earnest money as contemplated in Article 1482 of the New Civil Code. Petitioner cites the rulings of this Court in Villonco v. Bormaheco [39] and Topacio v. Court of Appeals. [40] Petitioner avers that its failure to append its conformity to the June 4, 1984 letter of respondent and its failure to pay the balance of the price as fixed by respondent within the 60-day period from notice was to protest respondents breach of its obligation to petitioner. It did not amount to a rejection of respondents offer to sell the property since respondent was merely seeking to enforce its right to pay the balance of P1,570,564.47. In any event, respondent had the option either to accept the balance of the offered price or to cause the rescission of the contract. Petitioners letters dated March 18, 1993 and June 21, 1993 to respondent during the pendency of the case in the RTC were merely to compromise the pending lawsuit, they did not constitute separate offers to repurchase the property. Such offer to compromise should not be taken against it, in accordance with Section 27, Rule 130 of the Revised Rules of Court. For its part, respondent contends that the parties never graduated from the negotiation stage as they could not agree on the amount of the repurchase price of the property. All that transpired was an exchange of proposals and counter-proposals, nothing more. It insists that a definite agreement on the amount and manner of payment of the price are essential elements in the formation of a binding and enforceable contract of sale. There was no such agreement in this case. Primarily, the concept of suspensive condition

signifies a future and uncertain event upon the fulfillment of which the obligation becomes effective. It clearly presupposes the existence of a valid and binding agreement, the effectivity of which is subordinated to its fulfillment. Since there is no perfected contract in the first place, there is no basis for the application of the principles governing suspensive conditions. According to respondent, the Statement of Account prepared by SAMD as of June 25, 1984 cannot be classified as a counter-offer; it is simply a recital of its total monetary claims against petitioner. Moreover, the amount stated therein could not likewise be considered as the counter-offer since as admitted by petitioner, it was only recommendation which was subject to approval of the PNB Board of Directors. Neither can the receipt by the SAMD of P725,000.00 be regarded as evidence of a perfected sale contract. As gleaned from the parties Stipulation of Facts during the proceedings in the court a quo, the amount is merely an acknowledgment of the receipt of P725,000.00 as deposit to repurchase the property. The deposit of P725,000.00 was accepted by respondent on the condition that the purchase price would still be approved by its Board of Directors. Respondent maintains that its acceptance of the amount was qualified by that condition, thus not absolute. Pending such approval, it cannot be legally claimed that respondent is already bound by any contract of sale with petitioner. According to respondent, petitioner knew that the SAMD has no capacity to bind respondent and that its authority is limited to administering, managing and preserving the properties and other special assets of PNB. The SAMD does not have the power to sell, encumber, dispose of, or otherwise alienate the assets, since the power to do so must emanate from its Board of Directors. The SAMD was not authorized by respondents Board to enter into contracts of sale with third persons involving corporate assets. There is absolutely nothing on record that respondent authorized the SAMD, or made it appear to petitioner that it represented itself as having such authority. Respondent reiterates that SAMD had informed petitioner that its offer to repurchase had been approved by the Board subject to the condition, among others, that the selling price shall be the total banks claim as of documentation date x x x payable in cash (P725,000.00 already deposited)

within 60 days from notice of approval. A new Statement of Account was attached therein indicating the total banks claim to be P1,931,389.53 less deposit of P725,000.00, or P1,206,389.00. Furthermore, while respondents Board of Directors accepted petitioners offer to repurchase the property, the acceptance was qualified, in that it required a higher sale price and subject to specified terms and conditions enumerated therein. This qualified acceptance was in effect a counter-offer, necessitating petitioners acceptance in return. The Ruling of the Court The ruling of the appellate court that there was no perfected contract of sale between the parties on June 4, 1985 is correct. A contract 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. [41] Under Article 1318 of the New Civil Code, there is no contract unless the following requisites concur: (1) Consent of the contracting parties;

A definite agreement as to the price is an essential element of a binding agreement to sell personal or real property because it seriously affects the rights and obligations of the parties. Price is an essential element in the formation of a binding and enforceable contract of sale. The fixing of the price can never be left to the decision of one of the contracting parties. But a price fixed by one of the contracting parties, if accepted by the other, gives rise to a perfected sale. [46] A contract of sale is consensual in nature and is perfected upon mere meeting of the minds. When there is merely an offer by one party without acceptance of the other, there is no contract. [47] When the contract of sale is not perfected, it cannot, as an independent source of obligation, serve as a binding juridical relation between the parties. [48] In San Miguel Properties Philippines, Inc. v. Huang, [49] the Court ruled that the stages of a contract of sale are as follows: (1) negotiation, covering the period from the time the prospective contracting parties indicate interest in the contract to the time the contract is perfected; (2) perfection, which takes place upon the concurrence of the essential elements of the sale which are the meeting of the minds of the parties as to the object of the contract and upon the price; and (3) consummation, which begins when the parties perform their respective undertakings under the contract of sale, culminating in the extinguishment thereof. A negotiation is formally initiated by an offer, which, however, must be certain. [50] At any time prior to the perfection of the contract, either negotiating party may stop the negotiation. At this stage, the offer may be withdrawn; the withdrawal is effective immediately after its manifestation. To convert the offer into a contract, the acceptance must be absolute and must not qualify the terms of the offer; it must be plain, unequivocal, unconditional and without variance of any sort from the proposal. In Adelfa Properties, Inc. v. Court of Appeals, [51] the Court ruled that: x x x The rule is that except where a formal acceptance is so required, although the acceptance must be affirmatively and clearly made and must be evidenced by some acts or conduct communicated to the offeror, it may be shown by acts, conduct, or words of the accepting party that clearly manifest a present intention or determination to accept the offer to buy or

(2) Object certain which is the subject matter of the contract; (3) established. Cause of the obligation which is

Contracts are perfected by mere consent which is manifested by the meeting of the offer and the acceptance upon the thing and the cause which are to constitute the contract. [42] Once perfected, they bind other contracting parties and the obligations arising therefrom have the form of law between the parties and should be complied with in good faith. The parties are bound not only to the fulfillment of what has been expressly stipulated but also to the consequences which, according to their nature, may be in keeping with good faith, usage and law. [43]

By the contract of sale, one of the contracting parties obligates himself to transfer the ownership of and deliver a determinate thing, and the other to pay therefor a price certain in money or its equivalent. [44] The absence of any of the essential elements will negate the existence of a perfected contract of sale. As the Court ruled in Boston Bank of the Philippines v. Manalo: [45]

sell. Thus, acceptance may be shown by the acts, conduct, or words of a party recognizing the existence of the contract of sale. [52] A qualified acceptance or one that involves a new proposal constitutes a counter-offer and a rejection of the original offer. A counter-offer is considered in law, a rejection of the original offer and an attempt to end the negotiation between the parties on a different basis. [53] Consequently, when something is desired which is not exactly what is proposed in the offer, such acceptance is not sufficient to guarantee consent because any modification or variation from the terms of the offer annuls the offer. [54] The acceptance must be identical in all respects with that of the offer so as to produce consent or meeting of the minds. In this case, petitioner had until February 17, 1984 within which to redeem the property. However, since it lacked the resources, it requested for more time to redeem/repurchase the property under such terms and conditions agreed upon by the parties. [55] The request, which was made through a letter dated August 25, 1983, was referred to the respondents main branch for appropriate action. [56] Before respondent could act on the request, petitioner again wrote respondent as follows: 1. Upon approval of our request, we will pay your goodselves ONE HUNDRED & FIFTY THOUSAND PESOS (P150,000.00); 2. Within six months from date of approval of our request, we will pay another FOUR HUNDRED FIFTY THOUSAND PESOS (P450,000.00); and 3. The remaining balance together with the interest and other expenses that will be incurred will be paid within the last six months of the one year grave period requested for. [57]

amount which petitioner was obliged to pay in case respondent would later agree to sell the property, including interests, advances on insurance premium, advances on realty taxes, publication cost, registration expenses and miscellaneous expenses. There is no evidence that the SAMD was authorized by respondents Board of Directors to accept petitioners offer and sell the property for P1,574,560.47. Any acceptance by the SAMD of petitioners offer would not bind respondent. As this Court ruled in AF Realty Development, Inc. vs. Diesehuan Freight Services, Inc.: [60]

Section 23 of the Corporation Code expressly provides that the corporate powers of all corporations shall be exercised by the board of directors. Just as a natural person may authorize another to do certain acts in his behalf, so may the board of directors of a corporation validly delegate some of its functions to individual officers or agents appointed by it. Thus, contracts or acts of a corporation must be made either by the board of directors or by a corporate agent duly authorized by the board. Absent such valid delegation/authorization, the rule is that the declarations of an individual director relating to the affairs of the corporation, but not in the course of, or connected with the performance of authorized duties of such director, are held not binding on the corporation.

Thus, a corporation can only execute its powers and transact its business through its Board of Directors and through its officers and agents when authorized by a board resolution or its by-laws. [61] It appears that the SAMD had prepared a recommendation for respondent to accept petitioners offer to repurchase the property even beyond the oneyear period; it recommended that petitioner be allowed to redeem the property and pay P1,574,560.00 as the purchase price. Respondent later approved the recommendation that the property be sold to petitioner. But instead of the P1,574,560.47 recommended by the SAMD and to which petitioner had previously conformed, respondent set the purchase price at P2,660,000.00. In fine, respondents acceptance of petitioners offer was qualified, hence can be at most considered as a counter-offer. If petitioner had accepted this counter-offer, a perfected contract of sale would have arisen; as it turns out, however, petitioner merely sought to have the counter-offer reconsidered.

When the petitioner was told that respondent did not allow partial redemption, *58+ it sent a letter to respondents President reiterating its offer to purchase the property. *59+ There was no response to petitioners letters dated February 10 and 15, 1984. The statement of account prepared by the SAMD stating that the net claim of respondent as of June 25, 1984 was P1,574,560.47 cannot be considered an unqualified acceptance to petitioners offer to purchase the property. The statement is but a computation of the

This request for reconsideration would later be rejected by respondent. We do not agree with petitioners contention that the P725,000.00 it had remitted to respondent was earnest money which could be considered as proof of the perfection of a contract of sale under Article 1482 of the New Civil Code. The provision reads: ART. 1482. 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.

1. That the selling price shall be the total Banks claim as of documentation date (pls. see attached statement of account as of 5-31-85), payable in cash (P725,000.00 already deposited) within sixty (60) days from notice of approval; 2. The Bank sells only whatever rights, interests and participation it may have in the property and you are charged with full knowledge of the nature and extent of said rights, interests and participation and waive your right to warranty against eviction. 3. All taxes and other government imposts due or to become due on the property, as well as expenses including costs of documents and science stamps, transfer fees, etc., to be incurred in connection with the execution and registration of all covering documents shall be borne by you; 4. That you shall undertake at your own expense and account the ejectment of the occupants of the property subject of the sale, if there are any; 5. That upon your failure to pay the balance of the purchase price within sixty (60) days from receipt of advice accepting your offer, your deposit shall be forfeited and the Bank is thenceforth authorized to sell the property to other interested parties. 6. That the sale shall be subject to such other terms and conditions that the Legal Department may impose to protect the interest of the Bank. [64]

This contention is likewise negated by the stipulation of facts which the parties entered into in the trial court: 8. On June 8, 1984, the Special Assets Management Department (SAMD) of PNB prepared an updated Statement of Account showing MMCCs total liability to PNB as of June 25, 1984 to be P1,574,560.47 and recommended this amount as the repurchase price of the subject property. 9. On June 25, 1984, MMCC paid P725,000.00 to PNB as deposit to repurchase the property. The deposit of P725,000 was accepted by PNB on the condition that the purchase price is still subject to the approval of the PNB Board. [62]

Thus, the P725,000.00 was merely a deposit to be applied as part of the purchase price of the property, in the event that respondent would approve the recommendation of SAMD for respondent to accept petitioners offer to purchase the property for P1,574,560.47. Unless and until the respondent accepted the offer on these terms, no perfected contract of sale would arise. Absent proof of the concurrence of all the essential elements of a contract of sale, the giving of earnest money cannot establish the existence of a perfected contract of sale. [63] It appears that, per its letter to petitioner dated June 4, 1985, the respondent had decided to accept the offer to purchase the property for P1,931,389.53. However, this amounted to an amendment of respondents qualified acceptance, or an amended counter-offer, because while the respondent lowered the purchase price, it still declared that its acceptance was subject to the following terms and conditions:

It appears that although respondent requested petitioner to conform to its amended counter-offer, petitioner refused and instead requested respondent to reconsider its amended counter-offer. Petitioners request was ultimately rejected and respondent offered to refund its P725,000.00 deposit. In sum, then, there was no perfected contract of sale between petitioner and respondent over the subject property.

IN LIGHT OF ALL THE FOREGOING, the petition is DENIED. The assailed decision is AFFIRMED. Costs against petitioner Manila Metal Container Corporation. SO ORDERED THIRD DIVISION

YNARES-SANTIAGO, J., Chairperson, AUSTRIA-MARTINEZ, CHICO-NAZARIO, NACHURA, and MANUEL LUIS SANCHEZ REYES, JJ. Petitioner,

Promulgated:

December 27, 2007

- versus x - - - - - - - - - - - - - -- - - - - - - - - - - - - - - - x DECISION

REYES, J.:

MAPALAD REALTY CORPORATION, Respondent.

G.R. No. 148516

KAPAG ang isang kasunduan ng bilihan ay may kaakibat na pandaraya at napatunayang huwad, ang bumili ay walang nakamit na titulo ng pag-aari. Ang bentahan ng apat na parsela ng mamahaling lupa sa Roxas Boulevard na isinuko ng dating kasamahan ng Pangulong Marcos sa pamahalaang Aquino ay nagtataglay ng mga palatandaan ng isang malakihang pandaraya na isinagawa mismo ng mga taong hinirang ng Presidential Commission on Good Government (PCGG) upang pangalagaan ang pag-aari ng isang na-sequester na kumpanya.

Present:

Ang mga ito ay dapat ibalik sa pamahalaan hanggang di pa tiyak ang tunay na may-ari. Hindi kanais-nais na nagpakahirap ang PCGG sa pagbawi ng nasabing pagaari para lamang mawala ito dahil sa manipulasyon ng isang di mapagkakatiwalaang opisyal.

Respondent Mapalad was the registered owner of four (4) parcels of land located along Roxas Boulevard, Baclaran, Paraaque. The properties, covered by Transfer Certificates of Title (TCT) Nos. S-81403, S-81404, S-81405 and S-81406 have a total land area of 4,038 square meters.[5]

Where a deed of sale was attended by fraud and proved to be fictitious, the buyer acquired no title to the subject property. The sale of four parcels of prime land along Roxas Boulevard surrendered by a former associate of President Marcos to the Aquino government bears the earmarks of a grand scam perpetrated by the very same persons appointed by the Presidential Commission on Good Government (PCGG) to safeguard the assets of the sequestered companies.[1]

On March 21, 1986, shortly after the February 1986 EDSA Revolution, Jose Y. Campos executed an affidavit[6] admitting, among others, that Mapalad was one of the companies he held in trust for former President Ferdinand E. Marcos. Campos turned over all assets, properties, records and documents pertaining to Mapalad to the new administration led by then President Corazon C. Aquino.

They must be restored to the custody of the government until their true owner is finally determined. It would be odious to have the PCGG work so hard to recover them only to have them lost due to manipulation of an unscrupulous official.

On March 23, 1986, the PCGG issued writs of sequestration for Mapalad and all its properties.[7]

This petition for review on certiorari seeks a reversal of the Decision[2] of the Court of Appeals (CA) which reversed and set aside that[3] of the Regional Trial Court (RTC), Branch 135, Makati City in an action for annulment of deed of sale and reconveyance[4] filed by respondent Mapalad Realty Corporation (Mapalad, for brevity).

On August 2, 1992, the PCGG appointed Rolando E. Josef as Vice President/Treasurer and General Manager of Mapalad. He immediately conducted an inventory of the assets of the corporation. This was when it was discovered that four (4) TCTs were missing, namely, TCT Nos. S-81403, S81404, S-81405, and S-81406.

Petitioner Manuel Luis Sanchez, who bought the properties during the pendency of the case at the trial court, intervened in the appeal before the CA.

Josef inquired on the whereabouts of these missing TCTs from Luis R. Narciso, an employee of Port Center Development Corporation, a sister company of Mapalad. Josef was informed that Mapalads former director and general manager, Felicito L. Manalili (GM Manalili) took the said missing TCTs sometime in July 1992.

The Facts

On September 8, 1992, Narciso executed an affidavit[8] stating that the missing TCTs were taken from him by GM Manalili.

The facts, as gleaned from the records, are as follows: Josef personally talked to GM Manalili to inquire about what happened to the titles he took from Narciso. GM

Manalili promised to return the titles as soon as he found them. He never did, despite repeated demands on him.

November 2, 1989 and purportedly signed by the same Miguel Magsaysay in his capacity as president and chairman of the board of Mapalad.

On November 16, 1992, Felimon Oliquiano, Jr., president of Nordelak Development Corporation (Nordelak, for brevity), filed a notice of adverse claim[9] over the subject properties based on a deed of sale purportedly executed on November 2, 1989 by Miguel Magsaysay in his capacity as president and board chairman of Mapalad, selling the four lots to Nordelak for the total purchase price of P20,190,000.00. This deed of sale was notarized by Elpidio T. Clemente as Document No. 121, Page 26, Book No. 82 Series of 1989.[10]

Although this document was also notarized by the same Elpidio T. Clemente, bearing the same Document No. 121, Page 26, Book No. 82, Series of 1989, the amount indicated in this deed of sale as total purchase price was P7,268,400.00 instead of P20,190,000.00 as earlier annotated in the title per the adverse claim on November 16, 1992. In other words, there were two deeds of absolute sale, bearing the same dates, involving the same parties, the same parcel of land, and notarized by the same Notary Public under identical notarial entries, with different considerations or purchase price.

Josef notified the Register of Deeds (RD) of Paraaque by three successive letters dated November 18, December 7 and 8, 1992 that the owners duplicate copies of four (4) TCTs in the name of Mapalad were missing, and requested the RD not to entertain any transaction, particularly any attempt to transfer ownership thereof, or annotate any encumbrance or lien of any kind on these four TCTs.

Way back October 13, 1978, A. Magsaysay, Inc., a corporation controlled by Miguel Magsaysay, acquired ownership of all shares of stock of Mapalad.[13]

Since Josefs letters to the RD were not verified, the RD instructed him to submit a verified petition or cancellation of adverse claim; Josef complied.

On December 3, 1982, however, A. Magsaysay, Inc. sold all its shares to Novo Properties, Inc.[14] Miguel Magsaysay also sold his one and only share to Novo Properties, Inc., thus completely terminating any and all rights or interest he used to have over the properties of Mapalad.

On December 22, 1992, Mapalad filed with the RD a verified petition for cancellation of adverse claim annotated on its titles by Nordelak.[11] The petition also included a notice of loss of the owners duplicate copies of the TCTs concerned. This was annotated on the titles as Entry No. 154431 on the next day.

Immediately upon learning of the cancellation of Mapalads four TCTs, Josef conferred with Miguel Magsaysay to find out whether the latter indeed signed the purported deeds of absolute sale both dated November 2, 1989.

Magsaysay denied having signed those deeds.

On January 14, 1993, Mapalad discovered, after verification with the records of the RD, that its titles to the four (4) properties were cancelled as early as December 22, 1992. In lieu of them, TCT Nos. 68493, 68494, 68495, and 68496 in the name of Nordelak were issued[12] by virtue of another deed of sale also dated

On January 19, 1993, the PCGG asked the Paraaque RD to immediately recall, revoke and cancel the four (4) titles that were issued in favor of Nordelak.[15]

On January 22, 1993, the PCGG issued a writ of injunction, enjoining and restraining the Paraaque RD from entertaining and processing any document or transaction relative to the titles in the name of Nordelak. This PCGG injunction was annotated on the titles as Entry No. 93-14786.

On March 4, 1993, the RD, through the Office of the Solicitor General, filed its answer alleging that when the requirements of registration are complied with, the duty of the register of deeds becomes simply ministerial.

On January 25, 1993, the RD in turn requested Nordelak to surrender the titles issued in its name, but Nordelak refused to comply.

On April 26, 1993, Nordelak and its president, Oliquiano filed their answer with special and affirmative defenses, alleging that Nordelak is a buyer in good faith, and that it never dealt with defendant Manalili in the purchase of the subject properties.

On February 3, 1993, Mapalad commenced, before the RTC, Makati City, the present action for annulment of deed of sale and reconveyance of title with damages against Nordelak, that is now the subject of this petition.

Mapalads complaint alleged that: (a) the deed of sale is falsified and a forgery; (b) defendant Felicito L. Manalili[16] conspired and confederated with the other defendants to defraud Mapalad by fabricating a fictitious, spurious and falsified deed of sale; and (c) there is another deed of absolute sale with the same date of November 2, 1989 and also bearing the purported signature of Miguel Magsaysay, but the two deeds of sale differ in the amounts of consideration, one for P20,190,000.00 and the other for P7,268,400.00, which was used in the transfer of Mapalads titles in favor of Nordelak.

Defendant Manalili, however, failed to file any answer within the reglementary period. The RTC declared him in default despite Section 14, Rule 18 of the Rules of Court stating that when a complaint states a common cause of action against several defendants, some of whom answer, and the others fail to do so, the court shall try the case against all upon the answers thus filed and render judgment upon the evidence presented x x x.

On October 24, 1994, while the case was still pending before the RTC, Nordelak sold the subject properties for P50,000,000.00 to a certain Manuel Luis S. Sanchez, now petitioner before Us.

RTC Judgment

Mapalad prayed for judgment: (a) declaring the two (2) deeds of absolute sale null and void; (b) ordering Nordelak to reconvey the four (4) parcels of land in favor of Mapalad; (c) ordering the Register of Deeds to cancel TCT Nos. 68493, 68494, 68495, and 68496, and in lieu thereof, to issue replacement titles in the name of Mapalad; and (d) ordering Nordelak to pay exemplary damages, attorneys fees and costs of suit. On February 22, 1993, a notice of lis pendens was annotated as Entry No. 93-91718 on the TCTs in Nordelaks name.*17+

On December 6, 1994, ruling that Mapalad failed to adduce positive proof of forgery, the RTC upheld the validity of the deed of absolute sale as a notarial document and rendered judgment[18] with the following fallo:

WHEREFORE, premises considered, for failure of plaintiff to establish preponderance of evidence to support its herein Complaint, the above-entitled case is ordered DISMISSED for lack of cause of action and for being without merit.

On the other hand, judgment is hereby rendered in favor of defendants against the plaintiff by way of counterclaim, for the latter to pay actual and compensatory damages in favor of private defendants (excluding public defendant Register of deeds of Paraaque herein represented by the Office of the Solicitor General) the sum of P50,000.00; attorneys fees in the sum of P30,000.00; and the costs of the proceedings.

Having previously bought the properties from Nordelak during the pendency of the case with the RTC, petitioner Sanchez moved to be joined with Nordelak as party defendant-appellee before the CA. The CA granted the motion to intervene.

CA Disposition

Finding merit in the appeal, the CA disposed of it, as follows: Furthermore, Entry No. 15431 re a Verified Petition for cancellation of the adverse claim annotated at the back of TCT Nos. S-81403, S-81404, S-81405, and S-81406, (Exhs. O, P, Q, and R) filed by Rolando E. Josef, V/P-General Manager of Mapalad Realty Corporation inscribed on December 17, 1992 is ordered CANCELLED.

WHEREFORE, premises considered, the assailed decision is REVERSED and SET ASIDE and a new one entered ?

SO ORDERED.[19]

1. DECLARING as null and void the deed of absolute sale dated 02 November 1989 executed by and between Mapalad Realty Corporation and Nordelak Development Corporation; 2. DECLARING as null and void the deed of absolute sale dated 24 October 1994 executed by and between Nordelak Development Corporation and Manuel Luis S. Sanchez; 3. ORDERING the Register of Deeds of Paraaque to cancel TCT Nos. 68493, 68494, 68495, and 68496 and in lieu thereof, to issue new certificates of title covering the subject properties in the name of Mapalad Realty Corporation. Further, appellee Nordelak is ordered to pay appellant P100,000.00 as attorneys fees. SO ORDERED.[20]

On December 19, 1994, upon Nordelaks manifestation, the RTC issued a Supplemental Decision cancelling the notice of lis pendens annotated as Entry No. 93-91718 at the back of Nordelaks TCTs Nos. 68493, 68494, 68495, and 68496, and also lifting the restraining order issued by the PCGG annotated on the said titles as Entry No. 93-14786.

On December 29, 1994 and January 2, 1995, Mapalad filed a motion for reconsideration and supplemental motion for reconsideration, respectively, to which an opposition was filed by Nordelak on January 13, 1995.

On January 2, 1995, the RTC issued an order denying the twin motions for reconsideration. Mapalad then seasonably appealed to the CA.

This ruling was arrived at after the CAs re-evaluation of the entire records, finding clear evidence of fraud in obtaining the certificates of title over the disputed properties, to wit: First. Miguel A. Magsaysay was no longer appellant Mapalads President and Chairman of the Board when

the subject deed of absolute sale was executed on 02 November 1989. The evidence shows that by virtue of a Deed of Sale of Shares of Stock dated 03 December 1982, Miguel Magsaysay ceded and sold his one and only share of stock in Mapalad Realty Corporation in favor of Novo Properties, Inc. x x x. And in his testimony, Miguel Magsaysay denied having affixed his signature on the questioned deed of sale and categorically stated that he ceased to be connected with appellant Mapalad after the sale of his share in 1982.

witness was ever presented by defendants-appellees to explain these highly anomalous documentations.

xxxx

Fourth. There was no consideration for the deed of sale. On this point, Rolando Josef testified that appellant Mapalad did not receive any amount with respect to the alleged transaction involving the sale of its properties. This was not disputed by the appellees. Since the alleged consideration is in the millions of pesos, it can be assumed that payment was made by check. It was easy enough for appellee Nordelak to have presented the cancelled check. Its failure to do so speaks volumes of truth of Josefs testimony. x x x.

Second. The Deed of Absolute Sale indicating a consideration of P7,268,400.00, which was the basis for the issuance of Transfer Certificates of Title Nos. 68493, 68494, 68495, and 68496 in the name of appellee Nordelak is dated 02 November 1989 but was only registered more than three (3) years later. This bolsters the testimony of Luis R. Narciso that the owners duplicate original of appellant Mapalads titles were taken from him by defendant Felicito Manalili in July 1992 and were never returned. Obviously, Manalili got the titles for the purpose of registering the fictitious deed of absolute sale because under the Property Registration Decree (P.D. 1529), no voluntary instrument shall be registered by the Register of Deeds unless the owners duplicate is presented with the instrument of transfer.

Fifth. In the questioned deed of sale, Nordelak was represented by one Felimon R. Oliquiano, Jr., in his capacity as President of the corporation. Thus, he was in the best position to testify on the validity of the questioned deed of sale and categorically state that it was Magsaysay who signed the deed of sale and refute Magsaysays testimony. But he was never presented and the failure to present him was never explained. In fact, no one was presented to testify having negotiated with and concluded the transaction with Magsaysay or that he personally saw Magsaysay sign the deed of sale. Defendant-appellee Nordelak presented only two witnesses both of whom were not connected Nordelak and, in fact, did not know Mapalad.

xxxx Third. Atty. Elpidio T. Clemente, the Notary Public who notarized the questioned Deed of Absolute Sale, did not submit a copy of said deed in the Notarial Section of the Regional Trial Court of Manila.

xxxx

x x x. As pointed out by appellant Mapalad in its brief, the notary public notarized two separate deeds of sale referring to the same parcels of land on the very same day, and made only one and the same entry for the two documents in his notarial registry. In fact, NOT ONE

We therefore find that the execution of the deed of absolute sale was attended by fraud, hence, a nullity. Thus, appellee Nordelak never acquired title over the subject properties. And given the evidence on record, We are left to wonder in no small measure how the court a quo could have upheld the validity of the questioned deed of sale. The transaction has all the earmarks of a grand scam perpetrated by the very same persons appointed by PCGG to safeguard the assets of sequestered companies.[21]

The CA further ruled that petitioner Sanchez, who was a transferee pendente lite, was not a buyer in good faith, having purchased the property with an annotation of a notice of lis pendens.

A procedural issue was raised by the Solicitor General in his Comment, too: whether or not petitioner may raise questions of fact in the present petition.

Without prior motion for reconsideration of the CA decision, intervenor-appellee Sanchez elevated the case to Us, raising the following assignment of errors:

We shall resolve them in the reverse order, dealing with the procedural ahead of the substantive question.

Our Ruling

CONTRARY TO THE EXPRESS FINDINGS OF THE TRIAL COURT THAT THE QUESTIONED DEED OF SALE IS GENUINE, VALID AND SUBSISTING, THE COURT OF APPEALS RULED THAT THERE WAS FRAUD ON THE PART OF NORDELAK IN OBTAINING THE CERTIFICATES OF TITLES OVER THE DISPUTED PROPERTY, AND CONSEQUENTLY THE QUESTIONED DEED IS FICTITIOUS.

I. The case falls within the exception to the rule that factual issues may not be entertained by this Court.

In petitions for review on certiorari such as in the present case, the findings of fact of the CA are generally conclusive on this Court, save for the following admitted exceptions:

II (1) the factual findings of the Court of Appeals and the trial court are contradictory; COROLLARILY, CONTRARY TO THE EXPRESS FINDINGS OF THE TRIAL COURT THAT NORDELAK IS A BUYER IN GOOD FAITH AND FOR VALUE, THE COURT OF APPEALS RULED OTHERWISE. (Underscoring supplied)

(2) the findings are grounded entirely on speculation, surmises or conjectures;

(3) the inference made by the Court of Appeals from its findings of fact is mainly mistaken, absurd or impossible; Issues

Two critical issues are plainly posed for our determination. First, on whether or not there was a valid sale between Mapalad and Nordelak. Second, whether or not petitioner Sanchez acquired valid title over the properties as innocent purchaser for value despite a defect in Nordelaks title.

(4) there is grave abuse of discretion in the appreciation of facts;

(5) the appellate court, in making its findings, goes beyond the issues of the case and such findings are contrary to the admissions of both appellant and appellee;

A: No, definitely not, so far away from my signature, not even in forgery; and besides I am not the president when it was sold already.

(6) the judgment of the Court of Appeals is premised on a misapprehension of facts;

Q: So on the date herein November 2, 1989, you were no longer president, Sir?

(7) the Court of Appeals fails to notice certain relevant facts which, if properly considered, will justify a different conclusion; and

A: No, I have nothing to do with them, of the corporation, after the sale in 1982.

(8) the findings of fact of the Court of Appeals are contrary to those of the trial court or are mere conclusions without citation of specific evidence, or where the facts set forth by the petitioner are not disputed by respondent, or where the findings of fact of the Court of Appeals are premised on the absence of evidence but are contradicted by the evidence on record.[22]

Atty. Calabio: Likewise, showing to you the Deed of Absolute Sale, also dated November 2, 1989, previously marked as Exhibit F, specifically on page 3, Sir, there is a signature also above the typewritten name, Miguel Magsaysay?

A: Definitely, this is not my signature, and besides I am not the president anymore. It looks exactly like the other one.

We note that the basis for the trial courts disposition in favor of Nordelak is Mapalads apparent failure to adduce sufficient evidence to prove that Miguel Magsaysays signatures on the two deeds of sale by Mapalad in favor of Nordelak were forged.

Atty. Calabio: Which for purposes of identification, Your Honor, may I respectfully request that his also be encircled and marked as Exhibit F-1?*23+

The CA, however, went beyond the mere determination of whether the signatures of Miguel Magsaysay were forged or not. It looked into the validity of the deed of absolute sale as a whole, based on the testimonies of Miguel Magsaysay himself, quoted in its decision, as follows:

Atty Calabio: x x x I am showing to you this Deed of Absolute Sale marked as Exhibit D, there is here appearing on page 3 above the typewritten name Miguel A. Magsaysay, is this your signature?

Aside from categorically denying under oath that the signatures appearing on the deeds of absolute sale were his, witness Miguel Magsaysay gave another reason why it was impossible for those signatures to be his. According to him, he was no longer connected in any way whatsoever with Mapalad, when it supposedly sold the properties. He divested himself of all his interests in Mapalad way back in 1982. There was no reason for him to sign the subject deeds of absolute sale as president and chairman of the board of Mapalad in 1989. This was another basis for Mapalad to convince the appellate court that the signatures purporting to be those of Magsaysay on the questioned deeds of sale were not written by him.

We sustain the CA finding and conclusion.

While there have been guidelines cited in the petition[24] used by this Court in determining what constitutes sufficient proof to establish whether a signature was forged, it does not preclude a party from adducing other possible proofs to establish whether a particular signature is genuine or not. In the case at bench, not only did Magsaysay disown the signatures appearing on the deed of sale, he cited a valid legal reason for him not to have signed such document at all. He had no more power and authority to sign for and in behalf of Mapalad because as early as 1982, he had already divested himself of all his interests in said corporation. His testimonies in this case constitute sufficient basis for the Court to conclude that the signatures appearing on the two deeds of sale (Exhibits D and F) were not his signatures.

A contract is defined as a juridical convention manifested in legal form, by virtue of which one or more persons bind themselves in favor of another, or others, or reciprocally, to the fulfillment of a prestation to give, to do, or not to do. There can be no contract unless the following concur: (a) consent of the contracting parties; (b) object certain which is the subject matter of the contract; (c) cause of the obligation which is established.[25]

Specifically, by the contract of sale, one of the contracting parties obligates himself to transfer ownership of and to deliver a determinate thing and the other party to pay therefor a price certain in money or its equivalent.[26]

The essential requisites of a valid contract of sale are:

This factual determination on the genuineness or forgery of the signatures purporting to be those of Miguel Magsaysay on the subject deeds of sale is most crucial. When compared with this one, all other factual issues raised in the petition become immaterial, such as: whether the owners duplicate copies of the TCT were voluntarily delivered to, or surreptitiously taken from Mapalads custodian of such documents; whether the deeds of sale were in fact notarized by Atty. Elpidio Clemente considering that these documents do not exist in the archives or files in the notarial registry; or even whether there were two or only one document purporting to be the deed of absolute sale dated November 2, 1989.

(1) Consent of the contracting parties by virtue of which the vendor obligates himself to transfer ownership of and to deliver a determinate thing, and the vendee obligates himself to pay therefor a price certain in money or its equivalent.

(2) Object certain which is the subject matter of the contract. The object must be licit and at the same time determinate or, at least, capable of being made determinate without the necessity of a new or further agreement between the parties.

There is, therefore, no cogent reason for this Court to delve further into these other factual matters.

(3) Cause of the obligation which is established. The cause as far as the vendor is concerned is the acquisition of the price certain in money or its equivalent, which the cause as far as the vendee is concerned is the acquisition of the thing which is the object of the contract.[27]

II. There can be no valid contract of sale between Mapalad and Nordelak.

Contracts of sale are perfected by mere consent, which is manifested by the meeting of the offer and the acceptance upon the thing and the cause which are to constitute the contract.[28]

Consent may be given only by a person with the legal capacity to give consent. In the case of juridical persons such as corporations like Mapalad, consent may only be granted through its officers who have been duly authorized by its board of directors.[29] In the present case, consent was purportedly given by Miguel Magsaysay, the person who signed for and in behalf of Mapalad in the deed of absolute sale dated November 2, 1989. However, as he categorically stated on the witness stand during trial, he was no longer connected with Mapalad on the said date because he already divested all his interests in said corporation as early as 1982. Even assuming, for the sake of argument, that the signatures purporting to be his were genuine, it would still be voidable for lack of authority resulting in his incapacity to give consent for and in behalf of the corporation. On this score, the contract of sale may be annulled for lack of consent on the part of Mapalad. The CA also noted that the alleged contract of sale on November 2, 1989 had no consideration. There was no payment effected by Nordelak for this transaction. Josef testified that no funds were infused into Mapalads coffers on account of this transaction. This testimony remained uncontroverted. In fact, the CA further noted that Nordelak could have easily produced the cancelled check before the trial court, if there was any. Again, Nordelak did not.

III. Petitioner as transferee pendente lite merely steps into the shoes of his predecessor-in-interest who had no valid title. As We have said, Nordelak did not acquire ownership or title over the four properties subject of this case because the contract of sale between Mapalad and Nordelak was not only voidable but also void ab inito. Not having any title to the property, Nordelak had nothing to transfer to petitioner Sanchez. Nemo dat non quod habet. Hindi maibibigay ng isang tao ang hindi kanya. No one can give what he does not have. Petitioner acquired the property subject of litigation during the pendency of the case in the trial court. It is undisputed that notices of lis pendens were annotated on the TCTs in Nordelaks name covering the subject properties as Entry No. 93-91718. In Lim v. Vera Cruz,[31] this Court explained: Lis pendens is a Latin term which literally means a pending suit. Notice of lis pendens is filed for the purpose of warning all persons that the title to certain property is in litigation and that if they purchase the same, they are in danger of being bound by an adverse judgment. The notice is, therefore, intended to be a warning to the whole world that one who buys the property does so at his own risk. This is necessary in order to save innocent third persons from any involvement in any future litigation concerning the property. By virtue of the notice of lis pendens annotated on the four TCTs in this case, petitioner had notice that the property he was intending to buy is under litigation. He is, therefore, a transferee pendente lite who, as held by this Court in Voluntad v. Dizon,[32] stands exactly in the shoes of the transferor and is bound by any judgment or decree which may be rendered for or against the transferor. Under the circumstances petitioner cannot acquire any better right than his predecessor, Nordelak. No river or stream can rise higher than its source. Walang ilog o batis na ang taas ay higit sa kanyang pinagmulan. There is thus no question that a judgment of reconveyance can be legally enforced by Mapalad against petitioner as transferee pendente lite of Nordelak. The four parcels of land surrendered by former Marcos associate Jose Y. Campos and sequestered by the PCGG must eventually be returned to their rightful owners. If forfeiture proceedings in the Marcos ill-gotten wealth cases prosper, and these properties are finally shown to

The third element for a valid contract of sale is likewise lacking. Lack of consideration makes a contract of sale fictitious. A fictitious sale is void ab initio.[30] The alleged deed of absolute sale dated November 2, 1989 notwithstanding, the contract of sale between Mapalad and Nordelak is not only voidable on account of lack of valid consent on the part of the purported seller, but also void ab initio for being fictitious on account of lack of consideration. Despite a void sale between Mapalad and Nordelak, may petitioner still claim valid title to the subject properties?

form part of such ill-gotten wealth, these properties should go to the Filipino people. If they are not illgotten, they should be turned over to the Marcoses. But definitely, these properties cannot be transferred to Nordelak nor to petitioner Manuel Luis Sanchez.

WHEREFORE, the petition is hereby DENIED and the appealed Court of Appeals decision AFFIRMED in toto..