Vasquez vs. CA [G.R. No. 83759.  July 12, 1991.]
Third Division, Gutierrez Jr. (J): 4 concur

Facts: On 21 September 1964, Vallejera and Olea sold the lot to Vasquez and Gayaleno under a Deed of Sale for the amount of P9,000.00. The Deed of Sale was duly ratified and notarized. On the same day and along with the execution of the Deed of Sale, a separate instrument, denominated as Right to Repurchase, was executed by the parties granting the Vallejera and Olea the right to repurchase the lot for P12,000.00, said document was likewise duly ratified and notarized. By virtue of the sale, the Vasquez and Gayaleno secured TCT T-58898 in their name. On 2 January 1969, Vallejera and Olea sold the same lot to Benito Derrama, Jr., after securing Vasquez and Gayaleno’s title, for the sum of P12,000.00. Upon the protestations of Vasquez and Gayaleno, assisted by counsel, the said second sale was cancelled after the payment of P12,000.00 by Vasquez and Gayaleno to Derrama.

On 15 January 1975, Spouses Martin Vallejera and Apolonia Olea filed an action against Spouses Cirpriano Vasquez and Valeriana Gayaleno seeking to redeem Lot 1860 of the Himamaylan Cadastre which was previously sold by the former to the latter on 21 September 1964. Said lot was registered in the name of Vallejera and Olea. On October 1959, the same was leased by them to Vasquez and Gayalleno up to crop year 1966-67, which was extended to crop year 1968-69. After the execution of the lease, Vasquez and Gayaleno took possession of the lot, up to now and devoted the same to the cultivation of sugar. Vasquez and Gayeleno resisted the action for redemption on the premise that the Right to Repurchase is just an option to buy since it is not embodied in the same document of sale but in a separate document, and since such option is not supported by a consideration distinct from the price, said deed for right to repurchase is not binding upon them. After trial, the RTC Himamaylan, Negros Occidental (6th Judicial Region, Branch 56, Civil Case 839) rendered judgment against Vasquez and Gayeleno, ordering them to resell lot 1860 of the Himamaylan Cadastre to Vallejera and Olea for the repurchase price of P24,000.00, which amount combines the price paid for the first sale and the price paid by the former to Benito Derrama, Jr. Vallejera and Gayeleno moved for, but were denied reconsideration. Excepting thereto, they appealed.

The Court of Appeals affirmed the decision of the RTC Himamaylan, Negros Occidental in Civil Case 839. In addition, the appellate court ordered Vasquez and Gayeleno to pay the amount of P5,000.00 as necessary and useful expenses in accordance with Article 1616 of the Civil Code. Hence, the petition.

The Supreme Court granted the petition, reversed and set aside the questioned decision and resolution of the Court of Appeals , and dismissed the complaint in Civil Case 839 of the then CFI Negros Occidental 12th Judicial District Branch 6; without costs.

1.    Right of repurchase not supported by a consideration distinct from the price; Burden of proof
In the present case, it is clear that the right to repurchase was not supported by a consideration distinct from the price. The rule is that the promisee has the burden of proving such consideration. Unfortunately, the promises (Vallejera) in the right to repurchase failed to prove such consideration. They did not even allege the existence thereof in their complaint. (See Sanchez v. Rigos supra).

2.    Application of Sanchez vs. Rigos case
In order that the Sanchez case can be applied, the evidence must show that the Vallejera and Olea accepted the right to repurchase. The record, however, does not show that they accepted the “Right to Repurchase” the land in question.

3.    Annotation and registration of right to repurchase not an acceptance but for the purpose of binding purchasers of such registered land
The annotation and registration of the right to repurchase at the back of the certificate of title of Vasquez and Gayeleno can not be considered as acceptance of the right to repurchase. Annotation at the back of the certificate of title of registered land is for the purpose of binding purchasers of such registered land. In the case of Bel Air Village Association, Inc. v. Dionisio (174 SCRA 589 [1989]), citing Tanchoco v. Aquino (154 SCRA 1 [1987]), and Constantino v. Espiritu (45 SCRA 557 [1972]), it was ruled that purchasers of a registered land are bound by the annotations found at the back of the certificate of title covering the subject parcel of land. In effect, the annotation of the right to repurchase found at the back of the certificate of title over the subject parcel of land of Vasquez and Gayeleno only served as notice of the existence of such unilateral promise of Vasquez and Gayeleno to resell the same to Vallejera and Olea. This, however, can not be equated with acceptance of such right to repurchase.

4.    Signature in the document called “right to repurchase” does not signify acceptance of right to repurchase
Neither can the signature of Vasquez and Gayeleno in the document called “right to repurchase” signify acceptance of the right to repurchase, as Vallejera and Olea did not sign the offer. Acceptance should be made by the promisee and not the promisors. It would be absurd to require the promisor of an option to buy to accept his own offer instead of the promisee to whom the option to buy is given.

4.    Actions of Vallejera and Olea cannot be considered as acceptance; Sending of letters without tender of redemption price falls short of requirement to repurchase
The actions of the private respondents — (a) filing a complaint to compel re-sale and their demands for resale prior to filing of the complaint cannot be considered acceptance. As stated in Vda. de Zulueta v. Octaviano (121 SCRA 314 [1983]), mere sending of letters by the vendor expressing his desire to repurchase the property without accompanying tender of the redemption price fell short of the requirements of law. (Lee v. Court of Appeals, 68 SCRA 197 [1972]). Neither did a judicial consignation of the repurchase price made within the agreed period.

5.    Contract of sale with right of repurchase
In a contract of sale with a right of repurchase, the redemptioner who may offer to make the repurchase on the option date of redemption should deposit the full amount in court . . . (Rumbaoa v. Arzaga, 84 Phil. 812 [1949]).’

6.    Right of vendor a retro to repurchase
To effectively exercise the right to repurchase the vendor a retro must make an actual and simultaneous tender of payment or consignation.’ (Catangcatang v. Legayada, 84 SCRA 51 [1978]).

7.    Refusal to sell parcel of land a withdrawal of the option to buy
The ineffectual acceptance of the option to buy validated the vendor’s refusal to sell the parcel which can be considered as a withdrawal of the option to buy.

8.    Conventional redemption, when occurs
Conventional redemption takes place when the vendor reserves the right to repurchase the thing sold, with the obligation to comply with the provisions of Article 1616 and other stipulations which may have been agreed upon. (Article 1601, Civil Code).

9.    Right of repurchase not granted in a subsequent document but in the same instrument of sale
As held in Villarica v. Court of Appeals (26 SCRA 189 [1968]), ‘The right of repurchase is not a right granted the vendor by the vendee in a subsequent instrument, but is a right reserved by the vendor in the same instrument of sale as one of the stipulations of the contract. Once the instrument of absolute sale is executed, the vendor can no longer reserve the right to repurchase, and any right thereafter granted the vendor by the vendee in a separate instrument cannot be a right of repurchase but some other right like the option to buy.

10.    Applicability of the Zulueta case as to the transaction being not a option to repurchase but an option to buy
As in the present case, the option to repurchase involved in the Zulueta case was executed in a separate document but on the same date that the deed of definite sale was executed.  While it is true that the Court in the Zulueta case found Zulueta guilty of laches, this, however, was not the primary reason why the Court disallowed the redemption of the property by Zulueta. It is clear from the decision that the ruling in the Zulueta case was based mainly on the finding that the transaction between Zulueta and Octaviano was not a sale with right to repurchase and that the “option to repurchase was but an option to buy or a mere promise on the part of Octaviano to resell the property to Zulueta. In the present case, since the transaction between the petitioners and private respondents was not a sale with right to repurchase, the private respondents cannot avail of Article 1601 of the Civil Code which provides for conventional redemption.

Montilla vs. CA [G.R. No. L-47968.  May 9, 1988.]
First Division, Narvasa (J): 3 concur

Facts:  On 27 April 1972, Emilio Aragon Jr. filed an action before the CFI Iloilo to compel Lina Montilla to comply with a verbal contract to sell to him a piece of land situated at Poblacion, Iloilo City, known as Lot 4 of the Consolidated Subdivision plan (LRC) Psc-11605. In his complaint, Aragon claimed that in the last week of June 1969, Montilla had orally offered to sell the lot to him at a price of P57,650.00 (at the rate of P50 per sq. m.), the price being payable at any time within a 3-year period from June, 1969 provided that Aragon constructed on the lot a house of strong materials and paid a nominal monthly rental in the meantime; but despite Aragon’s acceptance of the offer, fulfillment by him of the specified conditions, and his seasonable tender of the purchase price, Montilla had refused to comply with her obligation. In her answer Montilla categorically denied ever having entered into such an agreement, and set up the affirmative defenses of (1) unenforceability of the alleged agreement under the Statute of Frauds; and (2) failure of the complaint to state a cause of action, no allegation having been made therein of any consideration for the promise to sell distinct and separate from the price, as required by Article 1479 of the Civil Code. At Montilla’s instance, a preliminary hearing was had on her affirmative defenses in accordance with Section 6, Rule 16 of the Rules of Court,  “as if a motion to dismiss had been filed.” By Order dated 5 December 1972, the Court denied the implicit motion to dismiss. After trial, the Court rendered judgment on 22 August 1974 sentencing Montilla “to execute the requisite deed of conveyance of Lot 4, covered by TCT T-29976 in favor of Aragon upon full payment by him to Montilla of the total consideration thereof in the aggregate sum of P57,650.00; to pay to Montilla P2,000.00 as attorney’s fees, and to pay the costs.”

The decision was affirmed by the Court of Appeals. The latter’s adjudgment has, in turn, been duly brought up to the Supreme Court by Montilla, on appeal by certiorari under Rule 45 of the Rules of Court.

The Supreme Court reversed and set aside the Decision of the Court of Appeals dated 18 January 1978 and that of the CFI dated 22 August 1974 thereby affirmed, and entered a new one dismissing Aragon’s complaint, with costs against him.

1.    No admission by Montilla on the claimed verbal contract to sell; Affirmative defense could not be taken as unconditional and irretrievably binding factual admission
It is difficult to see by what process of ratiocination the Trial Court arrived at the conclusion that Montilla’s answer had “admitted the offer to sell” as any such admission is absolutely precluded by the specific and unequivocal denial by Montilla of the claimed verbal contract to sell. She in fact branded the allegations to that effect in the complaint as “outrageously false, fantastically ridiculous and despicable fabrications of plaintiff .” Nor may any admission be inferred from the circumstance that Montilla, apart from unqualifiedly denying the contract to sell, had also asserted in her responsive pleading that the contract was unenforceable because violative of the Statute of Frauds and because not supported by any consideration distinct from the price. For while those defenses imply an acceptance by the pleader of the truth of the agreement at which the defenses are directed, the acceptance is at best hypothetical, assumed only for purposes of determining the validity of the defenses, but cannot in any sense be taken as an unconditional and irretrievably binding factual admission. The import of the answer, couched in language that could not be made any plainer, is that there was no verbal contract to sell ever agreed to by Montilla, but that, even assuming hypothetically, or for the sake of argument that there was, the agreement was unenforceable because in breach of the Statute of Frauds.

2.    Res judicata does not apply to interlocutory orders as these cannot become final and executory
The Court’s interlocutory order of 5 December 1972 cannot become conclusive, i.e., conclusive on Montilla “with respect to the matter directly adjudged or as to any other matter that could have been raised in relation thereto, as the doctrine of res judicata or bar by prior judgment (or, for that matter, conclusiveness of judgment or estoppel by judgment) has relevance to, and will become operative only on the basis of a final judgment or final order, the qualifying term “final” being used in the sense of “final and executory,” i.e., not only final — because finally disposing of the case and leaving nothing more to be done by the adjudging court relative to its merits, but also executory — because the period for appeal has expired without an appeal having been taken, or an appeal having been perfected, the judgment or order has otherwise attained finality. An order such as that rendered on 5 December 1972, being interlocutory, cannot become final and executory in the sense described, and cannot bring the doctrine of res adjudicata into play at all. Indeed, the correctness of such an interlocutory order may subsequently be impugned on appeal by any party adversely affected thereby, regardless of whether or not he had presented a motion for the reconsideration thereof, if he has otherwise made of record his position thereon.

3.    Identification of identity of alleged vendor
Montilla’s acknowledgment of being the defendant in the case can not in any manner whatsoever be considered an admission that she had gone to see Aragon to offer her property for sale. Non sequitur. Aragon’s disconcerting failure to identify Montilla is cogent confutation of his allegation that he personally knew Montilla and had negotiated with her for his purchase of the property in question, and strongly indicative of the inaccuracy of the testimony of the witnesses who corroborated his dubious tale.

4.    Basis of dismissal: Statute of Frauds in relation to Rule 16 of the Rules of Court
There being therefore no admission whatever on Montilla’s part of the existence or ratification of the claimed contract to sell, and taking account of her disavowal in her pleadings and in her evidence of that contract, and necessarily of any fulfillment of the terms thereof, it is clear that the action for its enforcement should have been dismissed pursuant to the Statute of Frauds, in relation to Rule 16 of the Rules of Court.

5.    Basis of dismissal: Article 1479
The action is also dismissible upon another legal ground. Assuming arguendo veritability of the oral promise to sell by Montilla, the promise was nevertheless not binding upon her in view of the absence of any consideration therefor distinct from the stipulated price. This is the principle laid down by the second paragraph of Article 1479: “An accepted unilateral promise to . . sell a determinate thing for a price certain is binding upon the promissor if the promise is supported by a consideration distinct from the price.”

6.    Document executed by Aragon as to lease; Absent any mention of alleged promise to sell
A document, executed by Aragon on 9 July 1969 (some 9 or 10 days after Montilla had supposedly promised to sell the lot in question to him),  reveals several things. For one, the lot on which Aragon’s house was being built was obviously part of the “Montilla estate,” and did not as yet belong to any particular heir or person entitled thereto. For another, Aragon had been given permission by the representative of the estate, Mr. Manaloto, to stay on the lot in consideration of a prescribed rental, and he was imploring said Mr. Manaloto and the owners for leave to stay in the premises until his children could finish their schooling, promising to “meet the prescribed rental obligations.” Again, and this is quite significant as regards his claim of a promise to sell by one of the Montillas, since that promise is not referred to or even hinted at in any manner whatsoever, the genuineness of the claim is strongly suspect; for surely, Aragon would never have “implored” for “consideration of the owners and Mr. Manaloto” to stay in the premises until his children could finish their schooling, as lessee, if it be true that he had accepted a promise for the sale thereof to him. The document cannot therefore be interpreted otherwise than as denoting the concession to him of the privilege to build a house on a lot belonging to the Montillas, and a solicitation by him of the owners’ permission to lease the lot to him for a longer, and more or less determinable term, and as an implied, though nonetheless clear, negation of any right on his part to purchase the property.

7.    Lot 4 adjudicated to Lina Montilla pursuant to settlement of the Montilla Estate 2 years after her alleged offer to sell
A Court Order issued on 17 June 1971 in the judicial proceedings for the settlement of the Montilla Estate, obviously the same “Montilla estate” referred to by Aragon in his certification of 9 July 1969 just described, approved the project of partition of said estate, presented on 5 May 1971; and it states that Lot 4 was adjudicated to Lina Montilla on 17 June 1971, more than 2 years after she had supposedly offered to sell the property to Aragon. At the time of the alleged promise to sell, Lot 4 still formed part of the amorphous mass of property constituting the “Montilla estate;” at any rate, that particular lot had not been allotted to Lina Montilla yet. The uncertainty of the eventual ownership of said Lot 4, considered conjointly with the ostensible status of Aragon as a mere supplicant of favors from “the owners of the Montilla estate,” make it very improbable indeed that Montilla would personally go to him and promise to sell the lot to him.

Sanchez vs. Rigos [G.R. No. L-25494.  June  14, 1972.]
En Banc, Concepcion (J): 7 concur, 1 took no part, 1 concurs in separate opinion

Facts:  On 3 April 1961, Nicolas Sanchez and Severina Rigos executed an instrument, entitled “Option to Purchase,” whereby Mrs. Rigos “agreed, promised and committed . . . to sell” to Sanchez, for the sum of P1,510.00, a parcel of land situated in the barrios of Abar and Sibot, municipality of San Jose, province of Nueva Ecija, and more particularly described in TCT NT-12528 of said province, within two (2) years from said date with the understanding that said option shall be deemed “terminated and elapsed,” if “Sanchez shall fail to exercise his right to buy the property” within the stipulated period. Inasmuch as several tenders of payment of the sum of P1,510.00, made by Sanchez within said period, were rejected by Mrs. Rigos, on 12 March 1963, the former deposited said amount with the CFI Nueva Ecija and commenced against the latter the present action, for specific performance and damages. On 11 February  1964, after the filing of defendant’s answer, both parties, assisted by their respective counsel, jointly moved for a judgment on the pleadings. Accordingly, on 28 February 1964, the lower court rendered judgment for Sanchez, ordering Mrs. Rigos to accept the sum judicially consigned by him and to execute, in his favor, the requisite deed of conveyance. Mrs. Rigos was, likewise, sentenced to pay P200.00, as attorney’s fees, and the costs. Hence, the appeal by Mrs. Rigos to the Court of Appeals, which case was the certified by the latter court to the Supreme Court upon the ground that it involves a question purely of law.

The Supreme Court affirmed the decision appealed from, with costs against Severina Rigos.

1.    Option to purchase not a contract to buy and sell
The option did not impose upon Sanchez the obligation to purchase Rigos’ property. The contract denominated as “Option to Purchase” is not a “contract to buy and sell,” it merely granted Sanchez an “option” to buy, and both parties so understood it, as indicated by the caption given by them to said instrument. Under the provisions thereof, Rigos “agreed, promised and committed” herself to sell the land therein described to Sanchez for P1,510.00, but there is nothing in the contract to indicate that her aforementioned agreement, promise and undertaking is supported by a consideration “distinct from the price” stipulated for the sale of the land.

2.    Article 1354 applicable to contracts in general, Article 1479 refers to sales in particular
Relying upon Article 1354 of the Civil Code, which provides that “when the offerer has allowed the offeree a certain period to accept, the offer may be withdrawn at any time before acceptance by communicating such withdrawal, except when the option is founded upon consideration, as something paid or promised,” the lower court presumed the existence of a consideration distinct from the price. It must be noted however that Article 1354 applies to contracts in general, whereas the second paragraph of Article 1479 refers to “sales” in particular, and, more specifically, to “an accepted unilateral promise to buy or to sell.” In other words, Article 1479 is controlling in the present case. Article 1479 provides that “A promise to buy and sell a determinate thing for a price certain is reciprocally demandable. An accepted unilateral promise to buy or to sell a determinate thing for a price certain is binding upon the promissor if the promise is supported by a consideration distinct from the price.”

3.    Article 1479 imposes condition for a unilateral promise to be binding; Burden of proof
In order that a unilateral promise may be “binding” upon the promisor, Article 1479 requires the concurrence of a condition, namely, that the promise be “supported by a consideration distinct from the price.” Accordingly, the promisee can not compel the promisor to comply with the promise, unless the former establishes the existence of said distinct consideration. In other words, the promisee has the burden of proving such consideration. In the present case, Sanchez has not even alleged the existence thereof in his complaint.

4.    Implied admission of the truth of the other party’s averment if party joins in the petition for a judgment based on the pleadings without introducing evidence
In the case of Bauermann v. Casas (14 March  1908), it was held that “one who prays for judgment on the pleadings without offering proof as to the truth of hie own allegations, and without giving the opposing party an opportunity to introduce evidence, must be understood to admit the truth of all the material and relevant allegations of the opposing party, and to rest his motion for judgment on those allegations taken together with such of his own as are admitted in the pleading. (La Yebana Company vs. Sevilla, 9 Phil. 210).” This view was reiterated in Evangelista V. De la Rosa and Mercy’s Incorporated v. Herminia Verde. In the present case, Rigos explicitly averred in her answer, and pleaded as a special defense, the absence of said consideration for her promise to sell and, by joining in the petition for a judgment on the pleadings, Sanchez has impliedly admitted the truth of said averment in Rigos’ answer.

5.    Southwestern Sugar & Molasses Co. v. Atlantic Gulf & Pacific Co. case
The Court in the Southwestern Sugar case held that “under article 1479 of the new Civil Code ‘an option to sell,’ or ‘a promise to buy or to sell,’ as used in said article, to be valid must be ’supported by a consideration distinct from the price.’ This is clearly inferred from the context of said article that a unilateral promise to buy or to sell, even if accepted, is only binding if supported by a consideration. In other words, ‘an accepted unilateral promise’ can only have a binding effect if supported by a consideration, which means that the option can still be withdrawn, even if accepted, if the same is not supported by any consideration. Here it is not disputed that the option is without consideration. It can therefore be withdrawn notwithstanding the acceptance made of it by appellee. The Court held that the general rule regarding offer and acceptance under Article 1324 must be interpreted as modified by the provision of article 1479, which applies to ‘a promise to buy and sell’ specifically. In short, the rule requires that a promise to sell to be valid must be supported by a consideration distinct from the price.

6.    Atkins, Kroll and Co. v. Cua Hian Tek
In the case of Atkins, Kroll and Co., Inc. v. Cua Hian Tek, decided later than Southwestern Sugar & Molasses Co. v. Atlantic Gulf & Pacific Co., the Court saw no distinction between Articles 1324 and 1479 of the Civil Code and applied the former where a unilateral promise to sell similar to the one sued upon here was involved, treating such promise as an option which, although not binding as a contract in itself for lack of a separate consideration, nevertheless generated a bilateral contract of purchase and sale upon acceptance.

7.    Option is unilateral
Furthermore, an option is unilateral: a promise to sell at the price fixed whenever the offeree should decide to exercise his option within the specified time. After accepting the promise and before he exercises his option, the holder of the option is not bound to buy. He is free either to buy or not to buy later. In the present case, however, upon accepting Rigos’ offer a bilateral promise to sell and to buy ensued, and Sanchez ipso facto assumed the obligation of a purchaser. He did not just get the right subsequently to buy or not to buy. It was not a mere option then; it was bilateral contract of sale.

8.    Option without consideration is a mere offer of a contract of sale, which is not binding until accepted
If the option is given without a consideration, it is a mere offer of a contract of sale, which is not binding until accepted. If, however, acceptance is made before a withdrawal, it constitutes a binding contract of sale, even though the option was not supported by a sufficient consideration. . . .  (77 Corpus Juris Secundum p. 652. See also 27 Ruling Case Law 339 and cases cited.) It can be taken for granted that the option contract was not valid for lack of consideration. But it was, at least, an offer to sell, which was accepted by latter, and of the acceptance the offerer had knowledge before said offer was withdrawn. The concurrence of both acts — the offer and the acceptance — could at all events have generated a contract, if none there was before (arts. 1254 and 1262 of the Civil Code; Zayco vs. Serra, 44 Phil. 331.) In other words, since there may be no valid contract without a cause or consideration, the promisor is not bound by his promise and may, accordingly, withdraw it. Pending notice of its withdrawal, his accepted promise partakes, however, of the nature of an offer to sell which, if accepted, results in a perfected contract of sale.

9.    Proper construction of conflicting provisions of the same law; Harmonize to implement the same principle rather than to create exceptions
In line with the cardinal rule of statutory construction that, in construing different provisions of one and the same law or code, such interpretation should be favored as will reconcile or harmonize said provisions and avoid a conflict between the same. Indeed, the presumption is that, in the process of drafting the Code, its author has maintained a consistent philosophy or position. Moreover, the decision in Southwestern Sugar & Molasses Co. v. Atlantic Gulf & pacific Co., holding that Art. 1324 (on the general principles on contracts) is modified by Art. 1479 (on sales) of the Civil Code, in effect, considers the latter as an exception to the former, and exceptions are not favored, unless the intention to the contrary is clear, and it is not so, insofar as said 2 articles are concerned. What is more, the reference, in both the second paragraph of Art. 1479 and Art. 1324, to an option or promise supported by or founded upon a consideration, strongly suggests that the 2 provisions intended to enforce or implement the same principle.

10.    Atkins, Kroll & Co. case modifies or abandons Southwestern Sugar case insofar as to inconsistencies
Upon mature deliberation, the Court is of the considered opinion that it should, as it hereby reiterates the doctrine laid down in the Atkins, Kroll & Co. case, and that, insofar all inconsistent therewith, the view adhered to in the South western Sugar & Molasses Co. case should be deemed abandoned or modified.

Soriano, et. al. v. Bautista, et. al. [G.R. No. L-15752.  December 29, 1962.]
Bautista, et. al. v. Soriano, et. al. [G.R. No. L-17457.  December 29, 1962.]
En Banc, Makalintal (J): 9 concur

Facts: Spouses Basilio Bautista and Sofia de Rosas are the absolute and registered owners of a parcel of land, situated in Teresa, Rizal (OCT 3905, Register of Deeds of Rizal). On 30 May 1956, the said spouses for and in consideration on the sum of P1,800, signed a document entitled “Kasulatan Ng Sanglaan” in favor of Ruperto Soriano and Olimpia de Jesus. Simultaneously with the signing of the deed, the spouses Bautista and de Rosas transferred the possession of the said land to Soriano and de Jesus who have been and are still in possession of the said property and have since that date been and are cultivating the said land and have enjoyed and are still enjoying the produce thereof to the exclusion of all other persons. Sometimes after 30 May 1956, the spouses Bautista and de Rosas received from Soriano and de Jesus, the sum of P450.00 pursuant to the conditions agreed upon in the document for which no receipt was issued and which was returned by the spouses sometime on 31 May 1958. On 13 May 1958, a certain Atty. Angel O. Ver wrote a letter to the spouses Bautista informing the said spouses that his clients Soriano and de Jesus have decided to buy the parcel of land in question pursuant to paragraph 5 of the document in question (”That it has likewise been agreed that if the financial condition of the mortgagees will permit, they may purchase said land absolutely on any date within the two-year term of this mortgage at the agreed price of P3,900.00.”). The spouses in spite of the receipt of the letter refused to comply with the demand contained therein.

On 31 May 1958, Soriano and de Jesus filed before the Trial Court Civil Case 5023, praying that they be allowed to consign or deposit with the Clerk of Court the sum of P1,650.00 as the balance of the purchase price of the parcel of land in question. After due hearing, judgment be rendered ordering Bautista and de Rosas to execute an absolute deed of sale of the said property in their favor, plus damages.

On 9 June 1958, spouses Bautista and de Rosas filed a complaint against Soriano and de Jesus, which case after hearing was dismissed for lack of jurisdiction. On 5 August 1959, the spouses Bautista and de Rosas again filed a case in the CFI against Soriano and de Jesus asking the Court to order Soriano and de Jesus to accept the payment of the principal obligation and release the mortgage and to make an accounting of the harvest for the two harvest seasons (1956-1957). The two cases, were by agreement of the parties assigned to one branch so that they can be tried jointly. On 10 March 1959, the CFI Rizal, after a joint trial of both cases, ordered Bautista and de Rosas to execute a deed of sale covering the property in question in favor of Soriano and de Jesus upon payment by the latter of P1,650.00 which is the balance of the price agreed upon, i.e. P3,900.00, and the amount previously received by way of loan by the said spouses from Soriano and de Jesus, to pay the sum of P500.00 by way of attorney’s fees, and to pay the costs.

The Supreme Court affirmed the judgment appealed from, with costs.

1.    Mortgagors’ right to redeem defeasible due to stipulation on option to buy
While the transaction is undoubtedly a mortgage and contains the customary stipulation concerning redemption, it carries the added special provision, which renders the mortgagors’ right to redeem defeasible at the election of the mortgagees. There is nothing illegal or immoral in this. It is simply an option to buy, sanctioned by Article 1479 of the Civil Code, which states: “A promise to buy and sell a determinate thing for a price certain is reciprocally demandable. An accepted unilateral promise to buy or to sell a determinate thing for a price certain is binding upon the promisor if the promise is supported by a consideration distinct from the price.”

2.    Promise to sell supported by same consideration of the mortgage, which is distinct from which would support the sale; Continuing offer
In the present case, the mortgagors’ promise to sell is supported by the same consideration as that of the mortgage itself, which is distinct from that which would support the sale, an additional amount having been agreed upon, to make up the entire price of P3,900.00, should the option be exercised. The mortgagors’ promise was in the nature of a continuing offer, non-withdrawable during a period of two years, which upon acceptance by the mortgagees gave rise to a perfected contract of purchase and sale.

3.    Inigo vs. CA case affirms right of appellees for specific performance for the execution of deed of sale
In the case of Iñigo vs. Court of Appeals (96 Phil., 37; 50 O.G. 11 5281), it was held that a stipulation in a contract of mortgage to sell the property to the mortgagee does not bind the same but creates only a personal obligation on the part of the mortgagor. The citation, confirms the position of the appellees, who are not enforcing any real right to the disputed land but are rather seeking to obtain specific performance of a personal obligation, namely, the execution of a deed of sale for the price agreed upon, the corresponding amount to cover which was duly deposited in court upon the filing of the complaint.

4.    Tender ineffective as preemptive right to purchase by other party has been exercised
The tender of the sum of P1,800 to redeem the mortgage by Bautista and de Rosas was ineffective for other purpose intended. Such tender must have been made after the option to purchase had been exercised by Soriano and de Jesus (Civil Case 99 was filed on 9 June 1958, only to be dismissed for lack of jurisdiction). Bautista’s and de Rosas’ offer to redeem could be defeated by Soriano’s and de Jesus’ preemptive right to purchase within the period of 2 years from 30 May 1956. Such right was availed of and Bautista and de Rosas were accordingly notified by letter dated 13 May 1958, which was received by them on the following May 22. Offer and acceptance converged and gave rise to a perfected and binding contract of purchase and sale.

Villamor vs. CA [G.R. No. 97332.  October 10, 1991.]
First Division, Medialdea (J): 2 concur, 1 took no part

Facts: Macaria Labingisa Reyes was the owner of a 600-square meter lot located at Baesa, Caloocan City (TCT [18431] 18938, Register of Deeds of Rizal). In July 1971, Macaria sold a portion of 300 sq. ms. of the lot to the Spouses Julio and Marina Villamor for the total amount of P21,000.00. Earlier, Macaria borrowed P2,000.00 from the spouses which amount was deducted from the total purchase price of the 300 sq. m. lot sold. The portion sold to the Villamor spouses is now covered by TCT 39935 while the remaining portion which is still in the name of Macaria Labingisa- is covered by TCT 39934. On 11 November 1971, Macaria executed a “Deed of option” in favor of Villamor in which the remaining 300 sq. m. portion (TCT No. 39934) of the lot would be sold to Villamor under the conditions stated therein. According to Macaria, when her husband, Roberto Reyes, retired in 1984, they offered to repurchase the lot sold by them to the Villamor spouses but Marina Villamor refused and reminded them instead that the Deed of Option in fact gave them the option to purchase the remaining portion of the lot. The Villamors, on the other hand, claimed that they had expressed their desire to purchase the remaining 300 sq. m. portion of the lot but the Reyes had been ignoring them.

On 13 July 1987, after conciliation proceedings in the barangay level failed, the Villamors filed a complaint for specific performance against the Reyes before the RTC Caloocan City (Branch 121, Civil Case C-12942). On 26 July 1989, judgment was rendered by the trial court in favor of the Villamor spouses, ordering the Reyeses to sell the land to the Villamors, to pay the the latter the sum of P3,000 as attorney’s fees, and to pay the cost of suit. The court dismissed the counterclaim for lack of merit.

Not satisfied with the decision of the trial court, the Reyes spouses appealed to the Court of Appeals (CA-GR CV 24176). On 12 February 1991, the Court of Appeals rendered a decision reversing the decision of the trial court and dismissing the complaint. The reversal of the trial court’s decision was premised on the finding of respondent court that the Deed of Option is void for lack of consideration. The Villamor spouses brought the petition for review on certiorari before the Supreme Court.

The Supreme Court denied the petition, affirmed the decision of the appellate court for reasons cited in the decision, and dismissed the complaint in Civil Case C-12942 on the ground of prescription and laches.

1.    Consideration defined
As expressed in Gonzales v. Trinidad (67 Phil. 682), consideration is “the why of the contracts, the essential reason which moves the contracting parties to enter into the contract.” In the present case, the cause or the impelling reason on the part of private respondent in executing the deed of option as appearing in the deed itself is the Villamors’ having agreed to buy the 300 sq. m. portion of Reyes spouses’ land at P70.00 per sq. m. “which was greatly higher than the actual reasonable prevailing price.” This cause or consideration is clear from the deed which stated “that the only reason why the spouses-vendees Julio Villamor and Marina V Villamor agreed to buy the said one-half portion at the above stated price of about P70.00 per square meter, is because I, and my husband Roberto Reyes, have agreed to sell and convey to them the remaining one-half portion still owned by me . . .” It must be noted that in 1969 the Villamor spouses bought an adjacent lot from the brother of Macaria Labing-isa for only P18.00 per square meter, such fact not being rebutted by Macaria. Thus, expressed in terms of money, the consideration for the deed of option is the difference between the purchase price of the 300 sq. m. portion of the lot in 1971 (P70.00 per sq. m.) and the prevailing reasonable price of the same lot in 1971. Whatever it is, (P25.00 or P18.00) though not specifically stated in the deed of option, was ascertainable. Villamors’ allegedly paying P52.00 per square meter for the option may, as opined by the appellate court, be improbable but improbabilities does not invalidate a contract freely entered into by the parties.

2.    Option contract defined
An optional contract is a privilege existing in one person, for which he had paid a consideration and which gives him the right to buy, for example, certain merchandise or certain specified property, from another person, if he chooses, at any time within the agreed period at a fixed price (Enriquez de la Cavada v. Diaz, 37 Phil. 982).

3.    Deed of option unique; grants option to sell to both the Villamors and the Reyeses
The “deed of option” entered into by the parties in the present case had unique features. The first part covered the statement on the sale of the 300 sq. m. portion of the lot to Spouses Villamor at the price of P70 per sq. m. ‘which was higher than the actual reasonable prevailing value of the lands in that place at that time (of sale).” The second part stated that the only reason why the Villamor spouses agreed to buy the said lot at a much higher price is because the vendor (Reyes) also agreed to sell to the Villamors the other half-portion of 300 square meters of the land. Had the deed stopped there, there would be no dispute that the deed is really an ordinary deed of option granting the Villamors the option to buy the remaining 300 sq. m.-half portion of the lot in consideration for their having agreed to buy the other half of the land for a much higher price. But, the “deed of option” went on and stated that the sale of the other half would be made “whenever the need of such sale arises, either on our (Reyes) part or on the part of the Spouses Julio Villamor and Marina V. Villamor. It was not only the Villamors who were granted an option to buy for which they paid a consideration. The Reyes as well were granted an option to sell should the need for such sale on their part arise.

4.    Offer and Acceptance
In the present case, the option offered by the Reyeses had been accepted by the Villamors, the promises, in the same document. The acceptance of an offer to sell for a price certain created a bilateral contract to sell and buy and upon acceptance, the offered, ipso facto assumes obligations of a vendee (See Atkins, Kroll & Co. v. Cua Mian Tek, 102 Phil. 948).

5.    Perfection of contract of sale; Demandability
A contract of sale is, under Article 1475 of the Civil Code, “perfected at the moment there is a meeting of minds upon the thing which is the object of the contract and upon the price. From that moment, the parties may reciprocally demand performance, subject to the provisions of the law governing the form of contracts.” Since there was, between the parties, a meeting of minds upon the object and the price, there was already a perfected contract of sale. What was, however, left to be done was for either party to demand from the other their respective undertakings under the contract. In Sanchez v. Rigos, No. L-25494, June 14, 1972, 45 SCRA 368, 376, it was held that ” since there may be no valid contract without a cause of consideration, the promisor is not bound by his promise and may, accordingly withdraw it. Pending notice of its withdrawal, his accepted promise partakes, however, of the nature of an offer to sell which, if accepted, results in a perfected contract of sale.” In the present case, demandability may be exercised at any time after the execution of the deed. The Reyeses may compel the Villamors to pay for the property or that the latter may compel the former to deliver the property.

6.    Deed of Option does not provide for period for both parties to demand performance of undertaking, renders contract ineffective
The Deed of Option did not provide for the period within which the parties may demand the performance of their respective undertakings in the instrument. The parties could not have contemplated that the delivery of the property and the payment thereof could be made indefinitely and render uncertain the status of the land. The failure of either parties to demand performance of the obligation of the other for an unreasonable length of time renders the contract ineffective.

7.    Prescription of actions upon written contracts
Under Article 1144 (1) of the Civil Code, actions upon a written contract must be brought within 10 years. The Deed of Option was executed on 11 November 1971. The acceptance, as already mentioned, was also accepted in the same instrument. The complaint in this case was filed by the Villamors on 13 July 1987, 17 years from the time of the execution of the contract. Hence, the right of action had prescribed. There were allegations by the Villamors that they demanded from the Reyeses as early as 1984 the enforcement of their rights under the contract. Still, it was beyond the 10 year period prescribed by the Civil Code.  (See also Santos vs. Genayo, L-31854, 9 September 1982, 116 SCRA 431: bar by laches)

8.    Court in exercise of its equity jurisdiction
It is of judicial notice that the price of real estate in Metro Manila is continuously on the rise. To allow the petitioner to demand the delivery of the property subject 13 years or 17 years after the execution of the deed at the price of only P70 per sq. m. is inequitous. For reasons also of equity and in consideration of the fact that the Reyeses have no other decent place to live, the Court, in the exercise of its equity jurisdiction is not inclined to grant Villamor’s prayer.

Carceller v. CA [G.R. No. 124791.  February 10, 1999.]
Second Division, Quisumbing (J): 4 concur

Facts: State Investment Houses, Inc. (SIHI), a quasi-banking financial institution, is the registered owner of 2 parcels of land with a total area of 9,774 sq.ms., including all the improvements thereon, located at Bulacao, Cebu City (TCTs T-89152 and T-89153 of the Registry of Deeds of Cebu City). SIHI was beset with financial problems and was experiencing difficulty in meeting the claims of its creditors. In order to reprogram the company’s financial investment plan and facilitate its rehabilitation and viability, SIHI had been placed under the supervision and control of the Central Bank, was in dire need of liquidating its assets in order to stay afloat financially, and thus, was compelled to dispose some of its assets to generate sufficient funds to augment its badly-depleted financial resources. This then brought about the execution of the lease contract with option to purchase between SIHI and Jose Ramon Carceller. On 10 January 1985, Carceller and SIHI entered into a lease contract with option to purchase over said 2 parcels of land (P1.8 million: P360,000 as downpayment and 60 monthly installment with 24% interest per annum on diminishing balance), at a monthly rental of P10,000.00 for a period of 18 months, beginning on 1 August 1984 until 30 January 1986. On 7 January 1986, or approximately 3 weeks before the expiration of the lease contract, SIHI notified Carceller of the impending termination of the lease agreement, and of the short period of time left within which he could still validly exercise the option. It likewise requested Carceller to advise them of his decision on the option, on or before 20 January  1986.  In a letter dated 15 January 1986, which was received by SIHI on 29 January 1986, Carceller requested for a 6-month extension of the lease contract, alleging that he needs ample time to raise sufficient funds in order to exercise the option. To support his request, Carceller averred that he had already made a substantial investment on the property, and had been punctual in paying his monthly rentals. On 14 February 1986, SIHI notified Carceller that his request was disapproved. Nevertheless, it offered to lease the same property to Carceller at the rate of P30,000.00 a month, for a period of 1 year. It further informed Carceller of its decision to offer for sale said leased property to the general public.  On 18 February 1986, Carceller notified SIHI of his decision to exercise the option to purchase the property and at the same time he made arrangements for the payment of the down payment thereon in the amount of P360,000.00. On 20 February  1986, SIHI sent another letter to Carceller, reiterating its previous stand on the latter’s offer, stressing that the period within which the option should have been exercised had already lapsed. SIHI asked Carceller to vacate the property within 10 days from notice, and to pay rental and penalty due.

On 28 February 1986, Carceller filed a complaint for specific performance and damages against SIHI before the RTC Cebu City, to compel the latter to honor its commitment and execute the corresponding deed of sale. After trial, the court a quo promulgated its decision dated 1 April 1991, ordering SIHI to execute a deed of sale in favor of Carceller, the price of which is P1,800,000 in a single payment and to pay attorney’s fee of P20,000; without any award of damages.

Not satisfied with the judgment, SIHI elevated the case to the Court of Appeals by way of a petition for review. On 21 September  1995, the appellate court rendered its decision, affirming the trial court’s judgment, but modified the basis for assessing the purchase price. While respondent court affirmed appellee’s option to buy the property, it added that, “the purchase price must be based on the prevailing market price of real property in Bulacao, Cebu City.”

Baffled by the modification made by the appellate court, both parties filed a motion for reconsideration and/or clarification, with Carcller, on one hand, praying that the prevailing market price be the value of the property in February 1986, the time when the sale would have been consummated. SIHI, on the other hand, prayed that the market price of the property be based on the prevailing price index at least 10 years later, that is, 1996. The appellate court conducted further hearings to clarify the matter, but no agreement was reached by the parties. Thus, on 25 April 1996, the appellate court promulgated the assailed resolution, which denied both parties’ motions, and directed the trial court to conduct further hearings to ascertain the prevailing market value of real properties in Bulacao, Cebu City and fix the value of the property subject of the controversy. Hence, the petition for review.

The Supreme Court affirmed the decision of the appellate court, insofar as it affirms the judgment of the trial court in granting Carceller the opportunity to exercise the option to purchase the property. It held that the purchase price should be based on the fair market value of real property in Bulacao, Cebu City, as of February 1986, when the contract would have been consummated; ordered Carceller to pay SIHI legal interest on the said purchase price beginning February 1986 up to the time it is actually paid, as well as the taxes due on said property, considering that Carceller has enjoyed the beneficial use of said property; and remanded the case to the RTC Cebu, Branch 5, for further proceedings to determine promptly the fair market value of the property; with costs against SIHI.

1.    Option defined
An option is a preparatory contract in which one party grants to the other, for a fixed period and under specified conditions, the power to decide, whether or not to enter into a principal contract. It binds the party who has given the option, not to enter into the principal contract with any other person during the period designated, and, within that period, to enter into such contract with the one to whom the option was granted, if the latter should decide to use the option. It is a separate agreement distinct from the contract which the parties may enter into upon the consummation of the option.

2.    Carceller’s 15 January letter fair notice for his intent to exercise the option
Carceller’s letter to SIHI, dated 15 January 1986, was fair notice to the latter of the former’s intent to exercise the option, despite the request for the extension of the lease contract. As stated in said letter to SIHI, Carceller was requesting for an extension (of the contract) for 6 months to allow him to generate sufficient funds in order to exercise his option to buy the subject property. They are consistent with the parties’ primary intent when they executed the lease contract.

3.    Carceller in good faith and should be allowed to exercise option
As Carceller acted with honesty and good faith, he should be allowed to exercise his option to purchase the lease property. In fact, SIHI will not be prejudiced. A contrary ruling, however, will definitely cause damage to the Carceller, it appearing that he has introduced considerable improvements on the property and has borrowed huge loan from the Technology Resources Center.

4.    Construction of the intent of parties in a contract
Analysis and construction should not be limited to the words used in the contract, as they may not accurately reflect the parties’ true intent. The reasonableness of the result obtained, after said analysis, ought likewise to be carefully considered. Contracts are the law between the contracting parties and should be fulfilled, if their terms are clear and leave no room for doubt as to the intention of the contracting parties. In construing a written agreement, the reason behind and the circumstances surrounding its execution are of paramount importance. Sound construction requires one to be placed mentally in the situation occupied by the parties concerned at the time the writing was executed. Thereby, the intention of the contracting parties could be made to prevail, because their agreement has the force of law between them. Moreover, to ascertain the intent of the parties in a contractual relationship, it is imperative that the various stipulations provided for in the contract be construed together, consistent with the parties’ contemporaneous and subsequent acts as regards the execution of the contract. And once the intention of the parties has been ascertained, that element is deemed as an integral part of the contract as though it has been originally expressed in unequivocal terms.

5.    Delay in notification of desire to exercise option formally not fatal
The lease contract provided that to exercise the option, Canceller had to send a letter to SIHI, manifesting his intent to exercise said option within the lease period ending 30 January 1986. However, what Canceller did was to request on 15 January 1986, for a 6-month extension of the lease contract, for the alleged purpose of raising funds intended to purchase the property subject of the option. It was only after the request was denied on 14 February  1986, that Carceller in a letter dated 18 February 1986 notified SIHI of his desire to exercise the option formally. This was by letter dated February 18, 1986. Such delay, however, is neither “substantial” nor “fundamental” and did not amount to a breach that would defeat the intention of the parties when they executed the lease contract with option to purchase.

6.    Subsequent acts of parties point to intent of SIHI to dispose property and Carceller intent to buy
Judging from the subsequent acts of the parties, it is undeniable that SIHI really intended to dispose of said leased property, which Carceller indubitably intended to buy. SIHI’s agreement to enter first into a lease contract with option to purchase with Carceller, is a clear proof of its intent to promptly dispose said property although the full financial returns may materialize only in a year’s time. Furthermore, its letter dated 7 January 1986, reminding Carceller of the short period of time left within which to consummate their agreement, clearly showed its desire to sell that property. Also, SIHI’s letter dated 14 February 1986 supported the conclusion that it was bent on disposing said property as it made mention of the fact that, “said property is now for sale to the general public”. Carceller’s determination to purchase said property is equally indubitable. He introduced permanent improvements on the leased property, demonstrating his intent to acquire dominion in a year’s time. To increase his chances of acquiring the property, he secured an P8 Million loan from the Technology Resources Center (TRC), thereby augmenting his capital. He averred that he applied for a loan since he planned to pay the purchase price in one single payment, instead of paying in installment, which would entail the payment of additional interest at the rate of 24% per annum, compared to 7 3/4% per annum interest for the TRC loan. His letter earlier requesting extension was premised, in fact, on his need for time to secure the needed financing through a TRC loan.

7.    Leeway on the terms of the parties’ agreement
In contractual relations, the law allows the parties reasonable leeway on the terms of their agreement, which is the law between them. By contract SIHI had given Carceller 4 periods: (a) the option to purchase the property for P1,800,000.00 within the lease period, that is, until 30 January 1986; (b) the option to be exercised within the option period by written notice at anytime; (c) the “document of sale…to be consummated within the month immediately following the month” when Carceller exercises the option; and (d) the payment in equal installments of the purchase price over a period of 60 months. Carceller’s letter of 15 January 1986 and his formal exercise of the option on 18 February 1986 were within a reasonable time-frame consistent with periods given and the known intent of the parties to the agreement dated 10 January 1985. A contrary view would be harsh and iniquitous indeed.

8.    Courts of law are courts of equity; Determination of the equitable price for the property
In Tuason, Jr., etc. vs. De Asis, the Court opined that “in a contract of lease, if the lessor makes an offer to the lessee to purchase the property on or before the termination of the lease, and the lessee fails to accept or make the purchase on time, the lessee losses the right to buy the property later on the terms and conditions set in the offer.” Thus, on one hand, Carceller could not insist on buying the said property based on the price agreed upon in the lease agreement, even if his option to purchase it is recognized. On the other hand, SIHI could not take advantage of the situation to increase the selling price of said property by nearly 90% of the original price. Such leap in the price quoted would show an opportunistic intent to exploit the situation as SIHI knew for a fact that petitioner badly needed the property for his business and that he could afford to pay such higher amount after having secured an P8 Million loan from the TRC. If the courts were to allow SIHI to take advantage of the situation, the result would have been an injustice to Carceller, because SIHI would be unjustly enriched at his expense. Courts of law, being also courts of equity, may not countenance such grossly unfair results without doing violence to its solemn obligation to administer fair and equal justice for all.

De la Cavada v. Diaz [G.R. No. L-11668. April 1, 1918.]
First Division, Johnson (J): 5 concur

Facts: On 15 November 1912, Antonio Diaz and Antonio Enriquez de la Cavada entered into a “contract of option” for the latter to purchase the former’s hacienda at Pitogo, within the period necessary for the approval and issuance of a Torrens title thereto by the Government for P30,000 in cash or P40,000 with 6% interest per annum within 6 years with due security, i.e. the 100 hectares of land in Pitogo, Tayabas; containing 20,000 coconut trees and 10,000 nipa-palm trees sold to Enriquez for P70,000. Subsequently, Enriquez informed Diaz of his conformity with the letter of option under the condition that he shall send a surveyor to survey the said property, and to apply to the Government for a Torrens title therefor, and, if the expenses incurred for the same should not exceed P1,000, he shall pay the P500 and you the other P500; Provided, however, that Diaz shall give the surveyor all necessary assistance during his stay at the hacienda; and that he shall pay the purchase price to you in conformity with our letter of option of this date, and after the Torrens title shall have been officially approved. Soon after the execution of said contract, and in part compliance with the terms thereof, Diaz presented 2 petitions in the Court of Land Registration (13909 and 13919), each for the purpose of obtaining the registration of a part of the “Hacienda de Pitogo.” Said petitions were granted, and each parcel was registered and a certificate of title was issued for each part under the Torrens system to Diaz. Later, and pretending to comply with the terms of said contract, Diaz offered to transfer to Enriquez one of said parcels only, which was a part of said “hacienda.” Enriquez refused to accept said certificate for a part only of said “hacienda” upon the ground that it was only a part of the “Hacienda de Pitogo,” and under the contract he was entitled to a transfer to him a all said “hacienda.”

Raised in the lower court, Diaz’ theorized that the contract of sale of said “Hacienda de Pitogo” included only 100 hectares, more or less, of said “hacienda,” and that offering to convey to Enriquez a portion of said “hacienda,” and that by offering to convey to Enriquez a portion of said “hacienda” composed of “100 hectares, more or less,” he thereby complied with the terms of the contract. Enriquez theorized, on the other hand, that he had purchased all of said “hacienda,” and that the same contained, at least, 100 hectares, more or less. The lower court sustained the contention of Enriquez, that the sale was a sale of the “Hacienda de Pitogo” and not a sale of a part of it. The Court ordered Diaz, within 30 days from the date upon which this decision becomes final, convey to Enriquez a good and sufficient title in fee simple to the Court of Land Registration, upon payment or legal tender of payment by Enriquez of the sum of P30,000 in cash, and upon Enriquez giving security approved by this court for the payment within the term of 6 years from the date of the conveyance for the additional sum of P40,000 with interest at the rate of 6% per annum. The Court further ordered and adjudged that in the event of the failure of Diaz to execute the conveyance, Enriquez has and recover judgment against him, Diaz, for the sum of P20,000, with interest at the rate of 6% (6% per annum from the date upon which the conveyance should have been made). From the judgment, Diaz appealed.

The Supreme Court affirmed the judgment of the lower court, with costs.

1. Agreement between parties in civil litigation valid
On 21 November 1914, the parties agreed (with reference to the method of presenting their proof) that each of the litigating parties shall present his evidence before Don Felipe Canillas, assistant clerk of the CFI Manila, who, for such purpose, should be appointed commissioner; that said commissioner shall set a day and hour for the presentation of the evidence, both oral and documentary, and in the stenographic notes shall have record entered of all objections made to the evidence by either party, in order that they may afterwards be decided by the court; that the transcription of the stenographic notes, containing the record of the evidence taken, shall be paid for in equal shares by both parties; and that at the close of the taking of the evidence, each of the parties shall file his brief in respect to such evidence, whereupon the case as it then stands shall be submitted to the decision of the court. Said agreement was approved by the lower court. There is nothing in the law nor in public policy which prohibits the parties in a civil litigation from making an agreement on the method of presentation of their proofs. While the law concedes to parties litigant, generally, the right to have their proof taken in the presence of the judge, such a right is a renounceable one. In a civil action the parties litigant have a right to agree, outside of the court, upon the facts in litigation. Under certain conditions the parties litigant have a right to take the depositions of witnesses and submit the sworn statements in that form to the court. The proof, as it was submitted to the court in the present case, by virtue of said agreement, was, in effect, in the form of a deposition of the various witnesses presented. Having agreed to the method of taking the proof, and the same having been taking in compliance with said agreement, it is now too late, there being no law to the contrary, for them to deny and repudiate the effect of their agreement. (Biunas vs. Mora, R.G. No. 11464, March 11, 1918; Behr vs. Levy Hermanos, R.G. No. 12211, March 19, 1918.) Not only is there no law prohibiting the parties from entering into an agreement to submit their proof to the court in civil actions, but it may be a method highly convenient, not only to the parties, but to busy courts. The judgment of the lower court, therefore, should not be modified or reversed.

2. Contract offered in evidence, and not objected to; thus, was properly presented
The contract was offered in evidence and admitted as proof without objection. Said contract was, therefore, properly presented to the court as proof. Not only was the contract before the court by reason of its having been presented in evidence, but that Diaz himself made said contract an integral part of his pleadings. Diaz admitted the execution and delivery of the contract, and alleged that he made an effort to comply with its terms. His only defense is that he sold to Enriquez a part of the “hacienda” only and that he offered, in compliance with the terms of the contract, to convey to Enriquez all of the land which he had promised to sell.

3. Inadequacy of consideration raised for the first time on appeal
With reference to the objection that there was no consideration for said contract it may be said (a) that the contract was for the sale of a definite parcel of land: (b) that it was reduced to writing; (c) that Diaz promised to convey to Enriquez said parcel of land; (d) that Enriquez promised to pay therefor the sum of P70,000 in the manner prescribed in said contract; (e) that Diaz admitted the execution and delivery of the contract and alleged that he made an effort to comply with the same and requested Enriquez to comply with his part of the contract; and (f) that no defense or prevention was made in the lower court that there was no consideration for his contract. Having admitted the execution and delivery of the contract, having admitted an attempt to comply with its terms, and having failed in the court below to raise any question whatsoever concerning the inadequacy of consideration, it is rather late, in the face of said admissions, to raise that question for the first time in the Supreme Court.

4. A promise made in accordance with forms required by law may be a good consideration for a another party’s promise
A promise made by one party, if made in accordance with the forms required by the law, may be a good consideration (causa) for a promise made by another party. (Art. 1274, Civil Code.) The consideration (causa) need not pass from one to the other at the time the contract is entered into. For example, A promises to sell a certain parcel of land to B for the sum of P70,000. If A, by virtue of the promise of B to P70,000, promises to sell said parcel of land to B for said sum, then the contract is complete, provided they have complied with the forms required by the law. A cannot enforce a compliance with the contract and require B to pay said sum until he has complied with his part of the contract.

5. Contract not an “optional contract” in its ordinary meaning, but an absolute promise to sell a land for a fixed price upon definite condition
The contract was not an “optional contract” as that phrase in generally used. It is clearly an absolute promise to sell a definite parcel of land for a fixed price upon definite conditions. Diaz promised to convey to Enriquez the land in question as soon as the same was registered under the Torrens system, and Enriquez promised to pay to Diaz the sum of P70,000, under the condition named, upon the happening of that event.

6. Contract of option distinguished from present contract
The contract was not what is generally known as a “contract of option.” It differs very essentially from a contract of option. An optional contract is a privilege existing in one person, for which he had paid a consideration, which gives him the right to buy, for example, certain merchandise of certain specified property, from another person, if he chooses, at any time within the agreed period, at a fixed price. The contract of option is a separate and distinct contract from the contract which the parties may enter into upon the consummation of the option. A consideration for an optional contract is just as important as the consideration for any other kind of contract. If there was no consideration for the contract of option, then it cannot be enforced any more than any other contract where no consideration exists. To illustrate, A and B the sum of P100,000 for the option of buying his property within the period of 30 days. While it is true that the conditions upon which A promises to buy the property at the end of the period mentioned are usually fixed in the option, the consideration from the consideration of the contract with reference to which the option exists. A contract of option is a contract by virtue of the terms of which the parties thereto promise and obligate themselves to enter into another contract at a future time, upon the happening of certain events, or the fulfillment of certain conditions.

7. Laying the foundation for action damages
When Diaz alleged that he had complied with his part of the contract and demanded that Enriquez should immediately comply with his part of the same, he evident was laying the foundation for an action damages, the nullification or a specific compliance with contract.

8. Contract made with Enriquez, and not Rosenstock
Upon the face of the contract, the contract was made by Diaz with Enriquez. Not having raised the contention, that the contract was made with Rosenstock, Elser & Co. and not with Enriquez, in the lower court, and having admitted the execution and delivery of the contract in question with the plaintiff, Diaz’ admission is conclusive upon that question and need not be further discussed.

9. Action not premature; Payment simultaneous with delivery of deed of conveyance but not need not be made until deed of conveyance is offered
The action was not premature. The contention that Enriquez had not paid nor offered to pay the price agreed upon, under the conditions named, for the land in question was not raised in the lower court, which fact, ordinarily, would be a sufficient answer to the contention of the appellant. Still, Diaz could not demand the payment until he had offered the deeds of conveyance, in accordance with the terms of the contract, as he did not offer to comply with the terms of his contract. He offered to comply partially with the terms of the contract, but not fully. While the payment must be simultaneous with the delivery of the deeds of conveyance, the payment need not be made until deed of conveyance is offered. Enriquez stood ready and willing to perform his part of the contract immediately upon on the part of Diaz. (Arts. 1258 and 1451 of Civil Code.)

10. Enriquez stood ready to comply
It cannot be said that Diaz was not obligated to sell the “Hacienda de Pitogo” to Enriquez due to Enriquez’ alleged nonfulfillment, renunciation, abandonment and negligence, as such question was not presented to the lower court. Still, the record shows that Enriquez, at all times, insisted upon a compliance with the terms of the contract on the part of Diaz, standing ready to comply with his part of the same. Enriquez was constantly insisting upon compliance with the terms of the contract, to wit, a conveyance to him of the “Hacienda de Pitogo” by Diaz. Naturally, he refused, under the contract, to accept a conveyance of a part only be said “hacienda.”

11. No modification due to Enriquez’ claim for damages
The only proof upon the question of damages suffered by Enriquez for the noncompliance with the terms of the contract in question on the part of Diaz is that Enriquez, in contemplation of the compliance with the terms of the contract on the part of Diaz, entered into a contract with a third party to sell the said “hacienda” at a profit of P30,000. That proof is not disputed. No attempt was made in the lower court to deny that fact. The proof shows that the person with whom Enriquez had entered into a conditional sale of the land in question had made a deposit for the purpose of guaranteeing the final consummation of the that contract. By reason of the failure of Diaz to comply with the contract here in question, Diaz was obliged to return the sum deposited by said third party with a promise to pay damages. The record does not show why Enriquez did not ask for damages in the sum of P30,000, but asked for a judgment only in the sum of P20,000. Considering the fact that he neither asked for a judgment for more than P20,000 nor appealed from the judgment of the lower court, Enriquez’ request to modify the judgment of the lower court cannot be granted.

12. Subsequent sale of land to third person not an excuse for compliance of terms of contracts or to answer for damages
The mere fact that Diaz had sold a part of the “hacienda” to other person, is no sufficient reason for not requiring a strict compliance with the terms of his contract with Enriquez, or to answer in damages for his failure. (Arts. 1101 and 1251 of the Civil Code.)

Limketkai Sons Milling v. CA [G.R. No. 118509.  December 1, 1995.]
Third Division, Melo (J): 4 concur

Facts: On 14 May 1976, Philippine Remnants Co., Inc. constituted the Bank of the Philippine Islands (BPI) as its trustee to manage, administer, and sell its real estate property. One such piece of property placed under trust was the disputed lot, a 33,056-sq.ms. lot at Barrio Bagong Ilog, Pasig (TCT 493122). On 23 June 1988, Pedro Revilla, Jr., a licensed real estate broker was given formal authority by BPI to sell the lot for P1,000.00 per sq.m. This arrangement was concurred in by the owners of the Philippine Remnants. Broker Revilla contacted Alfonso Lim of Limketkai Sons Milling (LSM) who agreed to buy the land. On 8 July 1988, LSM’s officials and Revilla were given permission to enter and view the property they were buying (by Rolando V. Aromin, BPI Assistant Vice-President). On 9 July 1988, Revilla formally informed BPI that he had procured a buyer, LSM. On 11 July  1988, LSM’s officials, Alfonso Lim and Albino Limketkai, went to BPI to confirm the sale. They were entertained by Vice-President Merlin Albano and Asst. Vice-President Aromin. LSM asked that the price of P1,000.00 per sq.m. be reduced to P900.00 while Albano stated the price to be P1,100.00. The parties finally agreed that the lot would be sold at P1,000.00 per sq.m. to be paid in cash. Since the authority to sell was on a first come, first served and non-exclusive basis, it may be mentioned at this juncture that there is no dispute over LSM’s being the first comer and the buyer to be first served. Notwithstanding the final agreement to pay P1,000.00 per sq.m. on a cash basis, Alfonso Lim asked if it was possible to pay on terms. The bank officials stated that there was no harm in trying to ask for payment on terms because in previous transactions, the same had been allowed. It was the understanding, however, that should the term payment be disapproved, then the price shall be paid in cash. It was Albano who dictated the terms under which the installment payment may be approved, and acting thereon, Alfonso Lim, on the same date, 11 July 1988, wrote BPI through Merlin Albano embodying the payment initially of 10% and the remaining 90% within a period of 90 days. 2 or 3 days later, LSM learned that its offer to pay on terms had been frozen. Alfonso Lim went to BPI on 18 July 1988 and tendered the full payment of P33,056,000.00 to Albano. The payment was refused because Albano stated that the authority to sell that particular piece of property in Pasig had been withdrawn from his unit. The same check was tendered to BPI Vice-President Nelson Bona who also refused to receive payment.

An action for specific performance with damages was thereupon filed on 25 August 1988 by LSM against BPI with the RTC Pasig (Branch 151). In the course of the trial, BPI informed the trial court that it had sold the property under litigation to National Book Store (NBS) on 14 July 1989. The complaint was thus amended to include NBS. On 10 June 1991, the trial court rendered judgment in favor of LSM; holding that there was a perfected contract between LSM and BPI, and thus declared the Deed of Sale involving the lot in Pasig in the name of BPI and in favor of NBS as null and void; ordered the Register of Deeds of the Province of Rizal to cancel the TCT which may have been issued in favor of NBS by virtue of the said deed; ordered BPI upon receipt by it from LSM of the sum of P33,056,000,00 to execute a Deed of Sale in favor of the latter of the said property at the price of P1,000.00 per sq.m. and in default thereof, the Clerk of Court is directed to execute the deed dated 14 July 1989; ordered the Register of Deeds of Pasig, upon registration of the said deed, whether executed by BPI or the Clerk of Court and payment of the corresponding fees and charges, to cancel said TCT 493122 and to issue, in lieu thereof, another transfer certificate of title in the name of LSM; ordered BPI and NBS to pay in solidum to LSM the sums of P10,000,000.00 as actual and consequential damages and P150,000.00 as attorney’s fees and litigation expenses, both with interest at 12% per annum from date of judgment; on the cross-claim by the bank against NBS, ordered NBS to indemnify the bank of whatever BPI shall have paid to LSM; dismissed the counterclaim of both BPI and NBS against LSM and the cross-claim of NBS against BPI; with costs against BPI and NBS.

Upon elevation of the case to the Court of Appeals, the decision of the trial court was reversed and the complaint dismissed on 12 August 1994. It was held that no contract of sale was perfected because there was no concurrence of the three requisites enumerated in Article 1318 of the Civil Code. Hence, the petition.

The Supreme Court reversed and set aside the questioned judgment of the Court of Appeals, and reinstated the 10 June 1991 judgment of Branch 151 of the RTC of The National Capital Judicial Region stationed in Pasig, Metro Manila except for the award of P10,000,000.00 damages, which was deleted.

1.    Broker given authority to sell and not merely to look for a buyer
BPI as trustee of the property of Philippine Remnant Co. authorized a licensed broker, Pedro Revilla, to sell the lot for P1,000.00 per sq.m. Philippine Remnants confirmed the authority to sell of Revilla and the price at which he may sell the lot. LSM and Revilla agreed on the former buying the property. BPI Assistant Vice-President Rolando V. Aromin allowed the broker and the buyer to inspect the property. BPI was formally informed about the broker having procured a buyer. At the start of the transactions, Revilla by himself already had full authority to sell the disputed lot. The note dated 23 June 1988 states, “this will serve as your authority to sell on an as is, where is basis the property located at Pasig Blvd., Bagong Ilog.” Thus, the authority given to Revilla was to sell and not merely to look for a buyer. Revilla testified that at the time he perfected the agreement to sell the litigated property, he was acting for and in behalf of the BPI as if he were the Bank itself. This notwithstanding and to firm up the sale of the land, Revilla saw it fit to bring BPI officials into the transaction.

2.    BPI Vice Presidents have authority to sell
The alleged lack of authority of the bank officials acting in behalf of BPI is not sustained by the record. If BPI could give the authority to sell to a licensed broker, there is no reason to doubt the authority to sell of the two BPI Vice-Presidents whose precise job in the Bank was to manage and administer real estate property. Rolando Aromin was BPI Assistant Vice-President and Trust Officer. He directly supervised the BPI Real Property Management Unit. He had been in the Real Estate Division since 1985 and was the head supervising officer of real estate matters. He had been with the BPI Trust Department since 1968 and had been involved in the handling of properties of beneficial owners since 1975. He was in charge of Torrens titles, lease contracts, problems of tenants, insurance policies, installment receivables, management fees, quitclaims, and other matters involving real estate transactions. His immediate superior, Vice-President Merlin Albano had been with the Real Estate Division for only 1 week but he was present and joined in the discussions with LSM. There is nothing to show that Alfonso Lim and Albino Limketkai knew Aromin before the incident. Revilla brought the brothers directly to Aromin upon entering the BPI premises. Aromin acted in a perfectly natural manner on the transaction before him with not the slightest indication that he was acting ultra vires. This shows that BPI held Aromin out to the public as the officer routinely handling real estate transactions and, as Trust Officer, entering into contracts to sell trust properties. Further, it must be noted that the authority to buy and sell this particular trust property was later withdrawn from Trust Officer Aromin and his entire unit. If Aromin did not have any authority to act as alleged, there was no need to withdraw authority which he never possessed. Everything in the record points to the full authority of Aromin to bind the bank, except for the self-serving memoranda or letters later produced by BPI that Aromin was an inefficient and undesirable officer and who, in fact, was dismissed after he testified in this case. But, of course, Aromin’s alleged inefficiency is not proof that he was not fully clothed with authority to bind BPI.

3.    Trust Committee does not have to pass on regular transactions
On the allegation that sales of trust property need the approval of a Trust Committee made up of top bank officials, it appears from the record that this trust committee meets rather infrequently and it does not have to pass on regular transactions.

4.    Bank liable to innocent third persons where representation is made in course of its business even if agent abused his authority
In Areola vs. Court of Appeals (236 SCRA 643 [1994]) which cited Prudential Bank vs. Court of Appeals (22 SCRA 350 [1993]), which in turn relied upon McIntosh vs. Dakota Trust Co. (52 ND 752, 204 NW 818, 40 ALR 1021), it was stated that “a banking corporation is liable to innocent third persons where the representation is made in the course of its business by an agent acting within the general scope of his authority even though, in the particular case, the agent is secretly abusing his authority and attempting to perpetrate a fraud upon his principal or some other person for his own ultimate benefit.” In the present case, the position and title of Aromin alone, not to mention the testimony and documentary evidence about his work, leave no doubt that he had full authority to act for BPI in the questioned transaction. There is no allegation of fraud, nor is there the least indication that Aromin was acting for his own ultimate benefit. BPI later dismissed Aromin because it appeared that a top official of the bank was personally interested in the sale of the Pasig property and did not like Aromin’s testimony. Aromin was charged with poor performance but his dismissal was only sometime after he testified in court. More than 2 long years after the disputed transaction, he was still Assistant Vice-President of BPI.

5.    Meeting of the minds on the price; Manner of payment
Asst. Vice-President Aromin admitted that there was a meeting of the minds between the buyer and the bank in respect to the price of P1,000.00 per sq.m. The requirements in the payment of the purchase price on terms instead of cash were suggested by BPI Vice-President Albano. Since the authority given to broker Revilla specified cash payment, the possibility of paying on terms was referred to the Trust Committee but with the mutual agreement that “if the proposed payment on terms will not be approved by our Trust Committee, Limketkai should pay in cash, the amount was no longer subject to the approval or disapproval of the Committee, it is only on the terms.”  The record shows that if payment was in cash, either broker Revilla or Aromin had full authority. But because LSM took advantage of the suggestion of Vice-President Albano, the matter was sent to higher officials. Immediately upon learning that payment on terms was frozen and/or denied, Limketkai exercised his right within the period given to him and tendered payment in full. The BPI rejected the payment.

6.    Stages of the contract
The stages of a contracts are (a) preparation, conception or generation, which is the period of negotiation and bargaining, ending at the moment of agreement of the parties; (b) perfection or birth of the contract, which is the moment when the parties come to agree on the terms of the contract; and (c) consummation or death, which is the fulfillment or performance of the terms agreed upon in the contract (Toyota Shaw Inc. vs. Court of Appeals, G.R. No. 116650, May 23, 1995).

7.    Ang Yu Asuncion; Stages in ordinary contracts (consensual); Real contract: delivery required; Solemn contract: compliance with formalities prescribe by law
A contract undergoes various stages that include its negotiation or preparation, its perfection and, finally, its consummation. Negotiation covers the period from the time the prospective contracting parties indicate interest in the contract to the time the contract is concluded (perfected) The perfection of the contract takes place upon the concurrence of the essential elements thereof. A contract which is consensual as to perfection is so established upon a mere meeting of minds, i.e., the concurrence of offer and acceptance, on the object and on the cause thereof. A contract which requires, in addition to the above, the delivery of the object of the agreement, as in a pledge or commodatum, is commonly referred to as a real contract. In a solemn contract, compliance with certain formalities prescribed by law, such as in a donation of real property, is essential in order to make the act valid, the prescribed form being thereby an essential element thereof. The stage of consummation begins when the parties perform their respective undertakings under the contract culminating in the extinguishment thereof.

8.    Ang Yu Asuncion; Perfected contract of sale
Until the contract is perfected, it cannot, as an independent source of obligation, serve as a binding juridical relation. In sales, particularly, the contract is perfected when a person, called the seller, obligates himself, for a price certain, to deliver and to transfer ownership of a thing or right to another, called the buyer, over which the latter agrees (Ang Yu Asuncion).

9.    Stages of the contract in the present case
The negotiation or preparation stage started with the authority given by Philippine Remnants to BPI to sell the lot, followed by the authority given by BPI and confirmed by Philippine Remnants to broker Revilla to sell the property, the offer to sell to Limketkai, the inspection of the property and the negotiations with Aromin and Albano at the BPI offices.
The perfection of the contract took place when Aromin and Albano, acting for BPI, agreed to sell and Alfonso Lim with Albino Limketkai, acting for LSM, agreed to buy the disputed lot at P1,000.00 per sq.m.. Aside from this there was the earlier agreement between LSM and the authorized broker. There was a concurrence of offer and acceptance, on the object, and on the cause thereof.

10.    Villonco Realty v. Bormaheco; Perfected contract of sale
The contract of sale is perfected at the moment there is a meeting of minds upon the thing which is the object of the contract and upon the price. From that moment, the parties may reciprocally demand performance, subject to the provisions of the law governing the form of contracts.” (Art. 1475 Ibid).

11.    Villonco Realty v. Bormaheco; Consent
Consent is manifested by the meeting of the offer and the acceptance upon the thing and the cause which are to constitute the contract. The offer must be certain and the acceptance absolute. A qualified acceptance constitutes a counter-offer” (Art. 1319, Civil Code). “An acceptance may be express or implied” (Art. 1320, Civil Code).

12.    Villonco Realty v. Bormaheco; A contract is formed if offer is accepted, whether request for changes in terms is granted or not; Change does not amount to rejection of offer or a counter-offer
An acceptance may contain a request for certain changes in the terms of the offer and yet be a binding acceptance. So long as it is clear that the meaning of the acceptance is positively and unequivocally to accept the offer. whether such request is granted or not, a contract is formed. (Stuart vs. Franklin Life Ins. Co., 105 Fed. 2nd 965, citing Sec. 79, Williston on Contracts). The vendor’s change in a phrase of the offer to purchase, which change does not essentially change the terms of the offer, does not amount to a rejection of the offer and the tender or a counter-offer.” (Stuart vs. Franklin Life Ins. Co., supra.)

13.    Requisite form under Article 1458 merely for greater efficacy or convenience
The fact that the deed of sale still had to be signed and notarized does not mean that no contract had already been perfected. A sale of land is valid regardless of the form it may have been entered into (Claudel vs. Court of Appeals, 199 SCRA 113, 119 [1991]). The requisite form under Article 1458 of the Civil Code is merely for greater efficacy or convenience and the failure to comply therewith does not affect the validity and binding effect of the act between the parties. If the law requires a document or other special form, as in the sale of real property, the contracting parties may compel each other to observe that form, once the contract has been perfected. Their right may be exercised simultaneously with action upon the contract (Article 1359, Civil Code).

14.    Abrenica Rule: Contracts infringing the Statute of Frauds ratified when defense fails to object or asks questions on cross-examination
In Abrenica vs. Gonda (34 Phil. 739 [1916]) it was held that contracts infringing the Statute of Frauds are ratified when the defense fails to object, or asks questions on cross-examination. The reason for the rule is that “if the answers of those witnesses were stricken out, the cross-examination could have no object whatsoever and if the questions were put to the witnesses and answered by them, they could only be taken into account by connecting them with the answers given by those witnesses on direct examination.” Under said rule (reiterated in a number of cases, among them Talosig vs. Vda. de Nieba, 43 SCRA 472 [1972]), even assuming that parol evidence was initially inadmissible, the same became competent and admissible because of the cross-examination, which elicited evidence proving the evidence of a perfected contract. The cross-examination on the contract is deemed a waiver of the defense of the Statute of Frauds. In the present case, counsel for respondents cross-examined petitioner’s witnesses at length on the contract itself, the purchase price, the tender of cash payment, the authority of Aromin and Revilla, and other details of the litigated contract.

15.    Written note or memorandum an exception to the unenforceability of contracts pursuant to Statute of Frauds
Under Article 1403 of the Civil Code, an exception to the unenforceability of contracts pursuant to the Statute of Frauds is the existence of a written note or memorandum evidencing the contract. The memorandum may be found in several writings, not necessarily in one document. The memorandum or memoranda is/are written evidence that such a contract was entered into. Thus, the existence of a written contract of the sale is not necessary so long as the agreement to sell real property is evidenced by a written note or memorandum, embodying the essentials of the contract and signed by the party charged or his agent. Such note or memorandum suffices to make the verbal agreement enforceable, taking it out of the operation of the statute. In the present case, while there is no written contract of sale of the Pasig property executed by BPI in favor of LSM, there are abundant notes and memoranda extant in the records of this case evidencing the elements of a perfected contract.

16.    Form of memorandum or note
No particular form of language or instrument is necessary to constitute a memorandum or note in writing under the statute of frauds; any document or writing, formal or informal, written either for the purpose of furnishing evidence of the contract or for another purpose, which satisfies all the requirements of the statute as to contents and signature is a sufficient memorandum or note. A memorandum may be written as well with lead pencil as with pen and ink. It may also be filled in on a printed form. (37 C.J.S., 653-654). The note or memorandum required by the statute of frauds need not be contained in a single document, nor, when contained in two or more papers, need each paper be sufficient as to contents and signature to satisfy the statute. Two or more writings properly connected may be considered together, matters missing or uncertain in one may be supplied or rendered certain by another, and their sufficiency will depend on whether, taken together, they meet the requirements of the statute as to contents and the requirements of the statutes as to signature.

17.    Demeanor of witnesses as factor for Court to incline to the version of the case by one party
The demeanor of the witnesses the parties presented is one important factor that inclined the trial court to believe in the version given by LSM because its witnesses, including hostile witness Roland V. Aromin, an assistant vice-president of the bank, were straight forward, candid and unhesitating in giving their respective testimonies. Upon the other hand, the witnesses of BPI were evasive, less than candid and hesitant in giving their answers to cross examination questions. Moreover, the witnesses for BPI and NBS contradicted each other.

18.    Credibility of witnesses where the findings of the trial and appellate courts are contrary to each other; Trial court’s findings given great respect
On the matter of credibility of witnesses where the findings or conclusions of the Court of Appeals and the trial court are contrary to each other, the pronouncement of the Court in Serrano vs. Court of Appeals (196 SCRA 107 [1991]) bears stressing “It is a settled principle of civil procedure that the conclusions of the trial court regarding the credibility of witnesses are entitled to great respect from the appellate courts because the trial court had an opportunity to observe the demeanor of witnesses while giving testimony which may indicate their candor or lack thereof. While the Supreme Court ordinarily does not rule on the issue of credibility of witnesses, that being a question of fact not property raised in a petition under Rule 45, the Court has undertaken to do so in exceptional situations where, for instance, as here, the trial court and the Court of Appeals arrived at divergent conclusions on questions of fact and the credibility of witnesses.”

19.    NBS not an innocent purchaser for value
National Bookstore (NBS) is not an innocent purchaser for value, as it acted in bad faith. NBS ignored the notice of lis pendens annotated on the title when it bought the lot. It was the willingness and design of NBS to buy property already sold to another party which led BPI to dishonor the contract with LSM. It is the very nature of the deed of absolute sale between BPI and NBS which clearly negates any allegation of good faith on the part of the buyer. Instead of the vendee insisting that the vendor guarantee its title to the land and recognize the right of the vendee against the vendor if the title to the land turns out to be defective as when the land belongs to another person, the reverse is found in the deed of sale between BPI and NBS. Any losses which NBS may incur in the event the title turns out to be vested in another person are to be borne by NBS alone. BPI is expressly freed under the contract from any recourse of NBS against it should BPI’s title be found defective.

20.    Enumeration of badges of fraud found in Oria v. McMicking cannot cover all indications from 1912 to present and future
NBS simply cited the badges of fraud mentioned in Oria vs. McMicking (21 Phil. 243 (1912]) in its memorandum and argues that the enumeration there is exclusive. The decision in said case plainly states “the following are some of the circumstances attending sales which have been denominated by courts (as) badges of fraud.” There are innumerable situations where fraud is manifested. One enumeration in a 1912 decision cannot possibly cover all indications of fraud from that time up to the present and into the future.

21.    Damages; Loss of profits and use of land compensated by appreciation in land value
The profits and the use of the land which were denied to LSM because of the non-compliance or interference with a solemn obligation by BPI and NBS is somehow made up by the appreciation in land values.

Vda. De Gordon v.  CA [G.R. No. L-37831.  November 23, 1981.]
First Division, Teehankee (J): 4 concur, 1 took no part

Facts: Two parcels of land belong to Restituta V. Vda. De Gordon (covered by TCT 12204 and 12205). For the years 1953 to 1963, inclusive, the taxes against said parcels of land remained unpaid. The combined assessed value of the parcels of land is P16,800 and the residential house on the land was assessed at P45,580. The City Treasurer of Quezon City, upon warrant of a certified copy of the record of such delinquency, advertised for sale the parcels of land to satisfy the taxes, penalties and costs for a period of 30 days prior to the sale on 3 December 1964, by keeping a notice of sale posted at the main entrance on the City Hall and in a public and conspicuous place in the district where the same is located and by publication of said notice once a week for 3 weeks in the “Daily Mirror”, a newspaper of general circulation in Quezon City, the advertisement stating the amount of taxes and penalties due, time and place of sale, name of the taxpayer against whom the taxes are levied, approximate area, lot and block number, location by district, street and street number of the property. The public sale on 3 December 1964, the parcels of land were sold to Rosario Duazo for the amount of P10,500.00 representing the tax, penalty and costs. The certificate of sale executed by the City Treasurer was duly registered on 28 December 1964 in the office of the Register of Deeds of Quezon City. Upon the failure of the registered owner to redeem the parcels of land within the 1-year period prescribed by law, the City Treasurer of Quezon City executed on 4 January 1966 a final deed of sale of said lands and the improvements thereon. Said final deed of sale was also registered in the Office of the Register of Deeds of Quezon City on 18 January 1966.

Later on, Duazo filed a petition for consolidation of ownership.

The appellate court upheld the tax sale of the real properties at which Duazo acquired the same and her ownership upon vda. de Gordon’s failure to redeem the same, having found the sale to have been conducted “under the direction and supervision of the City Treasurer of Quezon City after the proper procedure and legal formalities had been duly accomplished.”

The Supreme Court affirmed the appellate court’s decision under review; Without costs.

1.    (CA Decision) Material averments admitted
The opposition [to Duazo’s petition for consolidation of ownership] has not controverted by specific denials the material averments in the petition. Hence, the material averments in the petition are deemed admitted. (Section 1, Rule 9, Revised Rules of Court)

2.    (CA Decision) Issue on the irregularity of public sale of parcels of land waived
The opposition has not raised the issue of irregularity in the public sale of the two parcels of land in question. This defense is deemed waived. (Section 2, Rule 9, id.)

3.    (CA Decision) Price in auction sale not grossly inadequate to be shocking to the conscience of court
Noting that the 1961 assessment of the combined value of the two parcels of land is P16,800, and the residential house on the land is P45,580; that the present value of the house would be much less considering the depreciation for over 10 years; and that while the price of P10,500 is less than the total assessed value of the land and the improvement thereon, said price cannot be considered so grossly inadequate as to be shocking to the conscience of the court.

4.    (CA Decision) Director of Lands v. Abarca: Price inadequate to shock conscience of court
In Director of Lands vs. Abarca (61 Phil. 70), the Supreme Court considered the price of P877.25 as so inadequate to shock the conscience of the court because the assessed value of the property in question was P60,000.00. The assessed value of the land was more than 60 times the price paid at the auction sale. In the present case, the price of P10,500.00 is about 1/6 of the total assessed value of the two parcels of land in question and the residential house thereon. The finding of the lower court that the house and land in question have a fair market value of not less than P200,000.00 has no factual basis. It cannot be said, therefore, that the price of P10,500.00 is so inadequate as to be shocking to the conscience of the court.

5.    (CA Decision) Mere inadequacy of price not ground to annul public sale, unlike in ordinary sale; Inadequacy of price an advantage in relation to owner’s right to redeem
Mere inadequacy of the price alone is not sufficient ground to annul the public sale. (Barrozo vs. Macaraeg, 83 Phil. 378) In Velasquez vs. Coronel (5 SCRA 985, 988), it was held that “while in ordinary sales for reasons of equity a transaction may be invalidated on the ground of inadequacy of price, or when such inadequacy shocks one’s conscience as to justify the courts to interfere, such does not follow when the law gives to the owner the right to redeem, as when a sale is made at public auction, upon the theory that the lesser the price the easier it is for the owner to effect the redemption. And so it was aptly said: ‘When there is the right to redeem, inadequacy of price should not be material, because the judgment debtor may reacquire the property or also sell his right to redeem and thus recover the loss he claims to have suffered by reason of the price obtained at the auction sale.”

6.    (CA Decision) Public Sale governed by Section 40 of CA 470
The public sale is governed by Section 40 of Commonwealth Act 470 which gives the delinquent taxpayer a period of 1 year from the date of the sale within which to repurchase the property sold. In case the delinquent taxpayer does not repurchase the property sold within the period of 1 year from the date of the sale, it becomes a mandatory duty of the provincial treasurer to issue in favor of the purchaser a final deed of sale. (Velasquez vs. Coronel)

7.    No lack of personal notice of tax sale
The alleged lack of personal notice of the tax sale is negated by her own averments in her own opposition filed in the lower court a quo that “the Oppositor in the petition is a woman 80 years of age. She was not aware of the auction sale conducted by the City Treasurer of Quezon City on 3 December 1964 or if there was any notice sent to her, the same did not reach her or it must have escaped her mind considering her age. ”

8.    Quezon City Charter (CA 502), not RA 1275, controlling on length of redemption period; Special law prevails over general law
The period for redemption is not the 2-year period provided in RA 1275, since the specific law governing tax sales of properties in Quezon City is the Quezon City Charter, Commonwealth Act 502 which provides in section 31 thereof for a 1-year redemption period. The special law covering Quezon City necessarily prevails over the general law. In the present case, since the filing of Duazo’s brief in 1974, Vda. De Gordon had not sought to exercise her alleged right of redemption or make an actual tender thereof.

9.    Gross inadequacy of purchase price not material if owner has right to redeem
As held in Velasquez vs. Coronel, alleged gross inadequacy of price is not material “when the law gives the owner the right to redeem as when a sale is made at public auction, upon the theory that the lesser the price the easier it is for the owner to effect the redemption.”
10.    Laws on tax sales for delinquent taxes necessary as taxes essential to life of Government
As stressed in Tajonera vs. Court of Appeals, the law governing tax sales for delinquent taxes may be “harsh and drastic, but it is a necessary means of insuring the prompt collection of taxes so essential to the life of the Government.”

Intestate Estate of Emilio Camon; Ereneta v. Bezore [G.R. No. L-29746.  November 26, 1973.]
First Division, Castro (J): 5 concur

Facts: Emilio Camon was the lessee of the hacienda Rosario, located in Pontevedra, Negros Occidental, for the period from crop year 1940-41 to crop year 1960-61. ½ pro-indiviso of the said sugar plantation belonged to Ignatius Henry Bezore, Elwood Knickerbocker and Mary Irene Fallon McCormick (as their inheritance from the late Thomas Fallon), while the other half belonged to Petronila Alunan vda. de Sta. Romana, Amparo Sta. Romana and Alberta vda. de Hopon (as their inheritance from their mother Rosario Sta. Romana).

Upon the death of Emilio Camon in 1967, his widow, Concepcion Ereñeta, filed a petition in the CFI Negros Occidental (Special Proceeding 8366) praying for the grant to her of letters of administration of the estate of the deceased Camon. The petition was granted. Thereafter, the court issued an order requiring all persons with money claims against the estate to file their claims within the period prescribed in the order.Thru their judicial administrator and counsel, Martiniano O. de la Cruz, Bezore, et al. filed a claim against the estate in the amounts of P62,065 as the money value of sugar allotments and allowances and P2,100 as the money value of palay and rentals, or a total of P64,165, appertaining to the claimants’ half-share in the hacienda. Bezore, et. al. and Ereneta are agreed that the late Emilio Camon appropriated for himself the amounts claimed. Bezore, et. al. had demanded payment of their claim from Emilio Camon when he was still alive, but Ereneta ignored the demands. At the trial, 3 documents were submitted in evidence by Ereneta, the authenticity of each of which is not controverted by Bezore, et.al.; i.e. (1) An “Agreement to Sell,” executed on 11 January 1961, whereby Bezore, et al., agreed to sell their ½ share in the hacienda Rosario to Amparo Sta. Romana and Alberta vda. de Hopon; (2) A “Release and Waiver of Claims,” executed on 12 January 961, whereby Amparo Sta. Romana and Alberta vda. de Hopon, for and in consideration of “their gratitude for the various services, financial and personal” extended to them by Emilio Camon, released him from “any and all claims that may have accrued pertaining to the 2/4 pro-indiviso share in Hacienda Rosario” owned by Bezore, et. al. who had bound themselves “to sell their share in the said Hacienda Rosario” to Amparo and Alberta, “including rights accrued or accruing,” and whereby Amparo and Alberta bound themselves “to waive in favor of Mr. Emilio Camon for his own use and benefit said rights accrued or accruing;” and (3) A “Deed of Sale,” executed on 4 August 1961, whereby Bezore, et al., for and in consideration of the sum of P78,000, to be paid in the manner stated in the instrument, sold, transferred and conveyed “all their rights, title, interest and participation, whether accrued or accruing in their 2/4 pro-indiviso share” in the hacienda Rosario, “together with all the improvements existing thereon, including its sugar quota,” in favor of Amparo Sta. Romana and Alberta vda. de Hopon. On 20 July 1968, the lower court dismissed the claim, rejecting Bezore et.al’s contention that the sugar allotments and allowances, subject of their claim against the estate of Emilio Camon, were not included in the sale, and held that by the positive and categorical terms of the deed of sale, all benefits accrued and accruing to the appellants before 4 August 1961 were included in the sale. Bezore, et.al. filed a direct appeal with the Supreme Court.

The Supreme Court affirmed the order of the lower court, at Bezore et. al.’s cost.

1.    Right to accrued claims not waived in January 1961
At the time of the execution, on 12 January 1961, of the deed of “Release and Waiver of Claims,” Amparo Sta. Romana and Alberta vda. de Hopon could not release or waive accrued claims belonging to Bezore et..al, because the right that Amparo and Alberta then had was a mere promise by Bezore, et.al. to sell their share in the hacienda, not the right to the accrued claims. What was agreed to be sold in the future was different from what was purportedly waived; and even if the object in both contracts were the same, the waiver would still be invalid for it is essential that a right, in order that it may be validly waived, must be in existence at the time of the waiver.

2.    Defect in waiver cured in August 1961; Bezore, et.al.  parted with their accrued rights
Whatever defect there was in the waiver was subsequently cured by the deed of sale of 4 August 1961 by virtue of which Bezore, et.al. sold not only their pro-indiviso half-share in the hacienda but also their accrued rights therein. It is immaterial that Emilio Camon was not the vendee since what mattered is that Bezore, et.al. parted with their accrued rights for a valuable consideration.

3.    Question of fact not reviewable in direct appeal to Supreme Court
Whether the vendees (Bezore etal) represented to Martiniano O. de la Cruz that the sugar quedans and palay were not included in the sale and that such was the intention of the parties, involves a question of fact which is not reviewable in a direct appeal to the Supreme Court.

4.    “Accrued or accruing”; Literal meaning of contractual stipulations control if terms are clear
The words “accrued or accruing’ in the deed of sale are not obscure and, as the lower court declared, are in fact positive and categorical enough to include accrued allotments and allowances. Since the said words are not ambiguous, there is no need to interpret them.  Article 1370 of the Civil Code provides that “if the terms of a contract are clear and leave no doubt upon the intention of the contracting parties, the literal meaning of its stipulations shall control.”

5.    Inadequacy of cause does not of itself invalidates the contract
That the consideration in the sale was “cheap” is not a ground for the infirmity of the sale. Inadequacy of cause in a contract does not of itself invalidate the contract.

6.    Silence as to demand letters not admission of debt
The silence of Camon with respect to the several demand letters sent to him was an admission of his debt, is without support or sanction in law of evidence.

7.    No change in the juridical relationship between hacienda owners and Emilio Camon after the written contract of lease; Continued cultivation merely implied a new lease, did not convert into express trust
There was no change in the juridical relationship between the hacienda owners and Emilio Camon when, after the expiration of their written contract of lease, he continued cultivating the hacienda during the crop years 1952-53 to 1960-61. The continuance in the cultivation, with the acquiescence of the owners, did not convert the original relationship into an express trust but merely implied a new lease over the property, with the same terms and conditions provided in the original contract, except as to the period of the lease.

8.    Article 1670 of the Civil Code
Article 1670 of the Civil Code provides that “if at the end of the contract the lessee should continue enjoying the thing leased for 15 days with the acquiescence of the lessor, and unless a notice to the contrary by either party has previously been given, it is understood that there is an implied new lease, not for the period of the original contract, but for the time established in articles 1682 and 1687. The other terms of the original contract shall be revived.”

9.    Fiduciary relationship an essential characteristic of trust; No express trust
There is nothing in the record that evidence the creation of a fiduciary relationship between the lessors and the lessee after the expiration of their written contract of lease. Fiduciary relationship is an essential characteristic of trust, and no written instrument has been pointed to as establishing an express trust, which writing is required in express trusts over immovables. There is no basis for the claim that an express trust was created when Camon continued to cultivate the land after the expiration of the written contract of lease.