Republic of the PhilippinesSUPREME COURTManila
FIRST DIVISIONG.R. No. 118114December 7, 1995
TEODORO ACAP, petitioner, vs.COURT OF APPEALS and EDY DE LOS
REYES, respondents.PADILLA, J.:
This is a petition for review on certiorari of the decision 1 of
the Court of Appeals, 2nd Division, in CA-G.R. No. 36177, which
affirmed the decision 2 of the Regional Trial Court of Himamaylan,
Negros Occidental holding that private respondent Edy de los Reyes
had acquired ownership of Lot No. 1130 of the Cadastral Survey of
Hinigaran, Negros Occidental based on a document entitled
"Declaration of Heirship and Waiver of Rights", and ordering the
dispossession of petitioner as leasehold tenant of the land for
failure to pay rentals.
The facts of the case are as follows:
The title to Lot No. 1130 of the Cadastral Survey of Hinigaran,
Negros Occidental was evidenced by OCT No. R-12179. The lot has an
area of 13,720 sq. meters. The title was issued and is registered
in the name of spouses Santiago Vasquez and Lorenza Oruma. After
both spouses died, their only son Felixberto inherited the lot. In
1975, Felixberto executed a duly notarized document entitled
"Declaration of Heirship and Deed of Absolute Sale" in favor of
Cosme Pido.
The evidence before the court a quo established that since 1960,
petitioner Teodoro Acap had been the tenant of a portion of the
said land, covering an area of nine thousand five hundred (9,500)
meters. When ownership was transferred in 1975 by Felixberto to
Cosme Pido, Acap continued to be the registered tenant thereof and
religiously paid his leasehold rentals to Pido and thereafter, upon
Pido's death, to his widow Laurenciana.
The controversy began when Pido died intestate and on 27
November 1981, his surviving heirs executed a notarized document
denominated as "Declaration of Heirship and Waiver of Rights of Lot
No. 1130 Hinigaran Cadastre," wherein they declared; to quote its
pertinent portions, that:
. . . Cosme Pido died in the Municipality of Hinigaran, Negros
Occidental, he died intestate and without any known debts and
obligations which the said parcel of land is (sic) held liable.
That Cosme Pido was survived by his/her legitimate heirs,
namely: LAURENCIANA PIDO, wife, ELY, ERVIN, ELMER, and ELECHOR all
surnamed PIDO; children;
That invoking the provision of Section 1, Rule 74 of the Rules
of Court, the above-mentioned heirs do hereby declare unto [sic]
ourselves the only heirs of the late Cosme Pido and that we hereby
adjudicate unto ourselves the above-mentioned parcel of land in
equal shares.
Now, therefore, We LAURENCIANA 3, ELY, ELMER, ERVIN and ELECHOR
all surnamed PIDO, do hereby waive, quitclaim all our rights,
interests and participation over the said parcel of land in favor
of EDY DE LOS REYES, of legal age, (f)ilipino, married to VIRGINIA
DE LOS REYES, and resident of Hinigaran, Negros Occidental,
Philippines. . . . 4 (Emphasis supplied)
The document was signed by all of Pido's heirs. Private
respondent Edy de los Reyes did not sign said document.
It will be noted that at the time of Cosme Pido's death, title
to the property continued to be registered in the name of the
Vasquez spouses. Upon obtaining the Declaration of Heirship with
Waiver of Rights in his favor, private respondent Edy de los Reyes
filed the same with the Registry of Deeds as part of a notice of an
adverse claim against the original certificate of title.
Thereafter, private respondent sought for petitioner (Acap) to
personally inform him that he (Edy) had become the new owner of the
land and that the lease rentals thereon should be paid to him.
Private respondent further alleged that he and petitioner entered
into an oral lease agreement wherein petitioner agreed to pay ten
(10) cavans of palay per annum as lease rental. In 1982, petitioner
allegedly complied with said obligation. In 1983, however,
petitioner refused to pay any further lease rentals on the land,
prompting private respondent to seek the assistance of the then
Ministry of Agrarian Reform (MAR) in Hinigaran, Negros Occidental.
The MAR invited petitioner to a conference scheduled on 13 October
1983. Petitioner did not attend the conference but sent his wife
instead to the conference. During the meeting, an officer of the
Ministry informed Acap's wife about private respondent's ownership
of the said land but she stated that she and her husband (Teodoro)
did not recognize private respondent's claim of ownership over the
land.
On 28 April 1988, after the lapse of four (4) years, private
respondent filed a complaint for recovery of possession and damages
against petitioner, alleging in the main that as his leasehold
tenant, petitioner refused and failed to pay the agreed annual
rental of ten (10) cavans of palay despite repeated demands.
During the trial before the court a quo, petitioner reiterated
his refusal to recognize private respondent's ownership over the
subject land. He averred that he continues to recognize Cosme Pido
as the owner of the said land, and having been a registered tenant
therein since 1960, he never reneged on his rental obligations.
When Pido died, he continued to pay rentals to Pido's widow. When
the latter left for abroad, she instructed him to stay in the
landholding and to pay the accumulated rentals upon her demand or
return from abroad.
Petitioner further claimed before the trial court that he had no
knowledge about any transfer or sale of the lot to private
respondent in 1981 and even the following year after Laurenciana's
departure for abroad. He denied having entered into a verbal lease
tenancy contract with private respondent and that assuming that the
said lot was indeed sold to private respondent without his
knowledge, R.A. 3844, as amended, grants him the right to redeem
the same at a reasonable price. Petitioner also bewailed private
respondent's ejectment action as a violation of his right to
security of tenure under P.D. 27.
On 20 August 1991, the lower court rendered a decision in favor
of private respondent, the dispositive part of which reads:
WHEREFORE, premises considered, the Court renders judgment in
favor of the plaintiff, Edy de los Reyes, and against the
defendant, Teodoro Acap, ordering the following, to wit:
1.Declaring forfeiture of defendant's preferred right to
issuance of a Certificate of Land Transfer under Presidential
Decree No. 27 and his farmholdings;
2.Ordering the defendant Teodoro Acap to deliver possession of
said farm to plaintiff, and;
3.Ordering the defendant to pay P5,000.00 as attorney's fees,
the sum of P1,000.00 as expenses of litigation and the amount of
P10,000.00 as actual damages. 5
In arriving at the above-mentioned judgment, the trial court
stated that the evidence had established that the subject land was
"sold" by the heirs of Cosme Pido to private respondent. This is
clear from the following disquisitions contained in the trial
court's six (6) page decision:
There is no doubt that defendant is a registered tenant of Cosme
Pido. However, when the latter died their tenancy relations changed
since ownership of said land was passed on to his heirs who, by
executing a Deed of Sale, which defendant admitted in his
affidavit, likewise passed on their ownership of Lot 1130 to herein
plaintiff (private respondent). As owner hereof, plaintiff has the
right to demand payment of rental and the tenant is obligated to
pay rentals due from the time demand is made. . . . 6
xxxxxxxxx
Certainly, the sale of the Pido family of Lot 1130 to herein
plaintiff does not of itself extinguish the relationship. There was
only a change of the personality of the lessor in the person of
herein plaintiff Edy de los Reyes who being the purchaser or
transferee, assumes the rights and obligations of the former
landowner to the tenant Teodoro Acap, herein defendant. 7
Aggrieved, petitioner appealed to the Court of Appeals, imputing
error to the lower court when it ruled that private respondent
acquired ownership of Lot No. 1130 and that he, as tenant, should
pay rentals to private respondent and that failing to pay the same
from 1983 to 1987, his right to a certificate of land transfer
under P.D. 27 was deemed forfeited.
The Court of Appeals brushed aside petitioner's argument that
the Declaration of Heirship and Waiver of Rights (Exhibit "D"), the
document relied upon by private respondent to prove his ownership
to the lot, was excluded by the lower court in its order dated 27
August 1990. The order indeed noted that the document was not
identified by Cosme Pido's heirs and was not registered with the
Registry of Deeds of Negros Occidental. According to respondent
court, however, since the Declaration of Heirship and Waiver of
Rights appears to have been duly notarized, no further proof of its
due execution was necessary. Like the trial court, respondent court
was also convinced that the said document stands as prima facie
proof of appellee's (private respondent's) ownership of the land in
dispute.
With respect to its non-registration, respondent court noted
that petitioner had actual knowledge of the subject sale of the
land in dispute to private respondent because as early as 1983, he
(petitioner) already knew of private respondent's claim over the
said land but which he thereafter denied, and that in 1982, he
(petitioner) actually paid rent to private respondent. Otherwise
stated, respondent court considered this fact of rental payment in
1982 as estoppel on petitioner's part to thereafter refute private
respondent's claim of ownership over the said land. Under these
circumstances, respondent court ruled that indeed there was
deliberate refusal by petitioner to pay rent for a continued period
of five years that merited forfeiture of his otherwise preferred
right to the issuance of a certificate of land transfer.
In the present petition, petitioner impugns the decision of the
Court of Appeals as not in accord with the law and evidence when it
rules that private respondent acquired ownership of Lot No. 1130
through the aforementioned Declaration of Heirship and Waiver of
Rights.
Hence, the issues to be resolved presently are the
following:
1.WHETHER OR NOT THE SUBJECT DECLARATION OF HEIRSHIP AND WAIVER
OF RIGHTS IS A RECOGNIZED MODE OF ACQUIRING OWNERSHIP BY PRIVATE
RESPONDENT OVER THE LOT IN QUESTION.
2.WHETHER OR NOT THE SAID DOCUMENT CAN BE CONSIDERED A DEED OF
SALE IN FAVOR OF PRIVATE RESPONDENT OF THE LOT IN QUESTION.
Petitioner argues that the Regional Trial Court, in its order
dated 7 August 1990, explicitly excluded the document marked as
Exhibit "D" (Declaration of Heirship, etc.) as private respondent's
evidence because it was not registered with the Registry of Deeds
and was not identified by anyone of the heirs of Cosme Pido. The
Court of Appeals, however, held the same to be admissible, it being
a notarized document, hence, a prima facie proof of private
respondents' ownership of the lot to which it refers.
Petitioner points out that the Declaration of Heirship and
Waiver of Rights is not one of the recognized modes of acquiring
ownership under Article 712 of the Civil Code. Neither can the same
be considered a deed of sale so as to transfer ownership of the
land to private respondent because no consideration is stated in
the contract (assuming it is a contract or deed of sale).
Private respondent defends the decision of respondent Court of
Appeals as in accord with the evidence and the law. He posits that
while it may indeed be true that the trial court excluded his
Exhibit "D" which is the Declaration of Heirship and Waiver of
Rights as part of his evidence, the trial court declared him
nonetheless owner of the subject lot based on other evidence
adduced during the trial, namely, the notice of adverse claim
(Exhibit "E") duly registered by him with the Registry of Deeds,
which contains the questioned Declaration of Heirship and Waiver of
Rights as an integral part thereof.
We find the petition impressed with merit.
In the first place, an asserted right or claim to ownership or a
real right over a thing arising from a juridical act, however
justified, is not per se sufficient to give rise to ownership over
the res. That right or title must be completed by fulfilling
certain conditions imposed by law. Hence, ownership and real rights
are acquired only pursuant to a legal mode or process. While title
is the juridical justification, mode is the actual process of
acquisition or transfer of ownership over a thing in question.
8
Under Article 712 of the Civil Code, the modes of acquiring
ownership are generally classified into two (2) classes, namely,
the original mode (i.e., through occupation, acquisitive
prescription, law or intellectual creation) and the derivative mode
(i.e., through succession mortis causa or tradition as a result of
certain contracts, such as sale, barter, donation, assignment or
mutuum).
In the case at bench, the trial court was obviously confused as
to the nature and effect of the Declaration of Heirship and Waiver
of Rights, equating the same with a contract (deed) of sale. They
are not the same.
In a Contract of Sale, one of the contracting parties obligates
himself to transfer the ownership of and to deliver a determinate
thing, and the other party to pay a price certain in money or its
equivalent. 9
Upon the other hand, a declaration of heirship and waiver of
rights operates as a public instrument when filed with the Registry
of Deeds whereby the intestate heirs adjudicate and divide the
estate left by the decedent among themselves as they see fit. It is
in effect an extrajudicial settlement between the heirs under Rule
74 of the Rules of Court. 10
Hence, there is a marked difference between a sale of hereditary
rights and a waiver of hereditary rights. The first presumes the
existence of a contract or deed of sale between the parties. 11 The
second is, technically speaking, a mode of extinction of ownership
where there is an abdication or intentional relinquishment of a
known right with knowledge of its existence and intention to
relinquish it, in favor of other persons who are co-heirs in the
succession. 12 Private respondent, being then a stranger to the
succession of Cosme Pido, cannot conclusively claim ownership over
the subject lot on the sole basis of the waiver document which
neither recites the elements of either a sale, 13 or a donation, 14
or any other derivative mode of acquiring ownership.
Quite surprisingly, both the trial court and public respondent
Court of Appeals concluded that a "sale" transpired between Cosme
Pido's heirs and private respondent and that petitioner acquired
actual knowledge of said sale when he was summoned by the Ministry
of Agrarian Reform to discuss private respondent's claim over the
lot in question. This conclusion has no basis both in fact and in
law.
On record, Exhibit "D", which is the "Declaration of Heirship
and Waiver of Rights" was excluded by the trial court in its order
dated 27 August 1990 because the document was neither registered
with the Registry of Deeds nor identified by the heirs of Cosme
Pido. There is no showing that private respondent had the same
document attached to or made part of the record. What the trial
court admitted was Annex "E", a notice of adverse claim filed with
the Registry of Deeds which contained the Declaration of Heirship
with Waiver of rights and was annotated at the back of the Original
Certificate of Title to the land in question.
A notice of adverse claim, by its nature, does not however prove
private respondent's ownership over the tenanted lot. "A notice of
adverse claim is nothing but a notice of a claim adverse to the
registered owner, the validity of which is yet to be established in
court at some future date, and is no better than a notice of lis
pendens which is a notice of a case already pending in court."
15
It is to be noted that while the existence of said adverse claim
was duly proven, there is no evidence whatsoever that a deed of
sale was executed between Cosme Pido's heirs and private respondent
transferring the rights of Pido's heirs to the land in favor of
private respondent. Private respondent's right or interest
therefore in the tenanted lot remains an adverse claim which cannot
by itself be sufficient to cancel the OCT to the land and title the
same in private respondent's name.
Consequently, while the transaction between Pido's heirs and
private respondent may be binding on both parties, the right of
petitioner as a registered tenant to the land cannot be
perfunctorily forfeited on a mere allegation of private
respondent's ownership without the corresponding proof thereof.
Petitioner had been a registered tenant in the subject land
since 1960 and religiously paid lease rentals thereon. In his mind,
he continued to be the registered tenant of Cosme Pido and his
family (after Pido's death), even if in 1982, private respondent
allegedly informed petitioner that he had become the new owner of
the land.
Under the circumstances, petitioner may have, in good faith,
assumed such statement of private respondent to be true and may
have in fact delivered 10 cavans of palay as annual rental for 1982
to private respondent. But in 1983, it is clear that petitioner had
misgivings over private respondent's claim of ownership over the
said land because in the October 1983 MAR conference, his wife
Laurenciana categorically denied all of private respondent's
allegations. In fact, petitioner even secured a certificate from
the MAR dated 9 May 1988 to the effect that he continued to be the
registered tenant of Cosme Pido and not of private respondent. The
reason is that private respondent never registered the Declaration
of Heirship with Waiver of Rights with the Registry of Deeds or
with the MAR. Instead, he (private respondent) sought to do
indirectly what could not be done directly, i.e., file a notice of
adverse claim on the said lot to establish ownership thereover.
It stands to reason, therefore, to hold that there was no
unjustified or deliberate refusal by petitioner to pay the lease
rentals or amortizations to the landowner/agricultural lessor
which, in this case, private respondent failed to establish in his
favor by clear and convincing evidence. 16
Consequently, the sanction of forfeiture of his preferred right
to be issued a Certificate of Land Transfer under P.D. 27 and to
the possession of his farmholdings should not be applied against
petitioners, since private respondent has not established a cause
of action for recovery of possession against petitioner.
WHEREFORE, premises considered, the Court hereby GRANTS the
petition and the decision of the Court of Appeals dated 1 May 1994
which affirmed the decision of the RTC of Himamaylan, Negros
Occidental dated 20 August 1991 is hereby SET ASIDE. The private
respondent's complaint for recovery of possession and damages
against petitioner Acap is hereby DISMISSED for failure to properly
state a cause of action, without prejudice to private respondent
taking the proper legal steps to establish the legal mode by which
he claims to have acquired ownership of the land in question.
SO ORDERED.
Davide, Jr., Bellosillo, Kapunan and Hermosisima, Jr., JJ.,
concur.
Republic of the PhilippinesSUPREME COURTManila
FIRST DIVISION
G.R. No. L-116650May 23, 1995
TOYOTA SHAW, INC., petitioner, vs.COURT OF APPEALS and LUNA L.
SOSA, respondents.
DAVIDE, JR., J.:
At the heart of the present controversy is the document marked
Exhibit "A" 1 for the private respondent, which was signed by a
sales representative of Toyota Shaw, Inc. named Popong Bernardo.
The document reads as follows:
4 June 1989
AGREEMENTS BETWEEN MR. SOSA& POPONG BERNARDO OF TOYOTASHAW,
INC.
1.all necessary documents will be submitted to TOYOTA SHAW, INC.
(POPONG BERNARDO) a week after, upon arrival of Mr. Sosa from the
Province (Marinduque) where the unit will be used on the 19th of
June.
2.the downpayment of P100,000.00 will be paid by Mr. Sosa on
June 15, 1989.
3.the TOYOTA SHAW, INC. LITE ACE yellow, will be pick-up [sic]
and released by TOYOTA SHAW, INC. on the 17th of June at 10
a.m.
Very truly yours,
(Sgd.) POPONG BERNARDO.
Was this document, executed and signed by the petitioner's sales
representative, a perfected contract of sale, binding upon the
petitioner, breach of which would entitle the private respondent to
damages and attorney's fees? The trial court and the Court of
Appeals took the affirmative view. The petitioner disagrees. Hence,
this petition for review on certiorari.
The antecedents as disclosed in the decisions of both the trial
court and the Court of Appeals, as well as in the pleadings of
petitioner Toyota Shaw, Inc. (hereinafter Toyota) and respondent
Luna L. Sosa (hereinafter Sosa) are as follows. Sometime in June of
1989, Luna L. Sosa wanted to purchase a Toyota Lite Ace. It was
then a seller's market and Sosa had difficulty finding a dealer
with an available unit for sale. But upon contacting Toyota Shaw,
Inc., he was told that there was an available unit. So on 14 June
1989, Sosa and his son, Gilbert, went to the Toyota office at Shaw
Boulevard, Pasig, Metro Manila. There they met Popong Bernardo, a
sales representative of Toyota.
Sosa emphasized to Bernardo that he needed the Lite Ace not
later than 17 June 1989 because he, his family, and a balikbayan
guest would use it on 18 June 1989 to go to Marinduque, his home
province, where he would celebrate his birthday on the 19th of
June. He added that if he does not arrive in his hometown with the
new car, he would become a "laughing stock." Bernardo assured Sosa
that a unit would be ready for pick up at 10:00 a.m. on 17 June
1989. Bernardo then signed the aforequoted "Agreements Between Mr.
Sosa & Popong Bernardo of Toyota Shaw, Inc." It was also agreed
upon by the parties that the balance of the purchase price would be
paid by credit financing through B.A. Finance, and for this
Gilbert, on behalf of his father, signed the documents of Toyota
and B.A. Finance pertaining to the application for financing.
The next day, 15 June 1989, Sosa and Gilbert went to Toyota to
deliver the downpayment of P100,000.00. They met Bernardo who then
accomplished a printed Vehicle Sales Proposal (VSP) No. 928, 2 on
which Gilbert signed under the subheading CONFORME. This document
shows that the customer's name is "MR. LUNA SOSA" with home address
at No. 2316 Guijo Street, United Paraaque II; that the model series
of the vehicle is a "Lite Ace 1500" described as "4 Dr minibus";
that payment is by "installment," to be financed by "B.A.," 3 with
the initial cash outlay of P100,000.00 broken down as follows:
a)downpaymentP 53,148.00
b)insuranceP 13,970.00
c)BLT registration feeP 1,067.00
CHMO feeP 2,715.00
service feeP 500.00
accessoriesP 29,000.00
and that the "BALANCE TO BE FINANCED" is "P274,137.00." The
spaces provided for "Delivery Terms" were not filled-up. It also
contains the following pertinent provisions:
CONDITIONS OF SALES
1.This sale is subject to availability of unit.
2.Stated Price is subject to change without prior notice, Price
prevailing and in effect at time of selling will apply. . . .
Rodrigo Quirante, the Sales Supervisor of Bernardo, checked and
approved the VSP.
On 17 June 1989, at around 9:30 a.m., Bernardo called Gilbert to
inform him that the vehicle would not be ready for pick up at 10:00
a.m. as previously agreed upon but at 2:00 p.m. that same day. At
2:00 p.m., Sosa and Gilbert met Bernardo at the latter's office.
According to Sosa, Bernardo informed them that the Lite Ace was
being readied for delivery. After waiting for about an hour,
Bernardo told them that the car could not be delivered because
"nasulot ang unit ng ibang malakas."
Toyota contends, however, that the Lite Ace was not delivered to
Sosa because of the disapproval by B.A. Finance of the credit
financing application of Sosa. It further alleged that a particular
unit had already been reserved and earmarked for Sosa but could not
be released due to the uncertainty of payment of the balance of the
purchase price. Toyota then gave Sosa the option to purchase the
unit by paying the full purchase price in cash but Sosa
refused.
After it became clear that the Lite Ace would not be delivered
to him, Sosa asked that his downpayment be refunded. Toyota did so
on the very same day by issuing a Far East Bank check for the full
amount of P100,000.00, 4 the receipt of which was shown by a check
voucher of Toyota, 5 which Sosa signed with the reservation,
"without prejudice to our future claims for damages."
Thereafter, Sosa sent two letters to Toyota. In the first
letter, dated 27 June 1989 and signed by him, he demanded the
refund, within five days from receipt, of the downpayment of
P100,000.00 plus interest from the time he paid it and the payment
of damages with a warning that in case of Toyota's failure to do so
he would be constrained to take legal action. 6 The second, dated 4
November 1989 and signed by M. O. Caballes, Sosa's counsel,
demanded one million pesos representing interest and damages,
again, with a warning that legal action would be taken if payment
was not made within three days. 7 Toyota's counsel answered through
a letter dated 27 November 1989 8 refusing to accede to the demands
of Sosa. But even before this answer was made and received by Sosa,
the latter filed on 20 November 1989 with Branch 38 of the Regional
Trial Court (RTC) of Marinduque a complaint against Toyota for
damages under Articles 19 and 21 of the Civil Code in the total
amount of P1,230,000.00. 9 He alleges, inter alia, that:
9.As a result of defendant's failure and/or refusal to deliver
the vehicle to plaintiff, plaintiff suffered embarrassment,
humiliation, ridicule, mental anguish and sleepless nights because:
(i) he and his family were constrained to take the public
transportation from Manila to Lucena City on their way to
Marinduque; (ii) his balikbayan-guest canceled his scheduled first
visit to Marinduque in order to avoid the inconvenience of taking
public transportation; and (iii) his relatives, friends, neighbors
and other provincemates, continuously irked him about "his
Brand-New Toyota Lite Ace that never was." Under the circumstances,
defendant should be made liable to the plaintiff for moral damages
in the amount of One Million Pesos (P1,000,000.00). 10
In its answer to the complaint, Toyota alleged that no sale was
entered into between it and Sosa, that Bernardo had no authority to
sign Exhibit "A" for and in its behalf, and that Bernardo signed
Exhibit "A" in his personal capacity. As special and affirmative
defenses, it alleged that: the VSP did not state date of delivery;
Sosa had not completed the documents required by the financing
company, and as a matter of policy, the vehicle could not and would
not be released prior to full compliance with financing
requirements, submission of all documents, and execution of the
sales agreement/invoice; the P100,000.00 was returned to and
received by Sosa; the venue was improperly laid; and Sosa did not
have a sufficient cause of action against it. It also interposed
compulsory counterclaims.
After trial on the issues agreed upon during the pre-trial
session, 11 the trial court rendered on 18 February 1992 a decision
in favor of Sosa. 12 It ruled that Exhibit "A," the "AGREEMENTS
BETWEEN MR. SOSA AND POPONG BERNARDO," was a valid perfected
contract of sale between Sosa and Toyota which bound Toyota to
deliver the vehicle to Sosa, and further agreed with Sosa that
Toyota acted in bad faith in selling to another the unit already
reserved for him.
As to Toyota's contention that Bernardo had no authority to bind
it through Exhibit "A," the trial court held that the extent of
Bernardo's authority "was not made known to plaintiff," for as
testified to by Quirante, "they do not volunteer any information as
to the company's sales policy and guidelines because they are
internal matters." 13 Moreover, "[f]rom the beginning of the
transaction up to its consummation when the downpayment was made by
the plaintiff, the defendants had made known to the plaintiff the
impression that Popong Bernardo is an authorized sales executive as
it permitted the latter to do acts within the scope of an apparent
authority holding him out to the public as possessing power to do
these acts." 14 Bernardo then "was an agent of the defendant Toyota
Shaw, Inc. and hence bound the defendants." 15
The court further declared that "Luna Sosa proved his social
standing in the community and suffered besmirched reputation,
wounded feelings and sleepless nights for which he ought to be
compensated." 16 Accordingly, it disposed as follows:
WHEREFORE, viewed from the above findings, judgment is hereby
rendered in favor of the plaintiff and against the defendant:
1.ordering the defendant to pay to the plaintiff the sum of
P75,000.00 for moral damages;
2.ordering the defendant to pay the plaintiff the sum of
P10,000.00 for exemplary damages;
3.ordering the defendant to pay the sum of P30,000.00 attorney's
fees plus P2,000.00 lawyer's transportation fare per trip in
attending to the hearing of this case;
4.ordering the defendant to pay the plaintiff the sum of
P2,000.00 transportation fare per trip of the plaintiff in
attending the hearing of this case; and
5.ordering the defendant to pay the cost of suit.
SO ORDERED.
Dissatisfied with the trial court's judgment, Toyota appealed to
the Court of Appeals. The case was docketed as CA-G.R. CV No.
40043. In its decision promulgated on 29 July 1994, 17 the Court of
Appeals affirmed in toto the appealed decision.
Toyota now comes before this Court via this petition and raises
the core issue stated at the beginning of the ponencia and also the
following related issues: (a) whether or not the standard VSP was
the true and documented understanding of the parties which would
have led to the ultimate contract of sale, (b) whether or not Sosa
has any legal and demandable right to the delivery of the vehicle
despite the non-payment of the consideration and the non-approval
of his credit application by B.A. Finance, (c) whether or not
Toyota acted in good faith when it did not release the vehicle to
Sosa, and (d) whether or not Toyota may be held liable for
damages.
We find merit in the petition.
Neither logic nor recourse to one's imagination can lead to the
conclusion that Exhibit "A" is a perfected contract of sale.
Article 1458 of the Civil Code defines a contract of sale as
follows:
Art. 1458.By the contract of sale one of the contracting parties
obligates himself to transfer the ownership of and to deliver a
determinate thing, and the other to pay therefor a price certain in
money or its equivalent.
A contract of sale may be absolute or conditional.
and Article 1475 specifically provides when it is deemed
perfected:
Art. 1475.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.
What is clear from Exhibit "A" is not what the trial court and
the Court of Appeals appear to see. It is not a contract of sale.
No obligation on the part of Toyota to transfer ownership of a
determinate thing to Sosa and no correlative obligation on the part
of the latter to pay therefor a price certain appears therein. The
provision on the downpayment of P100,000.00 made no specific
reference to a sale of a vehicle. If it was intended for a contract
of sale, it could only refer to a sale on installment basis, as the
VSP executed the following day confirmed. But nothing was mentioned
about the full purchase price and the manner the installments were
to be paid.
This Court had already ruled that a definite agreement on the
manner of payment of the price is an essential element in the
formation of a binding and enforceable contract of sale. 18 This is
so because the agreement as to the manner of payment goes into the
price such that a disagreement on the manner of payment is
tantamount to a failure to agree on the price. Definiteness as to
the price is an essential element of a binding agreement to sell
personal property. 19
Moreover, Exhibit "A" shows the absence of a meeting of minds
between Toyota and Sosa. For one thing, Sosa did not even sign it.
For another, Sosa was well aware from its title, written in bold
letters, viz.,
AGREEMENTS BETWEEN MR. SOSA & POPONG BERNARDO OF TOYOTA
SHAW, INC.
that he was not dealing with Toyota but with Popong Bernardo and
that the latter did not misrepresent that he had the authority to
sell any Toyota vehicle. He knew that Bernardo was only a sales
representative of Toyota and hence a mere agent of the latter. It
was incumbent upon Sosa to act with ordinary prudence and
reasonable diligence to know the extent of Bernardo's authority as
anagent 20 in respect of contracts to sell Toyota's vehicles. A
person dealing with an agent is put upon inquiry and must discover
upon his peril the authority of the agent. 21
At the most, Exhibit "A" may be considered as part of the
initial phase of the generation or negotiation stage of a contract
of sale. There are three stages in the contract of sale,
namely:
(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. 22
The second phase of the generation or negotiation stage in this
case was the execution of the VSP. It must be emphasized that
thereunder, the downpayment of the purchase price was P53,148.00
while the balance to be paid on installment should be financed by
B.A. Finance Corporation. It is, of course, to be assumed that B.A.
Finance Corp. was acceptable to Toyota, otherwise it should not
have mentioned B.A. Finance in the VSP.
Financing companies are defined in Section 3(a) of R.A. No.
5980, as amended by P.D. No. 1454 and P.D. No. 1793, as
"corporations or partnerships, except those regulated by the
Central Bank of the Philippines, the Insurance Commission and the
Cooperatives Administration Office, which are primarily organized
for the purpose of extending credit facilities to consumers and to
industrial, commercial, or agricultural enterprises, either by
discounting or factoring commercial papers or accounts receivables,
or by buying and selling contracts, leases, chattel mortgages, or
other evidence of indebtedness, or by leasing of motor vehicles,
heavy equipment and industrial machinery, business and office
machines and equipment, appliances and other movable property."
23
Accordingly, in a sale on installment basis which is financed by
a financing company, three parties are thus involved: the buyer who
executes a note or notes for the unpaid balance of the price of the
thing purchased on installment, the seller who assigns the notes or
discounts them with a financing company, and the financing company
which is subrogated in the place of the seller, as the creditor of
the installment buyer. 24 Since B.A. Finance did not approve Sosa's
application, there was then no meeting of minds on the sale on
installment basis.
We are inclined to believe Toyota's version that B.A. Finance
disapproved Sosa's application for which reason it suggested to
Sosa that he pay the full purchase price. When the latter refused,
Toyota cancelled the VSP and returned to him his P100,000.00.
Sosa's version that the VSP was cancelled because, according to
Bernardo, the vehicle was delivered to another who was "mas
malakas" does not inspire belief and was obviously a delayed
afterthought. It is claimed that Bernardo said, "Pasensiya kayo,
nasulot ang unit ng ibang malakas," while the Sosas had already
been waiting for an hour for the delivery of the vehicle in the
afternoon of 17 June 1989. However, in paragraph 7 of his
complaint, Sosa solemnly states:
On June 17, 1989 at around 9:30 o'clock in the morning,
defendant's sales representative, Mr. Popong Bernardo, called
plaintiff's house and informed the plaintiff's son that the vehicle
will not be ready for pick-up at 10:00 a.m. of June 17, 1989 but at
2:00 p.m. of that day instead. Plaintiff and his son went to
defendant's office on June 17 1989 at 2:00 p.m. in order to pick-up
the vehicle but the defendant for reasons known only to its
representatives, refused and/or failed to release the vehicle to
the plaintiff. Plaintiff demanded for an explanation, but nothing
was given; . . . (Emphasis supplied). 25
The VSP was a mere proposal which was aborted in lieu of
subsequent events. It follows that the VSP created no demandable
right in favor of Sosa for the delivery of the vehicle to him, and
its non-delivery did not cause any legally indemnifiable
injury.
The award then of moral and exemplary damages and attorney's
fees and costs of suit is without legal basis. Besides, the only
ground upon which Sosa claimed moral damages is that since it was
known to his friends, townmates, and relatives that he was buying a
Toyota Lite Ace which they expected to see on his birthday, he
suffered humiliation, shame, and sleepless nights when the van was
not delivered. The van became the subject matter of talks during
his celebration that he may not have paid for it, and this created
an impression against his business standing and reputation. At the
bottom of this claim is nothing but misplaced pride and ego. He
should not have announced his plan to buy a Toyota Lite Ace knowing
that he might not be able to pay the full purchase price. It was he
who brought embarrassment upon himself by bragging about a thing
which he did not own yet.
Since Sosa is not entitled to moral damages and there being no
award for temperate, liquidated, or compensatory damages, he is
likewise not entitled to exemplary damages. Under Article 2229 of
the Civil Code, exemplary or corrective damages are imposed by way
of example or correction for the public good, in addition to moral,
temperate, liquidated, or compensatory damages.
Also, it is settled that for attorney's fees to be granted, the
court must explicitly state in the body of the decision, and not
only in the dispositive portion thereof, the legal reason for the
award of attorney's fees. 26 No such explicit determination thereon
was made in the body of the decision of the trial court. No reason
thus exists for such an award.
WHEREFORE, the instant petition is GRANTED. The challenged
decision of the Court of Appeals in CA-G.R. CV NO. 40043 as well as
that of Branch 38 of the Regional Trial Court of Marinduque in
Civil Case No. 89-14 are REVERSED and SET ASIDE and the complaint
in Civil Case No. 89-14 is DISMISSED. The counterclaim therein is
likewise DISMISSED.
No pronouncement as to costs.
SO ORDERED.
Padilla, Bellosillo and Kapunan, JJ., concur.
Quiason, J., is on leave.
SECOND DIVISION
[G.R. No. 143513. November 14, 2001]
POLYTECHNIC UNIVERSITY OF THE PHILIPPINES, petitioner, vs. COURT
OF APPEALS and FIRESTONE CERAMICS, INC., respondents.
[G.R. No. 143590. November 14, 2001]
NATIONAL DEVELOPMENT CORPORATION, petitioner, vs. FIRESTONE
CERAMICS, INC., respondents.
D E C I S I O N
BELLOSILLO, J.:
A litigation is not simply a contest of litigants before the bar
of public opinion; more than that, it is a pursuit of justice
through legal and equitable means. To prevent the search for
justice from evolving into a competition for public approval,
society invests the judiciary with complete independence thereby
insulating it from demands expressed through any medium, the press
not excluded. Thus, if the court would merely reflect, and worse,
succumb to the great pressures of the day, the end result, it is
feared, would be a travesty of justice.
In the early sixties, petitioner National Development
Corporation (NDC), a government owned and controlled corporation
created under CA 182 as amended by CA 311 and PD No. 668, had in
its disposal a ten (10)-hectare property located along Pureza St.,
Sta. Mesa, Manila. The estate was popularly known as the NDC
compound and covered by Transfer Certificates of Title Nos. 92885,
110301 and 145470.
Sometime in May 1965 private respondent Firestone Ceramics Inc.
(FIRESTONE) manifested its desire to lease a portion of the
property for its ceramic manufacturing business. On 24 August 1965
NDC and FIRESTONE entered into a contract of lease denominated as
Contract No. C-30-65 covering a portion of the property measured at
2.90118 hectares for use as a manufacturing plant for a term of ten
(10) years, renewable for another ten (10) years under the same
terms and conditions.[1] In consequence of the agreement, FIRESTONE
constructed on the leased premises several warehouses and other
improvements needed for the fabrication of ceramic products.
Three and a half (3-1/2) years later, or on 8 January 1969,
FIRESTONE entered into a second contract of lease with NDC over the
latter's four (4)-unit pre-fabricated reparation steel warehouse
stored in Daliao, Davao. FIRESTONE agreed to ship the warehouse to
Manila for eventual assembly within the NDC compound. The second
contract, denominated as Contract No. C-26-68, was for similar use
as a ceramic manufacturing plant and was agreed expressly to be
"co-extensive with the lease of LESSEE with LESSOR on the 2.60
hectare-lot."[2]
On 31 July 1974 the parties signed a similar contract concerning
a six (6)-unit pre-fabricated steel warehouse which, as agreed upon
by the parties, would expire on 2 December 1978.[3] Prior to the
expiration of the aforementioned contract, FIRESTONE wrote NDC
requesting for an extension of their lease agreement. Consequently
on 29 November 1978 the Board of Directors of NDC adopted
Resolution No. 11-78-117 extending the term of the lease, subject
to several conditions among which was that in the event NDC "with
the approval of higher authorities, decide to dispose and sell
these properties including the lot, priority should be given to the
LESSEE"[4] (underscoring supplied). On 22 December 1978, in
pursuance of the resolution, the parties entered into a new
agreement for a ten-year lease of the property, renewable for
another ten (10) years, expressly granting FIRESTONE the first
option to purchase the leased premises in the event that it decided
"to dispose and sell these properties including the lot . . . .
"[5]
The contracts of lease conspicuously contain an identically
worded provision requiring FIRESTONE to construct buildings and
other improvements within the leased premises worth several hundred
thousands of pesos.[6]
The parties' lessor-lessee relationship went smoothly until
early 1988 when FIRESTONE, cognizant of the impending expiration of
their lease agreement with NDC, informed the latter through several
letters and telephone calls that it was renewing its lease over the
property. While its letter of 17 March 1988 was answered by Antonio
A. Henson, General Manager of NDC, who promised immediate action on
the matter, the rest of its communications remained
unacknowledged.[7] FIRESTONE's predicament worsened when rumors of
NDC's supposed plans to dispose of the subject property in favor of
petitioner Polytechnic University of the Philippines (PUP) came to
its knowledge. Forthwith, FIRESTONE served notice on NDC conveying
its desire to purchase the property in the exercise of its
contractual right of first refusal.
Apprehensive that its interest in the property would be
disregarded, FIRESTONE instituted an action for specific
performance to compel NDC to sell the leased property in its favor.
FIRESTONE averred that it was pre-empting the impending sale of the
NDC compound to petitioner PUP in violation of its leasehold rights
over the 2.60-hectare[8] property and the warehouses thereon which
would expire in 1999. FIRESTONE likewise prayed for the issuance of
a writ of preliminary injunction to enjoin NDC from disposing of
the property pending the settlement of the controversy.[9]
In support of its complaint, FIRESTONE adduced in evidence a
letter of Antonio A. Henson dated 15 July 1988 addressed to Mr.
Jake C. Lagonera, Director and Special Assistant to Executive
Secretary Catalino Macaraeg, reviewing a proposed memorandum order
submitted to then President Corazon C. Aquino transferring the
whole NDC compound, including the leased property, in favor of
petitioner PUP. Attached to the letter was a draft of the proposed
memorandum order as well as a summary of existing leases on the
subject property. The survey listed FIRESTONE as lessee of a
portion of the property, placed at 29,000[10] square meters, whose
contract with NDC was set to expire on 31 December 1989[11]
renewable for another ten (10) years at the option of the lessee.
The report expressly recognized FIRESTONE's right of first refusal
to purchase the leased property "should the lessor decide to sell
the same."[12]
Meanwhile, on 21 February 1989 PUP moved to intervene and
asserted its interest in the subject property, arguing that a
"purchaser pendente lite of property which is subject of a
litigation is entitled to intervene in the proceedings."[13] PUP
referred to Memorandum Order No. 214 issued by then President
Aquino ordering the transfer of the whole NDC compound to the
National Government, which in turn would convey the aforementioned
property in favor of PUP at acquisition cost. The issuance was
supposedly made in recognition of PUP's status as the "Poor Man's
University" as well as its serious need to extend its campus in
order to accommodate the growing student population. The order of
conveyance of the 10.31-hectare property would automatically result
in the cancellation of NDC's total obligation in favor of the
National Government in the amount of P57,193,201.64.
Convinced that PUP was a necessary party to the controversy that
ought to be joined as party defendant in order to avoid
multiplicity of suits, the trial court granted PUP's motion to
intervene. FIRESTONE moved for reconsideration but was denied. On
certiorari, the Court of Appeals affirmed the order of the trial
court. FIRESTONE came to us on review but in a Resolution dated 11
July 1990 we upheld PUP's inclusion as party-defendant in the
present controversy.
Following the denial of its petition, FIRESTONE amended its
complaint to include PUP and Executive Secretary Catalino Macaraeg,
Jr., as party-defendants, and sought the annulment of Memorandum
Order No. 214. FIRESTONE alleged that although Memorandum Order No.
214 was issued "subject to such liens/leases existing [on the
subject property]," PUP disregarded and violated its existing lease
by increasing the rental rate at P200,000.00 a month while
demanding that it vacated the premises immediately.[14] FIRESTONE
prayed that in the event Memorandum Order No. 214 was not declared
unconstitutional, the property should be sold in its favor at the
price for which it was sold to PUP - P554.74 per square meter or
for a total purchase price of P14,423,240.00.[15]
Petitioner PUP, in its answer to the amended complaint, argued
in essence that the lease contract covering the property had
expired long before the institution of the complaint, and that
further, the right of first refusal invoked by FIRESTONE applied
solely to the six-unit pre-fabricated warehouse and not the lot
upon which it stood.
After trial on the merits, judgment was rendered declaring the
contracts of lease executed between FIRESTONE and NDC covering the
2.60-hectare property and the warehouses constructed thereon valid
and existing until 2 June 1999. PUP was ordered and directed to
sell to FIRESTONE the "2.6 hectare leased premises or as may be
determined by actual verification and survey of the actual size of
the leased properties where plaintiff's fire brick factory is
located" at P1,500.00 per square meter considering that, as
admitted by FIRESTONE, such was the prevailing market price
thereof.
The trial court ruled that the contracts of lease executed
between FIRESTONE and NDC were interrelated and inseparable because
"each of them forms part of the integral system of plaintiff's
brick manufacturing plant x x x if one of the leased premises will
be taken apart or otherwise detached from the two others, the
purpose of the lease as well as plaintiff's business operations
would be rendered useless and inoperative."[16] It thus decreed
that FIRESTONE could exercise its option to purchase the property
until 2 June 1999 inasmuch as the 22 December 1978 contract
embodied a covenant to renew the lease for another ten (10) years
at the option of the lessee as well as an agreement giving the
lessee the right of first refusal.
The trial court also sustained the constitutionality of
Memorandum Order No. 214 which was not per se hostile to
FIRESTONE's property rights, but deplored as prejudicial thereto
the "very manner with which defendants NDC and PUP interpreted and
applied the same, ignoring in the process that plaintiff has
existing contracts of lease protectable by express provisions in
the Memorandum No. 214 itself."[17] It further explained that the
questioned memorandum was issued "subject to such liens/leases
existing thereon"[18] and petitioner PUP was under express
instructions "to enter, occupy and take possession of the
transferred property subject to such leases or liens and
encumbrances that may be existing thereon"[19] (underscoring
supplied).
Petitioners PUP, NDC and the Executive Secretary separately
filed their Notice of Appeal, but a few days thereafter, or on 3
September 1996, perhaps realizing the groundlessness and the
futility of it all, the Executive Secretary withdrew his
appeal.[20]
Subsequently, the Court of Appeals affirmed the decision of the
trial court ordering the sale of the property in favor of FIRESTONE
but deleted the award of attorney's fees in the amount of Three
Hundred Thousand Pesos (P300,000.00). Accordingly, FIRESTONE was
given a grace period of six (6) months from finality of the court's
judgment within which to purchase the property in questioned in the
exercise of its right of first refusal. The Court of Appeals
observed that as there was a sale of the subject property, NDC
could not excuse itself from its obligation TO OFFER THE PROPERTY
FOR SALE FIRST TO FIRESTONE BEFORE IT COULD TO OTHER PARTIES. The
Court of Appeals held: "NDC cannot look to Memorandum Order No. 214
to excuse or shield it from its contractual obligations to
FIRESTONE. There is nothing therein that allows NDC to disavow or
repudiate the solemn engagement that it freely and voluntarily
undertook, or agreed to undertake."[21]
PUP moved for reconsideration asserting that in ordering the
sale of the property in favor of FIRESTONE the courts a quo
unfairly created a contract to sell between the parties. It argued
that the "court cannot substitute or decree its mind or consent for
that of the parties in determining whether or not a contract (has
been) perfected between PUP and NDC."[22] PUP further contended
that since "a real property located in Sta. Mesa can readily
command a sum of P10,000.00 per square (meter)," the lower court
gravely erred in ordering the sale of the property at only
P1,500.00 per square meter. PUP also advanced the theory that the
enactment of Memorandum Order No. 214 amounted to a withdrawal of
the option to purchase the property granted to FIRESTONE. NDC, for
its part, vigorously contended that the contracts of lease executed
between the parties had expired without being renewed by FIRESTONE;
consequently, FIRESTONE was no longer entitled to any preferential
right in the sale or disposition of the leased property.
We do not see it the way PUP and NDC did. It is elementary that
a party to a contract cannot unilaterally withdraw a right of first
refusal that stands upon valuable consideration. That principle was
clearly upheld by the Court of Appeals when it denied on 6 June
2000 the twin motions for reconsideration filed by PUP and NDC on
the ground that the appellants failed to advance new arguments
substantial enough to warrant a reversal of the Decision sought to
be reconsidered.[23] On 28 June 2000 PUP filed an urgent motion for
an additional period of fifteen (15) days from 29 June 2000 or
until 14 July 2000 within which to file a Petition for Review on
Certiorari of the Decision of the Court of Appeals.
On the last day of the extended period PUP filed its Petition
for Review on Certiorari assailing the Decision of the Court of
Appeals of 6 December 1999 as well as the Resolution of 6 June 2000
denying reconsideration thereof. PUP raised two issues: (a) whether
the courts a quo erred when they "conjectured" that the transfer of
the leased property from NDC to PUP amounted to a sale; and, (b)
whether FIRESTONE can rightfully invoke its right of first refusal.
Petitioner posited that if we were to place our imprimatur on the
decisions of the courts a quo, "public welfare or specifically the
constitutional priority accorded to education" would greatly be
prejudiced.[24]
Paradoxically, our paramount interest in education does not
license us, or any party for that matter, to destroy the sanctity
of binding obligations. Education may be prioritized for
legislative or budgetary purposes, but we doubt if such importance
can be used to confiscate private property such as FIRESTONE's
right of first refusal.
On 17 July 2000 we denied PUP's motion for extension of fifteen
(15) days within which to appeal inasmuch as the aforesaid pleading
lacked an affidavit of service of copies thereof on the Court of
Appeals and the adverse party, as well as written explanation for
not filing and serving the pleading personally.[25]
Accordingly, on 26 July 2000 we issued a Resolution dismissing
PUP's Petition for Review for having been filed out of time. PUP
moved for reconsideration imploring a resolution or decision on the
merits of its petition. Strangely, about the same time, several
articles came out in the newspapers assailing the denial of the
petition. The daily papers reported that we unreasonably dismissed
PUP's petition on technical grounds, affirming in the process the
decision of the trial court to sell the disputed property to the
prejudice of the government in the amount of P1,000,000,000.00.[26]
Counsel for petitioner PUP, alleged that the trial court and the
Court of Appeals "have decided a question of substance in a way
definitely not in accord with law or jurisprudence."[27]
At the outset, let it be noted that the amount of
P1,000,000,000.00 as reported in the papers was way too
exaggerated, if not fantastic. We stress that NDC itself sold the
whole 10.31-hectare property to PUP at only P57,193,201.64 which
represents NDC's obligation to the national government that was, in
exchange, written off. The price offered per square meter of the
property was pegged at P554.74. FIRESTONE's leased premises would
therefore be worth only P14,423,240.00. From any angle, this amount
is certainly far below the ballyhooed price of
P1,000,000,000.00.
On 4 October 2000 we granted PUP's Motion for Reconsideration to
give it a chance to ventilate its right, if any it still had in the
leased premises, thereby paving the way for a reinstatement of its
Petition for Review.[28] In its appeal, PUP took to task the courts
a quo for supposedly "substituting or decreeing its mind or consent
for that of the parties (referring to NDC and PUP) in determining
whether or not a contract of sale was perfected." PUP also argued
that inasmuch as "it is the parties alone whose minds must meet in
reference to the subject matter and cause," it concluded that it
was error for the lower courts to have decreed the existence of a
sale of the NDC compound thus allowing FIRESTONE to exercise its
right of first refusal.
On the other hand, NDC separately filed its own Petition for
Review and advanced arguments which, in fine, centered on whether
or not the transaction between petitioners NDC and PUP amounted to
a sale considering that ownership of the property remained with the
government.[29] Petitioner NDC introduced the novel proposition
that if the parties involved are both government entities the
transaction cannot be legally called a sale.
In due course both petitions were consolidated.[30]
We believe that the courts a quo did not hypothesize, much less
conjure, the sale of the disputed property by NDC in favor of
petitioner PUP. Aside from the fact that the intention of NDC and
PUP to enter into a contract of sale was clearly expressed in the
Memorandum Order No. 214,[31] a close perusal of the circumstances
of this case strengthens the theory that the conveyance of the
property from NDC to PUP was one of absolute sale, for a valuable
consideration, and not a mere paper transfer as argued by
petitioners.
A contract of sale, as defined in the Civil Code, is a contract
where one of the parties obligates himself to transfer the
ownership of and to deliver a determinate thing to the other or
others who shall pay therefore a sum certain in money or its
equivalent.[32] It is therefore a general requisite for the
existence of a valid and enforceable contract of sale that it be
mutually obligatory, i.e., there should be a concurrence of the
promise of the vendor to sell a determinate thing and the promise
of the vendee to receive and pay for the property so delivered and
transferred. The Civil Code provision is, in effect, a "catch-all"
provision which effectively brings within its grasp a whole gamut
of transfers whereby ownership of a thing is ceded for a
consideration.
Contrary to what petitioners PUP and NDC propose, there is not
just one party involved in the questioned transaction. Petitioners
NDC and PUP have their respective charters and therefore each
possesses a separate and distinct individual personality.[33] The
inherent weakness of NDCs proposition that there was no sale as it
was only the government which was involved in the transaction thus
reveals itself. Tersely put, it is not necessary to write an
extended dissertation on government owned and controlled
corporations and their legal personalities. Beyond cavil, a
government owned and controlled corporation has a personality of
its own, distinct and separate from that of the government.[34] The
intervention in the transaction of the Office of the President
through the Executive Secretary did not change the independent
existence of these entities. The involvement of the Office of the
President was limited to brokering the consequent relationship
between NDC and PUP. But the withdrawal of the appeal by the
Executive Secretary is considered significant as he knew, after a
review of the records, that the transaction was subject to existing
liens and encumbrances, particularly the priority to purchase the
leased premises in favor of FIRESTONE.
True that there may be instances when a particular deed does not
disclose the real intentions of the parties, but their action may
nevertheless indicate that a binding obligation has been
undertaken. Since the conduct of the parties to a contract may be
sufficient to establish the existence of an agreement and the terms
thereof, it becomes necessary for the courts to examine the
contemporaneous behavior of the parties in establishing the
existence of their contract.
The preponderance of evidence shows that NDC sold to PUP the
whole NDC compound, including the leased premises, without the
knowledge much less consent of private respondent FIRESTONE which
had a valid and existing right of first refusal.
All three (3) essential elements of a valid sale, without which
there can be no sale, were attendant in the "disposition" and
"transfer" of the property from NDC to PUP - consent of the
parties, determinate subject matter, and consideration
therefor.
Consent to the sale is obvious from the prefatory clauses of
Memorandum Order No. 214 which explicitly states the acquiescence
of the parties to the sale of the property -
WHEREAS, PUP has expressed its willingness to acquire said NDC
properties and NDC has expressed its willingness to sell the
properties to PUP (underscoring supplied).[35]
Furthermore, the cancellation of NDC's liabilities in favor of
the National Government in the amount of P57,193,201.64 constituted
the "consideration" for the sale. As correctly observed by the
Court of Appeals-
The defendants-appellants' interpretation that there was a mere
transfer, and not a sale, apart from being specious sophistry and a
mere play of words, is too strained and hairsplitting. For it is
axiomatic that every sale imposes upon the vendor the obligation to
transfer ownership as an essential element of the contract.
Transfer of title or an agreement to transfer title for a price
paid, or promised to be paid, is the very essence of sale (Kerr
& Co. v. Lingad, 38 SCRA 524; Schmid & Oberly, Inc., v. RJL
Martinez Fishing Corp., 166 SCRA 493). At whatever legal angle we
view it, therefore, the inescapable fact remains that all the
requisites of a valid sale were attendant in the transaction
between co-defendants-appellants NDC and PUP concerning the
realities subject of the present suit.[36]
What is more, the conduct of petitioner PUP immediately after
the transaction is in itself an admission that there was a sale of
the NDC compound in its favor. Thus, after the issuance of
Memorandum Order No. 214 petitioner PUP asserted its ownership over
the property by posting notices within the compound advising
residents and occupants to vacate the premises.[37] In its Motion
for Intervention petitioner PUP also admitted that its interest as
a "purchaser pendente lite" would be better protected if it was
joined as party-defendant in the controversy thereby confessing
that it indeed purchased the property.
In light of the foregoing disquisition, we now proceed to
determine whether FIRESTONE should be allowed to exercise its right
of first refusal over the property. Such right was expressly stated
by NDC and FIRESTONE in par. XV of their third contract denominated
as A-10-78 executed on 22 December 1978 which, as found by the
courts a quo, was interrelated to and inseparable from their first
contract denominated as C-30-65 executed on 24 August 1965 and
their second contract denominated as C-26-68 executed on 8 January
1969. Thus -
Should the LESSOR desire to sell the leased premises during the
term of this Agreement, or any extension thereof, the LESSOR shall
first give to the LESSEE, which shall have the right of first
option to purchase the leased premises subject to mutual agreement
of both parties.[38]
In the instant case, the right of first refusal is an integral
and indivisible part of the contract of lease and is inseparable
from the whole contract. The consideration for the right is built
into the reciprocal obligations of the parties. Thus, it is not
correct for petitioners to insist that there was no consideration
paid by FIRESTONE to entitle it to the exercise of the right,
inasmuch as the stipulation is part and parcel of the contract of
lease making the consideration for the lease the same as that for
the option.
It is a settled principle in civil law that when a lease
contract contains a right of first refusal, the lessor is under a
legal duty to the lessee not to sell to anybody at any price until
after he has made an offer to sell to the latter at a certain price
and the lessee has failed to accept it.[39] The lessee has a right
that the lessor's first offer shall be in his favor.
The option in this case was incorporated in the contracts of
lease by NDC for the benefit of FIRESTONE which, in view of the
total amount of its investments in the property, wanted to be
assured that it would be given the first opportunity to buy the
property at a price for which it would be offered. Consistent with
their agreement, it was then implicit for NDC to have first offered
the leased premises of 2.60 hectares to FIRESTONE prior to the sale
in favor of PUP. Only if FIRESTONE failed to exercise its right of
first priority could NDC lawfully sell the property to petitioner
PUP.
It now becomes apropos to ask whether the courts a quo were
correct in fixing the proper consideration of the sale at P1,500.00
per square meter. In contracts of sale, the basis of the right of
first refusal must be the current offer of the seller to sell or
the offer to purchase of the prospective buyer. Only after the
lessee-grantee fails to exercise its right under the same terms and
within the period contemplated can the owner validly offer to sell
the property to a third person, again, under the same terms as
offered to the grantee.[40] It appearing that the whole NDC
compound was sold to PUP for P554.74 per square meter, it would
have been more proper for the courts below to have ordered the sale
of the property also at the same price. However, since FIRESTONE
never raised this as an issue, while on the other hand it admitted
that the value of the property stood at P1,500.00 per square meter,
then we see no compelling reason to modify the holdings of the
courts a quo that the leased premises be sold at that price.
Our attention is invited by petitioners to Ang Yu Asuncion v.
CA[41] in concluding that if our holding in Ang Yu would be applied
to the facts of this case then FIRESTONE's "option, if still
subsisting, is not enforceable," the option being merely a
preparatory contract which cannot be enforced.
The contention has no merit. At the heels of Ang Yu came
Equatorial Realty Development, Inc., v. Mayfair Theater, Inc.,[42]
where after much deliberation we declared, and so we hold, that a
right of first refusal is neither "amorphous nor merely
preparatory" and can be enforced and executed according to its
terms. Thus, in Equatorial we ordered the rescission of the sale
which was made in violation of the lessee's right of first refusal
and further ordered the sale of the leased property in favor of
Mayfair Theater, as grantee of the right. Emphatically, we held
that "(a right of first priority) should be enforced according to
the law on contracts instead of the panoramic and indefinite rule
on human relations." We then concluded that the execution of the
right of first refusal consists in directing the grantor to comply
with his obligation according to the terms at which he should have
offered the property in favor of the grantee and at that price when
the offer should have been made.
One final word. Petitioner PUP should be cautioned against
bidding for public sympathy by bewailing the dismissal of its
petition before the press. Such advocacy is not likely to elicit
the compassion of this Court or of any court for that matter. An
entreaty for a favorable disposition of a case not made directly
through pleadings and oral arguments before the courts do not
persuade us, for as judges, we are ruled only by our forsworn duty
to give justice where justice is due.
WHEREFORE, the petitions in G.R. No. 143513 and G.R. No. 143590
are DENIED. Inasmuch as the first contract of lease fixed the area
of the leased premises at 2.90118 hectares while the second
contract placed it at 2.60 hectares, let a ground survey of the
leased premises be immediately conducted by a duly licensed,
registered surveyor at the expense of private respondent FIRESTONE
CERAMICS, INC., within two (2) months from finality of the judgment
in this case. Thereafter, private respondent FIRESTONE CERAMICS,
INC., shall have six (6) months from receipt of the approved survey
within which to exercise its right to purchase the leased property
at P1,500.00 per square meter, and petitioner Polytechnic
University of the Philippines is ordered to reconvey the property
to FIRESTONE CERAMICS, INC., in the exercise of its right of first
refusal upon payment of the purchase price thereof.
SO ORDERED.
Mendoza, Buena, and De Leon, Jr., JJ., concur.Quisumbing, J., no
part due to prior close relations.
Republic of the PhilippinesSUPREME COURTManila
FIRST DIVISION
G.R. No. 166862 December 20, 2006
MANILA METAL CONTAINER CORPORATION, petitioner, REYNALDO C.
TOLENTINO, intervenor, vs.PHILIPPINE NATIONAL BANK,
respondent,DMCI-PROJECT DEVELOPERS, INC., intervenor.
D E C I S I O N
CALLEJO, SR., J.:
Before us is a petition for review on certiorari of the
Decision1 of the Court of Appeals (CA) in CA-G.R. No. 46153 which
affirmed the decision2 of the Regional Trial Court (RTC), Branch
71, Pasig City, in Civil Case No. 58551, and its Resolution3
denying the motion for reconsideration filed by petitioner Manila
Metal Container Corporation (MMCC).
The Antecedents
Petitioner was the owner of a 8,015 square meter parcel of land
located in Mandaluyong (now a City), Metro Manila. The property was
covered by Transfer Certificate of Title (TCT) No. 332098 of the
Registry of Deeds of Rizal. To secure a P900,000.00 loan it had
obtained from respondent Philippine National Bank (PNB), petitioner
executed a real estate mortgage over the lot. Respondent PNB later
granted petitioner a new credit accommodation of P1,000,000.00;
and, on November 16, 1973, petitioner executed an Amendment4 of
Real Estate Mortgage over its property. On March 31, 1981,
petitioner secured another loan of P653,000.00 from respondent PNB,
payable in quarterly installments of P32,650.00, plus interests and
other charges.5
On August 5, 1982, respondent PNB filed a petition for
extrajudicial foreclosure of the real estate mortgage and sought to
have the property sold at public auction for P911,532.21,
petitioner's outstanding obligation to respondent PNB as of June
30, 1982,6 plus interests and attorney's fees.
After due notice and publication, the property was sold at
public auction on September 28, 1982 where respondent PNB was
declared the winning bidder for P1,000,000.00. The Certificate of
Sale7 issued in its favor was registered with the Office of the
Register of Deeds of Rizal, and was annotated at the dorsal portion
of the title on February 17, 1983. Thus, the period to redeem the
property was to expire on February 17, 1984.
Petitioner sent a letter dated August 25, 1983 to respondent
PNB, requesting that it be granted an extension of time to
redeem/repurchase the property.8 In its reply dated August 30,
1983, respondent PNB informed petitioner that the request had been
referred to its Pasay City Branch for appropriate action and
recommendation.9
In a letter10 dated February 10, 1984, petitioner reiterated its
request for a one year extension from February 17, 1984 within
which to redeem/repurchase the property on installment basis. It
reiterated its request to repurchase the property on installment.11
Meanwhile, some PNB Pasay City Branch personnel informed petitioner
that as a matter of policy, the bank does not accept "partial
redemption."12
Since petitioner failed to redeem the property, the Register of
Deeds cancelled TCT No. 32098 on June 1, 1984, and issued a new
title in favor of respondent PNB.13 Petitioner's offers had not yet
been acted upon by respondent PNB.
Meanwhile, the Special Assets Management Department (SAMD) had
prepared a statement of account, and as of June 25, 1984
petitioner's obligation amounted to P1,574,560.47. This included
the bid price of P1,056,924.50, interest, advances of insurance
premiums, advances on realty taxes, registration expenses,
miscellaneous expenses and publication cost.14 When apprised of the
statement of account, petitioner remitted P725,000.00 to respondent
PNB as "deposit to repurchase," and Official Receipt No. 978191 was
issued to it.15
In the meantime, the SAMD recommended to the management of
respondent PNB that petitioner be allowed to repurchase the
property for P1,574,560.00. In a letter dated November 14, 1984,
the PNB management informed petitioner that it was rejecting the
offer and the recommendation of the SAMD. It was suggested that
petitioner purchase the property for P2,660,000.00, its minimum
market value. Respondent PNB gave petitioner until December 15,
1984 to act on the proposal; otherwise, its P725,000.00 deposit
would be returned and the property would be sold to other
interested buyers.16
Petitioner, however, did not agree to respondent PNB's proposal.
Instead, it wrote another letter dated December 12, 1984 requesting
for a reconsideration. Respondent PNB replied in a letter dated
December 28, 1984, wherein it reiterated its proposal that
petitioner purchase the property for P2,660,000.00. PNB again
informed petitioner that it would return the deposit should
petitioner desire to withdraw its offer to purchase the property.17
On February 25, 1985, petitioner, through counsel, requested that
PNB reconsider its letter dated December 28, 1984. Petitioner
declared that it had already agreed to the SAMD's offer to purchase
the property for P1,574,560.47, and that was why it had paid
P725,000.00. Petitioner warned respondent PNB that it would seek
judicial recourse should PNB insist on the position.18
On June 4, 1985, respondent PNB informed petitioner that the PNB
Board of Directors had accepted petitioner's offer to purchase the
property, but for P1,931,389.53 in cash less the P725,000.00
already deposited with it.19 On page two of the letter was a space
above the typewritten name of petitioner's President, Pablo
Gabriel, where he was to affix his signature. However, Pablo
Gabriel did not conform to the letter but merely indicated therein
that he had received it.20 Petitioner did not respond, so PNB
requested petitioner in a letter dated June 30, 1988 to submit an
amended offer to repurchase.
Petitioner rejected respondent's proposal in a letter dated July
14, 1988. It maintained that respondent PNB had agreed to sell the
property for P1,574,560.47, and that since its P725,000.00
downpayment had been accepted, respondent PNB was proscribed from
increasing the purchase price of the property.21 Petitioner averred
that it had a net balance payable in the amount of P643,452.34.
Respondent PNB, however, rejected petitioner's offer to pay the
balance of P643,452.34 in a letter dated August 1, 1989.22
On August 28, 1989, petitioner filed a complaint against
respondent PNB for "Annulment of Mortgage and Mortgage Foreclosure,
Delivery of Title, or Specific Performance with Damages." To
support its cause of action for specific performance, it alleged
the following:
34. As early as June 25, 1984, PNB had accepted the down payment
from Manila Metal in the substantial amount of P725,000.00 for the
redemption/repurchase price of P1,574,560.47 as approved by its
SMAD and considering the reliance made by Manila Metal and the long
time that has elapsed, the approval of the higher management of the
Bank to confirm the agreement of its SMAD is clearly a potestative
condition which cannot legally prejudice Manila Metal which has
acted and relied on the approval of SMAD. The Bank cannot take
advantage of a condition which is entirely dependent upon its own
will after accepting and benefiting from the substantial payment
made by Manila Metal.
35. PNB approved the repurchase price of P1,574,560.47 for which
it accepted P725,000.00 from Manila Metal. PNB cannot take
advantage of its own delay and long inaction in demanding a higher
amount based on unilateral computation of interest rate without the
consent of Manila Metal.
Petitioner later filed an amended complaint and supported its
claim for damages with the following arguments:
36. That in order to protect itself against the wrongful and
malicious acts of the defendant Bank, plaintiff is constrained to
engage the services of counsel at an agreed fee of P50,000.00 and
to incur litigation expenses of at least P30,000.00, which the
defendant PNB should be condemned to pay the plaintiff Manila
Metal.
37. That by reason of the wrongful and malicious actuations of
defendant PNB, plaintiff Manila Metal suffered besmirched
reputation for which defendant PNB is liable for moral damages of
at least P50,000.00.
38. That for the wrongful and malicious act of defendant PNB
which are highly reprehensible, exemplary damages should be awarded
in favor of the plaintiff by way of example or correction for the
public good of at least P30,000.00.23
Petitioner prayed that, after due proceedings, judgment be
rendered in its favor, thus:
a) Declaring the Amended Real Estate Mortgage (Annex "A") null
and void and without any legal force and effect.
b) Declaring defendant's acts of extra-judicially foreclosing
the mortgage over plaintiff's property and setting it for auction
sale null and void.
c) Ordering the defendant Register of Deeds to cancel the new
title issued in the name of PNB (TCT NO. 43792) covering the
property described in paragraph 4 of the Complaint, to reinstate
TCT No. 37025 in the name of Manila Metal and to cancel the
annotation of the mortgage in question at the back of the TCT No.
37025 described in paragraph 4 of this Complaint.
d) Ordering the defendant PNB to return and/or deliver physical
possession of the TCT No. 37025 described in paragraph 4 of this
Complaint to the plaintiff Manila Metal.
e) Ordering the defendant PNB to pay the plaintiff Manila
Metal's actual damages, moral and exemplary damages in the
aggregate amount of not less than P80,000.00 as may be warranted by
the evidence and fixed by this Honorable Court in the exercise of
its sound discretion, and attorney's fees of P50,000.00 and
litigation expenses of at least P30,000.00 as may be proved during
the trial, and costs of suit.
Plaintiff likewise prays for such further reliefs which may be
deemed just and equitable in the premises.24
In its Answer to the complaint, respondent PNB averred, as a
special and affirmative defense, that it had acquired ownership
over the property after the period to redeem had elapsed. It
claimed that no contract of sale was perfected between it and
petitioner after the period to redeem the property had expired.
During pre-trial, the parties agreed to submit the case for
decision, based on their stipulation of facts.25 The parties agreed
to limit the issues to the following:
1. Whether or not the June 4, 1985 letter of the defendant
approving/accepting plaintiff's offer to purchase the property is
still valid and legally enforceable.
2. Whether or not the plaintiff has waived its right to purchase
the property when it failed to conform with the conditions set
forth by the defendant in its letter dated June 4, 1985.
3. Whether or not there is a perfected contract of sale between
the parties.26
While the case was pending, respondent PNB demanded, on
September 20, 1989, that petitioner vacate the property within 15
days from notice,27 but petitioners refused to do so.
On March 18, 1993, petitioner offered to repurchase the property
for P3,500,000.00.28 The offer was however rejected by respondent
PNB, in a letter dated April 13, 1993. According to it, the
prevailing market value of the property was approximately
P30,000,000.00, and as a matter of policy, it could not sell the
property for less than its market value.29 On June 21, 1993,
petitioner offered to purchase the property for P4,250,000.00 in
cash.30 The offer was again rejected by respondent PNB on September
13, 1993.31
On May 31, 1994, the trial court rendered judgment dismissing
the amended complaint and respondent PNB's counterclaim. It ordered
respondent PNB to refund the P725,000.00 deposit petitioner had
made.32 The trial court ruled that there was no perfected contract
of sale between the parties; hence, petitioner had no cause of
action for specific performance against respondent. The trial court
declared that respondent had rejected petitioner's offer to
repurchase the property. Petitioner, in turn, rejected the terms
and conditions contained in the June 4, 1985 letter of the SAMD.
While petitioner had offered to repurchase the property per its
letter of July 14, 1988, the amount of P643,422.34 was way below
the P1,206,389.53 which respondent PNB had demanded. It further
declared that the P725,000.00 remitted by petitioner to respondent
PNB on June 4, 1985 was a "deposit," and not a downpayment or
earnest money.
On appeal to the CA, petitioner made the following
allegations:
I
THE LOWER COURT ERRED IN RULING THAT DEFENDANT-APPELLEE'S LETTER
DATED 4 JUNE 1985 APPROVING/ACCEPTING PLAINTIFF-APPELLANT'S OFFER
TO PURCHASE THE SUBJECT PROPERTY IS NOT VALID AND ENFORCEABLE.
II
THE LOWER COURT ERRED IN RULING THAT THERE WAS NO PERFECTED
CONTRACT OF SALE BETWEEN PLAINTIFF-APPELLANT AND
DEFENDANT-APPELLEE.
III
THE LOWER COURT ERRED IN RULING THAT PLAINTIFF-APPELLLANT WAIVED
ITS RIGHT TO PURCHASE THE SUBJECT PROPERTY WHEN IT FAILED TO
CONFORM WITH CONDITIONS SET FORTH BY DEFENDANT-APPELLEE IN ITS
LETTER DATED 4 JUNE 1985.
IV
THE LOWER COURT ERRED IN DISREGARDING THE FACT THAT IT WAS THE
DEFENDANT-APPELLEE WHICH RENDERED IT DIFFICULT IF NOT IMPOSSIBLE
FOR PLAINTIFF-APPELLANT TO COMPLETE THE BALANCE OF THEIR PURCHASE
PRICE.
V
THE LOWER COURT ERRED IN DISREGARDING THE FACT THAT THERE WAS NO
VALID RESCISSION OR CANCELLATION OF SUBJECT CONTRACT OF
REPURCHASE.
VI
THE LOWER COURT ERRED IN DECLARING THAT PLAINTIFF FAILED AND
REFUSED TO SUBMIT THE AMENDED REPURCHASE OFFER.
VII
THE LOWER COURT ERRED IN DISMISSING THE AMENDED COMPLAINT OF
PLAINTIFF-APPELLANT.
VIII
THE LOWER COURT ERRED IN NOT AWARDING PLAINTIFF-APPELLANT
ACTUAL, MORAL AND EXEMPLARY DAMAGES, ATTOTRNEY'S FEES AND
LITIGATION EXPENSES.33
Meanwhile, on June 17, 1993, petitioner's Board of Directors
approved Resolution No. 3-004, where it waived, assigned and
transferred its rights over the property covered by TCT No. 33099
and TCT No. 37025 in favor of Bayani Gabriel, one of its
Directors.34 Thereafter, Bayani Gabriel executed a Deed of
Assignment over 51% of the ownership and management of the property
in favor of Reynaldo Tolentino, who later moved for leave to
intervene as plaintiff-appellant. On July 14, 1993, the CA issued a
resolution granting the motion,35 and likewise granted the motion
of Reynaldo Tolentino substituting petitioner MMCC, as
plaintiff-appellant, and his motion to withdraw as
intervenor.36
The CA rendered judgment on May 11, 2000 affirming the decision
of the RTC.37 It declared that petitioner obviously never agreed to
the selling price proposed by respondent PNB (P1,931,389.53) since
petitioner had kept on insisting that the selling price should be
lowered to P1,574,560.47. Clearly therefore, there was no meeting
of the minds between the parties as to the price or consideration
of the sale.
The CA ratiocinated that petitioner's original offer to purchase
the subject property had not been accepted by respondent PNB. In
fact, it made a counter-offer through its June 4, 1985 letter
specifically on the selling price; petitioner did not agree to the
counter-offer; and the negotiations did not prosper. Moreover,
petitioner did not pay the balance of the purchase price within the
sixty-day period set in the June 4, 1985 letter of respondent PNB.
Consequently, there was no perfected contract of sale, and as such,
there was no contract to rescind.
According to the appellate court, the claim for damages and the
counterclaim were correctly dismissed by the court a quo for no
evidence was presented to support it. Respondent PNB's letter dated
June 30, 1988 cannot revive the failed negotiations between the
parties. Respondent PNB merely asked petitioner to submit an
amended offer to repurchase. While petitioner reiterated its
request for a lower selling price and that the balance of the
repurchase be reduced, however, respondent rejected the proposal in
a letter dated August 1, 1989.
Petitioner filed a motion for reconsideration, which the CA
likewise denied.
Thus, petitioner filed the instant petition for review on
certiorari, alleging that:
I. THE COURT OF APPEALS ERRED ON A QUESTION OF LAW WHEN IT RULED
THAT THERE IS NO PERFECTED CONTRACT OF SALE BETWEEN THE PETITIONER
AND RESPONDENT.
II. THE COURT OF APPEALS ERRED ON A QUESTION OF LAW WHEN IT
RULED THAT THE AMOUNT OF PHP725,000.00 PAID BY THE PETITIONER IS
NOT AN EARNEST MONEY.
III. THE COURT OF APPEALS ERRED ON A QUESTION OF LAW WHEN IT
RULED THAT THE FAILURE OF THE PETITIONER-APPELLANT TO SIGNIFY ITS
CONFORMITY TO THE TERMS CONTAINED IN PNB'S JUNE 4, 1985 LETTER
MEANS THAT THERE WAS NO VALID AND LEGALLY ENFORCEABLE CONTRACT OF
SALE BETWEEN THE PARTIES.
IV. THE COURT OF APPEALS ERRED ON A QUESTION OF LAW THAT
NON-PAYMENT OF THE PETITIONER-APPELLANT OF THE BALANCE OF THE
OFFERED PRICE IN THE LETTER OF PNB DATED JUNE 4, 1985, WITHIN SIXTY
(60) DAYS FROM NOTICE OF APPROVAL CONSTITUTES NO VALID AND LEGALLY
ENFORCEABLE CONTRACT OF SALE BETWEEN THE PARTIES.
V. THE COURT OF APPEALS SERIOUSLY ERRED WHEN IT HELD THAT THE
LETTERS OF PETITIONER-APPELLANT DATED MARCH 18, 1993 AND JUNE 21,
1993, OFFERING TO BUY THE SUBJECT PROPERTY AT DIFFERENT AMOUNT WERE
PROOF THAT THERE IS NO PERFECTED CONTRACT OF SALE.38
The threshold issue is whether or not petitioner and respondent
PNB had entered into a perfected contract for petitioner to
repurchase the property from respondent.
Petitioner maintains that it had accepted respondent's offer
made through the SAMD, to sell the property for P1,574,560.00. When
the acceptance was made in its letter dated June 25, 1984; it then
deposited P725,000.00 with the SAMD as partial payment, evidenced
by Receipt No. 978194 which respondent had issued. Petitioner avers
that the SAMD's acceptance of the deposit amounted to an acceptance
of its offer to repurchase. Moreover, as gleaned from the letter of
SAMD dated June 4, 1985, the PNB Board of Directors had approved
petitioner's offer to purchase the property. It claims that this
was the suspensive condition, the fulfillment of which gave rise to
the contract. Respondent could no longer unilaterally withdraw its
offer to sell the property for P1,574,560.47, since the acceptance
of the offer resulted in a perfected contract of sale; it was
obliged to remit to respondent the balance of the original purchase
price of P1,574,560.47, while respondent was obliged to transfer
ownership and deliver the property to petitioner, conformably with
Article 1159 of the New Civil Code.
Petitioner posits that respondent was proscribed from increasing
the interest rate after it had accepted respondent's offer to sell
the property for P1,574,560.00. Consequently, respondent could no
longer validly make a counter-offer of P1,931,789.88 for the
purchase of the property. It likewise maintains that, although the
P725,000.00 was considered as "deposit for the repurchase of the
property" in the receipt issued by the SAMD, the amount constitutes
earnest money as contemplated in Article 1482 of the New Civil
Code. Petitioner cites the rulings of this Court in Villonco v.
Bormaheco39 and Topacio v. Court of Appeals.40
Petitioner avers that its failure to append its conformity to
the June 4, 1984 letter of respondent and its failure to pay the
balance of the price as fixed by respondent within the 60-day
period from notice was to protest respondent's breach of its
obligation to petitioner. It did not amount to a rejection of
respondent's offer to sell the property since respondent was merely
seeking to enforce its right to pay the balance of P1,570,564.47.
In any event, respondent had the option either to accept the
balance of the offered price or to cause the rescission of the
contract.
Petitioner's letters dated March 18, 1993 and June 21, 1993 to
respondent during the pendency of the case in the RTC were merely
to compromise the pending lawsuit, they did not constitute separate
offers to repurchase the property. Such offer to compromise should
not be taken against it, in accordance with Section 27, Rule 130 of
the Revised Rules of Court.
For its part, respondent contends that the parties never
graduated from the "negotiation stage" as they could not agree on
the amount of the repurchase price of the property. All that
transpired was an exchange of proposals and counter-proposals,
nothing more. It insists that a definite agreement on the amount
and manner of payment of the price are essential elements in the
formation of a binding and enforceable contract of sale. There was
no such agreement in this case. Primarily, the concept o