SAN MIGUEL PROPERTIES vs.

HUANG
(G.R. No. 137290, July 31, 2000)
Facts:
Petitioner San Miguel Properties owns two parcels of land
which were offered to Atty Dauz who was acting in behalf of
respondent spouses Huang. The subject properties were
offered for sale in cash; however, Atty. Dauz gave a counteroffer to pay the purchase price in 8 monthly installments
instead, which San Miguel refused.
So on March 29, 1994, Atty. Dauz sent another proposal and
gave P1,000,000.00 representing earnest-deposit money, so
that his clients may be given the exclusive option to purchase
the property within the 30 days from date of the acceptance of
the said proposal.
San Miguel manifested their acceptance and negotiations
commenced afterwards. However, the parties were not able to
agree on the terms of the payment. And so on July 7, 1994, the
petitioner informed the respondents that they are returning the
earnest-deposit as they failed to come into an agreement.
Issue/s:
Whether or not the acceptance of the proposal dated March 29
merely resulted in an option contract. Yes.
WON the failure to come into an agreement as to the mode of
payment was fatal to the perfection of the contract of sale.
Ruling:
1. With regard to the alleged payment and acceptance of
earnest money, the Court holds that respondents did not give
the P1 million as "earnest money" as provided by Art. 1482 of
the Civil Code. They presented the amount merely as a deposit
of what would eventually become the earnest money or
downpayment should a contract of sale be made by them. The
amount was thus given not as a part of the purchase price and
as proof of the perfection of the contract of sale but only as a
guarantee that respondents would not back out of the sale.
The P1 million "earnest-deposit" could not have been given as
earnest money as contemplated in Art. 1482 because, at the
time when petitioner accepted the terms of respondents offer
of March 29, 1994, their contract had not yet been perfected.
Equally compelling as proof of the absence of a perfected sale
is the second condition that, during the option period, the
parties would negotiate the terms and conditions of the
purchase. The stages of a contract of sale are as follows: (1)
negotiation, covering the period from the time the prospective
contracting parties indicate interest in the contract to the time
the contract is perfected; (2) perfection, which takes place
upon the concurrence of the essential elements of the sale
which are the meeting of the minds of the parties as to the
object of the contract and upon the price; and (3)
consummation, which begins when the parties perform their
respective undertakings under the contract of sale, culminating
in the extinguishment thereof.[12] In the present case, the
parties never got past the negotiation stage.
2. In Navarro v. Sugar Producers Cooperative Marketing
Association, Inc.,[14] we laid down the rule that the manner of
payment of the purchase price is an essential element before a
valid and binding contract of sale can exist. Although the Civil
Code does not expressly state that the minds of the parties
must also meet on the terms or manner of payment of the
price, the same is needed, otherwise there is no sale.

Notes:
An obligation is a juridical necessity to give, to do or not to do
(Art. 1156, Civil Code).
The obligation is constituted upon the concurrence of the
essential elements thereof, viz:
(a) The vinculum juris or juridical tiewhich is the efficient cause
established by the various sources of obligations (law,
contracts, quasi-contracts, delicts and quasi-delicts);
(b) the object which is the prestation or conduct; required to be
observed (to give, to do or not to do); and
(c) the subject-persons who, viewed from the demandability of
the obligation, are the active (obligee) and the passive (obligor)
subjects.
Among the sources of an obligation is a contract (Art. 1157,
Civil Code), which is a meeting of minds between two persons
whereby one binds himself, with respect to the other, to give
something or to render some service (Art. 1305, Civil Code).
A contract undergoes various stages that include its
negotiation or preparation, its perfection and, finally, its
consummation.
1. Negotiation covers the period from the time the prospective
contracting parties indicate interest in the contract to the time
the contract is concluded (perfected).
2. 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 realcontract. 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.
3. The stage of consummation begins when the parties
perform their respective undertakings under the contract
culminating in the extinguishment thereof.
Until the contract is perfected, it cannot, as an independent
source of obligation, serve as a binding juridical relation.
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 (absolute or conditional) vs. Perfected
Contract of Option:
a. Conditional sale - in a "Contract to Sell" the ownership of the
thing sold is retained until the fulfillment of a positive
suspensive condition (normally, the full payment of the
purchase price), the breach of the condition will prevent the
obligation to convey title from acquiring an obligatory force. 2
b. Absolute sale - where the contract is devoid of any proviso
that title is reserved or the right to unilaterally rescind is
stipulated, e.g., until or unless the price is paid. Ownership will
then be transferred to the buyer upon actual or constructive
delivery (e.g., by the execution of a public document) of the
property sold.
c. Perfected contract of Option - An accepted unilateral
promise which specifies the thing to be sold and the price to be
paid, coupled with a valuable consideration distinct and
separate from the price (Art. 1479)

Observe that the option is not the contract of sale itself. The
optionee has the right, but not the obligation, to buy. Once the
option is exercised timely, i.e., the offer is accepted before a
breach of the option, a bilateral promise to sell and to buy
ensues and both parties are then reciprocally bound to comply
with their respective undertakings.
Policitation - An imperfect promise which is merely an offer.
Public advertisements or solicitations and the like are ordinarily
construed as mere invitations to make offers or only as
proposals. These relations, until a contract is perfected, are not
considered binding commitments. Thus, at any time prior to the
perfection of the contract, either negotiating party may stop the
negotiation. The offer, at this stage, may be withdrawn; the
withdrawal is effective immediately after its manifestation, such
as by its mailing and not necessarily when the offeree learns of
the withdrawal Where a period is given to the offeree within
which to accept the offer, the following rules generally govern:
(1) If the period is not itself founded upon or supported by a
consideration, the offeror is still free and has the right to
withdraw the offer before its acceptance, or, if an acceptance
has been made, before the offeror's coming to know of such
fact, by communicating that withdrawal to the offeree (see Art.
1324).
The right to withdraw, however, must not be exercised
whimsically or arbitrarily; otherwise, it could give rise to a
damage claim under Article 19 of the Civil Code which ordains
that "every person must, in the exercise of his rights and in the
performance of his duties, act with justice, give everyone his
due, and observe honesty and good faith."
(2) If the period has a separate consideration, a contract of
"option" is deemed perfected, and it would be a breach of that
contract to withdraw the offer during the agreed period. The
option, however, is an independent contract by itself, and it is
to be distinguished from the projected main agreement (subject
matter of the option) which is obviously yet to be concluded. If,
in fact, the optioner-offeror withdraws the offer before its
acceptance(exercise of the option) by the optionee-offeree, the
latter may not sue for specific performance on the proposed
contract ("object" of the option) since it has failed to reach its
own stage of perfection. The optioner-offeror, however, renders
himself liable for damages for breach of the option. In these
cases, care should be taken of the real nature of the
consideration given, for if, in fact, it has been intended to be
part of the consideration for the main contract with a right of
withdrawal on the part of the optionee, the main contract could
be deemed perfected; a similar instance would be an "earnest
money" in a contract of sale that can evidence its perfection
(Art. 1482, Civil Code).
Option vs. Right of First Refusal
a.) An option (1479 par. 2) or an offer (Art. 1319) would require,
among other things, a clear certainty on both the object and
the cause or consideration of the envisioned contract.
Governed by laws on contracts.
b.) In a right of first refusal, while the object might be made
determinate, the exercise of the right, however, would be
dependent not only on the grantor's eventual intention to enter
into a binding juridical relation with another but also on terms,
including the price, that obviously are yet to be later firmed up.
Governed not by laws of contract but of other general laws and
those governing human conduct.

TAYAG vs. LACSON (G.R. No. 134971. March 25, 2004)

Facts:
Respondents Lacson,3 and her children were the registered
owners of subject parcels of land.
On March 17, 1996, a group of original farmers/tillers of
respondent Lacsons land executed in favor of the petitioner
separate Deeds of Assignment6 in which the assignees
assigned to the petitioner their respective rights as
tenants/tillers of the landholdings possessed and tilled by them
for and in consideration of P50.00 per square meter. The
petitioner in turn gave varied sums of money to the tenants as
partial payments.
However, on August 8, 1996, the defendants-tenants, wrote the
petitioner stating their collective decision to sell all their rights
and interests, as tenants/lessees, over the landholding to the
respondents. So the petitioner filed a complaint against the
defendants-tenants, as well as the respondents Lacson, for the
fixing of the period within which to pay the agreed purchase
price of P50.00 per square meter to the defendants, as
provided for in the Deeds of Assignment.
Issue/s: WON there was a perfected contract of option
between Tayag and Lacson. NO.
Ruling:
We do not agree with the contention of the petitioner that the
deeds of assignment executed by the defendants-tenants are
perfected option contracts.
An option is a contract by which the owner of the property
agrees with another person that he shall have the right to buy
his property at a fixed price within a certain time. It is a
condition offered or contract by which the owner stipulates with
another that the latter shall have the right to buy the property at
a fixed price within a certain time, or under, or in compliance
with certain terms and conditions, or which gives to the owner
of the property the right to sell or demand a sale. It imposes no
binding obligation on the person holding the option, aside from
the consideration for the offer. Until accepted, it is not, properly
speaking, treated as a contract. The second party gets in
praesenti, not lands, not an agreement that he shall have the
lands, but the right to call for and receive lands if he elects. An
option contract is a separate and distinct contract from which
the parties may enter into upon the conjunction of the option.
In this case, the defendants-tenants-subtenants, under the
deeds of assignment, granted to the petitioner not only an
option but the exclusive right to buy the landholding. But the
grantors were merely the defendants-tenants, and not the
respondents, the registered owners of the property. Not being
the registered owners of the property, the defendants-tenants
could not legally grant to the petitioner the option, much less
the "exclusive right" to buy the property. As the Latin saying
goes, "NEMO DAT QUOD NON HABET."

LIMSON vs. CA
(G.R. No. 135929. April 20, 2001)
Facts:
Petitioner Limson alleged that respondent spouses de Vera
offered to sell to petitioner a specific parcel of land and that on
31 July 1978 she agreed to buy it at P34.00 per square meter
and gave P20, 000.00 to respondent spouses as "earnest
money;" for which, the respondent spouses gave her a 10-day
option period to purchase the property.
On 5 September 1978 petitioner learned that the property was
already being sold to SUNVAR Corp and ultimately on
September 15, 1978, a deed of sale between respondent
spouses and SUNVAR was executed. Petitioner now claim that
when respondent spouses sold the property in dispute to
SUNVAR, her valid and legal right to purchase it was violated.
Issue:
At issue is the nature of the contract entered into between
petitioner Limson and respondent spouses de Vera. And WON
there was a perfected contract to sell between her and
respondent spouses.
Ruling:
A scrutiny of the facts as well as the evidence of the parties
overwhelmingly leads to the conclusion that the agreement
between the parties was a contract of option and not a contract
to sell.
The consideration of P20,000.00 paid by petitioner was
designated as an earnest money, however a careful
examination of the words indicate that it is really an option
money.
In the interpretation of contracts, the ascertainment of the
intention of the contracting parties is to be discharged by
looking to the words they used to project that intention in their
contracts. The Receipt readily shows that respondent spouses
and petitioner only entered into a contract of option; a contract
by which respondent spouses agreed with petitioner that the
latter shall have the right to buy the former's property at a fixed
price of P34.00 per square meter within ten (10) days from 31
July 1978.
Also, there is nothing in the Receipt which indicates that the
P20,000.00 was part of the purchase price. And when
petitioner gave the "earnest money" the Receipt did not reveal
that she was bound to pay the balance of the purchase price.
On or before 10 August 1978, the last day of the option period,
no affirmative or clear manifestation was made by petitioner to
accept the offer. Certainly, there was no concurrence of private
respondent spouses offer and petitioners acceptance thereof
within the option period. Consequently, there was no perfected
contract to sell between the parties.
On 11 August 1978 the option period expired and the exclusive
right of petitioner to buy the property of respondent spouses
ceased.
Notes:
Option - is a continuing offer or contract by which the owner
stipulates with another that the latter shall have the right to buy
the property at a fixed price within a time certain, or under, or in
compliance with, certain terms and conditions, or which gives
to the owner of the property the right to sell or demand a sale.
It is also sometimes called an "unaccepted offer." An option is
not itself a purchase, but merely secures the privilege to buy. It
is not a sale of property but a sale of right to purchase.

Its distinguishing characteristic is that it imposes no binding

obligation on the person holding the option, aside from the
consideration for the offer. Until acceptance, it is not, properly
speaking, a contract, and does not vest, transfer, or agree to
transfer, any title to, or any interest or right in the subject
matter, but is merely a contract by which the owner of the
property gives the optionee the right or privilege of accepting
the offer and buying the property on certain terms.
A contract - like a contract to sell, involves the meeting of
minds between two persons whereby one binds himself, with
respect to the other, to give something or to render some
service.12Contracts, in general, are perfected by mere
consent, which is manifested by the meeting of the offer and
the acceptance upon the thing and the cause which are to
constitute the contract. The offer must be certain and the
acceptance absolute.
"Earnest money" and "option money" are not the same but
distinguished thus; (a) earnest money is part of the purchase
price, while option money is the money given as a distinct
consideration for an option contract; (b) earnest money given
only where there is already a sale, while option money applies
to a sale not yet perfected; and, (c) when earnest money is
given, the buyer is bound to pay the balance, while when the
would-be buyer gives option money, he is not required to buy,
but may even forfeit it depending on the terms of the option.

G.R. No. 155043

September 30, 2004

ARTURO R. ABALOS, petitioner,

vs.
DR. GALICANO S. MACATANGAY, JR., respondent.

Spouses Arturo and Esther Abalos are the registered owners of

a parcel of land with improvements located at Azucena St.,
Makati City consisting of about 327m2, covered by TCT No.
145316 of the Registry of Deeds of Makati.

Armed with a SPA dated June 2, 1988, purportedly issued by

his wife, Arturo executed a Receipt and Memorandum of
Agreement (RMOA) dated October 17, 1989, in favor of
respondent, binding himself to sell to respondent the subject
property and not to offer the same to any other party within 30
days from date. Arturo acknowledged receipt of a check from
respondent in the amount of 5,000.00 representing earnest
money for the subject property, the amount of which would be
deducted from the purchase price of 1,300,000.00. Further, the
RMOA stated that full payment would be effected as soon as
possession of the property shall have been turned over to
respondent.

Subsequently, Arturos wife, Esther, executed a Special Power

of Attorney dated October 25, 1989, appointing her sister,
Bernadette Ramos, to act for and in her behalf relative to the
transfer of the property to respondent. Ostensibly, a marital
squabble was brewing between Arturo and Esther at the time
and to protect his interest, respondent caused the annotation
of his adverse claim on the title of the spouses to the property
on November 14, 1989.

On November 16, 1989, respondent sent a letter to Arturo and

Esther informing them of his readiness and willingness to pay
the full amount of the purchase price. The letter contained a
demand upon the spouses to comply with their obligation to
turn over possession of the property to him. On the same date,
Esther, through her attorney-in-fact, executed in favor of
respondent, a Contract to Sell the property to the extent of her
conjugal interest therein for the sum of 650,000.00 less the
sum already received by her and Arturo. Esther agreed to
surrender possession of the property to respondent within 20
days from November 16, 1989, while the latter promised to pay
the balance of the purchase price in the amount of
1,290,000.00 after being placed in possession of the property.
Esther also obligated herself to execute and deliver to
respondent a deed of absolute sale upon full payment.

In a letter dated December 7, 1989, respondent informed the

spouses that he had set aside the amount of 1,290,000.00 as
evidenced by Citibank Check No. 278107 as full payment of
the purchase price. He reiterated his demand upon them to

comply with their obligation to turn over possession of the

property. Arturo and Esther failed to deliver the property which
prompted respondent to cause the annotation of another
adverse claim on TCT No. 145316. On January 12, 1990,
respondent filed a complaint for specific performance with
damages against petitioners. Arturo filed his answer to the
complaint while his wife was declared in default.

RTC - dismissed the complaint for specific performance. It

ruled that the SPA ostensibly issued by Esther in favor of
Arturo was void as it was falsified. Hence, the court concluded
that the SPA could not have authorized Arturo to sell the
property to respondent. The trial court also noted that the
check issued by respondent to cover the earnest money was
dishonored due to insufficiency of funds and while it was
replaced with another check by respondent, there is no
showing that the second check was issued as payment for the
earnest money on the property.

CA - reversed the decision of the trial court. It ruled that the

SPA in favor of Arturo, assuming that it was void, cannot affect
the transaction between Esther and respondent. The appellate
court ratiocinated that it was by virtue of the SPA executed by
Esther, in favor of her sister, that the sale of the property to
respondent was effected. On the other hand, the appellate
court considered the RMOA executed by Arturo in favor of
respondent valid to effect the sale of Arturos conjugal share in
the property.

Petitioners contentions:
1.

He asserts that the sale between him and respondent

is void for lack of consent because the SPA
purportedly executed by his wife Esther is a forgery
and therefore, he could not have validly sold the
subject property to respondent.

2.

the RMOA he executed in favor of respondent was

not perfected because the check representing the
earnest money was dishonored. He adds that there is
no evidence on record that the second check issued
by respondent was intended to replace the first check
representing payment of earnest money.

ISSUE:
Whether petitioner may be compelled to convey the property to
respondent under the terms of the RMOA and the Contract to
Sell

RULING:
Contracts, in general, require the presence of three essential
elements: (1) consent of the contracting parties; (2) object

certain which is the subject matter of the contract; and (3)

cause of the obligation which is established.

Until the contract is perfected, it cannot, as an independent

source of obligation, serve as a binding juridical relation. In a
contract of sale, the seller must consent to transfer ownership
in exchange for the price, the subject matter must be
determinate, and the price must be certain in money or its
equivalent. Being essentially consensual, a contract of sale is
perfected at the moment there is a meeting of the minds upon
the thing which is the object of the contract and upon the
price. However, ownership of the thing sold shall not be
transferred to the vendee until actual or constructive delivery of
the property.
On the other hand, an accepted unilateral promise which
specifies the thing to be sold and the price to be paid, when
coupled with a valuable consideration distinct and separate
from the price, is what may properly be termed a perfected
contract of option. An option merely grants a privilege to buy or
sell within an agreed time and at a determined price. It is
separate and distinct from that which the parties may enter into
upon the consummation of the option. A perfected contract of
option does not result in the perfection or consummation of the
sale; only when the option is exercised may a sale be
perfected. The option must, however, be supported by a
consideration distinct from the price.

The nullity of the RMOA as a contract of sale emanates not

only from lack of Esthers consent thereto but also from want of
consideration and absence of respondents signature thereon.
Such nullity cannot be obliterated by Esthers subsequent
confirmation of the putative transaction as expressed in the
Contract to Sell. Under the law, a void contract cannot be
ratified18 and the action or defense for the declaration of the
inexistence of a contract does not prescribe. 19 A void contract
produces no effect either against or in favor of anyoneit
cannot create, modify or extinguish the juridical relation to
which it refers.20

True, in the Contract to Sell, Esther made reference to the

earlier RMOA executed by Arturo in favor of respondent.
However, the RMOA which Arturo signed is different from the
deed which Esther executed through her attorney-in-fact. For
one, the first is sought to be enforced as a contract of sale
while the second is purportedly a contract to sell only. For
another, the terms and conditions as to the issuance of title
and delivery of possession are divergent.

The congruence of the wills of the spouses is essential for the

valid disposition of conjugal property. Where the conveyance is
contained in the same document which bears the conformity of
both husband and wife, there could be no question on the
validity of the transaction. But when there are two (2)
documents on which the signatures of the spouses separately
appear, textual concordance of the documents is
indispensable. Hence, in this case where the wifes putative
consent to the sale of conjugal property appears in a separate

document which does not, however, contain the same terms

and conditions as in the first document signed by the husband,
a valid transaction could not have arisen.

Arturo and Esther appear to have been married before the

effectivity of the FC. There being no indication that they have
adopted a different property regime, their property relations
would automatically be governed by the regime of conjugal
partnership of gains.

The subject land which had been admittedly acquired during

the marriage of the spouses forms part of their conjugal
partnership.22

Under the CC, the husband is the administrator of the conjugal

partnership. This right is clearly granted to him by law. 23 More,
the husband is the sole administrator. The wife is not entitled
as of right to joint administration.

The husband, even if he is statutorily designated as

administrator of the conjugal partnership, cannot validly
alienate or encumber any real property of the conjugal
partnership without the wifes consent. Similarly, the wife
cannot dispose of any property belonging to the conjugal
partnership without the conformity of the husband. The law is
explicit that the wife cannot bind the conjugal partnership
without the husbands consent, except in cases provided by
law.

More significantly, it has been held that prior to the liquidation

of the conjugal partnership, the interest of each spouse in the
conjugal assets is inchoate, a mere expectancy, which
constitutes neither a legal nor an equitable estate, and does
not ripen into title until it appears that there are assets in the
community as a result of the liquidation and settlement. The
interest of each spouse is limited to the net remainder or
"remanente liquido" (haber ganancial) resulting from the
liquidation of the affairs of the partnership after its
dissolution. Thus, the right of the husband or wife to one-half of
the conjugal assets does not vest until the dissolution and
liquidation of the conjugal partnership, or after dissolution of
the marriage, when it is finally determined that, after settlement
of conjugal obligations, there are net assets left which can be
divided between the spouses or their respective heirs.

In not a few cases, we ruled that the sale by the husband of

property belonging to the conjugal partnership without the
consent of the wife when there is no showing that the latter is
incapacitated is void ab initio because it is in contravention of
the mandatory requirements of Article 166 of the Civil
Code. Since Article 166 of the Civil Code requires the consent
of the wife before the husband may alienate or encumber any
real property of the conjugal partnership, it follows that acts or

transactions executed against this mandatory provision are

void except when the law itself authorizes their validity.30
As an exception, the husband may dispose of conjugal
property without the wifes consent if such sale is necessary to
answer for conjugal liabilities mentioned in Articles 161 and
162 of the Civil Code.

Inescapably, herein petitioners action for specific performance

must fail. Even on the supposition that the parties only
disposed of their respective shares in the property, the sale,
assuming that it exists, is still void for as previously stated, the
right of the husband or the wife to one-half of the conjugal
assets does not vest until the liquidation of the conjugal
partnership. Nemo dat qui non habet. No one can give what he
has not.