Page | 1
G.R. No. 90634-35 June 6, 1990
CARMELCRAFT CORPORATION &/OR CARMEN V. YULO, President and
General Manager, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION, CARMELCRAFT EMPLOYEES
UNION, PROGRESSIVE FEDERATION OF LABOR, represented by its Local
President GEORGE OBANA, respondents.
CRUZ, J.:
The Court is appalled by the degree of bad faith that has characterized the petitioners'
treatment of their employees. It borders on puredisdain. And on top of this, they now
have the temerity to seek from us a relief to which they are clearly not entitled. The
petition must be dismissed.
The record shows that after its registration as a labor union, the Camelcraft
Employees Union sought but did not get recognition from the petitioners.
Consequently, it filed a petition for certification election in June 1987. On July 13,
1987, Camelcraft Corporation, through its president and general manager, Carmen
Yulo, announced in a meeting with the employees that it would cease operations on
August 13, 1987, due to serious financial losses. Operations did cease as
announced. On August 17, 1987, the union filed a complaint with the Department of
Labor against the petitioners for illegal lockout, unfair labor practice and damages,
followed the next day with another complaint for payment of unpaid wages,
emergency cost of living allowances, holiday pay, and other benefits. On November
29, 1988, the Labor Arbiter declared the shutdown illegal and violative of the
employees' right to self-organization. The claim for unpaid benefits was also
granted. 1 After reviewing the decision on appeal, the respondent NLRC declared:
WHEREFORE, premises considered, the appealed decision is
modified. In addition to the underpayment in their wages,
emergency living allowance, 13th month pay, legal holiday pay and
premium pay for holidays for a period of three years, the
respondents are ordered to pay complainants their separation pay
equivalent to one-month pay for every year of service, a fraction of
six months or more shall be considered as one (1) whole year.
The rest of the disposition stand. 2
We do not find that the above decision is tainted with grave abuse of discretion. On
the contrary, it is comformable to the pertinent laws and the facts clearly established
at the hearing.
The reason invoked by the petitioner company to justify the cessation of its operations
is hardly credible; in fact, it is preposterous when viewed in the light of the other
relevent circumstances. Its justification is that it sustained losses in the amount of P
1,603.88 as of December 31, 1986 . 3 There is no report, however, of its operations
during the period after that date, that is, during the succeeding seven and a half
months before it decided to close its business. Significantly, the company is
capitalized at P 3 million . 4 Considering such a substantial investment, we hardly think
that a loss of the paltry sum of less than P 2,000.00 could be considered serious
enough to call for the closure of the company.
We agree with the public respondent that the real reason for the decision of the
petitioners to cease operations was the establishment of respondent Carmelcraft
Employees Union. It was apparently unwelcome to the corporation, which would
rather shut down than deal with the union. There is the allegation from the private
respondent that the company had suggested that it might decide not to close the
business if the employees were to affiliate with another union which the management
preferred. 5 This allegation has not been satisfactorily disproved. At any rate, the
finding of the NLRC is more believable than the ground invoked by the petitioners.
Notably, this justification was made only eight months after the alleged year-end loss
and shortly after the respondent union filed a petition for certification election.
The act of the petitioners was an unfair labor practice prohibited by Article 248 of the
Labor Code, to wit:
ART. 248. Unfair labor practices of employers.-It shall be unlawful
for an employer to commit any of the following unfair labor practice:
(a) To interfere with, restrain or coerce employees in the exercise of
their right to self-organization;
More importantly, it was a defiance of the constitutional provision guaranteeing to
workers the right to self-organization and to enter into collective bargaining with
management through the labor union of their own choice and confidence. 6
The determination to cease operations is a prerogative of management that is usually
not interfered with by the State as no business can be required to continue operating
at a loss simply to maintain the workers in employment. 7 That would be a taking of
property without due process of law which the employer has a right to resist. But
where it is manifest that the closure is motivated not by a desire to avoid further
losses but to discourage the workers from organizing themselves into a union for
more effective negotiations with the management, the State is bound to intervene.
And, indeed, even without such motivation, the closure cannot be justified because
the claimed losses are obviously not serious. In this situation, the employees are

entitled to separation pay at the rate of one-half month for every year of service under
Art. 283 of the Labor Code.
The contention of the petitioners that the employees are estopped from claiming the
alleged unpaid wages and other compensation must also be rejected. This claim is
based on the waivers supposedly made by the complainants on the understanding
that "the management will implement prospectively all benefits under existing labor
standard laws." The petitioners argue that this assurance provided the consideration
that made the quitclaims executed by the employees valid. They add that the waivers
were made voluntarily and contend that the contract should be respected as the law
between the parties.
Even if voluntarily executed, agreements are invalid if they are contrary to public
policy. This is elementary. The protection of labor is one of the policies laid down by
the Constitution not only by specific provision but also as part of social justice. The
Civil Code itself provides:
ART. 6. Rights may be waived, unless the waiver is contrary to law,
public order, public policy, morals, or good customs, or prejudicial to
a third person with a right recognized by law.
ART. 1306. The contracting parties may establish such stipulations,
clauses, terms and conditions as they may deem convenient,
provided they are not contrary to law, morals, good customs, public
order, or public policy.
The subordinate position of the individual employee vis-a-vis management renders
him especially vulnerable to its blandishments and importunings, and even
intimidations, that may result in his improvidently if reluctantly signing over benefits to
which he is clearly entitled. Recognizing this danger, we have consistently held that
quitclaims of the workers' benefits win not estop them from asserting them just the
same on the ground that public policy prohibits such waivers.
That the employee has signed a satisfaction receipt does not result
in a waiver; the law does not consider as valid any agreement to
receive less compensation than what a worker is entitled to recover.
A deed of release or quitclaim cannot bar an employee from
demanding benefits to which he is legally entitled. 8
Release and quitclaim is inequitable and incongruous to the
declared public policy of the State to afford protection to labor and
to assure the rights of workers to security of tenure. 9
Page | 2
We find also untenable the contention of Carmen Yulo that she is not liable for the
acts of the petitioner company, assuming it had acted illegally, because the
Carmelcraft Corporation is a distinct and separate entity with a legal personality of its
own. Yulo claims she is only an agent of the company carrying out the decisions of its
board of directors. We do not agree. Our finding is that she is in fact and legal effect
the corporation, being not only its president and general manager but also its
owner. 10
Moreover, and this is a no less important consideration, she is raising this issue only
at this tardy hour, when she should have invoked this argument earlier, when the case
was being heard before the labor arbiter and later m the NLRC. It is too late now to
shunt these responsibilities to the company after she herself had been found liable.
All told, the conduct of the petitioners toward the employees has been less than
commendable. Indeed, it is reprehensible. First, the company inveigled them to waive
their claims to compensation due them on the promise that future benefits would be
paid (and to make matters worse, there is no showing that they were indeed paid).
Second, it refused to recognize the respondent union, suggesting to the employees
that they join another union acceptable to management. Third, it threatened the
employees with the closure of the company and then actually did so when the
employees insisted on their demands. All these acts reflect on the bona fides of the
petitioners and unmistakably indicate their ill will toward the employees.
The petitioners obviously regard the private respondents as mere servants simply
because they are paid employees. That is a mistake. Laborers are not just hired help
to be exploited, without the right to defend and improve their interest . The working
class is an equal partner of management and should always be treated as such.
The more labor is prevented from pursuing its legitimate demands for its protection
and enhancement, the more it is likely to lose faith in our free institutions and to
incline toward Ideologies offering a more if deceptive regime. One way of disabusing
our working men and women of this delusion is to assure them that under our form of
government, the interests of labor deserve and will get proper recognition from an
enlightened and compassionate management, no less than the total sympathy of a
solicitous State.
WHEREFORE, the petition is DISMISSED and the challenged decision is AFFIRMED,
with costs against the petitioner. It is so ordered.

G.R. No. 16530 March 31, 1922
MAMERTO LAUDICO and FRED M. HARDEN, plaintiffs-appellants,
vs.
MANUEL ARIAS RODRIGUEZ, ET AL., defendants-appellants.
On February 5, 1919, the defendant, Vicente Arias, who, with his codefendants,
owned the building Nos. 205 to 221 on Carriedo Street, on his behalf and that of his
coowners, wrote a letter to the plaintiff, Mamerto Laudico, giving him an option to
lease the building to a third person, and transmitting to him for that purpose a
tentative contract in writing containing the conditions upon which the proposed lease
should be made. Later Mr. Laudico presented his coplaintiff, Mr. Fred. M. Harden, as
the party desiring to lease the building. On one hand, other conditions were added to
those originally contained in the tentative contract, and, on the other, counter-
propositions were made and explanations requested on certain points in order to
make them clear. These negotiations were carried on by correspondence and verbally
at interviews held with Mr. Vicente Arias, no definite agreement having been arrived at
until the plaintiff, Mr. Laudico, finally wrote a letter to Mr. Arias on March 6, 1919,
advising him that all his propositions, as amended and supplemented, were accepted.
It is admitted that this letter was received by Mr. Arias by special delivery at 2.53 p.m.
of that day. On that same day, at 11.25 in the morning, Mr. Arias had, in turn, written a
letter to the plaintiff, Mr. Laudico, withdrawing the offer to lease the building.
The chief prayer of the plaintiff in this action is that the defendants be compelled to
execute the contract of lease of the building in question. It thus results that when Arias
sent his letter of withdrawal to Laudico, he had not yet received the letter of
acceptance, and when it reached him, he had already sent his letter of withdrawal.
Under these facts we believe that no contract was perfected between the plaintiffs
and the defendants.
The parties agree that the circumstances under which that offer was made were such
that the offer could be withdrawn at any time before acceptance.
Page | 3
Under article 1262, paragraph 2, of the Civil Code, an acceptance by letter does not
have any effect until it comes to the knowledge of the offerer. Therefore, before he
learns of the acceptance, the latter is not yet bound by it and can still withdraw the
offer. Consequently, when Mr. Arias wrote Mr. Laudico, withdrawing the offer, he had
the right to do so, inasmuch as he had not yet receive notice of the acceptance. And
when the notice of the acceptance was received by Mr. Arias, it no longer had any
effect, as the offer was not then in existence, the same having already been
withdrawn. There was no meeting of the minds, through offer and acceptance, which
is the essence of the contract. While there was an offer, there was no acceptance,
and when the latter was made and could have a binding effect, the offer was then
lacking. Though both the offer and the acceptance existed, they did not meet to give
birth to a contract.
Our attention has been called to a doctrine laid down in some decisions to the effect
that ordinarily notice of the revocation of an offer must be given to avoid an
acceptance which may convert in into a binding contract, and that no such notice can
be deemed to have been given to the person to whom the offer was made unless the
revocation was in fact brought home to his knowledge.
This, however, has no application in the instant case, because when Arias received
the letter of acceptance, his letter of revocation had already been received. The latter
was sent through a messenger at 11.25 in the morning directly to the office of Laudico
and should have been received immediately on that same morning, or at least, before
Arias received the letter of acceptance. On this point we do not give any credence to
the testimony of Laudico that he received this letter of revocation at 3.30 in the
afternoon of that day. Laudico is interested in destroying the effect of this revocation
so that the acceptance may be valid, which is the principal ground of his complaint.
But even supposing Laudico's testimony to be true, still the doctrine invoked has no application
here. With regard to contracts between absent persons there are two principal theories, to wit,
one holding that an acceptance by letter of an offer has no effect until it comes to the knowledge
of the offerer, and the other maintaining that it is effective from the time the letter is sent.
The Civil Code, in paragraph 2 of article 1262, has adopted the first theory and,
according to its most eminent commentators, it means that, before the acceptance is
known, the offer can be revoked, it not being necessary, in order for the revocation to
have the effect of impeding the perfection of the contract, that it be known by the
acceptant. Q. Mucius Scaevola says apropros: "To our mind, the power to revoke is
implied in the criterion that no contract exists until the acceptance is known. As the tie
or bond springs from the meeting or concurrence of the minds, since up to that
moment there exists only a unilateral act, it is evident that he who makes it must have
the power to revoke it by withdrawing his proposition, although with the obligation to
pay such damages as may have been sustained by the person or persons to whom
the offer was made and by whom it was accepted, if he in turn failed to give them
notice of the withdrawal of the offer. This view is confirmed by the provision of article
1257, paragraph 2, concerning the case where a stipulation is made in favor of a third

person, which provision authorizes the contracting parties to revoke the stipulation
before the notice of its acceptance. That case is quite similar to that under comment,
as said stipulation in favor of a third person (who, for the very reason of being a third
person, is not a contracting party) is tantamount to an offer made by the makers of the
contract which may or may not be accepted by him, and which does not have any
effect until the obligor is notified, and may, before it is accepted, be revoked by those
who have made it; therefore, the case being similar, the same rule applies."
Under the second theory, the doctrine invoked by the plaintiffs is sound, because if
the sending of the letter of acceptance in itself really perfects the contract, the
revocation of the offer, in order to prevent it, must be known to the acceptor. But this
consideration has no place in the first theory under which the forwarding of the letter
of acceptance, in itself, does not have any effect until the acceptance is known by the
person who has made the offer.
The judgment appealed from is reversed and the defendants are absolved from the
complaint, without special finding as to costs. So ordered.
SUPREME COURT
FIRST DIVISION
MIGUELA R. VILLANUEVA, RICHARD R.
VILLANUEVA, and MERCEDITA
VILLANUEVA-TIRADOS,
Petitioners,
-versus-
G.R. No. 114870
May 26, 1995
COURT OF APPEALS, CENTRAL BANK
OF THE PHILIPPINES, ILDEFONSO C.
ONG, and PHILIPPINE VETERANS
BANK,
Respondents.
DAVIDE, JR., J.:
Do petitioners have a better right than private respondent Ildefonso Ong to
purchase from the Philippine Veterans Bank (PVB) the two situated at
Muntinglupa, Metro Manila, containing an area of 529 and 300 square
meters, respectively? This is the principal legal issue raised in this petition.
In its Decision of 27 January 1994 in CA-G.R. CV No. 35890,[1] the Court of
Appeals held for Ong, while the trial court, Branch 39 of the Regional Trial
Court (RTC) of Manila, ruled for the petitioners in its joint decision of 31
October 1991 in Civil Case No. 87-42550[2] and Sp. Proc. No. 85-32311.[3]
Page | 4
The operative antecedent facts are set forth in the challenged decision as
follows:
The disputed lots were originally owned by the spouses Celestino
Villanueva and Miguela Villanueva, acquired by the latter during her
husbands sojourn in the United States since 1968. Sometime in 1975,
Miguela Villanueva sought the help of one Jose Viudez, the then Officer-in-
Charge of the PVB branch in Makati if she could obtain a loan from said
bank. Jose Viudez told Miguela Villanueva to surrender the titles of said lots
as collaterals. And to further facilitate a bigger loan, Viudez, in connivance
with one Andres Sebastian, swayed Miguela Villanueva to execute a deed
of sale covering the two (2) disputed lots, which she did but without the
signature of her husband Celestino. Miguela Villanueva, however, never got
the loan she was expecting. Subsequent attempts to contact Jose Viudez
proved futile, until Miguela Villanueva thereafter found out that new titles
over the two (2) lots were already issued in the name of the PVB. It
appeared upon inquiry from the Registry of Deeds that the original titles of
these lots were canceled and new ones were issued to Jose Viudez, which
in turn were again canceled and new titles issued in favor of Andres
Sebastian, until finally new titles were issued in the name of PNB [should
be PVB] after the lots were foreclosed for failure to pay the loan granted in
the name of Andres Sebastian.
Miguela Villanueva sought to repurchase the lots from the PVB after being
informed that the lots were about to be sold at auction. The PVB told her
that she can redeem the lots for the price of P110,416.00. Negotiations for
the repurchase of the lots nevertheless were stalled by the filing of
liquidation proceedings against the PVB on August of 1985.
Plaintiff-appellant [Ong] on the other hand expounds on his claim over the
disputed lots in this manner:
In October 1984, plaintiff-appellant offered to purchase two pieces
of land that had been acquired by PVB through foreclosure. To
back-up plaintiff-appellants offer he deposited the sum of
P10,000.00.
In 23 November 1984, while appellant was still abroad, PVB
approved his subject offer under Board Resolution No. 10901-84.
Among the conditions imposed by PVB is that: The purchase price
shall be P110,000.00 (less deposit of P10,000.00) payable in cash
within fifteen (15) days from receipt of approval of the offer.
In mid-April 1985, appellant returned to the country. He
immediately verified the status of his offer with the PVB, now under
the control of CB, where he was informed that the same had
already been approved. On 16 April 1985, appellant formally
informed CB of his desire to pay the subject balance provided the
bank should execute in his favor the corresponding deed of
conveyance. The letter was not answered.

Plaintiff-appellant sent follow-up letters that went unheeded, the
last of which was on 21 May 1987. On 26 May 1987, appellants
payment for the balance of the subject properties were accepted
by CB under Official Receipt #0816.
On 17 September 1987, plaintiff-appellant through his counsel,
sent a letter to CB demanding for the latter to execute the
corresponding deed of conveyance in favor of appellant. CB did not
bother to answer the same. Hence, the instant case.
While appellants action for specific performance against CB was pending,
Miguela Villanueva and her children filed their claims with the liquidation
court. (Appellants Brief, pp. 3-4).[4]
From the pleadings, the following additional or amplificatory facts are
established:
The efforts of Miguela Villanueva to reacquire the property began
on 8 June 1983 when she offered to purchase the lots for
P60,000.00 with a 20% downpayment and the balance payable in
five years on a quarterly amortization basis.[5]
Her offer not having been accepted,[6] Miguela Villanueva increased her
bid to P70,000.00. It was only at this time that she disclosed to the bank
her private transactions with Jose Viudez.[7]
After this and her subsequent offers were rejected,[8] Miguela sent her
sealed bid of P110,417.00 pursuant to the written advice of the vice
president of the PVB.[9]
The PVB was placed under receivership pursuant to Monetary Board (MB)
Resolution No. 334 dated 3 April 1985 and later, under liquidation pursuant
to MB Resolution No. 612 dated 7 June 1985. Afterwards, a petition for
liquidation was filed with the RTC of Manila, which was docketed as Sp.
Proc. No. 85-32311 and assigned to Branch 39 of the said court.
On 26 May 1987, Ong tendered the sum of P100,000.00 representing the
balance of the purchase price of the litigated lots.[10] An employee of the
PVB received the amount conditioned upon approval by the Central Bank
liquidator.[11] Ongs demand for a deed of conveyance having gone
unheeded, he filed on 23 October 1987 with the RTC of Manila an action for
specific performance against the Central Bank.[12] It was raffled to Branch
47 thereof. Upon learning that the PVB had been placed under liquidation,
the presiding judge of Branch 47 ordered the transfer of the case to Branch
39, the liquidation court.[13]
On 15 June 1989, then Presiding Judge Enrique B. Inting issued an order
allowing the purchase of the two lots at the price of P150,000.00.[14] The
Central Bank liquidator of the PVB moved for the reconsideration of the
order asserting that it is contrary to law as the disposal of the lots should
be made through public auction.[15]
Page | 5
On 26 July 1989, Miguela Villanueva filed her claim with the liquidation
court. She averred, among others, that she is the lawful and registered
owner of the subject lots which were mortgaged in favor of the PVB thru
the falsification committed by Jose Viudez, the manager of the PVB Makati
Branch, in collusion with Andres Sebastian; that upon discovering this
fraudulent transaction, she offered to purchase the property from the bank;
and that she reported the matter to the PC/INP Criminal Investigation
Service Command, Camp Crame, and after investigation, the CIS officer
recommended the filing of a complaint for estafa through falsification of
public documents against Jose Viudez and Andres Sebastian. She then
asked that the lots be excluded from the assets of the PVB and be
conveyed back to her.[16] Later, in view of the death of her husband, she
amended her claim to include her children, herein petitioners Mercedita
Villanueva-Tirados and Richard Villanueva.[17]
On 31 October 1991, the trial court rendered judgment[18] holding that
while the board resolution approving Ongs offer may have created in his
favor a vested right which may be enforced against the PVB at the time or
against the liquidator after the bank was placed under liquidation
proceedings, the said right was no longer enforceable, as he failed to
exercise it within the prescribed 15-day period. As to Miguelas claim, the
court ruled that the principle of estoppel bars from questioning the
transaction with Viudez and the subsequent transactions because she was
a co-participant thereto, though only with respect to her undivided one-half
() conjugal share in the disputed lots and her one-third (1/3) hereditary
share in the estate of her husband.
Nevertheless, the trial court allowed her to purchase the lots if only to
restore their status as conjugal properties. It further held that by reason of
estoppel, the transactions having been perpetrated by a responsible officer
of the PVB, and for reasons of equity, the PVB should not be allowed to
charge interest on the price of the lots; hence, the purchase price should
be the PVBs claim as of 29 August 1984 when it considered the sealed
bids, i.e., P110,416.20, which should be borne by Miguela Villanueva alone.
The dispositive portion of the decision of the trial court reads as follows:
WHEREFORE, judgment is hereby rendered as follows:
1. Setting aside the order of this court issued on June 15,
1989 under the caption Civil Case No. 87-42550
entitled Ildefonso Ong vs. Central Bank of the Phils., et
al.;
2. Dismissing the claim of Ildefonso Ong over the two
parcels of land originally covered by TCT No. 438073
and 366364 in the names of Miguela Villanueva and
Celestino Villanueva, respectively which are now
covered by TCT No. 115631 and 115632 in the name of
the PVB;
 Page | 6

3. Declaring the Deed of Absolute Sale bearing the and interest in the two (2) disputed lots for being a co-participant
signature of Miguela Villanueva and the falsified in the fraudulent scheme perpetrated by Jose Viudez and Andres
signature of Celestino [sic] Viudez under date May 6, Sebastian a factual finding which We conform to and which
1975 and all transactions and related documents Miguela Villanueva does not controvert in this appeal by not filing
executed thereafter referring to the two lots covered by her appellees brief, yet it ordered the reconveyance of the
the above stated titles as null and void; disputed lots to Miguela Villanueva as the victorious party upon her
4. Ordering the Register of Deeds of Makati which has
payment of P110,416.20. Would not estoppel defeat the claim of
jurisdiction over the two parcels of land in question to
the party estopped? If so, which in fact must be so, would it not
re-instate in his land records, TCT No. 438073 in the
name of Miguela Villanueva and TCT No. 366364 in the then be absurd or even defiant for the lower court to finally entitle
name of Celestino Villanueva who were the registered Miguela Villanueva to the disputed lots after having been precluded
owners thereof, and to cancel all subsequent titles from assailing their subsequent conveyance in favor of Jose Viudez
emanating therefrom; and by reason of her own negligence and/or complicity therein? The
intended punitive effect of estoppel would merely be a dud if this
5. Ordering the Liquidator to reconvey the two lots described in TCT No. Court leaves the lower courts conclusion unrectified.[21]
115631 and 115632 and executing the corresponding deed of conveyance
of the said lots upon the payment of One Hundred Ten Thousand Four Their Motion for Reconsideration[22] having been denied,[23] the
Hundred Sixteen and 20/100 (P110,416.20) Pesos without interest and less petitioners filed this petition for review on certiorari.[24]
the amount deposited by the claimant, Miguela Villanueva in connection
Subsequently, the respondent Central Bank apprised this Court that the
with the bidding where she had participated and conducted by the PVB on
PVB was no longer under receivership or liquidation and that the PVB has
August 29, 1984. been back in operation since 3 August 1992. It then prayed that it be
dropped from this case or at least be substituted by the PVB, which is the
Cost against Ildefonso Ong and the PVB.
real party in interest.[25]
SO ORDERED.[19]
In its Manifestation and Entry of Appearance, the PVB declared that it
Only Ong appealed the Decision to the Court of Appeals. The appeal was
submits to the jurisdiction of this Court and that it has no objection to its
docketed as CA-G.R. CV No. 35890. In its decision of 27 January 1994, the
inclusion as a party respondent in this case in lieu of the Central Bank.[26]
Court of Appeals reversed the decision of the trial court and ruled as
The petitioners did not object to the substitution.[27]
follows:
WHEREFORE, premises considered, the assailed decision is hereby
Later, in its Comment dated 10 October 1994, the PVB stated that it
REVERSED and SET ASIDE, and a new one entered ordering the
submits to and shall abide by whatever judgment this Honorable Supreme
disputed lots be awarded in favor of plaintiff-appellant Ildefonso
Tribunal may announce as to whom said lands may be awarded without
Ong upon defendant-appellee Central Banks execution of the
any touch of preference in favor of one or the other party litigant in the
corresponding deed of sale in his favor.[20]
instant case.[28]
In support thereof, the Court of Appeals declared that Ongs failure to pay
In support of their contention that the Court of Appeals gravely erred in
the balance within the prescribed period was excusable because the PVB
holding that Ong is better entitled to purchase the disputed lots, the
neither notified him of the approval of his bid nor answered his letters
petitioners maintain that Ong is a disqualified bidder, his bid of
manifesting his readiness to pay the balance, for which reason he could not
P110,000.00 being lower than the starting price of P110,417.00 and his
have known when to reckon the 15-day period prescribed under its
deposit of P10,000.00 being less than the required 10% of the bid price;
resolution. It went further to suggest that the Central Bank was in estoppel
that Ong failed to pay the balance of the price within the 15-day period
because it accepted Ongs late payment of the balance. As to the
from notice of the approval of his bid; and that his offer of payment is
petitioners claim, the Court of Appeals stated:
ineffective since it was conditioned on PVBs execution of the deed of
absolute sale in his favor.
The conclusion reached by the lower court favorable to Miguela
Villanueva is, as aptly pointed out by plaintiff-appellant, indeed
On the other hand, Ong submits that his offer, though lower than Miguela
confusing. While the lower courts decision declared Miguela
Villanuevas bid by P417.00, is much better, as the same is payable in
Villanueva as estopped from recovering her proportionate share
cash, while Villanuevas bid is payable in installment; that his payment

could not be said to have been made after the expiration of the 15-day
period because this period has not even started to run, there being no
notice yet of the approval of his offer; and that he has a legal right to
compel the PVB or its liquidator to execute the corresponding deed of
conveyance.
There is no doubt that the approval of Ongs offer constitutes an
acceptance, the effect of which is to perfect the contract of sale upon
notice thereof to Ong.[29] The peculiar circumstances in this case,
however, pose a legal obstacle to his claim of a better right and deny
support to the conclusion of the Court of Appeals.
Ong did not receive any notice of the approval of his offer. It was only
sometime in mid-April 1985 when he returned from the United States and
inquired about the status of his bid that he came to know of the approval.
It must be recalled that the PVB was placed under receivership pursuant to
the MB Resolution of 3 April 1985 after a finding that it was insolvent,
illiquid, and could not operate profitably, and that its continuance in
business would involve probable loss to its depositors and creditors. The
PVB was then prohibited from doing business in the Philippines, and the
receiver appointed was directed to immediately take charge of its assets
and liabilities, as expeditiously as possible collect and gather all the assets
and administer the same for the benefit of its creditors, exercising all the
powers necessary for these purposes.
Under Article 1323 of the Civil Code, an offer becomes ineffective upon the
death, civil interdiction, insanity, or insolvency of either party before
acceptance is conveyed. The reason for this is that:
The contract is not perfected except by the concurrence of two
wills which exist and continue until the moment that they occur.
The contract is not yet perfected at any time before acceptance is
conveyed; hence, the disappearance of either party or his loss of
capacity before perfection prevents the contractual tie from being
formed.[30]
It has been said that where upon the insolvency of a bank a receiver
therefor is appointed, the assets of the bank pass beyond its control into
the possession and control of the receiver whose duty it is to administer to
assets for the benefit of the creditors of the bank.[31] Thus, the
appointment of a receiver operates to suspend the authority of the bank
and of its directors and officers over its property and effects, such authority
being reposed in the receiver, and in this respect, the receivership is
equivalent to an injunction to restrain the bank officers from intermeddling
with the property of the bank in any way.
Section 29 of the Central Bank Act, as amended, provides thus:
Page | 7
SEC. 29. Proceedings upon insolvency. Whenever, upon
examination by the head of the appropriate supervising or
examining department or his examiners or agents into the
condition of any bank or non-bank financial intermediary
performing quasi-banking functions, it shall be disclosed that the
condition of the same is one of insolvency, or that its continuance
in business would involve probable loss to its depositors or
creditors, it shall be the duty of the department head concerned
forthwith, in writing, to inform the Monetary Board of the facts. The
Board may, upon finding the statements of the department head to
be true, forbid the institution to do business in the Philippines and
designate an official of the Central Bank or a person of recognized
competence in banking or finance as receiver to immediately take
charge of its assets and liabilities, as expeditiously as possible
collect and gather all the assets and administer the same for the
benefit of its creditors exercising all the powers necessary for these
purposes.
xxx
The assets of an institution under receivership or liquidation shall
be deemed in custodia legis in the hands of the receiver or
liquidator and shall, from the moment of such receivership or
liquidation, be exempt from any order or garnishment, levy,
attachment, or execution.
In a nutshell, the insolvency of a bank and the consequent appointment of
a receiver restrict the banks capacity to act, especially in relation to its
property. Applying Article 1323 of the Civil Code, Ongs offer to purchase
the subject lots became ineffective because the PVB became insolvent
before the banks acceptance of the offer came to his knowledge. Hence,
the purported contract of sale between them did not reach the stage of
perfection. Corollarily, he cannot invoke the resolution of the bank
approving his bid as basis for his alleged right to buy the disputed
properties.
Nor may the acceptance by an employee of the PVB of Ongs payment of
P100,000.00 benefit him since the receipt of the payment was made
subject to the approval by the Central Bank liquidator of the PVB thus:
Payment for the purchase of the former property of Andres
Sebastian per approved BR No. 10902-84 dated 11/13/84, subject
to the approval of CB liquidator.
This payment was disapproved on the ground that the subject property
was already in custodia legis, and hence, disposable only by public auction
and subject to the approval of the liquidation court.[34]
The Court of Appeals therefore erred when it held that Ong had a better
right than the petitioners to the purchase of the disputed lots.
 Page | 8

Considering then that only Ong appealed the decision of the trial court, the
PVB and the Central Bank, as well as the petitioners, are deemed to have
fully and unqualifiedly accepted the judgment, which thus became final as
to them for their failure to appeal.
WHEREFORE, the instant Petition is GRANTED and the challenged
Decision of the Court of Appeals of 27 January 1994 in CA-G.R. CV No.
35890 is hereby SET ASIDE. The Decision of Branch 39 of the Regional
Trial Court of Manila of 31 October 1991 in Civil Case No. 87-42550 and Sp.
Proc. No. 85-32311 is hereby REINSTATED.
Respondent Philippine Veterans Bank is further directed to return to private
respondent Ildefonso C. Ong the amount of P100,000.00.
No pronouncement as to costs.

G.R. No. 111238 January 25, 1995

ADELFA PROPERTIES, INC., petitioner,

vs.
COURT OF APPEALS, ROSARIO JIMENEZ-CASTAEDA and SALUD
JIMENEZ, respondents.

REGALADO, J.:

The main issues presented for resolution in this petition for review on certiorari of the
judgment of respondent Court of appeals, dated April 6, 1993, in CA-G.R. CV No.
34767 1 are (1) whether of not the "Exclusive Option to Purchase" executed between
petitioner Adelfa Properties, Inc. and private respondents Rosario Jimenez-
Castaeda and Salud Jimenez is an option contract; and (2) whether or not there was
a valid suspension of payment of the purchase price by said petitioner, and the legal
effects thereof on the contractual relations of the parties.

The records disclose the following antecedent facts which culminated in the present
appellate review, to wit:

1. Herein private respondents and their brothers, Jose and Dominador Jimenez, were
the registered co-owners of a parcel of land consisting of 17,710 square meters,
covered by Transfer Certificate of Title (TCT) No. 309773, 2 situated in Barrio Culasi,
Las Pias, Metro Manila.
2. On July 28, 1988, Jose and Dominador Jimenez sold their share consisting of one-
half of said parcel of land, specifically the eastern portion thereof, to herein petitioner
pursuant to a "Kasulatan sa Bilihan ng Lupa." 3 Subsequently, a "Confirmatory
Extrajudicial Partition Agreement" 4 was executed by the Jimenezes, wherein the
eastern portion of the subject lot, with an area of 8,855 square meters was
adjudicated to Jose and Dominador Jimenez, while the western portion was allocated
to herein private respondents.
3. Thereafter, herein petitioner expressed interest in buying the western portion of the
property from private respondents. Accordingly, on November 25, 1989, an "Exclusive
Option to Purchase" 5 was executed between petitioner and private respondents,
under the following terms and conditions:
1. The selling price of said 8,655 square meters of the subject
property is TWO MILLION EIGHT HUNDRED FIFTY SIX
THOUSAND ONE HUNDRED FIFTY PESOS ONLY
(P2,856,150.00)
2. The sum of P50,000.00 which we received from ADELFA
PROPERTIES, INC. as an option money shall be credited as partial
payment upon the consummation of the sale and the balance in the
sum of TWO MILLION EIGHT HUNDRED SIX THOUSAND ONE
HUNDRED FIFTY PESOS (P2,806,150.00) to be paid on or before
November 30, 1989;
3. In case of default on the part of ADELFA PROPERTIES, INC. to
pay said balance in accordance with paragraph 2 hereof, this option
shall be cancelled and 50% of the option money to be forfeited in
our favor and we will refund the remaining 50% of said money upon
the sale of said property to a third party;
4. All expenses including the corresponding capital gains tax, cost
of documentary stamps are for the account of the VENDORS, and
expenses for the registration of the deed of sale in the Registry of
Deeds are for the account of ADELFA PROPERTIES, INC.
Considering, however, that the owner's copy of the certificate of title issued to
respondent Salud Jimenez had been lost, a petition for the re-issuance of a new
owner's copy of said certificate of title was filed in court through Atty. Bayani L.
Page | 9
Bernardo, who acted as private respondents' counsel. Eventually, a new owner's copy
of the certificate of title was issued but it remained in the possession of Atty. Bernardo
until he turned it over to petitioner Adelfa Properties, Inc.
4. Before petitioner could make payment, it received summons 6 on November 29,
1989, together with a copy of a complaint filed by the nephews and nieces of private
respondents against the latter, Jose and Dominador Jimenez, and herein petitioner in
the Regional Trial Court of Makati, docketed as Civil Case No. 89-5541, for
annulment of the deed of sale in favor of Household Corporation and recovery of
ownership of the property covered by TCT No. 309773. 7
5. As a consequence, in a letter dated November 29, 1989, petitioner informed private
respondents that it would hold payment of the full purchase price and suggested that
private respondents settle the case with their nephews and nieces, adding that ". . . if
possible, although November 30, 1989 is a holiday, we will be waiting for you and said
plaintiffs at our office up to 7:00 p.m." 8 Another letter of the same tenor and of even
date was sent by petitioner to Jose and Dominador Jimenez. 9Respondent Salud
Jimenez refused to heed the suggestion of petitioner and attributed the suspension of
payment of the purchase price to "lack of word of honor."
6. On December 7, 1989, petitioner caused to be annotated on the title of the lot its
option contract with private respondents, and its contract of sale with Jose and
Dominador Jimenez, as Entry No. 1437-4 and entry No. 1438-4, respectively.
7. On December 14, 1989, private respondents sent Francisca Jimenez to see Atty.
Bernardo, in his capacity as petitioner's counsel, and to inform the latter that they
were cancelling the transaction. In turn, Atty. Bernardo offered to pay the purchase
price provided that P500,000.00 be deducted therefrom for the settlement of the civil
case. This was rejected by private respondents. On December 22, 1989, Atty.
Bernardo wrote private respondents on the same matter but this time reducing the
amount from P500,000.00 to P300,000.00, and this was also rejected by the latter.
8. On February 23, 1990, the Regional Trial Court of Makati dismissed Civil Case No.
89-5541. Thus, on February 28, 1990, petitioner caused to be annotated anew on
TCT No. 309773 the exclusive option to purchase as Entry No. 4442-4.
9. On the same day, February 28, 1990, private respondents executed a Deed of
Conditional Sale 10 in favor of Emylene Chua over the same parcel of land for
P3,029,250, of which P1,500,000.00 was paid to private respondents on said date,
with the balance to be paid upon the transfer of title to the specified one-half portion.

10. On April 16, 1990, Atty. Bernardo wrote private respondents informing the latter
that in view of the dismissal of the case against them, petitioner was willing to pay the
purchase price, and he requested that the corresponding deed of absolute sale be
executed. 11 This was ignored by private respondents.
11. On July 27, 1990, private respondents' counsel sent a letter to petitioner enclosing
therein a check for P25,000.00 representing the refund of fifty percent of the option
money paid under the exclusive option to purchase. Private respondents then
requested petitioner to return the owner's duplicate copy of the certificate of title of
respondent Salud Jimenez. 12 Petitioner failed to surrender the certificate of title,
hence private respondents filed Civil Case No. 7532 in the Regional Trial Court of
Pasay City, Branch 113, for annulment of contract with damages, praying, among
others, that the exclusive option to purchase be declared null and void; that
defendant, herein petitioner, be ordered to return the owner's duplicate certificate of
title; and that the annotation of the option contract on TCT No. 309773 be cancelled.
Emylene Chua, the subsequent purchaser of the lot, filed a complaint in intervention.
12. The trial court rendered judgment 13 therein on September 5, 1991 holding that the
agreement entered into by the parties was merely an option contract, and declaring
that the suspension of payment by herein petitioner constituted a counter-offer which,
therefore, was tantamount to a rejection of the option. It likewise ruled that herein
petitioner could not validly suspend payment in favor of private respondents on the
ground that the vindicatory action filed by the latter's kin did not involve the western
portion of the land covered by the contract between petitioner and private
respondents, but the eastern portion thereof which was the subject of the sale
between petitioner and the brothers Jose and Dominador Jimenez. The trial court
then directed the cancellation of the exclusive option to purchase, declared the sale to
intervenor Emylene Chua as valid and binding, and ordered petitioner to pay
damages and attorney's fees to private respondents, with costs.
13. On appeal, respondent Court of appeals affirmed in toto the decision of the
court a quo and held that the failure of petitioner to pay the purchase price within the
period agreed upon was tantamount to an election by petitioner not to buy the
property; that the suspension of payment constituted an imposition of a condition
which was actually a counter-offer amounting to a rejection of the option; and that
Article 1590 of the Civil Code on suspension of payments applies only to a contract of
sale or a contract to sell, but not to an option contract which it opined was the nature
of the document subject of the case at bar. Said appellate court similarly upheld the
validity of the deed of conditional sale executed by private respondents in favor of
intervenor Emylene Chua.
In the present petition, the following assignment of errors are raised:
P a g e | 10
1. Respondent court of appeals acted with grave abuse of discretion in making its
finding that the agreement entered into by petitioner and private respondents was
strictly an option contract;
2. Granting arguendo that the agreement was an option contract, respondent court of
Appeals acted with grave abuse of discretion in grievously failing to consider that
while the option period had not lapsed, private respondents could not unilaterally and
prematurely terminate the option period;
3. Respondent Court of Appeals acted with grave abuse of discretion in failing to
appreciate fully the attendant facts and circumstances when it made the conclusion of
law that Article 1590 does not apply; and
4. Respondent Court of Appeals acted with grave abuse of discretion in conforming
with the sale in favor of appellee Ma. Emylene Chua and the award of damages and
attorney's fees which are not only excessive, but also without in fact and in law. 14
An analysis of the facts obtaining in this case, as well as the evidence presented by
the parties, irresistibly leads to the conclusion that the agreement between the parties
is a contract to sell, and not an option contract or a contract of sale.
I
1. In view of the extended disquisition thereon by respondent court, it would be
worthwhile at this juncture to briefly discourse on the rationale behind our treatment of
the alleged option contract as a contract to sell, rather than a contract of sale. The
distinction between the two is important for in contract of sale, the title passes to the
vendee upon the delivery of the thing sold; whereas in a contract to sell, by
agreement the ownership is reserved in the vendor and is not to pass until the full
payment of the price. In a contract of sale, the vendor has lost and cannot recover
ownership until and unless the contract is resolved or rescinded; whereas in a
contract to sell, title is retained by the vendor until the full payment of the price, such
payment being a positive suspensive condition and failure of which is not a breach
but an event that prevents the obligation of the vendor to convey title from becoming
effective. Thus, a deed of sale is considered absolute in nature where there is neither
a stipulation in the deed that title to the property sold is reserved in the seller until the
full payment of the price, nor one giving the vendor the right to unilaterally resolve the
contract the moment the buyer fails to pay within a fixed period. 15
There are two features which convince us that the parties never intended to transfer
ownership to petitioner except upon the full payment of the purchase price. Firstly, the
exclusive option to purchase, although it provided for automatic rescission of the
contract and partial forfeiture of the amount already paid in case of default, does not
mention that petitioner is obliged to return possession or ownership of the property as

a consequence of non-payment. There is no stipulation anent reversion or
reconveyance of the property to herein private respondents in the event that petitioner
does not comply with its obligation. With the absence of such a stipulation, although
there is a provision on the remedies available to the parties in case of breach, it may
legally be inferred that the parties never intended to transfer ownership to the
petitioner to completion of payment of the purchase price.
In effect, there was an implied agreement that ownership shall not pass to the
purchaser until he had fully paid the price. Article 1478 of the civil code does not
require that such a stipulation be expressly made. Consequently, an implied
stipulation to that effect is considered valid and, therefore, binding and enforceable
between the parties. It should be noted that under the law and jurisprudence, a
contract which contains this kind of stipulation is considered a contract to sell.
Moreover, that the parties really intended to execute a contract to sell, and not a
contract of sale, is bolstered by the fact that the deed of absolute sale would have
been issued only upon the payment of the balance of the purchase price, as may be
gleaned from petitioner's letter dated April 16, 1990 16 wherein it informed private
respondents that it "is now ready and willing to pay you simultaneously with the
execution of the corresponding deed of absolute sale."
Secondly, it has not been shown there was delivery of the property, actual or
constructive, made to herein petitioner. The exclusive option to purchase is not
contained in a public instrument the execution of which would have been considered
equivalent to delivery. 17 Neither did petitioner take actual, physical possession of the
property at any given time. It is true that after the reconstitution of private
respondents' certificate of title, it remained in the possession of petitioner's counsel,
Atty. Bayani L. Bernardo, who thereafter delivered the same to herein petitioner.
Normally, under the law, such possession by the vendee is to be understood as a
delivery. 18 However, private respondents explained that there was really no intention
on their part to deliver the title to herein petitioner with the purpose of transferring
ownership to it. They claim that Atty. Bernardo had possession of the title only
because he was their counsel in the petition for reconstitution. We have no reason not
to believe this explanation of private respondents, aside from the fact that such
contention was never refuted or contradicted by petitioner.
2. Irrefragably, the controverted document should legally be considered as a
perfected contract to sell. On this particular point, therefore, we reject the position and
ratiocination of respondent Court of Appeals which, while awarding the correct relief to
private respondents, categorized the instrument as "strictly an option contract."
The important task in contract interpretation is always the ascertainment of the
intention of the contracting parties and that task is, of course, to be discharged by
looking to the words they used to project that intention in their contract, all the words
not just a particular word or two, and words in context not words standing
P a g e | 11
alone. 19 Moreover, judging from the subsequent acts of the parties which will
hereinafter be discussed, it is undeniable that the intention of the parties was to enter
into a contract to sell. 20 In addition, the title of a contract does not necessarily
determine its true nature. 21 Hence, the fact that the document under discussion is
entitled "Exclusive Option to Purchase" is not controlling where the text thereof shows
that it is a contract to sell.
An option, as used in the law on sales, 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 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 is also sometimes called an "unaccepted offer." An option is not of itself a
purchase, but merely secures the privilege to buy. 22 It is not a sale of property but a
sale of property but a sale of the right to purchase. 23 It is simply a contract by which
the owner of property agrees with another person that he shall have the right to buy
his property at a fixed price within a certain time. He does not sell his land; he does
not then agree to sell it; but he does sell something, that it is, the right or privilege to
buy at the election or option of the other party. 24 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 property gives the
optionee the right or privilege of accepting the offer and buying the property on certain
terms. 25
On the other hand, a contract, like a contract to sell, involves a meeting of minds two
persons whereby one binds himself, with respect to the other, to give something or to
render some service. 26 Contracts, in general, are perfected by mere consent, 27 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. 28
The distinction between an "option" and a contract of sale is that an option is an
unaccepted offer. It states the terms and conditions on which the owner is willing to
sell the land, if the holder elects to accept them within the time limited. If the holder
does so elect, he must give notice to the other party, and the accepted offer
thereupon becomes a valid and binding contract. If an acceptance is not made within
the time fixed, the owner is no longer bound by his offer, and the option is at an end. A
contract of sale, on the other hand, fixes definitely the relative rights and obligations
of both parties at the time of its execution. The offer and the acceptance are
concurrent, since the minds of the contracting parties meet in the terms of the
agreement. 29
A perusal of the contract in this case, as well as the oral and documentary evidence
presented by the parties, readily shows that there is indeed a concurrence of

petitioner's offer to buy and private respondents' acceptance thereof. The rule is that
except where a formal acceptance is so required, although the acceptance must be
affirmatively and clearly made and must be evidenced by some acts or conduct
communicated to the offeror, it may be made either in a formal or an informal manner,
and may be shown by acts, conduct, or words of the accepting party that clearly
manifest a present intention or determination to accept the offer to buy or sell. Thus,
acceptance may be shown by the acts, conduct, or words of a party recognizing the
existence of the contract of sale. 30
The records also show that private respondents accepted the offer of petitioner to buy
their property under the terms of their contract. At the time petitioner made its offer,
private respondents suggested that their transfer certificate of title be first
reconstituted, to which petitioner agreed. As a matter of fact, it was petitioner's
counsel, Atty. Bayani L. Bernardo, who assisted private respondents in filing a petition
for reconstitution. After the title was reconstituted, the parties agreed that petitioner
would pay either in cash or manager's check the amount of P2,856,150.00 for the lot.
Petitioner was supposed to pay the same on November 25, 1989, but it later offered
to make a down payment of P50,000.00, with the balance of P2,806,150.00 to be
paid on or before November 30, 1989. Private respondents agreed to the counter-
offer made by petitioner. 31 As a result, the so-called exclusive option to purchase was
prepared by petitioner and was subsequently signed by private respondents, thereby
creating a perfected contract to sell between them.
It cannot be gainsaid that the offer to buy a specific piece of land was definite and
certain, while the acceptance thereof was absolute and without any condition or
qualification. The agreement as to the object, the price of the property, and the terms
of payment was clear and well-defined. No other significance could be given to such
acts that than they were meant to finalize and perfect the transaction. The parties
even went beyond the basic requirements of the law by stipulating that "all expenses
including the corresponding capital gains tax, cost of documentary stamps are for the
account of the vendors, and expenses for the registration of the deed of sale in the
Registry of Deeds are for the account of Adelfa properties, Inc." Hence, there was
nothing left to be done except the performance of the respective obligations of the
parties.
We do not subscribe to private respondents' submission, which was upheld by both
the trial court and respondent court of appeals, that the offer of petitioner to deduct
P500,000.00, (later reduced to P300,000.00) from the purchase price for the
settlement of the civil case was tantamount to a counter-offer. It must be stressed that
there already existed a perfected contract between the parties at the time the alleged
counter-offer was made. Thus, any new offer by a party becomes binding only when it
is accepted by the other. In the case of private respondents, they actually refused to
concur in said offer of petitioner, by reason of which the original terms of the contract
continued to be enforceable.
P a g e | 12
At any rate, the same cannot be considered a counter-offer for the simple reason that
petitioner's sole purpose was to settle the civil case in order that it could already
comply with its obligation. In fact, it was even indicative of a desire by petitioner to
immediately comply therewith, except that it was being prevented from doing so
because of the filing of the civil case which, it believed in good faith, rendered
compliance improbable at that time. In addition, no inference can be drawn from that
suggestion given by petitioner that it was totally abandoning the original contract.
More importantly, it will be noted that the failure of petitioner to pay the balance of the
purchase price within the agreed period was attributed by private respondents to "lack
of word of honor" on the part of the former. The reason of "lack of word of honor" is to
us a clear indication that private respondents considered petitioner already bound by
its obligation to pay the balance of the consideration. In effect, private respondents
were demanding or exacting fulfillment of the obligation from herein petitioner. with
the arrival of the period agreed upon by the parties, petitioner was supposed to
comply with the obligation incumbent upon it to perform, not merely to exercise an
option or a right to buy the property.
The obligation of petitioner on November 30, 1993 consisted of an obligation to give
something, that is, the payment of the purchase price. The contract did not simply
give petitioner the discretion to pay for the property. 32 It will be noted that there is
nothing in the said contract to show that petitioner was merely given a certain period
within which to exercise its privilege to buy. The agreed period was intended to give
time to herein petitioner within which to fulfill and comply with its obligation, that is, to
pay the balance of the purchase price. No evidence was presented by private
respondents to prove otherwise.
The test in determining whether a contract is a "contract of sale or purchase" or a
mere "option" is whether or not the agreement could be specifically enforced. 33 There
is no doubt that the obligation of petitioner to pay the purchase price is specific,
definite and certain, and consequently binding and enforceable. Had private
respondents chosen to enforce the contract, they could have specifically compelled
petitioner to pay the balance of P2,806,150.00. This is distinctly made manifest in the
contract itself as an integral stipulation, compliance with which could legally and
definitely be demanded from petitioner as a consequence.
This is not a case where no right is as yet created nor an obligation declared, as
where something further remains to be done before the buyer and seller obligate
themselves. 34 An agreement is only an "option" when no obligation rests on the party
to make any payment except such as may be agreed on between the parties as
consideration to support the option until he has made up his mind within the time
specified. 35An option, and not a contract to purchase, is effected by an agreement to
sell real estate for payments to be made within specified time and providing forfeiture
of money paid upon failure to make payment, where the purchaser does not agree to
purchase, to make payment, or to bind himself in any way other than the forfeiture of

the payments made. 36 As hereinbefore discussed, this is not the situation obtaining in
the case at bar.
While there is jurisprudence to the effect that a contract which provides that the initial
payment shall be totally forfeited in case of default in payment is to be considered as
an option contract, 37 still we are not inclined to conform with the findings of
respondent court and the court a quo that the contract executed between the parties
is an option contract, for the reason that the parties were already contemplating
the payment of the balance of the purchase price, and were not merely quoting an
agreed value for the property. The term "balance," connotes a remainder or
something remaining from the original total sum already agreed upon.
In other words, the alleged option money of P50,000.00 was actually earnest money
which was intended to form part of the purchase price. The amount of P50,000.00
was not distinct from the cause or consideration for the sale of the property, but was
itself a part thereof. It is a statutory rule that whenever earnest money is given in a
contract of sale, it shall be considered as part of the price and as proof of the
perfection of the contract. 38 It constitutes an advance payment and must, therefore,
be deducted from the total price. Also, earnest money is given by the buyer to the
seller to bind the bargain.
There are clear distinctions between earnest money and option money, viz.: (a)
earnest money is part of the purchase price, while option money ids the money given
as a distinct consideration for an option contract; (b) earnest money is 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. 39
The aforequoted characteristics of earnest money are apparent in the so-called option
contract under review, even though it was called "option money" by the parties. In
addition, private respondents failed to show that the payment of the balance of the
purchase price was only a condition precedent to the acceptance of the offer or to the
exercise of the right to buy. On the contrary, it has been sufficiently established that
such payment was but an element of the performance of petitioner's obligation under
the contract to sell. 40
II
1. This brings us to the second issue as to whether or not there was valid suspension
of payment of the purchase price by petitioner and the legal consequences thereof. To
justify its failure to pay the purchase price within the agreed period, petitioner invokes
Article 1590 of the civil Code which provides:
P a g e | 13
Art. 1590. Should the vendee be disturbed in the possession or
ownership of the thing acquired, or should he have reasonable
grounds to fear such disturbance, by a vindicatory action or a
foreclosure of mortgage, he may suspend the payment of the price
until the vendor has caused the disturbance or danger to cease,
unless the latter gives security for the return of the price in a proper
case, or it has been stipulated that, notwithstanding any such
contingency, the vendee shall be bound to make the payment. A
mere act of trespass shall not authorize the suspension of the
payment of the price.
Respondent court refused to apply the aforequoted provision of law on the erroneous
assumption that the true agreement between the parties was a contract of option. As
we have hereinbefore discussed, it was not an option contract but a perfected
contract to sell. Verily, therefore, Article 1590 would properly apply.
Both lower courts, however, are in accord that since Civil Case No. 89-5541 filed
against the parties herein involved only the eastern half of the land subject of the
deed of sale between petitioner and the Jimenez brothers, it did not, therefore, have
any adverse effect on private respondents' title and ownership over the western half
of the land which is covered by the contract subject of the present case. We have
gone over the complaint for recovery of ownership filed in said case 41 and we are not
persuaded by the factual findings made by said courts. At a glance, it is easily
discernible that, although the complaint prayed for the annulment only of the contract
of sale executed between petitioner and the Jimenez brothers, the same likewise
prayed for the recovery of therein plaintiffs' share in that parcel of land specifically
covered by TCT No. 309773. In other words, the plaintiffs therein were claiming to be
co-owners of the entire parcel of land described in TCT No. 309773, and not only of a
portion thereof nor, as incorrectly interpreted by the lower courts, did their claim
pertain exclusively to the eastern half adjudicated to the Jimenez brothers.
Such being the case, petitioner was justified in suspending payment of the balance of
the purchase price by reason of the aforesaid vindicatory action filed against it. The
assurance made by private respondents that petitioner did not have to worry about
the case because it was pure and simple harassment 42 is not the kind of guaranty
contemplated under the exceptive clause in Article 1590 wherein the vendor is bound
to make payment even with the existence of a vindicatory action if the vendee should
give a security for the return of the price.
2. Be that as it may, and the validity of the suspension of payment notwithstanding,
we find and hold that private respondents may no longer be compelled to sell and
deliver the subject property to petitioner for two reasons, that is, petitioner's failure to
duly effect the consignation of the purchase price after the disturbance had ceased;
and, secondarily, the fact that the contract to sell had been validly rescinded by
private respondents.
 P a g e | 14

The records of this case reveal that as early as February 28, 1990 when petitioner
caused its exclusive option to be annotated anew on the certificate of title, it already
knew of the dismissal of civil Case No. 89-5541. However, it was only on April 16,
1990 that petitioner, through its counsel, wrote private respondents expressing its
willingness to pay the balance of the purchase price upon the execution of the
corresponding deed of absolute sale. At most, that was merely a notice to pay. There
was no proper tender of payment nor consignation in this case as required by law.
The mere sending of a letter by the vendee expressing the intention to
pay, without the accompanying payment, is not considered a valid tender of
payment. 43 Besides, a mere tender of payment is not sufficient to compel private
respondents to deliver the property and execute the deed of absolute sale. It is
consignation which is essential in order to extinguish petitioner's obligation to pay the
balance of the purchase price. 44 The rule is different in case of an option contract 45 or
in legal redemption or in a sale with right to repurchase, 46 wherein consignation is not
necessary because these cases involve an exercise of a right or privilege (to buy,
redeem or repurchase) rather than the discharge of an obligation, hence tender of
payment would be sufficient to preserve the right or privilege. This is because the
provisions on consignation are not applicable when there is no obligation to pay. 47 A
contract to sell, as in the case before us, involves the performance of an obligation,
not merely the exercise of a privilege of a right. consequently, performance or
payment may be effected not by tender of payment alone but by both tender and
consignation.
Furthermore, petitioner no longer had the right to suspend payment after the
disturbance ceased with the dismissal of the civil case filed against it. Necessarily,
therefore, its obligation to pay the balance again arose and resumed after it received
notice of such dismissal. Unfortunately, petitioner failed to seasonably make payment,
as in fact it has deposit the money with the trial court when this case was originally
filed therein.
successfully impugned in court. If the debtor impugns the declaration, it shall be
subject to judicial determination 51 otherwise, if said party does not oppose it, the
extrajudicial rescission shall have legal effect. 52
In the case at bar, it has been shown that although petitioner was duly furnished and
did receive a written notice of rescission which specified the grounds therefore, it
failed to reply thereto or protest against it. Its silence thereon suggests an admission
of the veracity and validity of private respondents' claim. 53 Furthermore, the initiative
of instituting suit was transferred from the rescinder to the defaulter by virtue of the
automatic rescission clause in the contract. 54 But then, the records bear out the fact
that aside from the lackadaisical manner with which petitioner treated private
respondents' latter of cancellation, it utterly failed to seriously seek redress from the
court for the enforcement of its alleged rights under the contract. If private
respondents had not taken the initiative of filing Civil Case No. 7532, evidently
petitioner had no intention to take any legal action to compel specific performance
from the former. By such cavalier disregard, it has been effectively estopped from
seeking the affirmative relief it now desires but which it had theretofore disdained.
WHEREFORE, on the foregoing modificatory premises, and considering that the
same result has been reached by respondent Court of Appeals with respect to the
relief awarded to private respondents by the court a quo which we find to be correct,
its assailed judgment in CA-G.R. CV No. 34767 is hereby AFFIRMED.
SO ORDERED.

By reason of petitioner's failure to comply with its obligation, private respondents

elected to resort to and did announce the rescission of the contract through its letter
to petitioner dated July 27, 1990. That written notice of rescission is deemed sufficient
under the circumstances. Article 1592 of the Civil Code which requires rescission
either by judicial action or notarial act is not applicable to a contract to
sell. 48 Furthermore, judicial action for rescission of a contract is not necessary where
the contract provides for automatic rescission in case of breach, 49 as in the contract
involved in the present controversy.

We are not unaware of the ruling in University of the Philippines vs. De los Angeles,
etc. 50 that the right to rescind is not absolute, being ever subject to scrutiny and
review by the proper court. It is our considered view, however, that this rule applies to
a situation where the extrajudicial rescission is contested by the defaulting party. In
other words, resolution of reciprocal contracts may be made extrajudicially unless

G.R. No. 103338 January 4, 1994
FEDERICO SERRA, petitioner,
vs.
THE HON. COURT OF APPEALS AND RIZAL COMMERCIAL BANKING
CORPORATION, respondents.
NOCON, J.:
A promise to buy and sell a determinate thing for a price certain is reciprocally
demandable. An accepted unilateral promise to buy and sell a determinate thing for a
price certain is binding upon the promisor if the promise is supported by a
consideration distinct from the price. (Article 1479, New Civil Code) The first is the
mutual promise and each has the right to demand from the other the fulfillment of the
obligation. While the second is merely an offer of one to another, which if accepted,
would create an obligation to the offeror to make good his promise, provided the
acceptance is supported by a consideration distinct from the price.
Disputed in the present case is the efficacy of a "Contract of Lease with Option to
Buy", entered into between petitioner Federico Serra and private respondent Rizal
Commercial Banking Corporation. (RCBC).
Petitioner is the owner of a 374 square meter parcel of land located at Quezon St.,
Masbate, Masbate. Sometime in 1975, respondent bank, in its desire to put up a
branch in Masbate, Masbate, negotiated with petitioner for the purchase of the then
unregistered property. On May 20, 1975, a contract of LEASE WITH OPTION TO
BUY was instead forged by the parties, the pertinent portion of which reads:
P a g e | 15
1. The LESSOR leases unto the LESSEE, an the LESSEE hereby
accepts in lease, the parcel of land described in the first WHEREAS
clause, to have and to hold the same for a period of twenty-five (25)
years commencing from June 1, 1975 to June 1, 2000. The
LESSEE, however, shall have the option to purchase said parcel of
land within a period of ten (10) years from the date of the signing of
this Contract at a price not greater than TWO HUNDRED TEN
PESOS (P210.00) per square meter. For this purpose, the LESSOR
undertakes, within such ten-year period, to register said parcel of
land under the TORRENS SYSTEM and all expenses appurtenant
thereto shall be for his sole account.
If, for any reason, said parcel of land is not registered under the
TORRENS SYSTEM within the aforementioned ten-year period, the
LESSEE shall have the right, upon termination of the lease to be
paid by the LESSOR the market value of the building and
improvements constructed on said parcel of land.
The LESSEE is hereby appointed attorney-in-fact for the LESSOR
to register said parcel of land under the TORRENS SYSTEM in
case the LESSOR, for any reason, fails to comply with his
obligation to effect said registration within reasonable time after the
signing of this Agreement, and all expenses appurtenant to such
registration shall be charged by the LESSEE against the rentals
due to the LESSOR.
2. During the period of the lease, the LESSEE covenants to pay the
LESSOR, at the latter's residence, a monthly rental of SEVEN
HUNDRED PESOS (P700.00), Philippine Currency, payable in
advance on or before the fifth (5th) day of every calendar month,
provided that the rentals for the first four (4) months shall be paid by
the LESSEE in advance upon the signing of this Contract.
3. The LESSEE is hereby authorized to construct as its sole
expense a building and such other improvements on said parcel of
land, which it may need in pursuance of its business and/or
operations; provided, that if for any reason the LESSEE shall fail to
exercise its option mentioned in paragraph (1) above in case the
parcel of land is registered under the TORRENS SYSTEM within
the ten-year period mentioned therein, said building and/or
improvements, shall become the property of the LESSOR after the
expiration of the 25-year lease period without the right of
reimbursement on the part of the LESSEE. The authority herein
granted does not, however, extend to the making or allowing any
unlawful, improper or offensive used of the leased premises, or any

use thereof, other than banking and office purposes. The
maintenance and upkeep of such building, structure and
improvements shall likewise be for the sole account of the
LESSEE. 1
The foregoing agreement was subscribed before Notary Public Romeo F. Natividad.
Pursuant to said contract, a building and other improvements were constructed on the
land which housed the branch office of RCBC in Masbate, Masbate. Within three
years from the signing of the contract, petitioner complied with his part of the
agreement by having the property registered and
placed under the TORRENS SYSTEM, for which Original Certificate of Title No. 0-232
was issued by the Register of Deeds of the Province of Masbate.
Petitioner alleges that as soon as he had the property registered, he kept on pursuing
the manager of the branch to effect the sale of the lot as per their agreement. It was
not until September 4, 1984, however, when the respondent bank decided to exercise
its option and informed petitioner, through a letter, 2 of its intention to buy the property
at the agreed price of not greater than P210.00 per square meter or a total of
P78,430.00. But much to the surprise of the respondent, petitioner replied that he is
no longer selling the property. 3
Hence, on March 14, 1985, a complaint for specific performance and damages were
filed by respondent against petitioner. In the complaint, respondent alleged that during
the negotiations it made clear to petitioner that it intends to stay permanently on
property once its branch office is opened unless the exigencies of the business
requires otherwise. Aside from its prayer for specific performance, it likewise asked for
an award of P50,000.00 for attorney's fees P100,000.00 as exemplary damages and
the cost of the suit. 4
A special and affirmative defenses, petitioner contended:
1. That the contract having been prepared and drawn by RCBC, it
took undue advantage on him when it set in lopsided terms.
2. That the option was not supported by any consideration distinct
from the price and hence not binding upon him.
3. That as a condition for the validity and/or efficacy of the option, it
should have been exercised within the reasonable time after the
registration of the land under the Torrens System; that its delayed
action on the option have forfeited whatever its claim to the same.
P a g e | 16
4. That extraordinary inflation supervened resulting in the unusual
decrease in the purchasing power of the currency that could not
reasonably be forseen or was manifestly beyond the contemplation
of the parties at the time of the establishment of the obligation, thus,
rendering the terms of the contract unenforceable, inequitable and
to the undue enrichment of RCBC. 5
and as counterclaim petitioner alleged that:
1. The rental of P700.00 has become unrealistic and unreasonable,
that justice and equity will require its adjustment.
2. By the institution of the complaint he suffered moral damages
which may be assessed at P100,000.00 and award of attorney's fee
of P25,000.00 and exemplary damages at P100,000.00. 6
Initially, after trial on the merits, the court dismissed the complaint. Although it found
the contract to be valid, the court nonetheless ruled that the option to buy in
unenforceable because it lacked a consideration distinct from the price and RCBC did
not exercise its option within reasonable time. The prayer for readjustment of rental
was denied, as well as that for moral and exemplary damages. 7
Nevertheless, upon motion for reconsideration of respondent, the court in the order of
January 9, 1989, reversed itself, the dispositive portion reads:
WHEREFORE, the Court reconsiders its decision dated June 6,
1988, and hereby renders judgment as follows:
1. The defendant is hereby ordered to execute and deliver the
proper deed of sale in favor of plaintiff selling, transferring and
conveying the property covered by and described in the Original
Certificate of Title 0-232 of the Registry of Deeds of Masbate for the
sum of Seventy Eight Thousand Five Hundred Forty Pesos
(P78,540,00), Philippine Currency;
2. Defendant is ordered to pay plaintiff the sum of Five Thousand
(P5,000.00) Pesos as attorney's fees;
3. The counter claim of defendant is hereby dismissed; and
4. Defendants shall pay the costs of suit. 8

In a decision promulgated on September 19, 1991, 9 the Court of Appeals affirmed the
findings of the trial court that:
1. The contract is valid and that the parties perfectly understood the
contents thereof;
2. The option is supported by a distinct and separate consideration
as embodied in the agreement;
3. There is no basis in granting an adjustment in rental.
Assailing the judgment of the appellate court, petitioner would like us to consider
mainly the following:
1. The disputed contract is a contract of adhesion.
2. There was no consideration to support the option, distinct from
the price, hence the option cannot be exercised.
3. Respondent court gravely abused its discretion in not granting
currency adjustment on the already eroded value of the stipulated
rentals for twenty-five years.
The petition is devoid of merit.
There is no dispute that the contract is valid and existing between the parties, as
found by both the trial court and the appellate court. Neither do we find the terms of
the contract unfairly lopsided to have it ignored.
A contract of adhesion is one wherein a party, usually a corporation, prepares the
stipulations in the contract, while the other party merely affixes his signature or his
"adhesion" thereto. These types of contracts are as binding as ordinary contracts.
Because in reality, the party who adheres to the contract is free to reject it entirely.
Although, this Court will not hesitate to rule out blind adherence to terms where facts
and circumstances will show that it is basically one-sided. 10
We do not find the situation in the present case to be inequitable. Petitioner is a highly
educated man, who, at the time of the trial was already a CPA-Lawyer, and when he
entered into the contract, was already a CPA, holding a respectable position with the
Metropolitan Manila Commission. It is evident that a man of his stature should have
been more cautious in transactions he enters into, particularly where it concerns
valuable properties. He is amply equipped to drive a hard bargain if he would be so
minded to.
P a g e | 17
Petitioner contends that the doctrines laid down in the cases of
Atkins Kroll v. Cua Hian Tek, 11 Sanchez v. Rigos, 12 and Vda. de Quirino
v. Palarca 13 were misapplied in the present case, because 1) the option given to the
respondent bank was not supported by a consideration distinct from the price; and 2)
that the stipulated price of "not greater than P210.00 per square meter" is not certain
or definite.
Article 1324 of the Civil Code provides that when an offeror has allowed the offeree a
certain period to accept, the offer maybe withdrawn at anytime before acceptance by
communicating such withdrawal, except when the option is founded upon
consideration, as something paid or promised. On the other hand, Article 1479 of the
Code provides that an accepted unilateral promise to buy and sell a determinate
thing for a price certain is binding upon the promisor if the promise is supported by a
consideration distinct from the price.
In a unilateral promise to sell, where the debtor fails to withdraw the promise before
the acceptance by the creditor, the transaction becomes a bilateral contract to sell
and to buy, because upon acceptance by the creditor of the offer to sell by the debtor,
there is already a meeting of the minds of the parties as to the thing which is
determinate and the price which is certain. 14 In which case, the parties may then
reciprocally demand performance.
Jurisprudence has taught us that an optional contract is a privilege existing only in
one party the buyer. For a separate consideration paid, he is given the right to
decide to purchase or not, a certain merchandise or property, at any time within the
agreed period, at a fixed price. This being his prerogative, he may not be compelled
to exercise the option to buy before the time
expires. 15
On the other hand, what may be regarded as a consideration separate from the price
is discussed in the case of Vda. de Quirino v. Palarca 16 wherein the facts are almost
on all fours with the case at bar. The said case also involved a lease contract with
option to buy where we had occasion to say that "the consideration for the lessor's
obligation to sell the leased premises to the lessee, should he choose to exercise his
option to purchase the same, is the obligation of the lessee to sell to the lessor the
building and/or improvements constructed and/or made by the former, if he fails to
exercise his option to buy leased premises." 17
In the present case, the consideration is even more onerous on the part of the lessee
since it entails transferring of the building and/or improvements on the property to
petitioner, should respondent bank fail to exercise its option within the period
stipulated. 18
The bugging question then is whether the price "not greater than TWO HUNDRED
PESOS" is certain or definite. A price is considered certain if it is so with reference to
 P a g e | 18

another thing certain or when the determination thereof is left to the judgment of a
specified person or persons. 19 And generally, gross inadequacy of price does not
affect a contract of sale. 20
Contracts are to be construed according to the sense and meaning of the terms which
the parties themselves have used. In the present dispute, there is evidence to show
that the intention of the parties is to peg the price at P210 per square meter. This was
confirmed by petitioner himself in his testimony, as follows:
Q. Will you please tell this Court what was the
offer?
A. It was an offer to buy the property that I have
in Quezon City (sic).
Extraordinary inflation exists when there in an unimaginable increase or decrease of
the purchasing power of the Philippine currency, or fluctuation in the value of pesos
manifestly beyond the contemplation of the parties at the time of the establishment of
the obligation. 23
Premises considered, we find that the contract of "LEASE WITH OPTION TO BUY"
between petitioner and respondent bank is valid, effective and enforceable, the price
being certain and that there was consideration distinct from the price to support the
option given to the lessee.
WHEREFORE, this petition is hereby DISMISSED, and the decision of the appellate
court is hereby AFFIRMED.
SO ORDERED.

Q. And did they give you a specific amount?

xxx xxx xxx

A. Well, there was an offer to buy the property at

P210 per square meters (sic).

Q. And that was in what year?

A . 1975, sir.

Q. And did you accept the offer?

A. Yes, sir. 21

Moreover, by his subsequent acts of having the land titled under the Torrens System,
and in pursuing the bank manager to effect the sale immediately, means that he
understood perfectly the terms of the contract. He even had the same property
mortgaged to the respondent bank sometime in 1979, without the slightest hint of
wanting to abandon his offer to sell the property at the agreed price of P210 per
square meter. 22

Finally, we agree with the courts a quo that there is no basis, legal or factual, in
adjusting the amount of the rent. The contract is the law between the parties and if
there is indeed reason to adjust the rent, the parties could by themselves negotiate
for the amendment of the contract. Neither could we consider the decline of the
purchasing power of the Philippine peso from 1983 to the time of the commencement
of the present case in 1985, to be so great as to result in an extraordinary inflation.

[G.R. No. 125761. April 30, 2003]
SALVADOR P. MALBAROSA, petitioner, vs. HON. COURT OF APPEALS and
S.E.A. DEVELOPMENT CORP. respondents.
DECISION
CALLEJO, SR., J.:
Philtectic Corporation and Commonwealth Insurance Co., Inc. were only two of
the group of companies wholly-owned and controlled by respondent S.E.A.
Development Corporation (SEADC). The petitioner Salvador P. Malbarosa was the
president and general manager of Philtectic Corporation, and an officer of other
corporations belonging to the SEADC group of companies. The respondent assigned
to the petitioner one of its vehicles covered by Certificate of Registration No.
04275865[1] described as a 1982 model Mitsubishi Gallant Super Saloon, with plate
number PCA 180 for his use. He was also issued membership certificates in the
Architectural Center, Inc. Louis Da Costa was the president of the respondent and
Commonwealth Insurance Co., Inc., while Senen Valero was the Vice-Chairman of
the Board of Directors of the respondent and Vice-Chairman of the Board of Directors
of Philtectic Corporation.
Sometime in the first week of January 1990, the petitioner intimated to Senen
Valero his desire to retire from the SEADC group of companies and requested that his
1989 incentive compensation as president of Philtectic Corporation be paid to
him. On January 8, 1990, the petitioner sent a letter to Senen Valero tendering his
resignation, effective February 28, 1990 from all his positions in the SEADC group of
companies, and reiterating therein his request for the payment of his incentive
compensation for 1989.[2]
Louis Da Costa met with the petitioner on two occasions, one of which was on
February 5, 1990 to discuss the amount of the 1989 incentive compensation
petitioner was entitled to, and the mode of payment thereof. Da Costa ventured that
the petitioner would be entitled to an incentive compensation in the amount of
around P395,000.
On March 14, 1990, the respondent, through Senen Valero, signed a letter-offer
addressed to the petitioner[3] stating therein that petitioners resignation from all the
positions in the SEADC group of companies had been accepted by the respondent,
P a g e | 19
and that he was entitled to an incentive compensation in the amount of P251,057.67,
and proposing that the amount be satisfied, thus:
- The 1982 Mitsubishi Super saloon car assigned to you by the company shall be transferred to
you at a value of P220,000.00. (Although you have indicated a value of P180,000.00, our
survey in the market indicates that P220,000.00 is a reasonable reflection of the value of the
car.)
- The membership share of our subsidiary, Tradestar International, Inc. in the Architectural
Center, Inc. will be transferred to you. (Although we do not as yet have full information as to
the value of these shares, we have been informed that the shares have traded recently in the
vicinity of P60,000.00.)[4]
The respondent required that if the petitioner agreed to the offer, he had to affix
his conformity on the space provided therefor and the date thereof on the right bottom
portion of the letter, thus:
Agreed:
SALVADOR P. MALBAROSA
Date: _____________________[5]
On March 16, 1990, Da Costa met with the petitioner and handed to him the
original copy of the March 14, 1990 Letter-offer for his consideration and
conformity. The petitioner was dismayed when he read the letter and learned that he
was being offered an incentive compensation of only P251,057.67. He told Da Costa
that he was entitled to no less than P395,000 as incentive compensation. The
petitioner refused to sign the letter-offer on the space provided therefor. He received
the original of the letter and wrote on the duplicate copy of the letter-offer retained by
Da Costa, the words: Recd original for review purposes. [6]Despite the lapse of more
than two weeks, the respondent had not received the original of the March 14, 1990
Letter-offer of the respondent with the conformity of the petitioner on the space
provided therefor. The respondent decided to withdraw its March 14, 1990 Offer. On
April 3, 1996, the Board of Directors of the respondent approved a resolution
authorizing the Philtectic Corporation and/or Senen Valero to demand from the
petitioner for the return of the car and to take such action against the petitioner
including the institution of an action in court against the petitioner for the recovery of
the motor vehicle.[7]
On April 4, 1990, Philtectic Corporation, through its counsel, wrote the petitioner
withdrawing the March 14, 1990 Letter-offer of the respondent and demanding that
the petitioner return the car and his membership certificate in the Architectural Center,

Inc. within 24 hours from his receipt thereof. [8] The petitioner received the original
copy of the letter on the same day.
On April 7, 1990, the petitioner wrote the counsel of Philtectic Corporation
informing the latter that he cannot comply with said demand as he already accepted
the March 14, 1990 Letter-offer of the respondent when he affixed on March 28, 1990
his signature on the original copy of the letter-offer.[9] The petitioner enclosed a xerox
copy of the original copy of the March 14, 1990 Letter-offer of the respondent, bearing
his signature on the space provided therefore dated March 28, 1990.[10]
With the refusal of the petitioner to return the vehicle, the respondent, as
plaintiff, filed a complaint against the petitioner, as defendant, for recovery of personal
property with replevin with damages and attorneys fees, thus:
WHEREFORE, PREMISES CONSIDERED, it is respectfully prayed before this Honorable
Court that:
1. Before hearing and upon approval of plaintiffs bond, a writ be issued immediately for the
seizure of the vehicle described in paragraph 3 hereof, wherever it may be found, and for its
delivery to plaintiff;
2. After trial of the issues, judgment be rendered adjudging that plaintiff has the right to the
possession of the said motor vehicle, and, in the alternative, that defendant must deliver such
motor vehicle to plaintiff or pay to plaintiff the value thereof in case delivery cannot be made;
3. After trial, hold the defendant liable to plaintiff for the use of the motor vehicle in the
amount of P1,000.00 per day from date of demand until the motor vehicle is returned to
plaintiff.
4. After trial, hold the defendant liable to plaintiff for attorneys fees and costs of litigation in
the amount of P100,000.00.
Plaintiffs likewise prays for such other reliefs as are just and equitable under the
circumstances.[11]
On April 30, 1990, the trial court issued an order for the issuance of a writ of
replevin.[12] Correspondingly, the writ of replevin was issued on May 8, 1990.[13]
On May 11, 1990, the Sheriff served the writ on the petitioner and was able to
take possession of the vehicle in question. On May 15, 1990, the petitioner was able
to recover the possession of the vehicle upon his filing of the counter-bond.[14]
P a g e | 20
In his Answer to the complaint, the petitioner, as defendant therein, alleged that
he had already agreed on March 28, 1990 to the March 14, 1990 Letter-offer of the
respondent, the plaintiff therein, and had notified the said plaintiff of his acceptance;
hence, he had the right to the possession of the car. Philtectic Corporation had no
right to withdraw the offer of the respondent SEADC. The petitioner testified that after
conferring with his counsel, he had decided to accept the offer of the respondent,
and had affixed his signature on the space below the word Agree in the March 14,
1990 Letter-offer, thus:
Agreed:
(Sgd.)
SALVADOR P. MALBAROSA
Date: 3 28 - 90[15]
The petitioner adduced evidence that on March 9, 1990, he had written Senen
Valero that he was agreeable to an incentive compensation of P218,000 to be settled
by the respondent by transferring the car to the petitioner valued at P180,000
and P38,000 worth of shares of the Architectural Center, Inc. on the claim of Da Costa
that respondent was almost bankrupt. However, the petitioner learned that the
respondent was financially sound; hence, he had decided to receive his incentive
compensation of P395,000 in cash.[16] On March 29, 1990, the petitioner called up the
office of Louis Da Costa to inform the latter of his acceptance of the letter-offer of the
respondent. However, the petitioner was told by Liwayway Dinglasan, the telephone
receptionist of Commonwealth Insurance Co, that Da Costa was out of the office. The
petitioner asked Liwayway to inform Da Costa that he had called him up and that he
had already accepted the letter-offer. Liwayway promised to relay the message to Da
Costa. Liwayway testified that she had relayed the petitioners message to Da Costa
and that the latter merely nodded his head.
After trial, the court a quo rendered its Decision[17] on July 28, 1992, the
dispositive portion of which reads as follows:
WHEREFORE, in view of all the foregoing, judgment is rendered ordering the defendant:
1. To deliver the motor vehicle prescribed [sic] in the complaint to plaintiff
SEADC, or pay its value of P220,000 in case delivery cannot be made;
2. pay plaintiff SEADC P50,000 as and for attorneys fees; and
3. Cost of litigation.

SO ORDERED.[18]
The trial court stated that there existed no perfected contract between the
petitioner and the respondent on the latters March 14, 1990 Letter-offer for failure of
the petitioner to effectively notify the respondent of his acceptance of said letter-offer
before the respondent withdrew the same. The respondent filed a motion for the
amendment of the decision of the trial court, praying that the petitioner should be
ordered to pay to the respondent reasonable rentals for the car. On October 10, 1992,
the court a quo issued an order, granting plaintiffs motion and amending the
dispositive portion of its July 28, 1992 Decision:
1. Ordering defendant to pay to plaintiff lease rentals for the use of the motor
vehicle at the rate of P1,000.00 per Day from May 8, 1990 up to the date
of actual delivery to the plaintiff of the motor vehicle; and
2. Ordering First Integrated Bonding & Insurance Co. to make good on its
obligations to plaintiff under the Counterbond issued pursuant to this case.
SO ORDERED.[19]
The petitioner appealed from the decision and the order of the court a quo to the
Court of Appeals.
On February 8, 1996, the Court of Appeals rendered its Decision,[20] affirming the
decision of the trial court. The dispositive portion of the decision reads:
WHEREFORE, the Decision dated July 28, 1992 and the Order dated October 10, 1992 of the
Regional Trial Court of Pasig (Branch 158) are hereby AFFIRMED with the
MODIFICATION that the period of payment of rentals at the rate of P1,000.00 per day shall
be from the time this decision becomes final until actual delivery of the motor vehicle to
plaintiff-appellee is made.
Costs against the defendant-appellant.
SO ORDERED.[21]
The Court of Appeals stated that the petitioner had not accepted the
respondents March 14, 1990 Letter-offer before the respondent withdrew said offer on
April 4, 1990.
The petitioner filed a petition for review on certiorari of the decision of the Court
of Appeals.
P a g e | 21
The petitioner raises two issues, namely: (a) whether or not there was a valid
acceptance on his part of the March 14, 1990 Letter-offer of the respondent; [22] and (b)
whether or not there was an effective withdrawal by the respondent of said letter-offer.
The petition is dismissed.
Anent the first issue, the petitioner posits that the respondent had given him a
reasonable time from March 14, 1990 within which to accept or reject its March 14,
1990 Letter-offer. He had already accepted the offer of the respondent when he
affixed his conformity thereto on the space provided therefor on March 28,
1990[23] and had sent to the respondent corporation on April 7, 1990 a copy of said
March 14, 1990 Letter-offer bearing his conformity to the offer of the respondent;
hence, the respondent can no longer demand the return of the vehicle in question. He
further avers that he had already impliedly accepted the offer when after said
respondents offer, he retained possession of the car.
For its part, the respondent contends that the issues raised by the petitioner are
factual. The jurisdiction of the Court under Rule 45 of the Rules of Court, as
amended, is limited to revising and correcting errors of law of the CA. As concluded
by the Court of Appeals, there had been no acceptance by the petitioner of its March
14, 1990 Letter-offer. The receipt by the petitioner of the original of the March 14,
1990 Letter-offer for review purposes amounted merely to a counter-offer of the
petitioner. The findings of the Court of Appeals are binding on the petitioner. The
petitioner adduced no proof that the respondent had granted him a period within
which to accept its offer. The latter deemed its offer as not accepted by the petitioner
in light of petitioners ambivalence and indecision on March 16, 1990 when he
received the letter-offer of respondent.
We do not agree with the petitioner.
Under Article 1318 of the Civil Code, the essential requisites of a contract are as
follows:
Art. 1318. There is no contract unless the following requisites concur:
(1) Consent of the contracting parties;
(2) Object certain which is the subject matter of the contract;
(3) Cause of the obligation which is established.
Under Article 1319 of the New Civil Code, the consent by a party is manifested
by the meeting of the offer and the acceptance upon the thing and the cause which
are to constitute the contract. An offer may be reached at any time until it is accepted.

An offer that is not accepted does not give rise to a consent. The contract does not
come into existence.[24] To produce a contract, there must be acceptance of the offer
which may be express or implied[25] but must not qualify the terms of the offer. The
acceptance must be absolute, unconditional and without variance of any sort from the
offer.[26]
The acceptance of an offer must be made known to the offeror. [27] Unless the
offeror knows of the acceptance, there is no meeting of the minds of the parties, no
real concurrence of offer and acceptance.[28]The offeror may withdraw its offer and
revoke the same before acceptance thereof by the offeree. The contract is perfected
only from the time an acceptance of an offer is made known to the offeror. If an offeror
prescribes the exclusive manner in which acceptance of his offer shall be indicated by
the offeree, an acceptance of the offer in the manner prescribed will bind the
offeror. On the other hand, an attempt on the part of the offeree to accept the offer in
a different manner does not bind the offeror as the absence of the meeting of the
minds on the altered type of acceptance.[29] An offer made inter praesentes must be
accepted immediately. If the parties intended that there should be an express
acceptance, the contract will be perfected only upon knowledge by the offeror of the
express acceptance by the offeree of the offer. An acceptance which is not made in
the manner prescribed by the offeror is not effective but constitutes a counter-offer
which the offeror may accept or reject.[30] The contract is not perfected if the offeror
revokes or withdraws its offer and the revocation or withdrawal of the offeror is the
first to reach the offeree.[31] The acceptance by the offeree of the offer after knowledge
of the revocation or withdrawal of the offer is inefficacious. The termination of the
contract when the negotiations of the parties terminate and the offer and acceptance
concur, is largely a question of fact to be determined by the trial court.[32]
In this case, the respondent made its offer through its Vice-Chairman of the
Board of Directors, Senen Valero. On March 16, 1990, Da Costa handed over the
original of the March 14, 1990 Letter-offer of the respondent to the petitioner. The
respondent required the petitioner to accept the offer by affixing his signature on the
space provided in said letter-offer and writing the date of said acceptance, thus
foreclosing an implied acceptance or any other mode of acceptance by the
petitioner. However, when the letter-offer of the respondent was delivered to the
petitioner on March 16, 1990, he did not accept or reject the same for the reason that
he needed time to decide whether to reject or accept the same.[33] There was no
contract perfected between the petitioner and the respondent corporation. [34] Although
the petitioner claims that he had affixed his conformity to the letter-offer on March 28,
1990, the petitioner failed to transmit the said copy to the respondent. It was only on
April 7, 1990 when the petitioner appended to his letter to the respondent a copy of
the said March 14, 1990 Letter-offer bearing his conformity that he notified the
respondent of his acceptance to said offer. But then, the respondent, through
Philtectic Corporation, had already withdrawn its offer and had already notified the
petitioner of said withdrawal via respondents letter dated April 4, 1990 which was
delivered to the petitioner on the same day. Indubitably, there was no contract
perfected by the parties on the March 14, 1990 Letter-offer of the respondent.
P a g e | 22
The petitioners plaint that he was not accorded by the respondent reasonable
time to accept or reject its offer does not persuade. It must be underscored that there
was no time frame fixed by the respondent for the petitioner to accept or reject its
offer. When the offeror has not fixed a period for the offeree to accept the offer, and
the offer is made to a person present, the acceptance must be made immediately.
[35]
In this case, the respondent made its offer to the petitioner when Da Costa handed
over on March 16, 1990 to the petitioner its March 14, 1990 Letter-offer but that the
petitioner did not accept the offer. The respondent, thus, had the option to withdraw or
revoke the offer, which the respondent did on April 4, 1990.
Even if it is assumed that the petitioner was given a reasonable period to accept
or reject the offer of the respondent, the evidence on record shows that from March
16, 1990 to April 3, 1990, the petitioner had more than two weeks which was more
than sufficient for the petitioner to accept the offer of the respondent. Although the
petitioner avers that he had accepted the offer of the respondent on March 28, 1990,
however, he failed to transmit to the respondent the copy of the March 14, 1990
Letter-offer bearing his conformity thereto. Unless and until the respondent received
said copy of the letter-offer, it cannot be argued that a contract had already been
perfected between the petitioner and the respondent.
On the second issue, the petitioner avers that Philtectic Corporation, although a
wholly-owned and controlled subsidiary of the respondent, had no authority to
withdraw the offer of the respondent. The resolution of the respondent authorizing
Philtectic Corporation to take such action against the petitioner including the
institution of an action against him for the recovery of the subject car does not
authorize Philtectic Corporation to withdraw the March 14, 1990 Letter-offer of the
respondent. The withdrawal by Philtectic Corporation on April 4, 1990 of the offer of
the respondent was ineffective insofar as the petitioner was concerned. The
respondent, for its part, asserts that the petitioner had failed to put in issue the matter
of lack of authority of Philtectic Corporation to withdraw for and in behalf of the
respondent its March 14, 1990 Letter-offer. It contends that the authority of Philtectic
Corporation to take such action including the institution of an action against the
petitioner for the recovery of the car necessarily included the authority to withdraw the
respondents offer. Even then, there was no need for the respondent to withdraw its
offer because the petitioner had already rejected the respondents offer on March 16,
1990 when the petitioner received the original of the March 14, 1990 Letter-offer of
the respondent without the petitioner affixing his signature on the space therefor.
We do not agree with the petitioner. Implicit in the authority given to Philtectic
Corporation to demand for and recover from the petitioner the subject car and to
institute the appropriate action against him to recover possession of the car is the
authority to withdraw the respondents March 14, 1990 Letter-offer. It cannot be
argued that respondent authorized Philtectic Corporation to demand and sue for the
recovery of the car and yet did not authorize it to withdraw its March 14, 1990 Letter-
offer to the petitioner. Besides, when he testified, Senen Valero stated that the April 4,

1990 letter of Philtectic Corporation to the petitioner was upon his instruction and
conformably with the aforesaid resolution of the Board of Directors of the respondent:
Q Mr. Valero, after the Board passed this resolution. (sic) What action did
you take, if any?
A After that resolution was passed. (sic) I instructed our lawyers to proceed
with the demand letter for the recovery of the vehicle.
Q Do you know if that demand letter was every (sic) made by your lawyer?
A Yes. I know that because I was the one who gave the instruction and
before it was finally served on Malbarosa, I was shown about the
demand letter.
C/Pltf. - Your honor, or rather
Mr. Valero, if I show you a copy of that letter, will you be able to identify the
same?
A Yes, sir.
Q I am now showing to you a copy of the letter dated April 4, 1990,
addressed to Mr. Salvador P. Malbarosa and signed by Romulo,
Mabanta, Buenaventura, Sayoc and Delos Angeles by _____. What
relation, if any, does that demand letter have with the demand letter
that you are talking about?
A Its the same one I am referring to.
the Court of Appeals is AFFIRMED.
C/Pltf. Your honor, we manifest that the letter has been previously marked
as our exh. D.
P a g e | 23
Q Mr. Valero, on the first paragraph of this demand letter, you stated that
the letter is written in behalf of Philtectic Corporation. Do you have
any knowledge why it was written this way?
A Yes. Because Philtectic, being the agent used here by S.E.A.
Development Corporation for the one using the car, it was only
deemed proper that Philtectic will be the one to send the demand
letter.
Q In the second paragraph of that letter, Mr. Valero, you stated that there
was an allusion made to the offer made on March 14, 1990. That the
1982 Mitsubishi Galant Super Saloon car with plate# M-PCA-189
assigned to you by the company, and the membership share in the
Architectural Center Inc., be transferred to you in settlement. You
previously stated about this March 14 letter. What relation, if any,
does this second paragraph with the letter-offer that you previously
stated.
C/Def. - Objection, your honor. This witness is incompetent
C/Pltf. - But he was the one who instructed, your honor.
Court - LET the witness answer.
Witness- (Stenographer reads back the previous question asked by
counsel for him to answer, and.)
A It is the same.[36]
IN LIGHT OF ALL THE FOREGOING, the petition is dismissed. The Decision of
SO ORDERED.