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V.

Formation of Sale

Spouses Julio D. Villamor and Marina Villamor vs CA and Spouses


Macaria Lbingisa Reyes and Roberto Reyes
G.R. No. 97332
October 10, 1991
J. Medialdea

Facts:

This is a case wherein the Petitioners Sps. Villamor purchased half of the
land owned by the Respondents, Sps. Macaria Reyes, the land is identified
as follows, 600sqm situated at Baesa, Quezon City. The latter’s land was
purchased for a price considerably higher than the previling market price.
They then executed a Deed of Option stating that the only reason why the
Villamor’s agreed to purchase the said lot is because Macaria Reyes agreed
to confer upon them the exclusive right to purchase the other half of the land,
such sale under the deed maybe imposed whenever the need for the sale
arises on the part of either party. Macaria Reyes sought to repurchase the
land, but the Villamors refused. Instead, the Villamors exercised their option
to purchase the other half of the property. Macaria Reyes then refused, thus
the Villamors filed a case for specific performance. Macaria averred that the
option is void for lack of merit.

Issue: W/N the Option Constract is void for lack of consideration, No

Held:

The Option Contract is supported by a consideration – that being the


difference agreed price and the market price of the other half of the land,
which was sold to the Villamors. Thus it was sold higher than that of the
market price. The action of the Petitioners is valid and may be enforced. The
consideration may consist anything of value. (Aside from the consideration
promised)

The Option was, in fact, the only reason why they purchased the other half
for an expensive price. Since the Villamors exercised their option, this is
tantamount to an acceptance of the offer – a valid and obligatory contract of
sale was thus perfected.

1
PNOC vs Keppel Philippines Holdings, Inc contracting party assumed. Since Keppel was already a Filipino-owned
G. R. No. 202050 corporation, it satisfied the condition that entitled it to purchase the land.
July 25, 2016
J. Brion NOTES:

Facts: An option contract is a contract where one person (the offeror/promissor)


grants to another person (the offeree/promisee) the right or privilege to buy
The 1976 Lease Agreement and Option to Purchase (or to sell) a determinate thing at a fixed price, if he or she chooses to do so
within an agreed period.
That Keppel entered a 25year lease agreement with Luzon Stevedoring
Corporation (Lusteveco). That after the 25 years, Keppel was given the “firm In an option contract, the subject matter is the right or privilege to buy (or to
and absolute option to purchase the land for P4.9M, provided that it had sell) a determinate thing for a price certain, while in a sales contract, the
acquired the necessary qualification to own land under Philippine laws at the subject matter is the determinate thing itself. The consent in an option
time the option is exercised. Apparently, after the lease agreement was contract is the acceptance by the offeree of the offerer's promise to sell (or to
executed, less than 60% of Keppel’s share holding was Filipino-owned, buy)the determinate thing, i.e., the offeree agrees to hold the right or
hence, it was not constitutionally qualified to acquire private lands in the privilege to buy (or to sell) within a specified period. This acceptance is
country. If at the end of the 25year period, the lease agreement will still be different from the acceptance of the offer itself whereby the offeree asserts
renewed for another 25 year and still was allowed to exercise option to his or her right or privilege to buy (or to sell), which constitutes as his or her
purchasae the land up to the 30th year of the lease. consent to the sales contract. The consideration in an option contract may
be anything of value, unlike in a sale where the purchase price must be in
Together with Keppel's lease rights and option to purchase, Lusteveco money or its equivalent. There is sufficient consideration for a promise if
warranted not to sell the land or assign its rights to the land for the duration there is any benefit to the offeree or any detriment to the offeror.
of the lease unless with the prior written consent of Keppel.13 Accordingly,
when the petitioner Philippine National Oil Corporation 14 (PNOC) acquired An accepted unilateral promise to buy or to sell a determinate thing for
the land from Lusteveco and took over the rights and obligations under the a price certain is binding upon the promissor if the promise is
agreement, Keppel did not object to the assignment so long as the supported by a consideration distinct from the price, a unilateral
agreement was annotated on PNOC's title.15 With PNOC's consent and promise to buy or to sell, even if accepted, is only binding if supported by a
cooperation, the agreement was recorded as Entry No. 65340 on PNOC's consideration... In other words, an accepted unilateral promise can only
Transfer of Certificate of Title No. T-50724 have a binding effect if supported by a consideration, which means
that the option can still be withdrawn, even if accepted, if the same is
RTC: Ruled in favor of PNOC not supported by any consideration.
CA: Reversed the decision – It found that since the option contract was
embodied in the agreement – a reciprocal contract – the consideration was Accordingly, when an option to buy or to sell is not supported by a
the obligation that each of the contracting party assumed. Since Keppel was consideration separate from the purchase price, the option constitutes as an
already a Filipino-owned corporation, it satisfied the condition that entitled it offer to buy or to sell, which may be withdrawn by the offeror at any time
to purchase the land. prior to the communication of the offeree's acceptance. When the offer is
duly accepted, a mutual promise to buy and to sell under the first paragraph
Issue: W/N the Option Contract is Valid, Yes of Article 1479 of the Civil Code ensues and the parties' respective
obligations become reciprocally demandable.
Held:
Applied to the present case, we find that the offer to buy the land was
The condition is satisfied. Stated in the CA decision: timely accepted by Keppel. When Keppel communicated its acceptance,
the offer to purchase the Bauan land stood, not having been withdrawn by
It found that since the option contract was embodied in the agreement – a PNOC. The offer having been duly accepted, a contract to sell the land
reciprocal contract – the consideration was the obligation that each of the ensued which Keppel can rightfully demand PNOC to comply with.

2
Nicolas Sanchez vs Severina Rigos
G. R. No. L-25494
June 14, 1972
J. Concepcion

Facts:

That Petitioner Sanchez and Respondent Rigos executed an Option to


Purchase, wherein Rigos “agreed, promised and committed to sell” to
Sanchez a parcel of land in Nueva Ecija for P1,510. In spite of the repeated
tenders made by Sanchez, Rigos still refused to sell the same. Thus,
Sanchez consigned the amounts and filed a case for specific performance.
Rigos alleged that the contract between them as a unilateral promise to sell,
which is not supported by any consideration, hence, it is not binding.

Issue: W/N there was a valid Option Contract, No

Held:

The promise (Sanchez) cannot compel the promissor (Rigos) to comply with
the promise unless the former can establish that the promise was for a
consideration. The burden of proof to establish the existence of the
consideration lies with Sanchez. Therefore, there was no valid option
contract in this case. However, an option without consideration is a mere
offer, which is not binding until accepted before it is withdrawn, a valid
contract of sale arise. In this case, even though there was no option contract,
there was nevertheless an offer and acceptance enough to constitute a valid
contract of sale.

3
Ang Su Yu Asuncion, Arthur Go and Keh Tiong vs CA and Buen Realty
Development Corporation
G. R. No. 109125
December 2, 1994
J. Vitug

Facts:

This is case wherein the Petitioner Ang Yu filed a complaint for Specific
Performance againt Spouses Unjieng. That the Petitioners have been
leasing the said parcel of land since 1935. The Spouses Unjieng have
offered to sell the same parcel of land to the Petitioners for 6M and the latter
provided a counter offer of 5M. the Unjieng spouses asked the Petitioner to
specify his terms in writing but the latter failed to do so. They failed to arrive
at any definite agreement. When Ang Yu discovered that the spouses were
planning to sell the property to other, he then sued them for specific
performance. While the case was pending, the spouses sold the units to
Buen Realty for 15M.

Issue: W/N there was a perfected contract of sale, No


W/N they can exercise right of first refusal, No

Held:

There was no perfected contract of sale yet since there was yet any meeting
of the minds. Thus, there is no ground for specific performance. During the
negotiation stage, any party may withdraw the offer made – especially if it
was not supported by any consideration.

An Option Contract of Right of First Refusal is separate and distinct from the
actual contract of sale – which is the basis for specific performance. The
remedy available to Ang Yu, in case the withdrawal was made capriciously
and arbitrarily, would be to sue on the basis of abuse of right. In case there
was an option contract, timely acceptance would create an obligation to sell
in the part of the vendor; but no such circumstance attends in this case.

4
Equatorial Realty Development. Inc. & Carmelo & Bauermann Inc vs
Mayfair Theater
G. R. No. 106063
November 21, 1996
J. Hermosisima, Jr.

Facts:

For its theaters, Mayfair was leasing a portion of the property in CM Recto,
which Carmelo owns. Under the lease agreement, “if Carmelo should decide
to sell the leased premises, Mayfair shall be given 30day exclusive option to
purchase the same.” Carmelo, through Henry Yang, informed the president
of Mayfair that the former is interested in selling the whole CM Recto
property and that Araneta offered to purchase the same for 1.2M dollars.
Mayfair twice replied through a letter of its intention to exercise its right to
repurchase - but Carmelo never replied. Thereafter, Carmelo sold the entire
property to Equatorial Realty for 11M pesos. Thus, Mayfair instituted an
action for specific performance and annulment of the sale. Carmelo alleges
that the right, being an Option Contract is void for lack of consideration.

Issue: W/N the right to repurchase is an option contract and void for lack of
consideration, No

Held:

The clause in the lease agreement was not an option contract, but a right to
first refusal. It was premised on Carmelo’s decision to sell the said property.
The requirement of separate consideration is already an integral part of the
lease. Carmelo violated such right by not affording Mayfair a chance to
negotiate. It abandoned the negotiations arbitrarily.

Equatorial was likewise in bad faith; it was well aware of the right conferred
upon Mayfair because its lawyers had ample time to review the contract.
That being the case, the contract between Carmelo and Equatorial is
rescissible. Mayfair should be allowed to purchase the entire property for the
price offered by Equatorial. Rights of First Refusal are also governed by the
law on contracts, not the amorphous principles on human relations.

5
Paranaque Kings Enterprises Inc. vs CA, Catalina Santos represented sell at all, there can never be a breach, much less an enforcement of such
by her atty-in-fact Luz B. Protacio and David Raymundo right. But on September 21, 1988, Santos sold said properties to
G. R. No. 111538 Respondent Raymundo without first offering these to petitioner. Santos
February 26, 1997 indeed realized her error, since she repurchased the properties after
J. Panganiban petitioner complained. Thereafter, she offered to sell the properties to
petitioner for P15 million, which petitioner, however, rejected because of the
Facts: ridiculous price. But Santos again appeared to have violated the same
provision of the lease contract when she finally resold the properties to
Catalina Santos owned 8 parcels of land leased to a certain Frederick Chua, respondent Raymundo for only P9 million without first offering them to
who assigned its rights thereto Lee CHing Bing, who in turn assigned said petitioner at such price. Whether there was actual breach which entitled
rights to Paranaque Kings Enterprises, which introduced significant petitioner to damages and/or other just or equitable relief, is a question
improvements on the premises. Under the lease agreement, “in case of sale, which can better be resolved after trial on the merits where each party can
the lessee shall have the option or priority to buy the said properties.” present evidence to prove their respective allegations and defenses
Catalina, in violation of the said stipulation, sold the lot to Raymundo for 5M.
Paranaque Kings notified her of the said breach and she immediately had
the lots reconveyed. She then offered the lot to Paranque Kings for 15M –
but the latter refused claiming that the offer was ridiculous. Catalina
thereafter sold it again to Raymundo for 9M.

Issue: W/N there was compliance with the Right of First Refusal, NO
W/N there was a breach to the Right of First Refusal, YES

In a Right of First Refusal, the seller cannot offer the property to another for
a lower price or under terms more favorable. It must be offered under the
terms and conditions to Paranque Kings; otherwise, the right of first refusal
becomes illusory. Only if Paranque Kings fails to meet the offer may the
property be offered for sale to another buyer – and under the same terms
and conditions as well. The Right of First refusal may also be validly
transferred or assigned – as in the case.

[SAME PRICE]
From the foregoing, the basis of the right of the first refusal* must be the
current offer to sell of the seller or offer to purchase of any prospective
buyer. Only after the grantee** fails to exercise its right of first priority under
the same terms and within the period contemplated, could the owner validly
offer to sell the property to a third person, again, under the same terms as
offered to the grantee

[BREACH]
A careful examination of the complaint reveals that it sufficiently alleges an
actionable contractual breach on the part of private respondents. Under
paragraph 9 of the contract of lease between respondent Santos and
petitioner, the latter was granted the first option or priority to purchase the
leased properties in case Santos decided to sell. If Santos never decided to

6
Rosencor Development Corporation and Rene Joaquin vs Paterno place when things are the object of sale is legally in possession of third
Inquing, Irene Guillermo, Federico Bantugan, Fernando Magbanua and person who did not act in bad faith. Rosencor could not have acted in bad
Lizza TIangco faith because they are not aware of the right of first refusal given verbally.
G. R. No. 140479
March 8, 2001 This does not mean however that respondents are left without any remedy
J. Gonzaga-Reyes for the unjustified violation of their right of first refusal. Their remedy however
is not an action for the rescission of the Deed of Absolute Sale but an action
Facts: for damages against the heirs of the spouses Tiangco for the unjustified
disregard of their right of first refusal.
That the Respondents are the lessees of a two-story residential apartment
located at Tomas Morato since 1971. The lease was not covered by a
contract – however, the lessees were renting the premised for P150/month
and were allegedly verbally granted by the lessors the preemptive right to
purchase the property if ever they decide to sell the same. Upon the death of
Spouses Tiangco in 1975, the management of the property was adjudicated
to to theirs heirs represented by Eufrocina De Leon – that the lessees were
allegedly promised the same preemptive right by the heirs of Tiangcos; they
stayed and allegedly spent their own money for it upkeep. Some time un
June 1990, the lessees received a letter from Atty. Erlinda Aguila demanding
that they should vacate the place – but refused. Later, they received a letter
coming from Eufrocina De Leon offering to sell to them the property that they
were leasing for 2M. In November 1990, Rene Joaquin came to the leased
premised and introduced himself as its new owner. Later, they received a
letter again from Atty. Aguila demanding that they vacate the premises. A
month later, they received a letter form De Leon stated that the heirs of
Tiangcos sold the premises to Resencor – following such another letter from
Atty. Aguila as the counsel of Rosencor demanding that they should pay
rent.

Issue: W/N the right of pre-emptive right of first refusal to the lessees should
be recognized even if it was given verbally, Yes

Held:

The Right of First Refusal is not covered by the Statute of Frauds. The
application of such statute presupposes the existence of a perfected contract
which is not applicable in this case. As such, a right of first refusal need not
be written to be enforceable and can be proved by oral evidence. (In this
case the Right of First Refusal was recognized by De Leon). Lessees have
proven that the lessors admit the right of first refusal given to them when the
property was offered to them by 2M.

The prevailing doctrine is that a contract of sale entered in violation of right


of first refusal is rescissible. However, this doctrine cannot be applied here
because Resencor is in good faith. Under Art 1358, recission cannot take

7
Dr. Daniel Vazquez and Ma. Luiza M. Vazquez vs Ayala Corporation
G. R. No. 149734
November 19, 2004
J. Tinga

Facts:

Dr. Vazquez owns Conduit Inc. In 1981, Vazquez enters into a Memorandum
of Agreement with Ayala Corp wherein Ayala bought Conduit from Vazquez.
Ayala committed to develop Conduit’s lands including 4 parcels of land
adjacent to Vazquez’s retained land. Be it noted that these parcels of land
were in the 3rd phase of Ayala’s development plan. The MOA provides the ff:
“The BUYER (Ayala) agrees to give the SELLERS (Vazquez) a first option to
purchase four developed lots next to the Retained Area at the prevailing
market price at the time of the purchase.” In 1990, Ayala was able to develop
the said lots. Ayala then offered to sell the parcels of land to Vazquez market
price value in 1990. Vazquez refused the offer. He contended that the
purchase price should be the one from 1981 (time of purchase). Ayala then
lowered the purchase price but Vazquez refused again. Instead he made a
counter offer at a much lower price. This time, Ayala refused.

Issue: W/N the stipulations in MOA is an option contract or right of first


refusal

Held:

The said stipulation is a mere right of first refusal. Although the paragraph
has a definite object, i.e., the sale of the 4 lots, the period within which they
will be offered for sale to Vazquez and, necessarily, the price for which the
subject lots will be sold are not specified. The phrase “at the prevailing
market price at the time of the purchase” connotes that there is no definite
period within which Ayala is bound to reserve the subject lots for Vazquez to
exercise his privilege to purchase. Neither is there a fixed or determinable
price at which subject lots will be offered for sale. The price considered
certain if it may be determined with reference to another thing certain or if
the determination thereof is left to the judgment of a specified person or
persons. Further the stipulation was inserted to give Vazquez the first crack
to but the subject lots at the price which Ayala would be willing to accept
when it offers the subject lots for sale. It is not supported by an independent
consideration.

8
Henry Macion and Angeles Macion vs. Hon Japal Guiani transfer the property at some future date, or where some conditions have to
G. R. No. 106837 be fulfilled before the contract is converted from an executory to an executed
August 4, 1993 one, does not pass ownership over the real estate being sold. It cannot be
J. Romero denied that the compromise agreement, having been signed by both parties,
is tantamount to a bilateral promise to buy and sell a certain thing for a price
Facts: certain. Hence, this gives the contracting parties rights in personam, such
that each has the right to demand from the other the fulfillment of their
Macion and Dela Vida Institute entered into a contract to sell, where the respective undertakings. Demandability may be exercised at any time after
latter assured the former that it will buy the 2 parcels of land in Cotabato City the execution of the Deed.
in or before July 31, 1991 at P1.7M. In the meantime, Dela Vida took
possession of it built an edifice worth 800k. however, on the said date, the
sale did not materialize. Consequently, Macion filed a complaint for unlawful
detainer against Dela Vida, while Dela Vida countered with a complaint for
reformation of the contract to sell. These differences were eventually settled.
In 1992, both parties entered into a compromise agreement where Macion
will give Dela Vida 5months to raise 2.6M and in case of failure to do so,
Dela Vida would vacate the premises. After 2months, Dela Vida alleged that
they had negotiated a loan from BPI and requested Macion to execute a
contract to sell in its favor. However, Macion refused, which prompted De
Vida to file an urgent motion for an order to direct Macion to execute the
contract to sell. In return, Macion filed a motion for execution of judgment
alleging that after 5months, Dela Vida was not able to settle their obligations
with Macion. RTC ruled in favor of Dela Vida.

Issue: W/N it was proper to execute a contract to sell in favor of Dela Vida,
Yes

Held:

Although the compromise agreement does not give Dela Vida the right to
demand from Macion the execution of the contract to sell in its favor. From
this stipulation, it is clear that Macion is obliged to execute a Deed of Sale
and not a Contract to Sell upon payment of the full price of P2.6M.
Thereafter, Macion will turn over to Dela Vida the TCT.

However, a review of the facts reveals that even prior to the signing of the
compromise agreement, both parties had entered into a contract to sell,
which was superseded by a compromise agreement. This compromise
agreement must be interpreted as bestowing upon Dela Vida the power to
demand a contract to sell from Macion. Where Macion promised to execute
a Deed of Absolute Sale upon completing payment of the price, it is a
contract to sell. In the case at bar, the sale is still in the executory stage
since the passing of the title is subject to a suspensive condition – that if
Dela Vida is able to secure needed funds to purchase the properties from
Macion. A mere executory sale, one where the sellers merely promise to

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