refused to do so. He only returned the money when he was confronted by her daughter.

However, he still failed to return the TCT and other documents. Villanueva filed a complaint
before the IBP—1. Did not perform legal services, 2. Did not inform client of the status of the
case, 3. Returned acceptance fee w/o any explanation, 4. Respondent was indifferent.
Respondent was directed to answer, but he did not do so. Neither did he attend the mandatory
hearings.

HELD: YES, he violated Canons 16, 17, 18, and  Rules 16.01, 16.03, 18.03, and 18.04 of the
CPR

1. Respondent refused to account for and return his client’s money  (16.01 &16.03)
2. Respondent refused to return his client’s TCT and other documents (Canon 16 & Rule
16.03)
3. Respondent failed to serve his client with fidelity , competence, and diligence (Canons
17, 18 & Rule 18.03)
4. Respondent did not keep his client informed of the status of her case and refused to
respond to her requests for information (Rule 18.04)
5. Respondent did not file an answer nor attend the mandatory hearing before the IBP
(showed lack of respect for IBP and its proceedings, stains the nobility of the profession)

PALM VS ATTY. ILEDAN, JR.

A.C. NO. 8242 ; OCTOBER 2, 2009
FACTS:
The case before the Court is a disbarment proceeding filed by Rebecca J. Palm against
Atty. Felipe Iledan, Jr. for revealing information obtained in the course of an attorney-client
relationship and for representing an interest which conflicted with that of his former client,
Comtech Worldwide Solutions Philippines, Inc. (Comtech).
Complainant is the President of Comtech, a corporation engaged in the business of
computer software development.  From February 2003 to November 2003, respondent served as
Comtech’s retained corporate counsel for the amount of P6,000 per month as retainer fee.  From
September to October 2003, complainant personally met with respondent to review corporate
matters, including potential amendments to the corporate by-laws.  In a meeting held on 1
October 2003, respondent suggested that Comtech amend its corporate by-laws to allow
participation during board meetings, through teleconference, of members of the Board of
Directors who were outside the Philippines.
Prior to the completion of the amendments of the corporate by-laws, complainant became
uncomfortable with the close relationship between respondent and Elda Soledad (Soledad), a
former officer and director of Comtech, who resigned and who was suspected of releasing
unauthorized disbursements of corporate funds.  Thus, Comtech decided to terminate its retainer
agreement with respondent effective November 2003.
 
         In a stockholders’ meeting held on 10 January 2004, respondent attended as proxy for Gary
Harrison (Harrison).  Steven C. Palm (Steven) and Deanna L. Palm, members of the Board of
Directors, were present through teleconference.  When the meeting was called to order,
respondent objected to the meeting for lack of quorum.  Respondent asserted that Steven and
Deanna Palm could not participate in the meeting because the corporate by-laws had not yet been
amended to allow teleconferencing.
 
         On 24 March 2004, Comtech’s new counsel sent a demand letter to Soledad to return or
account for the amount of P90,466.10 representing her unauthorized disbursements when she
was the Corporate Treasurer of Comtech.  On 22 April 2004, Comtech received Soledad’s reply,
signed by respondent.  In July 2004, due to Soledad’s failure to comply with Comtech's written
demands, Comtech filed a complaint for Estafa against Soledad before the Makati Prosecutor’s
Office.  In the proceedings before the City Prosecution Office of Makati, respondent appeared as
Soledad’s counsel.
 
     Respondent alleged that there was no conflict of interest when he represented Soledad in the
case for Estafa filed by Comtech.  He alleged that Soledad was already a client before he became
a consultant for Comtech.  He alleged that the criminal case was not related to or connected with
the limited procedural queries he handled with Comtech.

ISSUE:
WON respondent violated his Code of Professional Responsibility.
HELD:
No.
The IBP Commission on Bar Discipline found respondent guilty of violation of Canon
21 of the Code of Professional Responsibility and of representing interest in conflict with that of
Comtech as his former client. It recommended that respondent be suspended from the practice of
law for one year.
The IBP Board of Governors adopted and approved the recommendation of the
Investigating Commissioner with modification by suspending respondent from the practice of
law for two years.
The Court did not sustain the findings of the IBP. The Court agreed with the IBP that in
the course of complainant’s consultations, respondent obtained the information about the need to
amend the corporate by-laws to allow board members outside the Philippines to participate in
board meetings through teleconferencing.  However, what transpired on 10 January 2004 was
not a board meeting but a stockholders’ meeting.  In addition, although the information about the
necessity to amend the corporate by-laws may have been given to respondent, it could not be
considered a confidential information.  The documents are public records and could not be
considered confidential.
The Court also held that it found no conflict of interest when respondent represented
Soledad in a case filed by Comtech.  The case where respondent represented Soledad is an Estafa
case filed by Comtech against its former officer.  There was nothing in the records that would
show that respondent used against Comtech any confidential information acquired while he was
still Comtech’s retained counsel. 
The Court dismissed the complaint against Atty. Felipe Iledan, Jr. for lack of merit.
 PALM VS ATTY. ILEDAN, JR.
A.C. NO. 8242 ; OCTOBER 2, 2009
FACTS:
The case before the Court is a disbarment proceeding filed by Rebecca J. Palm against
Atty. Felipe Iledan, Jr. for revealing information obtained in the course of an attorney-client
relationship and for representing an interest which conflicted with that of his former client,
Comtech Worldwide Solutions Philippines, Inc. (Comtech).
Complainant is the President of Comtech, a corporation engaged in the business of
computer software development.  From February 2003 to November 2003, respondent served as
Comtech’s retained corporate counsel for the amount of P6,000 per month as retainer fee.  From
September to October 2003, complainant personally met with respondent to review corporate
matters, including potential amendments to the corporate by-laws.  In a meeting held on 1
October 2003, respondent suggested that Comtech amend its corporate by-laws to allow
participation during board meetings, through teleconference, of members of the Board of
Directors who were outside the Philippines.
Prior to the completion of the amendments of the corporate by-laws, complainant became
uncomfortable with the close relationship between respondent and Elda Soledad (Soledad), a
former officer and director of Comtech, who resigned and who was suspected of releasing
unauthorized disbursements of corporate funds.  Thus, Comtech decided to terminate its retainer
agreement with respondent effective November 2003.
 
         In a stockholders’ meeting held on 10 January 2004, respondent attended as proxy for Gary
Harrison (Harrison).  Steven C. Palm (Steven) and Deanna L. Palm, members of the Board of
Directors, were present through teleconference.  When the meeting was called to order,
respondent objected to the meeting for lack of quorum.  Respondent asserted that Steven and
Deanna Palm could not participate in the meeting because the corporate by-laws had not yet been
amended to allow teleconferencing.
 
         On 24 March 2004, Comtech’s new counsel sent a demand letter to Soledad to return or
account for the amount of P90,466.10 representing her unauthorized disbursements when she
was the Corporate Treasurer of Comtech.  On 22 April 2004, Comtech received Soledad’s reply,
signed by respondent.  In July 2004, due to Soledad’s failure to comply with Comtech's written
demands, Comtech filed a complaint for Estafa against Soledad before the Makati Prosecutor’s
Office.  In the proceedings before the City Prosecution Office of Makati, respondent appeared as
Soledad’s counsel.
 
     Respondent alleged that there was no conflict of interest when he represented Soledad in the
case for Estafa filed by Comtech.  He alleged that Soledad was already a client before he became
a consultant for Comtech.  He alleged that the criminal case was not related to or connected with
the limited procedural queries he handled with Comtech.
ISSUE:
WON respondent violated his Code of Professional Responsibility.
HELD:
No.
The IBP Commission on Bar Discipline found respondent guilty of violation of Canon
21 of the Code of Professional Responsibility and of representing interest in conflict with that of
Comtech as his former client. It recommended that respondent be suspended from the practice of
law for one year.
The IBP Board of Governors adopted and approved the recommendation of the
Investigating Commissioner with modification by suspending respondent from the practice of
law for two years.
The Court did not sustain the findings of the IBP. The Court agreed with the IBP that in
the course of complainant’s consultations, respondent obtained the information about the need to
amend the corporate by-laws to allow board members outside the Philippines to participate in
board meetings through teleconferencing.  However, what transpired on 10 January 2004 was
not a board meeting but a stockholders’ meeting.  In addition, although the information about the
necessity to amend the corporate by-laws may have been given to respondent, it could not be
considered a confidential information.  The documents are public records and could not be
considered confidential.
The Court also held that it found no conflict of interest when respondent represented
Soledad in a case filed by Comtech.  The case where respondent represented Soledad is an Estafa
case filed by Comtech against its former officer.  There was nothing in the records that would
show that respondent used against Comtech any confidential information acquired while he was
still Comtech’s retained counsel. 
The Court dismissed the complaint against Atty. Felipe Iledan, Jr. for lack of merit.

ROLANDO B. PACANA, JR., Complainant, 

vs.
ATTY. MARICEL PASCUAL-LOPEZ, Respondent.

A.C. No. 8243               July 24, 2009

FACTS:

Rolando Pacana, Jr. (complainant) filed an administrative complaint against Atty. Maricel
Pascual-Lopez (respondent) charging the latter with flagrant violation of the provisions of the
Code of Professional Responsibility.

Complainant worked for Multitel (later renamed as Precedent) and earned the ire of investors
after becoming the assignee of majority of the shares of stock of Precedent and after being
appointed as trustee of a fund amounting to Thirty Million Pesos (P30,000,000.00) deposited at
Real Bank.

Complainant sought the advice of respondent but no Retainer Agreement was executed. Atty.
Lopez gave regular advice, helped prepare standard quitclaims, solicited money and properties
from complainant to pay the creditors and even discussed a collection case for the company.

Soon, complainant noticed that respondent began to avoid communicating with him.
Complainant then wrote to respondent a letter formally asking for a full accounting of all the
money, documents and properties given to the latter but respondent failed to provide a clear
audited financial report of all the properties turned over by the complainant to the respondent.
Complainant filed an affidavit-complaint against respondent before the Commission on Bar
Discipline of the Integrated Bar of the Philippines (IBP) seeking the disbarment of respondent.

ISSUE: WON a lawyer-client relationship was created.

RULING: YES.

After due hearing, IBP Investigating Commissioner Patrick M. Velez issued a Report and
Recommendation finding that a lawyer-client relationship was established between respondent
and complainant despite the absence of a written contract. The absence of a written contract
will not preclude the finding that there was a professional relationship between the parties.
Documentary formalism is not an essential element in the employment of an attorney; the
contract may be express or implied. To establish the relation, it is sufficient that the advice and
assistance of an attorney is sought and received in any matter pertinent to his profession.

Given the situation, the most decent and ethical thing which respondent should have done was
either to advise complainant to engage the services of another lawyer since she was already
representing the opposing parties, or to desist from acting as representative of Multitel investors
and stand as counsel for complainant. She cannot be permitted to do both because that would
amount to double-dealing and violate our ethical rules on conflict of interest.

PNB VS. ATTY. TELESFORO CEDO

A.C. NO. 3701

Facts: Respondent-lawyer was the former Asst. Vice-President of the Asset Management Group of the
complainant bank. While he was still an employee, he facilitated in arranging the sale of a steel sheet in
favor of Milagros Ong Siy for a certain amount of money and even noted a gate pass authorizing the pull
out of the sheets in a compound. When a civil action was filed by the bank against Mrs. Ong Siy, the
respondent act as the counsel for the defendant after he resigned from the complainant bank. Similarly
when PNB also file an administrative case against one of its employees, respondent again was the
counsel of the erring employee. This prompted the complainant to file an administrative case against
the respondent lawyer in violation of Canon 6, Rule 6.03 of the Code of Professional responsibility
which provides:
A lawyer shall not, after leaving government service, accept engagement or employment in
connection with any matter in which he had intervened while in said service

The Respondent admitted that he is the counsel for Ong Siy but only with regards the execution pending
appeal but did not participate in the main litigation. He even alleged that he never appeared in the case
of Almeda against the bank. While the law firm” Cedo, Ferrer, Maynigo and Associates” it is only Atty.
Ferrer who handled the case and never been form a partnership with Atty. Ferrer. Each of them handles
their cases separately and independently.

HELD:

The court cited the case of Hilado vs. David

"Communications between attorney and client are, in a great number of litigations, a complicated
affair, consisting of entangled relevant and irrelevant, secret and well-known facts. In the complexity
of what is said in the course of dealings between an attorney and client, inquiry of the nature
suggested would lead to the revelation, in advance of the trial, of other matters that might only
further prejudice the complainant's cause."

Whatever may be said as to whether or not respondent utilized against his former client information
given to him in a professional capacity, the mere fact of their previous relationship should have
precluded him from appearing as counsel for the other side in the forcible entry case. In the case
ofHilado vs. David, supra, this Tribunal further said:

Hence the necessity of setting the existence of the bare relationship of attorney and client as the
yardstick for testing incompatibility of interests. This stern rule is designed not alone to prevent the
dishonest practitioner from fraudulent conduct, but as well to protect the honest lawyer from
unfounded suspicion of unprofessional practice. . . . It is founded on principles of public policy, of
good taste. As has been said in another case, the question is not necessarily one of the rights of the
parties, but as to whether the attorney has adhered to proper professional standard. With these
thoughts in mind, it behooves attorney, like Caesar's wife, not only to keep inviolate the client's
confidence, but also to avoid the appearance of treachery and double dealing. Only thus can
litigants. be encouraged to entrust their secrets to their attorneys which is of paramount importance
in the administration of justice, It is unprofessional to represent conflicting interests, except by
express conflicting consent of all concerned given after a full disclosure of the facts. Within the
meaning of this canon, a lawyer represents conflicting interest when, in behalf on one client, it is his
duty to contend for that which duty to another client requires him to oppose. Respondent lawyer
must be suspended for 3 years violation of Canon 6 of the CPR,

CR Facts: This complaint for disbarment is relative to the administrative case filed by Atty. 
Collantes, house counsel for V& G Better Homes Subdivision, Inc. (V&G), against Atty.
Renomeron, Register of Deeds of Tacloban City, for the latter’s irregular actuations with
regard to the application of V&G for registration of 163 pro forma Deed of Absolute Sale with
Assignment (in favor of GSIS) of lots in its subdivision.
Although V&G complied with the desired requirements, respondent suspended the registration
of the documents with certain “special conditions” between them, which was that V&G should
provide him with weekly round trip ticket from Tacloban to Manila plus P2,000.00 as pocket
money per trip, or, in lieu thereof, the sale of respondent’s Quezon City house and lot by V&G
or GSIS representatives.

Eventually, respondent formally denied the registration of the documents. He himself elevated
the question on the registrability of the said documents to Administrator Bonifacio (of the
National Land Titles and Deeds Registration Administration-NLTDRA). The Administrator
then resolved in favor of the registrability of the documents. Despite the resolution of the
Administrator, the respondent still refused the registration thereof but demanded from the
parties interested the submission of additional requirements not adverted in his previous
denial.

Issues: (1) WON the respondent, as a lawyer, may also be disciplined by the Court for his
malfeasance as a public official, and (2) WON the Code of Professional Responsibility applies
to government service in the discharge of official tasks.

Held: (1) Yes, a lawyer’s misconduct as a public official also constitutes a violation of his oath
as a lawyer. The lawyer’s oath imposes upon every lawyer the duty to delay no man for money
or malice. The lawyer’s oath is a source of obligations and its violation is a ground for his
suspension, disbarment or other disciplinary action.

(2) Yes, the Code of Professional Responsibility applies to government service in the discharge
of their official tasks (Canon 6). The Code forbids a lawyer to engage in unlawful, dishonest,
immoral or deceitful conduct (Rule 1.01, Code of Professional Responsibility), or delay any
man’s cause “for any corrupt motive or interest” (Rule 1.03).

UZ V SALVA In 1985, Atty. Laurence Cordova, while being married to Salvacion Delizo and with two
children, left his wife and children to cohabit with another married woman. In 1986, Salvacion and
Cordova had a reconciliation where Cordova promised to leave his mistress. But apparently, Cordova
still continued to cheat on her wife as apparently, Cordova again lived with another woman and worse,
he took one of his children with him and hid the child away from Salvacion. In 1988, Salvacion filed a
letter-complaint for disbarment against Cordova. Eventually, multiple hearing dates were sent but no
hearing took place because neither party appeared. In 1989, Salvacion sent a telegraphic message to the
Commission on Bar Discipline intimating that she and her husband has reconciled. The Commission,
since Salvacion failed to submit her evidence ex parte, merely recommended the reprimand and
admonishment of Cordova.

ISSUE:

Whether or not Cordova should be merely reprimanded.

HELD:

No. He should be suspended indefinitely until he presents evidence that he has been morally reformed
and that there was true reconciliation between him and his wife. Before a person can be admitted to the
bar, one requirement is that he possesses good moral character. That requirement is not exhausted and
dispensed with upon admission to membership of the bar. On the contrary, that requirement persists as
a continuing condition for membership in the Bar in good standing. The moral delinquency that affects
the fitness of a member of the bar to continue as such includes conduct that outrages the generally
accepted

moral standards of the community, conduct for instance, which makes “a mockery of the inviolable
social institution or marriage” such was the case in the case at bar.

MONTEMAYOR; MARTELINO vs. ALEJANDRO

FACTS:

Major Eduardo Martelino is charged with the violation of the 94th and 97th Articles of War,
as a result of the alleged shooting on March 18, 1968 of some Muslim recruits then undergoing
commando training on the island of Corregidor.

On August 12, 1969 Martelino sought the disqualification of the President of the general
court-martial, following the latter's admission that he read newspaper stories of the Corregidor
incident. Martelino contended that the case had received such an amount of publicity in the press
and other news media and in fact was being exploited for political purposes in connection with the
presidential election on November 11, 1969 as to imperil his right to a fair trial. After deliberating,
the military court denied the challenge.

Respondents assert that despite the publicity which the case had received, no proof has
been presented showing that the court-martial's president's fairness and impartiality have been
impaired. On the contrary, they claim, the petitioner's own counsel expressed confidence in
the "integrity, experience and background" of the members of the court.

ISSUE:

Whether the publicity given to the case against the petitioners was such as to prejudice
their right to a fair trial?

HELD:

NO, the spate of publicity in this case did not focus on the guilt of the petitioners but rather
on the responsibility of the Government for what was claimed to be a "massacre" of Muslim
trainees.

If there was a "trial by newspaper" at all, it was not of the petitioners but of the
Government. Absent here is a showing of failure of the court-martial to protect the accused from
massive publicity encouraged by those connected with the conduct of the trial either by a failure to
control the release of information or to remove the trial to another venue or to postpone it until the
deluge of prejudicial publicity shall have subsided. Indeed we cannot say that the trial of the
petitioners was being held under circumstances which did not permit the observance of those
imperative decencies of procedure which have come to be identified with due process.

Granting the existence of "massive" and "prejudicial" publicity, since the petitioners here do
not contend that the respondents have been unduly influenced but simply that they might be by the
"barrage" of publicity, we think that the suspension of the court-martial proceedings has
accomplished the purpose sought by the petitioners' challenge for cause, by postponing the trial of
the petitioner until calmer times have returned. The atmosphere has since been cleared and the
publicity surrounding the Corregidor incident has so far abated that we believe the trial may now
be resumed in tranquility.
July 25, 1959

(chris capul)

NATURE

Original action in the Supreme Court. Certiorari and Prohibition with Preliminary Injunction.

FACTS

- A certain Manuel Monroy was murdered. CFI Pasay found Castelo, de Jesus, Bonifacio,
Mendoza, Berdugo et al. guilty of murder. They all appealed and Castelo sought new trial.
Castelo was again found guilty.
- Pres Magsaysay ordered reinvestigation. Philippine Constabulary questioned people and got
confessions pointing to persons other than those convicted.
- Castelo et al wrote to Fiscal Salva to conduct reinvestigation on basis of new confessions.
Fiscal conferred w/ SolGen and the Justice Sec decided to have the results of investigation
made available to counsel for appellants.
- Chief of Phil Constabulary furnished Fiscal Salva copies of the affidavits and confessions.
Salva organized a committee for reinvestigation and subpoenaed Timoteo Cruz, who was
implicated as instigator and mastermind in the new affidavits and confessions. Cruz’ counsel
questioned jurisdiction of the committee and of Salva to conduct preliminary investigation bec
the case was pending appeal in the SC. Counsel filed this present petition.
- Salva said he subpoenaed Cruz bec of Cruz’ oral and personal request to allow him to appear
at the investigation.
- SC issued writ of preliminary injunction stopping the prelim investigation.

ISSUES

1. WON Salva and his committee can push through with the investigation

2. WON Cruz can be compelled to appear and testify before Salva

3. WON Salva conducted the investigation property

HELD

1. Yes.

- SC believed Salva that it was Cruz who personally reqested to allow him to appear at the
investigation.

- Normally, when a criminal case handled by fiscal is tried and decided and appealed to a
higher court, functions of fiscal have terminated. However, Salva has justified his
reinvestigation bec in the orig case, one of the defendants (Salvador Realista y de Guzman)
was not included in the trial.

- The duty of a prosecuting attorney is not only to prosecute and secure conviction of the guilty
but also to protect the innocent.

- Writ of preliminary injunction dissolved. Investigation may continue.

- Petition for certiorari and prohibition granted in part, denied in part.

2. No

- Under the law, Cruz had right to be present at the investigation but he need not be present.
His presence is more of a right than a legal obligation.

3. No

- Salva shld have done investigation privately in his office and not publicly in the session hall of
Municipal Court of Pasay where microphones were installed and media people were present.
He should also not have made the media people ask questions. SC was disturbed and
annoyed by such publicity.

- Salva is publicly reprehended and censured.

CRUZ V SALVA

MONTEMAYOR; July 25, 1959

(chris capul)

NATURE

Original action in the Supreme Court. Certiorari and Prohibition with Preliminary Injunction.

FACTS
- A certain Manuel Monroy was murdered. CFI Pasay found Castelo, de Jesus, Bonifacio,
Mendoza, Berdugo et al. guilty of murder. They all appealed and Castelo sought new trial.
Castelo was again found guilty.
- Pres Magsaysay ordered reinvestigation. Philippine Constabulary questioned people and got
confessions pointing to persons other than those convicted.
- Castelo et al wrote to Fiscal Salva to conduct reinvestigation on basis of new confessions.
Fiscal conferred w/ SolGen and the Justice Sec decided to have the results of investigation
made available to counsel for appellants.
- Chief of Phil Constabulary furnished Fiscal Salva copies of the affidavits and confessions.
Salva organized a committee for reinvestigation and subpoenaed Timoteo Cruz, who was
implicated as instigator and mastermind in the new affidavits and confessions. Cruz’ counsel
questioned jurisdiction of the committee and of Salva to conduct preliminary investigation bec
the case was pending appeal in the SC. Counsel filed this present petition.
- Salva said he subpoenaed Cruz bec of Cruz’ oral and personal request to allow him to appear
at the investigation.
- SC issued writ of preliminary injunction stopping the prelim investigation.

ISSUES

1. WON Salva and his committee can push through with the investigation

2. WON Cruz can be compelled to appear and testify before Salva

3. WON Salva conducted the investigation property

HELD

1. Yes.

- SC believed Salva that it was Cruz who personally reqested to allow him to appear at the
investigation.

- Normally, when a criminal case handled by fiscal is tried and decided and appealed to a
higher court, functions of fiscal have terminated. However, Salva has justified his
reinvestigation bec in the orig case, one of the defendants (Salvador Realista y de Guzman)
was not included in the trial.

- The duty of a prosecuting attorney is not only to prosecute and secure conviction of the guilty
but also to protect the innocent.

- Writ of preliminary injunction dissolved. Investigation may continue.

- Petition for certiorari and prohibition granted in part, denied in part.

2. No

- Under the law, Cruz had right to be present at the investigation but he need not be present.
His presence is more of a right than a legal obligation.
3. No

- Salva shld have done investigation privately in his office and not publicly in the session hall of
Municipal Court of Pasay where microphones were installed and media people were present.
He should also not have made the media people ask questions. SC was disturbed and
annoyed by such publicity.

- Salva is publicly reprehended and censured.

conditions. G.R. No. 97664 October 10, 1991 G.R. No. 97664 October 10, 1991 G.R. No. 97664
October 10, 1991 G.R. No. 97664 October 10, 1991 G.R. No. 97664 October 10, 1991 G.R. No.
97664 October 10, 1991 G.R. No. 97664 October 10, 1991vvv

Statement of the Case

The assailed Resolution denied petitioner's Motion for Reconsideration.

The CA sustained the Decision of the Regional Trial Court (RTC) of Quezon City (Branch 217), which
had disposed as follows:

"WHEREFORE, premises considered, the Decision appealed from is AFFIRMED insofar as it dismissed
the complaint and it extended the lease contract up to September 16, 2001; and is MODIFIED such
that, defendants-appellees are ordered to pay plaintiff-appellant the amount of P444,800.00 less 5%
as withholding tax, as their rentals o conditions.

Statement of the Case

Before us is a Petition for Review under Rule 45 of the Rules of Court, assailing the October 29, 1999
Decision1 and the March 9, 2000 Resolution2 of the Court of Appeals3 (CA) in CA-GR SP No. 50618.
The decretal portion of the Decision reads as follows:

"WHEREFORE, the petition for review is hereby DISMISSED for lack of merit." 4

The assailed Resolution denied petitioner's Motion for Reconsideration.

The CA sustained the Decision of the Regional Trial Court (RTC) of Quezon City (Branch 217), which
had disposed as follows:

"WHEREFORE, premises considered, the Decision appealed from is AFFIRMED insofar as it dismissed n
subject premises from July 16, 1994 to November 13, 1994.

"Costs against the plaintiff-appellant."5

Republic of the Philippines

SUPREME COURT
Manila

THIRD DIVISION

G.R. No. 138814               April 16, 2009

MAKATI STOCK EXCHANGE, INC., MA. VIVIAN YUCHENGCO, ADOLFO M. DUARTE, MYRON C.
PAPA, NORBERTO C. NAZARENO, GEORGE UY-TIOCO, ANTONIO A. LOPA, RAMON B. ARNAIZ,
LUIS J.L. VIRATA, and ANTONIO GARCIA, JR. Petitioners,
vs.
MIGUEL V. CAMPOS, substituted by JULIA ORTIGAS VDA. DE CAMPOS, 1 Respondent.

DECISION

Statement of the Case

Before us is a Petition for Review under Rule 45 of the Rules of Court, assailing the October 29, 1999
Decision1 and the March 9, 2000 Resolution2 of the Court of Appeals3 (CA) in CA-GR SP No. 50618.
The decretal portion of the Decision reads as follows:

"WHEREFORE, the petition for review is hereby DISMISSED for lack of merit." 4

The assailed Resolution denied petitioner's Motion for Reconsideration.

The CA sustained the Decision of the Regional Trial Court (RTC) of Quezon City (Branch 217), which
had disposed as follows:

"WHEREFORE, premises considered, the Decision appealed from is AFFIRMED insofar as it dismissed
the complaint and it extended the lease contract up to September 16, 2001; and is MODIFIED such
that, defendants-appellees are ordered to pay plaintiff-appellant the amount of P444,800.00 less 5%
as withholding tax, as their rentals on subject premises from July 16, 1994 to November 13, 1994.

"Costs against the plaintiff-appellant."5

Republic of the Philippines

SUPREME COURT
Manila

THIRD DIVISION

G.R. No. 138814               April 16, 2009

MAKATI STOCK EXCHANGE, INC., MA. VIVIAN YUCHENGCO, ADOLFO M. DUARTE, MYRON C.
PAPA, NORBERTO C. NAZARENO, GEORGE UY-TIOCO, ANTONIO A. LOPA, RAMON B. ARNAIZ,
LUIS J.L. VIRATA, and ANTONIO GARCIA, JR. Petitioners,
vs.
MIGUEL V. CAMPOS, substituted by JULIA ORTIGAS VDA. DE CAMPOS, 1 Respondent.

DECISION

CHICO-NAZARIO, J.:

This is a Petition for Review on Certiorari under Rule 45 seeking the reversal of the Decision 2 dated 11
February 1997 and Resolution dated 18 May 1999 of the Court of Appeals in CA-G.R. SP No. 38455.

The facts of the case are as follows:

SEC Case No. 02-94-4678 was instituted on 10 February 1994 by respondent Miguel V. Campos, who
filed with the Securities, Investigation and Clearing Department (SICD) of the Securities and Exchange
Commission (SEC), a Petition against herein petitioners Makati Stock Exchange, Inc. (MKSE) and MKSE
directors, Ma. Vivian Yuchengco, Adolfo M. Duarte, Myron C. Papa, Norberto C. Nazareno, George Uy-
Tioco, Antonio A, Lopa, Ramon B. Arnaiz, Luis J.L. Virata, and Antonio Garcia, Jr. Respondent, in said
Petition, sought: (1) the nullification of the Resolution dated 3 June 1993 of the MK

CHICO-NAZARIO, J.:

This is a Petition for Review on Certiorari under Rule 45 seeking the reversal of the Decision 2 dated 11
February 1997 and Resolution dated 18 May 1999 of the Court of Appeals in CA-G.R. SP No. 38455.

The facts of the case are as follows:

I.

THE SEC EN BANC DID NOT COMMIT GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OR EXCESS OF
JURISDICTION WHEN IT DISMISSED THE PETITION FILED BY RESPONDENT BECAUSE ON ITS FACE, IT
FAILED TO STATE A CAUSE OF ACTION.

II.

THE GRANT OF THE IPO ALLOCATIONS IN FAVOR OF RESPONDENT WAS A MERE ACCOMMODATION
GIVEN TO HIM BY THE BOARD OF [DIRECTORS] OF THE MAKATI STOCK EXCHANGE, INC.

III.

THE COURT OF APPEALS ERRED IN HOLDING THAT THE SEC EN BANC COMMITTED GRAVE ABUSE OF
DISCRETION AMOUNTING TO LACK OR EXCESS OF JURISDICTION WHEN IT MADE AN EXTENDED INQUIRY
AND PROCEEDED TO MAKE A DETERMINATION AS TO THE TRUTH OF RESPONDENT’S ALLEGATIONS IN
HIS PETITION AND USED AS BASIS THE EVIDENCE ADDUCED DURING THE HEARING ON THE APPLICATION
FOR THE WRIT OF PRELIMINARY INJUNCTION TO DETERMINE THE EXISTENCE OR VALIDITY OF A STATED
CAUSE OF ACTION.

IV

IPO ALLOCATIONS GRANTED TO BROKERS ARE NOT TO BE BOUGHT BY THE BROKERS FOR THEMSELVES
BUT ARE TO BE DISTRIBUTED TO THE INVESTING PUBLIC. HENCE, RESPONDENT’S CLAIM FOR DAMAGES
IS ILLUSORY AND HIS PETITION A NUISANCE SUIT.3

On 18 September 2001, counsel for respondent manifested to this Court that his client died on 7 May
2001. In a Resolution dated 24 October 2001, the Court directed the substitution of respondent by his
surviving spouse, Julia Ortigas vda. de Campos.

Petitioners want this Court to affirm the dismissal by the SEC en banc of respondent’s Petition in SEC
Case No. 02-94-4678 for failure to state a cause of action. On the other hand, respondent insists on the
sufficiency of his Petition and seeks the continuation of the proceedings before the SICD.

A cause of action is the act or omission by which a party violates a right of another.4 A complaint states
a cause of action where it contains three essential elements of a cause of action, namely: (1) the legal
right of the plaintiff, (2) the correlative obligation of the defendant, and (3) the act or omission of the
defendant in violation of said legal right. If these elements are absent, the complaint becomes
vulnerable to dismissal on the ground of failure to state a cause of action.

If a defendant moves to dismiss the complaint on the ground of lack of cause of action, he is regarded as
having hypothetically admitted all the averments thereof. The test of sufficiency of the facts found in a
complaint as constituting a cause of action is whether or not admitting the facts alleged, the court can
render a valid judgment upon the same in accordance with the prayer thereof. The hypothetical
admission extends to the relevant and material facts well pleaded in the complaint and inferences fairly
deducible therefrom. Hence, if the allegations in the complaint furnish sufficient basis by which the
complaint can be maintained, the same should not be dismissed regardless of the defense that may be
assessed by the defendant.5

Given the foregoing, the issue of whether respondent’s Petition in SEC Case No. 02-94-4678 sufficiently
states a cause of action may be alternatively stated as whether, hypothetically admitting to be true the
allegations in respondent’s Petition in SEC Case No. 02-94-4678, the SICD may render a valid judgment in
accordance with the prayer of said Petition.

A reading of the exact text of respondent’s Petition in SEC Case No. 02-94-4678 is, therefore,
unavoidable. Pertinent portions of the said Petition reads:

7. In recognition of petitioner’s invaluable services, the general membership of respondent corporation

[MKSE] passed a resolution sometime in 1989 amending its Articles of Incorporation, to include the
following provision therein:

"ELEVENTH – WHEREAS, Mr. Miguel Campos is the only surviving incorporator of the Makati Stock
Exchange, Inc. who has maintained his membership;

"WHEREAS, he has unselfishly served the Exchange in various capacities, as governor from 1977 to the
present and as President from 1972 to 1976 and again as President from 1988 to the present;

"WHEREAS, such dedicated service and leadership which has contributed to the advancement and well
being not only of the Exchange and its members but also to the Securities industry, needs to be
recognized and appreciated;

"WHEREAS, as such, the Board of Governors in its meeting held on February 09, 1989 has
correspondingly adopted a resolution recognizing his valuable service to the Exchange, reward the
same, and preserve for posterity such recognition by proposing a resolution to the membership body
which would make him as Chairman Emeritus for life and install in the Exchange premises a
commemorative bronze plaque in his honor;

"NOW, THEREFORE, for and in consideration of the above premises, the position of the "Chairman
Emeritus" to be occupied by Mr. Miguel Campos during his lifetime and irregardless of his continued
membership in the Exchange with the Privilege to attend all membership meetings as well as the
meetings of the Board of Governors of the Exchange, is hereby created."

8. Hence, to this day, petitioner is not only an active member of the respondent corporation, but its
Chairman Emeritus as well.

9. Correspondingly, at all times material to this petition, as an active member and Chairman Emeritus of
respondent corporation, petitioner has always enjoyed the right given to all the other members to
participate equally in the Initial Public Offerings (IPOs for brevity) of corporations.

10. IPOs are shares of corporations offered for sale to the public, prior to the listing in the trading floor
of the country’s two stock exchanges. Normally, Twenty Five Percent (25%) of these shares are divided
equally between the two stock exchanges which in turn divide these equally among their members, who
pay therefor at the offering price.

11. However, on June 3, 1993, during a meeting of the Board of Directors of respondent-corporation,
individual respondents passed a resolution to stop giving petitioner the IPOs he is entitled to, based on
the ground that these shares were allegedly benefiting Gerardo O. Lanuza, Jr., who these individual
respondents wanted to get even with, for having filed cases before the Securities and Exchange (SEC) for
their disqualification as member of the Board of Directors of respondent corporation.

12. Hence, from June 3, 1993 up to the present time, petitioner has been deprived of his right to
subscribe to the IPOs of corporations listing in the stock market at their offering prices.

13. The collective act of the individual respondents in depriving petitioner of his right to a share in the
IPOs for the aforementioned reason, is unjust, dishonest and done in bad faith, causing petitioner
substantial financial damage.6

There is no question that the Petition in SEC Case No. 02-94-4678 asserts a right in favor of respondent,
particularly, respondent’s alleged right to subscribe to the IPOs of corporations listed in the stock
market at their offering prices; and stipulates the correlative obligation of petitioners to respect
respondent’s right, specifically, by continuing to allow respondent to subscribe to the IPOs of
corporations listed in the stock market at their offering prices.

However, the terms right and obligation in respondent’s Petition are not magic words that would
automatically lead to the conclusion that such Petition sufficiently states a cause of action. Right and
obligation are legal terms with specific legal meaning. A right is a claim or title to an interest in anything
whatsoever that is enforceable by law.7 An obligation is defined in the Civil Code as a juridical necessity
to give, to do or not to do.8 For every right enjoyed by any person, there is a corresponding obligation
on the part of another person to respect such right. Thus, Justice J.B.L. Reyes offers9 the definition given
by Arias Ramos as a more complete definition:
An obligation is a juridical relation whereby a person (called the creditor) may demand from another
(called the debtor) the observance of a determinative conduct (the giving, doing or not doing), and in
case of breach, may demand satisfaction from the assets of the latter.

The Civil Code enumerates the sources of obligations:

Art. 1157. Obligations arise from:

(1) Law;

(2) Contracts;

(3) Quasi-contracts;

(4) Acts or omissions punished by law; and

(5) Quasi-delicts.

Therefore, an obligation imposed on a person, and the corresponding right granted to another, must be
rooted in at least one of these five sources. The mere assertion of a right and claim of an obligation in an
initiatory pleading, whether a Complaint or Petition, without identifying the basis or source thereof, is
merely a conclusion of fact and law. A pleading should state the ultimate facts essential to the rights of
action or defense asserted, as distinguished from mere conclusions of fact or conclusions of law.10 Thus,
a Complaint or Petition filed by a person claiming a right to the Office of the President of this Republic,
but without stating the source of his purported right, cannot be said to have sufficiently stated a cause
of action. Also, a person claiming to be the owner of a parcel of land cannot merely state that he has a
right to the ownership thereof, but must likewise assert in the Complaint either a mode of acquisition of
ownership or at least a certificate of title in his name.

In the case at bar, although the Petition in SEC Case No. 02-94-4678 does allege respondent’s right to
subscribe to the IPOs of corporations listed in the stock market at their offering prices, and petitioners’
obligation to continue respecting and observing such right, the Petition utterly failed to lay down the
source or basis of respondent’s right and/or petitioners’ obligation.

Respondent merely quoted in his Petition the MKSE Board Resolution, passed sometime in 1989,
granting him the position of Chairman Emeritus of MKSE for life. However, there is nothing in the said
Petition from which the Court can deduce that respondent, by virtue of his position as Chairman
Emeritus of MKSE, was granted by law, contract, or any other legal source, the right to subscribe to the
IPOs of corporations listed in the stock market at their offering prices.

A meticulous review of the Petition reveals that the allocation of IPO shares was merely alleged to have
been done in accord with a practice normally observed by the members of the stock exchange, to wit:
IPOs are shares of corporations offered for sale to the public, prior to their listing in the trading floor of
the country’s two stock exchanges. Normally, Twenty-Five Percent (25%) of these shares are divided
equally between the two stock exchanges which in turn divide these equally among their members, who
pay therefor at the offering price.11 (Emphasis supplied)

A practice or custom is, as a general rule, not a source of a legally demandable or enforceable right.12
Indeed, in labor cases, benefits which were voluntarily given by the employer, and which have ripened
into company practice, are considered as rights that cannot be diminished by the employer.13
Nevertheless, even in such cases, the source of the employees’ right is not custom, but ultimately, the
law, since Article 100 of the Labor Code explicitly prohibits elimination or diminution of benefits.

There is no such law in this case that converts the practice of allocating IPO shares to MKSE members,
for subscription at their offering prices, into an enforceable or demandable right. Thus, even if it is
hypothetically admitted that normally, twenty five percent (25%) of the IPOs are divided equally
between the two stock exchanges -- which, in turn, divide their respective allocation equally among
their members, including the Chairman Emeritus, who pay for IPO shares at the offering price -- the
Court cannot grant respondent’s prayer for damages which allegedly resulted from the MKSE Board
Resolution dated 3 June 1993 deviating from said practice by no longer allocating any shares to
respondent.

Accordingly, the instant Petition should be granted. The Petition in SEC Case No. 02-94-4678 should be
dismissed for failure to state a cause of action. It does not matter that the SEC en banc, in its Order
dated 14 August 1995 in SEC-EB No. 403, overstepped its bounds by not limiting itself to the issue of
whether respondent’s Petition before the SICD sufficiently stated a cause of action. The SEC en banc
may have been mistaken in considering extraneous evidence in granting petitioners’ Motion to Dismiss,
but its discussion thereof are merely superfluous and obiter dictum. In the main, the SEC en banc did
correctly dismiss the Petition in SEC Case No. 02-94-4678 for its failure to state the basis for
respondent’s alleged right, to wit:

Private respondent Campos has failed to establish the basis or authority for his alleged right to
participate equally in the IPO allocations of the Exchange. He cited paragraph 11 of the amended articles
of incorporation of the Exchange in support of his position but a careful reading of the said provision
shows nothing therein that would bear out his claim. The provision merely created the position of
chairman emeritus of the Exchange but it mentioned nothing about conferring upon the occupant
thereof the right to receive IPO allocations.14

With the dismissal of respondent’s Petition in SEC Case No. 02-94-4678, there is no more need for this
Court to resolve the propriety of the issuance by SCID of a writ of preliminary injunction in said case.

WHEREFORE, the Petition is GRANTED. The Decision of the Court of Appeals dated 11 February 1997 and
its Resolution dated 18 May 1999 in CA-G.R. SP No. 38455 are REVERSED and SET ASIDE. The Orders
dated 31 May 1995 and 14 August 1995 of the Securities and Exchange Commission en banc in SEC-EB
Case No. 393 and No. 403, respectively, are hereby reinstated. No pronouncement as to costs.
SO ORDERED.

G.R. No. 109125 December 2, 1994

ANG YU ASUNCION, ARTHUR GO AND KEH TIONG, petitioners,

vs.
THE HON. COURT OF APPEALS and BUEN REALTY DEVELOPMENT
CORPORATION, respondents.

Antonio M. Albano for petitioners.

Umali, Soriano & Associates for private respondent.

VITUG, J.:

Assailed, in this petition for review, is the decision of the Court of Appeals, dated 04 December
1991, in CA-G.R. SP No. 26345 setting aside and declaring without force and effect the orders of
execution of the trial court, dated 30 August 1991 and 27 September 1991, in Civil Case No. 87-
41058.

The antecedents are recited in good detail by the appellate court thusly:
On July 29, 1987 a Second Amended Complaint for Specific Performance was filed
by Ang Yu Asuncion and Keh Tiong, et al., against Bobby Cu Unjieng, Rose Cu
Unjieng and Jose Tan before the Regional Trial Court, Branch 31, Manila in Civil
Case No. 87-41058, alleging, among others, that plaintiffs are tenants or lessees of
residential and commercial spaces owned by defendants described as Nos. 630-638
Ongpin Street, Binondo, Manila; that they have occupied said spaces since 1935 and
have been religiously paying the rental and complying with all the conditions of the
lease contract; that on several occasions before October 9, 1986, defendants
informed plaintiffs that they are offering to sell the premises and are giving them
priority to acquire the same; that during the negotiations, Bobby Cu Unjieng offered a
price of P6-million while plaintiffs made a counter offer of P5-million; that plaintiffs
thereafter asked the defendants to put their offer in writing to which request
defendants acceded; that in reply to defendant's letter, plaintiffs wrote them on
October 24, 1986 asking that they specify the terms and conditions of the offer to
sell; that when plaintiffs did not receive any reply, they sent another letter dated
January 28, 1987 with the same request; that since defendants failed to specify the
terms and conditions of the offer to sell and because of information received that
defendants were about to sell the property, plaintiffs were compelled to file the
complaint to compel defendants to sell the property to them.

Defendants filed their answer denying the material allegations of the complaint and
interposing a special defense of lack of cause of action.

After the issues were joined, defendants filed a motion for summary judgment which
was granted by the lower court. The trial court found that defendants' offer to sell was
never accepted by the plaintiffs for the reason that the parties did not agree upon the
terms and conditions of the proposed sale, hence, there was no contract of sale at
all. Nonetheless, the lower court ruled that should the defendants subsequently offer
their property for sale at a price of P11-million or below, plaintiffs will have the right of
first refusal. Thus the dispositive portion of the decision states:

WHEREFORE, judgment is hereby rendered in favor of the

defendants and against the plaintiffs summarily dismissing the
complaint subject to the aforementioned condition that if the
defendants subsequently decide to offer their property for sale for a
purchase price of Eleven Million Pesos or lower, then the plaintiffs
has the option to purchase the property or of first refusal, otherwise,
defendants need not offer the property to the plaintiffs if the purchase
price is higher than Eleven Million Pesos.

SO ORDERED.

Aggrieved by the decision, plaintiffs appealed to this Court in

CA-G.R. CV No. 21123. In a decision promulgated on September 21, 1990 (penned
by Justice Segundino G. Chua and concurred in by Justices Vicente V. Mendoza and
Fernando A. Santiago), this Court affirmed with modification the lower court's
judgment, holding:

In resume, there was no meeting of the minds between the parties

concerning the sale of the property. Absent such requirement, the
claim for specific performance will not lie. Appellants' demand for
actual, moral and exemplary damages will likewise fail as there exists
 no justifiable ground for its award. Summary judgment for defendants
was properly granted. Courts may render summary judgment when
there is no genuine issue as to any material fact and the moving party
is entitled to a judgment as a matter of law (Garcia vs. Court of
Appeals, 176 SCRA 815). All requisites obtaining, the decision of the
court a quo is legally justifiable.

WHEREFORE, finding the appeal unmeritorious, the judgment

appealed from is hereby AFFIRMED, but subject to the following
modification: The court a quo in the aforestated decision gave the
plaintiffs-appellants the right of first refusal only if the property is sold
for a purchase price of Eleven Million pesos or lower; however,
considering the mercurial and uncertain forces in our market
economy today. We find no reason not to grant the same right of first
refusal to herein appellants in the event that the subject property is
sold for a price in excess of Eleven Million pesos. No pronouncement
as to costs.

SO ORDERED.

The decision of this Court was brought to the Supreme Court by petition for review
on certiorari. The Supreme Court denied the appeal on May 6, 1991 "for insufficiency
in form and substances" (Annex H, Petition).

On November 15, 1990, while CA-G.R. CV No. 21123 was pending consideration by
this Court, the Cu Unjieng spouses executed a Deed of Sale (Annex D, Petition)
transferring the property in question to herein petitioner Buen Realty and
Development Corporation, subject to the following terms and conditions:

1. That for and in consideration of the sum of FIFTEEN MILLION

PESOS (P15,000,000.00), receipt of which in full is hereby
acknowledged, the VENDORS hereby sells, transfers and conveys
for and in favor of the VENDEE, his heirs, executors, administrators
or assigns, the above-described property with all the improvements
found therein including all the rights and interest in the said property
free from all liens and encumbrances of whatever nature, except the
pending ejectment proceeding;

2. That the VENDEE shall pay the Documentary Stamp Tax,

registration fees for the transfer of title in his favor and other
expenses incidental to the sale of above-described property including
capital gains tax and accrued real estate taxes.

As a consequence of the sale, TCT No. 105254/T-881 in the name of the Cu Unjieng
spouses was cancelled and, in lieu thereof, TCT No. 195816 was issued in the name
of petitioner on December 3, 1990.

On July 1, 1991, petitioner as the new owner of the subject property wrote a letter to
the lessees demanding that the latter vacate the premises.
On July 16, 1991, the lessees wrote a reply to petitioner stating that petitioner
brought the property subject to the notice of lis pendens regarding Civil Case No. 87-
41058 annotated on TCT No. 105254/T-881 in the name of the Cu Unjiengs.

The lessees filed a Motion for Execution dated August 27, 1991 of the Decision in
Civil Case No. 87-41058 as modified by the Court of Appeals in CA-G.R. CV No.
21123.

On August 30, 1991, respondent Judge issued an order (Annex A, Petition) quoted
as follows:

Presented before the Court is a Motion for Execution filed by plaintiff

represented by Atty. Antonio Albano. Both defendants Bobby Cu
Unjieng and Rose Cu Unjieng represented by Atty. Vicente Sison and
Atty. Anacleto Magno respectively were duly notified in today's
consideration of the motion as evidenced by the rubber stamp and
signatures upon the copy of the Motion for Execution.

The gist of the motion is that the Decision of the Court dated
September 21, 1990 as modified by the Court of Appeals in its
decision in CA G.R. CV-21123, and elevated to the Supreme Court
upon the petition for review and that the same was denied by the
highest tribunal in its resolution dated May 6, 1991 in G.R. No.
L-97276, had now become final and executory. As a consequence,
there was an Entry of Judgment by the Supreme Court as of June 6,
1991, stating that the aforesaid modified decision had already
become final and executory.

It is the observation of the Court that this property in dispute was the
subject of the Notice of Lis Pendens and that the modified decision of
this Court promulgated by the Court of Appeals which had become
final to the effect that should the defendants decide to offer the
property for sale for a price of P11 Million or lower, and considering
the mercurial and uncertain forces in our market economy today, the
same right of first refusal to herein plaintiffs/appellants in the event
that the subject property is sold for a price in excess of Eleven Million
pesos or more.

WHEREFORE, defendants are hereby ordered to execute the

necessary Deed of Sale of the property in litigation in favor of
plaintiffs Ang Yu Asuncion, Keh Tiong and Arthur Go for the
consideration of P15 Million pesos in recognition of plaintiffs' right of
first refusal and that a new Transfer Certificate of Title be issued in
favor of the buyer.

All previous transactions involving the same property notwithstanding

the issuance of another title to Buen Realty Corporation, is hereby set
aside as having been executed in bad faith.

SO ORDERED.
 On September 22, 1991 respondent Judge issued another order, the dispositive
portion of which reads:

WHEREFORE, let there be Writ of Execution issue in the above-

entitled case directing the Deputy Sheriff Ramon Enriquez of this
Court to implement said Writ of Execution ordering the defendants
among others to comply with the aforesaid Order of this Court within
a period of one (1) week from receipt of this Order and for defendants
to execute the necessary Deed of Sale of the property in litigation in
favor of the plaintiffs Ang Yu Asuncion, Keh Tiong and Arthur Go for
the consideration of P15,000,000.00 and ordering the Register of
Deeds of the City of Manila, to cancel and set aside the title already
issued in favor of Buen Realty Corporation which was previously
executed between the latter and defendants and to register the new
title in favor of the aforesaid plaintiffs Ang Yu Asuncion, Keh Tiong
and Arthur Go.

SO ORDERED.

On the same day, September 27, 1991 the corresponding writ of execution (Annex
C, Petition) was issued. 1

On 04 December 1991, the appellate court, on appeal to it by private respondent, set aside and
declared without force and effect the above questioned orders of the court a quo.

In this petition for review on certiorari, petitioners contend that Buen Realty can be held bound by the
writ of execution by virtue of the notice of lis pendens, carried over on TCT No. 195816 issued in the
name of Buen Realty, at the time of the latter's purchase of the property on 15 November 1991 from
the Cu Unjiengs.

We affirm the decision of the appellate court.

A not too recent development in real estate transactions is the adoption of such arrangements as the
right of first refusal, a purchase option and a contract to sell. For ready reference, we might point out
some fundamental precepts that may find some relevance to this discussion.

An obligation is a juridical necessity to give, to do or not to do (Art. 1156, Civil Code). The obligation
is constituted upon the concurrence of the essential elements thereof, viz: (a) The vinculum
juris or juridical tie which is the efficient cause established by the various sources of obligations
(law, contracts, quasi-contracts, delicts and quasi-delicts); (b) the object which is the prestation or
conduct; required to be observed (to give, to do or not to do); and (c) the subject-persons who,
viewed from the demandability of the obligation, are the active (obligee) and the passive (obligor)
subjects.

Among the sources of an obligation is a contract (Art. 1157, Civil Code), which is a meeting of minds
between two persons whereby one binds himself, with respect to the other, to give something or to
render some service (Art. 1305, Civil Code). A contract undergoes various stages that include its
negotiation or preparation, its perfection and, finally, its consummation. Negotiation covers the
period from the time the prospective contracting parties indicate interest in the contract to the time
the contract is concluded (perfected). The perfection of the contract takes place upon the
concurrence of the essential elements thereof. A contract which is consensual as to perfection is so
established upon a mere meeting of minds, i.e., the concurrence of offer and acceptance, on the
object and on the cause thereof. A contract which requires, in addition to the above, the delivery of
the object of the agreement, as in a pledge or commodatum, is commonly referred to as
a real contract. In a solemn contract, compliance with certain formalities prescribed by law, such as
in a donation of real property, is essential in order to make the act valid, the prescribed form being
thereby an essential element thereof. The stage of consummation begins when the parties perform
their respective undertakings under the contract culminating in the extinguishment thereof.

Until the contract is perfected, it cannot, as an independent source of obligation, serve as a binding
juridical relation. In sales, particularly, to which the topic for discussion about the case at bench
belongs, the contract is perfected when a person, called the seller, obligates himself, for a price
certain, to deliver and to transfer ownership of a thing or right to another, called the buyer, over
which the latter agrees. Article 1458 of the Civil Code provides:

Art. 1458. By the contract of sale one of the contracting parties obligates himself to
transfer the ownership of and to deliver a determinate thing, and the other to pay
therefor a price certain in money or its equivalent.

A contract of sale may be absolute or conditional.

When the sale is not absolute but conditional, such as in a "Contract to Sell" where invariably the
ownership of the thing sold is retained until the fulfillment of a positive suspensive condition
(normally, the full payment of the purchase price), the breach of the condition will prevent the
obligation to convey title from acquiring an obligatory force.  In Dignos vs. Court of Appeals (158
2

SCRA 375), we have said that, although denominated a "Deed of Conditional Sale," a sale is still
absolute where the contract is devoid of any proviso that title is reserved or the right to unilaterally
rescind is stipulated, e.g., until or unless the price is paid. Ownership will then be transferred to the
buyer upon actual or constructive delivery (e.g., by the execution of a public document) of the
property sold. Where the condition is imposed upon the perfection of the contract itself, the failure of
the condition would prevent such perfection.  If the condition is imposed on the obligation of a party
3

which is not fulfilled, the other party may either waive the condition or refuse to proceed with the sale
(Art. 1545, Civil Code).4

An unconditional mutual promise to buy and sell, as long as the object is made determinate and the
price is fixed, can be obligatory on the parties, and compliance therewith may accordingly be
exacted.5

An accepted unilateral promise which specifies the thing to be sold and the price to be paid, when

coupled with a valuable consideration distinct and separate from the price, is what may properly be
termed a perfected contract of option. This contract is legally binding, and in sales, it conforms with
the second paragraph of Article 1479 of the Civil Code, viz:

Art. 1479. . . .

An accepted unilateral promise to buy or to sell a determinate thing for a price certain
is binding upon the promissor if the promise is supported by a consideration distinct
from the price. (1451a) 6

Observe, however, that the option is not the contract of sale itself.  The optionee has the right, but
7

not the obligation, to buy. Once the option is exercised timely, i.e., the offer is accepted before a
breach of the option, a bilateral promise to sell and to buy ensues and both parties are then
reciprocally bound to comply with their respective undertakings. 8
Let us elucidate a little. A negotiation is formally initiated by an offer. An imperfect
promise (policitacion) is merely an offer. Public advertisements or solicitations and the like are
ordinarily construed as mere invitations to make offers or only as proposals. These relations, until a
contract is perfected, are not considered binding commitments. Thus, at any time prior to the
perfection of the contract, either negotiating party may stop the negotiation. The offer, at this stage,
may be withdrawn; the withdrawal is effective immediately after its manifestation, such as by its
mailing and not necessarily when the offeree learns of the withdrawal (Laudico vs. Arias, 43 Phil.
270). Where a period is given to the offeree within which to accept the offer, the following rules
generally govern:

(1) If the period is not itself founded upon or supported by a consideration, the offeror is still free and
has the right to withdraw the offer before its acceptance, or, if an acceptance has been made, before
the offeror's coming to know of such fact, by communicating that withdrawal to the offeree (see Art.
1324, Civil Code; see also Atkins, Kroll & Co. vs. Cua, 102 Phil. 948, holding that this rule is
applicable to a unilateral promise to sell under Art. 1479, modifying the previous decision in South
Western Sugar vs. Atlantic Gulf, 97 Phil. 249; see also Art. 1319, Civil Code; Rural Bank of
Parañaque, Inc., vs. Remolado, 135 SCRA 409; Sanchez vs. Rigos, 45 SCRA 368). The right to
withdraw, however, must not be exercised whimsically or arbitrarily; otherwise, it could give rise to a
damage claim under Article 19 of the Civil Code which ordains that "every person must, in the
exercise of his rights and in the performance of his duties, act with justice, give everyone his due,
and observe honesty and good faith."

(2) If the period has a separate consideration, a contract of "option" is deemed perfected, and it
would be a breach of that contract to withdraw the offer during the agreed period. The option,
however, is an independent contract by itself, and it is to be distinguished from the projected main
agreement (subject matter of the option) which is obviously yet to be concluded. If, in fact, the
optioner-offeror withdraws the offer before its acceptance (exercise of the option) by the optionee-
offeree, the latter may not sue for specific performance on the proposed contract ("object" of the
option) since it has failed to reach its own stage of perfection. The optioner-offeror, however, renders
himself liable for damages for breach of the option. In these cases, care should be taken of the real
nature of the consideration given, for if, in fact, it has been intended to be part of the consideration
for the main contract with a right of withdrawal on the part of the optionee, the main contract could
be deemed perfected; a similar instance would be an "earnest money" in a contract of sale that can
evidence its perfection (Art. 1482, Civil Code).

In the law on sales, the so-called "right of first refusal" is an innovative juridical relation. Needless to
point out, it cannot be deemed a perfected contract of sale under Article 1458 of the Civil Code.
Neither can the right of first refusal, understood in its normal concept, per se be brought within the
purview of an option under the second paragraph of Article 1479, aforequoted, or possibly of an offer
under Article 1319  of the same Code. An option or an offer would require, among other things,  a
9 10

clear certainty on both the object and the cause or consideration of the envisioned contract. In a right
of first refusal, while the object might be made determinate, the exercise of the right, however, would
be dependent not only on the grantor's eventual intention to enter into a binding juridical relation with
another but also on terms, including the price, that obviously are yet to be later firmed up. Prior
thereto, it can at best be so described as merely belonging to a class of preparatory juridical
relations governed not by contracts (since the essential elements to establish the vinculum
juris would still be indefinite and inconclusive) but by, among other laws of general application, the
pertinent scattered provisions of the Civil Code on human conduct.

Even on the premise that such right of first refusal has been decreed under a final judgment, like
here, its breach cannot justify correspondingly an issuance of a writ of execution under a judgment
that merely recognizes its existence, nor would it sanction an action for specific performance without
thereby negating the indispensable element of consensuality in the perfection of contracts.  It is not
11

to say, however, that the right of first refusal would be inconsequential for, such as already intimated
above, an unjustified disregard thereof, given, for instance, the circumstances expressed in Article
19  of the Civil Code, can warrant a recovery for damages.
12

The final judgment in Civil Case No. 87-41058, it must be stressed, has merely accorded a "right of
first refusal" in favor of petitioners. The consequence of such a declaration entails no more than what
has heretofore been said. In fine, if, as it is here so conveyed to us, petitioners are aggrieved by the
failure of private respondents to honor the right of first refusal, the remedy is not a writ of execution
on the judgment, since there is none to execute, but an action for damages in a proper forum for the
purpose.

Furthermore, whether private respondent Buen Realty Development Corporation, the alleged
purchaser of the property, has acted in good faith or bad faith and whether or not it should, in any
case, be considered bound to respect the registration of the lis pendens in Civil Case No. 87-41058
are matters that must be independently addressed in appropriate proceedings. Buen Realty, not
having been impleaded in Civil Case No. 87-41058, cannot be held subject to the writ of execution
issued by respondent Judge, let alone ousted from the ownership and possession of the property,
without first being duly afforded its day in court.

We are also unable to agree with petitioners that the Court of Appeals has erred in holding that the
writ of execution varies the terms of the judgment in Civil Case No. 87-41058, later affirmed in CA-
G.R. CV-21123. The Court of Appeals, in this regard, has observed:

Finally, the questioned writ of execution is in variance with the decision of the trial
court as modified by this Court. As already stated, there was nothing in said
decision   that decreed the execution of a deed of sale between the Cu Unjiengs and
13

respondent lessees, or the fixing of the price of the sale, or the cancellation of title in
the name of petitioner (Limpin vs. IAC, 147 SCRA 516; Pamantasan ng Lungsod ng
Maynila vs. IAC, 143 SCRA 311; De Guzman vs. CA, 137 SCRA 730; Pastor vs. CA,
122 SCRA 885).

It is likewise quite obvious to us that the decision in Civil Case No. 87-41058 could not have decreed
at the time the execution of any deed of sale between the Cu Unjiengs and petitioners.

WHEREFORE, we UPHOLD the Court of Appeals in ultimately setting aside the questioned Orders,
dated 30 August 1991 and 27 September 1991, of the court a quo. Costs against petitioners.

SO ORDERED.

s is a Petition for Review on Certiorari under Rule 45 seeking the reversal of the Decision2 dated 11
February 1997 and Resolution dated 18 May 1999 of the Court of Appeals in CA-G.R. SP No. 38455.

The facts of the case are as follows:

SEC Case No. 02-94-4678 was instituted on 10 February 1994 by respondent Miguel V. Campos, who
filed with the Securities, Investigation and Clearing Department (SICD) of the Securities and Exchange
Commission (SEC), a Petition against herein petitioners Makati Stock Exchange, Inc. (MKSE) and MKSE
directors, Ma. Vivian Yuchengco, Adolfo M. Duarte, Myron C. Papa, Norberto C. Nazareno, George Uy-
Tioco, Antonio A, Lopa, Ramon B. Arnaiz, Luis J.L. Virata, and Antonio Garcia, Jr. Respondent, in said
Petition, sought: (1) the nullification of the Resolution dated 3 June 1993 of the MKSE Board of
Directors, which allegedly deprived him of his right to participate equally in the allocation of Initial Public
Offerings (IPO) of corporations registered with MKSE; (2) the delivery of the IPO shares he was allegedly
deprived of, for which he would pay IPO prices; and (3) the payment of ₱2 million as moral damages, ₱1

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