BALUYOT v. CA1

Facts: Petitioners are residents of Brgy. Cruz-na-Ligas, Diliman, Quezon City.  They claimed that they and their ascendants have been in open, peaceful, adverse and continuous possession in the concept of an owner since time immemorial a parcel of land known as Sitio Libis of the said Barangay with the total land area of 42 hectares.  Consequently, the said land was the subject of Land Registration Case No.

1 3. ID.; ID.; INTENDED BENEFICIARIES HAVE CAUSE OF ACTIONS AGAINST THE PARTIES TO THE DEED OF DONATION. -While, admittedly, petitioners were not parties to the deed of donation, they anchor their right to seek its enforcement upon their allegation that they are intended beneficiaries of the donation to the Quezon City government.  Art. 1311, second paragraph, of the Civil Code provides: If a contract should contain some stipulation in favor of a third person, he may demand its fulfillment provided he communicated his acceptance to the obligor before its revocation.  A mere incidental benefit or interest of a person is not sufficient.  The contracting parties must have clearly and deliberately conferred a favor upon a third person.

4. CIVIL LAW; OBLIGATIONS AND CONTRACTS; STIPULATION POUR AUTRUI; REQUISITES. - Under this provision of the Civil Code, the following requisites must be present in order to have a stipulation pour autrui: (1) there must be a stipulation in favor of a third person; (2) the stipulation must be a part, not the whole of the contract; (3) the contracting parties must have clearly and deliberately conferred a favor upon a third person, not a mere incidental benefit or interest; (4) the third person must have communicated his acceptance to the obligor before its revocation; and (5) neither of the contracting parties bears the legal representation or authorization of the third party.

3151 before Branch 100 of the Regional Trial Court of Quezon City wherein the petitioner prayed, among others, that the said area shall be excluded from the technical description in the Certificate of Title of the University of the Philippines (UP) and to restrain UP from donating the said area to the Quezon City Government.  As part of settlement for the dismissal of the said case, UP made an assurance that an area of 15.8379 hectares of the land to be donated in favor of Quezon City Government shall be subdivided and distributed for the benefits of the petitioners.  Subsequently, a Deed of Conditional Donation was executed.  The Quezon City Government immediately prepared for ground works, in compliance with the conditions therein.  However, UP President Jose Abueva failed to deliver the Certificate of Title covering the said.property to enable the Quezon City Government to register the Deed of Donation.  Upon expiration of the eighteen months period for alleged non-compliance of the Quezon City Government with the terms and conditions, Mr. Abueva revoked the Deed of Donation.  The petitioners filed an action for specific performance with preliminary injunction against the UP and the Quezon City Government.  The trial judge denied the motion to dismiss filed by the respondents.  However, in a petition for certiorari filed by respondents before the Court of Appeals, the appellate court ordered the dismissal of the case.

Hence, this petition.

Issue: W/N petitioners have the right to seek the enforcement of the deed of donation.

Held: If a contract should contain some stipulation in favor of a third person, he may demand its fulfillment provided he communicated his acceptance to the obligor before its revocation.  A mere incidental benefit or interest of a person is not sufficient.  The contracting parties must have clearly and deliberately conferred a favor upon a third person.

Under this provision of the Civil Code, the following requisites must be present in order to have a stipulation pour autrui:[15]

(1) there must be a stipulation in favor of a third person;

(2) the stipulation must be a part, not the whole of the contract;

(3) the contracting parties must have clearly and deliberately conferred a favor upon a third person, not a mere incidental benefit or interest;

(4) the third person must have communicated his acceptance to the obligor before its revocation; and

(5) neither of the contracting parties bears the legal representation or authorization of the third party.

The allegations in the following paragraphs of the amended complaint are sufficient to bring petitioners’ action within the purview of the second paragraph of Art. 1311 on stipulations pour autrui:

1.  Paragraph 17, that the deed of donation contains a stipulation that the Quezon City government, as donee, is required to transfer to qualified residents of Cruz-na-Ligas, by way of donations, the lots occupied by them;

2.  The same paragraph, that this stipulation is part of conditions and obligations imposed by UP, as donor, upon the Quezon City government, as donee;

3.  Paragraphs 15 and 16, that the intent of the parties to the deed of donation was to confer a favor upon petitioners by transferring to the latter the lots occupied by them;

4. Paragraph 19, that conferences were held between the parties to convince UP to surrender the certificates of title to the city government, implying that the donation had been accepted by petitioners by demanding fulfillment thereof[16] and that private respondents were aware of such acceptance; and

5.  All the allegations considered together from which it can be fairly inferred that neither of private respondents acted in representation of the other; each of the private respondents had its own obligations, in view of conferring a favor upon petitioners.

The amended complaint further alleges that respondent UP has an obligation to transfer the subject parcel of land to the city government so that the latter can in turn comply with its obligations to make improvements on the land and thereafter transfer the same to petitioners but that, in breach of this obligation, UP failed to deliver the title to the land to the city government and then revoked the deed of

donation after the latter failed to fulfill its obligations within the time allowed in the contract.

For the purpose of determining the sufficiency of petitioners’ cause of action, these allegations of the amended complaint must be deemed to be hypothetically true.  So assuming the truth of the allegations, we hold that petitioners have a cause of action against UP.  Thus, in Kauffman v. National Bank,[17] where the facts were ¾

Stated in bare simplicity the admitted facts show that the defendant bank for a valuable consideration paid by the Philippine Fiber and Produce Company agreed on October 9, 1918, to cause a sum of money to be paid to the plaintiff in New York City; and the question is whether the plaintiff can maintain an action against the bank for the non performance of said undertaking.  In other words, is the lack of privity with the contract on the part of the plaintiff fatal to the maintenance of an action by him?[18]

it was held:

In the light of the conclusions thus stated, the right of the plaintiff to maintain the present action is clear enough; for it is undeniable that the bank’s promise to cause a definite sum of money to be paid to the plaintiff in New York City is a stipulation in his favor within the meaning of the paragraph above quoted; and the circumstances under which that promise was given disclose an evident intention on the part of the contracting parties that the plaintiff should have that money upon demand in New York City.  The recognition of this unqualified right in the plaintiff to receive the money implies in our opinion the right in him to maintain an action to recover it; and indeed if the

provision in question were not applicable to the facts now before us, it would be difficult to conceive of a case arising under it.

It will be noted that under the paragraph cited a third person seeking to enforce compliance with a stipulation in his favor must signify his acceptance before it has been revoked.  In this case the plaintiff clearly signified his acceptance to the bank by demanding payment; and although the Philippine National Bank had already directed its New York agency to withhold payment when this demand was made, the rights of the plaintiff cannot be considered to have been prejudiced by that fact.  The word “revoked,” as there used, must be understood to imply revocation by the mutual consent of the contracting parties, or at least by direction of the party purchasing the exchange.[19]

It is hardly necessary to state that our conclusion that petitioners’ complaint states a cause of action against respondents is in no wise a ruling on the merits.  That is for the trial court to determine in light of respondent UP’s defense that the donation to the Quezon City government, upon which petitioners rely, has been validly revoked.

Respondents contend, however, that the trial court has already found that the donation (on which petitioners base their action) has already been revoked.  This contention has no merit.  The trial court’s ruling on this point was made in connection with petitioners’ application for a writ of preliminary injunction to stop respondent UP from ejecting petitioners.  The trial court denied injunction on the ground that the donation had already been revoked and therefore petitioners had no clear legal right to be protected.  It is evident that the trial

court’s ruling on this question was only tentative, without prejudice to the final resolution of the question after the presentation by the parties of their evidence.

INTEGRATED PACKAGING v. CA

Facts: Integrated Packaging entered into a contract with Fil-Anchor for the latter to deliver to the former reams of printing paper on different dates. In the stipulation of the parties for the delivery of the reams of printing paper, it was agreed in the standard operating practice of the parties that the materials were to be paid within a minimum of thirty days and maximum of ninety days from delivery. The agreement also provided for the delivery of printing paper on different dates and a separate price has been agreed upon for each delivery. Thereafter, Integrated Packaging also entered into a contract with Philippine Appliance Corporation (Philacor) to print three volumes of "Philacor Cultural Books" with a minimum of 300,000 copies at a price of P10.00 per copy or a total cost of P3,000,000.00.

As of July 30, 1979, private respondent had delivered to petitioner 1,097 reams of printing paper out of the total 3,450 reams stated in the agreement. Petitioner alleged it wrote private respondent to immediately deliver the balance because further delay would greatly prejudice petitioner. From June 5, 1980 and until July 23, 1981, private respondent delivered again to petitioner various quantities of printing paper amounting to P766,101.70. However, petitioner encountered difficulties paying private respondent said amount. Accordingly, private respondent made a formal demand upon petitioner to settle the outstanding account. On July 23

and 31, 1981 and August 27, 1981, petitioner made partial payments totalling P97,200.00 which was applied to its back accounts covered by delivery invoices dated September 29-30, 1980 and October 1-2, 1980.[3]

Meanwhile, petitioner entered into an additional printing contract with Philacor. Unfortunately, petitioner failed to fully comply with its contract with Philacor for the printing of books VIII, IX, X and XI. Thus, Philacor demanded compensation from petitioner for the delay and damage it suffered on account of petitioner’s failure.

On August 14, 1981, private respondent filed with the Regional Trial Court of Caloocan City a collection suit against petitioner for the sum of P766,101.70, representing the unpaid purchase price of printing paper bought by petitioner on credit.

In its answer, petitioner denied the material allegations of the complaint. By way of counterclaim, petitioner alleged that private respondent was able to deliver only 1,097 reams of printing paper which was short of 2,875 reams, in total disregard of their agreement; that private respondent failed to deliver the balance of the printing paper despite demand therefor, hence, petitioner suffered actual damages and failed to realize expected profits; and that petitioner’s complaint was prematurely filed.

After filing its reply and answer to the counterclaim, private respondent moved for admission of its supplemental complaint, which was granted. In said supplemental complaint, private respondent alleged that subsequent to the enumerated purchase invoices in the

original complaint, petitioner made additional purchases of printing paper on credit amounting to P94,200.00. Private respondent also averred that petitioner failed and refused to pay its outstanding obligation although it made partial payments in the amount of P97,200.00 which was applied to back accounts, thus, reducing petitioner’s indebtedness to P763,101.70.

The TC ruled that were it not for the failure or delay of private respondent to deliver printing paper, petitioner could have sold books to Philacor and realized profit of P790,324.30 from the sale. It further ruled that petitioner suffered a dislocation of business on account of loss of contracts and goodwill as a result of private respondent’s violation of its obligation, for which the award of moral damages was justified.

The CA reversed the ruling of the TC.

Issue: W/N Fil-Anchor should be held liable for petitioner’s breach of contract with Philacor. 

Held: This claim is manifestly devoid of merit.

As correctly held by the appellate court, private respondent cannot be held liable under the contracts entered into by petitioner with Philacor. Private respondent is not a party to said agreements. It is also not a contract pour autrui. Aforesaid contracts could not affect third persons like private respondent because of the basic civil law principle of relativity of contracts which provides that contracts can only bind the parties who entered into it, and it cannot favor or prejudice a third person,[10] even if he is

aware of such contract and has acted with knowledge thereof.[11]

Indeed, the order agreement entered into by petitioner and private respondent has not been shown as having a direct bearing on the contracts of petitioner with Philacor. As pointed out by private respondent and not refuted by petitioner, the paper specified in the order agreement between petitioner and private respondent are markedly different from the paper involved in the contracts of petitioner with Philacor.[12] Furthermore, the demand made by Philacor upon petitioner for the latter to comply with its printing contract is dated February 15, 1984, which is clearly made long after private respondent had filed its complaint on August 14, 1981. This demand relates to contracts with Philacor dated April 12, 1983 and May 13, 1983, which were entered into by petitioner after private respondent filed the instant case.

To recapitulate, private respondent did not violate the order agreement it had with petitioner. Likewise, private respondent could not be held liable for petitioner’s breach of contract with Philacor. It follows that there is no basis to hold private respondent liable for damages. Accordingly, the appellate court did not err in deleting the damages awarded by the trial court to petitioner.

A&C MINIMART v. CA

Facts: A&C Minimart entered into a contract of lease with the spouses Bonifacio. It appears however that the land where the leased building was located is currently subject to litigation of who should be the rightful owners of the subject property. The parties in the case are the spouses Sevilla, the spouses

Bonifacio and the Villareals. The Court however had already upheld the ownership of the Villareals of the subject property which was later sold in public auction and bought by the latter.

A&C Minimart on the other hand stopped paying rentals upon knowing that the Bonifacios were not the rightful owners of the subject property.

Upon motion of the Villareals, the Parañaque RTC, Branch  194, issued a Writ of Execution requiring petitioner to deposit in Land Bank Account No. 1831-0166-91 the amount of P3,186,154.68, plus 12% yearly interest, computed from the date of petitioner’s receipt of the demand letter on 25 June 1999.[17]

 On 4 November 2003, respondents filed a Motion for Recomputation of the amount of rentals as the writ of execution allegedly did not conform to the Decision dated 1 October 2003.  Respondents claimed that the computation should include a monthly interest of 3% on the total amount of rental and other charges not paid on time, in accordance with paragraph 6(g) of the Contract of Lease, dated 22 January 1998, between petitioner and Teresita Bonifacio, to wit: 

g) To pay the LESSOR three (3%) percent interest per month on the total amount of rental and other charges not paid on time under this contract with said amount accruing automatically upon default without necessity of any demand.[18]

  

Respondents anchored their claim on the Amended Decision dated 1 October 2003,

and the Writ of Execution dated 27 October 2003, in Civil Cases No. 02-0538 to 40, which both used the phrase “in accordance with the Lease Contract,” when referring to the monthly rentals due and were to be deposited in the bank by the petitioner.

Issue: W/N A&C Minimart can be held liable to pay 3% interest per month on the total amount of rental and other charges not paid on time to the Villareals.

Held: Petitioner argues that respondents are not entitled to the 3% penalty stipulated under the Lease Contract dated 22 January 1998, which becomes payable to thelessor whenever the petitioner incurs delay in the payment of its rentals.  This argument is well-taken.

 It is a well-known rule that a contractual obligation or liability, or an action ex-contractu, must be founded upon a contract, oral or written, either express or implied.  If there is no contract, there is no corresponding liability and no cause of action may arise therefrom.[22]  This is provided for in Article 1311 of the Civil Code:

 Article 1311.  Contracts take effect only between the parties, their assigns and heirs, except in case where the rights and obligations arising from the contract are not transmissible by their nature, or by stipulation or by provision of law.  The heir is not liable beyond the value of the property he received from the decedent.  

The Lease Contract dated 22 January 1998, was executed between the spouses Bonifacio and petitioner.  It is undisputed that none of the respondents had taken part, directly or indirectly, in the contract in question.  Respondents also did not enter into contract with either the lessee or the lessor, as to an assignment of any right under the Lease Contract in question.  The Lease Contract, including the stipulation for the 3% penalty interest, was bilateral between petitioner and TeresitaBonifacio.  Respondents claim ownership over the subject property, but not as a successor-in-interest of the spouses Bonifacios.  They purchased the property in an execution sale from the spouses Sevilla.  Thus, respondents cannot succeed to any contractual rights which may accrue to the spouses Bonifacio. Contracts produce an effect as between the parties who execute them.  A contract cannot be binding upon and cannot be enforced by one who is not party to it. Although the respondents were adjudged to be entitled to rentals accruing from 2 March 1999, until the time the petitioner vacated the premises, the obligation to pay rent was not derived from the Lease Contract dated 22 January 1998, but from a quasi-contract.  Article 2142 of the Civil Code reads: 

Art. 2142.  Certain lawful, voluntary and unilateral acts give rise to the juridical relation of quasi-contract to the end that no one shall be unjustly enriched or benefited at the expense of another.  

In the present case, the spouses Bonifacio, who were named as the lessors in the

Lease Contracts, dated 3 August 1992 and 22 January 1998, are already adjudged not to be the real owners of the subject property.  In Civil Case No. 90-2551, Branch 63 of the Makati RTC declared that the Deed of Sale, executed on 17 June 1986, between the spouses Bonifacio and the spouses Sevilla was a forgery and, hence, did not validly transfer ownership to the spouses Bonifacio.  At present, there is a pending appeal before the Supreme Court docketed as G.R. No. 150824, which would determine who between the respondents and the spouses Sevilla are the rightful owners of the property. Since the spouses Bonifacio are not the owners of the subject property, they cannot unjustly benefit from it by collecting rent which should accrue to the rightful owners of the same.  Hence, the Makati RTC, Branch 132, had set up a bank account where the rent due on the subject property should be deposited and kept in trust for the real owners thereto.

LLENADO v. LLENADO

Facts: The predecessors-in-interest of both petitioners (Winifreda) and respondents (Eduardo and Jorge) entered into a contract of lease with each other. Orlando derived his contract of lease from Romeo, who entered into a contract of lease with Eduardo and Jorge’s father (Cornelio). In the contract of lease between the parties, it was stipulated that such contract can be transmitted to their heirs, with the option of the lessee to renew for a given number of years the lease of the subject property.

After Orlando’s death, Cornelio (the lessor) sold the subject leased properties to his sons Eduardo and Jorge. After his

death Eduardo and Jorge ordered Wiifreda to vacate the property, but the latter refused. This prompted the brothers to file an unlawful detainer case against Winifreda.

Winifreda argued that the transfer and conveyance of the subject lot by Cornelio in favor of respondents Eduardo and Jorge, was fraudulent and in bad faith considering that the March 31, 1978 Agreement provided that while the lease is in force, the subject lot cannot be sold, transferred or conveyed to any third party; that the period of the lease was until December 3, 1987 with the option to renew granted to Orlando; that the subject lot was transferred and conveyed to respondents Eduardo and Jorge on January 29, 1987 when the lease was in full force and effect making the sale null and void; that Cornelio verbally promised Orlando that in case he (Cornelio) decides to sell the subject lot, Orlando or his heirs shall have first priority or option to buy the subject lot so as not to prejudice Orlando’s business and because Orlando is the owner of the property adjacent to the subject lot; and that this promise was wantonly disregarded when Cornelio sold the said lot to respondents Jorge and Eduardo.

 In their Answer,[12] respondents

Eduardo and Jorge claimed that they bought the subject lot from their father, Cornelio, for value and in good faith; that the lease agreement and its supplement were not annotated at the back of the mother title of the subject lot and do not bind them; that said agreements are personal only to Cornelio and Orlando; that the lease expired upon the death of Orlando on November 7, 1983; that they were not aware of any verbal promise to sell the subject lot granted by Cornelio to Orlando and, even if there was, said

option to buy is unenforceable under the statute of frauds.

Issue: W/N  the sale of the subject lot by Cornelio to his sons, respondents Eduardo and Jorge, is invalid for (1) violating the prohibitory clause in the lease agreement between Cornelio, as lessor-owner, and Orlando, as lessee; and (2) contravening the right of first refusal of Orlando over the subject lot.

Held: It is not disputed that the lease agreement contained an option to renew and a prohibition on the sale of the subject lot in favor of third persons while the lease is in force.  Petitioner claims that when Cornelio sold the subject lot to respondents Eduardo and Jorge the lease was in full force and effect, thus, the sale violated the prohibitory clause rendering it invalid. In resolving this issue, it is necessary to determine whether the lease agreement was in force at the time of the subject sale and, if it was in force, whether the violation of the prohibitory clause invalidated the sale.

Under Article 1311 of the Civil Code, the heirs are bound by the contracts entered into by their predecessors-in-interest except when the rights and obligations therein are not transmissible by their nature, by stipulation or by provision of law.  A contract of lease is, therefore, generally transmissible to the heirs of the lessor or lessee.  It involves a property right and, as such, the death of a party does not excuse non-performance of the contract.[29]  The rights and obligations pass to the heirs of the deceased and the heir of the deceased lessor is bound to respect the period of the lease.[30]  The same principle applies to the option to renew the lease. As a general rule, covenants to renew a lease are not personal but will run with the land.

[31]  Consequently, the successors-in-interest of the lessee are entitled to the benefits, while that of the lessor are burdened with the duties and obligations, which said covenants conferred and imposed on the original parties.

 The foregoing principles apply with greater force in this case because the parties expressly stipulated in the March 31, 1978 Agreement that Romeo, as lessee, shall transfer all his rights and interests under the lease contract with option to renew “in favor of the party of the Third Part (Orlando), the latter’s heirs, successors and assigns”[32] indicating the clear intent to allow the transmissibility of all the rights and interests of Orlando under the lease contract unto his heirs, successors or assigns.  Accordingly, the rights and obligations under the lease contract with option to renew were transmitted from Orlando to his heirs upon his death onNovember 7, 1983.

 It does not follow, however, that the lease subsisted at the time of the sale of the subject lot on January 29, 1987.  When Orlando died on November 7, 1983, the lease contract was set to expire 26 days later or on December 3, 1983, unless renewed by Orlando’s heirs for another four years.  While the option to renew is an enforceable right, it must necessarily be first exercised to be given effect.[33]  As the Court explained in Dioquino v. Intermediate Appellate Court:[34]

 A clause found in an agreement relative to the renewal of the lease agreement at the option of the lessee gives the latter an enforceable right to renew the contract in which the clause is found for such time as provided

for.  The agreement is understood as being in favor of the lessee, and the latter is authorized to renew the contract and to continue to occupy the leased property after notifying the lessor to that effect.  A lessor’s covenant or agreement to renew gives a privilege to the tenant, but is nevertheless an executory contract, and until the tenant has exercised the privilege by way of some affirmative act, he cannot be held for the additional term.  In the absence of a stipulation in the lease requiring notice of the exercise of an option or an election to renew to be given within a certain time before the expiration of the lease, which of course, the lessee must comply with, the general rule is that a lessee must exercise an option or election to renew his lease and notify the lessor thereof before, or at least at the time of the expiration of his original term, unless there is a waiver or special circumstances warranting equitable relief.

 There is no dispute that in the instant case, the lessees (private respondents) were granted the option to renew the lease for another five (5) years after the termination of the original period of fifteen years. Yet, there was never any positive act on the part of private respondents before or after the termination of the original period to show their exercise of such option. The silence of the lessees after the termination of the original

period cannot be taken to mean that they opted to renew the contract by virtue of the promise by the lessor, as stated in the original contract of lease, to allow them to renew. Neither can the exercise of the option to renew be inferred from their persistence to remain in the premises despite petitioners’ demand for them to vacate.   x x x.[35]

  

Similarly, the election of the option to renew the lease in this case cannot be inferred from petitioner Wenifreda’s continued possession of the subject lot and operation of the gasoline station even after the death of Orlando on November 7, 1983 and the expiration of the lease contract on December 3, 1983.  In the unlawful detainer case against petitioner Wenifreda and in the subject complaint for annulment of conveyance, respondents consistently maintained that after the death of Orlando, the lease was terminated and that they permitted petitioner Wenifreda and her children to remain in possession of the subject property out of tolerance and respect for the close blood relationship between Cornelio and Orlando.  It was incumbent, therefore, upon petitioner as the plaintiff with the burden of proof during the trial below to establish by some positive act that Orlando or his heirs exercised the option to renew the lease.  After going over the records of this case, we find no evidence, testimonial or documentary, of such nature was presented before the trial court to prove that Orlando or his heirs exercised the option to renew prior to or at the time of the expiration of the lease on December 3, 1983.  In particular, the testimony of petitioner Wenifreda is

wanting in detail as to the events surrounding the implementation of the subject lease agreement after the death of Orlando and any overt acts to establish the renewal of said lease. Given the foregoing, it becomes unnecessary to resolve the issue on whether the violation of the prohibitory clause invalidated the sale and conferred ownership over the subject lot to Orlando’s heirs, who are mere lessees, considering that at the time of said sale on January 29, 1987 the lease agreement had long been terminated for failure of Orlando or his heirs to validly renew the same.  As a result, there was no obstacle to the sale of the subject lot by Cornelio to respondents Eduardo and Jorge as the prohibitory clause under the lease contract was no longer in force.

 

PNB v. DEE

Facts: Some time in July 1994, respondent Teresita Tan Dee (Dee) bought from respondent Prime East Properties Inc.5 (PEPI) on an installment basis a residential lot located in Binangonan, Rizal, with an area of 204 square meters6 and covered by Transfer Certificate of Title (TCT) No. 619608. Subsequently, PEPI assigned its rights over a 213,093–sq m property on August 1996 to respondent Armed Forces of the Philippines–Retirement and Separation Benefits System, Inc. (AFP–RSBS), which included the property purchased by Dee.

Thereafter, or on September 10, 1996, PEPI obtained a P205,000,000.00 loan from petitioner Philippine National Bank (petitioner), secured by a mortgage over several properties, including Dee’s property. The mortgage was cleared by

the Housing and Land Use Regulatory Board (HLURB) on September 18,1996.

After Dee’s full payment of the purchase price, a deed of sale was executed by respondents PEPI and AFP–RSBS on July 1998 in Dee’s favor. Consequently, Dee sought from the petitioner the delivery of the owner’s duplicate title over the property, to no avail. Thus, she filed with the HLURB a complaint for specific performance to compel delivery of TCT No. 619608 by the petitioner, PEPI and AFP–RSBS, among others.

The petitioner claims that it has a valid mortgage over Dee’s property, which was part of the property mortgaged by PEPI to it to secure its loan obligation, and that Dee and PEPI are bound by such mortgage. The petitioner also argues that it is not privy to the transactions between the subdivision project buyers and PEPI, and has no obligation to perform any of their respective undertakings under their contract.

Respondent AFP–RSBS, meanwhile, contends that it cannot be compelled to pay or settle the obligation under the mortgage contract between PEPI and the petitioner as it is merely an investor in the subdivision project and is not privy to the mortgage.

Issue: W/N PNB is bound to respect the transactions between PEPI and Dee.

Held:Yes. The petition must be DENIED.

The petitioner is correct in arguing that it is not obliged to perform any of the undertaking of respondent PEPI and AFP–RSBS in its transactions with Dee because it is not a privy thereto. The basic principle of relativity of contracts is that contracts can only bind the parties who entered into it,23 and cannot favor or

prejudice a third person, even if he is aware of such contract and has acted with knowledge thereof.24 “Where there is no privity of contract, there is likewise no obligation or liability to speak about.”25cralawred 

The petitioner, however, is not being tasked to undertake the obligations of PEPI and AFP–RSBS. In this case, there are two phases involved in the transactions between respondents PEPI and Dee – the first phase is the contract to sell, which eventually became the second phase, the absolute sale, after Dee’s full payment of the purchase price. In a contract of sale, the parties’ obligations are plain and simple. The law obliges the vendor to transfer the ownership of and to deliver the thing that is the object of sale.26 On the other hand, the principal obligation of a vendee is to pay the full purchase price at the agreed time.27 Based on the final contract of sale between them, the obligation of PEPI, as owners and vendors of Lot 12, Block 21–A, Village East Executive Homes, is to transfer the ownership of and to deliver Lot 12, Block 21–A to Dee, who, in turn, shall pay, and has in fact paid, the full purchase price of the property. There is nothing in the decision of the HLURB, as affirmed by the OP and the CA, which shows that the petitioner is being ordered to assume the obligation of any of the respondents. There is also nothing in the HLURB decision, which validates the petitioner’s claim that the mortgage has been nullified. The order of cancellation/release of the mortgage is simply a consequence of Dee’s full payment of the purchase price, as mandated by Section 25 of P.D. No. 957, to wit:chanRoblesvirtualLawlibrarySec. 25. Issuance of Title. The owner or developer shall deliver the title of the lot or unit to the buyer upon full payment of

the lot or unit. No fee, except those required for the registration of the deed of sale in the Registry of Deeds, shall be collected for the issuance of such title. In the event a mortgage over the lot or unit is outstanding at the time of the issuance of the title to the buyer, the owner or developer shall redeem the mortgage or the corresponding portion thereof within six months from such issuance in order that the title over any fully paid lot or unit may be secured and delivered to the buyer in accordance herewith.It must be stressed that the mortgage contract between PEPI and the petitioner is merely an accessory contract to the principal three–year loan takeout from the petitioner by PEPI for its expansion project. It need not be belaboured that “[a] mortgage is an accessory undertaking to secure the fulfillment of a principal obligation,”28 and it does not affect the ownership of the property as it is nothing more than a lien thereon serving as security for a debt.29

Note that at the time PEPI mortgaged the property to the petitioner, the prevailing contract between respondents PEPI and Dee was still the Contract to Sell, as Dee was yet to fully pay the purchase price of the property. On this point, PEPI was acting fully well within its right when it mortgaged the property to the petitioner, for in a contract to sell, ownership is retained by the seller and is not to pass until full payment of the purchase price.30 In other words, at the time of the mortgage, PEPI was still the owner of the property. Thus, in China Banking Corporation v. Spouses Lozada,31 the Court affirmed the right of the owner/developer to mortgage the property subject of development, to wit: “[P.D.] No. 957 cannot totally prevent the owner or developer from mortgaging the

subdivision lot or condominium unit when the title thereto still resides in the owner or developer awaiting the full payment of the purchase price by the installment buyer.”32 Moreover, the mortgage bore the clearance of the HLURB, in compliance with Section 18 of P.D. No. 957, which provides that “[n]o mortgage on any unit or lot shall be made by the owner or developer without prior written approval of the [HLURB].”

Nevertheless, despite the apparent validity of the mortgage between the petitioner and PEPI, the former is still bound to respect the transactions between respondents PEPI and Dee. The petitioner was well aware that the properties mortgaged by PEPI were also the subject of existing contracts to sell with other buyers. While it may be that the petitioner is protected by Act No. 3135, as amended, it cannot claim any superior right as against the installment buyers. This is because the contract between the respondents is protected by P.D. No. 957, a social justice measure enacted primarily to protect innocent lot buyers.33 Thus, in Luzon Development Bank v. Enriquez,34 the Court reiterated the rule that a bank dealing with a property that is already subject of a contract to sell and is protected by the provisions of P.D. No. 957, is bound by the contract to sell.35

However, the transferee BANK is bound by the Contract to Sell and has to respect Enriquez’s rights thereunder. This is because the Contract to Sell, involving a subdivision lot, is covered and protected by PD 957.  x x x.

x x x

x x x Under these circumstances, the BANK knew or should have known of the possibility and risk that the assigned

properties were already covered by existing contracts to sell in favor of subdivision lot buyers. As observed by the Court in another case involving a bank regarding a subdivision lot that was already subject of a contract to sell with a third party:chanRoblesvirtualLawlibrary“[The Bank] should have considered that it was dealing with a property subject of a real estate development project. A reasonable person, particularly a financial institution x x x, should have been aware that, to finance the project, funds other than those obtained from the loan could have been used to serve the purpose, albeit partially. Hence, there was a need to verify whether any part of the property was already intended to be the subject of any other contract involving buyers or potential buyers. In granting the loan, [the Bank] should not have been content merely with a clean title, considering the presence of circumstances indicating the need for a thorough investigation of the existence of buyers x x x. Wanting in care and prudence, the [Bank] cannot be deemed to be an innocent mortgagee. x x x”36 (Citation omitted)cha

SOLER v. CA

Facts: Petitioner Jazmin Soler is a Fine Arts graduate of the University of Sto. Tomas, Manila. She is a well known licensed professional interior designer.  In November 1986, her friend Rosario Pardo asked her to talk to Nida Lopez, who was manager of the COMBANK Ermita Branch for they were planning to renovate the branch offices.[2]

Even prior to November 1986, petitioner and Nida Lopez knew each other because of Rosario Pardo, the latter’s sister.  During their meeting, petitioner was hesitant to accept the job because of

her many out of town commitments, and also considering that Ms. Lopez was asking that the designs be submitted by December 1986, which was such a short notice. Ms. Lopez insisted, however, because she really wanted petitioner to do the design for renovation.  Petitioner acceded to the request.  Ms. Lopez assured her that she would be compensated for her services.  Petitioner even told Ms. Lopez that her professional fee was ten thousand pesos (P10,000.00), to which Ms. Lopez acceded.[3]

During the November 1986 meeting between petitioner and Ms. Lopez, there were discussions as to what was to be renovated, which included a provision for a conference room, a change in the carpeting and wall paper, provisions for bookshelves, a clerical area in the second floor, dressing up the kitchen, change of the ceiling and renovation of the tellers booth.  Ms. Lopez again assured petitioner that the bank would pay her fees.[4]

After a few days, petitioner requested for the blueprint of the building so that the proper design, plans and specifications could be given to Ms. Lopez in time for the board meeting in December 1986.  Petitioner then asked her draftsman Jackie Barcelon to go to the jobsite to make the proper measurements using the blue print.  Petitioner also did her research on the designs and individual drawings of what the bank wanted.  Petitioner hired Engineer Ortanez to make the electrical layout, architects Frison Cruz and De Mesa to do the drafting.  For the services rendered by these individuals, petitioner paid the engineer P4,000.00, architects Cruz and  de Mesa P5,000.00 and architect Barcelon P6,000.00.  Petitioner also contacted the suppliers of the wallpaper and the sash makers for their quotation. So come December 1986, the

lay out and the design were submitted to Ms. Lopez. She even told petitioner that she liked the designs.[5]

Subsequently, petitioner repeatedly demanded payment for her services but Ms. Lopez just ignored the demands.  In February 1987, by chance petitioner and Ms. Lopez saw each other in a concert at the Cultural Center of the Philippines.  Petitioner inquired about the payment for  her  services, Ms. Lopez  curtly replied that she was not entitled to it because her designs did not conform to the bank’s policy of having a standard design, and that there was no agreement between her and the bank.[6]

To settle the controversy, petitioner referred the matter to her lawyers, who wrote Ms. Lopez on May 20, 1987, demanding payment for her professional fees in the amount of P10,000.00 which Ms. Lopez ignored.  Hence, on June 18, 1987, the lawyers wrote Ms. Lopez once again demanding the return of the blueprint copies petitioner submitted which Ms. Lopez refused to return.[7]

On October 13, 1987, petitioner filed at the Regional Trial Court of Pasig, Branch 153 a complaint against COMBANK and Ms. Lopez for collection of professional fees and damages.

Issues: 1.) W/N there was a perfected contract between petitioner Jazmin Soler and respondents COMBANK and Nida Lopez

2.) Nida Lopez, the manager of the bank branch, had authority to bind the bank in the transaction.

Held: The discussions between petitioner and Ms. Lopez was to the effect that she had authority to engage the services of petitioner. During their meeting, she even gave petitioner specifications as to what

was to be renovated in the branch premises and when petitioners requested for the blueprints of the building, Ms. Lopez supplied the same. 

Ms. Lopez was aware that petitioner hired the services of people to help her come up with the designs for the December, 1986 board meeting of the bank. Ms. Lopez even insisted that the designs be rushed in time for presentation to the bank.  With all these discussion and transactions, it was apparent to petitioner that Ms. Lopez indeed had authority to engage the services of petitioner.

The next issue is whether there was a perfected contract between petitioner and the Bank.

“A contract is a meeting of the minds between two persons whereby one binds himself to give something or to render some service to bind himself to give something to render some service to another for consideration.  There is no contract unless the following requisites concur: 1.  Consent of the contracting parties; 2.  Object certain which is the subject matter of the contract; and 3. Cause of the obligation which is established.

“A contract undergoes three stages:

“(a) preparation, conception, or generation, which is the period of negotiation and bargaining, ending at the moment of agreement of the parties;

“(b) perfection or birth of the contract, which is the moment when the parties come to agree on the terms of the contract; and

“(c) consummation or death, which is the fulfillment or

performance of the terms agreed upon in the contract.”

In the case at bar, there was a perfected oral contract. When Ms. Lopez and petitioner met in November 1986, and discussed the details of the work, the first stage of the contract commenced.  When they agreed to the payment of the ten thousand pesos (P10,000.00) as professional fees of petitioner and that she should give the designs before the December 1986 board meeting of the bank, the second stage of the contract proceeded, and when finally petitioner gave the designs to Ms. Lopez, the contract was consummated.

Petitioner believed that once she submitted the designs she would be paid her professional fees. Ms. Lopez assured petitioner that she would be paid.

It is familiar doctrine that if a corporation knowingly permits one of its officers, or any other agent, to act within the scope of an apparent authority, it holds him out to the public as possessing the power to do those acts; and thus, the corporation will, as against anyone who has in good faith dealt with it through such agent, be estopped from denying the agent’s authority.

Also, petitioner may be paid on the basis of quantum meruit. “It is essential for the proper operation of the principle that there is an acceptance of the benefits by one sought to be charged for the services rendered under circumstances as reasonably to notify him that the lawyer performing the task was expecting to be paid compensation  therefor.  The doctrine of quantum meruit is a device to prevent undue enrichment based on the equitable postulate that it is unjust for a person to retain benefit without paying for it.”

We note that the designs petitioner submitted to Ms. Lopez were not returned.  Ms. Lopez, an officer of the bank as branch manager used such designs for presentation to the board of the bank.  Thus, the designs were in fact useful to Ms. Lopez for she did not appear to the board without any designs at the time of the deadline set by the board.

DUARTE v. DURAN

Facts: This petition arose from a suit[5] for collection of sum of money filed by respondent Miguel Samuel A.E. Duran[6]  against petitioner Elena Jane Duarte withBranch 5 of the Municipal Trial Court in Cities (MTCC), Cebu. According to respondent, on February 14, 2002, he offered to sell a laptop computer for the sum of P15,000.00 to petitioner thru the help of a common friend, Josephine Dy (Dy).[7] Since petitioner was undecided, respondent left the laptop with petitioner for two days.[8] On February 16, 2002, petitioner told respondent that she was willing to buy the laptop on installment.[9] Respondent agreed; thus, petitioner gave P5,000.00 as initial payment and promised to pay P3,000.00 on February 18, 2002 and P7,000.00 on March 15, 2002.[10]  On February 18, 2002, petitioner gave her second installment of P3,000.00 to Dy, who signed the handwritten receipt[11] allegedly made by petitioner as proof of payment.[12]  But when Dy returned to get the remaining balance on March 15, 2002, petitioner offered to pay only P2,000.00 claiming that the laptop was only worthP10,000.00.[13]  Due to the refusal of petitioner to pay the remaining balance, respondent thru counsel sent petitioner a demand letter dated July 29, 2002.[14]   Petitioner, however, denied writing the receipt dated February 18, 2002,[15] and receiving the

demand letter dated July 29, 2002.[16]  Petitioner claimed that there was no contract of sale.[17] Petitioner said that Dy offered to sell respondent’s laptop but because petitioner was not interested in buying it, Dy asked if petitioner could instead lend respondent the amount of P5,000.00.[18]  Petitioner agreed and in turn, Dy left the laptop with petitioner.[19] On February 18, 2002, Dy came to get the laptop but petitioner refused to give it back because the loan was not yet paid.[20]  Dy then asked petitioner to lend an additional amount of P3,000.00 to respondent who allegedly was in dire need of money.[21] Petitioner gave the money under agreement that the amounts she lent to respondent would be considered as partial payments for the laptop in case she decides to buy it.[22]  Sometime in the first week of March 2002, petitioner informed respondent that she has finally decided not to buy the laptop.[23] Respondent, however, refused to pay and insisted that petitioner purchase the laptop instead.Petitioner likewise denies the existence of a contract of sale, insisting that the laptop was not sold to her but was given as a security for respondent’s debt.  To prove that there was no contract of sale, petitioner calls attention to respondent’s failure to present a written contract of sale.[44]  She claims that under the Statute of Frauds, a contract of sale to be enforceable must be in writing.[45]  She also imputes error on the part of the CA in giving weight and credence to the receipt dated February 18, 2002 and the demand letter dated July 29, 2002.[46]  She claims that the receipt dated February 18, 2002, which she denies having written, is not an actionable document; thus, there was no need for her to deny under oath its genuineness and due execution.[47]  Furthermore, she claims that her denial of the receipt of the demand letter dated July 29, 2002 shifted the burden upon respondent to prove that the letter was indeed received by her.

Respondent defends the ruling of the CA by arguing that the receipt dated February 18, 2002 is an actionable document, and thus, petitioner’s failure to deny under oath its genuineness and due execution constitutes an admission thereof.[52] In addition, petitioner’s denial of the receipt of the demand letter dated July 29, 2002 cannot overcome the presumption that the said letter was received in the regular course of mail.[53]  Respondent likewise points out that the Statute of Frauds does not apply in the instant case.

Issue: W/N there was a perfected contract of sale between the parties.

Held:

There was a contract of sale between the parties

As to whether there was a contract of sale between the parties, we hold that there was, and the absence of a written contract of sale does not mean otherwise.  A contract of sale is perfected the moment the parties agree upon the object of the sale, the price, and the terms of payment.[60]  Once perfected, the parties are bound by it whether the contract is verbal or in writing because no form is required.[61]  Contrary to the view of petitioner, the Statute of Frauds does not apply in the present case as this provision applies only to executory, and not to completed, executed or partially executed contracts.[62]  In this case, the contract of sale had been partially executed because the possession of the laptop was already transferred to petitioner and the partial payments had been made by her.  Thus, the absence of a written contract is not fatal to respondent’s case.  Respondent only needed to show by a preponderance of evidence that there was an oral contract of sale, which he did by submitting in evidence his own affidavit, the affidavit of his witness Dy, the

receipt dated February 18, 2002 and the demand letter dated July 29, 2002.

 As regards the receipt dated February 18, 2002, we agree with petitioner that it is not an actionable document.  Hence, there was no need for her to deny its genuineness and due execution under oath. Nonetheless, we find no error on the part of the CA in giving full weight and credence to it since it corroborates the testimonies of respondent and his witness Dy that there was an oral contract of sale between the parties.

 With regard to petitioner’s denial of the receipt of the demand letter dated July 29, 2002, we believe that this did not overturn the presumption of regularity that the letter was delivered and received by the addressee in the regular course of the mail considering that respondent was able to present the postmaster’s certification[63] stating that the letter was indeed sent to the address of petitioner.  Bare denial of receipt of a mail cannot prevail over the certification of the postmaster, whose official duty is to send notices of registered mail.[64]

 As we see it then, the evidence submitted by respondent weigh more than petitioner’s bare denials. Other than her denials, no other evidence was submitted by petitioner to prove that the laptop was not sold but was only given as security for respondent’s loan.  What adds doubt to her story is the fact that from the first week of March 2002, the time she allegedly decided not to buy the laptop, up to the time the instant case was filed against her, she did not exert any effort to recover from respondent the payment of the alleged loan.  Her inaction leads us to conclude that the alleged loan was a mere afterthought.

 All told, no error can be attributed to the CA in finding that there was a contract of sale between the parties

 

ROBERN DEVELOPMENT v. PEOPLE’S LANDLESS

Facts:

Issue: W/N there was a perfected contract of sale between PELA and Al-Amanah, the resolution of which will decide whether the sale of the lot to Robern should be sustained or not.

Held: We shall first briefly address some matters raised by PELA.

PELA’s contention that Robern cannot assail the alleged sale between PELA and Al-Amanah is untenable. Robern is one of the parties who claim title to the disputed lot. As such, it is a real party in interest since it stands to be benefited or injured by the judgment.45

Petitioners’ failure to attach the material portions of the record that would support the allegations in the Petition is not fatal. We ruled in F.A.T. Kee Computer Systems, Inc. v. Online Networks International, Inc.,46 thus:

x x x However, such a requirement failure to attach material portions of the record was not meant to be an ironclad rule such that the failure to follow the same would merit the outright dismissal of the petition. In accordance with Section 7 of Rule 45, ‘the Supreme Court may require or allow the filing of such pleadings, briefs, memoranda or documents as it may deem necessary within such periods and under such conditions as it may consider appropriate.’ More importantly, Section 8 of Rule 45 declares that ‘[i]f the petition is given due course, the Supreme Court may require the elevation of the complete record of the case or specified parts

thereof within fifteen (15) days from notice.’ x x x47

Anent the statement of the courts below that there was ‘an apparent perfection of contract (of sale) between Al-Amanah and PELA’, we hold that the same is strictly confined to the resolution of whether a writ of preliminary injunction should issue since the PELA members were then about to be evicted. PELA should not rely on such statement as the same is not decisive of the rights of the parties and the merits of this case.

We shall now delve into the crucial issue of whether there was a perfected contract of sale between PELA and Al-Amanah.

Essential Elements of a Contract of Sale

A contract of sale is perfected at the moment there is a meeting of minds upon the thing which is the object of the contract and upon the price.48 Thus, for a contract of sale to be valid, all of the following essential elements must concur: "a) consent or meeting of the minds; b) determinate subject matter; and c) price certain in money or its equivalent."49

In the case at bench, there is no controversy anent the determinate subject matter, i.e., the 2,000-square meter lot. This leaves us to resolve whether there was a concurrence of the remaining elements.

As for the price, fixing it can never be left to the decision of only one of the contracting parties.50 "But a price fixed by one of the contracting parties, if accepted by the other, gives rise to a perfected sale."51

As regards consent, "when there is merely an offer by one party without acceptance of the other, there is no contract."52 The decision to accept a bidder’s proposal must be communicated to the bidder.53 However, a binding contract may exist between the parties whose minds have met, although they did not affix their signatures to any written document,54 as acceptance may be expressed or implied.55 It "can be inferred from the contemporaneous and subsequent acts of the contracting parties."56 Thus, we held:

x x x The rule is that except where a formal acceptance is so required, although the acceptance must be affirmatively and clearly made and must be evidenced by some acts or conduct communicated to the offeror, it may be made either in a formal or an informal manner, and may be shown by acts, conduct, or words of the accepting party that clearly manifest a present intention or determination to accept the offer to buy or sell. Thus, acceptance may be shown by the acts, conduct, or words of a party recognizing the existence of the contract of sale.57

There is no perfected contract of sale between PELA and Al-Amanah for want of consent and agreement on the price.

After scrutinizing the testimonial and documentary evidence in the records of the case, we find no proof of a perfected contract of sale between Al-Amanah and PELA. The parties did not agree on the price and no consent was given, whether express or implied.

When PELA Secretary Florida Ramos (Ramos) testified, she referred to the March 18, 1993 letter which PELA sent to Al-Amanah as the document supposedly embodying the perfected contract of

sale.58 However, we find that the March 18, 1993 letter referred to was merely an offer to buy, viz:

March 18, 1993

The ManagerIslamic BankDavao Branch

Davao City

Sir/Madam:

This has reference to the offer made by Messrs. Alejandro Padilla, Leonardo Labora, Boy Bartiana, Francisco Paig, and Mr. Asterio Aki for the purchase of the acquired asset of the bank with an area of 2,000 square meters and covered by T.C.T. No. T-138914, portions of which are occupied by their houses. These occupants have formed and registered a group of x x x landless families who have occupied shoulders of National Highways, to be able to raise an amount that would meet the approval of the Bank as the consideration for the purchase of the property. The group which is known as PELA or People’s Landless Association, is offering the bank the amount of THREE HUNDRED THOUSAND PESOS (P300,000.00) for the whole 2,000 sq. meters. Of this amount the buyers will pay a down payment of ONE HUNDRED FIFTY THOUSAND PESOS (P150,000.00) and the balance payable in one (1) year.

According to the plan of PELA, about 24 landless families can be accommodated in the property. We hope the Bank can help these families own even a small plot for their shelter. This would be in line with the government’s program of housing which the present administration promised

to put in high gear this year.59 (Emphasis supplied)

Neither can the note written by the bank that "subject offer has been acknowledged/received but processing to take effect upon putting up of the partial amount of P150,000.00 on or before April 15, 1993" be construed as acceptance of PELA’s offer to buy. Taken at face value, the annotation simply means that the bank merely acknowledged receipt of PELA’s letter-offer. Furthermore, by ‘processing,’ Al-Amanah only meant that it will ‘act on the offer’, i.e., it still has to evaluate whether PELA’s offer is acceptable. Until and unless Al-Amanah accepts, there is as yet no perfected contract of sale. Notably here, the bank never signified its ‘approval’ or ‘acceptance’ of the offer.

We cannot agree with the CA’s ratiocination that receipt of the amount, coupled with the phrase written on the four receipts as "deposit on sale of TCT No. 138914," signified a tacit acceptance by Al-Amanah of PELA’s offer. For sure, the money PELA gave was not in the concept of an earnest money. Besides, as testified to by then OIC Dalig, it is the usual practice of Al-Amanah to require submission of a bid deposit which is acknowledged by way of bank receipts before it entertains offers. Thus:

Atty. Bolcan:

Now, as far as you can remember, these receipts state that these are partial deposits, what do you mean by that?

WITNESS:

A: x x x, we normally request an offeror to submit or make deposit, actually the bank does not entertain any offer without

any deposit and just like that, during my time x x x in buying the property for those interested the bank does not entertain any offer unless they make a deposit.

x x x x

Q: Why do you issue receipts as officer-in-charge stating only partial deposits?

A: Because there was no sale, there was no consu[m]mated sale, so any amount which you will give as a deposit will be accepted by the bank for the offer and that if their offer will be disapproved we will return the deposit because their offer was very low and this might be disapproved by the head office in Manila.60

x x x x

Atty. Taasan:

Do you confirm that based on the interest of the plaintiff to acquire the property they made a deposit with said bank, as evidenced by the receipts that were shown to you by your counsel, correct?

A: Yes, sir.

Q: And according to you, the bank does not entertain any offer to buy the property without deposits?

A: Yes, sir.

Q: In this case since the plaintiffs made a deposit x x x they were properly entertained, correct?

A: Yes because it is under negotiation, now while their offer price is below the selling price of the bank.61

The absence of a perfected contract of sale was further buttressed by the testimony of PELA Secretary Ramos on cross examination, viz:

Atty. Rabor:

Since it was x x x hard earned money you did not require the Amanah Bank when you gave that P150,000.00 to reduce your agreement into writing regarding the sale of this property?

A: I insisted but she will not issue that.62

x x x x

Atty. Bolcan:

Now, on April 15, 1993 when the deposit was made, you were present?

A: Yes, sir.

Q: Now, after making the deposit of One Hundred Fifty Thousand (P150,000.00) Pesos on April 15, 1993 did you not request for the bank to execute a document to prove that actually you are buying the property?

A: I even said to the OIC or the manager that ma’am, now that you have received our money, where is our paper that we were the ones to buy that property, sir.

Q: To whom are you referring to?

A: Febe Dalig, the OIC, sir.

Q: And this OIC Febe Dalig informed you that the Offer on your part to buy the property is subject for approval by the head office in Manila, is that correct?

A: Yes she told me that it would be subject to approval in Manila x x x.

Q: And later on you were informed by the bank that your offer was not accepted by the head office in Manila, is that correct?

A: She did not inform us but we kept on following it up with their office and she told us that it did not arrive yet, sir.63 (Emphasis supplied)

PELA Secretary Ramos’ testimony thus corroborated OIC Dalig’s consistent stand that it is the Head Office which will decide whether Al-Amanah would accept PELA’s offer:

Atty. Bolcan:

And now, if there are interested persons making offer x x x what would you do?

A: Well, we have to screen the offer before we forward the offer to Manila for approval because…

Court:

What would you do before you forward that to Manila?

A: We will be screening the offer x x x.

Atty. Bolcan:

And you said that it is referred to Manila?

A: Yes, sir.

Q: Who will eventually approve the offer made by the interested persons to buy the property?

A: We have a committee in Manila to approve the sale of the property.

Q: Do you have any idea who will approve the offer of the property?

A: I have no idea but the president, rather it consists of the president I think and then signed also by the vice-president and some officers in the office, sir.

x x x x

Q: Now, in case of offers of the property of the bank, x x x the officer-in-charge of the bank, Al-Amanah Bank branch, usually refers this matter to the head office in Manila?

A: Yes, sir.

Q: And it is the head office that will decide whether the offer will be approved or not?

A: Yes as head of the branch, we have to forward the offer whether it was acceptable or not.64

It is thus undisputed, and PELA even acknowledges, that OIC Dalig made it clear that the acceptance of the offer, notwithstanding the deposit, is subject to the approval of the Head Office. Recognizing the corporate nature of the bank and that the power to sell its real properties is lodged in the higher authorities,65 she never falsely represented to the bidders that she has authority to sell the bank’s property. And regardless of PELA’s insistence that she execute a written agreement of the sale, she refused and told PELA to wait for the decision of the Head Office, making it clear that she has no authority to execute any deed of sale.

Contracts undergo three stages: "a) negotiation which begins from the time

the prospective contracting parties indicate interest in the contract and ends at the moment of their agreement[; b) perfection or birth, x x x which takes place when the parties agree upon all the essential elements of the contract x x x; and c) consummation, which occurs when the parties fulfill or perform the terms agreed upon, culminating in the extinguishment thereof."66

In the case at bench, the transaction between Al-Amanah and PELA remained in the negotiation stage. The offer never materialized into a perfected sale, for no oral or documentary evidence categorically proves that Al-Amanah expressed amenability to the offered P300,000.00 purchase price. Before the lapse of the 1-year period PELA had set to pay the remaining ‘balance,’ Al-Amanah expressly rejected its offered purchase price, although it took the latter around seven months to inform the former and this entitled PELA to award of damages.67 Al-Amanah’s act of selling the lot to another buyer is the final nail in the coffin of the negotiation with PELA. Clearly, there is no double sale, thus, we find no reason to disturb the consummated sale between Al-Amanah and Robern.

At this juncture, it is well to stress that Al-Amanah’s Petition before this Court docketed as G.R. No. 173437 was already denied with finality on December 4, 2006. Hence, we see no reason to disturb paragraph 6 of the CA’s Decision ordering Al-Amanah to pay damages to PELA.