Sales Revalida No.

1
1. Nobleza v. Nueza, G.R. No. 193038, March 11, 2015.
Facts:
Respondent Shirley B. Nuega (Shirley) was married to Rogelio A. Nuega (Rogelio) on September
1, 1990. Sometime in 1988 when the parties were still engaged, Shirley was working as a domestic helper
in Israel. Upon the request of Rogelio, Shirley sent him money for the purchase of a residential lot in
Marikina where they had planned to eventually build their home. Rogelio was then also working abroad
as a seaman. The following year, or on September 13, 1989, Rogelio purchased the subject house and lot
for One Hundred Two Thousand Pesos (P102,000.00) from Rodeanna Realty Corporation. The subject
property has an aggregate area of one hundred eleven square meters (111 sq. m.) covered by Transfer
Certificate of Title (TCT) No. N-133844. Shirley claims that upon her arrival in the Philippines sometime in
1989, she settled the balance for the equity over the subject property with the developer through SSS
financing. She likewise paid for the succeeding monthly amortizations. On October 19, 1989, TCT No.
171963 over the subject property was issued by the Registry of Deeds of Marikina, Rizal solely under the
name of Rogelio.
On September 1, 1990, Shirley and Rogelio got married and lived in the subject property. The
following year, Shirley returned to Israel for work. While overseas, she received information that Rogelio
had brought home another woman, Monica Escobar, into the family home. She also learned, and was
able to confirm upon her return to the Philippines in May 1992, that Rogelio had been introducing
Escobar as his wife.
In June 1992, Shirley filed two cases against Rogelio: one for Concubinage before the Provincial
Prosecution Office of Rizal, and another for Legal Separation and Liquidation of Property before the RTC
of Pasig City. Shirley later withdrew the complaint for legal separation and liquidation of property, but
re-filed the same on January 29, 1993. In between the filing of these cases, Shirley learned that Rogelio
had the intention of selling the subject property. Shirley then advised the interested buyers — one of
whom was their neighbor and petitioner Josefina V. Nobleza (petitioner) — of the existence of the cases
that she had filed against Rogelio and cautioned them against buying the subject property until the
cases are closed and terminated. Nonetheless, under a Deed of Absolute Sale 11 dated December 29,
1992, Rogelio sold the subject property to petitioner without Shirley's consent in the amount of Three
Hundred Eighty Thousand Pesos (P380,000.00), including petitioner's undertaking to assume the
existing mortgage on the property with the National Home Mortgage Finance Corporation and to pay
the real property taxes due thereon.
Issue: Whether or not court of appeals erred when it affirmed the decision of the regional trial
court by sustaining the finding that petitioner was not a purchaser in good faith.
Held:
An innocent purchaser for value is one who buys the property of another, without notice
that some other person has a right or interest in the property, for which a full and fair price is
paid by the buyer at the time of the purchase or before receipt of any notice of claims or interest
of some other person in the property. To successfully invoke and be considered as a buyer in good
faith, the presumption is that first and foremost, the "buyer in good faith" must have shown
prudence and due diligence in the exercise of his/her rights. It presupposes that the buyer did
everything that an ordinary person would do for the protection and defense of his/her rights and
interests against prejudicial or injurious concerns when placed in such a situation. In fine, for a
purchaser of a property in the possession of another to be in good faith, he must exercise due
diligence, conduct an investigation, and weigh the surrounding facts and circumstances like what
any prudent man in a similar situation would do.
A buyer cannot claim to be an innocent purchaser for value by merely relying on the TCT
of the seller while ignoring all the other surrounding circumstances relevant to the sale.
Respondent even testified that she had warned their neighbors at Ladislao Diwa Village
— including petitioner's sister — not to engage in any deal with Rogelio relative to the purchase
of the subject property because of the cases she had filed against Rogelio.
 2. Spouses Nicanor Tumbokon v. Legaspi, G.R. No. 153736, August 4, 2010.
Facts:
Under contention herein are the ownership and possession of that parcel of land with an
area of 12,480 square meters, more or less, situated in Barangay Buenavista (formerly Barangay
San Isidro, in the Municipality of Ibajay, Province of Aklan. The land — planted to rice, corn, and
coconuts — was originally owned by the late Alejandra Sespeñe (Alejandra), who had two
marriages.
The ownership and possession of the parcel of land became controversial after Spouses
Nicanor Tumbokon and Rosario Sespeñe (petitioners) asserted their right in it by virtue of their
purchase of it from Cresenciana Inog, who had supposedly acquired it by purchase from Victor
Miralles. The tug-of-war over the property between the petitioners and the respondents first led
to the commencement of a criminal case. The Spouses Nicanor Tumbokon and Rosario Sespeñe
filed a criminal complaint for qualified theft against respondents Apolonia and Paulina S.
Magtanum and others not parties herein, charging them with stealing coconut fruits from the land
subject of the present case.
Issue: Whether or not the decision of the CA that the appellees (petitioners) are not the owners
and therefore not entitled to the recovery of the litigated lot was supported by law and the
evidence on record.

Held:
Yes. The CA correctly found that the petitioners' claim of ownership could not be legally
and factually sustained.
First of all, the petitioners adduced no competent evidence to establish that Victor
Miralles, the transferor of the land to Cresenciana Inog (the petitioners' immediate predecessor
in interest) had any legal right in the first place to transfer ownership. He was not himself an heir
of Alejandra, being only her son-in-law (as the husband of Ciriaca, one of Alejandra's two
daughters). Thus, the statement in the deed of absolute sale (Exhibit B) entered into between
Victor Miralles and Cresenciana Inog, to the effect that the "parcel of land was inherited from the
deceased Alejandra Sespeñe" by Victor Miralles "being the sole heir of the said Alejandra Sespeñe,
having no other brothers or sisters," was outrightly false.
Secondly, a decedent's compulsory heirs in whose favor the law reserves a part of the
decedent's estate are exclusively the persons enumerated in Article 887 of the Civil Code.
Only two forced heirs survived Alejandra upon her death, namely: respondent Apolonia,
her daughter, and Crisanto Miralles, her grandson. The latter succeeded Alejandra by right of
representation because his mother, Ciriaca, had predeceased Alejandra. Representation is a right
created by fiction of law, by virtue of which the representative is raised to the place and
the degree of the person represented, and acquires the rights which the latter would have if she
were living or if she could have inherited. Herein, the representative (Crisanto Miralles) was
called to the succession by law and not by the person represented (Ciriaca); he thus succeeded
Alejandra, not Ciriaca.
Thirdly, Victor Miralles' supposed acquisition of the land by oral sale from Alejandra had
no competent factual support in the records. With Victor Miralles lacking any just and legal right
in the land, except as an heir of Ciriaca, the transfer of the land from him to Cresenciana Inog was
ineffectual. As a consequence, Cresenciana Inog did not legally acquire the land, and, in turn, did
not validly transfer it to the petitioners.
 3. Spouses Aggabao v. Parulan, G.R. No. 165803, September 1, 2010.
Facts:
In January 1991, real estate broker Marta K. Atanacio (Atanacio) offered the property to
the petitioners, who initially did not show interest due to the rundown condition of the
improvements. But Atanacio's persistence prevailed upon them, so that on February 2, 1991, they
and Atanacio met with Ma. Elena at the site of the property. During their meeting, Ma. Elena
showed to them the following documents, namely: (a) the owner's original copy of TCT No.
63376; (b) a certified true copy of TCT No. 63377; (c) three tax declarations; and (d) a copy of the
special power of attorney (SPA) dated January 7, 1991 executed by Dionisio authorizing Ma. Elena
to sell the property. 4 Before the meeting ended, they paid P20,000.00 as earnest money, for
which Ma. Elena executed a handwritten Receipt of Earnest Money,whereby the parties
stipulated that: (a) they would pay an additional payment of P130,000.00 on February 4,
1991; (b) they would pay the balance of the bank loan of the respondents amounting to
P650,000.00 on or before February 15, 1991; and (c) they would make the final payment of
P700,000.00 once Ma. Elena turned over the property on March 31, 1991.
Following their verification, the petitioners delivered P130,000.00 as additional down
payment on February 4, 1991; and P650,000.00 to the Los Baños Rural Bank on February 12, 1991,
which then released the owner's duplicate copy of TCT No. 63377 to them.
On March 18, 1991, the petitioners delivered the final amount of P700,000.00 to Ma.
Elena, who executed a deed of absolute sale in their favor. However, Ma. Elena did not turn over
the owner's duplicate copy of TCT No. 63376, claiming that said copy was in the possession of a
relative who was then in Hongkong. She assured them that the owner's duplicate copy of TCT No.
63376 would be turned over after a week.
On March 19, 1991, TCT No. 63377 was cancelled and a new one was issued in the name
of the petitioners.
Ma. Elena did not turn over the duplicate owner's copy of TCT No. 63376 as promised. In
due time, the petitioners learned that the duplicate owner's copy of TCT No. 63376 had been all
along in the custody of Atty. Jeremy Z. Parulan, who appeared to hold an SPA executed by his
brother Dionisio authorizing him to sell both lots.
On July 26, 2000, the Regional Trial Court (RTC), Branch 136, in Makati City annulled the
deed of absolute sale executed in favor of the petitioners covering two parcels of registered land
the respondents owned for want of the written consent of respondent husband Dionisio Parulan,
Jr. On July 2, 2004, in C.A.-G.R. CV No. 69044, 1 the Court of Appeals (CA) affirmed the RTC
decision.

Issue: Whether or not the petitioners be considered in good faith at the time of their purchase of
the property?

Held:
A purchaser in good faith is one who buys the property of another, without notice that
some other person has a right to, or interest in, such property, and pays the full and fair price for
it at the time of such purchase or before he has notice of the claim or interest of some other
persons in the property. He buys the property with the belief that the person from whom he
receives the thing was the owner and could convey title to the property. He cannot close his eyes
to facts that should put a reasonable man on his guard and still claim he acted in good faith. The
status of a buyer in good faith is never presumed but must be proven by the person invoking it.
In Bautista v. Silva, the Court erected a standard to determine the good faith of the
buyers dealing with a seller who had title to and possession of the land but whose capacity to sell
was restricted, in that the consent of the other spouse was required before the conveyance,
declaring that in order to prove good faith in such a situation, the buyers must show that they
inquired not only into the title of the seller but also into the seller's capacity to sell. Thus, the
buyers of conjugal property must observe two kinds of requisite diligence, namely: (a) the
diligence in verifying the validity of the title covering the property; and(b) the diligence in inquiring
into the authority of the transacting spouse to sell conjugal property in behalf of the other spouse.
It is true that a buyer of registered land needs only to show that he has relied on the face
of the certificate of title to the property, for he is not required to explore beyond what the
certificate indicates on its face. In this respect, the petitioners sufficiently proved that they had
checked on the authenticity of TCT No. 63376 and TCT No. 63377 with the Office of the Register
of Deeds in Pasay City as the custodian of the land records; and that they had also gone to the Los
Baños Rural Bank to inquire about the mortgage annotated on TCT No. 63377. Thereby, the
petitioners observed the requisite diligence in examining the validity of the TCTs concerned.
Yet, it ought to be plain enough to the petitioners that the issue was whether or not they
had diligently inquired into the authority of Ma. Elena to convey the property, not whether or not
the TCT had been valid and authentic, as to which there was no doubt.
 4. Far East Bank and Trust Company v. Philippine Deposit Insurance Corp., G.R. No.
172983, July 22, 2015.
Facts:
On July 5, 1985, the Central Bank of the Philippines (Central Bank) issued Monetary
Board (MB) Resolution No. 699, placing Pacific Banking Corporation (PBC)under receivership.
On October 28, 1985, the Central Bank formally invited banks to submit their proposals for
the purchase of the assets and franchise of the various offices of the PBC and the assumption of an
equivalent amount of the PBC's liabilities.
In answer to the formal invitation, the FEBTC submitted its bid on November 14, 1985.
The FEBTC's bid covered the purchase of the PBC's non-fixed and fixed assets and the
assumption of the PBC's recorded liabilities.
On November 22, 1985, the Monetary Board issued MB Resolution No. 1234, accepting the
FEBTC's bid after finding it as the most advantageous.
On April 16, 1986, the FEBTC as the buyer,the PBC as the seller,and the Central Bank entered
into a Memorandum of Agreement (MOA).The PBC was represented by its Liquidator Renan V.
Santos (Liquidator Santos) who was then the Special Assistant to the Central Bank Governor.
The parties agreed, however, in Section 1 (a) (vii) of the MOA that the PBC assets submitted
to the Central Bank as collaterals shall be excluded from the purchase.
In accordance with Section 1 (a) of the MOA, the PBC as the seller,the FEBTC as the buyer,and
the Central Bank, executed a purchase agreement (PA)for the FEBTC's purchase of the PBC assets
and the assumption of its liabilities. The PBC was again represented by Liquidator Santos.
The PA merely covered the non-fixed assets of the PBC and did not include the fixed assets
agreed upon under Section 3 (c) of the MOA.

Issue: Whether or not the PDIC, as the Liquidator of the PBC, may be compelled to execute the deeds
of sale over the nine (9) disputed PBC fixed assets.
Held:
Yes. It is well-established that 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 its essential elements. 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 or consideration. The consummation stage begins when
the parties perform their respective undertakings under the contract, culminating in its
extinguishment.
Specifically, contracts of sale are perfected by mutual consent, when the seller obligates
himself, for a price certain, to deliver and transfer ownership of a specified thing or right to the buyer
over which the latter agrees.
 Mutual consent, as a state of mind, may only be inferred from the confluence of two acts of
the parties: an offer certain as to the object of the contract and its consideration, and an absolute
acceptance of the offer, i.e.,with respect to the exact object and consideration embodied in the offer.
While it may not be possible to expect the acceptance to echo every nuance of the offer, it is
imperative that it assents to those points in the offer that, under the operative facts of each contract,
are not only material but motivating as well.
Simply put, a contract of sale is perfected upon the meeting of the minds of the parties on the
essential elements of the contract, i.e.,consent, object certain, and the consideration of the contract.
Based on the above well-established principles, the Court rules that the essential elements of
a contract of sale are present in the MOA as confirmed by the FEBTC's bid and the provisions of the
MOA and the PA.
As mentioned above, the FEBTC submitted its bid to the Central Bank in response to the
latter's invitation to submit a formal proposal for the purchase of the assets of the PBC.
The negotiation stage of the contract of sale
The FEBTC's bid or offer included the purchase of selected assets of the PBC consisting of
the fixed and non-fixed assets.
The perfection stage of the contract of sale
Subsequently, the FEBTC, the PBC, and the Central Bank entered into a MOA that essentially
adopted the FEBTC's bid.
The MOA covered, therefore, the purchase of the non-fixed assets and the disputed fixed
assets, their valuation and the manner of payment, including discounts. The MOA contained the PBC's
acceptance, as represented by the Liquidator and by the Central Bank, of the relevant provisions of
the FEBTC bid; and the FEBTC's acceptance of any changes or counter-offer made by the Liquidator
and by the Central Bank.
We thus find it clear that the essential elements for the perfection of a contract of
sale, i.e.,object, consideration, and consent were present in the MOA. The MOA also set the manner
of payment for the additional consideration above, with an agreement that upon the execution of the
MOA, the FEBTC shall pay P5,000,000.00, which shall be applied against the downpayment for the
P260,000,000.00 additional consideration.
Thus viewed, the parties clearly had a meeting of minds on the essential elements of the
contract, perfecting therefore their contract of sale. This meeting was embodied in their MOA which
contained the absolute acceptance of the offer and the essential elements of the contract of sale.
Consummation stage, which includes the execution of an absolute purchase agreement over the
non-fixed assets
First, the FEBTC's down payment of P5,000,000.00 upon the execution of the MOA was
intended to be part of the purchase price as it was part of the additional consideration of
P260,000,000.00 referred to in Section 10 (c) (i) of the MOA. The P5 million downpayment therefore
is earnest money and is proof of the perfection of contract pursuant to Article 1482 of the New Civil
Code.
Second, as correctly found by the RTC, the FEBTC took possession of the subject fixed assets
immediately after the execution of the MOA and the PA. In fact, the FEBTC introduced improvements
thereon with the knowledge of the Liquidator, without the latter demanding any payment of rent
from the FEBTC.
Third, the parties executed the PA over the non-fixed assets as contemplated under Section
1 (a) of the MOA.
In these lights, the CA clearly erred when it ruled that there was no perfected contract of sale
over the disputed fixed assets simply because the PA did not include these fixed assets.
A contract of sale is perfected by the meeting of the minds of the parties regardless of
whether it was reduced to writing.
 5. Pulumbarit, Sr. v. CA, G.R. No. 153745-46, October 14, 2015

Facts:

Sometime in 1982, San Juan Macias Memorial Park, Inc. (SJMMPI), through its President Lourdes
S. Pascual, authorized Atty. Soledad de Jesus to look for a buyer for the San Juan Memorial Park (Memorial
Park) for P1,500,000.00. Thereafter, Lourdes Pascual, Leonila F. Acasio, and the other officers of SJMMPI
(Pascual et al.) were introduced to Nemencio Pulumbarit (Pulumbarit). The parties eventually came to an
agreement, with Pulumbarit issuing eighteen (18) checks in the name of SJMMPI SecretaryTreasurer
Leonila Acasio. Pulumbarit and/or his lawyer took charge of reducing the agreement into writing and
securing the signatures of all concerned parties.

On June 13, 1983, Pascual et al. sent a letter to Pulumbarit requesting for a copy of their written
agreement. In another letter of even date, they also asked Pulumbarit to reissue new checks to replace
the ones he previously issued. Failing to get a favorable response, Pascual et al. filed a Complaint for
Rescission of Contract, Damages and Accounting with Prayer for Preliminary Injunction or Receivership
against Pulumbarit.

Issue: Whether the agreement between the parties was one for sale or management of the memorial
park.

Held:

Agreement between the parties was a contract to sell the shares of SJMMPJ and not a contract of
sale or a management contract with option to buy.

xxx

Assuming arguendo that no evidentiary weight could be given to the Memorandum of Agreement, the
evidence on record would still show that appellee Dr. Pascual really intended to sell the memorial park.
This is shown by the letter of authority given to Atty. Soledad Pascual who was tasked to look for a
buyer for the memorial park.

xxx

It is absurd to sustain the trial court's finding that the agreement was for the management of the memorial
park. Notably, appellant already paid more than P400,000.00, a substantial amount especially at the
time of its payment, the early 80s. If the agreement was really for the management of the memorial
park, it should have been the corporation which should be paying appellant. In fact, no evidence was
presented by appellee Dr. Pascual on the compensation of appellant for his management of the
memorial park

The text of the MOA between the parties shows that their agreement was a contract to sell SJMMPl
shares. The pertinent portion of page three of the MOA reads:

xxx
4. The shares of stocks stated above and subject matter of this Agreement will only be transferred in the
name of the PARTY OF THE SECOND PART, its heirs, successors and assigns upon full payment and/or full
satisfaction thereon of the consideration of this agreement.

While Pascual et al. are technically correct in arguing that they did not enter into a contract of sale
with Pulumbarit, they cannot deny the existence of the stipulation in page three of the MOA evidencing
a contract to sell and negating their claim of a management contract with option to buy. Notably, page
three bears the signatures of Pulumbarit, Pascual, and the other SJMMPI stockholders. We further note
that Pascual did not dispute the authenticity of her signature appearing on page three of the MOA. Neither
did she allege during the course of the proceedings that she signed another document or entered into
another written transaction with Pulumbarit aside from the MOA.
 6. Akong v. Municipality of Isulan, Sultan Kudarat Province, G.R. No. 186014, June 26, 2013

Doctrine: Difference between contract of sale and contract to sell.

Facts:

Ali Akang (petitioner) is a member of the national and cultural community belonging to the
Maguindanaon tribe of Isulan, Province of Sultan Kudarat and the registered owner of Lot 5-B-2-B-14-F
(LRC) Psd 1100183 located at Kalawag III, Isulan, Sultan Kudarat, covered by Transfer Certificate of Title
(TCT) No. T-3653, with an area of 20,030 square meters.

Sometime in 1962, a two-hectare portion of the property was sold by the petitioner to the
Municipality of Isulan, Province of Sultan Kudarat (respondent) through then Isulan Mayor Datu
Ampatuan under a Deed of Sale executed on July 18, 1962.

The respondent immediately took possession of the property and began construction of the
municipal building.

Thirty-nine (39) years later or on October 26, 2001, the petitioner, together with his wife, Patao
Talipasan, filed a civil action for Recovery of Possession of Subject Property and/or Quieting of Title
thereon and Damages against the respondent, represented by its Municipal Mayor, et al.

In his complaint, the petitioner alleged, among others, that the agreement was one to sell, which
was not consummated as the purchase price was not paid.

In its answer, the respondent denied the petitioner’s allegations, claiming, among others: that the
petitioner’s cause of action was already barred by laches; that the Deed of Sale was valid; and that it has
been in open, continuous and exclusive possession of the property for forty (40) years.

Issue: Whether the Deed of Sale dated July 18, 1962 is a valid and perfected contract of sale.

Held:

Yes. A contract of sale is defined under Article 1458 of the Civil Code:

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 therefore a price certain in money or its
equivalent.

The elements of a contract of sale are: (a) consent or meeting of the minds, that is, consent to
transfer ownership in exchange for the price; (b) determinate subject matter; and (c) price certain in
money or its equivalent.

A contract to sell, on the other hand, is defined by Article 1479 of the Civil Code:

A bilateral contract whereby the prospective seller, while expressly reserving the ownership of
the subject property despite delivery thereof to the prospective buyer, binds himself to sell the said
property exclusively to the prospective buyer upon fulfillment of the condition agreed upon, that is, full
payment of the purchase price.

In a contract of sale, the title to the property passes to the buyer upon the delivery of the thing
sold, whereas in a contract to sell, the ownership is, by agreement, retained by the seller and is not to
pass to the vendee until full payment of the purchase price.

The Deed of Sale executed by the petitioner and the respondent is a perfected contract of sale,
all its elements being present. There was mutual agreement between them to enter into the sale, as
shown by their free and voluntary signing of the contract. There was also an absolute transfer of
ownership of the property by the petitioner to the respondent as shown in the stipulation: "x x x I
petitioner hereby sell, transfer, cede, convey and assign as by these presents do have sold, transferred,
ceded, conveyed and assigned, x x x." There was also a determine subject matter, that is, the two-hectare
parcel of land as described in the Deed of Sale. Lastly, the price or consideration is at Three Thousand
Pesos (₱3,000.00), which was to be paid after the execution of the contract. The fact that no express
reservation of ownership or title to the property can be found in the Deed of Sale bolsters the absence of
such intent, and the contract, therefore, could not be one to sell.
 7. Fullido v. Grilli, G.R. No. 215014, February 29, 2016.
Facts:
Sometime in 1994, Grilli, an Italian national, met Fullido in Bohol and courted her. In 1995,
Grilli decided to build a residential house where he and Fullido would to stay whenever he would be
vacationing in the country.
Grilli financially assisted Fullido in procuring a lot located in Biking I, Dauis, Bohol, from her
parents which was registered in her name under Transfer Certificate of Title (TCT) No. 30626. On the
said property, they constructed a house, which was funded by Grilli. Upon completion, they
maintained a common-law relationship and lived there whenever Grilli was on vacation in the
Philippines twice a year.
In 1998, Grilli and Fullido executed a contract of lease, a memorandum of agreement
(MOA) and a special power of attorney (SPA), to define their respective rights over the house and lot.
The lease contract stipulated, among others, that Grilli as the lessee, would rent the lot, registered in
the name of Fullido, for a period of fifty (50) years, to be automatically renewed for another fifty (50)
years upon its expiration in the amount of P10,000.00 for the whole term of the lease contract; and that
Fullido as the lessor, was prohibited from selling, donating, or encumbering the said lot without the
written consent of Grilli.
The said lease contract was duly registered in the Register of Deeds of Bohol.
The MOA, on the other hand, stated, among others, that Grilli paid for the purchase price of the house
and lot; that ownership of the house and lot was to reside with him; and that should the common-law
relationship be terminated, Fullido could only sell the house and lot to whomever Grilli so desired.
Lastly, the SPA allowed Grilli to administer, manage, and transfer the house and lot on behalf
of Fullido.
Issue: whether the assailed lease contract and MOA are null and void.
Held:
Yes. Under Section 1 of Article XIII of the 1935 Constitution, natural resources shall not be
alienated, except with respect to public agricultural lands and in such cases, the alienation is limited
to Filipino citizens. Concomitantly, Section 5 thereof states that, save in cases of hereditary
succession, no private agricultural land shall be transferred or assigned except to individuals,
corporations, or associations qualified to acquire or hold lands of the public domain in the Philippines.
The prohibition on the transfer of lands to aliens was adopted in the present 1987 Constitution, under
Sections 2, 3 and 7 of Article XII thereof. Agricultural lands, whether public or private, include
residential, commercial and industrial lands. The purpose of prohibiting the transfer of lands to
foreigners is to uphold the conservation of our national patrimony and ensure that agricultural
resources remain in the hands of Filipino citizens. SDHTEC
The prohibition, however, is not limited to the sale of lands to foreigners. It also covers leases
of lands amounting to the transfer of all or substantially all the rights of dominion. Thus, if an alien is
given not only a lease of, but also an option to buy, a piece of land by virtue of which the Filipino
owner cannot sell or otherwise dispose of his property, this to last for 50 years, then it becomes clear
that the arrangement is a virtual transfer of ownership whereby the owner divests himself in stages
not only of the right to enjoy the land but also of the right to dispose of it — rights which constitute
ownership. If this can be done, then the Constitutional ban against alien landholding in the Philippines,
is indeed in grave peril.
 8. Heirs of Fausto C. Ignacio v. Home Bankers Savings and Trust Company, G.R. No. 177783,
January 23, 2013

Doctrine: Perfection of Contract (Essential Requisites, Consent)

Facts:

In August 1981, petitioner Fausto C. Ignacio mortgaged two parcels of land to Home Savings Bank
and Trust Company, the predecessor of respondent Home Bankers Savings and Trust Company, as security
for the ₱500,000.00 loan extended to him by said bank. These properties which are located in Cabuyao,
Laguna are covered by Transfer Certificate of Title Nos. (T-40380) T-8595 and (T-45804) T-8350 containing
an area of 83,303 square meters and 120,110 square meters, respectively.

When petitioner defaulted in the payment of his loan obligation, respondent bank proceeded to
foreclose the real estate mortgage. At the foreclosure sale held on January 26, 1983, respondent bank
was the highest bidder for the sum of ₱764,984.67. On February 8, 1983, the Certificate of Sale issued to
respondent bank was registered with the Registry of Deeds of Calamba, Laguna. With the failure of
petitioner to redeem the foreclosed properties within one year from such registration, title to the
properties were consolidated in favor of respondent bank. Consequently, TCT Nos. T-8595 and T-8350
were cancelled and TCT Nos. 111058 and 111059 were issued in the name of respondent bank.

Despite the lapse of the redemption period and consolidation of title in respondent bank,
petitioner offered to repurchase the properties. While the respondent bank considered petitioner's offer
to repurchase, there was no repurchase contract executed. The present controversy was fuelled by
petitioner's stance that a verbal repurchase/compromise agreement was actually reached and
implemented by the parties.

Issue: Whether a contract for the repurchase of the foreclosed properties was perfected between
petitioner and respondent bank.

Held:

Contracts are perfected by mere consent, which is manifested by the meeting of the offer and the
acceptance upon the thing and the cause which are to constitute the contract.

Contracts that are consensual in nature, like a contract of sale, are perfected upon mere meeting
of the minds. Once there is concurrence between the offer and the acceptance upon the subject matter,
consideration, and terms of payment, a contract is produced. The offer must be certain. To convert the
offer into a contract, the acceptance must be absolute and must not qualify the terms of the offer; it must
be plain, unequivocal, unconditional, and without variance of any sort from the proposal. A qualified
acceptance, or one that involves a new proposal, constitutes a counter-offer and is a rejection of the
original offer. Consequently, when something is desired which is not exactly what is proposed in the offer,
such acceptance is not sufficient to generate consent because any modification or variation from the
terms of the offer annuls the offer.

The acceptance must be identical in all respects with that of the offer so as to produce consent or
meeting of the minds. Where a party sets a different purchase price than the amount of the offer, such
acceptance was qualified which can be at most considered as a counter-offer; a perfected contract would
have arisen only if the other party had accepted this counter-offer.
 9. Quiroga v. Parsons, 38 Phil. 501

Doctrine: Difference between sale and agency to sell.

Facts:

On January 24, 1911, in this city of manila, a contract in the following tenor was entered into by
and between the plaintiff, as party of the first part, and J. Parsons (to whose rights and obligations the
present defendant later subrogated itself), as party of the second part:

CONTRACT EXECUTED BY AND BETWEEN ANDRES QUIROGA AND J. PARSONS, BOTH

MERCHANTS ESTABLISHED IN MANILA, FOR THE EXCLUSIVE SALE OF "QUIROGA" BEDS
IN THE VISAYAN ISLANDS.

Issue: Whether the defendant, by reason of the contract, was a purchaser or an agent of the plaintiff for
the sale of his beds.

Held:

The defendant is a purchaser of the plaintiff for the sale of his beds.

In order to classify a contract, due regard must be given to its essential clauses. In the contract in
question, what was essential, as constituting its cause and subject matter, is:

1. The plaintiff was to furnish the defendant with the beds which the latter might order, at the price
stipulated, and that the defendant was to pay the price in the manner stipulated.
2. Payment was to be made at the end of sixty days, or before, at the plaintiff's request, or in cash,
if the defendant so preferred, and in these last two cases an additional discount was to be allowed
for prompt payment.

These are precisely the essential features of a contract of purchase and sale. There was the obligation on
the part of the plaintiff to supply the beds, and, on the part of the defendant, to pay their price. These
features exclude the legal conception of an agency or order to sell whereby the mandatory or agent
received the thing to sell it, and does not pay its price, but delivers to the principal the price he obtains
from the sale of the thing to a third person, and if he does not succeed in selling it, he returns it.
 10. Asuncion v. CA, G.R. No. 109125, December 2, 1994.

Facts:

On July 29, 1987 a Second Amended Complaint for Specific Performance was filed by
Ann 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 ofresidential 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.

The Court of Appeals 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.”

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.

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.

Issue:

Held:

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

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.

Observe, however, that the option is not the contract of sale itself. The optionee has the right, but not
the obligation, to buy. Once the option is exercised timely, i.e., the offer is accepted before a
breach of the option, a bilateral promise to sell and to buy ensues and both parties are then
reciprocally bound to comply with their respective undertakings.
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 withdrawal 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.
(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 matterof 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 ofperfection.

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
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 classof 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.
 11. Bible Baptist Church v. CA, G.R. No. 126454, November 26, 2004.

Facts:

On June 7, 1985, the Bible Baptist Church (petitioner Baptist Church) entered into a contract of lease with
Mr. & Mrs. Elmer Tito Medina Villanueva (respondent spouses Villanueva). The latter are the registered
owners of a property located at No. 2436 (formerly 2424) Leon Guinto St., Malate, Manila.

The foregoing stipulations of the lease contract are the subject of the present controversy.

Although the same lease contract resulted in several cases filed between the same parties herein,
petitioner submits, for this Court's review

Issue: Whether or not the option to buy given to the Baptist Church is founded upon a consideration.

Held:

Under Article 1479 of the Civil Code, it is provided:

Art. 1479. A promise to buy and sell a determinate thing for a price certain is
reciprocally demandable.

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.

The second paragraph of Article 1479 provides for the definition and consequent rights and
obligations under an option contract. For an option contract to be valid and enforceable against the
promissor, there must be a separate and distinct consideration that supports it.

In this case, petitioner Baptist Church seeks to buy the leased premises from the spouses
Villanueva, under the option given to them. Petitioners claim that theBaptist Church "agreed to advance
the large amount needed for the rescue of the property but, in exchange, it asked the Villanuevas to grant
it a long term lease and an option to buy the property for P1.8 million." They argue that the consideration
supporting the option was their agreement to pay off the Villanueva's P84,000 loan with the bank, thereby
freeing the subject property from the mortgage encumbrance.

Petitioners cannot insist that the P84,000 they paid in order to release the Villanuevas' property
from the mortgage should be deemed the separate consideration to support the contract of option. It
must be pointed out that said amount was in fact apportioned into monthly rentals spread over a
period of one year, at P7,000 per month.

To summarize the rules, an option contract needs to be supported by a separate consideration.

The consideration need not be monetary but could consist ofother things or undertakings. However, if
the consideration is not monetary, these must be things or undertakings of value, in view of the onerous
nature of the contract of option. Furthermore, when a consideration for an option contract is not
monetary, said consideration must be clearly specified as such in the option contract or clause.
 This Court also notes that in the present case both the Regional Trial Court and
the Court of Appeals agree that the option was not founded upon a separate and distinct consideration
and that, hence, respondents Villanuevas cannot be compelled to sell their property to
petitioner Baptist Church.
 12. Limson v. CA, G.R. No. 135929, April 20, 2001.

Facts:

Petitioner Lourdes Ong Limson, in her 14 May 1979 Complaint filed before the trial court, alleged
that in July 1978 respondent spouses Lorenzo de Vera and Asuncion Santos-de Vera, through their agent
Marcosa Sanchez, offered to sell to petitioner a parcel of land consisting of 48,260 square meters, more
or less, situated in Barrio San Dionisio, Parañaque, Metro Manila; that respondent spouses informed her
that they were the owners of the subject property; that on 31 July 1978 she agreed to buy the property
at the price of P34.00 per square meter and gave the sum of P20,000.00 to respondent spouses as
"earnest money;" that respondent spouses signed a receipt therefor and gave her a 10-day option period
to purchase the property; that respondent Lorenzo de Vera then informed her that the subject property
was mortgaged to Emilio Ramos and Isidro Ramos; that respondent Lorenzo de Vera asked her to pay the
balance of the purchase price to enable him and his wife to settle their obligation with the Ramoses.

Petitioner also averred that she agreed to meet respondent spouses and the Ramoses on 5 August
1978 at the Office of the Registry of Deeds of Makati, Metro Manila, to consummate the transaction but
due to the failure of respondent Asuncion Santos-de Vera and the Ramoses to appear, no transaction was
formalized. In a second meeting scheduled on 11 August 1978 she claimed that she was willing and ready
to pay the balance of the purchase price but the transaction again did not materialize as respondent
spouses failed to pay the back taxes of subject property. Subsequently, on 23 August 1978 petitioner
allegedly gave respondent Lorenzo de Vera three (3) checks in the total amount of P36,170.00 for the
settlement of the back taxes of the property and for the payment of the quitclaims of the three (3) tenants
of subject land. The amount was purportedly considered part of the purchase price and respondent
Lorenzo de Vera signed the receipts therefor.

Petitioner alleged that on 5 September 1978 she was surprised to learn from the agent of
respondent spouses that the property was the subject of a negotiation for the sale to respondent Sunvar
Realty Development Corporation (SUNVAR) represented by respondent Tomas Cuenca, Jr. On 15
September 1978 petitioner discovered that although respondent spouses purchased the property from
the Ramoses on 20 March 1970 it was only on 15 September 1978 that TCT No. S-72946 covering the
property was issued to respondent spouses. As a consequence, she filed on the same day an Affidavit of
Adverse Claim with the Office of the Registry of Deeds of Makati, Metro Manila, which was annotated on
TCT No. S-72946. She also claimed that on the same day she informed respondent Cuenca of her
"contract" to purchase the property.

The Deed of Sale between respondent spouses and respondent SUNVAR was executed on 15
September 1978 and TCT No. S-72377 was issued in favor of the latter on 26 September 1978 with
the Adverse Claim of petitioner annotated thereon. Petitioner claimed that when respondent spouses
sold the property in dispute to SUNVAR, her valid and legal right to purchase it was ignored if not violated.
Moreover, she maintained that SUNVAR was in bad faith as it knew of her "contract" to purchase the
subject property from respondent spouses.

Finally, for the alleged unlawful and unjust acts of respondent spouses, which caused her damage,
prejudice and injury, petitioner claimed that the Deed of Sale, should be annulled and TCT No. S-72377 in
the name of respondent SUNVAR canceled and TCT No. S-72946 restored. She also insisted that a Deed of
Sale between her and respondent spouses be now executed upon her payment of the balance of the
purchase price agreed upon, plus damages and attorney's fees.
 Issue: What is the nature of the contract entered into between petitioner Lourdes Ong Limson on
one hand, and respondent spouses Lorenzo de Vera and Asuncion Santos-de Vera on the other.

Held:

It is a contract of option. The main argument of petitioner is that there was a perfected contract
to sell between her and respondent spouses. On the other hand, respondent spouses and respondents
SUNVAR and Cuenca argue that what was perfected between petitioner and respondent spouses was a
mere option.

A scrutiny of the facts as well as the evidence of the parties overwhelmingly leads to the
conclusion that the agreement between the parties was a contract of option and not a contract to sell.

An option, as used in the law of sales, is a continuing offer or contract by which the owner
stipulates with another that the latter shall have the right to buy the property at a fixed price within a
time certain, or under, or in compliance with, certain terms and conditions, or which gives to the owner
of the property the right to sell or demand a sale. It is also sometimes called an "unaccepted offer." An
option is not of itself a purchase, but merely secures the privilege to buy. It is not a sale of property but a
sale of the right to purchase. It is simply a contract by which the owner of property agrees with another
person that he shall have the right to buy his property at a fixed price within a certain time. He does not
sell his land; he does not then agree to sell it; but he does sell something, i.e., the right or privilege to buy
at the election or option of the other party. Its distinguishing characteristic is that it imposes no binding
obligation on the person holding the option, aside from the consideration for the offer. Until acceptance it
is not, properly speaking, a contract, and does not vest, transfer, or agree to transfer, any title to, or any
interest or right in the subject matter, but is merely a contract by which the owner of the property gives
the optionee the right or privilege of accepting the offer and buying the property on certain terms.

On the other hand, a contract, like a contract to sell, involves the meeting of minds between two
persons whereby one binds himself, with respect to the other, to give something or to render some
service. Contracts, in general, are perfected by mere consent, which is manifested by the meeting of the
offer and the acceptance upon the thing and the cause which are to constitute the contract. The offer
must be certain and the acceptance absolute.

In the interpretation of contracts, the ascertainment of the intention of the contracting parties is
to be discharged by looking to the words they used to project that intention in their contract, all the words,
not just a particular word or two, and words in context, not words standing alone. The
above Receipt readily shows that respondent spouses and petitioner only entered into a contract of
option; a contract by which respondent spouses agreed with petitioner that the latter shall have the right
to buy the former's property at a fixed price of P34.00 per square meter within ten (10) days from 31 July
1978. Respondent spouses did not sell their property; they did not also agree to sell it; but they sold
something, i.e., the privilege to buy at the election or option of petitioner. The agreement imposed no
binding obligation on petitioner, aside from the consideration for the offer.

The consideration of P20,000.00 paid by petitioner to respondent spouses was referred to as

"earnest money." However, a careful examination of the words used indicates that the money is not
earnest money but option money. "Earnest money" and "option money" are not the same but
distinguished thus: (a) earnest money is part of the purchase price, while option money is the money given
as a distinct consideration for an option contract; (b) earnest money is given only where there is already
a sale, while option money applies to a sale not yet perfected; and, (c) when earnest money is given, the
buyer is bound to pay the balance, while when the would-be buyer gives option money, he is not required
to buy, but may even forfeit it depending on the terms of the option.

There is nothing in the Receipt which indicates that the P20,000.00 was part of the purchase price.
Moreover, it was not shown that there was a perfected sale between the parties where earnest money
was given. Finally, when petitioner gave the "earnest money," the Receipt did not reveal that she was
bound to pay the balance of the purchase price. In fact, she could even forfeit the money given if the
terms of the option were not met. Thus, the P20,000.00 could only be money given as consideration for
the option contract. That the contract between the parties is one of option is buttressed by the provision
therein that should the transaction of the property not materialize without fault of petitioner as buyer,
respondent Lorenzo de Vera obligates himself to return the full amount of P20,000.00 "earnest money"
with option to buy or forfeit the same on the fault of petitioner.

Doubtless, the agreement between respondent spouses and petitioner was an "option contract"
or what is sometimes called an "unaccepted offer." During the option period the agreement was not
converted into a bilateral promise to sell and to buy where both respondent spouses and petitioner were
then reciprocally bound to comply with their respective undertakings as petitioner did not timely,
affirmatively and clearly accept the offer of respondent spouses.

The rule is that except where a formal acceptance is not required, although the acceptance must
be affirmatively and clearly made and 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 by
the accepting party that clearly manifest a present intention or determination to accept the offer to buy
or sell. But there is nothing in the acts, conduct or words of petitioner that clearly manifest a present
intention or determination to accept the offer to buy the property of respondent spouses within the 10-
day option period. The only occasion within the option period when petitioner could have demonstrated
her acceptance was on 5 August 1978 when, according to her, she agreed to meet respondent spouses
and the Ramoses at the Office of the Register of Deeds of Makati. Petitioner's agreement to meet with
respondent spouses presupposes an invitation from the latter, which only emphasizes their persistence
in offering the property to the former. But whether that showed acceptance by petitioner of the offer is
hazy and dubious.

On or before 10 August 1978, the last day of the option period, no affirmative or clear
manifestation was made by petitioner to accept the offer. Certainly, there was no concurrence of private
respondent spouses' offer and petitioner's acceptance thereof within the option period. Consequently,
there was no perfected contract to sell between the parties.

On 11 August 1978 the option period expired and the exclusive right of petitioner to buy the
property of respondent spouses ceased. The subsequent meetings and negotiations, specifically on 11
and 23 August 1978, between the parties only showed the desire of respondent spouses to sell their
property to petitioner. Also, on 14 September 1978 when respondent spouses sent a telegram to
petitioner demanding full payment of the purchase price on even date simply demonstrated an inclination
to give her preference to buy subject property. Collectively, these instances did not indicate that
petitioner still had the exclusive right to purchase subject property. Verily, the commencement of
negotiations between respondent spouses and respondent SUNVAR clearly manifested that their offer to
sell subject property to petitioner was no longer exclusive to her.

We cannot subscribe to the argument of petitioner that respondent spouses extended the option
period when they extended the authority of their agent until 31 August 1978. The extension of the
contract of agency could not operate to extend the option period between the parties in the instant case.
The extension must not be implied but categorical and must show the clear intention of the parties.
 13. Atkins Kroll & Co. v. Cua Hian Tek, G.R. No. L-9871, January 31, 1958.

Facts:

For its failure to deliver one thousand cartons of sardines, which it had sold to B. Cua Hian
Tek, petitioner was sued, and after trial was ordered by the Manila court of first instance to pay
damages, which on appeal was reduced by the Court of Appeals to P3,240.15 representing unrealized
profits.
There was no such contract of sale, says petitioner, but only an option to buy, which was not
enforceable for lack of consideration because in accordance with Art. 1479 of the New Civil Code "an
accepted unilateral promise to buy or to sell a determinate thing for a price certain is binding upon
the promisor if the promise is supported by a consideration distinct from the price."

Issue: Whether or not the acceptance only created an option, which, lacking consideration, had no
obligatory force.

Held:

No, it created a bilateral contract of sale. The offer Exh. A, petitioner argues, "was a promise
to sell a determinate thing for a price certain. Upon its acceptance by respondent, the offer became
an accepted unilateral promise to sell a determinate thing for a price certain. Inasmuch as there was
no consideration to support the promise to sell distinct from the price, it follows that under Art. 1479
aforequoted, the promise is not binding on the petitioner even if it was accepted by respondent."

The argument, manifestly assumes that only a unilateral promise arose when the offeree accepted. Such
assumption is a mistake, because a bilateral contract to sell and to buy was created upon acceptance. So
much so that B. Cua Hian Tek could be sued, had he backed out after accepting, by refusing to get the
sardines and/or to pay for their price.

Furthermore, an option is unilateral: a promise to sell at the price fixed whenever the offeree
should decide to exercise his option within the specified time. After accepting the promise and before
he exercises his option, the holder of the option is not bound to buy. He is free either to buy or not to
buy later. In this case, however, upon accepting herein petitioner's offer a bilateral promise to sell
and to buy ensued, and the respondent ipso facto assumed the obligations of a purchaser. He did not
just get the right subsequently to buy or not to buy. It was not a mere option then; it was bilateral
contract of sale.
Lastly, even supposing that Exh. A granted an option which is not binding for lack of
consideration, the authorities hold that
"If the option is given without a consideration, it is a mere offer of a contract of
sale, which is not binding until accepted.
If, however, acceptance is made before a withdrawal, it constitutes a binding contract of sale,
even though the option was not supported by a sufficient consideration. . . .."
 14. Gregorio v. Crisologo Vda. De Culig, G.R. No. 180559, January 20, 2016.
Facts:
Respondent Maria Crisologo Vda. de Culig (respondent) is the widow of Alfredo Culig, Sr.
(Alfredo). During his lifetime, Alfredo was granted a homestead patent under the Public Land Act (C.A.
141) over a 54,730-square meter parcel of land (the property) in Nuangan, Kidapawan, North
Cotabato. Alfredo died sometime in 1971, and on October 9, 1974, his heirs, including respondent,
executed an extra-judicial settlement of estate with simultaneous sale of the property in favor of
spouses Andres Seguritan and Anecita Gregorio (petitioner). The property was sold for
P25,0000.00, and title to the property was issued in the name of the spouses.
On September 26, 1979, respondent filed a complaint demanding the repurchase of the
property under the provisions of the Public Land Act. She alleged that she first approached the
spouses personally and offered to pay back the purchase price of P25,000.00 but the latter refused.
Subsequently, respondent and her son, Alfredo Culig, Jr. (petitioner's attorney-in-fact) wrote letters
reiterating their desire to repurchase the property but the spouses did not answer.
For their part, the spouses Seguritan countered that the respondent had no right to
repurchase the property since the latter only wanted to redeem the property to sell it for a greater
profit. Meanwhile, Andres Seguritan died on May 15, 1981, and was substituted by petitioner.
On January 5, 1998, the Regional Trial Court (RTC), Branch 17, Kidapawan, North Cotabato
(the trial court) rendered its decision dismissing the complaint. The trial court, relying on the case
of Lee Chuy Realty Corporation v. Court of Appeals ruled that a formal offer alone, or the filing of a
case alone, within the prescribed period of five (5) years is not sufficient to effect a valid offer to
redeem — either must or should be coupled with consignation of the repurchase price if bona
fidetender of payment has been refused.
In its decision dated July 11, 2006, the CA granted the appeal. It ruled that the Lee Chuy case
is not applicable because: 1.) it does not involve the exercise of the right of redemption of homestead
or free patent lots, but instead the right of legal pre-emption or redemption in relation to the rights
of co-owners under theCivil Code; 2.) the Civil Code provisions on conventional and legal redemption
do not apply, even suppletorily, to the legal redemption of homestead or free patent lands under the
Public Land Act; and 3.) the conclusions of the trial court is contrary to the doctrine in Hulganza v.
Court of Appeals, which is the case cited in Lee Chuy.
According to the CA, consignation should not be considered a requisite element for the
repurchase of homestead or free patent lots, citing Adelfa Properties, Inc. v. Court of Appeals, wherein
this Court held that consignation is not necessary in a sale with right of repurchase because it involves
"an exercise of a right or privilege . . . rather than the discharge of an obligation, hence tender of
payment would be sufficient to preserve [a] right or [a] privilege."
Issue:
1. Whether or not respondent validly exercised the right of redemption.
2. Whether or not the CA should not have dismissed the motion for reconsideration for being
filed out of time.
Held:
1. Petitioner insists that there was no valid redemption since there was no valid tender of payment
nor consignation of the amount of repurchase made by the respondent. Citing Lee v. Court of
Appeals, which in turn cites Article 1616 of the Civil Code, petitioner maintains that tender of
 payment of the repurchase price is necessary to exercise the right of redemption. Thus, when
respondent filed to tender payment of the repurchase price, and admitted her failure to consign
the amount in court, she lost her right to repurchase the property. Petitioner also states that
respondent is not entitled to the right of repurchase because the latter's aim in redeeming the
land is purely for speculation and profit. She points out that respondent and her siblings are
professionals and most are living in Canada, and cannot possibly comply with the express
provision of the law that the land must be cultivated personally by the holder of the homestead.
It is undisputed, in fact, the parties already stipulated, that the complaint for repurchase was
filed within the reglementary period of five years. The parties also agreed that there was no
consignment of the repurchase price. However, petitioner argues that consignment is necessary to
validly exercise the right of redemption.
The argument fails.
In Hulganza v. Court of Appeals, we held that the bona fide tender of the redemption price or
its equivalent — consignation of said price in court is not essential or necessary where the filing of the
action itself is equivalent to a formal offer to redeem.
The case of Vda. de Panaligan v. Court of Appeals further clarified that tender of payment of
the repurchase price is not among the requisites, and thus unnecessary for redemption under the
Public Land Act. Citing Philippine National Bank v. De los Reyes, we ruled that it is not even necessary
for the preservation of the right of redemption to make an offer to redeem or tender of payment of
purchase price within five years. The filing of an action to redeem within that period is equivalent to
a formal offer to redeem, and that there is even no need for consignation of the redemption
price. Thus, even in the case before us, it is immaterial that the repurchase price was not deposited
with the Clerk of Court.
We also do not agree with petitioner's insistence that Article 1616 of the Civil Code applies in
this case. As found by the CA, the provision only speaks of the amount to be tendered when exercising
the right to repurchase, but it does not state the procedure to be followed in exercising the right.
In Lee v. Court of Appeals, the case cited by petitioner, we held that the mere sending of
letters expressing the desire to repurchase is not sufficient to exercise the right of redemption. In the
said case, the original owners of a homestead lot sought to compel the buyers to resell the property
to them by writing demand letters within the five-year period. The latter refused, but the former filed
a case for redemption after the lapse of the five-year period. We ruled that the letters did not preserve
the former owners' right to redeem. The case finds no application in this case because while
respondent also sent letters to the petitioner, she also filed a complaint for repurchase within the
five-year period. As ruled in Hulganza, the filing of the complaint is the formal offer to redeem
recognized by law.
Petitioner claims that even if the redemption is timely made, respondent is not entitled to the
right of repurchase because respondent intends to resell the property again for profit, and that her
"aim in redeeming the land is purely for speculation and profit." To support her claim, petitioner states
that respondent and her heirs are professionals and her siblings are residing in Canada.
Indeed, the main purpose in the grant of a free patent or homestead is to preserve and keep
in the family of the homesteader that portion of public land which the State has given to him so he
may have a place to live with his family and become a happy citizen and a useful member of the
society. We have ruled in several instances, that the right to repurchase of a patentee should fail if
the purpose was only speculative and for profit, or "to dispose of it again for greater profit" or "to
recover the land only to dispose of it again to amass a hefty profit to themselves." In all these
instances, we found basis for ruling that there was intent to sell the property for a higher profit. We
find no such purpose in this case.
2. Yes, dismissed. A client is bound by the negligence of his counsel. A counsel, once retained,
holds the implied authority to do all acts necessary or, at least, incidental to the prosecution
and management of the suit in behalf of his client, such that any act or omission by counsel
within the scope of the authority is regarded, in the eyes of the law, as the act or omission of
the client himself. A recognized exception to the rule is when the reckless or gross negligence
of the counsel deprives the client of due process of law. For the exception to apply, however,
the gross negligence should not be accompanied by the client's own negligence or malice,
considering that the client has the duty to be vigilant in respect of his interests by keeping
himself up-to-date on the status of the case. Failing in this duty, the client should suffer
whatever adverse judgment is rendered against him.
 15. Osmena v. Power Sector Assets and Liabilities Management Corp., G.R. No. 212686,
September 28, 2015.
Facts:
In a direct recourse to this Court, Senator Sergio R. Osmeña III (petitioner) seeks to enjoin the
sale of the Naga Power Plant Complex (NPPC) to respondent SPC Power Corporation (SPC) resulting
from the latter's exercise of the right to top the winning bid of respondent Therma Power Visayas,
Inc. (TPVI), and to declare such stipulation in the Lease Agreement as void for being contrary to public
policy.
On October 16, 2009, PSALM privatized the 55-MW Naga Power Plant (LBGT) by way of
negotiated sale after a failed bidding in accordance with the LBGT Bidding Procedures. The land
underlying the LBGT was also leased out for a period of 10 years. This bidding resulted in SPC's
acquisition of the LBGT through an Asset Purchase Agreement (LBGT-APA) and lease of the land under
a Land Lease Agreement (LBGT-LLA). The LBGT-LLA would expire on January 29, 2020. The LBGT-LLA
contained a provision for SPC's right to top in the event of lease or sale of property which is not part
of the leased premises.
On December 27, 2013, the Board of Directors of PSALM approved the commencement of the
3rd Round of Bidding for the sale of the 153.1-MW NPPC. Only SPC and TPVI submitted bids. On March
31, 2014, TPVI was declared as the highest bidder. Consequently, a Notice of Award was issued to
TPVI on April 30, 2014, subject to SPC's right under Section 3.02 of the LBGT-LLA, as previously stated
in Section 1B-20 of the Bidding Procedures.
In a letter dated April 29, 2014, PSALM notified SPC of TPVI's winning bid which covers the
purchase of the Naga Power Plant Complex (NPPC) and lease of the land. It also advised SPC that
under the terms of LBGT-LLA (Sections 2.01 and 3.02), the lease of the land (as governed by the LBGT-
LLA) will likewise expire on January 29, 2020. In a letter-reply dated May 7, 2014, SPC confirmed that
it is exercising the right to top the winning bid of TPVI and will pay the amount of Php1,143,240,000.00
on the understanding that the term of the lease is 25 years from Closing Date.
PSALM then wrote the Office of the Government Corporate Counsel (OGCC) requesting for
legal opinion or confirmation of its position that the term of the lease of the NPPC upon SPC's exercise
of its right to top would be for the remaining period of the lease of the land of the Naga LBGT Power
Plant, which will expire in 2020.
On May 21, 2014, the OGCC rendered Opinion No. 098, Series of 2014 which upheld PSALM's
position that SPC may exercise the right to top under the LBGT-LLA provisions, the source of such
right. It explained that the NPPC-LLA is a separate and distinct transaction which is inapplicable with
respect to SPC's right to top.
However, upon re-evaluation of the arguments in the position papers submitted by SPC and PSALM,
the OGCC submitted its study and recommendation to Secretary of Justice Leila M. De Lima. The
study concluded that the right to top exercised by SPC in the NPPC bidding is a right to top on a sale,
which must then be separately governed by the NPPC-APA, and implemented in accordance with
the NPPC-APA and LLA provisions.
On June 16, 2014, the present petition was filed in this Court praying that (1) a temporary
restraining order (TKO) be issued ex parte, and after hearing the parties, a writ of preliminary
injunction be issued enjoining PSALM from implementing SPC's exercise of its right to top in
connection with the NPPC bidding; (2) SPC's right to top as provided in Section 3.02 of the LBGT-LLA
be declared void; and (3) a permanent injunction be issued enjoining respondents Ledesma and
PSALM from committing any act in furtherance of SPC's exercise of the right to top.
SPC, TPVI and PSALM filed their respective Comments on the petition, while SPC filed a Reply
to TPVI's Comment and petitioner his Reply to PSALM's Comment.
On August 11, 2014, petitioner filed a Supplemental Petition with Motion for Early Resolution
of the Application for Temporary Restraining Order and/or Writ of Preliminary Injunction. According
to petitioner, the transfer and possessionto SPC of the NPPC and of the land on which it is built should
be deferred until after this Court has ruled on his petition due to the following reasons: (1) there
seems to be no urgency for PSALM to rush the award of the NPPC; (2) by the execution of the subject
NPPC-APA and LLA in favor of SPC, PSALM has invalidly awarded a government property without the
requisite public bidding; and (3) there are practical difficulties and expense that will be incurred in
order to reverse acts that are committed before any provisional or preventive relief is issued, such as
transfer of ownership and/or possession of the properties in SPC's name or to third parties, and
potential liability of the Government under suit for damages to be filed by any interested party.
On November 11, 2014, PSALM filed a Manifestation in Lieu of Comment to the Supplemental
Petition, stating that: (1) PSALM's Board of Directors, in a meeting held on July 25, 2014, taking into
consideration the OGCC's letter dated June 13, 2014 and the DOJ's opinion-letter dated June 23, 2014,
declared SPC as the winning bidder for the sale of 153.1-MW NPPC; (2) PSALM issued on July 28, 2014
the Notice of Award and Certificate of Effectivity in favor of SPC; (3) the NPPC-APA and LLA were
already signed and delivered to SPC; and (4) PSALM turned over the properties to SPC last September
25, 2014. aDSIHc
Petitioner's Arguments
Petitioner asserts that the right to top provision in the LBGT-LLA is an option contract which
must be supported by a consideration separate from the lease contract and may be withdrawn at any
time by PSALM in the absence of such consideration. He submits that SPC's preferential right to buy
or lease "any property in the vicinity of the Leased Premises which is not part of the Leased Premises"
was a gratuitous concession to SPC, and most likely was part of a scheme to bar any competition to
SPC and to restrict the production of energy. Citing Power Sector Assets and Liabilities Management
Corporation v. Pozzolanic Philippines Incorporated, petitioner argues that the right of first refusal is
upheld only in cases where the holder of such right holds an existing, or at least, a vested interest in
the object for which the right is to be exercised. Thus, even if SPC has a legal interest in the vicinity
lots, its right to top can no longer be exercised because it is not operating the Naga LBGT itself.
Another legal ground for the nullity of the option raised by petitioner pertains to the policy requiring
competitive public bidding in all government contracts. Petitioner contends that by granting SPC
the right to top, PSALM violated the express provisions of R.A. No. 9136 (EPIRA Law) and R.A. No.
9184 (Procurement Law) on public bidding by failing to maintain bidders on equal footing in order
to give the government the best possible and available offer for public assets being sold or leased.
Respondents' Arguments
At the outset, SPC questions petitioner's legal standing to file the present petition, having failed to
establish any personal benefit in the event relief is granted, and there being no expenditure of public
funds involved that would impress upon the petition the character of a taxpayer's suit. Neither could
petitioner invoke his office as a Senator because legislators may only be accorded standing to sue if
there is a claim that official action complained of infringes upon their prerogative as legislators.
 On procedural grounds, SPC seeks the dismissal of the petition as there is no basis for
annulling PSALM's acts by way of a petition for certiorari or prohibition, and said petition was not filed
within the 60-day reglementary period from the time the Naga LBGT contract incorporating the right
to top was awarded to SPC in 2009 and the issuance of DOJ opinion dated January 9, 2013 wherein
SPC's right to top was held to be valid and not disallowed by law.
SPC asserts that even on substantive grounds, the petition should still be dismissed as the
right to top is clearly not an option contract and the Naga LBGT was validly awarded to SPC through a
public bidding. Citing JG Summit Holdings, Inc. v. Court of Appeals, SPC maintains that the right to top
granted under the LBGT-LLA and exercised by it did not violate the rules of competitive bidding. The
implementation of such right to top, moreover, does not place the Government in a disadvantaged
position but rather assures the Government of an additional 5% of the highest reasonable bid. SPC
thus argues that the right to top provision in the LBGT-LLA is consistent with public policy and there
is no law that invalidates such provision, such that SPC's vested right should not be disregarded.
Issue: Do right to top provisions in the land lease agreements entered into by PSALM contravene
public policy on competitive bidding?
Held:
A right to top is a variation of the right of first refusal often incorporated in lease contracts. When a
lease contract contains a right of first refusal, the lessor is under a legal duty to the lessee not to
sell to anybody at any price until after he has made an offer to sell to the latter at a certain price
and the lessee has failed to accept it. The lessee has a right that the lessor's first offer shall be in his
favor. While sometimes referred to as a "first option to buy" or "option of first refusal," a right of
first refusal is not an option contract.
We explained the distinction between a right of first refusal and option to purchase in Spouses
Vasquez v. Ayala Corporation, to wit: SDAaTC
The Court has clearly distinguished between an option contract and a right of
first refusal. An option is a preparatory contract in which one party grants to another,
for a fixed period and at a determined price, the privilege to buy or sell, or to decide
whether or not to enter into a principal contract. It binds the party who has given the
option not to enter into the principal contract with any other person during the period
designated, and within that period, to enter into such contract with the one to whom
the option was granted, if the latter should decide to use the option. It is a separate
and distinct contract from that which the parties may enter into upon the
consummation of the option. It must be supported by consideration.
In a right of first refusal, on the other hand, while the object might be made
determinate, the exercise of the right 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 are yet to be firmed up.
We disagree with petitioner's theory that SPC's right of first refusal should be declared void
as it was not supported by a separate consideration. As we held inPolytechnic University of the
Philippines v. Golden Horizon Realty Corporation:
Indeed, basic is the rule that a party to a contract cannot unilaterally withdraw a right of first refusal
that stands upon valuable consideration. We have categorically ruled that it is not correct to say
that there is no consideration for the grant of the right of first refusal if such grant is embodied in
the same contract of lease. Since the stipulation forms part of the entire lease contract, the
 consideration for the lease includes the consideration for the grant of the right of first refusal. In
entering into the contract, the lessee is in effect stating that it consents to lease the premises and
to pay the price agreed upon provided the lessor also consents that, should it sell the leased
property, then, the lessee shall be given the right to match the offered purchase price and to buy
the property at that price.
Stipulations on right of first refusal over the leased premises have been held to be valid as
they are commonly inserted in contracts of lease for the benefit of lessees who wanted to be assured
that they shall be given the first crack or the first option to buy the property at the price which the
owner is willing to accept. Where such right of first refusal is incorporated in lease contracts involving
public assets, however, courts go beyond ascertaining and giving effect to the intent of the contracting
parties. For in this jurisdiction, public bidding is the established procedure in the grant of government
contracts. The award of public contracts, through public bidding, is a matter of public policy.
In the award of government contracts, the law requires a competitive public bidding, which
aims to protect the public interest by giving the public the best possible advantages thru open
competition. It is a mechanism that enables the government agency to avoid or preclude anomalies
in the execution of public contracts.
In JG Summit Holdings, Inc. v. Court of Appeals, this Court was presented with the issue of
validity of right of first refusal granted to both parties under a joint venture agreement between a
government corporation (National Investment and Development Corporation) and private firm
(Kawasaki Heavy Industries, Ltd. of Kobe, Japan) should either of them decide to sell, assign or transfer
its interest in the joint venture. In the subsequent negotiations for the sale of the government's
interest, it was agreed that Kawasaki's right of first refusal be exchanged for the right to top by five
percent (5%) the highest bid for the subject shares. We initially granted the petition for review
on certiorari and reversed the Court of Appeals' dismissal of the petition for mandamus questioning
the aforesaid right to top which was held illegal not only because it violates the rules on competitive
bidding but more so because it allows foreign corporations to own more than 40% equity in the
shipyard.
On motions for reconsideration filed by the parties, we ruled that the right to top granted to
and exercised by Kawasaki did not violate the rules on competitive bidding, viz.:
We also hold that the right to top granted to KAWASAKI and exercised by
private respondent did not violate the rules of competitive bidding.
The word "bidding" in its comprehensive sense means making an offer or an
invitation to prospective contractors whereby the government manifests its intention
to make proposals for the purpose of supplies, materials and equipment for official
business or public use, or for public works or repair. The three principles of public
bidding are: (1) the offer to the public; (2) an opportunity for competition; and (3)
a basis for comparison of bids. As long as these three principles are complied with,
the public bidding can be considered valid and legal. . . .
The essence of competition in public bidding is that the bidders are placed
on equal footing. This means that all qualified bidders have an equal chance of
winning the auction through their bids. Parenthetically, it cannot be argued that the
existence of the right to top "set for naught the entire public bidding. In like manner,
the existence of the right to top cannot be likened to a second bidding, which is
countenanced, except when there is failure to bid as when there is only one bidder
or none at all. A prohibited second bidding presupposes that based on the terms and
 conditions of the sale, there is already a highest bidder with the right to demand that
the seller accept its bid. In the instant case, the highest bidder was well aware that
the acceptance of its bid was conditioned upon the non-exercise of the right to top.
It is true that properties of the National Government, as a rule, may be sold
only after a public bidding is held. Public bidding is the accepted method in arriving
at a fair and reasonable price and ensures that overpricing, favoritism and other
anomalous practices are eliminated or minimized. But the requirement for public
bidding does not negate the exercise of the right of first refusal. In fact, public
bidding is an essential first step in the exercise of the right of first refusal because it
is only after the public bidding that the terms upon which the Government may be
said to be willing to sell its shares to third parties may be known. It is only after the
public bidding that the Government will have a basis with which to offer KAWASAKI
the option to buy or forego the shares.
The above-cited case involved a right of first refusal in favor of a contracting party which
did not participate in the bidding conducted for the sale of the subject shares.
In this case, all potential bidders were aware of the existence of SPC's right to top as
duly disclosed in the Bidding Procedures for the 3rd Round of Bidding for the NPPC. TPVI did
not question the said right to top and participated in the bidding where SPC was also a bidder.
Emerging as the winning bidder, TPVI nevertheless knew that the acceptance of its bid was
subject to SPC's exercise of the right to top by confirming its exercise of the right of first refusal
and paying the amount of the winning bid plus five percent (5%).
Notwithstanding compliance with the conduct of bidding and procedures, we hold that SPC's
right to top under the LBGT-LLA is void for lack of a valid interest or right to the object over which the
right of first refusal is to be exercised. First, the property subject of the right of first refusal is outside
the leased premises covered by the LBGT-LLA. Second, the right of first refusal refers not only to land
but to any property within the vicinity of the leased premises, as in this case, an entire power plant
complex (NPPC) and the land on which it is built. And third, while SPC cited concerns regarding
security, right of way or other operational requirements, these are clearly not analogous to a lessee's
legitimate interest on the property being leased. Indeed, acquisition of a three coal-fired thermal
plants with far greater generating capacity than the gas turbine plant currently owned by SPC will not
be merely for purposes of the latter's reasonable access, security or present operational needs.
Besides, no such right or interest may be invoked by SPC because, as confirmed by PSALM itself, SPC
never operated the Naga LBGT. HSAcaE
More recently, in LTFRB v. Stronghold Insurance Company, we declared as void the right to
match clause in a memorandum of agreement which was being invoked by respondent after it failed
to meet capitalization requirements and was consequently excluded by the petitioner from the pool
of qualified bidders for the third round of bidding to accredit providers of accident insurance to
operators of passenger public utility vehicles. The CA granted respondent's petition for prohibition
and nullified the said bidding proceedings. On appeal, we reversed the CA and found no grave abuse
of discretion committed by the LTFRB, viz.:
The Matching Clause contains what is referred to in contract law as the right of first refusal or
the "right to match."
Such stipulations grant to a party the right to offer the same amount as the
highest bid to beat the highest bidder. "Right to match" stipulations are different from
agreements granting to a party the so-called "right to top." Under the latter
 arrangement, a party is accorded the right to offer a higher amount, usually a fixed
sum or percentage, to beat the highest bid.
In the field of public contracts, these stipulations are weighed with the taint
of invalidity for contravening the policy requiring government contracts to be
awarded through public bidding. Unless clearly falling under statutory exceptions,
government contracts for the procurement of goods or services are required to
undergo public bidding "to protect the public interest by giving the public the best
possible advantages thru open competition."
Moreover, a "right of first refusal", or "right to top," whether granted to a
bidder or non-bidder, discourages other parties from submitting bids, narrowing
the number of possible bidders and thus preventing the government from securing
the best bid.
These clauses escape the taint of invalidity only in the narrow instance
where the right of first refusal (or "right to top") is founded on the beneficiary's
"interest on the object over which the right of first refusal is to be exercised" (such
as a "tenant with respect to the land occupied, a lessee vis-à-vis the property leased,
a stockholder as regards shares of stock, and a mortgagor in relation to the subject of
the mortgage") and the government stands to benefit from the stipulation.
In the light of the foregoing, we hold that the grant of right to top to SPC under the
LBGT-LLA is void as it is not founded on the said lessee's legitimate interest over the leased
premises.