Mutuality

EQUATORIAL REALTY DEVELOPMENT, INC. & CARMELO & BAUERMANN, INC

FACTS:

Carmelo owned a parcel of land, together with two 2-storey buildings constructed thereon.
On June 1, 1967 Carmelo entered into a contract of lease with Mayfair for the latter’s lease of a
portion of Carmelo’s property. Two years later, on March 31, 1969, Mayfair entered into a second
contract of lease with Carmelo for the lease of another portion of Carmelo’s property.
Both contracts of lease provide identically worded paragraph 8, which reads:

‘That if the LESSOR should desire to sell the leased premises, the LESSEE shall be given
30-days exclusive option to purchase the same.

In the event, however, that the leased premises is sold to someone other than the
LESSEE, the LESSOR is bound and obligated, as it hereby binds and obligates itself, to stipulate
in the Deed of Sale thereof that the purchaser shall recognize this lease and be bound by all the
terms and conditions thereof.

Mr. Henry Pascal of Carmelo informed Mr. Henry Yang, President of Mayfair, through a telephone
conversation that Carmelo was desirous of selling the entire Claro M. Recto property. Mr. Pascal
told Mr. Yang that a certain Jose Araneta was offering to buy the whole property for US Dollars
1,200,000, and Mr. Pascal asked Mr. Yang if the latter was willing to buy the property for Six to
Seven Million Pesos.

Under your company’s two lease contracts with our client, it is uniformly provided:

‘8. That if the LESSOR should desire to sell the leased premises the LESSEE shall be given 30-
days exclusive option to purchase the same. In the event, however, that the leased premises is sold
to someone other than the LESSEE, the LESSOR is bound and obligated, as it here binds and
obligates itself, to stipulate in the Deed of Sale thereof that the purchaser shall recognize this lease
and be bound by all the terms and conditions hereof.
Carmelo did not reply to this letter.

On September 18, 1974, Mayfair sent another letter to Carmelo purporting to express
interest in acquiring not only the leased premises but ‘the entire building and other improvements
if the price is reasonable. However, both Carmelo and Equatorial questioned the authenticity of
the second letter.

Four years later, on July 30, 1978, Carmelo sold its entire C.M. Recto Avenue land and
building, which included the leased premises housing the ‘Maxim’ and ‘Miramar’ theatres, to
Equatorial by virtue of a Deed of Absolute Sale, for the total sum of P11,300,000.00.
 In September 1978, Mayfair instituted the action a quo for specific performance and
annulment of the sale of the leased premises to Equatorial. It dismissed the complaint with costs
against the plaintiff. The Court of Appeals reversed the decision of the trial court.

ISSUE:

Whether or not the decision of the Court of Appeals’ decision was correct.

RULING:
The Court agrees with the Court of Appeals that the aforecited contractual stipulation
provides for a right of first refusal in favor of Mayfair. It is not an option clause or an option
contract. It is a contract of a right of first refusal.

As early as 1916, in the case of Beaumont vs. Prieto, unequivocal was our characterization
of an option contract as one necessarily involving the choice granted to another for a distinct and
separate consideration as to whether or not to purchase a determinate thing at a predetermined
fixed price.

Further, what Carmelo and Mayfair agreed to, by executing the two lease contracts, was
that Mayfair will have the right of first refusal in the event Carmelo sells the leased premises. It is
undisputed that Carmelo did recognize this right of Mayfair, for it informed the latter of its
intention to sell the said property in 1974. There was an exchange of letters evidencing the offer
and counter-offers made by both parties. Carmelo, however, did not pursue the exercise to its
logical end. While it initially recognized Mayfair’s right of first refusal, Carmelo violated such
right when without affording its negotiations with Mayfair the full process to ripen to at least an
interface of a definite offer and a possible corresponding acceptance within the “30-day exclusive
option” time granted Mayfair, Carmelo abandoned negotiations, kept a low profile for some time,
and then sold, without prior notice to Mayfair, the entire Claro M. Recto property to Equatorial.

Since Equatorial is a buyer in bad faith, this finding renders the sale to it of the property in
question rescissible. We agree with respondent Appellate Court that the records bear out the fact
that Equatorial was aware of the lease contracts because its lawyers had, prior to the sale, studied
the said contracts. As such, Equatorial cannot tenably claim to be a purchaser in good faith, and,
therefore, rescission lies.

Hence, the petition was denied.

PILIPINO TELEPHONE CORPORATION vs. DELFINO TECSON

FACTS:

On various dates in 1996, Delfino C. Tecson applied for 6 cellular phone subscriptions
with petitioner Pilipino Telephone Corporation (PILTEL), a company engaged in the
telecommunications business, which applications were each approved and covered, respectively,
by six mobiline service agreements. On 05 April 2001, respondent filed with the Regional Trial
Court a complaint against petitioner for a “Sum of Money and Damages.” Petitioner moved for
the dismissal of the complaint on the ground of improper venue, citing a common provision in the
mobiline service agreements to the effect that - “Venue of all suits arising from this Agreement or
any other suit directly or indirectly arising from the relationship between PILTEL and subscriber
shall be in the proper courts of Makati, Metro Manila. Subscriber hereby expressly waives any
other venues.” The Regional Trial Court of Iligan City, Lanao del Norte, denied petitioner’s motion
to dismiss and required it to file an answer within 15 days from receipt thereof.
Petitioner filed a petition for certiorari before the Court of Appeals. The Court of Appeals
saw no merit in the petition and affirmed the assailed orders of the trial court.

ISSUE:
Whether or not the Court of Appeals erred in affirming the orders of the trial court.

RULING:

The contract herein involved is a contract of adhesion. But such an agreement is not per se
inefficacious. The rule instead is that, should there be ambiguities in a contract of adhesion, such
ambiguities are to be construed against the party that prepared it. If, however, the stipulations are
not obscure, but are clear and leave no doubt on the intention of the parties, the literal meaning of
its stipulations must be held controlling. A contract of adhesion is just as binding as ordinary
contracts. It is true that this Court has, on occasion, struck down such contracts as being assailable
when the weaker party is left with no choice by the dominant bargaining party and is thus
completely deprived of an opportunity to bargain effectively. Nevertheless, contracts of adhesion
are not prohibited even as the courts remain careful in scrutinizing the factual circumstances
underlying each case to determine the respective claims of contending parties on their efficacy. In
the case at bar, respondent secured 6 subscription contracts for cellular phones on various dates. It
would be difficult to assume that, during each of those times, respondent had no sufficient
opportunity to read and go over the terms and conditions embodied in the agreements. Respondent
continued, in fact, to acquire in the pursuit of his business subsequent subscriptions and remained
a subscriber of petitioner for quite sometime.
Hence, the petition was granted by the Court and the decision of the Court of Appeals is
reversed and set aside. The Civil Case pending before the Regional Trial Court of Iligan City,
Branch 4, was DISMISSED without prejudice to the filing of an appropriate complaint by
respondent against petitioner with the court of proper venue.
 Non-binding as to Third Parties; Exceptions (1309-1310)
UNIWIDE SALES REALTY AND RESOURCES CORPORATION,
vs. TITAN-IKEDA CONSTRUCTIONAND DEVELOPMENT CORPORATION
G.R. No. 126619 December 20, 2006
511 SCRA 335

FACTS:

PROJECT 1. The first agreement was a written “Construction Contract” entered into by
Titan and Uniwide sometime in May 1991 whereby Titan undertook to construct Uniwide’s
Warehouse Club and Administration Building in Libis, Quezon City for a fee of P120,936,591.50,
payable in monthly progress billings to be certified to by Uniwide’s representative. The parties
stipulated that the building shall be completed not later than 30 November 1991. As found by the
CIAC, the building was eventually finished on 15 February 1992 and turned over to Uniwide.

PROJECT 2. Sometime in July 1992, Titan and Uniwide entered into the second agreement
whereby the former agreed to construct an additional floor and to renovate the latter’s warehouse
located at the EDSA Central Market Area in Mandaluyong City. There was no written contract
executed between the parties for this project. Construction was allegedly to be on the basis of
drawings and specifications provided by Uniwide’s structural engineers. The parties proceeded on
the basis of a cost estimate of P21,301,075.77 inclusive of Titan’s 20% mark-up. Titan conceded
in its complaint to having received P15,000,000.00 of this amount. This project was completed in
the latter part of October 1992 and turned over to Uniwide.
PROJECT 3. The parties executed the third agreement in May 1992. In a written
“Construction Contract,” Titan undertook to construct the Uniwide Sales Department Store
Building in Kalookan City for the price of P118,000,000.00 payable in progress billings to be
certified to by Uniwide’s representative. It was stipulated that the project shall be completed not
later than 28 February 1993. The project was completed and turned over to Uniwide in June 1993.
Uniwide asserted in its petition that: (a) it overpaid Titan for unauthorized additional
works in Project 1 and Project 3; (b) it is not liable to pay the Value-Added Tax for Project 1; (c)
it is entitled to liquidated damages for the delay incurred in constructing Project 1 and Project 3;
and (d) it should not have been found liable for deficiencies in the defectively constructed Project
2.
The decision:
On Project 1 – Libis: Uniwide is absolved of any liability for the claims made by [Titan]
on this Project.
Project 2 – Edsa Central: Uniwide is absolved of any liability for VAT payment on this
project, the same being for the account of Titan. On the other hand, Titan is absolved of any
liability on the counterclaim for defective construction of this project. Uniwide is held liable for
the unpaid balance in the amount of P6,301,075.77 which is ordered to be paid to the Titan with
12% interest per annum commencing from 19 December 1992 until the date of payment.
On Project 3 – Kalookan: Uniwide is held liable for the unpaid balance in the amount of
P5,158,364.63 which is ordered to be paid to Titan with 12% interest per annum commencing from
08 September 1993 until the date of payment. Uniwide is held liable to pay in full the VAT on this
project, in such amount as may be computed by the Bureau of Internal Revenue to be paid directly
thereto. The BIR is hereby notified that Uniwide Sales Realty and Resources Corporation has
assumed responsibility and is held liable for VAT payment on this project. This accordingly
exempts Claimant Titan-Ikeda Construction and Development Corporation from this obligation.

ISSUE:
Whether or not the decision rendered is correct.

RULING:

The petition is DENIED and the Decision of the Court of Appeals was AFFIRMED.
Enforceability (A.1317)
JESUS M. GOZUN vs. JOSE TEOFILO T. MERCADO
G.R. No. 167812 December 19, 2006

FACTS:

In the local elections of 1995, respondent vied for the gubernatorial post in Pampanga.
Upon respondent’s request, petitioner, owner of JMG Publishing House, a printing shop, submitted
to respondent draft samples and price quotation of campaign materials.
By petitioner’s claim, respondent’s wife had told him that respondent already approved his
price quotation and that he could start printing the campaign materials, hence, he did print
campaign materials. Given the urgency and limited time to do the job order, petitioner availed of
the services and facilities of Metro Angeles Printing and of St. Joseph Printing Press, owned by
his daughter Jennifer Gozun and mother Epifania Macalino Gozun, respectively.
Petitioner delivered the campaign materials to respondent’s headquarters.
On March 31, 1995, respondent’s sister-in-law, Lilian Soriano obtained from petitioner
“cash advance” of P253,000 allegedly for the allowances of poll watchers who were attending a
seminar and for other related expenses. Lilian acknowledged on petitioner’s 1995 diary receipt of
the amount.
Petitioner later sent respondent a Statement of Account in the total amount of P2,177,906
itemized as follows: P640,310 for JMG Publishing House; P837,696 for Metro Angeles Printing;
P446,900 for St. Joseph Printing Press; and P253,000, the “cash advance” obtained by Lilian.
Respondent’s wife partially paid P1,000,000 to petitioner who issued a receipt therefor. Despite
repeated demands and respondent’s promise to pay, respondent failed to settle the balance of his
account to petitioner.
Petitioner thus filed with the RTC a complaint against respondent to collect the remaining
amount of P1,177,906 plus “inflationary adjustment” and attorney’s fees. The trial court rendered
judgment in favor of the petitioner. The CA however, reversed the trial court’s decision and
dismissed the complaint for lack of cause of action.

ISSUE:

Whether or not the Court of Appeals erred in reversing the trial courts’ decision.

RULING:

Petitioner is the real party in interest in this case. The trial court’s findings on the matter
were affirmed by the appellate court. It erred, however, in not declaring petitioner as a real party
in interest insofar as recovery of the cost of campaign materials made by petitioner’s mother and
sister are concerned, upon the wrong notion that they should have been, but were not, impleaded
as plaintiffs.
Thus, respondent has the obligation to pay the total cost of printing his campaign materials
delivered by petitioner in the total of P1,924,906, less the partial payment of P1,000,000, or
P924,906.