EN BANC
[G.R. No. 130722. March 27, 2000]
SPS. REYNALDO
K. LITONJUA and ERLINDA P. LITONJUA and PHIL. WHITE HOUSE AUTO SUPPLY, INC., petitioners,
vs. L & R CORPORATION, VICENTE M. COLOYAN in his capacity as Acting Registrar
of the Register of Deeds of Quezon City thru Deputy Sheriff ROBERTO R. GARCIA, respondents.HATOL
R E S O L U T I O N
YNARES-SANTIAGO, J.:
For resolution is petitioners’ Motion for
Partial Reconsideration of our December 9, 1999 Decision on the following
grounds:
"I........THE PROVISION OF PARAGRAPH NO. 9 OF THE
SUBJECT MORTGAGE CONTRACT IS NULL AND VOID AB INITIO.
II........THE RESCISSION OF THE DEED OF SALE DATED 6
AUGUST 1974 BETWEEN THE SPS. LITONJUA AND PHIILIPPINE WHITEHOUSE AUTO SUPPLY,
INC. HAS NEVER BEEN INVOKED AS A DEFENSE BY RESPONDENT L & R CORPORATION;
THUS, DEEMED WAIVED.
III........THE DECISION RESCINDING THE DEED OF SALE
EXECUTED BY AND BETWEEN THE PETITIONERS IN EFFECT DEPRIVED THEM OF THEIR BASIC
RIGHT TO DUE PROCESS."
Movants first theorize that paragraphs 8
(limiting the right of the mortgagor to sell the property, which we held as
void) and 9 (on the right of first refusal of respondent Corporation) should be
"regarded as a tandem designed to subvert the sound public policy prohibiting
pactum commissarium"; that both paragraphs "constitute a
package". In particular, petitioners argue that "(P)aragraph 9 being
intended to support paragraph 8, it is therefore coupled thereto and is thus
similarly mired in its invalidity".
This is the first time, though, that
petitioners have raised the issue of invalidity of paragraph 9. While
respondent Corporation has consistently invoked the provisions thereof,
petitioners have remained silent insofar as this provision is concerned,
concentrating their pleadings on the invalidity of paragraph 8 alone. Not
having been timely objected to below, petitioners cannot belatedly present
their objections thereto at this stage.
At any rate, even if we were to entertain
petitioners’ objections, the same will still be held as without merit. To be
sure, paragraphs 8 and 9 are separate provisions of the subject contract and
the invalidity of one does not automatically render the other invalid. Indeed, Article
1420 of the New Civil Code holds that "(I)n case of a divisible
contract, if the illegal terms can be separated from the legal ones, the latter
may be enforced." Contrary to the suppositions of petitioners, the invalid
stipulation is independent from the rest of the terms of the agreement and can
easily be separated therefrom without doing violence to the manifest intention
of the parties. This being so, the legal terms of the contract, including
paragraph 9, can be enforced.[1]
Petitioners next argue that even if
paragraph 9 is considered independently of paragraph 8, it is still
unenforceable for being null and void ab initio. In support of their
argument, petitioners point out that the provision in paragraph 9 is not a
perfected contract for lack of consideration as mandated by Article 1479.
Petitioners argue that our finding that the consideration for the pre-emptive
right is incorporated in the amount of the loan is a presumption that enjoys no
basis.
Again, petitioners’ arguments must be
brushed aside.
Petitioners’ contention that absent a
consideration therefor, the right of first refusal embodied in paragraph 9 is
void ab initio is misplaced. Such contention loses sight of the
difference between a right of first refusal and an option contract where a
separate consideration is, indeed, required. This distinction was set out in
the analogous case of Equatorial Realty Development, Inc. vs. Mayfair Theater,
Inc.[2] where it
was held that –
"Both
contracts of lease in question provide the 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.’
We agree with the
respondent 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.
‘It is
unquestionable that, by means of the document Exhibit E, to wit, the letter of
December 4, 1911, quoted at the beginning of this decision, the defendant
Valdes granted to the plaintiff Borck the right to purchase the Nagtahan
Hacienda belonging to Benito Legarda, during the period of three months and for
its assessed valuation, a grant which necessarily implied the offer or
obligation on the part of the defendant Valdes to sell to Borck the said
hacienda during the period and for the price mentioned. x x x. There was,
therefore, a meeting of minds on the part of the one and the other, with regard
to the stipulations made in the said document. But it is not shown that there
was any cause or consideration for that agreement, and this omission is a bar
which precludes our holding that the stipulations contained in Exhibit E is a
contract of option, for, x x x, there can be no contract without the requisite,
among others, of the cause for the obligation to be established.
In his Law
Dictionary, edition of 1897, Bouvier defines an option as a contract, in the
following language:
‘A contract by
virtue of which A, in consideration of the payment of a certain sum to
B, acquires the privilege of buying from, or selling to B, certain securities
or properties within a limited time at a specified price. (Story vs. Salamon,
71 N.Y., 420).’
From vol. 6, page 5001, of the work ‘Words
and Phrases,’ citing the case of Ide vs. Leiser (24 Pac., 695; 10 Mont., 5; 24
Am. St. Rep., 17) the following quotation has been taken:
‘An agreement in
writing to give a person the option to purchase lands within a given time at
a named price is neither a sale nor an agreement to sell. 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; that is, the right or privilege to buy at the election
or option of the other party. The second party gets in praesenti, not lands,
not an agreement that he shall have lands, but he does get something of value;
that is, the right to call for and receive lands if he elects. The owner parts
with his right to sell his lands, except to the second party, for a limited
period. The second party receives the right, or, rather, from his point of
view, he receives the right to elect to buy.’
But the two definitions abovecited refer to
the contract of option, or, what amounts to the same thing, to the case where
there was cause or consideration for the obligation, the subject of the
agreement made by the parties; while in the case at bar there was no such cause
or consideration.’
The rule so early established in this
jurisdiction is that the deed of option or the option clause in a contract, in
order to be valid and enforceable, must, among other things, indicate the
definite price at which the person granting the option, is willing to sell.
Notably, in one case we held that the lessee
loses his right to buy the leased property for a named price per square meter
upon failure to make the purchase within the time specified; in one other case
we freed the landowner from her promise to sell her land if the prospective
buyer could raise P4,500.00 in three weeks because such option was not
supported by a distinct consideration; in the same vein in yet one other case,
we also invalidated an instrument entitled, ‘Option to Purchase’ a parcel of
land for the sum of P1,510.00 because of lack of consideration; and as an exception
to the doctrine enumerated in the two preceding cases, in another case, we
ruled that the option to buy the leased premises for P12,000.00 as stipulated
in the lease contract, is not without consideration for in reciprocal
contracts, like lease, the obligation or promise of each party is the
consideration for that of the other. In all these cases, the selling price of
the object thereof is always predetermined and specified in the option clause
in the contract or in the separate deed of option. We elucidated, thus, in the
very recent case of Ang Yu Asuncion vs. Court of Appeals, that:
‘x x x. In sales,
particularly, to which the topic for discussion about the case at bench
belongs, the contract is perfected when a person, called the seller, obligates
himself, for a price certain, to deliver and to transfer ownership of a thing
or right to another, called the buyer, over which the latter agrees. Article
1458 of the Civil Code provides:
‘Art. 1458. By the
contract of sale one of the contracting parties obligates himself to transfer
the ownership of and to deliver a determinate thing, and the other to pay
therefor a price certain in money or its equivalent.
A contract of sale
may be absolute or conditional.’
When the sale is
not absolute but conditional, such as in a ‘Contract to Sell’ where invariably
the ownership of the thing sold is retained until the fulfillment of a positive
suspensive condition (normally, the full payment of the purchase price), the
breach of the condition will prevent the obligation to convey title from
acquiring an obligatory force. x x x.
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, viz.
‘ART. 1479. x x x.
An accepted
unilateral promise to buy or 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.’
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
withdraw the offer before its acceptance, or, if an acceptance has been made,
before the offeror’s coming to know of such fact, by communicating that
withdrawal to the offeree. The right to withdraw, however, must not be
exercised whimsically or arbitrarily; otherwise, it could give rise to a damage
claim under Article 19 of the Civil Code which ordains that ‘every person must,
in the exercise of his rights and in the performance of his duties, act with
justice, give everyone his due, and observe honesty and good faith.’
(2).......If the period has a separate consideration, a
contract of ‘option’ is deemed perfected, and it would be a breach of that
contract to withdraw the offer during the agreed period. The option, however,
is an independent contract by itself, and it is to be distinguished from the
projected main agreement (subject matter of the option) which is obviously yet
to be concluded. If, in fact, the optioner-offeror withdraws the offer before
its acceptance (exercise of the option) by the optionee-offeree, the latter may
not sue for specific performance on the proposed contract (‘object’ of the
option) since it has failed to reach its own stage of perfection. The optioner-offeror,
however, renders himself liable for damages for breach of the option. x x x.’
In the light of
the foregoing disquisition and in view of the wording of the questioned
provision in the two lease contracts involved in the instant case, we so hold
that no option to purchase in contemplation of the second paragraph of Article
1479 of the Civil Code, has been granted to Mayfair under the said lease
contracts.
Respondent
Court of Appeals correctly ruled that the said paragraph 8 grants the right of first
refusal to Mayfair and is not an option contract. It also correctly reasoned
that as such, the requirement of a separate consideration for the option, has
no applicability in the instant case.
There is nothing
in the identical Paragraphs ‘8’ of the June 1, 1967 and March 31, 1969
contracts which would bring them into the ambit of the usual offer or option
requiring an independent consideration.
An option is
a contract granting a privilege to buy or sell within an agreed time and at a
determined price. 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 the instant case, the right of first refusal is
an integral part of the contracts of lease. The consideration is built into the
reciprocal obligations of the parties.
To rule that a
contractual stipulation such as that found in paragraph 8 of the contracts is
governed by Article 1324 on withdrawal of the offer or Article 1479 on promise
to buy and sell would render ineffectual or ‘inutile’ the provisions on right
of first refusal so commonly inserted in leases of real estate nowadays. The
Court of Appeals is correct in stating that Paragraph 8 was incorporated into
the contracts of lease for the benefit of Mayfair which wanted to be assured
that it shall be given the first crack or the first option to buy the property
at the price which Carmelo is willing to accept. It is not also correct
to say that there is no consideration in an agreement of right of first
refusal. The stipulation is part and parcel of the entire contract of lease.
The consideration for the lease includes the consideration for the right of
first refusal. Thus, Mayfair 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, Mayfair shall be given
the right to match the offered purchase price and to buy the property at that
price. As stated in Vda. De Quirino vs. Palarca, in reciprocal contract,
the obligation or promise of each party is the consideration for that of the
other.
In the instant case, as we have already
stated in our Decision sought to be reconsidered, the consideration for the
loan-mortgage includes the consideration for the right of first refusal. Again,
contrary to petitioners’ charge that this conclusion enjoys no basis, we have
merely taken our cue from the Equatorial case, aforequoted.
Petitioners also pray that since the subject
contract is a contract of adhesion, its validity and legality should be
strictly interpreted against respondent Corporation. As explained in Ayala
Corporation vs. Ray Burton Development Corporation,[3] however, where this court refrained from applying
the rule on strict interpretation of a contract of adhesion –
"(T)he
stringent treatment towards contracts of adhesion which the courts are enjoined
to observe is in pursuance of the mandate in Article 24 of the New Civil Code
that ‘(i)n all contractual, property or other relations, when one of the
parties is at a disadvantage on account of his moral dependence, ignorance,
indigence, mental weakness, tender age or other handicap, the courts must be
vigilant for his protection.
Thus, the validity
and/or enforceability of a contract of adhesion will have to be determined by
the peculiar circumstances obtaining in each case and the situation of the
parties concerned."
Here, petitioners, being not only educated
but businesspersons as well, cannot claim being the weaker or disadvantaged
parties in the subject contract so as to call for a strict interpretation
against respondent Corporation.
The court also went on to rule in the Ayala
case (supra), that since the stipulations in the subject Deed of
Restrictions are plain and unambiguous, which leave no room for interpretation,
there was no cause for applying the rule on stringent treatment towards
contracts of adhesion. Indeed, while ambiguities in a contract of adhesion are
to be construed against the party that prepared the same, this rule applies
only if the stipulations in such contract are obscure or ambiguous. If the
terms thereof are clear and leave no doubt upon the intention of the
contracting parties, the literal meaning of its stipulations control. In the
latter case, there would be no need for construction.[4] Coming now to the case at bar, considering that the
contract provision in question (paragraph 9) is likewise plain and unambiguous,
we also find no occasion to apply the aforesaid treatment called for by
petitioners.
With respect to the rescission of the Deed
of Sale, petitioners complain that this was never invoked as a defense by
respondent corporation and is thus deemed waived. Thus, petitioners also
complain that our Decision deprived them of due process since they were not
given the opportunity to confront the issue of rescission, not having been
raised as a defense by respondent corporation.
It cannot be denied, however, that
respondent Corporation had always invoked its right of first refusal, which
became the basis for our order of rescission. Stated differently, rescission
was the necessary relief arising out of the violation of the right of first
refusal. For the same reason, neither may petitioners complain of having been
denied due process as they were given the chance to meet the issue of violation
of respondent Corporation’s right of first refusal upon which we anchored our
order for the rescission of the Deed of Sale.
WHEREFORE, premises considered, petitioners’ Motion for
Partial Reconsideration is hereby DENIED for lack of merit.
SO ORDERED. 6/21/00 1:40 PM
Bellosillo, Melo, Puno, Kapunan,
Panganiban, Quisumbing, Purisima, Pardo, Buena, Gonzaga-Reyes, and De Leon, Jr., JJ., concur.
Davide, Jr., C.J., reiterates his original vote and joins J. Vitug's separate
opinion.
Vitug, J., reiterates his separate opinion.
Mendoza, J., reiterates his previous vote.