THIRD DIVISION
|
UNITED MUSLIM AND
CHRISTIAN URBAN POOR ASSOCIATION, INC. represented
by its President, MANUEL V. BUEN, Petitioner, - versus - BRYC-V DEVELOPMENT
CORPORATION
represented by its President, BENJAMIN QUIDILLA; and SEA FOODS CORPORATION, represented
by its Executive Vice President, VICENTE
T. HERNANDEZ, Respondents. |
G.R.
No. 179653
Present: YNARES-SANTIAGO, J.,
Chairperson, CHICO-NAZARIO, VELASCO, JR., NACHURA, and PERALTA, JJ. Promulgated: July 31, 2009 |
x------------------------------------------------------------------------------------x
DECISION
NACHURA, J.:
This petition for review on certiorari seeks to set aside the
Decision[1] of
the Court of Appeals (CA) in CA G.R. CV No. 62557 which affirmed in toto the Decision[2] of
the Regional Trial Court (RTC), Branch 16,
The facts are simple.
Respondent Sea Foods Corporation
(SFC) is the registered owner of Lot No. 300 located in Lower Calainan,
Sometime in 1991, petitioner United
Muslim and Christian Urban Poor Association, Inc. (UMCUPAI), an organization of
squatters occupying Lot No. 300, through its President, Carmen T. Diola,
initiated negotiations with SFC for the purchase thereof. UMCUPAI expressed its
intention to buy the subject property using the proceeds of its pending loan
application with National Home Mortgage Finance Corporation (NHMF). Thereafter,
the parties executed a Letter of Intent to Sell by [SFC] and Letter of Intent
to Purchase by UMCUPAI, providing, in pertinent part:
WHEREAS, [SFC] is the registered owner of a
parcel [of] land designated as
WHEREAS, UMCUPAI, an association duly
registered with the SEC (Registration No. 403410) and duly accredited with the
Presidential Commission for the Urban Poor, has approached [SFC] and negotiated
for the ACQUISITION of the above-described property of [SFC];
WHEREAS, in pursuance to the negotiations
between [SFC] and UMCUPAI, the latter has taken steps with the proper
government authorities particularly the Mayor of Zamboanga City and its City
Housing Board which will act as “Originator” in the acquisition of said
property which will enable UMCUPAI to avail of its Community Mortgage Program;
WHEREAS, it appears that UMCUPAI will ultimately
apply with the Home Mortgage and Finance Corporation for a loan to pay the
acquisition price of said land;
WHEREAS, as one of the steps required by the
government authorities to initiate proceedings is to receive a formal
manifestation of Intent to Sell from [SFC];
NOW, THEREFORE, for and in consideration of
the foregoing premises, the parties hereto agree as follows:
1. [SFC]
expressly declares its intention to sell Lot No. 300 with an area of 61,736
square meters situated in Lower Calarian, Zamboanga City and covered by TCT No.
576 of the Registry of Deeds of Zamboanga City to UMCUPAI at the price of
P105.00 per square meter, free from all liens, charges and encumbrances;
2. That
UMCUPAI hereby expressly declares its intention to buy the aforesaid property
and shall endeavor to raise the necessary funds to acquire same at the
abovementioned price of P105.00 per square meter;
3. That
the Absolute Deed of Sale shall be executed, signed and delivered together with
the title and all other pertinent documents upon full payment of the purchase
price;
4.
That
[SFC] shall pay the capital gains tax and documentary stamps, Registration,
transfer tax and other expenses shall be paid by the UMCUPAI.[3]
However,
the intended sale was derailed due to UMCUPAI’s inability to secure the loan from
NHMF as not all its members occupying Lot No. 300 were willing to join the undertaking.
Intent on buying the subject property, UMCUPAI, in a series of conferences with
SFC, proposed the subdivision of Lot No. 300 to allow the squatter-occupants to
purchase a smaller portion thereof.
Consequently, sometime in December
1994, Lot No. 300 was subdivided into three (3) parts covered by separate
titles:
1. Lot No. 300-A with an area of 41,460 square
meters under TCT No. T-117,448;
2. Lot
No. 300-B with an area of 1,405 square meters under TCT No. T-117,449; and
3. Lot
No. 300-C with an area of 18,872 square meters under TCT No. T-117,450.
On January 11, 1995, UMCUPAI
purchased
UMCUPAI failed to acquire Lot No.
300-C for lack of funds. On March 5, 1995, UMCUPAI negotiated anew with SFC and
was given by the latter another three months to purchase Lot No. 300-C. However,
despite the extension, the three-month period lapsed with the sale not consummated
because UMCUPAI still failed to obtain a loan from NHMF. Thus, on July 20,
1995, SFC sold Lot No. 300-C for P2,547,585.00 to respondent BRYC-V Development
Corporation (BRYC).
A year later, UMCUPAI filed with the
RTC a complaint against respondents SFC and BRYC seeking to annul the sale of Lot
No. 300-C, and the cancellation of TCT No. T-121,523. UMCUPAI alleged that the
sale between the respondents violated its valid and subsisting agreement with
SFC embodied in the Letter of Intent. According to UMCUPAI, the Letter of
Intent granted it a prior, better, and preferred right over BRYC in the
purchase of Lot No. 300-C.
In refutation, BRYC said that
UMCUPAI’s complaint did not state a cause of action since UMCUPAI had unequivocally
recognized its ownership of Lot No. 300-C when UMCUPAI likewise sent BRYC a
Letter of Intent dated August 18, 1995 imploring BRYC to re-sell the subject
lot.
In a separate Answer, SFC countered
that the Letter of Intent dated October 4, 1991 is not, and cannot be
considered, a valid and subsisting contract of sale. On the contrary, SFC
averred that the document was drawn and executed merely to accommodate UMCUPAI
and enable it to comply with the loan documentation requirements of NHMF. In
all, SFC maintained that the Letter of Intent dated October 4, 1991 was subject
to a condition i.e., payment of the
acquisition price, which UMCUPAI failed to do when it did not obtain the loan
from NHMF.
After trial, the RTC dismissed
UMCUPAI’s complaint. The lower court found that the Letter of Intent was
executed to facilitate the approval of UMCUPAI’s loan from NHMF for its
intended purchase of Lot No. 300. According to the RTC, the Letter of Intent
was simply SFC’s declaration of intention to sell, and not a promise to sell,
the subject lot. On the whole, the RTC concluded that the Letter of Intent was
neither a promise, nor an option contract, nor an offer contemplated under
Article 1319 of the Civil Code, or a bilateral contract to sell and buy.
As previously adverted to, the CA, on
appeal, affirmed in toto the RTC’s
ruling.
Hence, this recourse by UMCUPAI
positing a sole issue for our resolution:
IS THE LETTER OF INTENT TO SELL AND LETTER OF
INTENT TO BUY A BILATERAL RECIPROCAL CONTRACT WITHIN THE MEANING OR
CONTEMPLATION OF ARTICLE 1479, FIRST PARAGRAPH, CIVIL CODE OF THE
The
petition deserves scant consideration. We completely agree with the lower
courts’ rulings.
Well-entrenched in jurisprudence is
the rule that factual findings of the trial court, especially when affirmed by
the appellate court, are accorded the highest degree of respect and are
considered conclusive between the parties.[5] A
review of such findings by this Court is not warranted except upon a showing of
highly meritorious circumstances, such as: (1) when the findings of a trial
court are grounded entirely on speculation, surmises or conjectures; (2) when a
lower court’s inference from its factual findings is manifestly mistaken,
absurd or impossible; (3) when there is grave abuse of discretion in the
appreciation of facts; (4) when the findings of the appellate court go beyond
the issues of the case, or fail to notice certain relevant facts which, if
properly considered, would justify a different conclusion; (5) when there is a
misappreciation of facts; (6) when the findings of fact are conclusions without
mention of the specific evidence on which they are based, or are premised on
the absence of evidence, or are contradicted by evidence on record.[6]
None of the foregoing exceptions necessitating a reversal of the assailed
decision obtain in this instance.
UMCUPAI is adamant, however, that the
CA erred when it applied the second paragraph of Article 1479 of the Civil Code
instead of the first paragraph thereof. UMCUPAI urges us that the first
paragraph of Article 1479 contemplates a bilateral reciprocal contract which is
binding on the parties. Yet, UMCUPAI is careful not to designate the Letter of Intent
as a Contract to Sell. UMCUPAI simply insists that the Letter of Intent is not
a unilateral promise to sell or buy which has to be supported by a
consideration distinct from the price for it to be binding on the promissor. In
short, UMCUPAI claims that the Letter of Intent did not merely grant the
parties the option to respectively sell or buy the subject property. Although
not stated plainly, UMCUPAI claims that the Letter of Intent is equivalent to a
conditional contract of sale subject only to the suspensive condition of
payment of the purchase price.
UMCUPAI appears to labor under a
cloud of confusion. The first paragraph of Article 1479 contemplates the
bilateral relationship of a contract to sell as distinguished from a contract
of sale which may be absolute or conditional under Article 1458[7] of
the same code. It reads:
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 case of Coronel v. Court of Appeals[8] is
illuminating and explains the distinction between a conditional contract of
sale under Article 1458 of the Civil Code and a bilateral contract to sell
under Article 1479 of the same code:
A contract to sell may thus be defined as 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.
A contract to sell as defined hereinabove, may not even be considered as a conditional contract of sale where the seller may likewise reserve title to the property subject of the sale until the fulfillment of a suspensive condition, because in a conditional contract of sale, the first element of consent is present, although it is conditioned upon the happening of a contingent event which may or may not occur. If the suspensive condition is not fulfilled, the perfection of the contract of sale is completely abated. However, if the suspensive condition is fulfilled, the contract of sale is thereby perfected, such that if there had already been previous delivery of the property subject of the sale to the buyer, ownership thereto automatically transfers to the buyer by operation of law without any further act having to be performed by the seller.
In a contract to sell, upon the fulfillment of the suspensive condition which is the full payment of the purchase price, ownership will not automatically transfer to the buyer although the property may have been previously delivered to him. The prospective seller still has to convey title to the prospective buyer by entering into a contract of absolute sale.
It is essential to distinguish between a contract to sell and a conditional contract of sale specially in cases where the subject property is sold by the owner not to the party the seller contracted with, but to a third person, as in the case at bench. In a contract to sell, there being no previous sale of the property, a third person buying such property despite the fulfillment of the suspensive condition such as the full payment of the purchase price, for instance, cannot be deemed a buyer in bad faith and the prospective buyer cannot seek the relief of reconveyance of the property. There is no double sale in such case. Title to the property will transfer to the buyer after registration because there is no defect in the owner-seller’s title per se, but the latter, of course, may be sued for damages by the intending buyer.
In a conditional contract of sale, however, upon the fulfillment of the suspensive condition, the sale becomes absolute and this will definitely affect the seller’s title thereto. In fact, if there had been previous delivery of the subject property, the seller’s ownership or title to the property is automatically transferred to the buyer such that, the seller will no longer have any title to transfer to any third person. Applying Article 1544 of the Civil Code, such second buyer of the property who may have had actual or constructive knowledge of such defect in the seller’s title, or at least was charged with the obligation to discover such defect, cannot be a registrant in good faith. Such second buyer cannot defeat the first buyer’s title. In case a title is issued to the second buyer, the first buyer may seek reconveyance of the property subject of the sale.
In the instant case, however, the
parties executed a Letter of Intent, which is neither a contract to sell nor a
conditional contract of sale. As found by the RTC, and upheld by the CA, the
Letter of Intent was executed to accommodate UMCUPAI and facilitate its loan application
with NHMF. The 4th and 5th paragraphs of the recitals
(whereas clauses) specifically provide:
WHEREAS, it appears that UMCUPAI will ultimately
apply with the Home Mortgage and Finance Corporation for a loan to pay the
acquisition price of said land;
WHEREAS, as one of the steps required by the
government authorities to initiate proceedings is to receive a formal
manifestation of Intent to Sell from [SFC].
Nowhere in the Letter of Intent does
it state that SFC relinquishes its title over the subject property, subject
only to the condition of complete payment of the purchase price; nor, at the
least, that SFC, although expressly retaining ownership thereof, binds itself
to sell the property exclusively to UMCUPAI. The Letter of Intent to Buy and
Sell is just that – a manifestation of SFC’s intention to sell the property and
UMCUPAI’s intention to acquire the same. This is quite obvious from the
reference to the execution of an Absolute Deed of Sale in paragraph three[9] of
the Letter of Intent.
As the CA did, we quote with favor the
RTC’s disquisition:
The
Decision in this case hinges on the legal interpretation of the Agreement
entered into by SFC and UMCUPAI denominated as “Letter of Intent to Sell by
Landowner and Letter of Intent to Purchase by United Muslim and Christian Urban
Poor Association, Inc.”
Black’s Law Dictionary says that a Letter of
Intent is customarily employed to reduce to writing a preliminary understanding
of parties who intend to enter into contract. It is a phrase ordinarily used to
denote a brief memorandum of the preliminary understanding of parties who
intend to enter into a contract. It is a written statement expressing the
intention of the parties to enter into a formal agreement especially a business
arrangement or transaction.
In their Agreement, SFC expressly declared
its “intention” to sell and UMCUPAI expressly declared its “intention” to buy
subject property. An intention is a mere idea, goal, or plan. It simply
signifies a course of action that one proposes to follow. It simply indicates
what one proposes to do or accomplish. A mere “intention” cannot give rise to
an obligation to give, to do or not to do (Article 1156, Civil Code). One
cannot be bound by what he proposes or plans to do or accomplish. A Letter of
Intent is not a contract between the parties thereto because it does not bind
one party, with respect to the other, to give something, or to render some
service (Art. 1305, Civil Code).
x
x x x x x x x x
The
Letter of Intent/Agreement between SFC and UMCUPAI is merely a written
preliminary understanding of the parties wherein they declared their intention
to enter into a contract of sale. It is subject to the condition that UMCUPAI will
“apply with the Home Mortgage and Finance Corporation for a loan to pay the
acquisition price of said land.” One of the requirements for such loan is “a
formal manifestation of Intent to Sell” from SFC. Thus, the Letter of Intent to
Sell fell short of an “offer” contemplated in Article 1319 of the Civil Code
because it is not a certain and definite proposal to make a contract but merely
a declaration of SFC’s intention to enter into a contract. UMCUPAI’s
declaration of intention to buy is also not certain and definite as it is
subject to the condition that UMCUPAI shall endeavor to raise funds to acquire
subject land. The acceptance of the offer must be absolute; it must be plain
and unconditional. Moreover, the Letter of Intent/Agreement does not contain a
promise or commitment to enter into a contract of sale as it merely declared
the intention of the parties to enter into a contract of sale upon fulfillment
of a condition that UMCUPAI could secure a loan to pay for the price of a land.
The
Letter of Intent/Agreement is not an “option contract” because aside from the
fact that it is merely a declaration of intention to sell and to buy subject to
the condition that UMCUPAI shall raise the necessary funds to pay the price of
the land, and does not contain a binding promise to sell and buy, it is not
supported by a distinct consideration distinct from the price of the land
intended to be sold and to be bought x x x No option was granted to UMCUPAI
under the Letter of Intent/Agreement to buy subject land to the exclusion of
all others within a fixed period nor was SFC bound under said Agreement to Sell
exclusively to UMCUPAI only the said land within the fixed period.
Neither
can the Letter of Intent/Agreement be considered a bilateral reciprocal
contract to sell and to buy contemplated under Article 1479 of the Civil Code
which is reciprocally demandable. The Letter of Intent/Agreement does not
contain a PROMISE to sell and to buy subject property. There was no promise or
commitment on the part of SFC to sell subject land to UMCUPAI, but merely a
declaration of its intention to buy the land, subject to the condition that
UMCUPAI could raise the necessary funds to acquire the same at the price of
P105.00 per square meter x x x
While
UMCUPAI succeeded in raising funds to acquire a portion of
WHEREFORE, premises considered, the petition
is hereby DENIED. The Decision of
the Court of Appeals in CA G.R. CV No. 62557 and the Regional Trial Court in
Civil Case No. 467(4544) are AFFIRMED.
Costs against the petitioner.
SO ORDERED.
ANTONIO EDUARDO B. NACHURA
Associate
Justice
WE CONCUR:
CONSUELO YNARES-SANTIAGO
Associate
Justice
Chairperson
|
MINITA V. CHICO-NAZARIO Associate
Justice |
PRESBITERO J. VELASCO, JR. Associate
Justice |
DIOSDADO M. PERALTA
Associate
Justice
A T T E S T A T I O N
I attest that the
conclusions in the above Decision were reached in consultation before the case
was assigned to the writer of the opinion of the Court’s Division.
CONSUELO
YNARES-SANTIAGO
Associate
Justice
Chairperson,
Third Division
C E R T I F I C A T I O N
Pursuant to Section 13, Article VIII of the Constitution
and the Division Chairperson's Attestation, I certify that the conclusions in
the above Decision had been reached in consultation before the case was
assigned to the writer of the opinion of the Court’s Division.
REYNATO
S. PUNO
Chief
Justice
[1] Penned by Associate Justice Ramon R. Garcia with Associate Justices Romulo V. Bora and Antonio Villamor, concurring; rollo, pp. 13-29.
[2] Penned by Judge Jesus C. Carbon, Jr.; rollo, 55-68.
[3] Rollo, pp. 15-16.
[4]
[5] Titan Construction Corporation v. Uni-Field Enterprises, Inc., G.R. No. 153874, March 7, 2007, 517 SCRA 180; Sigaya v. Mayuga, G.R. No. 143254, August 18, 2005, 467 SCRA 341.
[6] Ilao-Quianay v. Mapile, G.R. No. 154087, October 25, 2005, 474 SCRA 246, 247. See Child Learning Center, Inc. v. Tagorio, G.R. No. 150920, November 25, 2005, 476 SCRA 236, 236-237.
[7] 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.
[8] G.R. No. 103577, October 7, 1996, 331 Phil. 294.
[9] 3. That the Absolute Deed of Sale shall be executed, signed and delivered together with the title and all other pertinent documents upon full payment of the purchase price.