G.R. No. 109125 - Asuncion vs. Court of Appeals

Case Summary (G.R. No. 109125)

Petitioner’s Cause of Action and Trial Court Disposition

On July 29, 1987 petitioners filed a Second Amended Complaint for Specific Performance (Civil Case No. 87-41058) alleging an offer to sell by the Cu Unjiengs, prior negotiations including a counteroffer by plaintiffs, and plaintiffs’ requests (October 24, 1986 and January 28, 1987) for the sellers to specify terms and conditions. Defendants denied material allegations and moved for summary judgment. The Regional Trial Court granted summary judgment for defendants, holding there was no contract of sale because the parties did not agree upon terms and conditions. The trial court nevertheless declared that if defendants subsequently offered the property for sale at P11,000,000.00 or below, plaintiffs would have the right of first refusal.

Court of Appeals Modification and Supreme Court Action

On appeal (CA-G.R. CV No. 21123), the Court of Appeals affirmed the trial court’s result but modified the first-refusal condition, extending the right of first refusal to sales at prices in excess of P11,000,000.00. This modified decision was the subject of a petition for review to the Supreme Court; the petition was denied on May 6, 1991 for insufficiency in form and substance, rendering the modified appellate decision final as noted by the trial court.

Subsequent Deed of Sale to Buen Realty and Transfer of Title

While the case was pending before the Supreme Court, the Cu Unjiengs executed a Deed of Sale on November 15, 1990 conveying the property to Buen Realty Development Corporation for Fifteen Million Pesos (P15,000,000.00). TCT No. 105254/T-881 in the Cu Unjiengs’ names was cancelled and TCT No. 195816 was subsequently issued in Buen Realty’s name on December 3, 1990.

Post-sale Correspondence and Motion for Execution

After Buen Realty’s acquisition, petitioner-owner demanded lessees vacate on July 1, 1991. The lessees cited the lis pendens annotated on the original title and, on August 27, 1991, filed a Motion for Execution based on the modified appellate decision that had become final. On August 30, 1991 the trial court issued an order treating the appellate modification as final and executory, and ordered defendants to execute a Deed of Sale in favor of the plaintiffs for P15,000,000.00, set aside Buen Realty’s title as executed in bad faith, and directed issuance of a new Transfer Certificate of Title in plaintiffs’ names. A writ of execution was later issued on September 27, 1991.

Court of Appeals’ Review of the Execution Orders

On December 4, 1991, the Court of Appeals, on private respondent’s appeal, set aside and declared without force or effect the trial court’s orders of August 30 and September 27, 1991. Petitioners invoked the notice of lis pendens and argued Buen Realty should be bound by the writ of execution. The Supreme Court was asked to review the Court of Appeals’ setting aside of the execution orders.

Applicable Law

Constitutional basis: 1987 Philippine Constitution (decision date post-1990). Controlling statutory and civil-law provisions applied by the Court include: Civil Code provisions on obligations (Art. 1156), sources of obligations and contracts (Arts. 1157, 1305), formation and perfection of contracts (Arts. 1319, 1458), conditional contracts and options (Art. 1479, related jurisprudence), duties of good faith (Art. 19), and rules on withdrawal of offers and enforcement of options (Art. 1324 and related authorities cited in the decision).

Contract Formation, Sale, Option and Right of First Refusal — Doctrinal Points Applied

The Court reiterated traditional distinctions: obligations arise from sources listed in the Civil Code; contracts are perfected upon concurrence of offer and acceptance with certainty as to object and cause. A contract of sale is perfected when a seller obligates to transfer ownership and the buyer agrees to pay a price certain (Art. 1458). An option is an accepted unilateral promise to buy or sell supported by consideration distinct from the price (second paragraph, Art. 1479) and creates a binding, but limited, commitment: the optionee has a right, not an obligation, to buy. The right of first refusal is identified as an innovative, preparatory juridical relation that, unlike an option or a perfected sale, does not itself create the perfected contract of sale because the final terms (including price) remain indeterminate until later. Offers may be withdrawn prior to acceptance unless supported by separate consideration creating an enforceable option; otherwise withdrawal may give rise to damages for bad faith under Art. 19.

Court’s Analysis on Right of First Refusal and Executability of Judgment

The Supreme Court held that the trial court’s final judgment merely accorded petitioners a right of first refusal. Such a right, even if recognized by final judgment, is not equivalent to a perfected contract of sale and

Case Syllabus (G.R. No. 109125)

Procedural Posture

Petition for review from the Supreme Court assailing the decision of the Court of Appeals dated 04 December 1991 in CA-G.R. SP No. 26345 which set aside and declared without force and effect the trial court's orders of execution dated 30 August 1991 and 27 September 1991 in Civil Case No. 87-41058.
Trial court rendered summary judgment dismissing plaintiffs' Second Amended Complaint for Specific Performance (Civil Case No. 87-41058) but granted plaintiffs a conditional right of first refusal should the owners subsequently offer the property for sale at P11,000,000.00 or below.
Plaintiffs appealed to the Court of Appeals in CA-G.R. CV No. 21123; the Court of Appeals on September 21, 1990 affirmed the trial court's judgment with modification, extending the right of first refusal to cover sales at a price in excess of Eleven Million pesos.
Petition for review on certiorari to the Supreme Court was denied on May 6, 1991 "for insufficiency in form and substance" (Annex H, Petition).
After the modified judgment became final, the trial court issued orders of execution directing the defendants to execute a deed of sale in favor of the plaintiffs for P15,000,000.00, to cancel the title issued to Buen Realty, and to register a new title in plaintiffs' favor; the Court of Appeals subsequently set aside these orders; the present petition seeks review of that Court of Appeals decision.

Factual Background

Plaintiffs (Ang Yu Asuncion and Keh Tiong, et al.) are lessees/tenants of residential and commercial spaces at Nos. 630-638 Ongpin Street, Binondo, Manila, occupying the premises since 1935 and paying rent religiously.
Plaintiffs alleged that defendants (Bobby Cu Unjieng, Rose Cu Unjieng, and Jose Tan) informed them on several occasions prior to October 9, 1986 that the premises were being offered for sale and plaintiffs were given priority to acquire the property; during negotiations defendants offered P6,000,000.00; plaintiffs counter-offered P5,000,000.00.
Plaintiffs requested the defendants to reduce their offer to writing; defendants acceded. Plaintiffs, in reply to defendants' letter, wrote on October 24, 1986 asking defendants to specify terms and conditions. When no reply was received plaintiffs sent another letter dated January 28, 1987 with the same request.
Because defendants failed to specify the terms and conditions and due to information that the property was about to be sold, plaintiffs filed the complaint to compel defendants to sell the property to them (Second Amended Complaint for Specific Performance filed July 29, 1987).
Defendants denied material allegations and pleaded lack of cause of action; after issues were joined defendants moved for summary judgment which was granted by the trial court on grounds that the parties did not agree on terms and conditions so no contract of sale existed.
While appeal processes were ongoing, on November 15, 1990 the Cu Unjieng spouses executed a Deed of Sale transferring the property to Buen Realty Development Corporation for FIFTEEN MILLION PESOS (P15,000,000.00), subject to specified terms and conditions; TCT No. 105254/T-881 in the name of the Cu Unjieng spouses was cancelled and TCT No. 195816 was issued in the name of Buen Realty on December 3, 1990.
On July 1, 1991 Buen Realty (as new owner) demanded the lessees vacate. Plaintiffs replied on July 16, 1991 asserting the property was subject to notice of lis pendens annotated on TCT No. 105254/T-881.
Plaintiffs filed a Motion for Execution dated August 27, 1991 of the decision in Civil Case No. 87-41058 as modified by the Court of Appeals; the trial court issued execution orders on August 30, 1991 and on September 22 and 27, 1991 instructing defendants to execute a deed of sale in favor of the plaintiffs for P15,000,000.00, cancel Buen Realty’s title and register a new title in plaintiffs' favor, and issuing the writ of execution to effect such relief.

Trial Court Ruling (Lower Court)

Granted defendants' motion for summary judgment on the ground that no meeting of the minds occurred; therefore, no contract of sale existed between defendants and plaintiffs.
Nevertheless, the trial court declared that if defendants subsequently decided to offer the property for sale for a purchase price of Eleven Million Pesos or lower, plaintiffs would have the right of first refusal.
The dispositive portion of the trial court judgment: dismissal of the complaint but subject to the condition conferring the right of first refusal for offers at P11,000,000.00 or lower.

Court of Appeals Decision (CA-G.R. CV No. 21123 and CA-G.R. SP No. 26345)

On September 21, 1990 the Court of Appeals affirmed the lower court's decision but modified it: extended the right of first refusal to cover sales at a price in excess of Eleven Million Pesos, considering market mercuriality and uncertainty.
The Court of Appeals decision as modified was appealed to the Supreme Court, which denied the petition for review on May 6, 1991.
On 04 December 1991, in CA-G.R. SP No. 26345, the Court of Appeals set aside and declared without force and effect the trial court's execution orders of August 30, 1991 and September 27, 1991. The appellate court found that the writ of execution issued by the trial court varied the terms of the judgment as modified and further identified procedural and substantive infirmities in ordering specific conveyance and cancellation of the title in favor of Buen Realty without affording Buen Realty an opportunity to be heard.

Transactions Subsequent to Finality of Judgment

November 15, 1990: Cu Unjieng spouses executed a Deed of Sale conveying the subject property to Buen Realty for P15,000,000.00; Deed specified transfer subject to certain terms including buyer paying documentary stamp tax, regi