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

Case Summary (G.R. No. 109125)

Factual Background

The petitioners were long-term lessees of the premises at Nos. 630-638 Ongpin Street, Binondo, Manila, claiming occupancy since 1935 and punctual payment of rentals. The Cu Unjieng spouses, owners, purportedly offered to sell the property and gave the lessees priority to acquire it. Negotiations produced an initial asking price of P6,000,000 and a counteroffer of P5,000,000 by the lessees. The lessees requested written terms by letters dated October 24, 1986 and January 28, 1987 but received no final terms. Claiming that defendants were about to sell the property elsewhere, the lessees filed a Second Amended Complaint for Specific Performance on July 29, 1987.

Trial Court Proceedings

The defendants answered and raised lack of cause of action. The trial court granted defendants' motion for summary judgment. It found no meeting of the minds and held that no contract of sale had been perfected. Nonetheless, the trial court declared that if the defendants subsequently offered the property for sale at a price of Eleven Million Pesos or lower, the plaintiffs would enjoy a right of first refusal.

Court of Appeals and Supreme Court Review

On appeal, the Court of Appeals in CA-G.R. CV No. 21123 affirmed the summary judgment but modified the trial court's condition by extending the right of first refusal to apply even should the property be sold for a price in excess of Eleven Million Pesos. That decision was thereafter the subject of a petition for review to the Supreme Court, which denied the petition on May 6, 1991 for insufficiency in form and substance, leaving the modified appellate judgment final.

Sale to Buen Realty and Respondent's Actions

While the matter was pending in the Supreme Court, the Cu Unjieng spouses executed a Deed of Sale on November 15, 1990 conveying the subject property to Buen Realty Development Corporation for P15,000,000. TCT No. 195816 in the name of Buen Realty was issued on December 3, 1990, replacing the title in the Cu Unjiengs' names. Buen Realty, as new owner, demanded vacation of the premises on July 1, 1991. The lessees replied on July 16, 1991 asserting that a notice of lis pendens as to Civil Case No. 87-41058 had been annotated on the title.

Orders of Execution Issued by the Trial Court

The lessees filed a Motion for Execution on August 27, 1991 seeking enforcement of the judgment that had recognized their right of first refusal. On August 30, 1991 the trial court ordered the defendants to execute a deed of sale to the plaintiffs for P15,000,000, declared prior transactions in bad faith, and directed the issuance of a new title in favor of the plaintiffs. On September 22, 1991 the court directed the issuance of a writ of execution and on September 27, 1991 the writ of execution was issued, directed to effect the sale and to cancel the title issued in favor of Buen Realty.

Court of Appeals' Decision on the Execution Orders

On appeal by Buen Realty, the Court of Appeals, in CA-G.R. SP No. 26345, set aside and declared without force and effect the trial court's orders of August 30, 1991 and September 27, 1991. The appellate court held that the writ of execution varied the terms of the judgment as modified and affirmed, and that nothing in the judgment had decreed the execution of a deed of sale between the Cu Unjiengs and the lessees, fixation of the sale price, or cancellation of title in favor of Buen Realty.

Issues Presented to the Supreme Court

The principal questions presented were whether the trial court could issue a writ of execution to compel the execution of a deed of sale and cancellation of a subsequently issued title on the ground that the judgment had recognized a right of first refusal, and whether Buen Realty Development Corporation, as purchaser and grantee of TCT No. 195816 and not impleaded in the original action, could be bound by such writ or otherwise deprived of title without being afforded its day in court.

Petitioners' Contentions

The petitioners contended that Buen Realty was bound by the notice of lis pendens carried over on TCT No. 195816 at the time of its purchase and thus could be subjected to the writ of execution. They argued that the trial court orders properly enforced the judgment recognizing their right of first refusal and that cancellation of Buen Realty's title and issuance of a new title in favor of the lessees were warranted.

Ruling of the Supreme Court

The Supreme Court affirmed the Court of Appeals and dismissed the petition. The Court held that the judgment in Civil Case No. 87-41058 merely recognized a right of first refusal in favor of the petitioners and did not constitute a perfected contract of sale or an option enforceable by specific performance. Consequently, the judgment did not furnish a basis for issuing a writ of execution to effectuate the execution of a deed of sale or to cancel and reissue title in derogation of Buen Realty's ownership. The Court further held that Buen Realty, not being impleaded in the original action, could not be ousted from ownership or deprived of possession without being afforded due process.

Legal Basis and Reasoning

The Court reviewed fundamental principles of obligations and contracts under the Civil Code. It reiterated that an obligation requires the concurrence of the vinculum juris, object, and subject, and that a contract of sale is perfected by a meeting of minds on object and price (Art. 1458, Civil Code). The decision explained the distinction among negotiation, perfection, and consummation of contracts, and emphasized that an option requires a valuable consideration distinct from the price (second paragraph, Art. 1479, Civil Code) to be binding. The Court analyzed the right of f

Case Syllabus (G.R. No. 109125)

Parties and Posture

Ang Yu Asuncion, Arthur Go and Keh Tiong were the plaintiffs and petitioners seeking specific performance and enforcement of a right of first refusal in Civil Case No. 87-41058.
The Hon. Court of Appeals was respondent to the petition for review from orders of execution issued by the trial court.
Buen Realty Development Corporation was the purchaser of the subject property and respondent in the proceedings before the Court of Appeals.
The petition assailed the Court of Appeals decision dated December 4, 1991 in CA-G.R. SP No. 26345 which set aside the trial court’s orders of execution dated August 30, 1991 and September 27, 1991.

Key Facts

The plaintiffs alleged tenancy of residential and commercial spaces at Nos. 630–638 Ongpin Street, Binondo, Manila since 1935 and payment of rent since that time.
The plaintiffs alleged that the defendants offered to sell the property and gave plaintiffs priority to acquire it, with price negotiations reaching P6,000,000 offered by defendants and P5,000,000 counter-offered by plaintiffs.
The plaintiffs requested written terms of sale by letters dated October 24, 1986 and January 28, 1987 and filed the Second Amended Complaint for Specific Performance on July 29, 1987 when no definitive terms were supplied.
The trial court granted defendants’ motion for summary judgment on the ground that there was no meeting of the minds and therefore no contract of sale.
The trial court, however, declared that if defendants subsequently offered the property for sale at P11,000,000 or less plaintiffs would have the right of first refusal.
The Court of Appeals, in CA-G.R. CV No. 21123, affirmed with modification extending the right of first refusal to sales in excess of P11,000,000.
The Cu Unjieng spouses executed a Deed of Sale dated November 15, 1990 transferring the property to Buen Realty for P15,000,000, and TCT No. 195816 was issued in Buen Realty’s name on December 3, 1990.
The plaintiffs moved for execution of the judgment on August 27, 1991, and the trial court issued orders and a writ directing the execution of a deed of sale in plaintiffs’ favor for P15,000,000 and cancellation of Buen Realty’s title.

Procedural History

The trial court rendered summary judgment for defendants and recognized a conditional right of first refusal at P11,000,000 or less.
The Court of Appeals affirmed the judgment but modified it to extend the right of first refusal to sales above P11,000,000.
A petition for review to the Supreme Court was denied on May 6, 1991 for insufficiency in form and substance.
Plaintiffs sought execution of the modified judgment after Buen Realty acquired the property and after registration events on the title.
The trial court issued orders of execution and a writ directing transfer and cancellation of title in favor of th