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Vasquez Vs Ayala Corp
Vasquez Vs Ayala Corp
Vasquez Vs Ayala Corp
was divided into Villages 1, 2 and 3 of the "Don Vicente Village." The
G.R. No. 149734 November 19, 2004 development was then being undertaken for Conduit by G.P. Construction
and Development Corp. (hereafter, GP Construction).
DR. DANIEL VAZQUEZ and MA. LUIZA M. VAZQUEZ, petitioners,
vs. Under the MOA, Ayala was to develop the entire property, less what was
AYALA CORPORATION, respondent. defined as the "Retained Area" consisting of 18,736 square meters. This
"Retained Area" was to be retained by the Vazquez spouses. The area to
be developed by Ayala was called the "Remaining Area". In this
"Remaining Area" were 4 lots adjacent to the "Retained Area" and Ayala
agreed to offer these lots for sale to the Vazquez spouses at the
prevailing price at the time of purchase. The relevant provisions of the
DECISION MOA on this point are:
"5.7. The BUYER hereby commits that it will develop the 'Remaining
Property' into a first class residential subdivision of the same class as its
New Alabang Subdivision, and that it intends to complete the first phase
TINGA, J.: under its amended development plan within three (3) years from the date
of this Agreement. x x x"
The rise in value of four lots in one of the country's prime residential developments,
Ayala Alabang Village in Muntinlupa City, over a period of six (6) years only, 5.15. The BUYER agrees to give the SELLERS a first option to purchase
represents big money. The huge price difference lies at the heart of the present four developed lots next to the "Retained Area" at the prevailing market
controversy. Petitioners insist that the lots should be sold to them at 1984 prices price at the time of the purchase."
while respondent maintains that the prevailing market price in 1990 should be the
selling price. The parties are agreed that the development plan referred to in paragraph
5.7 is not Conduit's development plan, but Ayala's amended development
Dr. Daniel Vazquez and Ma. Luisa Vazquez1 filed this Petition for Review on plan which was still to be formulated as of the time of the MOA. While in
Certiorari2 dated October 11, 2001 assailing the Decision 3 of the Court of Appeals the Conduit plan, the 4 lots to be offered for sale to the Vasquez Spouses
dated September 6, 2001 which reversed the Decision4 of the Regional Trial Court were in the first phase thereof or Village 1, in the Ayala plan which was
(RTC) and dismissed their complaint for specific performance and damages formulated a year later, it was in the third phase, or Phase II-c.
against Ayala Corporation.
Under the MOA, the Vasquez spouses made several express warranties,
Despite their disparate rulings, the RTC and the appellate court agree on the as follows:
following antecedents:5
"3.1. The SELLERS shall deliver to the BUYER:
On April 23, 1981, spouses Daniel Vasquez and Ma. Luisa M. Vasquez
(hereafter, Vasquez spouses) entered into a Memorandum of Agreement xxx
(MOA) with Ayala Corporation (hereafter, AYALA) with AYALA buying
from the Vazquez spouses, all of the latter's shares of stock in Conduit 3.1.2. The true and complete list, certified by the Secretary and Treasurer
Development, Inc. (hereafter, Conduit). The main asset of Conduit was a of the Company showing:
49.9 hectare property in Ayala Alabang, Muntinlupa, which was then
xxx 7.1.1 The said Audited Financial Statements shall show that on the day of
Closing, the Company shall own the "Remaining Property", free from all
D. A list of all persons and/or entities with whom the Company has liens and encumbrances and that the Company shall have no obligation
pending contracts, if any. to any party except for billings payable to GP Construction &
Development Corporation and advances made by Daniel Vazquez for
which BUYER shall be responsible in accordance with Par. 2 of this
xxx Agreement.
3.1.5. Audited financial statements of the Company as at Closing date. 7.1.2 Except to the extent reflected or reserved in the Audited Financial
Statements of the Company as of Closing, and those disclosed to
4. Conditions Precedent BUYER, the Company as of the date thereof, has no liabilities of any
nature whether accrued, absolute, contingent or otherwise, including,
All obligations of the BUYER under this Agreement are subject to without limitation, tax liabilities due or to become due and whether
fulfillment prior to or at the Closing, of the following conditions: incurred in respect of or measured in respect of the Company's income
prior to Closing or arising out of transactions or state of facts existing prior
thereto.
4.1. The representations and warranties by the SELLERS contained in
this Agreement shall be true and correct at the time of Closing as though
such representations and warranties were made at such time; and 7.2 SELLERS do not know or have no reasonable ground to know of any
basis for any assertion against the Company as at closing or any liability
of any nature and in any amount not fully reflected or reserved against
xxx such Audited Financial Statements referred to above, and those disclosed
to BUYER.
6. Representation and Warranties by the SELLERS
xxx xxx xxx
The SELLERS jointly and severally represent and warrant to the BUYER
that at the time of the execution of this Agreement and at the Closing: 7.6.3 Except as otherwise disclosed to the BUYER in writing on or before
the Closing, the Company is not engaged in or a party to, or to the best of
xxx the knowledge of the SELLERS, threatened with, any legal action or other
proceedings before any court or administrative body, nor do the
SELLERS know or have reasonable grounds to know of any basis for any
6.2.3. There are no actions, suits or proceedings pending, or to the
such action or proceeding or of any governmental investigation relative to
knowledge of the SELLERS, threatened against or affecting the
the Company.
SELLERS with respect to the Shares or the Property; and
Q: In other words, it is not Exhibit "D-5" which is the original plan of However, the demand by the creditor shall not be necessary in order that
Conduit? delay may exist:
A: No, it is not. (1) When the obligation or the law expressly so declares; or
Q: This Exhibit "D-5" was the plan that was being followed by GP (2) When from the nature and the circumstances of the obligation it
Construction in 1981? appears that the designation of the time when the thing is to be delivered
or the service is to be rendered was a controlling motive for the
A: Yes, sir. establishment of the contract; or
Q: And point of fact during your direct examination as of the date of the (3) When demand would be useless, as when the obligor has rendered it
agreement, this amended development plan was still to be formulated by beyond his power to perform.
Ayala?
In reciprocal obligations, neither party incurs in delay if the other does not comply
A: Yes, sir.32 or is not ready to comply in a proper manner with what is incumbent upon him.
From the moment one of the parties fulfills his obligation, delay by the other
As correctly held by the appellate court, this admission is crucial because while the begins.
subject lots to be sold to petitioners were in the first phase of the Conduit
development plan, they were in the third or last phase of the Ayala Corporation In order that the debtor may be in default it is necessary that the following
development plan. Hence, even assuming that paragraph 5.7 expresses a requisites be present: (1) that the obligation be demandable and already liquidated;
commitment on the part of Ayala Corporation to develop the first phase of its (2) that the debtor delays performance; and (3) that the creditor requires the
amended development plan within three (3) years from the execution of the MOA, performance judicially or extrajudicially.33
Under Article 1193 of the Civil Code, obligations for whose fulfillment a day certain II. Option on the adjoining lots
has been fixed shall be demandable only when that day comes. However, no such
day certain was fixed in the MOA. Petitioners, therefore, cannot demand We have already written your goodselves regarding the intention of Dr. &
performance after the three (3) year period fixed by the MOA for the development Mrs. Vazquez to exercise their option to purchase the two lots on each
of the first phase of the property since this is not the same period contemplated for side (a total of 4 lots) adjacent to their "Retained Area". They are
the development of the subject lots. Since the MOA does not specify a period for concerned that although over a year has elapsed since the settlement of
the development of the subject lots, petitioners should have petitioned the court to the legal problems, you have not presented them with the size,
fix the period in accordance with Article 1197 34 of the Civil Code. As no such action configuration, etc. of these lots. They would appreciate being provided
was filed by petitioners, their complaint for specific performance was premature, with these at your earliest convenience.35
the obligation not being demandable at that point. Accordingly, Ayala Corporation
cannot likewise be said to have delayed performance of the obligation.
Manifestly, this letter expresses not only petitioners' acknowledgement that the
delay in the development of Phase I was due to the legal problems with GP
Even assuming that the MOA imposes an obligation on Ayala Corporation to Construction, but also their acquiescence to the completion of the development of
develop the subject lots within three (3) years from date thereof, Ayala Corporation Phase I at the much later date of February 19, 1990. More importantly, by no
could still not be held to have been in delay since no demand was made by stretch of semantic interpretation can it be construed as a categorical demand on
petitioners for the performance of its obligation. Ayala Corporation to offer the subject lots for sale to petitioners as the letter merely
articulates petitioners' desire to exercise their option to purchase the subject lots
As found by the appellate court, petitioners' letters which dealt with the three (3)- and concern over the fact that they have not been provided with the specifications
year timetable were all dated prior to April 23, 1984, the date when the period was of these lots.
supposed to expire. In other words, the letters were sent before the obligation
could become legally demandable. Moreover, the letters were mere reminders and The letters of petitioners' children, Juan Miguel and Victoria Vazquez, dated
not categorical demands to perform. More importantly, petitioners waived the three January 23, 198436 and February 18, 198437 can also not be considered categorical
(3)-year period as evidenced by their agent, Engr. Eduardo Turla's letter to the demands on Ayala Corporation to develop the first phase of the property within the
effect that petitioners agreed that the three (3)-year period should be counted from three (3)-year period much less to offer the subject lots for sale to petitioners. The
the termination of the case filed by Lancer. The letter reads in part: letter dated January 23, 1984 reads in part:
I. Completion of Phase I You will understand our interest in the completion of the roads to our
property, since we cannot develop it till you have constructed the same.
As per the memorandum of Agreement also dated April 23, 1981, it was Allow us to remind you of our Memorandum of Agreement, as per which
undertaken by your goodselves to complete the development of Phase I you committed to develop the roads to our property "as per the original
within three (3) years. Dr. & Mrs. Vazquez were made to understand that plans of the company", and that
you were unable to accomplish this because of legal problems with the
previous contractor. These legal problems were resolved as of February 1. The back portion should have been developed before the front portion
19, 1987, and Dr. & Mrs. Vazquez therefore expect that the development – which has not been the case.
of Phase I will be completed by February 19, 1990, three years from the
settlement of the legal problems with the previous contractor. The reason
for this is, as you know, that security-wise, Dr. & Mrs. Vazquez have been 2. The whole project – front and back portions be completed by 1984.38
advised not to construct their residence till the surrounding area (which is
Phase I) is developed and occupied. They have been anxious to build The letter dated February 18, 1984 is similarly worded. It states:
their residence for quite some time now, and would like to receive
assurance from your goodselves regarding this, in compliance with the
agreement.
In this regard, we would like to remind you of Articles 5.7 and 5.9 of our sale of subject lots, the period within which they will be offered for sale to
Memorandum of Agreement which states respectively:…39 petitioners and, necessarily, the price for which the subject lots will be sold are not
specified. The phrase "at the prevailing market price at the time of the purchase"
Even petitioner Daniel Vazquez' letter40 dated March 5, 1984 does not make out a connotes that there is no definite period within which Ayala Corporation is bound to
categorical demand for Ayala Corporation to offer the subject lots for sale on or reserve the subject lots for petitioners to exercise their privilege to purchase.
before April 23, 1984. The letter reads in part: Neither is there a fixed or determinable price at which the subject lots will be
offered for sale. The price is considered certain if it may be determined with
reference to another thing certain or if the determination thereof is left to the
…and that we expect from your goodselves compliance with our judgment of a specified person or persons.46
Memorandum of Agreement, and a definite date as to when the road to
our property and the development of Phase I will be completed.41
Further, paragraph 5.15 was inserted into the MOA to give petitioners the first
crack to buy the subject lots at the price which Ayala Corporation would be willing
At best, petitioners' letters can only be construed as mere reminders which cannot to accept when it offers the subject lots for sale. It is not supported by an
be considered demands for performance because it must appear that the tolerance independent consideration. As such it is not governed by Articles 1324 and 1479 of
or benevolence of the creditor must have ended.42 the Civil Code, viz:
The petition finally asks us to determine whether paragraph 5.15 of the MOA can Art. 1324. When the offeror has allowed the offeree a certain period to
properly be construed as an option contract or a right of first refusal. Paragraph accept, the offer may be withdrawn at any time before acceptance by
5.15 states: communicating such withdrawal, except when the option is founded upon
a consideration, as something paid or promised.
5.15 The BUYER agrees to give the SELLERS first option to purchase
four developed lots next to the "Retained Area" at the prevailing market Art. 1479. A promise to buy and sell a determinate thing for a price certain
price at the time of the purchase.43 is reciprocally demandable.
The Court has clearly distinguished between an option contract and a right of first An accepted unilateral promise to buy or to sell a determinate thing for a price
refusal. An option is a preparatory contract in which one party grants to another, for certain is binding upon the promissor if the promise is supported by a consideration
a fixed period and at a determined price, the privilege to buy or sell, or to decide distinct from the price.
whether or not to enter into a principal contract. It binds the party who has given
the option not to enter into the principal contract with any other person during the
period designated, and within that period, to enter into such contract with the one Consequently, the "offer" may be withdrawn anytime by communicating the
to whom the option was granted, if the latter should decide to use the option. It is a withdrawal to the other party.47
separate and distinct contract from that which the parties may enter into upon the
consummation of the option. It must be supported by consideration.44 In this case, Ayala Corporation offered the subject lots for sale to petitioners at the
price of P6,500.00/square meter, the prevailing market price for the property when
In a right of first refusal, on the other hand, while the object might be made the offer was made on June 18, 1990.48 Insisting on paying for the lots at the
determinate, the exercise of the right would be dependent not only on the grantor's prevailing market price in 1984 of P460.00/square meter, petitioners rejected the
eventual intention to enter into a binding juridical relation with another but also on offer. Ayala Corporation reduced the price to P5,000.00/square meter but again,
terms, including the price, that are yet to be firmed up.45 petitioners rejected the offer and instead made a counter-offer in the amount of
P2,000.00/square meter.49 Ayala Corporation rejected petitioners' counter-offer.
With this rejection, petitioners lost their right to purchase the subject lots.
Applied to the instant case, paragraph 5.15 is obviously a mere right of first refusal
and not an option contract. Although the paragraph has a definite object, i.e., the
It cannot, therefore, be said that Ayala Corporation breached petitioners' right of
first refusal and should be compelled by an action for specific performance to sell
the subject lots to petitioners at the prevailing market price in 1984.
SO ORDERED.