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SALES AND LEASE

We affirm the findings of the CA insofar as it ruled that the parties did not contemplate a
management contract with option to buy. We nevertheless rule that the agreement entered
into by the parties was not a contract of sale, but rather, a contract to sell the shares of SJMMPI.

The text of the MOA between the parties shows that their agreement was a contract to sell
SJMMPI shares. The pertinent portion of page three of the MOA reads:

xxx

4. The shares of stocks stated above and subject matter of this Agreement will
only be transferred in the name of the PARTY OF THE SECOND PART, its heirs,
successors and assigns upon full payment and/or full satisfaction thereon of the
consideration of this agreement.

While Pascual, et al. are technically correct in arguing that they did not enter into a contract of
sale with Pulumbarit, they cannot deny the existence of the stipulation in page three of the MOA
evidencing a contract to sell and negating their claim of a management contract with option to
buy.

Notably, page three bears the signatures of Pulumbarit, Pascual, and the other SJMMPI
stockholders. We further note that Pascual did not dispute the authenticity of her signature
appearing on page three of the MOA. Neither did she allege during the course of the proceedings
that she signed another document or entered into another written transaction with Pulumbarit
aside from the MOA. (Pulumbarit, Sr. vs. Court of Appeals,772 SCRA 244, G.R. Nos. 153745-46
October 14, 2015)

As held in the case of Heirs of Protacio Go, Sr. and Marta Barola v. Servacio, 657 SCRA 10 (2011),
“it is now settled that the appropriate recourse of co-owners in cases where their consent were
not secured in a sale of the entire property as well as in a sale merely of the undivided shares
of some of the co-owners is an action for Partition under Rule 69 of the Revised Rules of Court.”

The spouses Molina would be a trustee for the benefit of the coheirs of Anastacio in respect of
any portion that might belong to the coheirs after liquidation and partition. The observations of
Justice Paras cited in the case of Heirs of Protacio Go, Sr. and Marta Barola v. Servacio, 657 SCRA
10 (2011), are instructive: x x x [I]f it turns out that the property alienated or mortgaged really
would pertain to the share of the surviving spouse, then said transaction is valid. If it turns out
that there really would be, after liquidation, no more conjugal assets then the whole transaction
is null and void. But if it turns out that half of the property thus alienated or mortgaged belongs

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to the husband as his share in the conjugal partnership, and half should go to the estate of the
wife, then that corresponding to the husband is valid, and that corresponding to the other is not.
Since all these can be determined only at the time the liquidation is over, it follows logically that
a disposal made by the surviving spouse is not void ab initio. Thus, it has been held that the sale
of conjugal properties cannot be made by the surviving spouse without the legal requirements.
The sale is void as to the share of the deceased spouse (except of course as to that portion of the
husband’s share inherited by her as the surviving spouse). The buyers of the property that could
not be validly sold become trustees of said portion for the benefit of the husband’s other heirs,
the cestui que trust ent. Said heirs shall not be barred by prescription or by laches. Melecio’s
recourse as a co-owner of the conjugal properties, including the subject property, is an action for
partition under Rule 69 of the Revised Rules of Court. As held in the case of Heirs of Protacio Go,
Sr., “it is now settled that the appropriate recourse of co-owners in cases where their consent
were not secured in a sale of the entire property as well as in a sale merely of the undivided
shares of some of the co-owners is an action for PARTITION under Rule 69 of the Revised Rules
of Court.” (Domingo vs. Molina, 791 SCRA 47, G.R. No. 200274 April 20, 2016)

The binding force of a contract must be recognized as far as it is legally possible to do so.

Anastacio, as a co-owner, had the right to freely sell and dispose of his undivided interest, but
not the interest of his co-owners. Consequently, Anastactio’s sale to the spouses Molina without
the consent of the other co-owners was not totally void, for Anastacio’s rights or a portion
thereof were thereby effectively transferred, making the spouses Molina a co-owner of the
subject property to the extent of Anastacio’s interest. This result conforms with the well-
established principle that the binding force of a contract must be recognized as far as it is legally
possible to do so (quando res non valet ut ago, valeat quantum valere potest). (Gregorio vs.
Crisologo Vda. de Culig, 781 SCRA 377, G.R. No. 180559 January 20, 2016)

The case of Vda. de Panaligan v. Court of Appeals, 260 SCRA 127 (1996), further clarified that
tender of payment of the repurchase price is not among the requisites, and thus unnecessary
for redemption under the Public Land Act (PLA).

Citing Philippine National Bank v. De los Reyes, 179 SCRA 619 (1989), we ruled that it is not even
necessary for the preservation of the right of redemption to make an offer to redeem or tender
of payment of purchase price within five years. The filing of an action to redeem within that
period is equivalent to a formal offer to redeem, and that there is even no need for consignation
of the redemption price. Thus, even in the case before us, it is immaterial that the repurchase
price was not deposited with the Clerk of Court. (Gregorio vs. Crisologo Vda. de Culig, 781 SCRA
377, G.R. No. 180559 January 20, 2016)

A contract where the vendor/mortgagor remains in physical possession as lessee or otherwise

has been held to be an equitable mortgage.

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An equitable mortgage has been defined as one which although lacking in some formality, or
form or words, or other requisites demanded by a statute, nevertheless reveals the intention of
the parties to charge real property as security for a debt, there being no impossibility nor
anything contrary to law in this intent. A contract where the vendor/mortgagor remains in
physical possession as lessee or otherwise has been held to be an equitable mortgage. In
determining the nature of a contract, the Court is not bound by the title or name given to it by
the parties, but by their intention, as shown not necessarily by the terminology used in the
contract but by their conduct, words, actions and deeds prior to, during and immediately after
executing the agreement. (Gallent, Sr. vs. Velasquez, 788 SCRA 518, G.R. No. 203949, G.R. No.
205071 April 6, 2016)

The formal offer to redeem, accompanied by a bona fide tender of the redemption price, within
the period of redemption prescribed by law, is only essential to preserve the right of redemption
for future enforcement beyond such period of redemption and within the period prescribed for
the action by the statute of limitations.

In Hulganza v. Court of Appeals, 147 SCRA 77 (1986), we held that the bona fide tender of the
redemption price or its equivalent — consignation of said price in court is not essential or
necessary where the filing of the action itself is equivalent to a formal offer to redeem. As
explained in the said case: “The formal offer to redeem, accompanied by a bona fide tender of
the redemption price, within the period of redemption prescribed by law, is only essential to
preserve the right of redemption for future enforcement beyond such period of redemption and
within the period prescribed for the action by the statute of limitations. Where, as in the instant
case, the right to redeem is exercised thru the filing of judicial action within the period of
redemption prescribed by the law, the formal offer to redeem, accompanied by a bona fide
tender of the redemption price, might be proper, but is not essential. The filing of the action
itself, within the period of redemption, is equivalent to a formal offer to redeem.” (Gregorio vs.
Crisologo Vda. de Culig, 781 SCRA 377, G.R. No. 180559 January 20, 2016)

Sections 6 and 70 are clear in stating that any sale and disposition of agricultural lands in
violation of the Republic Act (RA) No. 6657 shall be null and void.

Under the facts of this case, the reasonable reading of these three provisions in relation to the
constitutional right of retention should be that the consequence of nullity pertains to the area/s
which were sold, or owned by the transferee, in excess of the 5-hectare land ceiling. Thus, the
CA was correct in declaring that the land is Carriedo’s retained area. (Department of Agrarian
Reform, Quezon City vs. Carriedo, 781 SCRA 301, G.R. No. 176549 January 20, 2016)

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An assignment of credit is the process of transferring the right of the assignor to the assignee
who would then have the right to proceed against the debtor.

An assignment of credit is an agreement by virtue of which the owner of a credit, known as the
assignor, by a legal cause, such as sale, dation in payment, exchange or donation, and without
the consent of the debtor, transfers his credit and accessory rights to another, known as the
assignee, who acquires the power to enforce it to the same extent as the assignor could enforce
it against the debtor. It may be in the form of sale, but at times it may constitute a dation in
payment, such as when a debtor, in order to obtain a release from his debt, assigns to his creditor
a credit he has against a third person.” Simply, an assignment of credit is the process of
transferring the right of the assignor to the assignee who would then have the right to proceed
against the debtor. The assignment may be done either gratuitously or onerously, in which case,
the assignment has an effect similar to that of a sale. (Liam vs. United Coconut Planters Bank,
793 SCRA 383, G.R. No. 194664 June 15, 2016)

“Assignment of Credit” and “Subrogation,” Distinguished.

Subrogation is a process by which the third party pays the obligation of the debtor to the creditor
with the latter’s consent. As a consequence, the paying third party steps into the shoes of the
original creditor as subrogee of the latter. It results in a subjective novation of the contract in
that a third person is subrogated to the rights of the creditor. The crucial distinction between
assignment and subrogation actually deals with the necessity of the consent of the debtor in the
original transaction. In an assignment of credit, the consent of the debtor is not necessary in
order that the assignment may fully produce legal effects. What the law requires in an
assignment of credit is not the consent of the debtor but merely notice to him as the assignment
takes effect only from the time he has knowledge thereof. A creditor may, therefore, validly
assign his credit and its accessories without the debtor’s consent. Meanwhile, subrogation
requires an agreement among the three parties concerned — the original creditor, the debtor,
and the new creditor. It is a new contractual relation based on the mutual agreement among all
the necessary parties. (Liam vs. United Coconut Planters Bank, 793 SCRA 383, G.R. No. 194664
June 15, 2016)

When a lease contract contains a right of first refusal, the lessor is under a legal duty to the
lessee not to sell to anybody at any price until after he has made an offer to sell to the latter at
a certain price and the lessee has failed to accept it.

A right to top is a variation of the right of first refusal often incorporated in lease contracts. When
a lease contract contains a right of first refusal, the lessor is under a legal duty to the lessee not
to sell to anybody at any price until after he has made an offer to sell to the latter at a certain
price and the lessee has failed to accept it. The lessee has a right that the lessor’s first offer shall

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be in his favor. While sometimes referred to as a “first option to buy” or “option of first refusal,”
a right of first refusal is not an option contract.

“Right of First Refusal” and “Option to Purchase,” Distinguished.

We explained the distinction between a right of first refusal and option to purchase in Spouses
Vazquez v. Ayala Corporation, 443 SCRA 231 (2004), to wit: The Court has clearly distinguished
between an option contract and a right of first refusal. An option is a preparatory contract in
which one party grants to another, for a fixed period and at a determined price, the privilege to
buy or sell, or to decide 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 to whom the
option was granted, if the latter should decide to use the option. 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 a right of first refusal, on the other hand, while the object
might be made determinate, the exercise of the right would be dependent not only on the
grantor’s eventual intention to enter into a binding juridical relation with another but also on
terms, including the price, that are yet to be firmed up. (Osmeña III vs. Power Sector Assets and
Liabilities Management Corporation, 771 SCRA 559, G.R. No. 212686 September 28, 2015)

The destruction of the building should not in any way be made a basis to exempt petitioners
from paying rent for the period they made use of the leased property. Otherwise, this will be a
clear case of unjust enrichment.

This Court finds no reason to depart from the ruling of the courts a quo that petitioners should
pay respondent for back rentals. There is no dispute that the contract entered into by the parties
is one of lease. True, it had some modifications such that instead of paying the rent in the form
of money, petitioners will withhold such payment and will apply the accumulated rent to the cost
of the building they built on the leased property. Thereafter, at the end of the lease period or
until such time the cost of the building has been fully covered by the rent accumulated,
petitioners, as lessees will transfer the ownership of said building to respondent. Unfortunately,
the subject building was gutted down by fire. However, the destruction of the building should
not in any way be made a basis to exempt petitioners from paying rent for the period they made
use of the leased property. Otherwise, this will be a clear case of unjust enrichment. As held in
P.C. Javier & Sons, Inc. v. Court of Appeals, 462 SCRA 36 (2005): x x x The fundamental doctrine
of unjust enrichment is the transfer of value without just cause or consideration. The elements
of this doctrine are: enrichment on the part of the defendant; impoverishment on the part of the
plaintiff; and lack of cause. The main objective is to prevent one to enrich himself at the expense
of another. It is commonly accepted that this doctrine simply means that a person shall not be

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allowed to profit or enrich himself inequitably at another’s expense. (Golez vs. Nemeño, 771 SCRA
306, G.R. No. 178317 September 23, 2015)

The formal offer to redeem, accompanied by a bona fide tender of the redemption price, within
the period of redemption prescribed by law, is only essential to preserve the right of redemption
for future enforcement beyond such period of redemption and within the period prescribed for
the action by the statute of limitations.

In Hulganza v. Court of Appeals, 147 SCRA 77 (1986), we held that the bona fide tender of the
redemption price or its equivalent — consignation of said price in court is not essential or
necessary where the filing of the action itself is equivalent to a formal offer to redeem. As
explained in the said case: “The formal offer to redeem, accompanied by a bona fide tender of
the redemption price, within the period of redemption prescribed by law, is only essential to
preserve the right of redemption for future enforcement beyond such period of redemption and
within the period prescribed for the action by the statute of limitations. Where, as in the instant
case, the right to redeem is exercised thru the filing of judicial action within the period of
redemption prescribed by the law, the formal offer to redeem, accompanied by a bona fide
tender of the redemption price, might be proper, but is not essential. The filing of the action
itself, within the period of redemption, is equivalent to a formal offer to redeem.” (Gregorio vs.
Crisologo Vda. de Culig, 781 SCRA 377, G.R. No. 180559 January 20, 2016)

The case of Vda. de Panaligan v. Court of Appeals, 260 SCRA 127 (1996), further clarified that
tender of payment of the repurchase price is not among the requisites, and thus unnecessary
for redemption under the Public Land Act (PLA).

The case of Vda. de Panaligan v. Court of Appeals, 260 SCRA 127 (1996), further clarified that
tender of payment of the repurchase price is not among the requisites, and thus unnecessary for
redemption under the Public Land Act. Citing Philippine National Bank v. De los Reyes, 179 SCRA
619 (1989), we ruled that it is not even necessary for the preservation of the right of redemption
to make an offer to redeem or tender of payment of purchase price within five years. The filing
of an action to redeem within that period is equivalent to a formal offer to redeem, and that
there is even no need for consignation of the redemption price. Thus, even in the case before us,
it is immaterial that the repurchase price was not deposited with the Clerk of Court. (Gregorio vs.
Crisologo Vda. de Culig, 781 SCRA 377, G.R. No. 180559 January 20, 2016)

Conjugal partnership of gains established before and after the effectivity of the Family Code
are governed by the rules found in Chapter 4 (Conjugal Partnership of Gains) of Title IV
(Property Relations Between Husband and Wife) of the Family Code.

There is no dispute that Anastacio and Flora Domingo married before the Family Code’s
effectivity on August 3, 1988 and their property relation is a conjugal partnership. Conjugal

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partnership of gains established before and after the effectivity of the Family Code are governed
by the rules found in Chapter 4 (Conjugal Partnership of Gains) of Title IV (Property Relations
Between Husband and Wife) of the Family Code. This is clear from Article 105 of the Family Code
which states: x x x The provisions of this Chapter shall also apply to conjugal partnerships of gains
already established between spouses before the effectivity of this Code, without prejudice to
vested rights already acquired in accordance with the Civil Code or other laws, as provided in
Article 256. (Domingo vs. Molina, 791 SCRA 47, G.R. No. 200274 April 20, 2016)

In the case of Taningco v. Register of Deeds of Laguna, 5 SCRA 381 (1962), the Supreme Court
(SC) held that the properties of a dissolved conjugal partnership fall under the regime of co-
ownership among the surviving spouse and the heirs of the deceased spouse until final
liquidation and partition.

The surviving spouse, however, has an actual and vested one-half undivided share of the
properties, which does not consist of determinate and segregated properties until liquidation
and partition of the conjugal partnership. (Domingo vs. Molina, 791 SCRA 47, G.R. No. 200274
April 20, 2016)

A contract of sale is perfected by the meeting of the minds of the parties regardless of whether
it was reduced to writing.

In Limketkai Sons Milling, Inc. v. CA, we ruled that the fact that the deed of sale still had to be
signed and notarized did not mean that no contract had been perfected. A binding contract may
exist between the parties whose minds have met, although they did not affix their signatures to
any written document, as acceptance may be expressed or implied.

Furthermore, a sale of land, once consummated, is valid regardless of the form it may have been
entered into. The law or jurisprudence does not mandate that the contract of sale be put in
writing before such contract can validly cede or transmit rights over a certain real property
between the parties themselves. (Far East Bank and Trust Company vs. Philippine Deposit
Insurance Corporation, G.R. No. 172983, July 22, 2015)

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