Velarde vs. Court of Appeals (361 SCRA 57)

Velarde vs.
Court of Appeals (361 SCRA 57)
14 Jan
FACTS:
The private respondent executed a Deed of Sale with Assumption of Mortgage, with
a balance of P1.8 million, in favor of the petitioners. Pursuant to said agreements,
plaintiffs paid the bank (BPI) for three (3) months until they were advised that the
Application for Assumption of Mortgage was denied. This prompted the plaintiffs not
to make any further payment. Private respondent wrote the petitioners informing the
non-fulfillment of the obligations. Petitioners, thru counsel responded that they are
willing to pay in cash the balance subject to several conditions. Private respondents
sent a notarial notice of cancellation/rescission of the Deed of Sale. Petitioners filed a
complaint which was consequently dismissed by an outgoing judge but was reversed
by the assuming judge in their Motion for Reconsideration. The Court of Appeals
reinstated the decision to dismiss.
ISSUE:
Whether or not there is a substantial breach of contract that would entitle its
rescission.
RULING:
YES. Article 1191 of the New Civil Code applies. The breach committed did not
merely consist of a slight delay in payment or an irregularity; such breach would not
normally defeat the intention of the parties to the contract. Here, petitioners not only
failed to pay the P1.8 million balance, but they also imposed upon private
respondents new obligations as preconditions to the performance of their own
obligation. In effect, the qualified offer to pay was a repudiation of an existing
obligation, which was legally due and demandable under the contract of sale. Hence,
private respondents were left with the legal option of seeking rescission to protect
their own interest.
SAN MIGUEL PROPERTIES PHILS., INC. v SPOUSES ALFREDO and GRACE

HUANG, G. R. No. 137290, 31 July 2000
Facts: San Miguel Properties offered two parcels of land for sale and the offer was
made to an agent of the respondents. An “earnest-deposit” of P1 million was offered
by the respondents and was accepted by the petitioner’s authorized officer subject to
certain terms.
Petitioner, through its executive officer, wrote the respondent’s lawyer that because
ethe parties failed to agree on the terms and conditions of the sale despite the
extension granted by the petitioner, the latter was returning the “earnest-deposit”.
The respondents demanded execution of a deed of sale covering the properties and
attempted to return the “earnest-deposit” but petitioner refused on the ground that the
option to purchase had already expired.
A complaint for specific performance was filed against the petitioner and the latter
filed a motion to dismiss the complaint because the alleged “exclusive option” of the
respondents lacked a consideration separate and distinct from the purchase price
and was thus unenforceable; the complaint did not allege a cause of action because
there was no “meeting of the mind” between the parties and therefore the contact of
sale was not perfected.
The trial court granted the petitioner’s motion and dismissed the action. The
respondents filed a motion for reconsideration but were denied by the trial court. The
respondents elevated the matter to the Court of Appeals and the latter reversed the
decision of the trial court and held that a valid contract of sale had been complied
with.
Petitioner filed a motion for reconsideration but was denied.
Issue: WON there was a perfected contract of sale between the parties
Ruling: The decision of the appellate court was reversed and the respondents’
complaint was dismissed.
Ratio Decidendi: It is not the giving of earnest money , but the proof of the
concurrence of all the essential elements of the contract of sale which establishes the
existence of a perfected sale.
The P1 million “earnest-deposit” could not have been given as earnest money
because at the time when petitioner accepted the terms of respondents’ offer, their
contract had not yet been perfected. This is evident from the following conditions
attached by respondents to their letter.
The first condition for an option period of 30 days sufficiently shows that a sale was
never perfected. As petitioner correctly points out, acceptance of this condition did
not give rise to a perfected sale but merely to an option or an accepted unilateral
promise on the part of respondents to buy the subject properties within 30 days from
the date of acceptance of the offer. Such option giving respondents the exclusive
right to buy the properties within the period agreed upon is separate and distinct from
the contract of sale which the parties may enter. All that respondents had was just
the option to buy the properties which privilege was not, however, exercised by them
because there was a failure to agree on the terms of payment. No contract of sale
may thus be enforced by respondents.
Even the option secured by respondents from petitioner was fatally defective. Under
the second paragraph of Art. 1479, an accepted unilateral promise to buy or sell a
determinate thing for a price certain is binding upon the promisor only if the promise
is supported by a distinct consideration. Consideration in an option contract may be
anything of value, unlike in sale where it must be the price certain in money or its
equivalent. There is no showing here of any consideration for the option. Lacking any
proof of such consideration, the option is unenforceable.
Equally compelling as proof of the absence of a perfected sale is the second

condition that, during the option period, the parties would negotiate the terms and
conditions of the purchase. The stages of a contract of sale are as follows: (1)
negotiation, covering the period from the time the prospective contracting parties
indicate interest in the contract to the time the contract is perfected; (2) perfection,
which takes place upon the concurrence of the essential elements of the sale which
are the meeting of the minds of the parties as to the object of the contract and upon
the price; and (3) consummation, which begins when the parties perform their
respective undertakings under the contract of sale, culminating in the extinguishment
thereof.
In the present case, the parties never got past the negotiation stage. The alleged
“indubitable evidence” of a perfected sale cited by the appellate court was nothing
more than offers and counter-offers which did not amount to any final arrangement
containing the essential elements of a contract of sale. While the parties already
agreed on the real properties which were the objects of the sale and on the purchase
price, the fact remains that they failed to arrive at mutually acceptable terms of
payment, despite the 45-day extension given by petitioner.

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Velarde vs.

Court of Appeals (361 SCRA 57)

SAN MIGUEL PROPERTIES PHILS., INC. v SPOUSES ALFREDO and GRACE

Petitioner filed a motion for reconsideration but was denied.

Equally compelling as proof of the absence of a perfected sale is the second

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