*

G.R. No. 109125. December 2, 1994.

ANG YU ASUNCION, ARTHUR GO AND KEH TIONG, petitioners, vs. THE HON. COURT OF

APPEALS and BUEN REALTY DEVELOPMENT CORPORATION, respondents.

Obligations; Essential elements of an obligation.—An obligation is a juridical necessity to give, to do or

not to do (Art. 1156, Civil Code). The obligation is constituted upon the concurrence of the essential elements
thereof, viz: (a) The  vinculum juris  or  juridical tie  which is the efficient cause established by the various
sources of obligations (law, contracts, quasi-contracts, delicts and quasi-delicts); (b) the object which is the
prestation or conduct, required to be observed (to give, to do or not to do); and (c) the subject-persons who,
viewed from the demandability of the obligation, are the active (obligee) and the passive (obligor) subjects.
Same; Contracts; Various stages of a contract.—Among the sources of an obligation is a contract (Art.
1157, Civil Code), which is a meeting of minds between two persons whereby one binds himself, with respect
to the other, to give something or to render some service (Art. 1305, Civil Code). A contract undergoes
various stages that include its negotiation or preparation, its perfection and, finally, its
consummation.  Negotiation  covers the period  from  the time the prospective contracting parties indicate
interest in the contract to the time the contract is concluded (perfected). The perfection of the contract takes
place upon the concurrence of the essential elements thereof. A contract which is consensual as to perfection
is so established upon a mere meeting of minds, i.e., the concurrence of offer and acceptance, on the object
and on the cause thereof. A contract which requires, in addition to the above, the delivery of the object of the
agreement, as in a pledge or commodatum, is commonly referred to as a realcontract. In a solemn contract,
compliance with certain formalities prescribed by law, such as in a donation of real property, is essential in
order to make the act valid, the prescribed form being thereby an essential element thereof. The stage
of  consummationbegins when the parties perform their respective undertakings under the contract
culminating in the extinguishment thereof.

_______________

* EN BANC.

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Ang Yu Asuncion vs. Court of Appeals

Same;  Same;  Sales;  In sales, the contract is perfected when the seller obligates himself, for a price
certain, to deliver and to transfer ownership of a thing or right to the buyer, over which the latter agrees.—
Until the contract is perfected, it cannot, as an independent source of obligation, serve as a binding juridical
relation. In sales, particularly, to which the topic for discussion about the case at bench belongs, the contract
is perfected when a person, called the seller, obligates himself, for a price certain, to deliver and to transfer
ownership of a thing or right to another, called the buyer, over which the latter agrees.
Same;  Same;  Same;  When the sale is not absolute but conditional, the breach of the condition will
prevent the obligation to convey title from acquiring an obligatory force.—When the sale is not absolute but
conditional, such as in a “Contract to Sell” where invariably the ownership of the thing sold is retained until
the fulfillment of a positive suspensive condition (normally, the full payment of the purchase price), the
breach of the condition will prevent the obligation to convey title from acquiring an obligatory force. In
Dignos vs. Court of Appeals (158 SCRA 375), we have said that, although denominated a “Deed of
Conditional Sale,” a sale is still absolute where the contract is devoid of any proviso that title is reserved or
the right to unilaterally rescind is stipulated, e.g., until or unless the price is paid. Ownership will then be
transferred to the buyer upon actual or constructive delivery (e.g., by the execution of a public document) of
the property sold. Where the condition is imposed upon the perfection of the contract itself, the failure of the
condition would prevent such perfection. If the condition is imposed on the obligation of a party which is not
fulfilled, the other party may either waive the condition or refuse to proceed with the sale (Art. 1545, Civil
Code).
Same; Same; Same; An unconditional mutual promise to buy and sell, with an object that is determinate
and the price fixed, can be obligatory on the parties.—An unconditional mutual promise to buy and sell, as
long as the object is made determinate and the price is fixed, can be obligatory on the parties, and
compliance therewith may accordingly be exacted.
Same; Same; Same; Options; An accepted unilateral promise which specifies the thing to be sold and the
price to be paid, when coupled with a valuable consideration distinct and separate from the price, may be
termed a perfected contract of option.—An accepted unilateral promise which specifies the thing to be sold
and the price to be paid, when coupled with a valuable consideration distinct and

604

604 SUPREME COURT REPORTS

ANNOTATED

Ang Yu Asuncion vs. Court of Appeals

separate from the price, is what may properly be termed a perfected contract of option. This contract is
legally binding, and in sales, it conforms with the second paragraph of Article 1479 of the Civil Code.
Observe, however, that the option is not the contract of sale itself. The optionee has the right, but not the
obligation, to buy. Once the option is exercised timely, i.e., the offer is accepted before a breach of the option,
a bilateral promise to sell and to buy ensues and both parties are then reciprocally bound to comply with
their respective undertakings.
Same; Same; Same; Same; Rules applicable where a period is given to the offeree within which to accept
the offer.—Where a period is given to the offeree within which to accept the offer, the following rules
generally govern: (1) If the period is not itself founded upon or supported by a consideration, the offeror is
still free and has the right to withdraw the offer before its acceptance, or, if an acceptance has been made,
before the offeror’s coming to know of such fact, by communicating that withdrawal to the offeree. The right
to withdraw, however, must not be exercised whimsically or arbitrarily; otherwise, it could give rise to a
damage claim under Article 19 of the Civil Code; (2) If the period has a separate consideration, a contract of
“option” is deemed perfected, and it would be a breach of that contract to withdraw the offer during the
agreed period. The option, however, is an independent contract by itself, and it is to be distinguished from
the projected main agreement (subject matter of the option) which is obviously yet to be concluded. If, in
fact, the optioner-offeror withdraws the offer before its acceptance (exercise of the option) by the optionee-
offeree, the latter may not sue for specific performance on the proposed contract (“object” of the option) since
it has failed to reach its own stage of perfection. The optionee-offeror, however, renders himself liable for
damages for breach of the option. In these cases, care should be taken on the real nature of the consideration
given, for if, in fact, it has been intended to be part of the consideration for the main contract with a right of
withdrawal on the part of the optionee, the main contract could be deemed perfected; a similar instance
would be an “earnest money” in a contract of sale that can evidence its perfection (Art. 1482, Civil Code).
Same; Same; Same; Same; Words and Phrases; “Right of First Refusal,” Explained; In the law on sales,
the so-called “right of first refusal” is an innovative juridical relation, but it cannot be deemed a perfected
contract of sale under Article 1458 of the Civil Code.—In the law on sales, the so-called “right of first refusal”
is an innovative juridical relation. Needless to point out, it cannot be deemed a perfected contract of sale
under Article 1458 of the Civil Code, Neither can the right of first refusal, understood in its normal
concept, per se be brought

605
 VOL. 238, DECEMBER 2, 1994 605

Ang Yu Asuncion vs. Court of Appeals

within the purview of an option under the second paragraph of Article 1479, aforequoted, or possibly of
an offer under Article 1319 of the same Code. An option or an offer would require, among other things, a
clear certainty on both the object and the cause or consideration of the envisioned contract. In a right of first
refusal, while the object might be made determinate, the exercise of the right, however, 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 obviously are yet to be later firmed up. Prior thereto, it can at best be so
described as merely belonging to a class of preparatory juridical relations governed not by contracts (since
the essential elements to establish the  vinculum juris  would still be indefinite and inconclusive) but by,
among other laws of general application, the pertinent scattered provisions of the Civil Code on human
conduct.
Same; Same; Same; Same; Same; Same; Breach of a right of first refusal decreed under a final judgment
does not entitle the aggrieved party to a writ of execution of the judgment but to an action for damages.—
Even on the premise that such right of first refusal has been decreed under a final judgment, like here, its
breach cannot justify correspondingly an issuance of a writ of execution under a judgment that merely
recognizes its existence, nor would it sanction an action for specific performance without thereby negating
the indispensable element of consensuality in the perfection of contracts. It is not to say, however, that the
right of first refusal would be inconsequential for, such as already intimated above, an unjustified disregard
thereof, given, for instance, the circumstances expressed in Article 19 of the Civil Code, can warrant a
recovery for damages. The final judgment in Civil Case No. 87-41058, it must be stressed, has merely
accorded a “right of first refusal” in favor of petitioners. The consequence of such a declaration entails no
more than what has heretofore been said. In fine, if, as it is here so conveyed to us, petitioners are aggrieved
by the failure of private respondents to honor the right of first refusal, the remedy is not a writ of execution
on the judgment, since there is none to execute, but an action for damages in a proper forum for the purpose.
Due Process; Actions; A party not impleaded in an action cannot be held subject to the writ of execution
issued therein.—Furthermore, whether private respondent Buen Realty Development Corporation, the
allegedpurchaser of the property, has acted in good faith or bad faith and whether or not it should, in any
case, be considered bound to respect the registration of the  lis pendens  in Civil Case No. 87-41058 are
matters that must be independently addressed in appropriate proceedings. Buen Realty, not having been
impleaded in Civil Case No.

606

606 SUPREME COURT REPORTS

ANNOTATED

Ang Yu Asuncion vs. Court of Appeals

87-41058, cannot be held subject to the writ of execution issued by respondent Judge, let alone ousted
from the ownership and possession of the property, without first being duly afforded its day in court.

PETITION for review of a decision of the Court of Appeals.

The facts are stated in the opinion of the Court.
     Antonio M. Albano for petitioners.
      Umali, Soriano & Associates for private respondent.

VITUG, J.:

Assailed, in this petition for review, is the decision of the Court of Appeals, dated 04 December
1991, in CA-G.R. SP No. 26345 setting aside and declaring without force and effect the orders of
execution of the trial court, dated 30 August 1991 and 27 September 1991, in Civil Case No. 87-
41058.
The antecedents are recited in good detail by the appellate court thusly:
“On July 29, 1987 a Second Amended Complaint for Specific Performance was filed by Ann Yu Asuncion and
Keh Tiong, et al., against Bobby Cu Unjieng, Rose Cu Unjieng and Jose Tan before the Regional Trial Court,
Branch 31, Manila in Civil Case No. 87-41058, alleging, among others, that plaintiffs are tenants or lessees
of residential and commercial spaces owned by defendants described as Nos. 630-638 Ongpin Street,
Binondo, Manila; that they have occupied said spaces since 1935 and have been religiously paying the rental
and complying with all the conditions of the lease contract; that on several occasions before October 9, 1986,
defendants informed plaintiffs that they are offering to sell the premises and are giving them priority to
acquire the same; that during the negotiations, Bobby Cu Unjieng offered a price of P6-million while
plaintiffs made a counter offer of P5-million; that plaintiffs thereafter asked the defendants to put their offer
in writing to which request defendants acceded; that in reply to defendants’ letter, plaintiffs wrote them on
October 24, 1986 asking that they specify the terms and conditions of the offer to sell; that when plaintiffs
did not receive any reply, they sent another letter dated January 28, 1987 with the same request; that since
defendants failed to specify the terms and conditions of the offer to sell and because of information received
that defendants were about to sell the property, plaintiffs were compelled to file the complaint to compel
defendants to sell the property to them.

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Ang Yu Asuncion vs. Court of Appeals

“Defendants filed their answer denying the material allegations of the complaint and interposing a special
defense of lack of cause of action.
“After the issues were joined, defendants filed a motion for summary judgment which was granted by the
lower court. The trial court found that defendants’ offer to sell was never accepted by the plaintiffs for the
reason that the parties did not agree upon the terms and conditions of the proposed sale, hence, there was
no contract of sale at all. Nonetheless, the lower court ruled that should the defendants subsequently offer
their property for sale at a price of P11-million or below, plaintiffs will have the right of first refusal. Thus
the dispositive portion of the decision states:

“‘WHEREFORE, judgment is hereby rendered in favor of the defendants and against the plaintiffs summarily
dismissing the complaint subject to the aforementioned condition that if the defendants subsequently decide to offer
their property for sale for a purchase price of Eleven Million Pesos or lower, then the plaintiffs has the option to
purchase the property or of first refusal, otherwise, defendants need not offer the property to the plaintiffs if the
purchase price is higher than Eleven Million Pesos.
“‘SO ORDERED.’

“Aggrieved by the decision, plaintiffs appealed to this Court in  CA-G.R. CV No. 21123. In a decision
promulgated on September 21, 1990 (penned by Justice Segundino G. Chua and concurred in by Justices
Vicente V. Mendoza and Fernando A. Santiago), this Court affirmed with modification the lower court’s
judgment, holding:

“‘In resume, there was no meeting of the minds between the parties concerning the sale of the property. Absent such
requirement, the claim for specific performance will not lie. Appellants’ demand for actual, moral and exemplary
damages will likewise fail as there exists no justifiable ground for its award. Summary judgment for defendants was
properly granted. Courts may render summary judgment when there is no genuine issue as to any material fact and the
moving party is entitled to a judgment as a matter of law (Garcia vs. Court of Appeals, 176 SCRA 815). All requisites
obtaining, the decision of the court a quo is legally justifiable.
‘WHEREFORE, finding the appeal unmeritorious, the judgment appealed from is hereby AFFIRMED, but subject to
the following modification: The court a quo in the aforestated decision gave the plaintiffs-appellants the right of first
refusal only if the

608

608 SUPREME COURT REPORTS ANNOTATED

Ang Yu Asuncion vs. Court of Appeals

property is sold for a purchase price of Eleven Million pesos or lower; however, considering the mercurial and uncertain
forces in our market economy today. We find no reason not to grant the same right of first refusal to herein appellants in
the event that the subject property is sold for a price in excess of Eleven Million pesos. No pronouncement as to costs.
‘SO ORDERED.’

“The decision of this Court was brought to the Supreme Court by petition for review on certiorari. The
Supreme Court denied the appeal on May 6, 1991 ‘for insufficiency in form and substance’ (Annex H,
Petition).
“On November 15, 1990, while CA-G.R. CV No. 21123 was pending consideration by this Court, the Cu
Unjieng spouses executed a Deed of Sale (Annex D, Petition) transferring the property in question to herein
petitioner Buen Realty and Development Corporation, subject to the following terms and conditions:
“‘1. That for and in consideration of the sum of FIFTEEN MILLION PESOS (P15,000,000.00), receipt of which in full is
hereby acknowledged, the VENDORS hereby sells, transfers and conveys for and in favor of the VENDEE, his heirs,
executors, administrators or assigns, the above-described property with all the improvements found therein including all
the rights and interest in the said property free from all liens and encumbrances of whatever nature, except the pending
ejectment proceeding;
‘2. That the VENDEE shall pay the Documentary Stamp Tax, registration fees for the transfer of title in his favor and
other expenses incidental to the sale of above-described property including capital gains tax and accrued real estate
taxes.’

“As a consequence of the sale, TCT No. 105254/T-881 in the name of the Cu Unjieng spouses was
cancelled and, in lieu thereof, TCT No. 195816 was issued in the name of petitioner on December 3, 1990.
“On July 1, 1991, petitioner as the new owner of the subject property wrote a letter to the lessees
demanding that the latter vacate the premises.
“On July 16, 1991, the lessees wrote a reply to petitioner stating that petitioner brought the property
subject to the notice of lis pendens regarding Civil Case No. 87-41058 annotated on TCT No. 105254/T-881
in the name of the Cu Unjiengs.
“The lessees 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 in CA-G.R. CV No. 21123.
“On August 30, 1991, respondent Judge issued an order (Annex A, Petition) quoted as follows:

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Ang Yu Asuncion vs. Court of Appeals

“‘Presented before the Court is a Motion for Execution filed by plaintiff represented by Atty. Antonio Albano.
Both defendants Bobby Cu Unjieng and Rose Cu Unjieng represented by Atty. Vicente Sison and Atty.
Anacleto Magno respectively were duly notified in today’s consideration of the motion as evidenced by the
rubber stamp and signatures upon the copy of the Motion for Execution.
‘The gist of the motion is that the Decision of the Court dated September 21, 1990 as modified by the
Court of Appeals in its decision in CA G.R. CV-21123, and elevated to the Supreme Court upon the petition
for review and that the same was denied by the highest tribunal in its resolution dated May 6, 1991 in G.R.
No. L-97276, had now become final and executory. As a consequence, there was an Entry of Judgment by the
Supreme Court as of June 6, 1991, stating that the aforesaid modified decision had already become final and
executory.
‘It is the observation of the Court that this property in dispute was the subject of the  Notice of Lis
Pendens  and that the modified decision of this Court promulgated by the Court of Appeals which had
become final to the effect that should the defendants decide to offer the property for sale for a price of P11
Million or lower, and considering the mercurial and uncertain forces in our market economy today, the same
right of first refusal to herein plaintiffs/appellants in the event that the subject property is sold for a price in
excess of Eleven Million pesos or more.
‘WHEREFORE, defendants are hereby ordered to execute the necessary Deed of Sale of the property in
litigation in favor of plaintiffs Ang Yu Asuncion, Keh Tiong and Arthur Go for the consideration of P15
Million pesos in recognition of plaintiffs’ right of first refusal and that a new Transfer Certificate of Title be
issued in favor of the buyer.
‘All previous transactions involving the same property notwithstanding the issuance of another title to
Buen Realty Corporation, is hereby set aside as having been executed in bad faith.
‘SO ORDERED.’

“On September 22, 1991 respondent Judge issued another order, the dispositive portion of which reads:

“‘WHEREFORE, let there be Writ of Execution issue in the above-entitled case directing the Deputy
Sheriff Ramon Enriquez of this Court to implement said Writ of Execution ordering the defendants among
others to comply with the aforesaid Order of

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610 SUPREME COURT REPORTS ANNOTATED

Ang Yu Asuncion vs. Court of Appeals

this Court within a period of one (1) week from receipt of this Order and for defendants to execute the necessary Deed of
Sale of the property in litigation in favor of the plaintiffs Ang Yu Asuncion, Keh Tiong and Arthur Go for the
consideration of P15,000,000.00 and ordering the Register of Deeds of the City of Manila, to cancel and set aside the title
already issued in favor of Buen Realty Corporation which was previously executed between the latter and defendants
and to register the new title in favor of the aforesaid plaintiffs Ang Yu Asuncion, Keh Tiong and Arthur Go.
‘SO ORDERED.’

“On the
1
same day, September 27, 1991 the corresponding writ of execution (Annex C, Petition) was
issued.”

On 04 December 1991, the appellate court, on appeal to it by private respondent, set aside and
declared without force and effect the above questioned orders of the court a quo.
In this petition for review on  certiorari, petitioners contend that Buen Realty can be held
bound by the writ of execution by virtue of the notice of  lis pendens, carried over on TCT No.
195816 issued in the name of Buen Realty, at the time of the latter’s purchase of the property on
15 November 1991 from the Cu Unjiengs.
We affirm the decision of the appellate court.
A not too recent development in real estate transactions is the adoption of such arrangements
as the right of first refusal, a purchase option and a contract to sell. For ready reference, we
might point out some fundamental precepts that may find some relevance to this discussion.
An obligation is a juridical necessity to give, to do or not to do (Art. 1156, Civil Code). The
obligation is constituted upon the concurrence of the essential elements thereof,  viz:(a)
The vinculum juris or juridical tie which is the efficient cause established by the various sources
of obligations (law, contracts, quasicontracts, delicts and quasi-delicts); (b) the object which is the
prestation or conduct, required to be observed (to give, to do or not to do); and (c) the  subject-
persons  who, viewed from the demandability of the obligation, are the active (obligee) and the
passive (obligor) subjects.

_______________
1 Rollo, pp. 32-38.

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Ang Yu Asuncion vs. Court of Appeals

Among the sources of an obligation is a contract (Art. 1157, Civil Code), which is a meeting of
minds between two persons whereby one binds himself, with respect to the other, to give
something or to render some service (Art. 1305, Civil Code). A contract undergoes various stages
that include its negotiation or preparation, its perfection and, finally, its
consummation.  Negotiation  covers the period  from  the time the prospective contracting parties
indicate interest in the contract tothe time the contract is concluded (perfected). The perfection of
the contract takes place upon the concurrence of the essential elements thereof. A contract which
is  consensual  as to perfection is so established upon a mere meeting of minds, i.e., the
concurrence of offer and acceptance, on the object and on the cause thereof. A contract which
requires, in addition to the above, the delivery of the object of the agreement, as in a pledge
or commodatum, is commonly referred to as a realcontract. In a solemn contract, compliance with
certain formalities prescribed by law, such as in a donation of real property, is essential in order
to make the act valid, the prescribed form being thereby an essential element thereof. The stage
of  consummation  begins when the parties perform their respective undertakings under the
contract culminating in the extinguishment thereof.
Until the contract is perfected, it cannot, as an independent source of obligation, serve as a
binding juridical relation. In sales, particularly, to which the topic for discussion about the case
at bench belongs, the contract is perfected when a person, called the seller, obligates himself, for
a price certain, to deliver and to transfer ownership of a thing or right to another, called the
buyer, over which the latter agrees. Article 1458 of the Civil Code provides:
“Art. 1458. By the contract of sale one of the contracting parties obligates himself to transfer the ownership
of and to deliver a determinate thing, and the other to pay therefor a price certain in money or its
equivalent.
“A contract of sale may be absolute or conditional.”

When the sale is not absolute but conditional, such as in a “Contract to Sell” where invariably the
ownership of the thing sold is retained until the fulfillment of a positive suspensive
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612 SUPREME COURT REPORTS ANNOTATED

Ang Yu Asuncion vs. Court of Appeals

condition (normally, the full payment of the purchase price), the breach 2
of the condition will
prevent the obligation to convey title from acquiring an obligatory force.  In Dignos vs. Court of
Appeals (158 SCRA 375), we have said that, although denominated a “Deed of Conditional Sale,”
a sale is still absolute where the contract is devoid of any proviso that title is reserved or the right
to unilaterally rescind is stipulated, e.g., until or unless the price is paid. Ownership will then be
transferred to the buyer upon actual or constructive delivery (e.g., by the execution of a public
document) of the property sold. Where the condition is imposed upon the 3
perfection of the
contract itself, the failure of the condition would prevent such perfection.   If the condition is
imposed on the obligation of a party which is not fulfilled, the other 4
party may either waive the
condition or refuse to proceed with the sale (Art. 1545, Civil Code).
An unconditional mutual promise  to buy and sell, as long as the object is made determinate
and the price5
is fixed, can be obligatory on the parties, and compliance therewith may accordingly
be exacted.
An  accepted unilateral promise  which  specifies  the  thing to be sold and the price to
be paid, when coupled with a valuable consideration distinct and separate from the price, is what
may properly be termed a perfected contract of  option. This contract is legally binding, and in
sales, it conforms with the second paragraph of Article 1479 of the Civil Code, viz:
“ART. 1479. x x x.
“An accepted unilateral promise to buy or to sell a determinate thing for a price certain 6is binding upon
the promissor if the promise is supported by a consideration distinct from the price. (1451a).”

_______________
2 Roque vs. Lapuz, 96 SCRA 741; Agustin vs. CA, 186 SCRA 375.
3 See People’s Homesite and Housing Corp. vs. Court of Appeals, 133 SCRA 777.
4 Delta Motor Corporation vs. Genuino, 170 SCRA 29.
5 See Art. 1459; Atkins, Kroll and Co., Inc. vs. Cua Hian Tek, 102 Phil. 948.
6 It is well to note that when the consideration given, for what otherwise would have been an option, partakes the

nature in reality of a part payment of the purchase price (termed as “earnest money” and

613

VOL. 238, DECEMBER 2, 1994 613

Ang Yu Asuncion vs. Court of Appeals
7
Observe, however, that the option is not the contract of sale itself.   The optionee has the right,
but not the obligation, to buy. Once the option is exercised timely, i.e., the offer is accepted before
a breach of the option, a bilateral promise to sell and to buy ensues
8
and both parties are then
reciprocally bound to comply with their respective undertakings.
Let us elucidate a little. A negotiation is formally initiated by an offer. An imperfect promise
(policitacion) is merely an offer. Public advertisements or solicitations and the like are ordinarily
construed as mere invitations to make offers or only as proposals. These relations, until a
contract is perfected, are not considered binding commitments. Thus, at any time prior to the
perfection of the contract, either negotiating party may stop the negotiation. The offer, at this
stage, may be withdrawn; the withdrawal is effective immediately after its manifestation, such as
by its mailing and not necessarily when the offeree learns of the withdrawal (Laudico vs.
Arias, 43 Phil. 270). Where a period is given to the offeree within which to accept the offer, the
following rules generally govern:
(1) If the period is not itself founded upon or supported by a consideration, the offeror is still
free and has the right to withdraw the offer before its acceptance, or, if an acceptance has been
made, before the offeror’s coming to know of such fact, by communicating that withdrawal to the
offeree (see Art. 1324, Civil Code; see also Atkins, Kroll & Co. vs. Cua, 102 Phil. 948, holding that
this rule is applicable to a unilateral promise to sell under Art. 1479, modifying the previous
decision in  South  Western Sugar vs. Atlantic Gulf,  97 Phil. 249; see also  Art. 1319, Civil
Code; Rural Bank of Parañaque, Inc. vs. Remolado, 135 SCRA 409; Sanchez vs. Rigos, 45 SCRA
368). The right to withdraw, however, must not be exercised whimsically or arbitrarily otherwise,
it could give rise to a damage claim under Article 19 of the Civil Code which ordains that “every
person must, in the exercise of his rights and in the performance of his duties, act

_______________

considered as an initial payment thereof), an actual contract of sale is deemed entered into and enforceable as such.
7 Enriquez de la Cavada vs. Diaz, 37 Phil. 982.
8 Atkins, Kroll & Co., Inc. vs. Cua Hian Tek, 102 Phil. 948.

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614 SUPREME COURT REPORTS ANNOTATED

Ang Yu Asuncion vs. Court of Appeals

with justice, give everyone his due, and observe honesty and good faith.”
(2) If the period has a separate consideration, a contract of “option” is deemed perfected, and it
would be a breach of that contract to withdraw the offer during the agreed period. The option,
however, is an independent contract by itself, and it is to be distinguished from the projected
main agreement (subject matter of the option) which is obviously yet to be concluded. If, in fact,
the optioner-offeror  withdraws the offer before its acceptance  (exercise of the option) by the
optionee-offeree, the latter may not sue for specific performance on the proposed contract (“object”
of the option) since it has failed to reach its own stage of perfection. The optioner-offeror,
however, renders himself liable for damages for breach of the option. In these cases, care should
be taken of the real nature of the considerationgiven, for if, in fact, it has been intended to be part
of the consideration for the main contract with a right of withdrawal on the part of the optionee,
the main contract could be deemed perfected; a similar instance would be an “earnest money” in a
contract of sale that can evidence its perfection (Art. 1482, Civil Code).
In the law on sales, the so-called “right of first refusal” is an innovative juridical relation.
Needless to point out, it cannot be deemed a perfected contract of sale under Article 1458 of the
Civil Code. Neither can the right of first refusal, understood in its normal concept,  per se  be
brought within the purview of an option under
9
the second paragraph of Article 1479, aforequoted,
or possibly of an offer
10
under Article 1319  of the same Code. An option or an offer would require,
among other things,  a clear

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9 Article 1319, Civil Code, provides:

“Art. 1319. Consent is manifested by the meeting of the offer and the acceptance upon the thing and the cause which are to constitute
the contract. The offer must be certain  and the acceptance absolute. A qualified acceptance constitutes a counter-offer.” (Emphasis
supplied.)
10 It is also essential for an option to be binding that valuable consideration distinct from the price should be given
(see Montilla vs. Court of Appeals, 161 SCRA 167; Sps. Natino vs. IAC, 197 SCRA 323; Cronico vs. J.M. Tuason & Co.,
Inc., 78 SCRA 331).

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certainty on both the object and the cause or consideration of the envisioned contract. In a right
of first refusal, while the object might be made determinate, the exercise of the right, however,
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 obviously are yet to be later
firmed up. Prior thereto, it can at best be so described as merely belonging to a class of
preparatory juridical relations governed not by contracts (since the essential elements to
establish the vinculum juris would still be indefinite and inconclusive) but by, among other laws
of general application, the pertinent scattered provisions of the Civil Code on human conduct.
Even on the premise that such right of first refusal has been decreed under a final judgment,
like here, its breach cannot justify correspondingly an issuance of a writ of execution under a
judgment that merely recognizes its existence, nor would it sanction an action for specific
performance without thereby
11
negating the indispensable element of consensuality in the
perfection of contracts.   It is not to say, however, that the right of first refusal would be
inconsequential for, such as already intimated above,12
an unjustified disregard thereof, given, for
instance, the circumstances expressed in Article 19  of the Civil Code, can warrant a recovery for
damages.
The final judgment in  Civil Case No. 87-41058, it must be stressed, has merely accorded a
“right of first refusal” in favor of petitioners. The consequence of such a declaration entails no
more than what has heretofore been said. In fine, if, as it is here so conveyed to us, petitioners
are aggrieved by the failure of private respondents to honor the right of first refusal, the remedy
is not a writ of execution on the judgment, since there is none to execute, but an action for
damages in a proper forum for the purpose.
Furthermore, whether private respondent Buen Realty Development Corporation, the alleged
purchaser of the property,

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11 See Article 1315 and 1318, Civil Code; Madrigal & Co. vs. Stevenson & Co., 15 Phil. 38; Salonga vs. Farrales,  105
SCRA 359.
12 Art. 19. Every person must, in the exercise of his rights and in the performance of his duties, act with justice, give

everyone his due, and observe honesty and good faith.

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Ang Yu Asuncion vs. Court of Appeals

has acted in good faith or bad faith and whether or not it should, in any case, be considered bound
to respect the registration of the lis pendens in Civil Case No. 87-41058are matters that must be
independently addressed in appropriate proceedings. Buen Realty, not having been impleaded
in Civil Case No. 87-41058, cannot be held subject to the writ of execution issued by respondent
Judge, let alone ousted from the ownership and possession of the property, without first being
duly afforded its day in court.
We are also unable to agree with petitioners that the Court of Appeals has erred in holding
that the writ of execution varies the terms of the judgment in  Civil Case No. 87-41058, later
affirmed in CA-G.R. CV-21123. The Court of Appeals, in this regard, has observed:
“Finally, the questioned writ of execution is in variance with the 13decision of the trial court as modified by
this Court. As already stated, there was nothing in said decision  that decreed the execution of a deed of
sale between the Cu Unjiengs and respondent lessees, or the fixing of the price of the sale, or the
cancellation of title in the name of petitioner (Limpin vs. IAC, 147 SCRA 516; Pamantasan ng Lungsod ng
Maynila

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13 The decision referred to reads:
“In resume, there was no meeting of the minds between the parties concerning the sale of the property. Absent such requirement, the claim for specific
performance will not lie. Appellants’ demand for actual, moral and exemplary damages will likewise fail as there exists no justifiable ground for its
award. Summary judgment for defendants was properly granted. Courts may render summary judgment when there is no genuine issue as to any
material fact and the moving party is entitled to a judgment as a matter of law (Garcia vs. Court of Appeals, 176 SCRA 815). All requisites obtaining,
the decision of the court a quo is legally justifiable.
“WHEREFORE, finding the appeal unmeritorious, the judgment appealed from is hereby AFFIRMED, but subject to the following modification: The
court a quo in the aforestated decision, gave the plaintiffs—considering the mercurial and uncertain forces in our market economy today. We find no
reason not to grant the same right of first refusal to herein appellants in the event that the subject property is sold for a price in excess of Eleven
Million pesos. No pronouncement as to costs.”

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Ang Yu Asuncion vs. Court of Appeals

vs. IAC, 143 SCRA 311; De Guzman vs. CA, 137 SCRA 730; Pastor vs. CA, 122 SCRA 885).”

It is likewise quite obvious to us that the decision in Civil Case No. 87-41058 could not have
decreed at the time the execution of any deed of sale between the Cu Unjiengs and petitioners.
WHEREFORE, we UPHOLD the Court of Appeals in ultimately setting aside the questioned
Orders, dated 30 August 1991 and 27 September 1991, of the court  a quo. Costs against
petitioners.
SO ORDERED.

          Narvasa  (C.J.),  Padilla,  Bidin,  Regalado,  Davide,

Jr., Romero, Bellosillo, Melo, Quiason, Puno and Mendoza, JJ., concur.
     Feliciano, J., On leave.
     Kapunan, J., No part, being the ponente of the Court of Appeals’ decision sought to be set
aside in this case.

Judgment affirmed.

Note.—Unilateral cancellation of a contract to sell is not warranted if the breach is slight or

casual. (Siska Development Corporation vs. Office of the President of the Philippines,  231 SCRA
674 [1994])