Villonco Realty Company v. Bormaheco

AQUINO, J.:

This action was instituted by Villonco Realty Company against Bormaheco, Inc. and the spouses Francisco N. Cervantes and Rosario N. Cervantes for the specific performance of a supposed contract for the sale of land and the improvements thereon for one million four hundred thousand pesos. Edith Perez de Tagle, as agent, intervened in order to recover her commission. The lower court enforced the sale.

Bormaheco, Inc. and the Cervantes spouses, as supposed vendors, appealed. This Court took cognizance of the appeal because the amount involved is more than P200,000 and the appeal was perfected before Republic Act No. 5440 took effect on September 9, 1968. The facts are as follows: Francisco N. Cervantes and his wife, Rosario P. Navarra-Cervantes, are the owners of lots 3, 15 and 16 located at 245 Buendia Avenue, Makati, Rizal with a total area of three thousand five hundred square meters (TCT Nos. 43530, 43531 and 43532, Exh.

A, A-1 and A-2). The lots were mortgaged to the Development Bank of the Phil (DBP) on April 21, 1959 as security for a loan of P441,000. The mortgage debt was fully paid on July 10, 1969.

Cervantes is the president of Bormaheco, Inc., a dealer and importer of industrial and agricultural machinery. The entire lots are occupied by the building, machinery and equipment of Bormaheco, Inc. and are adjacent to the property of Villonco Realty Company situated at 219 Buendia Avenue. In the early part of February, 1964 there were negotiations for the sale of the said lots and the improvements thereon between Romeo Villonco of Villonco Realty Company "and Bormaheco, Inc., represented by its president, Francisco N. Cervantes, through the intervention of Edith Perez de Tagle, a real estate broker".

In the course of the negotiations, the brothers Romeo Villonco and Teofilo Villonco conferred with Cervantes in his office to discuss the price and terms of the sale. Later, Cervantes "went to see Villonco for the same reason until some agreement" was arrived at.

On a subsequent occasion, Cervantes, accompanied by Edith Perez de Tagle, discussed again the terms of the sale with Villonco. During the negotiations, Villonco Realty Company assumed that the lots belonged to Bormaheco, Inc. and that Cervantes was duly authorized to sell the same. Cervantes did not disclose to the broker and to Villonco Realty Company that the lots were conjugal properties of himself and his wife and that they were mortgaged to the DBP.

Bormaheco, Inc., through Cervantes, made a written offer dated February 12, 1964, to Romeo Villonco for the sale of the property. The offer reads (Exh. B): BORMAHECO, INC.

February 12,1964 Mr. Romeo Villonco Villonco Building Buendia Avenue Makati, Rizal. Dear Mr. Villonco: This is with reference to our telephone conversation this noon on the matter of the sale of our property located at Buendia Avenue, with a total area of 3,500 sq. m., under the following conditions: (1) That we are offering to sell to you the above property at the price of P400.00 per square meter; (2) That a deposit of P100,000.00 must be placed as earnest money on the purchase of the above property which will become part payment of the property in the event that the sale is consummated; (3) That this sale is to be consummated only after I shall have also consummated my purchase of another property located at Sta.

Ana, Manila; (4) That if my negotiations with said property will not be consummated by reason beyond my control, I will return to you your deposit of P100,000 and the sale of my property to you will not also be consummated; and (5) That final negotiations on both properties can be definitely known after 45 days. If the above terms is (are) acceptable to your Board, please issue out the said earnest money in favor of Bormaheco, Inc., and deliver the same thru the bearer, Miss Edith Perez de Tagle. Very truly yours, SGD.

FRANCISCO N. CERVANTES President The property mentioned in Bormaheco's letter was the land of the National Shipyards & Steel Corporation (Nassco), with an area of twenty thousand square meters, located at Punta, Sta. Ana, Manila. At the bidding held on January 17, 1964 that land was awarded to Bormaheco, Inc., the highest bidder, for the price of P552,000.

The Nassco Board of Directors in its resolution of February 18, 1964 authorized the General Manager to sign the necessary contract (Exh. H). On February 28, 1964, the Nassco Acting General Manager wrote a letter to the Economic Coordinator, requesting approval of that resolution.

The Acting Economic Coordinator approved the resolution on March 24, 1964 (Exh. 1). In the meanwhile, Bormaheco, Inc. and Villonco Realty Company continued their negotiations for the sale of the Buendia Avenue property.

Cervantes and Teofilo Villonco had a final conference on February 27, 1964. As a result of that conference Villonco Realty Company, through Teofilo Villonco, in its letter of March 4, 1964 made a revised counter- offer (Romeo Villonco's first counter-offer was dated February 24, 1964, Exh. C) for the purchase of the property.

The counter-offer was accepted by Cervantes as shown in Exhibit D, which is quoted below: VILLONCO REALTY COMPANY V. R. C. Building 219 Buendia Avenue, Makati, Rizal, Philippines March 4, 1964 Mr. Francisco Cervantes. Bormaheco, Inc. 245 Buendia Avenue Makati, Rizal Dear Mr. Cervantes: In reference to the letter of Miss E. Perez de Tagle dated February 12th and 26, 1964 in respect to the terms and conditions on the purchase of your property located at Buendia Ave., Makati, Rizal, with a total area of 3,500 sq. meters., we hereby revise our offer, as follows: 1.

That the price of the property shall be P400.00 per sq. m., including the improvements thereon; 2. That a deposit of P100,000.00 shall be given to you as earnest money which will become as part payment in the event the sale is consummated; 3.

This sale shall be cancelled, only if your deal with another property in Sta. Ana shall not be consummated and in such case, the P100,000-00 earnest money will be returned to us with a 10% interest p.a. However, if our deal with you is finalized, said P100,000.00 will become as part payment for the purchase of your property without interest: 4.

The manner of payment shall be as follows: a. P100,000.00 earnest money and 650,000.00