Cronico vs. J.M. Tuason & Co., Inc.

A unilateral promise to sell is not binding on the promisor unless supported by a consideration distinct from the price, and a person who is neither a party to nor principally or subsidiarily obliged by a contract to sell has no standing to bring an action for its annulment. A stipulation in a contract referencing a third party's claim does not confer enforceable rights upon that third party unless it constitutes a genuine stipulation pour autrui.

Respondent J. M. Tuason & Co., Inc. was the registered owner of Lot No. 22, Block 461, Sta. Mesa Heights Subdivision, Quezon City, covered by Transfer Certificate of Title No. 49235. The company's real estate affairs were managed by Gregorio Araneta, Inc., through its Real Estate Department head Benjamin F. Bautista. Petitioner Florencia Cronico, later substituted by Lucille E. Venturanza, claimed priority rights to purchase the lot based on a chain of transfers traceable to Pedro Deudor, whose rights allegedly originated from a Compromise Agreement with the respondent company. That Compromise Agreement, however, had been rescinded and set aside in prior Supreme Court decisions.

In March 1962, Florencia Cronico, with the assistance of Mary E. Venturanza, offered to purchase Lot No. 22, Block 461, Sta. Mesa Heights Subdivision from J. M. Tuason & Co., Inc., whose real estate affairs were handled by Gregorio Araneta, Inc. through its Real Estate Department manager Benjamin F. Bautista. Cronico was required to present proofs of her priority rights to the lot, and on March 8, 1962, she exhibited documents purporting to establish such rights. Around the same time, Claudio Ramirez also learned that the lot was being sold. The occupants of the lot, Juanita Semilla and Pedro Fernandez, who held priority rights, expressed willingness to waive those rights in favor of Ramirez, with Fernandez reserving a condition that a small portion where his house stood be sold to him. Both Cronico and Ramirez sent separate letters to the company expressing their desire to purchase the lot and requesting information on the area, price, and terms. Two other prospective buyers, Bonifacio Chung and Angeles Henson, initially showed interest but later withdrew.

On March 20, 1962, the company sent separate reply letters to all prospective buyers, including Cronico and Ramirez, stating that the lot was available for sale on a "first come first served" basis under specified conditions. These letters were deposited at the Manila Post Office at 11:00 a.m. on March 21, 1962 by registered mail. On that same day, Cronico visited the company's office and was informed by Bautista that the reply letters had already been mailed. Cronico and Mary Venturanza immediately proceeded to the Manila Post Office, where Cronico was able to retrieve her registered letter at approximately 3:30 p.m. — taking delivery at the entry section of the post office, before the letter had passed through the normal course of registered mail delivery. She then went directly to the office of Gregorio Araneta, Inc. in Escolta, Manila, and presented the letter to Bautista. Since she had no money, she requested Mary Venturanza to issue a check for ₱33,572.00 to cover the down payment. Bautista did not accept the check, advising Cronico that Gregorio Araneta II would decide whose offer to accept only after the company received the registry return cards from the registered letters sent to all offerors.

Ramirez, for his part, received his reply letter through normal postal delivery at the San Francisco del Monte post office in Quezon City on the morning of March 22, 1962. He proceeded to Bautista's office the same morning and verbally accepted the conditions stated in the company's letter. Bautista advised him to wait for the decision of Gregorio Araneta II. The following day, March 23, 1962, Ramirez submitted a written letter confirming his verbal acceptance of the terms and conditions. On March 31, 1962, Atty. Jose E. Patangco, on behalf of Ramirez, wrote the company requesting early execution of the contract to sell, enclosing a check for ₱33,572.00 as down payment. The request was favorably considered, and on April 2, 1962, the company and Ramirez executed a contract to sell for a total price of ₱167,896.00.

Meanwhile, on March 27, 1962, the company received a letter from Atty. Godofredo Asuncion on behalf of Cronico requesting that the lot be sold to her, with an enclosed check for the down payment, which was returned. On April 4, 1962, the company informed Cronico that it had decided to sell the lot to Ramirez. On April 28, 1962, Cronico filed a complaint in the Court of First Instance of Rizal, Quezon City Branch, seeking to annul and set aside the contract to sell between the company and Ramirez. On November 19, 1968, Cronico filed a motion for substitution of party plaintiff, having transferred whatever rights and interests she had over the lot to Dr. Lucille E. Venturanza by deed of assignment dated July 5, 1968. The trial court granted the substitution and rendered judgment in favor of the plaintiff, declaring the contract to sell to Ramirez null and void and ordering the company to execute a contract to sell in favor of Venturanza. The Court of Appeals reversed, dismissing the complaint, and Cronico's assignee elevated the matter to the Supreme Court by petition for certiorari.

• Regularity of Mail Delivery: Petitioner contended that the chief of the general service section of the Manila post office, Gaspar Bautista, testified that the means by which Cronico received her letter was "very regular," and that the manner by which offerees were to receive their letters was not announced by the offeror, such that the rule of the fittest should govern and Cronico proved her diligence and resourcefulness over Ramirez.
• Financial Capability as an Afterthought: Petitioner averred that the issue of Cronico's financial capability to purchase the land was not raised in the answer of the defendant company and was developed as an afterthought during trial.
• Consideration for the Promise to Sell: Petitioner argued that the promise to sell was supported by consideration because she had established her link as successor of Gregorio Venturanza, who bought the lot from Juan Ramos, who in turn acquired it from Pedro Deudor, and that Clause Seventh of the Compromise Agreement between the respondent company and the Deudors obligated the company to sell to the buyers of the Deudors listed in Annex B thereof.
• Acceptance Before Withdrawal: Petitioner maintained that she had accepted the promise before it was withdrawn and that she was the first to comply with the terms of the letter-offer, thereby becoming the obligee or creditor of the respondent company.
• Stipulation Pour Autrui: Petitioner asserted that the contract to sell executed between the company and Ramirez contained a stipulation for her benefit — wherein Ramirez acknowledged being informed of Cronico's offer and agreed to hold the company free from her claims — which she could enforce as a stipulation pour autrui.

• Regular Delivery of the Letter-Offer: Whether the Court of Appeals erred in holding that Florencia Cronico obtained the respondent company's letter-offer dated March 20, 1962 by means of irregular and premature delivery.
• Consideration Distinct from Price: Whether the Court of Appeals erred in holding that the records do not show that the respondent company's letter-offer or unilateral promise to sell was supported by a consideration other than the selling price.
• Standing to Sue for Annulment: Whether the Court of Appeals erred in holding that Cronico is not principally nor subsidiarily obliged under the contract to sell executed between the company and Ramirez and hence may not bring suit to annul the same.
• Reversal and Dismissal: Whether the Court of Appeals erred in reversing the trial court and dismissing the complaint.

• Regular Delivery of the Letter-Offer: No. The Court concurred with the Court of Appeals' finding that Cronico fell short of the yardstick of regularity, having taken delivery of the registered letter at the entry section of the Manila post office without waiting for normal delivery, in violation of the "first come first served" condition.
• Consideration Distinct from Price: No. The Compromise Agreement upon which Cronico predicated her right to buy the lot had been rescinded and set aside, and no consideration distinct from the selling price was established as required by Article 1479 of the Civil Code.
• Standing to Sue for Annulment: No. Cronico was not a party to the contract to sell between the company and Ramirez, was not principally or subsidiarily obliged thereby, and the stipulation referencing her claim was not a stipulation pour autrui but an indemnity clause for the company's benefit.
• Reversal and Dismissal: No. The Court of Appeals committed none of the errors assigned, and its decision reversing the trial court and dismissing the complaint was affirmed.

• Regular Delivery of the Letter-Offer: The company imposed a "first come first served" condition in its letter-offer to all prospective buyers. While postal authorities may tolerate a person claiming a registered letter at the entry section before normal delivery, doing so violated the spirit of the "first come first served" condition, which contemplated the ordinary course of registered mail. Cronico, upon being tipped by Bautista that the letters had been mailed on March 21, 1962 at 11:00 a.m., immediately went to the post office and claimed her letter at approximately 3:30 p.m. that same day — before the letter could have been delivered through normal channels. Ramirez, by contrast, received his letter through regular postal delivery on the morning of March 22, 1962 and proceeded to the company's office the same day to accept. The Court concurred with the Court of Appeals that "Viewing the case from the standpoint of regularity of notice, plaintiff-appellee falls short of the yardstick."

• Consideration Distinct from Price: Article 1479 of the Civil Code requires that a unilateral promise to sell be supported by a consideration distinct from the price for it to be binding on the promisor. The promisee bears the burden of proving such distinct consideration. Cronico predicated her right on Clause Seventh of the Compromise Agreement between the company and the Deudors, which allegedly obligated the company to sell to the buyers of the Deudors listed in Annex B. However, that Compromise Agreement had already been rescinded and set aside in Deudor vs. J. M. Tuason & Co., Inc. and J. M. Tuason & Co., Inc. vs. Sanvictores. Absent a valid consideration apart from the selling price, the unilateral promise to sell was not binding. The Court also noted serious doubts as to Cronico's financial capability, she earning only ₱150.00 monthly and having relied on Mary Venturanza's check for the down payment, suggesting she was a mere front for the Venturanzas. Realtors are entitled to choose buyers to avoid delinquent payments and costly litigation.

• Standing to Sue for Annulment: An action for annulment of a contract may be brought only by parties to the contract or those principally or subsidiarily obliged thereby. Cronico was not a party to the contract to sell between the company and Ramirez. The stipulation in that contract — wherein Ramirez acknowledged being informed of Cronico's offer and agreed to hold the company harmless from her claims — was not a stipulation pour autrui. It conferred no enforceable right upon Cronico and imposed no obligation upon her; it was solely for the company's benefit as an indemnity clause. Her so-called acceptance was ineffective because she violated the "first come first served" condition, and her formal letter of acceptance was received by the company only on March 27, 1962, whereas Ramirez had confirmed his acceptance in writing on March 23, 1962.

• Reversal and Dismissal: Having found no merit in any of the assigned errors — the irregularity of Cronico's receipt of the letter-offer, the absence of consideration distinct from the price, and her lack of standing to annul the contract — the Court concluded that the Court of Appeals committed none of the errors assigned and affirmed its decision dismissing the complaint.

• Unilateral Promise to Sell (Article 1479, Civil Code) — A unilateral promise to sell is not binding on the promisor unless supported by a consideration distinct from the price. The promisee bears the burden of proving such distinct consideration. In this case, the Compromise Agreement relied upon as the source of consideration had been rescinded, and no other consideration apart from the selling price was established, rendering the promise unenforceable.
• Stipulation Pour Autrui — A stipulation in a contract that merely references a third party's claim and provides for indemnity in favor of one of the contracting parties does not constitute a stipulation pour autrui conferring enforceable rights upon the third party. The stipulation must actually confer a right arising from the contract that the third party may enforce. Here, the clause in the contract to sell acknowledging Cronico's claim and binding Ramirez to hold the company harmless was solely for the company's benefit and created no enforceable right in Cronico's favor.
• Standing to Annul a Contract — Only parties to a contract or persons principally or subsidiarily obliged thereby may maintain an action for its annulment. A third person who is not a party to and not obliged under a contract to sell has no standing to seek its annulment.

• "In order that a unilateral promise may be binding upon the promisor, Article 1479, Civil Code of the Philippines, requires the concurrence of the condition that the promise be 'supported by a consideration distinct from the price. Accordingly, the promisee can not compel the promisor to comply with the promise, unless the former establishes the existence of said distinct consideration." — This passage states the controlling rule on option contracts under Article 1479 and the burden of proof on the promisee, central to the Court's ruling that the promise to sell was unenforceable.

• "The foregoing clause cannot by any stretch of the imagination be considered as a clause 'pour autrui' or for the benefit of the petitioner. The stipulation does not confer any right arising from the contract that may be enforced by the petitioner against any of the parties thereto." — This passage defines the limits of the stipulation pour autrui doctrine and explains why the indemnity clause in the contract to sell did not confer standing upon Cronico to annul the contract.

• "While this procedure may be tolerated by the postal authorities, the act of the petitioner in taking delivery of the registered letter addressed to her at the entry section of the Manila post office without waiting for said letter to be delivered to her in due course of mail is a violation of the 'first come first served' condition imposed by the respondent J. M. Tuason & Co., Inc." — This passage articulates the Court's reasoning on why premature retrieval of a registered letter-offer, though tolerated by postal authorities, violated the conditions of the offer and rendered the purported acceptance ineffective.

• Deudor vs. J. M. Tuason & Co., Inc., 2 SCRA 129 — Cited as authority that the Compromise Agreement upon which petitioner predicated her right to buy the lot had been rescinded and set aside, thereby eliminating any consideration distinct from the price for the promise to sell.
• J. M. Tuason & Co., Inc. vs. Sanvictores, 4 SCRA 123, 126 — Cited together with Deudor for the same proposition: the rescission of the Compromise Agreement removed the legal basis for petitioner's claimed priority rights.
• Sanchez vs. Rigos, 45 SCRA 368, 372-373 — Cited for the rule that the promisee bears the burden of proving the existence of a consideration distinct from the price in a unilateral promise to sell under Article 1479 of the Civil Code.

• Article 1479, Civil Code of the Philippines — Provides that a unilateral promise to sell is not binding unless supported by a consideration distinct from the price. Applied to hold that petitioner's promise to sell was unenforceable because no consideration apart from the selling price was established, the Compromise Agreement having been rescinded.

Makasiar, Martin, and Guerrero, JJ., concurred. Teehankee (Chairman) concurred in the result. Muñoz Palma, J., took no part.