Salonga vs. Farrales

A contract to sell cannot be enforced through specific performance where the offeree rejected the offer and no meeting of the minds occurred on the price or manner of payment; social justice under the Constitution cannot be invoked to compel a property owner to sell land to a lessee who has no perfected contract of sale.

Julita B. Farrales is the titled owner of a parcel of residential land in Sta. Rita, Olongapo City, acquired from one Leoncio Dytuco, who in turn acquired it from the Corpuz family. Consolacion Duque Salonga, assisted by her husband Wenceslao Salonga, had been in possession of a 156-square-meter portion of that land as a lessee even before Farrales acquired title, having erected a house of strong materials thereon and paying rentals first to the original owners and later to Farrales. The dispute arose against the backdrop of a final and executory ejectment judgment in favor of Farrales against Salonga and other lessees, after which Farrales sold portions of the land to three co-lessees and reached a compromise with a fourth, leaving Salonga as the sole remaining defendant against whom the writ of execution for removal of her house was to be enforced.

Consolacion Duque Salonga, assisted by her husband Wenceslao Salonga, was a lessee in possession of approximately 156 square meters of residential land in Sta. Rita, Olongapo City, on which she had erected a house of strong materials. The land was titled in the name of Julita B. Farrales, who had acquired it from Leoncio Dytuco, who in turn had purchased it from the Corpuz family. Salonga had been paying rentals on the portion she occupied, first to the original owners and later to Farrales, even before Farrales acquired title.

Sometime prior to November 1968, Farrales filed an ejectment case for non-payment of rentals against Salonga and her husband, jointly with other lessees of other portions of the land — Jorge Carvajal, Catalino Pascua, Marciala Zarsadias, and the spouses Cesar and Rosalina Quiocson — docketed as Civil Case No. 650 in the Olongapo City Court. On November 20, 1968, and reiterated on February 4, 1970, a decision was rendered in favor of Farrales, ordering the defendants to vacate the portions occupied by them and to pay rentals in arrears, attorney's fees, and costs. The decision was elevated on appeal to the Court of First Instance of Zambales and Olongapo City as Civil Case No. 581-0, and on November 11, 1971, Branch III thereof affirmed the decision with modification only as to the amount of rental arrears. That affirmatory decision became final and executory, and the records were remanded to the City Court for execution. The corresponding writ of execution was partially satisfied as far as Salonga was concerned, by payment of all rentals in arrears, although the removal of her house from the land remained to be carried out.

Even before the rendition of the affirmatory decision, Farrales had sold to Catalino Pascua, Marciala Zarsadias, and the spouses Cesar and Rosalina Quiocson the areas respectively occupied by them. With respect to Jorge Carvajal, a suit was filed between him and Farrales that resulted in a compromise agreement under which Farrales undertook to pay for Carvajal's house on her land. Thus, the ejectment judgment was being executed only against Salonga. Salonga, in view of the sales to the three other tenants, offered to purchase from Farrales the 156-square-meter portion where her house stood, but Farrales persistently refused the offer and instead insisted on executing the ejectment judgment through the Sheriff of Olongapo City.

On January 2, 1973, Salonga filed a complaint for specific performance against Farrales and the Sheriff of Olongapo City before the CFI of Zambales and Olongapo City, docketed as Civil Case No. 1144-0, seeking an order compelling Farrales to sell the land to her and enjoining the defendants from disturbing her possession. The trial court, after trial on the merits, dismissed the complaint, finding that Salonga's own judicial admissions showed Farrales had persistently refused the offer to purchase, and that Salonga herself testified no agreement was finalized because she had no cash and no installment arrangement was ever negotiated. The trial court concluded that no meeting of the minds took place and no contract of sale was perfected. On August 13, 1973, Salonga appealed to the Court of Appeals, which certified the case to the Supreme Court on September 15, 1977, on the ground that the issue raised is purely legal. Meanwhile, on October 21, 1974, Salonga's house was demolished and the land was delivered to Farrales, who was then in possession.

• Specific Performance: Petitioner maintained that the court a quo erred in dismissing the complaint and denying her relief to purchase from Farrales the 156-square-meter parcel of land on which her house stood, arguing that since Farrales had sold to three other co-lessees the portions they respectively occupied, she must likewise sell to petitioner the portion occupied by petitioner.
• Social Justice: Petitioner argued that the court a quo erred in not applying Section 6, Article II of the New Constitution, which controls, delimits, and regulates property rights and private gains, to the case at bar.

• Mootness of Appeal: Respondent Farrales moved to dismiss the appeal on the ground that it had become moot and academic because Salonga's house was demolished on October 21, 1974, the land was delivered to her, and she was already in possession.
• No Perfected Contract: Respondent Farrales opposed the issuance of a preliminary injunction and supported the trial court's dismissal on the ground that no compromise agreement or contract of sale was perfected between the parties, Farrales having persistently refused petitioner's offer to buy.

• Perfection of Contract to Sell: Whether the court a quo erred in dismissing the complaint for specific performance on the ground that no legally enforceable compromise agreement existed upon which Farrales could be compelled to sell the land to Salonga.
• Rights of Lessee: Whether a lessee who has built improvements on leased land has the right to compel the lessor to sell the land to her.
• Social Justice: Whether Section 6, Article II of the New Constitution may be invoked to compel a property owner to sell land to a lessee in the absence of a perfected contract.

• Perfection of Contract to Sell: No. The complaint was correctly dismissed because no contract to sell was perfected, Farrales having rejected Salonga's offer and no meeting of the minds having occurred on the price or manner of payment. Consent being an essential element of a contract, its absence renders the contract non-existent and unenforceable.
• Rights of Lessee: No. As lessees, the Salongas are governed by Article 1678 of the Civil Code, not Article 448; they may remove the improvements should the lessor refuse to reimburse them, but they do not have the right to buy the land.
• Social Justice: No. Social justice cannot be invoked to trample on the rights of property owners who are likewise entitled to protection under the Constitution and laws, and cannot nullify the law on obligations and contracts.

• Perfection of Contract to Sell: Consent is an essential element for the existence of a contract, and where it is wanting, the contract is non-existent. The essence of consent is the conformity of the parties on the terms of the contract — the acceptance by one of the offer made by the other. A contract to sell is a bilateral contract; where there is merely an offer by one party without acceptance by the other, there is no consent. In this case, the offeree Farrales not only did not accept but rejected the offer of the Salongas to buy the land. Salonga's own judicial admissions in the complaint confirmed that Farrales "persistently refused such offer," and her testimony on the witness stand admitted that no agreement was finalized because Farrales wanted payment in cash while Salonga had no money and no installment arrangement was ever negotiated. A definite agreement on the manner of payment of the purchase price is an essential element in the formation of a binding and enforceable contract of sale. Since contracts are enforceable only from the moment of perfection (Articles 1315 and 1475, Civil Code), and no perfected contract existed, there was nothing to enforce. The fact that Farrales sold portions to other lessees does not change the situation because, as to those other lessees, a perfected contract of sale existed — which was not the case with Salonga. Moreover, the alleged compromise agreement to sell is unenforceable under the Statute of Frauds (Article 1403, par. [2], Subpar. [e], Civil Code), further rendering the action for specific performance ineffective.
• Rights of Lessee: The Salongas, as lessees, are neither builders in good faith nor in bad faith. Their rights are governed not by Article 448 but by Article 1678 of the Civil Code, which provides that if the lessee makes useful improvements in good faith, the lessor upon termination of the lease shall pay one-half the value of the improvements, and should the lessor refuse to reimburse, the lessee may remove the improvements. The lessee, however, does not have the right to buy the land. The sale to the three other co-lessees does not create an obligation to sell to Salonga, because those sales involved perfected contracts — a circumstance absent here.
• Social Justice: Social justice cannot be invoked to trample on the rights of property owners who, under the Constitution and laws, are also entitled to protection. The social justice consecrated in the Constitution was not intended to take away rights from one person and give them to another who is not entitled thereto. The plea for social justice cannot nullify the law on obligations and contracts and is beyond the power of the Court to grant.

• Essence of Consent in Contracts — Consent is an essential element for the existence of a contract; where it is wanting, the contract is non-existent. The essence of consent is the conformity of the parties on the terms of the contract, the acceptance by one of the offer made by the other. In a contract to sell, which is bilateral, a mere offer by one party without acceptance by the other means there is no consent and therefore no contract. Applied here: Farrales rejected Salonga's offer, and Salonga admitted no agreement on payment terms was reached, so no contract to sell was perfected.
• Definite Agreement on Manner of Payment as Essential Element — A definite agreement on the manner of payment of the purchase price is an essential element in the formation of a binding and enforceable contract of sale. Applied here: Salonga had no cash and no installment arrangement was negotiated, so no firm sales agreement was perfected.
• Rights of Lessee Under Article 1678 — A lessee who builds useful improvements in good faith on leased land is entitled, upon termination of the lease, to reimbursement of one-half the value of the improvements from the lessor, or to remove the improvements if the lessor refuses to reimburse. The lessee does not, however, have the right to buy the land. Applied here: the Salongas' rights as lessees are governed by Article 1678, not Article 448, and they cannot compel Farrales to sell.
• Social Justice as Not Override of Property Rights — Social justice cannot be invoked to trample on the rights of property owners who are likewise entitled to constitutional and legal protection. It was not intended to take away rights from one person and give them to another not entitled thereto, and cannot nullify the law on obligations and contracts.

• "It is elementary that consent is an essential element for the existence of a contract, and where it is wanting, the contract is non-existent. The essence of consent is the conformity of the parties on the terms of the contract, the acceptance by one of the offer made by the other. The contract to sell is a bilateral contract. Where there is merely an offer by one party, without the acceptance of the other, there is no consent." — This passage articulates the ratio decidendi on the necessity of consent for the perfection of a contract to sell, establishing why the action for specific performance must fail.
• "social justice cannot be invoked to trample on the rights of property owners who under our Constitution and laws are also entitled to protection. The social justice consecrated in our constitution was not intended to take away rights from a person and give them to another who is not entitled thereto. Evidently, the plea for social justice cannot nullify the law on obligations and contracts, and is, therefore, beyond the power of the Court to grant." — This passage defines the boundary between social justice principles and vested property rights, a formulation frequently cited in subsequent jurisprudence on the limits of social justice.

• Velasco vs. Court of Appeals, G.R. No. L-31018, June 29, 1973 — Controlling precedent followed. The Supreme Court ruled in that case that where the parties admit they still had to agree on how and when the down payment and installment payments were to be paid, no definite and firm sales agreement was perfected, and that a definite agreement on the manner of payment of the purchase price is an essential element in the formation of a binding and enforceable contract of sale. Applied on all fours to the present case.
• Southwestern University vs. Salvador, 90 SCRA 318 — Followed for the proposition that a lessee does not have the right to buy the land leased; the lessee's rights are governed by Article 1678 of the Civil Code, not Article 448.
• Gamboa vs. Gonzales, 17 Phil. 381 — Cited for the principle that where there is merely an offer by one party without acceptance by the other, there is no consent and therefore no contract.
• Pacific Oxygen and Acetylene Co. vs. Central Bank, G.R. No. L-21881, March 1, 1968 — Cited for the rule that contracts are enforceable only from the moment of perfection, pursuant to Articles 1315 and 1475 of the Civil Code.
• Atkins, Kroll and Co., Inc. vs. B. Cua Hian Teck, G.R. No. L-9817, January 31, 1958 — Cited alongside Pacific Oxygen for the same proposition on the moment of enforceability of contracts.

• Article 1315, Civil Code of the Philippines — Contracts are perfected by mere consent and are binding not only upon what has been expressly stipulated but also upon all consequences which, according to their nature, may be in keeping with good faith, usage, and law. Applied to show that since no consent existed, no contract was perfected and nothing could be enforced.
• Article 1475, Civil Code of the Philippines — A contract of sale is perfected at the moment there is a meeting of the minds on the thing which is the object of the contract and on the price. Applied to demonstrate that no meeting of the minds occurred between Farrales and Salonga on the price or manner of payment.
• Article 1403(2)(e), Civil Code of the Philippines (Statute of Frauds) — An agreement for the sale of real property or of an interest therein is unenforceable unless it is in writing and subscribed by the party charged. Applied to render the alleged compromise agreement to sell the land all the more unenforceable.
• Article 1678, Civil Code of the Philippines — Governs the rights of a lessee who makes useful improvements in good faith: the lessor, upon termination of the lease, shall pay one-half the value of the improvements, and if the lessor refuses, the lessee may remove the improvements. Applied to establish that the Salongas, as lessees, have no right to buy the land but may remove their improvements.
• Section 6, Article II, 1973 Constitution — The State shall promote social justice to ensure the dignity, welfare, and security of all the people. Invoked by petitioner but held inapplicable, as social justice cannot override property rights or nullify the law on obligations and contracts.

Teehankee (Chairman), Makasiar, Guerrero, and Melencio-Herrera, JJ., concurred.