G.R. No. 18335. January 10, 1923

On November 7, 1918, the plaintiff, Lorenzo Zayco, and the defendant,
Salvador Serra, entered into a contract, the pertinent clauses of which are the
following:

“1. That the party of the first part shall give the party of the second part
an option to buy the Palma Central for the sum of one million pesos
(P1,000,000).

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“4. That in case the purchase of the Palma Central is made and the
party of the second part cannot pay the whole price in cash, then he will be
given a period not exceeding three years within which to make the full payment,
computed from the day of the execution of the contract of sale, provided that
the party of the second part gives a security or bond to the satisfaction of the
party of the first part to guarantee tihe payment of the balance of the purchase
price, with interest thereon at a reasonable rate.

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“6. That this option of the party of the second part to purchase the Palma
Central, or to become a partner of, or join, the party of the first part,
expires on the 30th of June, 1919.

“7. That hereafter, in case of the sale of the Palma Central, or the
formation of a partnership to operate the same, the party of the second part
shall have preference to make such sale, or become a partner, over any other
persons desiring to purchase the central or enter into
partnership.”

Under date of June 28, 1919, the plaintiff, Lorenzo Zayco, through his
attorney, wrote a letter (Exhibit A) to the defendant, Salvador Serra, accepting
the foregoing contract and placing at his disposal a cash order of the Bank of
the Philippine Islands of Iloilo in the amount of P100,000, in part payment of
the price of the Palma Central and Estate. In this letter, notice was
also given to Serra that the Philippine National Bank agreed to transfer his
long term loan of P600,000, to the account of Zayco and to hold the latter
responsible for all the amounts had and received on account of this loan, Serra
to be completely relieved from all responsibility arising therefrom. Offer was
further made in this letter to give the bond required by the contract of
November 7, 1918, to secure the payment of the balance of the price of the
Palma Central and Estate. The letter ended with a demand by Zayco on
Serra to execute the deed of sale. Serra had knowledge of this letter on June
30, 1919, as may be inferred from his answer bearing that date (Exhibit C). On
the following 15th of July, Serra wrote to Zayco’s attorney, stating that the
option contract of November 7, 1918, was cancelled and annulled.

On the same day, June 30, 1919, Zayco brought suit against Serra to compel
him to execute the deed of sale and conveyance of the Palma Central and
Estate and to pay, in addition, P500,000 as damages.

It might be well to make a brief statement of the proceedings had thereafter
until the holding of the trial.

To this complaint the defendant demurred on the ground, among others, that
the contract of November 7, 1918, does not specify the part of the price that
was to be paid in cash and the part that was to be paid within a period not
exceeding three years.

Before the court could pass upon this demurrer, Zayco filed an amended
complaint on September 9, 1919, which was later withdrawn, and substituted by
another one dated October 21, 1919.

To this amended complaint of October 21, 1919, another demurrer was filed,
one of its grounds being the same as that alleged in the first demurrer, to wit,
that the contract of November 7, 1918, does not stipulate what part of the price
was to be paid in cash and what part within a period not exceeding three years.
The court sustained this demurrer and granted the plaintiff a period within
which to amend his complaint.

On January 23, 1920, the last amended complaint was filed in which, for the
first time, an allegation is made that subsequent to the contract of November 7,
1918, and prior to June 28, 1919, a stipulation was made by the plaintiff,
Zayco, and the defendant, Serra, that the sum to be paid in cash on account of
the total price of the sale was P100,000.

A demurrer was also interposed to this last amended complaint, which was
overruled.

The defendant filed his answer on February 27, 1920, containing a general and
specific denial of all and each of the allegations of the complaint and a
special defense consisting in that the contract of November 7, 1918, did not
specify a sufficient consideration on the part of the plaintiff Zayco.

On March 19, 1920, the plaintiff filed a supplemental complaint in which
Philip Whitaker, Venancio Concepcion, and Eusebio E, de Luzuriaga were included
as defendants, and it was alleged that, without the knowledge of the plaintiff
Zayco, the defendant Serra sold the Palma Central and Estate to said
Messrs. Philip Whitaker, Venancio Concepcion, and Eusebio R. de Luzuriaga on
January 29, 1920, for the sum of P1,500,000 on the terms and conditions
specified in said contract. It is prayed in this complaint that, at all events,
the plaintiff Zayco be declared entitled to purchase from the defendant, Serra,
the Palma Central and Estate on the same terms and conditions as those of
the sale to Messrs. Whitaker, Concepcion, and Luzuriaga.

Later Mr. Eusebio R. de Luzuriaga was excluded from this complaint. The
plaintiff Zayco having assigned his rights to Dionisio Inza and Severino
Lizarraga, these parties were admitted to intervene as plaintiffs. The cause
having been tried, the court below rendered judgment absolving the defendants
from the complaint.

By the terms of the contract of November 7, 1918, Zayco was granted the
right: (a) To purchase the Palma Central and Estate until June 30,
1919, and (b) to have preference, after that date, over any other
purchaser making the same terms.

The court below holds that this contract of November 7, 1918, has no
consideration and is, for this reason, null and void. This conclusion, however,
is not supported by the evidence.

It is true that the contract does not state any consideration on the part of
Serra, but it is presumed that there is a consideration in all contracts (art.
1277, Civ. Code). Besides, a consideration can be proved and, in this case,
there is evidence showing its existence.

The Palma Central was in competition with the Bearin Central of
Lizarraga Hermanos and both were doing their best to gain the greatest number of
supporters, which, as is well-known, constitutes the basis and measure of their
development. Zayco owned an estate containing 350 hectares used for cultivating
cane, situated between both centrals in such a way as to constitute an opening
to them from the adjacent estates. Owing to this circumstance, Zayco has been
the subject of solicitations of both centrals, each making the most favorable
offers to win him. Lizarraga Hermanos went so far as to offer to remit his debt,
amounting to P40,000, if he became a supporter of their central. Serra, in turn,
offered to give him 60 per cent of the sugar of his cane milled in the Palma
Central instead of 55 per cent, as allowed by the other centrals, and
besides, they promised to assist him in acquiring this central. Zayco, at last,
decided to become, as he in fact became, a supporter of the Palma
Central.

All this, which preceded and led to the execution of the contract of November
7, 1918, is evidently a sufficient consideration to give life to the contract.
It meant, on the part of Zayco, the waiver of positive benefits which he would
have obtained from Lizarraga Hermanos. It meant at the same time, on the part of
Serra, an expansion of his central and the consequent increase in his production
and profit. Under such circumstances Zayco’s support to the Palma Central
was a prestation of thing or service which positively benefited Serra.

As has been stated, Zayco prays in this action that Serra be compelled to
sell to him the Palma Central in accordance with the contract of November
7, 1918. It having been determined that there exists a consideration for this
contract, the same is binding upon the parties.

However, it is not necessary to view the question from this standpoint. It
can be taken for granted, as contended by the defendants, that the option
contract was not valid for lack of consideration. But it was, at least, an offer
to sell, which was accepted by letter, and of this acceptance the offerer had
knowledge before said offer was withdrawn. The concurrence of both acts—the
offer and the acceptance—could at all events have generated a contract, if none
there was before (arts. 1254 and 1262 of the Civil Code).

However, Zayco’s acceptance, as his letter of June 28, 1919, indicates, could
not, in itself, convert the offer of sale made by Serra in the, document of
November 7, 1918, into a perfect contract. In order for the acceptance to have
this effect, it must be plain and unconditional, and it will not be so if it
involves any new proposal, for in that case it would not mean conformity with
the offer, which is what gives rise to the generation of the contract. The
letter of acceptance of Zayco lacks these requisites.

It should be noted that, according to the terms of the offer, in case the
total of the agreed price of P1,000,000 could not be paid in cash, the balance
was to be paid within a period not exceeding three years. This means that a part
of this price was to be paid in cash. But the amount of this first payment was
not determined. Consequently, when Zayco accepted the offer, tendering the sum
of P100,000 as first payment, his acceptance involved a proposal, not contained
in the offer, that this precisely, and not any other, should be the amount of
the first payment. This proposal, in turn, required acceptance on the part of
Serra. For this reason, Zayco’s acceptance did not imply conformity with the
offer of Serra, but only when the latter shall, in turn, have accepted his
proposal that the amount to be paid in cash was P100,000. Not only was this not
accepted by Serra, but Serra cancelled his offer on July 15, 1919.

An attempt was made to prove the allegation contained in the last amended
complaint to the effect that subsequent to the execution of the contract of
November 7, 1918, Zayco and Serra agreed, as a suppletory stipulation, that the
amount of the first payment to be made in cash should be P100,000. It is said
that this stipulation is contained in a letter sent by Serra to Zayco. This
letter, however, was not introduced in evidence, but was alleged to have been
lost, and secondary evidence of its contents was presented which consisted in
the testimonies of Zayco, his son, Rafael, and Antonio Velez. Upon examination
of the testimony of these witnesses, the same is found so uncertain and
contradictory on many points affecting their veracity as not to be considered
sufficient to prove either the loss of the alleged letter, or its existence and
contents. Moreover, it is strange, if that stipulation ever existed, that Zayco,
in accepting the offer, not only agreed to pay P100,000 in cash, but agreed
also, as part of his acceptance, to assume Serra’s obligations in connection
with the credit of P600,000 given him by the National Bank. It is stranger still
that this stipulation, being so important a part of the contract, was not
alleged in the original complaint, and notwithstanding that in the demurrer to
this complaint attention was called to the fact that this stipulation was
lacking, this allegation was not made in the two successive amended complaints
but only in the fourth, after the court had sustained the demurrer filed on this
ground.

Our conclusion is that the acceptance made by Zayco of Serra’s offer was not
sufficient to give life to a contract and is no ground for compelling Serra to
execute the sale offered.

As to plaintiffs’ claim that they have preference over the defendants,
Messrs. Venancio Concepcion and Phil. C. Whitaker in the purchase of the
Palma Central, two members of this court and the writer of this opinion
believe that the plaintiffs are entitled to this preference, but the majority of
the court hold otherwise, for the reason that the plaintiffs have not formally
offered to repay the defendants Concepcion and Whitaker the price paid by them,
and to assume their obligations incurred under the contract.

For the foregoing reasons, the judgment appealed from is affirmed with the
costs against the appellants. So ordered.

Araullo, C.J., Johnson, Street,
Malcolm, Villamor, Ostrand, and Johns, JJ., concur.