United Muslim and Christian Urban Poor Association, Inc. represented by its President, Manuel v. Buen, vs. BRYC-V Development and Sea Foods Corporation - G.R. No. 179653 - July 31, 2009

Facts:

• Respondent Sea Foods Corporation (SFC) was the registered owner of Lot No. 300 located in lower Calainan, Zamboanga City where a group of squatters were occupying the said lot.
• In 1991, the squatters created an organization (hereinafter “petitioner”) and through its President, initiated negotiations for the purchase of the subject property.
• Both parties executed a Letter of Intent to Sell by Sea Foods Corporation and Letter of Intent to Purchase by UMCUPAI. The former was executed to accommodate UMCUPAI and facilitate its loan application with National Home Mortgage Finance Corporation (NHMFC).
• Accordingly, petitioner had a pending loan application with NHMFC wherein loan proceeds shall be used to purchase subject property.
• The intended sale did not materialize as not all members of petitioner organization were willing to join the undertaking. Hence, the subject property was subdivided into three lots namely Lot No. 300-A, Lot No. 300-B, and Lot No. 300-C. The first two lots were duly acquired by petitioner while the third lot was failed to be acquired by petitioner due to lack of funds.
• While a three-month grace period was given by respondent SFC to petitioner for them to acquire the said lot, the grace period lapsed while petitioner failed to acquire the loan to pay for the lot.
• On July 20, 1995, SFC sold Lot No. 300-C to respondent BRYC-V Development Corporation.
• Petitioner filed a complaint with the Regional Trial Court seeking to annul the sale of Lot No. 300-C contending that the sale between respondents violated the valid and subsisting agreement between the petitioner and SFC as embodied in the Letter of Intent.

Issue:

• Whether or not the Letter of Intent to Sell and Letter of Intent to Buy is a bilateral reciprocal contract which could be a source of obligation per Article 1156 of the New Civil Code

Ruling:

• The Court ruled that the Letter of Intent was executed merely as a declaration of intent to sell and does not contain a promise to sell the subject lot. It was neither a contract to sell nor a conditional contract of sale. In effect, the Letter of Intent executed by both parties did not create an obligation between them.