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BOSTON BANK OF PHILIPPINES v. PERLA P. MANALO

FACTS:

The Xavierville Estate, Inc. (XEI) owned parcels of land in Quezon City known as the Xavierville Estate Subdivision. XEI sold some residential lots to The Overseas Bank of Manila (OBM) through a Deed of Sale of Real Estate. XEI continued selling the residential lots as the agent of OBM. XEI also contracted the services of Engr. Carlos Manalo, Jr., who offered to purchase a lot in the Xavierville subdivision. Manalo, Jr. proposed to deduct the amount owed to him for installing a water pump from the downpayment of the lot. XEI agreed, and the parties agreed on Lots 1 and 2 of Block 2. However, the Manalos did not pay the balance of the downpayment because XEI failed to prepare a contract of conditional sale. XEI sent statements of account to the Manalos, including interest on the unpaid balance. XEI demanded the removal of a business sign constructed by Manalo, Jr. on the sidewalk near his house, but he did not comply. XEI turned over its selling operations to OBM and warned Manalo, Jr. to comply with their demand.

The spouses Manalo claimed that they had a contract of sale with XEI to purchase the lots and had constructed a house on the property worth P2,000,000.00 in good faith. During the ejectment case hearing, they offered to pay the balance of the purchase price but it was rejected. They sought specific performance and damages from the Commercial Bank of Manila (CBM), demanding the execution of a deed of absolute sale and the transfer of title to the lots. CBM denied the existence of the contract and filed counterclaims for damages and eviction of the plaintiffs from the property.

The plaintiffs entered into separate Contracts of Conditional Sale with XEI for the purchase of residential lots in the subdivision. Boston Bank claimed ownership of these lots and rejected offers from the plaintiffs to purchase the lots. The trial court ruled in favor of the plaintiffs, ordering the defendant to execute and deliver a Deed of Absolute Sale for the lots, pay damages, attorney's fees, and costs. The defendant appealed the decision, but the Court of Appeals affirmed the ruling with modifications. The defendant argued that there was no perfected contract to sell the lots as there was no agreement on the manner of payment and other terms and conditions.

The petitioner entered into a contract to sell two lots with the respondents. The terms and conditions relating to the payment of the balance of the purchase price were not discussed between the parties. The petitioner argues that it cannot be compelled to convey the property to the respondents because they failed to pay the balance of the downpayment and purchase price. The respondents argue that as long as there is a meeting of the minds as to the price, the contract is valid despite the failure to agree on the payment method. They cite a previous Supreme Court ruling to support their claim.

ISSUES:

  1. Whether the petitioner or its predecessors-in-interest forged a perfect contract to sell over the property with the respondents.

  2. Whether the petitioner is estopped from contending that no such contract was forged by the parties.

  3. Whether the respondents have a cause of action against the petitioner for specific performance.

RULING:

  1. No perfected contract to sell. The Supreme Court ruled that there was no perfected contract to sell between the parties. The parties failed to agree on the essential element of the manner of payment of the balance of the purchase price, rendering the contract incomplete and unenforceable. The absence of a clear agreement on the schedule of payment of the balance meant that no binding juridical relation was established.

  2. Not estopped. The Supreme Court held that the petitioner is not estopped from asserting that XEI or OBM, on one hand, and the respondents, on the other, failed to forge a perfected contract to sell. The appellate court’s decision was found to be against the law and unsupported by evidence.

  3. No cause of action for specific performance. The respondents do not have a cause of action for specific performance against the petitioner since there was no perfected contract to sell. The Supreme Court reversed and set aside the appellate court’s decision and ordered the complaint to be dismissed.

PRINCIPLES:

  1. Perfected Contract of Sale or Contract to Sell (Article 1458 of the Civil Code) Requires a meeting of the minds upon the thing sold and the price, including the manner of payment.

  2. Essential Elements Both price and the manner of payment must be agreed upon. Without an agreement on the manner of payment, there is no perfected contract of sale or contract to sell.

  3. Article 1469 of the New Civil Code Price can be certain if the terms in the contract provide a method or criterion for its ascertainment.

  4. Incompleteness and Unenforceability A contract lacking in essential elements such as price or manner of payment is incomplete and unenforceable.

  5. Doctrine of Estoppel Does not apply when there is no error on the application of the substantive law by the lower courts.

  6. Republic Act No. 6552 (Maceda Law) Applies only to perfected contracts to sell and not to contracts that are incomplete or unenforceable.

  7. Judicial Demand for Rescission Filing a complaint for ejectment constitutes judicial demand for rescission.

  8. Course of Dealings, Usage, and Habit Must be sufficiently proven to be incorporated into the contract.

  9. Article 1169 of the Civil Code Deals with delay and its effects on contractual obligations; however, the mere delay in valueless performance does not bind beyond explicit contractual terms.