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MANILA METAL CONTAINER CORPORATION v. PHILIPPINE NATIONAL BANK

FACTS:

This case involves a dispute between Manila Metal Container Corporation (MMCC) and Philippine National Bank (PNB) over a property in Mandaluyong, Metro Manila. MMCC secured a loan from PNB and executed a real estate mortgage over the property. Additional loans were obtained by MMCC, and amendments to the mortgage were executed. PNB eventually filed a petition for extrajudicial foreclosure of the mortgage, which resulted in the property being sold at public auction with PNB as the winning bidder.

MMCC requested an extension of time to redeem the property, but PNB rejected the request, stating that they do not accept "partial redemption." As a result, the property title was cancelled and a new title was issued in favor of PNB. MMCC attempted to repurchase the property by remitting a deposit, but PNB rejected the offer and proposed a higher amount for the sale. MMCC rejected PNB's proposal and insisted on the agreed purchase price.

MMCC filed a complaint against PNB for annulment of mortgage, mortgage foreclosure, delivery of title, or specific performance with damages. MMCC claimed that PNB accepted their down payment for the redemption/repurchase price and cannot demand a higher amount. PNB argued that it acquired ownership over the property and that no contract of sale was perfected between the parties. The trial court dismissed the complaint but ordered PNB to refund the deposit made by MMCC. MMCC's claim for damages and counterclaim were also dismissed. The Court of Appeals affirmed the trial court's ruling, prompting MMCC to file a petition for review on certiorari, alleging that the Court of Appeals erred.

ISSUES:

  1. Whether there is a perfected contract of sale between the petitioner and respondent.

  2. Whether the amount of PHP725,000.00 paid by the petitioner is considered as earnest money.

  3. Whether the failure of the petitioner to signify its conformity to the terms contained in the respondent's letter means that there was no valid and legally enforceable contract of sale between the parties.

  4. Whether the non-payment by the petitioner of the balance of the offered price within the specified period constitutes a valid and legally enforceable contract of sale.

  5. Whether the letters of the petitioner offering to buy the subject property at different amounts are proof that there is no perfected contract of sale.

  6. Whether there was a perfected contract of sale between the parties.

  7. Whether the acceptance by the respondent of the amount as a deposit constituted a binding contract.

  8. Whether the acceptance of petitioner's offer was unqualified or a counter-offer.

  9. Whether the SAMD, without authorization from respondent's Board of Directors, had the power to accept petitioner's offer.

  10. Whether the payment of earnest money establishes the existence of a perfected contract of sale.

  11. Whether there was a perfected contract of sale over the subject property.

RULING:

  1. The Court of Appeals (CA) ruled that there was no perfected contract of sale between the petitioner and respondent. The negotiations between the parties did not prosper and the petitioner did not pay the balance of the purchase price within the specified period. Therefore, there was no contract to rescind.

  2. The CA dismissed the claim that the amount of PHP725,000.00 paid by the petitioner is considered as earnest money. No evidence was presented to support this claim.

  3. The CA held that the petitioner's failure to signify its conformity to the terms contained in the respondent's letter means that there was no valid and legally enforceable contract of sale between the parties.

  4. The CA ruled that the non-payment by the petitioner of the balance of the offered price within the specified period constitutes no valid and legally enforceable contract of sale between the parties.

  5. The CA considered the letters of the petitioner offering to buy the subject property at different amounts as proof that there is no perfected contract of sale.

  6. The appellate court correctly ruled that there was no perfected contract of sale between the parties on June 4, 1985. A contract of sale requires the meeting of minds between the contracting parties, which includes the offer and acceptance upon the object and cause of the contract. Furthermore, the absence of an essential element, such as the fixing of a price certain, negates the existence of a perfected contract of sale.

  7. The acceptance of petitioner's offer was a counter-offer. The statement of account prepared by the SAMD only computed the amount petitioner was obliged to pay in case respondent agreed to sell the property, including various expenses. It did not manifest an unqualified acceptance of petitioner's offer.

  8. The SAMD did not have the authority to accept petitioner's offer without authorization from respondent's Board of Directors. Contracts or acts of a corporation must be made either by the board of directors or by a corporate agent duly authorized by the board.

  9. The payment of earnest money does not establish the existence of a perfected contract of sale. The giving of earnest money can only be considered as part of the price and as proof of the perfection of the contract if there is proof of the concurrence of all the essential elements of a contract of sale. In this case, the payment of P725,000.00 was merely a deposit to be applied as part of the purchase price of the property, subject to the approval of the PNB Board. Thus, without the acceptance of the offer on these terms, no perfected contract of sale would arise.

  10. There was no perfected contract of sale between the parties over the subject property. The respondent had accepted the offer to purchase the property for a reduced price, but this amounted to an amendment of its qualified acceptance or an amended counter-offer. The acceptance was still subject to several terms and conditions imposed by the respondent. Since the petitioner refused to conform to the amended counter-offer and requested a reconsideration, the respondent's offer to refund the deposit indicated that there was no perfected contract of sale.

PRINCIPLES:

  • A valid and binding agreement, including a definite agreement on the amount and manner of payment of the price, is essential in the formation of a binding and enforceable contract of sale.

  • The concept of a "suspensive condition" presupposes the existence of a valid and binding agreement, and upon the fulfillment of the condition, the obligation becomes effective.

  • The non-payment of the balance of the purchase price within the specified period may result in no valid and legally enforceable contract of sale.

  • A contract is a meeting of minds between two parties wherein one obligates themselves to give something or render a service. It requires the consent of the parties, a certain object, and a cause. Once perfected, the obligations arising from the contract should be complied with in good faith. (Article 1318, New Civil Code)

  • A contract of sale is perfected upon the meeting of the minds of the parties as to the object and price, and it begins with negotiation, followed by perfection upon the concurrence of the essential elements, and culminates in consummation when the parties perform their respective undertakings. (San Miguel Properties Philippines, Inc. v. Huang)

  • A definite agreement as to the price is an essential element of a binding contract of sale. The fixing of the price cannot be left to the decision of one party alone. A price fixed by one party, if accepted by the other, gives rise to a perfected sale. (Boston Bank of the Philippines v. Manalo)

  • An acceptance must be absolute and must not qualify the terms of the offer to convert it into a contract.

  • A counter-offer constitutes a rejection of the original offer and an attempt to negotiate on a different basis.

  • Any modification or variation from the terms of the offer annuls the offer.

  • The corporate powers of all corporations shall be exercised by the board of directors.

  • Declarations of an individual director not in the course of, or connected with the performance of authorized duties of such director, are not binding on the corporation.

  • A corporation can only execute its powers and transact its business through its board of directors or through authorized officers and agents.

  • Earnest money does not establish the existence of a perfected contract of sale without proof of the concurrence of all the essential elements of a contract of sale.

  • An amended counter-offer amounts to a new proposal and does not result in a perfected contract of sale unless accepted by the other party without further modifications.