Manila Metal Container Corporation vs Philippine National Bank

[GR No. 166862, December 20, 2006] No contract of sale because no

agreement as to the price.


Callejo, Sr., J.:

Facts:
Petitioner was the owner of 8,015 square meters of parcel of land located in
Mandaluyong City, Metro Manila. To secure a P900,000.00 loan it had obtained
from respondent Philippine National Bank, petitioner executed a real estate
mortgage over the lot. Respondent PNB later granted petitioner a new credit
accommodation. On August 5, 1982, respondent PNB filed a petition for
extrajudicial foreclosure of the real estate mortgage and sought to have the
property sold at public auction. After due notice and publication, the property was
sold at public action where respondent PNB was declared the winning bidder.
Petitioner sent a letter to PNB, requesting it to be granted an extension of time to
redeem/repurchase the property. Some PNB personnel informed that as a matter
of policy, the bank does not accept partial redemption. Since petitioner failed to
redeem the property, the Register of Deeds cancelled TCT No. 32098 and issued
a new title in favor of PNB.
Meanwhile, the Special Asset Management Department (SAMD) had prepared a
statement of account of petitioners obligation. It also recommended the
management of PNB to allow petitioner to repurchase the property for
P1,574,560.oo. PNB rejected the offer and recommendation of SAMD. It instead
suggested to petitioner to purchase the property for P2,660,000.00, in its
minimum market value. Petitioner declared that it had already agreed to SAMDs
offer to purchase for P1,574,560.47 and deposited a P725,000.00.
Issue:
Whether or not petitioner and respondent PNB had entered into a perfected
contract for petitioner to repurchase the property for respondent.

Ruling:
The SC affirmed the ruling of the appellate court that there was no perfected
contact of sale between the parties.
A contract is meeting of minds between two persons whereby one binds himself,
with respect to the other, to give something or to render some service. Under
1818 of the Civil Code, there is no contract unless the following requisites
concur:
1. Consent of the contracting parties;
2. Objection certain which is the subject matter of the contract;
3. Cause of the obligation which is established.
Contract is perfected by mere consent which is manifested by the meeting of the
offer and the acceptance upon the thing and causes which are to constitute the
contract. Once perfected, the bind between other contracting parties and the
obligations arising therefrom have the form of law between the parties and
should be complied in good faith. The absence of any essential element will
negate the existence of a perfected contract of sale.

The court ruled in Boston Bank of the Philippines vs Manalo:
A definite agreement as to the price is an essential element of a binding
agreement to sell personal or real property because it seriously affects the rights
and obligations of the parties. Price is an essential element in the formation of a
binding and enforceable contract of sale. The fixing of the price can never be left
to the decision of one of the contracting parties. But a price fixed by one of the
contracting parties, if accepted by the other, gives rise to a perfected sale.
In the case at bar, the parties to the contract is between Manila Metal Container
Corporation and Philippine National Bank and not to Special Asset Management
Department. Since the price offered by PNB was not accepted, there is no
contract. Hence it cannot serve as a binding juridical relation between the parties.


Quiroga vs Parsons Contract of Sale
G.R. No. L-11491

Subject: Sales
Doctrine: Contract of Agency to Sell vs Contract of Sale

Facts: On Jan 24, 1911, plaintiff and the respondent entered into a contract
making the latter an agent of the former. The contract stipulates that Don
Andres Quiroga, here in petitioner, grants exclusive rights to sell his beds in the
Visayan region to J. Parsons. The contract only stipulates that J.Parsons should
pay Quiroga within 6 months upon the delivery of beds.
Quiroga files a case against Parsons for allegedly violating the following
stipulations: not to sell the beds at higher prices than those of the invoices; to
have an open establishment in Iloilo; itself to conduct the agency; to keep the
beds on public exhibition, and to pay for the advertisement expenses for the
same; and to order the beds by the dozen and in no other manner. With the
exception of the obligation on the part of the defendant to order the beds by the
dozen and in no other manner, none of the obligations imputed to the defendant
in the two causes of action are expressly set forth in the contract. But the plaintiff
alleged that the defendant was his agent for the sale of his beds in Iloilo, and that
said obligations are implied in a contract of commercial agency. The whole
question, therefore, reduced itself to a determination as to whether the
defendant, by reason of the contract hereinbefore transcribed, was a purchaser
or an agent of the plaintiff for the sale of his beds.

Issue: Whether the contract is a contract of agency or of sale.

Held: In order to classify a contract, due attention must be given to its essential
clauses. In the contract in question, what was essential, as constituting its cause
and subject matter, is that the plaintiff was to furnish the defendant with the beds
which the latter might order, at the price stipulated, and that the defendant was to
pay the price in the manner stipulated. Payment was to be made at the end of
sixty days, or before, at the plaintiffs request, or in cash, if the defendant so
preferred, and in these last two cases an additional discount was to be allowed
for prompt payment. These are precisely the essential features of a contract of
purchase and sale. There was the obligation on the part of the plaintiff to
supply the beds, and, on the part of the defendant, to pay their price. These
features exclude the legal conception of an agency or order to sell whereby the
mandatory or agent received the thing to sell it, and does not pay its price, but
delivers to the principal the price he obtains from the sale of the thing to a third
person, and if he does not succeed in selling it, he returns it. By virtue of the
contract between the plaintiff and the defendant, the latter, on receiving the beds,
was necessarily obliged to pay their price within the term fixed, without any other
consideration and regardless as to whether he had or had not sold the beds.
In respect to the defendants obligation to order by the dozen, the only one
expressly imposed by the contract, the effect of its breach would only entitle the
plaintiff to disregard the orders which the defendant might place under other
conditions; but if the plaintiff consents to fill them, he waives his right and cannot
complain for having acted thus at his own free will.
For the foregoing reasons, we are of opinion that the contract by and between
the plaintiff and the defendant was one of purchase and sale, and that the
obligations the breach of which is alleged as a cause of action are not imposed
upon the defendant, either by agreement or by law.

COMMISSIONER OF INTERNAL REVENUE vs. ENGINEERING EQUIPMENT
G.R. No. L-27044 June 30, 1975

Facts:

Engineering Equipment and Supply Co., an engineering and machinery firm, is
engaged in the design and installation of central type air conditioning system,
pumping plants and steel fabrications.

CIR received an anonymous letter denouncing Engineering for tax evasion by
misdeclaring its imported articles and failing to pay the correct percentage taxes
due thereon in connivance with its foreign suppliers. Engineering was likewise
denounced to the Central Bank (CB) for alleged fraud in obtaining its dollar
allocations. So, NBI and Central Bank conducted a raid and search on which
occasion voluminous records of the firm were seized and confiscated. CIR also
reported about deficiency advance sales tax. CIR assessed against the
Company payment of the increased amount and suggested that P10,000 be paid
as compromise in extrajudicial settlement of the Companys penal liability for
violation of the Tax Code. The firm, however, contested the tax assessment and
requested that it be furnished with the details and particulars of the
Commissioners assessment.Engineering appealed the case to the Court of Tax
Appeals. During the pendency of the case the investigating revenue examiners
reduced the Companys deficiency tax. CTA declared that Engineering is a
contractor and is exempt from deficiency manufacturers sales tax. The
Commissioner, not satisfied with the decision of the CTA, appealed to the
Supreme Court.

Issue:

1) WON Engineering Equipment is a manufacturer or contractor?
CONTRACTOR.
2) Corrollarily WON the installation of a centralized air-conditioning system a
contact of sale or a contract for piece of work? CONTRACT FOR PIECE OF
WORK.
3) Is Celestino Co vs. CIR case applicable in this case? NO.

Held:

1) The word contractor has come to be used with special reference to a person
who, in the pursuit of the independent business, undertakes to do a specific job
or piece of work for other persons, using his own means and methods without
submitting himself to control as to the petty details. The true test of a contractor is
that when he renders service in the course of an independent occupation,
representing the will of his employer only as to the result of his work, and not as
to the means by which it is accomplished.

Engineering did not manufacture air conditioning units for sale to the general
public, but imported some items (as refrigeration compressors in complete set,
heat exchangers or coils) which were used in executing contracts entered into by
it. Engineering undertook negotiations and execution of individual contracts for
the design, supply and installation of air conditioning units of the central type
taking into consideration in the process such factors as the area of the space to
be air conditioned; the number of persons occupying or would be occupying the
premises; the purpose for which the various air conditioning areas are to be
used; and the sources of heat gain or cooling load on the plant such as sun load,
lighting, and other electrical appliances which are or may be in the plan. Relative
to the installation of air conditioning system, Engineering designed and
engineered complete each particular plant and that no two plants were identical
but each had to be engineered separately.

2)NATURE OF OBJECT TEST:

The distinction between a contract of sale and one for work, labor and materials
is tested by the inquiry whether the thing transferred is one NOT in existence
and which never would have existed but for the order of the party desiring to
acquire it, or a thing which would have existed and has been the subject of sale
to some other persons even if the order had not been given. If the article ordered
by the purchaser is exactly such as the plaintiff makes and keeps on hand for
sale to anyone, and no change or modification of it is made at defendants
request, it is a contract of sale, even though it may be entirely made after, and in
consequence of, the defendants order for it.

The air conditioning units installed in a central type of air conditioning system
would not have existed but for the order of the party desiring to acquire it and if it
existed without the special order of Engineerings customer, the said air
conditioning units were not intended for sale to the general public. Hence, it is a
contract for a piece of work.

3)Celestino Co compared to Engineering Equipment:

Points of discussion:
1) Advertisement as manufacturer/contractor
2) Ready-made materials

In Celestino Co, the Court held the taxpayer to be a manufacturer rather than a
contractor of sash, doors and windows manufactured in its factory. From the very
start, Celestino Co intended itself to be a manufacturer of doors, windows,
sashes etc. as it did register a special trade name for its sash business and
ordered company stationery carrying the bold print ORIENTAL SASH
FACTORY. As a general rule, sash factories receive orders for doors and
windows of special design only in particular cases, but the bulk of their sales is
derived from ready-made doors and windows of standard sizes for the average
home, which sales were reflected in their books of accounts totalling
P118,754.69 for the period of only nine (9) months. The Court found said sum
difficult to have been derived from its few customers who placed special orders
for these items.

In the present case, the company advertised itself as Engineering Equipment and
Supply Company, Machinery Mechanical Supplies, Engineers, Contractors and
not as manufacturers. It likewise paid the contractors tax on all the contracts for
the design and construction of central system. Similarly, it did not have ready-
made air conditioning units for sale.

Eulogio vs Apeles

Spouses Apeles lease a property in QC to Enrico Eulogio . The parties entered
into a contract of lease with option to purchase for a price of not exceeding 1.5 M
before expiration in 3 years. Before 3 years lease was over Eulogio attempted to
purchase but was ignored. He then filed for an action allowing him to acquire
ownership of the property after paying the agreed amount.

Issue: WON Eulogio has the right to acquire ownership of the property.

Held. No.

An option is a contract by which the owner of the property agrees with another
person that the latter shall have the right to buy the former's property at a fixed
price within a certain time. It is a condition offered or contract by which the owner
stipulates with another that the latter shall have the right to buy the property at a
fixed price within a certain time, or under, or in compliance with certain terms and
conditions; or which gives to the owner of the property the right to sell or demand
a sale. An option is not of itself a purchase, but merely secures the privilege to
buy. It is not a sale of property but a sale of the right to purchase. It is simply a
contract by which the owner of the property agrees with another person that he
shall have the right to buy his property at a fixed price within a certain time. He
does not sell his land; he does not then agree to sell it; but he does sell
something, i.e., the right or privilege to buy at the election or option of the other
party. Its distinguishing characteristic is that it imposes no binding obligation on
the person holding the option, aside from the consideration for the offer.

ANG YU V. CA (December 02, 1994)

FACTS:
Petitioner Ang Yu Asuncion and Keh Tiong leased a property of respondents Bobby Cu
Unjieng, Rose Cu Unjieng and Jose Tan in Binondo Manila.

Respondents informed plaintiffs that they are offering to sell the premises and are
giving them priority to acquire the same.

Respondents 6M for the property but petitioners offered 5M. Respondents acceted and
asked petitioners to put in writing the terms and conditions but the latter never
provided such.

When defendants were about to sell the property, plaintiffs were compelled to file the
complaint to compel defendants to sell the property to them. Court recognizes the right
of first refusal of the petitioner. Notwithstanding the courts decision, respondent sold
the property to Buen Realty and Development Corporation.

ISSUE:
WON petitioners can demand specific performance to the respondents to sell to them
the property.

HELD:
The petitioners never accepted the offer when they refused to make the terms and
condition of the sale. As such, respondents has the right to sell the property to other
parties.

Even if petitioners are aggrieved by the failure of private respondents to honor the right
of first refusal, the remedy is not a writ of execution on the judgment, since there is
none to execute, but an action for damages in a proper forum for the purpose.

Promises to Buy and Sell
Unconditional mutual promise to buy and sell As long as the object is made
determinate and the price is fixed, can be obligatory on the parties, and compliance
therewith may accordingly be exacted. The Right of First Refusal falls under this
classification.

Accepted unilateral promise If it specifies the thing to be sold and the price to be paid
and when coupled with a valuable consideration distinct and separate from the price, is
what may properly be termed a perfected contract of option. This contract is legally
binding. (Par. 2 Art. 1458) Note however, that the option is a contract separate and
distinct from the contract of sale. Once the option is exercised before it is withdrawn, a
bilateral promise to sell and to buy ensues and both parties are then reciprocally bound
to comply with their respective undertakings.

Offers with a Period
Where a period is given to the offeree within which to accept the offer, the following
rules generally govern:
If the period is not itself founded upon or supported by a consideration Offeror may
withdraw offer at any time before its acceptance (or knowledge of its acceptance).
However, the right to withdraw must not be exercised whimsically or arbitrarily
otherwise it can give rise to damages under Art. 19 of the New Civil Code
If period is founded on a separate consideration This is a perfected contract of option.
Withdrawal of the offer within the period of the option is deemed a breach of the
contract of option (not the sale). If, in fact, the optioner-offeror withdraws the offer
before its acceptance (exercise of the option) by the optionee-offeree, the latter may
not sue for specific performance on the proposed contract (object of the option) since
it has failed to reach its own stage of perfection. The optioner-offeror, however, renders
himself liable for damages for breach of the option.
Earnest money This is not an offer with a period. Earnest money is distinguished from
the option contract if the consideration given will be considered as a part of the
purchase price of the object of the sale. Earnest money is evidence of a perfected
contract of sale. (Art. 1482)

SPS RAMOS vs. SPS HERUELA
G.R. No. 145330, October 14, 2005, J. Carpio

In 1980, a contract of conditional sale was executed by petitioner, for a sale of land, with
respondents. In spite of this, 18 years after, petitioner filed a complaint for Recovery of Ownership
with Damages against respondent alleging that respondents only paid P4,000 out of the P15,300
consideration. Way back 1982, the petitioners discovered that the respondents, together with
spouses Pallori (daughter and son in law), erected another house on the land and refused to
vacate the said property. According to the respondents, they already made down payment and
monthly payment since March 1980. In 1982, they expressed their willingness to pay the
remaining P11,300 but the petitioners refused their offer. The RTC ruled in favor of defendants
and declared that the petitioners failed to comply with Sec. 4 of RA 6552:

The issues involve are whether or not the a. RA 6552 is applicable in the case (absolute sale); b.
1191 and 1592 of the NCC are applicable in the case; c. petitioners has the right to cancel the
sale; d. respondents have a right to damages.

According to the SC, the sale is not absolute. As held in the case of Alfonso vs. CA: It was held
that the contract should not be considered as a written but an oral one; not a sale but a promise
to sell; and that the absence of a formal deed of conveyance was a strong indication that the
parties did not intend immediate transfer of title, but only a transfer after full payment of the price.
Article 1191 and 1592 are inapplicable in the case because rescission cannot take place since
there is no written contract to speak of. The applicable law is RA 6552, as stated above in Sec.
4, which should have been respected by the petitioners. However, respondents are required
to pay 6% per annum on the balance of the purchase price in consonance with their breach of
contract as stipulated in Article 2209 of the NCC. Lastly, the petitioners have no right to cancel
the sale and at the same time the respondents have no right to damages.

Heirs of Mascunana vs CA
Ong vs Ca GR 97347 July 6, 1999
Coronel vs. CA GR 103577, Oct 7, 1996
Nabus Vs. Pacson