SAN MIGUEL PROPERTIES vs.

HUANG
San Miguel Properties Philippines, Inc v Sps. Alfredo Huang and Grace
Huang
July 31, 2000, Mendoza, J.
TinTin Co
Law 103 Sales
Group 1
FACTS
Petitioner San Miguel Properties is a domestic corporation engaged
in the purchase and sale of real properties. It offered its 2 parcels of
land for sale for P52,140, 000.00 in cash to the respondent spouses
Huang.
The spouses expressed their interest to buy with the sum of 1M as
earnest-deposit money and subject to the ff. conditons:
o We will be given the exclusive option to purchase the
property within 30 days from date of the companys
acceptance of this offer
o During said period, we will negotiate on the terms and
conditions of the purchase
o If we do not come to an agreement on this transaction, the
1M shall be refundable to us in full amount upon demand
Petitioners VP and operations manager Sobrecaray agreed with the
conditions and accepted the earnest deposit of 1M. During
negotiations, San Miguel was willing to sell the properties on a 90
day tem but the spouses countered it with an offer of 6 months. The
spouses asked for an extension of 45 days to exercise option to
purchase the property but still wasnt able to pay.
San Miguel returned the 1M given as earnest deposit as the parties
failed to agree on the terms and conditions of the sale despite the
extension given.
The spouses filed for specific performance.
ISSUES/HELD:
1. WON the 1M is considered earnest money. NO
2. WON there was perfected contract of sale. NO
RATIONALE
1. The spouses did not give the 1M as earnest money as provided by Art.
14821 of CC. They presented the amount merely as a deposit of what
would eventually become the earnest money or downpayment should a
contract of sale be made by them. It was given not as a part of the
purchase price but only as a guarantee that the spouses would
not back out of the sale. The 1M couldnt have been an earnest money
because at the time San Miguel accepted the spouses offer, their contract
had no yet been perfected.
2. Contract has not yet been perfected as proven by the following
conditions:

1 Whenever earnest money is given in a contract of sale it shall be

considered as part of the price and as proof of the perfection of the
contract.

Option period of 30 days all the spouses had was the option to
buy the properties which privilege was not exercised by them due to
failure to agree on the terms of payment. Also there was no
consideration for the option as required by Art. 1479 2.

Parties never got past the negotiation stage which covers the
time the prospective contracting parties indicate interest in the
contract to the time the contract is perfected. The next stages
would be perfection (concurrence of the essential elements of the
sale which are the meeting of the minds of the parties as to the
object and price) and the consummation (performance of
undertakings) which were not reached.

The parties also failed to arrive at mutually acceptable terms

of payment despite the 45 day extension. As laid down in Navarro
v Sugar Producer Cooperative Marketing Assoc. case, manner of
payment of the purchase price is an essential element before a
valid and binding contract of sale can exist.

Thus, it is not the giving of earnest money but the proof of the
concurrence of all the essential elements of the contract of sale which
establishes the existence of a perfected sale.

2 An accepted unilateral promise to buy or to sell a determinate thing for

a price certain is binding upon the promissor if the promise is supported
by a consideration distinct from the price .