a. Heirs of Fausto C. Ignacio vs.

Home Bankers Savings and Trust Company, GR 177783, January

DOCTRINE: Contracts are perfected by mere consent which is manifested by the meeting of the
offer and the acceptance upon the thing and the cause which are to constitute the contract. The
requisite acceptance of the offer is expressed in Article 1319 of the Civil Code. The offer must be
certain and the acceptance absolute. A qualified acceptance constitutes a counter offer. If the
acceptance of the offer was not absolute, such acceptance is insufficient to generate consent that
would perfect a contract.

FACTS: In order to secure the P500,000.00 loan, petitioner Fausto C. Ignacio (Ignacio) mortgaged
two pieces of land in Cabuyao, Laguna to the respondent Home Bankers Savings and Trust Company
(Home Bankers). Home Bankers foreclosed on the real estate mortgage where it was the highest
bidder after Ignacio failed or defaulted to repay his loan obligation.

Thereafter, a Certificate of Sale was issued to Home Bankers. The titles were consolidated in favor of
Home Bankers due to the failure of Ignacio to redeem the foreclosed properties within one year from
registration.

Despite the lapse of the redemption period, Ignacio offered to repurchase the properties. Home
Bankers considered Ignacios offer to repurchase, there was no repurchase contract executed. Home
Bankers made several dispositions of the foreclosed properties already titled in its name.

Ignacio, through a letter to the Home Bankers, expressed his willingness to pay the amount of
P600,000.00 in full, as balance of the repurchase price, and requested Home Bankers to release to
him the remaining parcels of land. Home Bankers turned down his request. Then, Home Bankers sold
the properties to herein respondents.

RTC rendered judgment in favor of Ignacio and found that Home Bankers deliberately disregarded
petitioner’s substantial payments on the total repurchase consideration. Home Bankers appealed to
the Court of Appeals.

CA reversed the decision of the trial court and found that Ignacio modified the terms of the offer
contained in the March 22, 1984 letter of Home Bankers. There was also no written conformity by
Home Bankers officers to the amended conditions for repurchase which were unilaterally inserted by
Ignacio. Consequently, no contract of repurchase was perfected and Home Bankers acted well within
its rights when it sold the subject properties to herein respondents.

ISSUE: Whether the contract for the repurchase of the foreclosed properties was perfected between
the petitioner and respondent bank.

RULING: No, there was no perfected contract. Here, Ignacio set a different repurchase price and
also modified the terms of payment, which even contained a unilateral condition for payment of the
balance (P600,000), that is, depending on petitioner’s financial position. However, there was no
showing that the Bank approved the modified offer.

A contract of sale is consensual in nature and is perfected upon mere meeting of the minds. When
there is merely an offer by one party without acceptance of the other, there is no contract. When the
contract of sale is not perfected, it cannot, as an independent source of obligation, serve as a binding
juridical relation between the parties.

The negotiations between Ignacio and UPI, the collection agent, were merely preparatory to the
repurchase agreement and, therefore, was not binding on the Bank. Ignacio could not compel the
Bank to accede to the repurchase of the property.
 
In Palattao v. Court of Appeals, the Court held that if the acceptance of the offer was not absolute,
such acceptance is insufficient to generate consent that would perfect a contract. The acceptance
must be identical in all respects with that of the offer so as to produce consent or meeting of the
minds. Where a party sets a different purchase price than the amount of the offer, such acceptance
was qualified which can be at most considered as a counter-offer; a perfected contract would have
arisen only if the other party had accepted this counter- offer.

While it is impossible to expect the acceptance to echo every nuance of the offer, it is imperative that
it assents to those points in the offer which, under the operative facts of each contract, are not only
material but motivating as well. Anything short of that level of mutuality produces not a contract but
a mere counter-offer awaiting acceptance. More particularly on the matter of the consideration of the
contract, the offer and its acceptance must be unanimous both on the rate of the payment and on its
term. An acceptance of an offer which agrees to the rate but varies the term is ineffective.

b. Virgilio S. David vs. Misamis Occidental II Electric Cooperative, Inc., GR 194785, July 11, 2012,
676 SCRA 367 

DOCTRINE:

FACTS: Petitioner David was the owner of VSD Electric Sales which is engaged in the business of
supplying electrical hardware for rural electric cooperatives like Misamis Occidental II Electric
Cooperative, Inc (MOELCI).

MOELCI expressed its intention to purchase a 10 MVA power transformer from David. MOELCI’s
General Manager met with David and the latter agreed to supply the power transformer provided that
they would secure a board resolution because the item would still have to be imported. Both parties
came to the reading of proposals and discussion of terms and signed the document under the word
conforme. A board resolution was then attached to the proposal.

The Board Resolution stated that the purchase of transfer be financed through a loan from the
National Electrification Administration. Since there was no action on the loan application, MOELCI
through Engineer Rada requested David to deliver the transformer without the required down
payment.

David granted the request with a condition that MOELCI pay interest at 24% per annum. Engineer
Rada then agreed to the condition. The goods were shipped and in the Bill of Lading, a sales invoice
was included which stated the 24% interest per annum stipulation.

Nothing was heard from MOELCI after the shipment. Thereafter, David’s Marketing Manager named
Emanuel Medina went to check on the shipment but was told that the loan was not yet released and
asked if it was possible to withdraw the shipped items. Medina then agreed.

No payment was still made after months which prompted Medina to send a demand letter to
MOELCI. Engineer Rada then said that the goods were still in warehouse and loan was not approved.
When Medina came back, he found that the goods were released to MOELCI. He then sent demand
letters.

David filed a complaint for specific performance with damages with the RTC.

MOELCI alleged that there was lack of cause of action because there was no contract of sale, or that
the contract was unenforceable under the Statute of Frauds.

RTC dismissed the complaint and found that although a contract of sale was perfected, it was not
consummated because David failed to prove that there was delivery of the item and MOELCI received
the same.

CA affirmed RTC’s decision. Although David was correct in saying that MOELCI deemed to have
admitted the due execution of the quotation letter, he failed to offer any textual support to his stand
that it was a contract of sale instead of a mere price quotation agreed by MOELCI representatives.
ISSUE: Whether there was a perfected contract of sale and whether the delivery consummated the
contract.

RULING: There is perfected contract of sale. There was a meeting of minds as there was consent on
the part of David to transfer ownership of the power transformer to MOELCI in exchange for a price.
Moreover, the document cannot be considered a contract to sell but rather a perfected contract of
sale.

The Civil Code provides the elements of contract which are:

The absence of the first element distinguishes a contract of sale from a contract to sell. Here, it was
shown that both parties agreed and consented to the sale involving the transformer for a price.

Moreover, there was delivery and release which consummated the contract. MOELCI agreed that the
power transformer be delivered and that the handling, insurance, custom duties, and other expenses
be shouldered by the cooperative.
 

 
c. Starbright Sales Enterprises, Inc. vs. Philippines Realty Corporation, Msgr. Domingo A. Cirilos,
et. al ., GR 177936, January 18, 2012 

DOCTRINE: Under the law on sales, a contract of sale is perfected when the seller, obligates
himself, for a price certain, to deliver and to transfer ownership of a thing or right to the buyer, over
which the latter agrees.

FACTS: On April 17, 1988 Ramon Licup wrote Msgr. Domingo A. Cirilos, offering to buy three
contiguous parcels of land in Parañaque that The Holy See and Philippine Realty Corporation (PRC)
owned for P1,240.00 per square meter.

Licup accepted the responsibility for removing the illegal settlers on the land and enclosed a check for
P100,000.00 to "close the transaction.” He undertook to pay the balance of the purchase price upon
presentation of the title for transfer and once the property has been cleared of its occupants.

Msgr. Cirilos, representing The Holy See and PRC, signed his name on the conforme portion of the
letter and accepted the check. But the check could not be encashed due to Licup's stop-order
payment. Licup wrote Msgr. Cirilos on April 26, 1988, requesting that the titles to the land be instead
transferred to petitioner Starbright Sales Enterprises, Inc. (SSE). He enclosed a new check for the
same amount. SSE's representatives, Mr. and Mrs. Cu, did not sign the letter.

Thereafter, Msgr. Cirilos wrote SSE, requesting it to remove the occupants on the property and,
should it decide not to do this, Msgr. Cirilos would return to it the P100,000.00 that he received. On
January 24, 1989 SSE replied with an "updated proposal.” It would be willing to comply with Msgr.
Cirilos' condition provided the purchase price is lowered to P1,150.00 per square meter.
Msgr. Cirilos wrote back, rejecting the "updated proposal." He said that other buyers were willing to
acquire the property on an "as is, where is" basis at P1,400.00 per square meter. He gave SSE seven
days within which to buy the property at P1,400.00 per square meter, otherwise, Msgr. Cirilos would
take it that SSE has lost interest in the same. He enclosed a check for P100,000.00 in his letter as
refund of what he earlier received. The property was eventually sold to Tropicana Properties and
then sold Standard Realty.

ISSUE: Whether there is a perfected contract existing between SSE and land owners.
RULING: There was no perfected contract existing between SSE and land owners. Three elements
are needed to create a perfected contract:
1) the consent of the contracting parties;
2) an object certain which is the subject matter of the contract; and
3) the cause of the obligation which is established.
Under the law on sales, a contract of sale is perfected when the seller, obligates himself, for a price
certain, to deliver and to transfer ownership of a thing or right to the buyer, over which the latter
agrees. From that moment, the parties may demand reciprocal performance. The letter between
Licup and Msgr. Cirilos constituted a perfected contract.
However, when Licup ordered to stop his deposit and instead transferred the property to SSE, a
novation took place.
Novation serves two functions - one is to extinguish an existing obligation, the other to substitute a
new one in its place - requiring concurrence of four requisites:
1) a previous valid obligation;
2) an agreement of all parties concerned to a new contract;
3) the extinguishment of the old obligation; and
4) the birth of a valid new obligation.
In the given case, it was noted that the signatures present during Licup and Msgr. Cirilos agreement
are not present in the letter of agreement between SSE and Msgr. Cirilos. SSE cannot revert to the
original terms stated in Licup's letter to Msgr. Cirilos since it was not privy to such contract. The
parties to it were Licup and Msgr. Cirilos. Under the principle of relativity of contracts, contracts can
only bind the parties who entered into it.
The proposed substitution of Licup by SSE opened the negotiation stage for a new contract of sale as
between SSE and the owners. The succeeding exchange of letters between Mr. Stephen Cu, SSE’s
representative, and Msgr. Cirilos attests to an unfinished negotiation. Msgr. Cirilos referred to his
discussion with SSE regarding the purchaseas a “pending transaction.”
Cu, on the other hand, regarded SSE’s Frstletter to Msgr. Cirilos as an “updated proposal.” This
proposal took up two issues: which party would undertake to evict the occupants on the property and
how much must the consideration be for the property. These are clear indications that there was no
meeting of the minds between the parties.
As it turned out, the parties reached no consensus regarding these issues, thus producing no
perfected sale between them. The P100,000.00 that was given to Msgr. Cirilos as “deposit” cannot be
considered as earnest money.
Where the parties merely exchanged offers and counter-offers, no contract is perfected
since they did not yet give their consent to such offers. Earnest money applies to a
perfected sale.