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 petitioner’s 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 SAMD’s 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 SaleG.R. No. L-11491

Subject: SalesDoctrine: 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 plaintiff’s 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 defendant’s 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 EQUIPMENTG.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 Company’s 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 Commissioner’s assessment.Engineering appealed the case to the Court of Tax Appeals. During the pendency of the case the investigating revenue examiners

reduced the Company’s 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 defendant’s 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 Engineering’s 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/contractor2) 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 court’s 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 SellUnconditional 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 PeriodWhere 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 CodeIf 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 HERUELAG.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 CAOng vs Ca GR 97347 July 6, 1999Coronel vs. CA GR 103577, Oct 7, 1996Nabus Vs. Pacson