STARBRIGHT SALES G.R. No. 177936
ENTERPRISES, INC.,
Petitioner, Present:
VELASCO, JR., J., Chairperson,
- versus - PERALTA,
ABAD,
PERLAS-BERNABE, JJ.
PHILIPPINE REALTY
CORPORATION,
MSGR. DOMINGO A.
CIRILOS,
TROPICANA
PROPERTIES AND
DEVELOPMENT
CORPORATION
and STANDARD REALTY Promulgated:
CORPORATION,
Respondents. January 18, 2012
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ABAD,
J.:
The present case involves a
determination of the perfection of contract of sale.
The Facts and the Case
On April 17, 1988 Ramon Licup
wrote Msgr. Domingo A. Cirilos, offering to buy three contiguous parcels of
land in Paraaque 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.[1] 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 Licups 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. SSEs representatives, Mr. and Mrs. Cu, did
not sign the letter.
On November 29, 1988 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.[2] It would be willing to comply with Msgr.
Cirilos condition provided the purchase price is lowered to P1,150.00
per square meter.
On January 26, 1989 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.
On February 4, 1989 SSE wrote Msgr.
Cirilos that they already had a perfected contract of sale in the April 17,
1988 letter which he signed and that, consequently, he could no longer impose amendments
such as the removal of the informal settlers at the buyers expense and the increase
in the purchase price.
SSE claimed that it got no reply from
Msgr. Cirilos and that the next thing they knew, the land had been sold to
Tropicana Properties on March 30, 1989. On
May 15, 1989 SSE demanded rescission of that sale. Meanwhile, on August 4, 1989 Tropicana
Properties sold the three parcels of land to Standard Realty.
Its demand for rescission
unheeded, SSE filed a complaint for annulment of sale and reconveyance with
damages before the Regional Trial Court (RTC) of
The Holy See sought dismissal of
the case against it, claiming that as a foreign government, it cannot be sued
without its consent. The RTC held otherwise
but, on December 1, 1994,[3]
the Court reversed the ruling of the RTC and ordered the case against The Holy
See dismissed. By Order of January 26,
1996 the case was transferred to the Paraaque RTC, Branch 258.
SSE alleged that Licups original
letter of April 17, 1988 to Msgr. Cirilos constituted a perfected contract. Licup even gave an earnest money of P100,000.00
to close the transaction. His offer to
rid the land of its occupants was a mere gesture of accommodation if only to
expedite the transfer of its title.[4] Further, SSE claimed that, in representing The
Holy See and PRC, Msgr. Cirilos acted in bad faith when he set the price of the
property at P1,400.00 per square meter when in truth, the property was sold
to Tropicana Properties for only P760.68 per square meter.
Msgr. Cirilos maintained, on the
other hand, that based on their exchange of letters, no contract of sale was
perfected between SSE and the parties he represented. And, only after the negotiations between them
fell through did he sell the land to Tropicana Properties.
In its Decision of February 14,
2000, the Paraaque RTC treated the April 17, 1988 letter between Licum and
Msgr. Cirilos as a perfected contract of sale between the parties. Msgr. Cirilos attempted to change the terms of
contract and return SSEs initial deposit but the parties reached no agreement
regarding such change. Since such
agreement was wanting, the original terms provided in the April 17, 1988 letter
continued to bind the parties.
On appeal to the Court of Appeals
(CA), the latter rendered judgment on November 10, 2006,[5]
reversing the Paraaque RTC decision.
The CA held that no perfected contract can be gleaned from the April 17,
1988 letter that SSE had relied on. Indeed, the subsequent exchange of letters
between SSE and Msgr. Cirilos show that the parties were grappling with the terms
of the sale. Msgr. Cirilos made no unconditional
acceptance that would give rise to a perfected contract.
As to the P100,000.00 given
to Msgr. Cirilos, the CA considered it an option money that secured for SSE
only the privilege to buy the property even if Licup called it a deposit. The CA denied SSEs motion for
reconsideration on May 2, 2007.
The
Issue Presented
The only issue in this case is
whether or not the CA erred in holding that no perfected contract of sale existed
between SSE and the land owners, represented by Msgr. Cirilos.
The
Courts Ruling
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.[6] 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.[7] From
that moment, the parties may demand reciprocal performance.
The Court believes that the April
17, 1988 letter between Licup and Msgr. Cirilos, the representative of the
propertys owners, constituted a perfected contract. When Msgr. Cirilos affixed his signature on
that letter, he expressed his conformity to the terms of Licups offer
appearing on it. There was meeting of
the minds as to the object and consideration of the contract.
But when
Licup ordered a stop-payment on his deposit and proposed in his April 26, 1988 letter
to Msgr. Cirilos that the property be instead transferred to SSE, a subjective novation
took place.
A subjective novation results through
substitution of the person of the debtor or through subrogation of a third
person to the rights of the creditor. To accomplish a subjective novation through
change in the person of the debtor, the old debtor needs to be expressly released
from the obligation and the third person or new debtor needs to assume his
place in the relation.[8]
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.[9]
Notably, Licup and Msgr. Cirilos
affixed their signatures on the original agreement embodied in Licups letter
of April 26, 1988. No similar letter agreement
can be found between SSE and Msgr. Cirilos.
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, SSEs representative, and Msgr.
Cirilos attests to an unfinished negotiation. Msgr. Cirilos referred to his discussion with
SSE regarding the purchase as a pending transaction.[10]
Cu, on the other hand, regarded
SSEs first letter to Msgr. Cirilos as an updated proposal.[11] 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.
Parenthetically, Msgr. Cirilos
did not act in bad faith when he sold the property to Tropicana even if it was
for a lesser consideration. More than a
month had passed since the last communication between the parties on February
4, 1989. It is not improbable for prospective
buyers to offer to buy the property during that time.
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.[12] Earnest money applies to a perfected sale.
SSE
cannot revert to the original terms stated in Licups letter to Msgr. Cirilos
dated April 17, 1988 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. It cannot favor or prejudice a third
person.[13] Petitioner SSE cannot, therefore, impose the
terms Licup stated in his April 17, 1988 letter upon the owners.
WHEREFORE, the Court DISMISSES the petition and AFFIRMS
the Court of Appeals Decision dated November 10, 2006 in CA-G.R. CV 67366.
SO
ORDERED.
ROBERTO A. ABAD
Associate Justice
WE
CONCUR:
PRESBITERO
J. VELASCO, JR.
Associate Justice
Chairperson
DIOSDADO
M. PERALTA JOSE CATRAL MENDOZA
Associate Justice Associate Justice
ESTELA M.
PERLAS-BERNABE
Associate Justice
ATTESTATION
I attest that the conclusions in the
above Decision had been reached in consultation before the case was assigned to
the writer of the opinion of the Courts Division.
PRESBITERO J. VELASCO, JR.
Associate Justice
Chairperson, Third Division
CERTIFICATION
Pursuant to Section 13, Article VIII
of the Constitution and the Division Chairpersons Attestation, I certify that
the conclusions in the above Decision had been reached in consultation before
the case was assigned to the writer of the opinion of the Courts Division.
RENATO
C. CORONA
Chief Justice
[1] Rollo,
p. 14.
[2]
[3] Holy
See, The v. Rosario, Jr., G.R. No. 101949, December 1, 1994, 238 SCRA 524.
[4] CA rollo,
p. 100.
[5] Penned by Associate Justice Monina Arevalo-Zearosa
with the concurrence of Associate Justices Martin S. Villarama, Jr. and Lucas
P. Bersamin (both Members of the Court), rollo,
pp. 157-184.
[6] Civil
Code, Article 1318.
[7]
Ang Yu
[8] Ajax
Marketing & Development Corporation v. Court of Appeals, G.R. No.
118585, September 14, 1995, 248 SCRA 222, 227.
[9] Quinto
v. People, 365 Phil. 259, 266 (1999).
[10] Rollo,
p. 64.
[11] See note 2.
[12] XYST Corporation. v. DMC Urban Properties Development, Inc., G.R.
No. 171968, July 31, 2009, 594 SCRA 598, 605.
[13] Ramos v.
Court of Appeals, 362 Phil. 205, 215 (1999).