case digest submitted by zosa

INSURANCE LIFE ASSURANCE COMPANY, LTD. VS. ASSET BUILDERS CORPORATION
G.R. No. 147410, February 5, 2004

Facts:

Insular Life Insurance Company, Limited invited companies to participate in the bidding of the proposed Insular Life building. The Instruction to Bidders prepared by Insular Life expressly required a formal acceptance and a period within which such acceptance was to be made known to the winner. Asset Builders Corporation submitted a bid proposal secured by bid bonds valid for 60 days. Under its proposal form, Asset Builders bound and obliged itself to enter into a contract with Insular Life within 10 days from the notice of the award, with good and sufficient securities. The project was awarded to the Asset Builders and a notice to proceed with the construction was sent by Insular Life to the former. However, Asset Builders project. Neither did it execute any construction agreement. It informed Insular Life that it will not proceed with the project.

Issue:

Whether or not there is a perfected contract between Insular Life and Asset Builders.

Held:

There was indeed no acceptance of the offer by Asset Builders. Such failure to comply with the condition imposed for the perfection of the contract resulted in the failure of the contract. It is elementary that, being consensual, a contract is perfected by mere consent. From the moment of a meeting of the offer and the acceptance upon the object and the cause that would constitute the contract, consent arises. However, "the offer must be certain" and "the acceptance seasonable and absolute; if qualified, the acceptance would merely constitute a counter-offer."

There are three distinct stages of a contract- preparation or negotiation, perfection or consummation. Negotiation begins when the prospective contracting parties manifest their interest in the contract and ends at the moment of their agreement. Perfection occurs when they agree upon the essential elements thereof. The last stage is the consummation where they fulfill the terms agreed upon culminating in the extinguishment of the contract.

In the case at bar, the parties did not get past the negotiation stage.

In fact, there was only an offer and a counteroffer that did not sum up to any final arrangement containing the elements of a contract. Clearly, no meeting of minds was established.



METROPOLITAN MANILA DEVELOPMENT AUTHORITY VS. JANCOM ENVIRONMENTAL CORPORATION
GR No. 147465, January 30, 2002

Facts:

A Build-Operate-Transfer Contract for the waste to energy project was signed between JANCOM and the Philippine Government. The BOT Contract was submitted to President Ramos for approval but was then too close to the end of his term that his term expired without him signing the contract. He, however, endorsed the same to incoming President Estrada. With the change in administration came changes in policy and economic environment, thus the BOT contract was not pursued and implemented. JANCOM appealed to the President for reconsideration and despite the pendency of the appeal, MMDA caused the publication of an invitation to pre-qualify and submit proposals for solid waste management.

Issue:

Whether or not there is a valid and binding contract between the Republic of the Philippines and JANCOM.

Held:

There is a valid and binding contract between JANCOM and the Republic of the Philippines. Under Articles 1305 of the Civil Code, “A contract is a meeting of the minds between two persons whereby one binds himself, with respect to the other, to give something or to render some service.” Art. 1315 of the Civil Code provides that a contract is perfected by mere consent. Consent, on the other hand, is manifested by the meeting of the offer and the acceptance upon the thing and the cause which are to constitute the contract. In the case at bar, the signing and execution of the contract by the parties clearly show that, as between the parties, there was a concurrence of offer and acceptance with respect to the material details of the contract, thereby giving rise to the perfection of the absence of President’s signature is untenable. Significantly, the contract itself provides that the signature of the President is necessary only for its effectivity, not its perfection.
            There being a perfected contract, MMDA cannot revoke or renounce the same without the consent of the other. From the moment of perfection, the parties are bound not only to the fulfillment of what has been expressly stipulated but also to all the consequences which, according to their nature, may be in keeping with good faith, usage and law. It is a general principle of law that no one may be permitted to change his mind and go back upon his own acts, or to proceed contrary thereto, to the prejudice of the other party.

ANAMA VS. COURT OF APPEALS
GR. No. 128609, January 29, 2004

Facts:

The property was previously owned by Douglas Anama’s parents, who mortgaged it to Philippine Savings Bank and later was foreclosed. Douglas and the PSBank entered into an agreement denominated as a Contract to Buy whereby the bank agreed to sell to Douglas the said land with all the improvements thereon. The Contract to Buy provides that Anama shall purchase the property of a certain amount and shall pay to the PSBank; it also provides that Anama shall apply with the bank for a loan, the proceeds of which answer for the balance of the purchase price; should the petitioner fail to comply with any of the terms of contract, all amounts paid are forfeited in favor of PSBank, the latter having the option either to demand full payment of total price or to rescind the contract.
Anama was able to pay the first and second installments; however, he failed to pay the third installment when it became due. There were several transactions between them to settle the amount due. But later, the bank executed an Affidavit of Cancellation rescinding the contract, and forfeited the payments made by Anama which were applied as rentals of the use of the property. Anama was then advised to vacate the property despite his opposition to the rescission of the Contract to Buy. The bank sold the property to spouses Co, in whose favor TCT was issued. Anama then filed a case for Declaration of Nullity of Deed of Sale, Cancellation of TCT, and Specific Performance with Damages.

Issue:

Whether the rescission of the Contract to Buy was valid.

Held:

Since Anama failed to pay the third installment, PSBank was entitled to rescind the Contract to Buy. The contract provides the Bank two options in the event that petitioner fails to pay any of the installments. This was either (1) to rescind the contract outright and forfeit all amounts paid by the petitioner, or (2) to demand the satisfaction of the contract and insist on the full payment of the total price. After petitioner repeatedly failed to pay the third installment, the Bank chose to exercise the first option.
            The Contract to Buy is actually a contract to sell whereby the vendor reserves ownership of the property and is not to pass until full payment. Such payment is a positive suspensive condition, the failure of which is not a breach but simply an event that prevents the obligation of the vendor to convey title from acquiring binding force. Since ownership of the subject property was not pass to petitioner until full payment of the purchase price, his failure to pay on the date stipulated, or in the extension granted, prevented the obligation for the Bank to pass title of the property to Anama. The bank could validly sell the property to the spouses Co, the right of the bank to sell the property being unequivocal.

HILADO VS. HEIRS OF RAFAEL MEDALLA
G.R. No. 144227, February 15, 2002

Facts:

Gorgonio Macainan was the owner of the several properties. After his death, his estate was divided among his heirs, including his children by his first wife, a contract (Anita, Rosita & Berbonio) As Berbonio had predeceased Gorgonio, her children ( Rafael, Lourdes&Teresita surnamed Medalla) succeeded to her inheritance. Respondents herein are the heirs of Rafael Medalla.

Rafael Medalla executed a Deed of Absolute Sale purporting to sell his share in the inheritance to Gorgonio Hilado. Later, he executed another”Deed of Absolute Sale in favor of Hilado over his share in another inherited property. Over the next 2 years, Hilado and Medalla executed 3 more contracts concerning the sold properties;” “ Memorandum of Agreement,”“Deed of Resale,” whereby Hilado resold to Medalla two of the 5 hectares a lot, and ”Agreement.”

Anita Macainan tried to redeem the first property that was sold from Hilado but she failed, so she filed a suit against Rafael and Hilado for legal redemption before the RTC. So, Rafael filed a cross-claim against Hilado, alleging that the first deed of sale was in fact an equitable mortgage to secure a loan from Hilado. The latter denied that the agreement between them was a loan but a Deed of Sale, reflecting their true agreement.

Issue:

Whether the Deed of Absolute Sale executed by Medalla and Hilado is in fact an equitable mortgage.

Held:

Under Art. 1602 in relation to Art. 1604, a contract purporting to be an absolute sale is presumed to be an equitable mortgage (1) when the price of a sale with a right to reprchase is unusually inadequate; (2) when the vendor remains in possession as lessee or otherwise;(3) when upon or after the expiration of the right to repurchase another instrument extending the period of the redemption or granting a new period is executed;(4) when the purchaser retains for himself a part of the purchase price;(5) when the vendor binds himself to pay the taxes on the thing sold;(6) in any other case where it may be fairly inferred that the real intention of the parties is that the presence of any of these circumstances is sufficient for a contract to be presumed as an equitable mortgage.
            In view of the conclusions we have reached, it is unnecessary to pass upon Hilado’s contention that respondents are bound by the terms of the “Deed of Sale” in question as the law between the parties. It will suffice to say that even if a document appears on its face to be a sale, the owner of the property may prove that the contract is really a loan with a mortgage that the document does not express the true intent and agreement of the parties.

KATIPUNAN VS. KATIPUNAN, JR.
G.R. No. 132415, January 30, 2002


Facts:

Respondent Braulio Katipunan Jr. is the registered owner of a lot and a five-door apartment constructed thereon, which were occupied by lessees. Respondent assisted by his brother petitioner Miguel entered into a Deed of Absolute Sale with brothers Edardo Balguma and Leopoldo Balguma, Jr. ( co-petitioners), represented by their lawyer-father involving the subject property for a consideration of P187,000.00. So, the title was registered in the names of the Balguma brothers and they started collecting rentals thereon.
            Later, Braulio filed a complaint for annulment of the Deed of Absolute Sale, contending that his brother Miguel, Atty. Balguma and Inocencio Valdez ( one of the petitioners) convinced him to work abroad. Through insidious words and machinations, they made him sign a document purportedly a contract of employment, which document turned out to be a Deed of Absolute Sale. He further alleged that he did not receive the consideration stated in the contract. He claimed that there was evident bad faith and conspiracy in taking advantage of his ignorance, he being only a third grader.
            The RTC dismissed the complaint because Braulio failed to prove his cause of action since he admitted that he obtained loans from the Balgumas, he signed the Deed of Absolute Sale, and he acknowledged selling the property and stopped collecting the rentals. But when the case was elevated, the decision of RTC was reversed and it was held that Braulio was incompetent, has very low I.Q., illiterate and has a slow comprehension. The CA based its decision on Arts.1332 and 1390 of NCC and Sec. 2, Rule 92 of the Rules of Court, concerning the incompetence of a party in contract.

Issue:

Whether there was a valid contract of sale between the parties.

Held:

The Supreme Court found the petition devoid of merit. There was a vitiated consent on the part of the respondent as he signed the Deed of Absolute Sale without the remotest idea of what it was and received no consideration thereof. The contract entered into by the parties being voidable contract, was correctly annulled on appeal.
            A contract of sale is born from the moment there is a meeting of minds upon the thing which is the object of the contract and upon the price. This meeting of minds speaks of the intent of the parties in entering the contract respecting the subject matter and the consideration thereof. Thus, the elements of a contract of a sale are consent, object, and price in money or its equivalent. Under Art. 1330 of NCC, consent may be vitiated by any of the following: mistake, violence, intimidation, undue influence, and fraud. The presence of any of these vices renders the contract voidable.

A contract where one of the parties is incapable of giving consent or where consent is vitiated by mistake, fraud, or intimidation is not void ab initio but only voidable and is binding upon the parties unless annulled proper court action. The effect of annulment is to restore the parties to the status quo ante insofar as legally and equitably possible---this much is dictated by Art. 1398 provides that when the defect of the contract consists in the incapacity of one of the parties, the incapacitated person is not obliged to make any restitution, except when he has been benefited by the things or price received by him.        Thus, since the Deed of Absolute Sale between respondent and Balguma brothers is voidable and hereby annulled, then the restitution of the property and its fruits to respondent is just and proper.