Firme vs. Ukal Enterprises

A contract of sale is not perfected where there is no meeting of the minds, as when the sellers explicitly reject the offer and refuse to sell, and the buyer's agent lacks board authorization to finalize the transaction.

Spouses Firme owned a parcel of land in Quezon City. Renato de Castro, vice president of Bukal Enterprises, authorized his friend Teodoro Aviles, a broker, to negotiate the purchase of the property. Aviles met with the spouses twice, presenting draft deeds of sale which the spouses rejected due to objectionable terms. The spouses subsequently informed Aviles they were no longer selling. Despite this, Bukal Enterprises relocated squatters and introduced improvements on the property, then filed a complaint for specific performance when the spouses refused to sell.

• The Property and Negotiations: Spouses Firme owned a parcel of land covered by TCT No. 264243. Teodoro Aviles, authorized by Bukal Enterprises Vice President Renato de Castro, negotiated for its purchase. During their first meeting on January 30, 1995, Aviles offered ₱2,500 per square meter, which the spouses rejected. During the second meeting on February 6, 1995, Aviles presented a draft deed of sale (the "Third Draft" according to Dr. Firme), which the spouses found one-sided and rejected, particularly the provision requiring them to deliver the title so the buyer could mortgage the property. On March 2 and 4, 1995, Aviles called the spouses, who explicitly informed him that the property was not for sale.
• The Improvements and Demands: Despite knowledge of the spouses' refusal—Aviles relayed the refusal to De Castro on March 2, 1995—Bukal Enterprises relocated the squatter families on March 6-7, 1995, and constructed fences, posts, and riprap on the property. On March 7, 1995, Bukal Enterprises sent a letter demanding execution of the sale. On March 20, 1995, the Spouses Firme sent a letter demanding the removal of the structures and the vacation of the property.
• The Agent's Authority: Aviles was not an officer or member of the Board of Directors of Bukal Enterprises. There was no board resolution authorizing him to negotiate or purchase the property on behalf of the corporation. Furthermore, Aviles signed the verification and certification of non-forum shopping in the complaint without proof of authorization from the corporation.

• Lack of Consent: Petitioners argued there was no meeting of the minds; they explicitly rejected the draft deeds and repeatedly refused to sell the property.
• Statute of Frauds: Petitioners maintained that the alleged contract is unenforceable under the Statute of Frauds because there was no writing subscribed by the party charged.
• Agent's Authority: Petitioners argued that Aviles had no legal authority to bind Bukal Enterprises without a board resolution, rendering any transaction void.
• Damages: Petitioners contended that the award of moral and compensatory damages by the trial court was proper.

• Perfected Contract/Partial Performance: Respondent countered that a contract was perfected when the spouses accepted the second draft (which deleted the objectionable conditions) and that partial performance—relocating the squatters and introducing improvements—took the oral contract out of the scope of the Statute of Frauds.
• Ratification: Respondent argued that the lack of board authorization for Aviles was cured by ratification when Bukal Enterprises filed the complaint for specific performance.

• Consent: Whether there was a perfected contract of sale between the parties despite the sellers' explicit refusal to sell.
• Statute of Frauds: Whether the alleged contract is unenforceable under the Statute of Frauds.
• Corporate Authority: Whether an agent without board authorization can validly bind a corporation in a contract of sale.
• Builder in Good Faith: Whether Bukal Enterprises is a builder in good faith entitled to reimbursement for improvements.
• Damages: Whether the Spouses Firme are entitled to compensatory, moral, and nominal damages.

• Consent: No perfected contract of sale existed. Consent is an essential element of a valid contract (Art. 1318, Civil Code), requiring a meeting of the minds on the object and price (Art. 1475, Civil Code). The spouses explicitly rejected the drafts and informed Aviles they were not selling. Aviles' testimony regarding the presentation and acceptance of the drafts was inconsistent and contradicted by De Castro's admission that he knew of the refusal. Unsigned deeds have no probative value.
• Corporate Authority: Aviles lacked authority to bind Bukal Enterprises. Under Sections 23 and 36 of the Corporation Code, the power to purchase real property is vested in the board of directors. While a corporation may appoint agents, the final say rests with the board. Without a board resolution, Aviles could not finalize the transaction.
• Statute of Frauds: Inapplicable. The application of the Statute of Frauds (Art. 1403, Civil Code) presupposes the existence of a perfected contract. Since no contract existed here, there is no basis for its application or the exception of partial performance.
• Builder in Good Faith: Bukal Enterprises is a builder in bad faith. They introduced improvements after being informed of the sellers' refusal to sell. Under Arts. 449 and 450 of the Civil Code, a builder in bad faith loses what is built without indemnity, and the owner may demand demolition or appropriate the improvements. Bukal Enterprises is not entitled to reimbursement for relocating the squatters.
• Damages: Compensatory and moral damages were properly deleted because the claimed travel expenses could not be attributed solely to the case. However, nominal damages of ₱30,000 were awarded because Bukal Enterprises violated the property rights of the spouses (Arts. 2221, 2222, 451, Civil Code).

• Essential Requisites of a Contract — Consent, object, and cause must concur for a contract to exist. The absence of consent—such as when an offer is explicitly rejected—negates the existence of a perfected contract.
• Corporate Powers and Agency — The corporate power to purchase real property is exercised by the board of directors. Contracts or acts of a corporation must be made either by the board or by a corporate agent duly authorized by the board; absent such authorization, the declarations of an individual director or agent are not binding on the corporation.
• Builder in Bad Faith — One who builds, plants, or sows on the land of another with knowledge that they have no right to do so loses what is built without right of indemnity. The owner of the land may demand demolition of the work or appropriate the improvements.
• Nominal Damages — Adjudicated to vindicate or recognize a property right that has been violated, not for the purpose of indemnifying the plaintiff for any loss suffered.

• "The essence of consent is the conformity of the parties on the terms of the contract, the acceptance by one of the offer made by the other."
• "Contracts or acts of a corporation must be made either by the board of directors or by a corporate agent duly authorized by the board. Absent such valid delegation/authorization, the rule is that the declarations of an individual director relating to the affairs of the corporation, but not in the course of, or connected with, the performance of authorized duties of such director, are held not binding on the corporation."

• Salonga v. Farrales — Followed. Consent is an essential element for the existence of a contract, and where it is wanting, the contract is non-existent.
• AF Realty & Development, Inc. v. Dieselman Freight Services, Co. — Followed. Corporate powers are exercised by the board of directors; absent valid delegation, acts of an individual director are not binding on the corporation.
• Rosencor Development Corporation v. Inquing — Followed. The application of the Statute of Frauds presupposes the existence of a perfected contract.

• Article 1318, Civil Code — Cited to enumerate the essential requisites of a contract: consent, object, and cause.
• Article 1475, Civil Code — Cited to state that the contract of sale is perfected at the moment there is a meeting of minds on the thing and the price.
• Article 1403, Civil Code — Cited regarding the Statute of Frauds; applied negatively, as the provision presupposes a perfected contract.
• Articles 449, 450, 451, Civil Code — Cited to determine the rights and obligations of a landowner and a builder in bad faith.
• Articles 2221, 2222, Civil Code — Cited as the basis for the award of nominal damages to vindicate a violated property right.
• Sections 23 and 36, Corporation Code — Cited to establish that the power to purchase real property is vested in the board of directors.

Davide, Jr., C.J., (Chairman), Vitug, and Azcuna, JJ., concur.