Heirs of Ignacio vs. Home Bankers Savings and Trust Company

A contract of sale is perfected only upon the meeting of the minds with absolute acceptance of the offer; a qualified acceptance that modifies the price or payment terms constitutes a counter-offer that requires acceptance by the offeror to perfect a contract, and in the case of a banking corporation, such acceptance must be made by the Board of Directors or by a corporate agent duly authorized by the board, not merely by verbal assent of individual officers or employees.

In August 1981, Fausto C. Ignacio mortgaged two parcels of land in Cabuyao, Laguna covering 203,413 square meters to Home Savings Bank and Trust Company (predecessor of respondent Home Bankers Savings and Trust Company) to secure a ₱500,000.00 loan. Following default, the bank foreclosed the mortgage and emerged as highest bidder at the January 26, 1983 foreclosure sale for ₱764,984.67. The Certificate of Sale was registered on February 8, 1983, and upon expiration of the redemption period, title was consolidated in the bank's name and new TCTs were issued. Despite the lapse of the redemption period, Ignacio negotiated with the bank to repurchase the properties, claiming that a verbal compromise agreement was reached allowing him to pay ₱900,000.00 in installments and to sell portions of the subdivided land to third parties to fund the repurchase.

• The Mortgage and Foreclosure: In August 1981, Fausto C. Ignacio mortgaged two parcels of land in Cabuyao, Laguna (TCT Nos. T-8595 and T-8350, totaling 203,413 sq.m.) to secure a ₱500,000.00 loan from Home Savings Bank and Trust Company. Upon default, the bank foreclosed the mortgage and was the highest bidder at the January 26, 1983 sale for ₱764,984.67. The Certificate of Sale was registered on February 8, 1983, and after the redemption period expired without redemption, the bank consolidated title and obtained new TCTs (Nos. 111058 and 111059).

• The Alleged Repurchase Agreement: Petitioner claimed that a verbal compromise agreement was reached whereby he could repurchase the properties for ₱900,000.00, payable in installments, with the balance dependent on his "financial position." He alleged that the bank agreed to release equivalent land areas for payments made, allow him to sell portions to third parties with the bank executing direct sales to buyers to save on taxes, and permit him to remain in possession. As evidence, petitioner presented a March 22, 1984 letter from Rita B. Manuel, President of Universal Properties, Inc. (UPI), the bank's collecting agent, offering repurchase for ₱950,000.00 with specific installment terms, which petitioner had annotated with handwritten modifications to ₱900,000.00 and different payment dates.

• Disposition of Properties: The bank subdivided the properties and sold portions to various third parties: Fermin and Bella Salvador (TCT No. 117771); Dr. Oscar Remulla, et al. (Lot 3-B-1); Dr. Myrna del Carmen Reyes (Lot 3-B-2-A); Dr. Rodito Boquiren (Lot 3-B-2-B); and Rizalina Pedrosa (TCT No. 117773). Petitioner shouldered subdivision expenses and negotiated these sales. On August 24, 1989 and October 6, 1989, the bank sold the remaining properties (TCT Nos. 154658 and 111058) to respondent spouses Rodriguez and the Zuñigas without notice to petitioner.

• Demand and Adverse Claim: On July 25, 1989, petitioner wrote the bank offering ₱600,000.00 as balance of the repurchase price and demanding release of the remaining titles. The bank refused. On September 18, 1989, petitioner annotated an adverse claim on the titles.

• Proceedings Below: Petitioner filed suit for specific performance on December 27, 1989. The RTC ruled in his favor, finding a perfected contract of repurchase and holding the bank acted in bad faith. The CA reversed, finding no perfected contract because petitioner's acceptance was qualified and constituted a counter-offer never accepted by the bank, and that petitioner acted merely as a broker.

• Perfection of Contract: Petitioner maintained that a contract of repurchase was perfected through the March 22, 1984 letter and his handwritten notations representing a "compromise agreement," supported by receipts for installment payments issued in his name by UPI. He argued that the bank's acceptance was manifested by its conduct in allowing him to make payments, sell portions of the land, and shoulder subdivision expenses.

• Authority of Officers: Petitioner contended that even if the bank officers (Mr. Lazaro and Mr. Fajardo) who allegedly agreed to his modified terms were not formally authorized, the bank was estopped from denying their authority because it accepted the benefits of the arrangement (payments and subdivision expenses).

• Brokerage Allegation: Petitioner argued that he was not merely a broker but the principal buyer, evidenced by receipts issued to him personally rather than to the ultimate buyers, and that the direct sales to third parties were merely a tax-saving arrangement pursuant to the repurchase agreement.

• Innocent Purchasers: Petitioner asserted that respondents-intervenors were not innocent purchasers for value because they failed to exercise due diligence by inquiring into the adverse claim annotated on the titles shortly after their purchase.

• No Perfected Contract: Respondent bank countered that no contract of repurchase was perfected because petitioner's purported acceptance modified the essential terms of the offer—changing the price from ₱950,000.00 to ₱900,000.00 and altering the payment schedule to an indefinite term "depending on financial position"—thereby constituting a counter-offer that was never accepted by the bank.

• Corporate Authority: The bank argued that even assuming verbal discussions occurred, individual officers like Mr. Lazaro or Mr. Fajardo had no authority to bind the corporation to a counter-proposal; only the Board of Directors could approve such a material modification, and no board resolution or written conformity existed.

• Broker Relationship: Respondent maintained that petitioner acted merely as a broker or middleman, and the receipts in his name were actually remittances of payments made by his buyers (Fermin Salvador and Rizalina Pedrosa), not payments on his own account.

• Innocent Purchasers: Respondents-intervenors argued they were innocent purchasers for value who bought the properties in good faith without notice of petitioner's claim, as the titles were clean and registered in the bank's name when they purchased.

• Perfection of Contract: Whether a contract for the repurchase of the foreclosed properties was perfected between petitioner and respondent bank.

• Authority to Bind Corporation: Whether the alleged verbal acceptance by bank officers of petitioner's counter-proposal bound the corporate respondent absent board authorization.

• Nature of Relationship: Whether petitioner acted as a principal buyer or merely as a broker in the sale of the foreclosed properties to third parties.

• Status of Intervenors: Whether respondents-intervenors were innocent purchasers for value in good faith.

• Perfection of Contract: No contract of repurchase was perfected. Petitioner's response to the bank's offer constituted a qualified acceptance and counter-offer because it modified the purchase price from ₱950,000.00 to ₱900,000.00 and changed the payment terms from three fixed installments to an open-ended schedule where the ₱600,000.00 balance would be paid "depending on financial position." Under Article 1319 of the Civil Code, an acceptance must be absolute, plain, unequivocal, and without variance from the offer; a qualified acceptance constitutes a counter-offer that requires acceptance by the original offeror to generate consent.

• Authority to Bind Corporation: The alleged verbal assent by individual bank officers (Mr. Lazaro and Mr. Fajardo) did not bind the corporation. Pursuant to Section 23 of the Corporation Code, corporate powers are exercised by the Board of Directors, and contracts must be made either by the board or by a corporate agent duly authorized by board resolution or by-laws. Absent such authorization, declarations of individual directors or employees relating to corporate affairs are not binding on the corporation. No evidence showed these officers were authorized to accept petitioner's counter-proposal.

• Nature of Relationship: Petitioner acted as a broker or middleman rather than a principal buyer. The receipts issued in his name were remittances of payments made by third-party buyers (Fermin Salvador and Rizalina Pedrosa) for portions of the subdivided land, not payments on his own account. The arrangement where the bank executed direct sales to petitioner's buyers while petitioner paid subdivision expenses was consistent with a brokerage relationship, not a repurchase agreement.

• Status of Intervenors: The issue of whether respondents-intervenors were innocent purchasers for value was rendered moot by the finding that no repurchase contract existed. However, the Court noted that intervenors purchased properties registered in the bank's name without notice of petitioner's claim, and petitioner's adverse claim was annotated only after their purchases.

• Absolute Acceptance in Contract Perfection — For a contract of sale to be perfected by mere consent, the acceptance of the offer must be absolute, certain, and identical in all respects with the offer, assenting to material and motivating terms including price and payment schedule. A qualified acceptance that introduces new terms—such as modifying the price or making payment contingent on the buyer's financial position—constitutes a counter-offer that rejects the original offer and requires separate acceptance to perfect a contract. The Court applied this doctrine to hold that petitioner's modified terms prevented contract formation.

• Corporate Authority and Binding Effect — Under Section 23 of the Corporation Code, the corporate powers of all corporations are 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 board resolution or by-laws. Absent valid delegation or authorization, declarations of individual directors or employees relating to corporate affairs, but not made in the course of authorized duties, are not binding on the corporation. The Court applied this to reject petitioner's claim that verbal assent by bank employees created a binding obligation on the banking institution.

• Implied Acceptance — Acceptance of an offer may be shown by acts, conduct, or words of a party that clearly manifest a present intention to accept. However, such implied acceptance must still be absolute and unqualified. The Court distinguished this doctrine to note that the bank's acceptance of payments and subdivision expenses did not constitute implied acceptance of petitioner's counter-offer where the bank viewed petitioner as a broker facilitating sales to third parties, not as a buyer.

• "The offer must be certain. To convert the offer into a contract, the acceptance must be absolute and must not qualify the terms of the offer; it must be plain, unequivocal, unconditional, and without variance of any sort from the proposal. A qualified acceptance, or one that involves a new proposal, constitutes a counter-offer and is a rejection of the original offer." — Articulating the rule on contract perfection under Article 1319 of the Civil Code and distinguishing between acceptance and counter-offer.

• "Section 23 of the Corporation Code expressly provides that the corporate powers of all corporations shall be exercised by the board of directors... 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." — Establishing the requirement of board authorization for corporate contracts and rejecting the binding effect of unauthorized officer declarations.

• "It is quite absurd and unusual that the defendant-appellant could have acceded to the condition that the balance of the payment of the repurchase price would depend upon the financial position of the plaintiff-appellee. Such open-ended and indefinite period for payment is hardly acceptable to a banking institution... whose core existence fundamentally depends upon its financial arrangements and transactions." — Observing that petitioner's claimed terms were contrary to normal banking practice and business reality.

• Palattao v. Court of Appeals, G.R. No. 131726, May 7, 2002 — Controlling precedent on the requirement of absolute acceptance; held that qualified acceptance insufficient to generate consent necessary to perfect a contract. Followed to establish that petitioner's modified terms constituted a counter-offer.

• Villanueva v. Philippine National Bank, G.R. No. 154493, December 6, 2006 — Controlling precedent on contract perfection; held that acceptance must assent to material and motivating points of the offer, and that agreement on rate but variance in term is ineffective. Followed to emphasize that modification of payment terms prevented contract formation.

• Adelfa Properties, Inc. v. Court of Appeals, 310 Phil. 623 (1995) — Cited for the rule that acceptance may be evidenced by acts, conduct, or words manifesting intent to accept, but distinguished because the bank's conduct was consistent with viewing petitioner as a broker, not accepting a counter-offer.

• AF Realty & Development, Inc. v. Dieselman Freight Services, Co., 424 Phil. 446 (2002) — Controlling precedent on corporate authority; held that Section 23 of the Corporation Code requires board exercise of corporate powers and that unauthorized director declarations are not binding. Followed to reject binding effect of verbal assents by bank officers.

• Manila Metal Container Corporation v. Philippine National Bank, G.R. No. 166862, December 20, 2006 — Controlling precedent on contract perfection and corporate authority; cited for the principle that contracts must be made by the board or authorized agents. Followed to reinforce the requirement of board authorization for the counter-proposal.

• Article 1319, Civil Code of the Philippines — States that consent is manifested by the meeting of the offer and the acceptance upon the thing and the cause which are to constitute the contract, and that the offer must be certain and the acceptance absolute, with a qualified acceptance constituting a counter-offer. Applied to hold that petitioner's qualified acceptance of the repurchase offer prevented contract perfection.

• Section 23, Corporation Code of the Philippines (Batas Pambansa Blg. 68) — Provides that the corporate powers of all corporations shall be exercised by the board of directors. Applied to establish that contracts binding the corporation must be made by the board or duly authorized agents, and that the alleged verbal acceptance by individual officers was insufficient to bind the bank.

Maria Lourdes P. A. Sereno (Chief Justice, Chairperson), Antonio T. Carpio, Teresita J. Leonardo-De Castro, Lucas P. Bersamin.