Manila Metal Container Corporation vs. Philippine National Bank

A qualified acceptance or one that involves a new proposal constitutes a counter-offer and a rejection of the original offer, preventing the perfection of a contract of sale. Furthermore, a deposit made subject to the condition that the purchase price is still subject to board approval does not constitute earnest money proving the perfection of a contract.

Petitioner Manila Metal Container Corporation (MMCC) owned an 8,015-square meter parcel of land in Mandaluyong, which it mortgaged to respondent Philippine National Bank (PNB) to secure multiple loan accommodations. After MMCC defaulted, PNB extrajudicially foreclosed the mortgage and purchased the property at public auction. MMCC failed to redeem the property within the redemption period expiring February 17, 1984, and instead initiated negotiations to repurchase the property on installment terms.

• The Mortgage and Foreclosure: MMCC mortgaged its Mandaluyong property to PNB to secure loans totaling over P1,000,000. Upon default, PNB extrajudicially foreclosed the mortgage on August 5, 1982, and bought the property at auction on September 28, 1982 for P1,000,000. The redemption period was set to expire on February 17, 1984.
• Post-Redemption Negotiations: MMCC requested an extension to redeem or repurchase the property on installment. PNB's branch informed MMCC that it did not accept "partial redemption." After the redemption period lapsed, the Register of Deeds cancelled MMCC's title and issued a new one to PNB on June 1, 1984.
• The SAMD Recommendation and Deposit: PNB's Special Assets Management Department (SAMD) prepared a statement of account showing MMCC's liability at P1,574,560.47, recommending this as the repurchase price. On June 25, 1984, MMCC paid P725,000 as "deposit to repurchase," accepted by PNB on the condition that the purchase price was subject to Board approval.
• The Counter-Offers: PNB management rejected the SAMD recommendation, proposing a minimum market value of P2,660,000. On June 4, 1985, PNB's Board approved the sale but at P1,931,389.53, payable in cash within 60 days, with several conditions (forfeiture of deposit for non-payment, waiver of warranty against eviction, etc.). MMCC's President received the letter but did not sign or conform. MMCC insisted on the SAMD price and refused to pay the higher balance.
• Subsequent Offers: During the pendency of the case, MMCC offered P3.5M and P4.25M to repurchase the property, which PNB rejected based on a P30M market value appraisal.

• Perfected Contract of Sale: Petitioner argued that SAMD's acceptance of the P725,000 deposit amounted to acceptance of its offer to repurchase for P1,574,560.47, and the Board's subsequent approval was a suspensive condition that gave rise to the contract.
• Earnest Money: Petitioner maintained that the P725,000 deposit constituted earnest money under Article 1482 of the Civil Code, proving the perfection of the contract.
• Prohibition Against Unilateral Price Increase: Petitioner averred that PNB was proscribed from increasing the interest rate and making a counter-offer after accepting the deposit, as the approval of the higher management was a potestative condition that could not legally prejudice MMCC.
• Compromise Offers: Petitioner argued that its later offers (P3.5M, P4.25M) during the trial were merely compromise offers under Section 27, Rule 130 of the Rules of Court, and should not be taken against it as proof of non-perfection.

• No Meeting of the Minds: Respondent countered that the parties never agreed on the repurchase price; there was merely an exchange of proposals and counter-proposals, and a definite agreement on the amount and manner of payment is essential for a binding contract.
• SAMD Lack of Authority: Respondent argued that SAMD had no authority to bind PNB to a sale; its statement of account was merely a recital of claims, and the deposit was accepted conditionally pending Board approval.
• Qualified Acceptance as Counter-Offer: Respondent maintained that the Board's acceptance at a higher price and with conditions was a qualified acceptance, constituting a counter-offer that petitioner rejected.

• Perfection of Contract: Whether a perfected contract of sale was formed between petitioner and respondent.
• Nature of Deposit: Whether the P725,000 paid by petitioner constitutes earnest money proving the perfection of the contract.
• Effect of Qualified Acceptance: Whether petitioner's failure to conform to the terms in PNB's June 4, 1985 letter and non-payment of the balance negates the existence of a valid and enforceable contract.

• Perfection of Contract: No perfected contract of sale existed because a qualified acceptance involving a new proposal constitutes a counter-offer and a rejection of the original offer. PNB's Board approval set a higher price (P1,931,389.53 versus the recommended P1,574,560.47) and imposed new conditions, which was a counter-offer that MMCC did not accept.
• Nature of Deposit: The P725,000 was not earnest money but a conditional deposit. Under the Stipulation of Facts, it was accepted on the condition that the purchase price was subject to Board approval. Absent a perfected contract, the deposit cannot be considered earnest money proving the perfection of a sale.
• Effect of Qualified Acceptance: Petitioner's failure to conform to the June 4, 1985 letter meant there was no meeting of the minds. The SAMD had no authority to bind PNB; corporate powers to sell assets reside in the Board of Directors. Thus, the Board's qualified acceptance was a counter-offer, and petitioner's refusal to accept it meant no contract was perfected.

• Qualified Acceptance as Counter-Offer — A qualified acceptance or one that involves a new proposal constitutes a counter-offer and a rejection of the original offer. Any modification or variation from the terms of the offer annuls the offer. The Court applied this to hold that PNB's imposition of a higher price and additional conditions was a counter-offer that MMCC rejected, negating consent.
• Earnest Money — Earnest money is given in a contract of sale as part of the price and proof of the perfection of the contract. However, a deposit made subject to the condition that the purchase price is still subject to approval does not constitute earnest money that proves perfection, absent a meeting of the minds on the price. The Court applied this to hold that the P725,000 was a conditional deposit, not earnest money.
• Corporate Authority to Sell — Corporate powers are exercised by the board of directors. Contracts must be made by the board or authorized agents. A department's recommendation or acceptance without board authorization does not bind the corporation. The Court applied this to hold that SAMD's statement of account did not bind PNB to a sale price.

• "A qualified acceptance or one that involves a new proposal constitutes a counter-offer and a rejection of the original offer. A counter-offer is considered in law, a rejection of the original offer and an attempt to end the negotiation between the parties on a different basis."
• "Absent proof of the concurrence of all the essential elements of a contract of sale, the giving of earnest money cannot establish the existence of a perfected contract of sale."

• Boston Bank of the Philippines v. Manalo, G.R. No. 158149, February 9, 2006 — Followed; held that a definite agreement as to the price is an essential element of a binding contract of sale, and fixing the price cannot be left to one party.
• San Miguel Properties Philippines, Inc. v. Huang, 391 Phil. 636 (2000) — Followed; outlined the stages of a contract of sale: negotiation, perfection, and consummation.
• Adelfa Properties, Inc. v. Court of Appeals, 310 Phil. 623 (1995) — Followed; held that acceptance must be absolute, plain, unequivocal, and unconditional to convert an offer into a contract.
• AF Realty Development, Inc. vs. Diesehuan Freight Services, Inc., 424 Phil. 446 (2002) — Followed; held that corporate powers are exercised by the board of directors, and unauthorized declarations by an individual director or department do not bind the corporation.

• Article 1318, Civil Code — Requisites of a contract (consent, object, cause). Applied to determine that consent was lacking due to no meeting of the minds on the price.
• Article 1458, Civil Code — Definition of a contract of sale. Applied to emphasize the necessity of a price certain.
• Article 1482, Civil Code — Earnest money as part of the price and proof of perfection. Interpreted to mean that absent a perfected contract, a deposit is not earnest money.
• Section 23, Corporation Code — Corporate powers exercised by the board of directors. Applied to show SAMD lacked authority to bind PNB without board approval.

Ynares-Santiago, J. (Working Chairperson), Austria-Martinez, and Chico-Nazario, JJ. (Chief Justice Panganiban retired prior to the decision).