National Grains Authority vs. Intermediate Appellate Court

A contract of sale is perfected at the moment there is a meeting of minds upon the thing which is the object of the contract and upon the price, even if neither has been delivered; the acceptance that determines consent is acceptance of the offer by the other party, not acceptance of the goods delivered. NFA's internal procurement procedures (rebagging, classification, weighing, and issuance of a Warehouse Stock Receipt) constitute operational steps in receiving goods, not prerequisites to the perfection of the contract of sale.

Petitioner National Grains Authority (now National Food Authority, NFA) is a government agency created under Presidential Decree No. 4, one of whose incidental functions is the buying of palay grains from qualified farmers. Private respondent Leon Soriano was a farmer who leased riceland from Judge Concepcion Salud and sought to sell palay to the NFA through William Cabal, the NFA Provincial Manager stationed at Tuguegarao, Cagayan. To qualify as a seller, a farmer had to submit certain documents, including a Farmer's Information Sheet certified by a Bureau of Agricultural Extension (BAEX) technician, tax declarations and copies of the lease contract, and a Residence Tax Certificate. Upon processing these documents, NFA would assign a quota representing the maximum number of cavans of palay the farmer could sell.

On August 23, 1979, Leon Soriano offered to sell palay grains to the National Grains Authority through William Cabal, the NFA Provincial Manager at Tuguegarao, Cagayan. Soriano submitted the documents required for pre-qualification as a seller: a Farmer's Information Sheet accomplished by Soriano and certified by BAEX technician Napoleon Callangan, xerox copies of four tax declarations of the riceland leased to him and copies of the lease contract between him and Judge Concepcion Salud, and his Residence Tax Certificate. After processing these documents, NFA assigned Soriano a quota of 2,640 cavans of palay, noted on the Farmer's Information Sheet, representing the maximum number of cavans he could sell to the agency.

In the afternoon of August 23 and on August 24, 1979, Soriano delivered 630 cavans of palay to the NFA's Carig warehouse. The palay delivered during these two days was not rebagged, classified, or weighed. When Soriano demanded payment, he was informed that payment would be held in abeyance because Cabal was investigating information that Soriano was not a bona fide farmer and that the palay had not been produced from his farmland but was taken from the warehouse of rice trader Ben de Guzman. On August 28, 1979, Cabal wrote Soriano advising him to withdraw the 630 cavans, stating that NFA could not legally accept the delivery on the basis of a subsequent certification by BAEX technician Callangan that Soriano was not a bona fide farmer.

Soriano refused to withdraw the palay and instead insisted on payment. On November 2, 1979, he filed a complaint for specific performance and/or collection of money with damages against NFA and Cabal with the Court of First Instance of Tuguegarao, docketed as Civil Case No. 2754. By agreement of the parties and upon order of the trial court, the 630 cavans were withdrawn from the NFA warehouse and deposited in the bonded warehouse of Ben de Guzman, with an inventory made by the sheriff, a representative of Soriano, and a representative of NFA. Both the trial court and the appellate court found that Soriano was a bona fide farmer and therefore qualified to sell palay to NFA, and that NFA's refusal to accept the delivery was without just cause.

• No Perfected Contract of Sale: Petitioners contended that the 630 cavans of palay delivered by Soriano were merely offered for sale and that no contract of sale was perfected because the palay was not rebagged, classified, weighed, or piled inside the warehouse with a Warehouse Stock Receipt (WSR) prepared, as required by NFA's palay procurement procedure. Petitioners argued that rebagging is the initial operative act signifying acceptance, and acceptance is complete only after the preparation of the WSR; since none of these steps occurred, there was no acceptance of the offer.
• Absence of Consent: Petitioners further contended that there was no consent because there was no acceptance of the 630 cavans of palay in question, citing Article 1319 of the Civil Code, which provides that consent is manifested by the meeting of the offer and the acceptance of the thing and the cause which are to constitute the contract.

• Perfection of Contract of Sale: Whether a contract of sale was perfected between NFA and Soriano notwithstanding that the delivered palay had not undergone NFA's internal procurement procedure of rebagging, classification, weighing, and issuance of a Warehouse Stock Receipt.

• Perfection of Contract of Sale: Yes. A contract of sale was perfected at the moment there was a meeting of minds upon the object (palay) and the price, which occurred when NFA accepted Soriano's offer by noting the quota of 2,640 cavans on his Farmer's Information Sheet. The acceptance that determines consent is acceptance of the offer by the other party, not acceptance of the goods delivered.

• Perfection of Contract of Sale: Under Article 1475 of the Civil Code, the contract of sale is perfected at the moment there is a meeting of minds upon the thing which is the object of the contract and upon the price. Sale is a consensual contract, and perfection occurs upon consent as to the subject matter and price, even if neither is delivered. When NFA accepted Soriano's offer by noting the quota of 2,640 cavans on his Farmer's Information Sheet, there was already a meeting of minds: the object was the palay grains produced in Soriano's farmland, and the price was to be determined depending on quality. The fact that the exact number of cavans to be delivered had not been determined did not affect perfection, because Article 1349 of the Civil Code provides that the fact that the quantity is not determinate shall not be an obstacle to the existence of the contract, provided it is possible to determine the same without need of a new contract. Soriano could deliver any amount up to 2,640 cavans. Petitioners' reliance on NFA's internal procurement procedure — rebagging, classification, weighing, and preparation of the WSR — was misplaced, because the acceptance referred to in Article 1319, which determines consent, is the acceptance of the offer of one party by the other, not acceptance of the goods delivered. NFA's refusal to accept the goods was based on its allegation that Soriano was not a bona fide farmer, but both the trial and appellate courts found that Soriano was indeed a bona fide farmer and that NFA's refusal was without just cause. These factual findings, supported by the record, were not disturbed on appeal.

• Perfection of Contract of Sale (Consensual Nature) — A contract of sale is perfected at the moment there is a meeting of minds upon the thing which is the object of the contract and upon the price, even if neither the object nor the price has been delivered. The essential requisites of contracts are: (1) consent of the contracting parties, (2) object certain which is the subject matter of the contract, and (3) cause of the obligation which is established. Consent is manifested by the meeting of the offer and the acceptance of the thing and the cause which are to constitute the contract. The acceptance that determines consent is the acceptance of the offer of one party by the other, not acceptance of the goods delivered. The Court applied this doctrine by holding that NFA's notation of the quota on Soriano's Farmer's Information Sheet constituted acceptance of Soriano's offer to sell palay, thereby perfecting the contract of sale.

• Indeterminacy of Quantity — Under Article 1349 of the Civil Code, the fact that the quantity is not determinate shall not be an obstacle to the existence of the contract, provided it is possible to determine the same without need of a new contract between the parties. The Court applied this principle by holding that the undetermined exact number of cavans to be delivered did not affect the perfection of the sale, because Soriano could deliver any amount up to the approved quota of 2,640 cavans.

• "The acceptance referred to which determines consent is the acceptance of the offer of one party by the other and not of the goods delivered as contended by petitioners." — This passage is the ratio decidendi: it distinguishes acceptance of an offer (which perfects the contract of sale) from acceptance of goods (which is merely a step in performance), thereby rejecting NFA's argument that its internal procurement procedures were prerequisites to contractual perfection.

• "Sale is a consensual contract, 'there is perfection when there is consent upon the subject matter and price, even if neither is delivered.'" — This formulation, citing Obana vs. C.A., articulates the consensual nature of the contract of sale and is the doctrinal basis for holding that the contract was perfected upon the meeting of minds, regardless of whether the palay had been physically accepted into NFA's warehouse.

• "The fact that the exact number of cavans of palay to be delivered has not been determined does not affect the perfection of the contract." — This statement applies Article 1349 of the Civil Code to the facts, confirming that an undetermined quantity within an agreed maximum does not preclude contractual perfection.

• Obana vs. C.A., L-36249, March 29, 1985, 135 SCRA 557, 560 — Cited as controlling authority for the proposition that sale is a consensual contract and that perfection occurs when there is consent upon the subject matter and price, even if neither is delivered. The Court applied this principle directly to hold that the contract of sale between NFA and Soriano was perfected upon the meeting of minds.

• Article 1458, Civil Code of the Philippines — Defines sale as a contract whereby one party obligates himself to transfer ownership of and deliver a determinate thing, and the other to pay a price certain in money or its equivalent. Applied to characterize the transaction between Soriano and NFA as a contract of sale.
• Article 1305, Civil Code of the Philippines — Defines a contract as a meeting of minds between two persons whereby one binds himself, with respect to the other, to give something or render some service. Cited to establish the nature of the transaction.
• Article 1318, Civil Code of the Philippines — Sets forth the essential requisites of contracts: (1) consent of the contracting parties, (2) object certain which is the subject matter of the contract, and (3) cause of the obligation which is established. Applied to determine whether the requisites for a valid contract of sale were present.
• Article 1319, Civil Code of the Philippines — Provides that consent is manifested by the meeting of the offer and the acceptance of the thing and the cause which are to constitute the contract. Petitioners invoked it to argue absence of consent; the Court clarified that the acceptance referred to is acceptance of the offer, not of the goods.
• Article 1349, Civil Code of the Philippines — Provides that the fact that the quantity is not determinate shall not be an obstacle to the existence of the contract, provided it is possible to determine the same without need of a new contract. Applied to hold that the undetermined exact quantity of palay did not preclude perfection.
• Article 1475, Civil Code of the Philippines — States that the contract of sale is perfected at the moment there is a meeting of minds upon the thing which is the object of the contract and upon the price, and that from that moment the parties may reciprocally demand performance. Applied as the controlling provision establishing when the contract of sale was perfected.
• Presidential Decree No. 4 — The decree creating the National Grains Authority (now NFA). Cited as the statutory basis for the agency's existence and its incidental function of buying palay grains from qualified farmers.

Narvasa, Cruz, Gancayco, and Griño-Aquino, JJ., concurred.