G.R. No. 199648 (January 28, 2015)
Topics: contract of sale; earnest money
Summary:
Respondent deposited P100,000.00 to the bank account of petitioner, and latter claimed such deposit was earnest money.
Doctrines:
The stages of a contract of sale are:
(1) negotiation, starting from the time the prospective contracting parties indicate interest in the contract to the time the contract is perfected;
(2) perfection, which takes place upon the concurrence of the essential elements of the sale; and
(3) consummation, which commences when the parties perform their respective undertakings under the contract of sale, culminating in the extinguishment of the contract.
Facts:
Looking to expand its business and add to its existing offices, respondent – through its General Manager, Antonio Eleazar (Eleazar) – sent a December 9, 2004 Letter addressed to petitioner – through its Executive Vice-President, Carolina T. Young (Young) – offering to purchase the subject property at P6,000.00 per square meter. A series of telephone calls ensued, but only between Eleazar and Young’s secretary; Eleazar likewise personally negotiated with a certain Maria Remoso (Remoso), who was an employee of petitioner. At this point, Eleazar was unable to personally negotiate with Young or the petitioner’s board of directors.
Sometime thereafter, Eleazar personally went to petitioner’s office offering to pay for the subject property in cash, which he already brought with him. However, Young declined to accept payment, saying that she still needed to secure her sister’s advice on the matter. She likewise informed Eleazar that prior approval of petitioner’s Board of Directors was required for the transaction, to which remark Eleazar replied that respondent shall instead await such approval.
On February 4, 2005, respondent sent a Letter of even date to petitioner. It was accompanied by Philippine National Bank Check No. 24677 (the subject check), issued for P100,000.00 and made payable to petitioner.
The check was eventually deposited with and credited to petitioner’s bank account.
Issue: Whether the money delivered by respondent to petitioner was earnest money, thereby providing a perfected contract of sale.
Ruling:
NO. Respondent’s subsequent sending of the February 4, 2005 letter and check to petitioner – without awaiting the approval of petitioner’s board of directors and Young’s decision, or without making a new offer – constitutes a mere reiteration of its original offer which was already rejected previously; thus, petitioner was under no obligation to reply to the February 4, 2005 letter. It would be absurd to require a party to reject the very same offer each and every time it is made; otherwise, a perfected contract of sale could simply arise from the failure to reject the same offer made for the hundredth time. Thus, said letter cannot be considered as evidence of a perfected sale, which does not exist in the first place; no binding obligation on the part of the petitioner to sell its property arose as a consequence. The letter made no new offer replacing the first which was rejected.
Since there is no perfected sale between the parties, respondent had no obligation to make payment through the check; nor did it possess the right to deliver earnest money to petitioner in order to bind the latter to a sale. As contemplated under Art. 1482 of the Civil Code, “there must first be a perfected contract of sale before we can speak of earnest money.” “Where the parties merely exchanged offers and counter-offers, no contract is perfected since they did not yet give their consent to such offers. Earnest money applies to a perfected sale.”