SAN MIGUEL PROPERTIES PHILIPPINES, INC v HUANG G.R. No. 137290. July 31, 2000

FACTS Petitioner San Miguel Properties Philippines, Inc. is a domestic corporation engaged in the purchase and sale of real properties. Part of its inventory are two parcels of land totalling 1,738 square meters at the corner of Meralco Avenue and General Capinpin Street, Barrio Oranbo, Pasig City and was duly registered with Register of Deeds of Pasig City. The properties were offered for sale for P52,140,000.00 in cash. The offer was made to Atty. Helena M. Dauz who was acting for respondent spouses as undisclosed principals. Atty. Dauz signified her clients interest in purchasing the properties for the amount for which they were offered by petitioner, which Isidro A. Sobrecarey, petitioner’s Vice-President and Operations Manager for corporate real estate, indicated his conformity to the offer by affixing his signature to the letter and accepted the "earnest deposit" of P1 million. Upon request of respondent spouses, Sobrecarey ordered the removal of the "FOR SALE" sign from the properties. Atty. Dauz and Sobrecarey then commenced negotiations. Sobrecarey informed Atty. Dauz that petitioner was willing to sell the subject properties on a 90-day term. Atty. Dauz countered with an offer of six months within which to pay. Atty. Dauz asked for an extension of 45 days adding that within that period, they hope to finalize the agreement on the matter."Her request was granted. However, petitioner, through its president and chief executive officer, Federico Gonzales, wrote Atty. Dauz informing her that because the parties failed to agree on the terms and conditions of the sale despite the extension granted by petitioner, the latter was returning the amount of P1 million given as "earnest-deposit." Respondent spouses, through counsel, wrote petitioner demanding the execution within five days of a deed of sale covering the properties. Respondents attempted to return the "earnest-deposit" but petitioner refused on the ground that respondent’s option to purchase had already expired. Respondent spouses filed a complaint for specific performance against petitioner before the Regional Trial Court of Pasig City. Within the period for filing a responsive pleading, petitioner filed a motion to dismiss the complaint alleging that (1) the alleged "exclusive option" of respondent spouses lacked a consideration separate and distinct from the purchase price and was thus unenforceable and (2) the complaint did not allege a cause of action because there was no "meeting of the minds" between the parties and, therefore, no perfected contract of sale. The trial court granted petitioners motion and dismissed the action. Respondents filed a motion for reconsideration, but it was denied by the trial court. They then appealed to the Court of Appeals which rendered a decision reversing the judgment of the trial court on the ground that that all the requisites of a perfected contract of sale had been complied. Petitioner moved for reconsideration of the trial court’s decision, but its motion was denied. Hence, this petition. ISSUE Whether or not there’s a perfected contract of sale between the petitioner and respondents. RULING No. With regard to the alleged payment and acceptance of earnest money, the Court holds that respondents did not give the P1 million as "earnest money" as provided by Art. 1482 of the Civil Code because at the time when petitioner accepted the terms of respondents offer, their contract had not yet been perfected. They presented the amount merely as a deposit of what would eventually become the earnest money or downpayment should a contract of sale be made by them. The amount was thus given not as a part of the purchase price and as proof of the perfection of the contract of sale but only as a guarantee that respondents would not back out of the sale. The first condition for an option period of 30 days sufficiently shows that a sale was never perfected. All that respondents had was just the option to buy the properties which privilege was not, however, exercised by them because there was a failure to agree on the terms of payment. No contract of sale may thus be enforced by respondents. Furthermore, even the option secured by respondents from petitioner was fatally defective. Under the second paragraph of Art. 1479, an accepted unilateral promise to buy or sell a determinate thing for a price certain is binding upon the promisor only if the promise is supported by a distinct consideration. Consideration in an option contract may be anything of value, unlike in sale where it must be the price certain in money or its equivalent. There is no showing here of any consideration for the option. Lacking any proof of such consideration, the option is unenforceable. Equally compelling as proof of the absence of a perfected sale is the second condition that, during the option period, the parties would negotiate the terms and conditions of the purchase. The stages of a contract of sale are as follows: (1) negotiation, covering the period 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 which are the meeting of the minds of the parties as to the object of the contract and upon the price; and (3) consummation, which begins when the parties perform their respective undertakings under the contract of sale, culminating in the extinguishment thereof. In the present case, the parties never got past the negotiation stage. While the parties already agreed on the real properties which were the objects of the sale and on the purchase price, the fact remains that they failed to arrive at mutually acceptable terms of payment, despite the 45-day extension given by petitioner. The manner of payment of the purchase price is an essential element before a valid and binding contract of sale can exist. Thus, it is not the giving of earnest money, but the proof of the concurrence of all the essential elements of the contract of sale which establishes the existence of a perfected sale. In the absence of a perfected contract of sale, it is immaterial whether Isidro A. Sobrecarey had the authority to enter into a contract of sale in behalf of petitioner.