Case Summary (G.R. No. 20732)
Key Dates
• 1920 – Acquisition of yacht by Burke in Australia
• Feb. 12, 1922 – Burke grants Elser a 30-day written option to buy at ₱120,000
• Mar. 6–23, 1922 – Elser charters and repairs yacht, sponsors a pleasure voyage
• Mar. 31, 1922 – Elser writes Burke that he can pay at most ₱70,000; Burke negotiates ₱80,000 deal with bank
• Apr. 3, 1922 – Elser’s letter (“Exhibit 1”) stipulates ₱80,000 purchase terms; accepted by Burke and Asia Bank
• Apr. 5–8, 1922 – Elser withdraws; Burke demands performance; suit ensues
• Sept. 26, 1924 – Supreme Court decision
Applicable Law
• Civil Code of the Philippines (Spanish Civil Code principles)
• Organic Acts governing property and contracts under U.S. sovereignty (no Philippine constitution in force)
Factual Background
Burke’s yacht was mortgaged to Asia Banking for ₱100,000 unpaid since 1921. Elser proposed to organize a yacht club, pay ₱120,000 (retaining ₱20,000 commission), and discharge the mortgage. Failing to resell immediately, Elser arranged a publicity cruise, advancing ₱6,972.21 for repairs, plus ₱1,730.84 owing to Cooper Company and ₱832.93 owed to himself. He used the yacht free of charge.
Initial Negotiations and Option
On Feb. 12, Burke offered Elser a 30-day option at ₱120,000 (P120k), open for acceptance within thirty days, pursuant to Elser’s yacht-club plan. No sale was concluded under that option.
Repairs, Voyage, and Financial Arrangements
Elser advanced repair funds to seaworthiness. He never formally accepted Burke’s ₱120,000 option. Post-voyage, Elser sought a ₱20,000 loan from Avery to replace the engine. Avery refused further credit.
April 3 Stipulation of Terms
At a meeting on Apr. 3, Elser directed his stenographer to draft and sign a letter stating he was “in position and … willing to entertain the purchase” of Bronzewing for ₱80,000, with ₱10,000 due in 60 days, the balance in ₱5,000 monthly installments at 9% interest, secured by ₱80,000 in stock. Burke and Avery endorsed the letter as “Proposition Accepted.”
Revocation, Demand, and Proceedings
On Apr. 5, Elser repudiated Exhibit 1, citing Avery’s refusal to fund the engine loan, and returned the yacht. On Apr. 8, Burke demanded performance under Exhibit 1. Elser sued for recovery of repair costs (₱6,139.28); Burke defended that repairs were quid pro quo for free use and counterclaimed for unpaid canvas costs (₱832.93) and performance of the sale (₱80,000 plus damages). Cooper Company intervened for ₱1,730.84. Trial court awarded repair sums to Elser and Cooper, and ordered Elser to perform Exhibit 1. Both sides appealed.
Issue: Nature of the April 3 Letter
Whether Elser’s letter of Apr. 3 was a definite, binding offer to purchase or merely an invitation to Burke (with bank consent) to formulate an offer, and thus whether it created an enforceable contract of sale. Additionally, whether Burke must pay Elser for repairs.
Analysis: Definite Offer or Mere Invitation
• Plain language: “willing to entertain the purchase” denotes deliberation, not present commitment.
• Elser’s own stenographer and an employee testified that Elser refused at Burke’s suggestion to substitute unequivocal offer language (“I offer to purchase…”).
• Elser’s prior conduct showed he intended resale profit and required external funding for an engine, making final purchase contingent.
• A definitive offer would use explicit phrases (“I offer,” “I agree to buy”), which Exhibit 1 lacks.
• Burke’s and Avery’s endorsements only signified acceptance of Elser
Case Syllabus (G.R. No. 20732)
Facts of the Case
- Edwin Burke acquired the motor yacht “Bronzewing” in Australia in 1920 with the intent to sell in the Philippines.
- The yacht was mortgaged to Asia Banking Corporation for ₱100,000, unpaid for over a year.
- In early 1922 H. W. Elser negotiated with Burke to buy the yacht for organizing a yacht club, planning to resell at ₱120,000 (₱100,000 payable to Burke, ₱20,000 commission to himself).
- On February 12, 1922, Burke gave Elser a 30-day written option for ₱120,000.
- The yacht needed repairs (₱6,972.21 paid by Elser; ₱1,730.84 owed to The Cooper Company; ₱832.93 owed to Elser).
- Elser used the yacht gratuitously, hosted receptions, and cruised south (March 6–23, 1922).
Subsequent Negotiations
- After the cruise, Elser sought a ₱20,000 bank loan to replace the engine; Mr. Avery of Asia Banking declined further advances.
- March 31, 1922: Elser wrote Burke that he would not pay more than ₱70,000 and requested Burke speak with Avery.
- Same day, Burke and Avery agreed on sale terms: ₱80,000 total, payable ₱5,000 per month for six months, then ₱10,000 until paid, secured by mortgage.
- April 1: Elser informed Burke he could not accept those payment terms.
- April 3: In a face-to-face meeting Elser dictated and signed a letter stating he was “in position and … willing to entertain the purchase” for ₱80,000, with ₱10,000 due in 60 days, balance in ₱5,000 monthly installments at 9% interest, secured by ₱80,000 in J. K. Pickering Co. stock. Burke and Avery signed their acceptance on the same document.
- April 5: Elser renounced the transaction, citing Avery’s refusal of the ₱20,000 engine loan, and returned the yacht.
- April 8: Burke demanded performance under the April 3 letter.
Procedural History
- Els