G.R. No. 80399-404 - People vs. Fortich

Case Summary (G.R. No. 80399-404)

Background of the Case and Parties' Relationship to the Property

Francisco N. Cervantes and his wife, Rosario, legally owned the three lots in Makati. These lots were mortgaged to the Development Bank of the Philippines (DBP) in 1959 and fully paid in 1969. Cervantes was president of Bormaheco, Inc., a company occupying the property, and negotiations for the sale were conducted under the impression that Bormaheco, Inc. owned the property, with Cervantes authorized to act as vendor. However, the lots were conjugal property of the spouses, not corporate property. The adjacent Villonco Realty Company sought to purchase the land, with Edith Perez de Tagle acting as broker to recover her commission.

Nature of the Contract Negotiations and Offers

Initial negotiations began in early February 1964 involving Romeo and Teofilo Villonco and Francisco Cervantes, with Edith Perez de Tagle mediating. Bormaheco, via Cervantes, sent a written offer dated February 12, 1964, outlining terms including a price of ₱400/sq. m., a ₱100,000 earnest money deposit, and a condition that the sale of the Buendia property depended on Bormaheco’s successful purchase of the Nassco property in Sta. Ana. The offer included a 45-day period after which the final negotiations would be clarified.

Villonco Realty Company made a revised counter-offer on March 4, 1964, adjusting payment terms and reiterating acceptance was subject to Bormaheco's favorable acquisition of the Sta. Ana property. Cervantes signed this counter-offer as acceptance, and the earnest money was delivered and received by him (via the broker) the same day, accompanied by a voucher receipt referencing the terms of the initial offer and counter-offer.

Fulfillment and Dispute Regarding the Condition Precedent

Bormaheco was declared highest bidder for the Nassco property on January 17, 1964. The Nassco Board authorized contract signing on February 18, 1964, and the Economic Coordinator approved the sale on March 24, 1964. Despite this, Cervantes, by letter dated March 30, 1964, sent back the earnest money with interest, citing that despite the lapse of 45 days, there was “no certainty” of acquiring the substitute (Nassco) property, thus rescinding the contract. Villonco Realty Company, however, refused to accept this rescission, citing consummation of the Nassco property purchase as a condition precedent met.

Legal Issues Presented

Whether a perfected contract of sale existed between Villonco Realty Company and Bormaheco, Inc./Cervantes for the three lots;
Whether the 45-day period was a binding deadline for the purchase of the Nassco property and a suspensive condition to the sale;
The legal effect of Cervantes' alleged qualified acceptance constituting a counter-offer;
Whether Bormaheco, Inc. or the Cervantes spouses could be compelled to sell the property, given the title was in the spouses’ names and the dealings were conducted by Cervantes as corporate president;
Entitlement to broker’s commissions, damages, and attorney’s fees.

Legal Analysis on Contract Perfection

Under the Civil Code, a contract of sale is perfected at the moment of meeting of minds upon the thing and price (Art. 1475), communicated by an absolute acceptance (Art. 1319). The acceptance signed by Cervantes on March 4, 1964, coupled with the payment and acceptance of earnest money, constitutes a perfected contract. The earnest money is considered part of the price and proof of contract perfection (Art. 1482).

The alleged "qualified acceptance" or counter-offer theory raised by Bormaheco and Cervantes lacks evidence of Villonco Realty Company’s non-assent. The acceptance, as evidenced by the payment of earnest money and its acceptance with knowledge of the terms, indicates Villonco’s assent to any modifications made. Minor revisions in wording were deemed clarifications and not material alterations destroying meeting of minds.

Interpretation of the 45-Day Condition

The 45-day period mentioned in the original offer letter was not a strict deadline for consummation of the Nassco property purchase but an estimate or forecast for final negotiations. The obligation to acquire the Nassco property was the suspensive condition, but no express or definitive time frame was imposed. Since the Nassco Board authorized the sale and the Economic Coordinator approved it within the 45-day span (approval on March 24, 1964), the suspensive condition was fulfilled. Thus, Cervantes' return of the earnest money due to non-fulfillment of the time requirement was baseless.

Authority to Sell and Ownership of the Property

The lots were conjugal property owned by Cervantes and his wife, not Bormaheco, Inc. Nonetheless, Cervantes conducted negotiations and signed offers as president of Bormaheco, Inc., leading Villonco Realty Company to reasonably believe that Bormaheco had ownership and full authority to sell and that Cervantes was duly authorized.

Neither Bormaheco, Inc. nor the Cervantes spouses pleaded as affirmative defense that Cervantes lacked authority or that Mrs. Cervantes opposed the sale until after litigation commenced and trial began. The belated claim of opposition by Mrs. Cervantes was not properly pleaded nor supported by her testimony, thus waived. Cervantes’ conduct amounted to concealment and bad faith, estopping them from denying authority. Given these circumstances, equity and good faith principles bind Cervantes and his spouse to honor the contract.

Award of Damages, Broker’s Commission, and Attorney’s Fees

The trial court awarded Villonco Realty Company consequential damages of ₱10,000 monthly due to delay in sale consummation. However, these damages were speculative and not sufficiently pleaded or proven, thus the award was modified to exclude such damages.

Bormaheco, Inc. was ordered to pay Edith Perez de Tagle 3% commission on the ₱1,400,000 sale price (₱42,000). This was supported by the stipulation of facts and documentary evidence showing her engagement by Bormaheco to negotiate the sale.

Attorney’s fees of ₱20,

Case Syllabus (G.R. No. 80399-404)

Background and Parties Involved

Villonco Realty Company filed an action for specific performance against Bormaheco, Inc. and spouses Francisco N. Cervantes and Rosario N. Cervantes, alleging the existence of a contract for the sale of land and improvements worth P1,400,000.
Edith Perez de Tagle, a real estate broker, intervened claiming entitlement to commission.
Bormaheco, Inc. and the Cervantes spouses appealed the lower court ruling that enforced the sale.
The Supreme Court took jurisdiction due to the amount involved and timing of appeal.

Facts of the Case

Francisco N. Cervantes and wife Rosario were owners of three lots measuring 3,500 sqm located at 245 Buendia Avenue, Makati, Rizal, titles 43530, 43531, and 43532.
The lots were mortgaged to the Development Bank of the Philippines in 1959, loan fully paid by 1969.
Cervantes was president of Bormaheco, Inc., a machinery dealer that occupied the lots with building and equipment.
Villonco Realty's property was adjacent at 219 Buendia Avenue.
Early 1964 negotiations ensued for the sale of the three lots and improvements between Villonco Realty, represented by Romeo Villonco, Bormaheco, Inc. (via President Cervantes), and broker Edith Perez de Tagle.
Villonco Realty assumed the lots belonged to Bormaheco, Inc. and Cervantes had authority to sell but were not informed the properties were conjugal properties and mortgaged.

The Letters and Offers Between Parties

February 12, 1964: Bormaheco, Inc. through Cervantes made a written offer to Villonco Realty to sell the 3,500 sqm property at P400/sqm, subject to sale consummation of another property (Nassco lot in Sta. Ana, Manila), including conditions on earnest money, and a 45-day period to finalize negotiations.
January 17, 1964: Bormaheco was awarded Nassco property as highest bidder.
February 18, 1964: Nassco Board authorized sale to Bormaheco.
March 24, 1964: Economic Coordinator approved Nassco property sale.
March 4, 1964: Villonco Realty made a revised counter-offer accepting P400/sqm price including improvements, earnest money of P100,000, balance with specified payment terms, and conditioned sale contingent on Bormaheco's consummation of Nassco property purchase.
Cervantes accepted this counter-offer; a check of P100,000 was delivered through broker Edith Perez de Tagle and received by Cervantes.

Subsequent Events and Controversy

March 30, 1964: Cervantes returned the earnest money with interest citing uncertainty over Nassco property acquisition.
Villonco Realty rejected return and refused cancellation citing completed agreement.
April 7, 1964: Villonco Realty filed complaint for specific performance; placed notice of lis pendens on titles.
Bormaheco claimed contract was conditional on final acceptance within 45 days and Nassco property purchase.
June 26, 1964: Deed of sale for Nassco property executed.
July 21, 1964: Villonco Realty impleaded Cervantes spouses as registered owners.
Villonco Realty claimed damages and costs; Bormaheco claimed damages from lis pendens affecting possible construction.

Legal Issues and Contentions on Appeal

Bormaheco and Cervantes argued:
1. No perfected contract due to qualified acceptance amounting to counter-offer.
2. The 45-day period condition for Nassco acquisition was not met.
3. Bormaheco, Inc. could not sell property