The Supreme Court ruled in this case that a contract to repurchase foreclosed properties requires absolute acceptance of the offer. A qualified acceptance, which modifies the original terms, constitutes a counter-offer that must also be accepted to form a binding agreement. This decision underscores the importance of clear and consistent communication in real estate transactions, ensuring that all parties are in complete agreement before proceeding. This ruling protects the rights of property owners while upholding contractual obligations.

Conditional Promises: When a Repurchase Agreement Fails Due to Modified Terms

This case, Heirs of Fausto C. Ignacio vs. Home Bankers Savings and Trust Company, revolves around a dispute over a purported repurchase agreement. Fausto Ignacio mortgaged two parcels of land to Home Bankers Savings and Trust Company. After Ignacio defaulted on the loan, the bank foreclosed the mortgage and acquired the properties at a foreclosure sale. Subsequently, Ignacio offered to repurchase the properties, leading to negotiations with the bank. The central legal question is whether a valid contract for the repurchase of these foreclosed properties was ever perfected between Ignacio and the bank.

The Supreme Court emphasized that contracts are perfected through consent, which requires a clear offer and an unqualified acceptance. Article 1319 of the Civil Code defines consent as the meeting of the offer and acceptance regarding the subject matter and consideration of the contract. The acceptance must be absolute; a qualified acceptance is considered a counter-offer. As the Supreme Court explained in Palattao v. Court of Appeals:

Contracts that are consensual in nature, like a contract of sale, are perfected upon mere meeting of the minds. Once there is concurrence between the offer and the acceptance upon the subject matter, consideration, and terms of payment, a contract is produced. The offer must be certain. To convert the offer into a contract, the acceptance must be absolute and must not qualify the terms of the offer; it must be plain, unequivocal, unconditional, and without variance of any sort from the proposal. A qualified acceptance, or one that involves a new proposal, constitutes a counter-offer and is a rejection of the original offer. Consequently, when something is desired which is not exactly what is proposed in the offer, such acceptance is not sufficient to generate consent because any modification or variation from the terms of the offer annuls the offer.

In this case, the bank presented a letter outlining the terms for repurchase, including a total selling price of P950,000.00 and specific installment dates. Ignacio then made notations on the letter, altering the repurchase price to P900,000.00 and modifying the payment terms, indicating that the balance would depend on his financial position. The court viewed these changes as a qualified acceptance, effectively a counter-offer. Since there was no written evidence that the bank accepted these modified terms, the court found that no repurchase contract was perfected.

The Court highlighted the requirement for an unqualified acceptance, referencing Villanueva v. Philippine National Bank, where it was held that offer and acceptance must be unanimous on both the payment rate and term. In this context, the alterations made by Ignacio to the payment terms and the repurchase price were substantial enough to constitute a rejection of the original offer.

…While it is impossible to expect the acceptance to echo every nuance of the offer, it is imperative that it assents to those points in the offer which, under the operative facts of each contract, are not only material but motivating as well. Anything short of that level of mutuality produces not a contract but a mere counter-offer awaiting acceptance. More particularly on the matter of the consideration of the contract, the offer and its acceptance must be unanimous both on the rate of the payment and on its term. An acceptance of an offer which agrees to the rate but varies the term is ineffective.

Ignacio contended that his installment payments, evidenced by receipts, proved the bank’s implied acceptance of his counter-proposal. However, the Court noted that these payments could also be interpreted as payments made by Ignacio’s buyers for subdivided portions of the foreclosed properties. The Supreme Court emphasized that implied acceptance must be evidenced by actions that clearly demonstrate an intention to accept the offer. Even if a bank officer had verbally agreed to Ignacio’s terms, such verbal agreements would not bind the bank, given its corporate nature.

Under Section 23 of the Corporation Code, corporate powers are exercised by the board of directors. As the Supreme Court explained in AF Realty & Development, Inc. v. Dieselman Freight Services, Co.:

Section 23 of the Corporation Code expressly provides that the corporate powers of all corporations shall be exercised by the board of directors. Just as a natural person may authorize another to do certain acts in his behalf, so may the board of directors of a corporation validly delegate some of its functions to individual officers or agents appointed by it. Thus, contracts or acts of a corporation must be made either by the board of directors or by a corporate agent duly authorized by the board. Absent such valid delegation/authorization, the rule is that the declarations of an individual director relating to the affairs of the corporation, but not in the course of, or connected with, the performance of authorized duties of such director, are held not binding on the corporation.

The Court stated that corporations can transact business only through their Board of Directors or authorized agents. Since Ignacio failed to prove that the bank officers were authorized to accept his counter-proposal, no valid contract was formed. This ruling underscores the importance of ensuring that agreements with corporations are made with authorized representatives.

Ultimately, the Supreme Court sided with the bank, holding that no perfected repurchase contract existed because Ignacio’s acceptance was conditional. As such, the bank was within its rights to sell the properties to other parties. The Court emphasized that a contract of sale must be perfected upon the meeting of minds. An unaccepted offer does not create a binding juridical relation between the parties.

In conclusion, the Supreme Court found the Court of Appeals’ ruling more consistent with the facts and applicable law. The appellate court observed that it was improbable for the bank to agree to payment terms dependent on Ignacio’s financial position, and that the absence of signatures from the bank’s representatives on the modified proposal further weakened Ignacio’s claim. Furthermore, Ignacio never obtained land titles in his name as a result of the alleged repurchase agreement, reinforcing the conclusion that no such agreement was ever perfected.

FAQs

What was the key issue in this case?	The key issue was whether a valid contract for the repurchase of foreclosed properties was perfected between Fausto Ignacio and Home Bankers Savings and Trust Company, specifically focusing on the nature of acceptance of the repurchase offer.
What is required for a contract to be perfected?	For a contract to be perfected, there must be a clear offer and an unqualified acceptance, which means the acceptance must mirror the offer’s terms without any modifications.
What happens when an acceptance is qualified?	A qualified acceptance is considered a counter-offer, effectively rejecting the original offer. It requires acceptance from the original offeror to form a binding contract.
What does the Civil Code say about offer and acceptance?	Article 1319 of the Civil Code states that consent is manifested by the meeting of the offer and the acceptance upon the thing and the cause which are to constitute the contract, emphasizing the necessity of an absolute acceptance.
How do corporate powers affect contract execution?	Corporate powers are exercised by the board of directors, and contracts must be made by the board or an authorized agent. Agreements made by unauthorized individuals are not binding on the corporation.
Was there a valid acceptance of the repurchase offer in this case?	No, the Supreme Court found that Fausto Ignacio’s modifications to the original offer constituted a counter-offer, which the bank never formally accepted, meaning no contract was perfected.
What was the significance of the receipts issued by UPI?	The receipts were not conclusive evidence of a repurchase agreement as they could be interpreted as payments for subdivided portions of the property sold to third parties, rather than payments toward a repurchase.
What was the final ruling of the Supreme Court?	The Supreme Court affirmed the Court of Appeals’ decision, holding that no perfected repurchase contract existed between Ignacio and the bank, thus validating the bank’s sale of the properties to other parties.

This case reinforces the fundamental principles of contract law, particularly the requirements for offer and acceptance in real estate transactions. The ruling serves as a reminder of the importance of clear communication, documented agreements, and authorized representation when dealing with corporate entities.

For inquiries regarding the application of this ruling to specific circumstances, please contact ASG Law through contact or via email at frontdesk@asglawpartners.com.

Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
Source: HEIRS OF FAUSTO C. IGNACIO VS. HOME BANKERS SAVINGS AND TRUST COMPANY, G.R. No. 177783, January 23, 2013