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Corporate Law Sales Case Digest: Manila Metal Container Corp. v. PNB (2006)

G.R. No. 166862  December 20, 2006

Lessons Applicable: Doctrine of Centralized Management: Powers of Board of Directors (Corporate Law)
  • Doctrine of Centralized Management (Corporate Law)
  • Price (Sales)
  • Earnest Money (Sales)
  • Manila Metal Corp. executed a real estate mortgage (TCT. 32098) as a security for its loan from PNB amounting to 900,000 php, later on 1,000,000 php and 653,000 php
  • Aug. 5, 1982: PNB filed a petition for extrajudicial foreclosure for the property to be sold at a public auction 911,532.21 php (outstanding as of June 30) + interest + attorney's fees
  • Sept. 2, 1982: PNB won the public auction at 1,000,000 php
  • Feb. 17, 1983: Certificate of Sale was issued and registered at the Registry of Deeds and was annotated at the dorsal portion of the title (Redeemable until Feb 17,1983)
  • Petitioner requested 1 year extension until Feb 17,1984 but was rejected by PNB saying it is their policy not to accept partial redemption
  • Jun. 1,1984: Since petitioner failed to redeem, TCT. 32098 was cancelled and a new title was issued in favor of PNB
  • Meanwhile, Special Assets Management Department (SAMD) had prepared a statement of account as of Jun 25,1984 amounting to 1,574,560.47 php (bid price + interest + advances of insurance premiums + advances on relaty taxes + reg. exp. +misc. exp + piblication cost)
  • Petitioner deposited 725,000 php as deposit to repurchase and was issued an O.R.
  • PNB management rejected the recommendation of SAMD and demanded that petitioner pay the markt value of 2,660,000 php.
  • Jun 24, 1984: PNB informed petitioner that its B.O.D had agreed to accept its offer to purchase but at 1,931,389.53 less the 725,000 php.  
    • PNB President did not conform to the letter but merely indicated that he has received it.  
    • Petitioner rejected this since PNB has already accepted its downpayment so it can no longer increase the price.  
    • PNB also rejected petitioners payment for the balance.
  • Petitioner filed a complaint against PNB for Annulment of Mortgage and Mortgage Foreclosure, Delivery of Title, or Specific Performance with Damages
  • CA affirmed RTC: Favored PNB and demanded that it refund the 725,000 php (no sale because no meeting of the minds in terms of price)
  • Lot was later transferred to its PNB President Bayani Gabriel
  • Petitioner filed a petition for certiorari
  1. W/N the statement of account by SAMD is only a recommendation subject to the approval of the BOD - YES
  2. W/N there was a contract of sale - NO
  3. W/N earnest money establishes a contract of sale - NO
HELD:  Denied.  Costs Against Petitioner.
  1. YES
  • Art. 1318 of NCC:
    • no contract unless the following requisites concur:
    1.  Consent of the contracting parties;
    2.  Object certain which is the subject matter of the contract;
    3. Cause of the obligation which is established
  • The fixing of the price can never be left to the decision of one of the contracting parties. But a price fixed by one of the contracting parties, if accepted by the other, gives rise to a perfected sale.
  • When there is merely an offer by one party without acceptance of the other, there is no contract.
     2. NO
  • Section 23 of the Corporation Code:
    • 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.
  • a corporation can only execute its powers and transact its business through its:
    • Board of Directors 
    • officers and agents when authorized by:
      • a board resolution;or 
      • its by-laws
    3. NO
  • ART. 1482. Whenever earnest money is given in a contract of sale, it shall be considered as part of the price and as proof of the perfection of the contract
  • The deposit of P725,000 was accepted by PNB on the condition that the purchase price is still subject to the approval of the PNB Board
  • Absent proof of the concurrence of all the essential elements of a contract of sale, the giving of earnest money cannot establish the existence of a perfected contract of sale.