Republic of the Philippines

BATANGAS STATE UNIVERSITY

COLLEGE OF ACCOUNTANCY BUSINESS ECONOMICS AND
INTERNATIONAL HOSPITALITY MANAGEMENT
CITE Building, Pablo Borbon Main 1, Rizal Avenue, Batangas City

MANILA METAL CONTAINER CORPORATION VS. PHILIPPINE NATIONAL BANK

G.R. No. 166862 December 20, 2006

Petitioner: Manila Metal Container Corporation

Respondents: Philippine National Bank

Ponente: J. Callejo, Sr.,

FACTS:

 Owner of an 8,015 square meter tract of property in Mandaluyong City, Metro Manila, the petitioner.
 Petitioner signed a mortgage over the parcel in order to finance a P900,000 loan it had gotten from respondent
Philippine National Bank (PNB).
 Respondent PNB requested that the property be sold at public auction in a petition for extrajudicial foreclosure of
the real estate mortgage that was submitted on August 5, 1982.
 On September 28, 1982, the property was sold at public auction with respondent PNB being deemed the successful
bidder after adequate notice and publicity.
 Specifically, a statement of account for the petitioner's obligation had been created by the Special Asset
Management Department (SAMD).
 It further suggested that the petitioner be permitted to repurchase the property for P1,574,560 from PNB
management. PNB turned down SAMD's proposal and advice. Instead, it recommended that the petitioner pay
P2,660,000.00 for the property, which was its minimum market value.
 Petitioner stated that it had previously accepted SAMD's purchase offer of P1,574,560.47 and had put down a
deposit of P725,000.00.

ISSUES:

1.) Whether or not there was a contract of sale.

2.) Whether or not earnest money establishes a contract of sale.
HELD:

1.) No. According to Article 1318 of the New Civil Code, a contract cannot be formed unless the following conditions
are met:
• Consent of the contracting parties;
• Object certain which is the subject matter of the contract;  Cause of the obligation which is
established.
Never let one of the contracting parties decide how much to charge for something. However, a finalized sale results
from a price that is set by one of the contracting parties and accepted by the other. There is no contract when one
party only makes an offer, and the other party does not accept it.

2.) No. According to 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.” PNB approved the P725,000 deposit with the stipulation
that the PNB Board must still approve the purchase price. The payment of earnest money cannot prove the
existence of a finalized contract of sale without evidence that all necessary conditions have been met.