JOSE R. MORENO, JR., PETITIONER, VS. PRIVATE MANAGEMENT OFFICE (FORMERLY, ASSET PRIVATIZATION TRUST), RESPONDENT.

Moreno versus Private Management Office

The Case

This is a petition for review on certiorari brought by Jose Moreno, Junior against the Private Management Office, formerly the Asset Privatization Trust. Moreno seeks to enforce what he claims is a perfected contract of sale over five floors of a building owned by the government through the Trust, at the price of 21,000,000 pesos. The case matters because it is the Supreme Court's clearest statement that a sale of a government asset under the privatization program requires the prior approval of the Committee on Privatization, and that until that approval is obtained, the parties remain in the stage of negotiation and no contract is born.

Procedural History

Moreno filed a complaint for specific performance before the Regional Trial Court of Makati, Branch 62. The parties submitted a joint motion and stipulation of facts and asked the court to render judgment on the stipulated facts without trial. The trial court ruled in favor of Moreno, ordering the Trust to sell the five floors to him at 21,000,000 pesos and to endorse the transaction to the Committee on Privatization. The Trust moved for reconsideration, which was denied, and then appealed to the Court of Appeals.

During the appeal, Moreno moved to dismiss the appeal because the Trust failed to file its brief within the reglementary period. The Eighth Division of the Court of Appeals granted the dismissal, but on a petition for review, the Supreme Court reversed that dismissal and directed a review on the merits. The Court of Appeals then rendered its decision reversing the trial court and dismissing the complaint. Moreno's motion for reconsideration was denied, so he elevated the case to the Supreme Court by petition for review on certiorari.

Facts

Moreno owns the ground floor, the seventh floor, and the penthouse of the J. Moreno Building, formerly the North Davao Mining Building, as well as the lot on which it stands. The Trust owns the second, third, fourth, fifth, and sixth floors of the same building. On February 13, 1993, the Trust called a conference to discuss Moreno's right of first refusal over those floors and informed him that the proposed purchase price was 21,000,000 pesos.

On February 22, 1993, the Trust, through its Trustee Juan Moran, wrote Moreno's counsel confirming that the Board of Trustees was in agreement that Moreno had the right of first refusal. The letter described 21,000,000 pesos as the suggested indicative price and asked Moreno to deposit ten percent of that amount on or before February 26, 1993. Moreno paid 2,100,000 pesos on February 26, 1993.

On March 12, 1993, the Trust wrote Moreno that its Legal Department had questioned the basis for the computation of the indicative price. On April 2, 1993, the Trust wrote again, stating that its Board had tentatively agreed on a settlement price of 42,274,702 pesos and seventeen centavos. Moreno then sued, insisting that a contract had been perfected at 21,000,000 pesos.

Issues

• Whether or not there was a perfected contract of sale over the five floors at the price of 21,000,000 pesos.
• Whether or not the Trust is bound by the price of 21,000,000 pesos, or is estopped from denying the contract.
• Whether or not the Court of Appeals should have dismissed the Trust's appeal for violation of the procedural rules on the contents of the appellant's brief.

Applicable Provisions

Article 1475 of the Civil Code provides:

The contract of sale is perfected at the moment there is a meeting of minds upon the thing which is the object of the contract and upon the price.

This fixes the moment of perfection, which the Court finds never arrived because the price was never certain and approved.

Article 1319 of the Civil Code provides:

Consent is manifested by the meeting of the offer and the acceptance upon the thing and the cause which are to constitute the contract. The offer must be certain and the acceptance absolute. A qualified acceptance constitutes a counter-offer.

This requires that the offer be certain, and the letter of February 22, 1993 left the price open for approval.

Section 5 of Article II of Proclamation Number 50 provides:

To approve or disapprove, on behalf of the National Government and without need of any further approval or other action from any other government institution or agency, the sale or disposition of such assets, in each case on terms and to purchasers recommended by the Trust or the government institution, as the case may be, to whom the disposition of such assets may have been delegated; Provided that, the Committee shall not itself undertake the marketing of any such assets, or participate in the negotiation of their sale.

This vests in the Committee on Privatization the power to approve the buyer and the price, making its approval a condition before any sale can be perfected.

Section 12 of Article III of the same Proclamation provides:

Subject to its having received the prior written approval of the Committee to sell such asset at a price and on terms of payment and to a party disclosed to the Committee, to sell each asset referred to it by the Committee to such party and on such terms as in its discretion are in the best interest of the National Government, and for such purpose to execute and deliver, on behalf and in the name of the National Government, such deeds of sale, contracts and other instruments as may be necessary or appropriate to convey title to such assets.

This confirms that the Trust may sell only after prior written approval of the Committee as to price, terms, and buyer.

Ruling

On the first issue, the Court held that there was no perfected contract of sale. A contract is perfected only when the parties agree on the thing and the price, and the minds of the parties must meet at every point, with nothing left open for further arrangement. The letter of February 22, 1993 described 21,000,000 pesos as a suggested indicative price still subject to confirmation by the Board and approval by the Committee on Privatization. The Court quoted the letter itself, which stated that the balance would be due after Moreno receives the formal notice of approval of the indicative price. The parties were therefore still in the stage of negotiation, and the letter was a mere agreement to agree.

On the second issue, the Court rejected the argument that the Committee's approval could be dispensed with. Reading Sections 5 and 12 together, the Trust recommends the terms and the Committee approves or disapproves them, and a construction that would render one provision inoperative must be avoided. The Court also held that the term indicative price has a peculiar meaning in the privatization scheme, being a ball park figure, and that Moreno's subjective understanding was not shared by the Trust. Since no contract existed, the issue of estoppel became moot and academic.

On the third issue, the Court declined to dismiss the appeal on procedural grounds, holding that procedural rules may be relaxed to relieve a litigant of an injustice not commensurate with the degree of noncompliance.

Doctrine

A contract of sale is perfected only upon a meeting of minds on the thing and the price, and the offer must be certain and the acceptance absolute. Where the price is described as a suggested indicative price still subject to the approval of the Committee on Privatization, there is no certain price and no perfected contract; the parties remain in negotiation. Under Proclamation Number 50, the Trust recommends the terms of sale and the Committee approves or disapproves the buyer and the price, and this approval is a condition that must precede any perfected sale of a government asset.

Disposition

The Supreme Court affirmed the decision and resolution of the Court of Appeals, and the complaint of Moreno was dismissed.

Remember This

Memorize this line: a suggested indicative price subject to the approval of the Committee on Privatization is not a certain price, so no contract of sale is perfected. Examiners use this case to test the stages of a contract and the requirement of Committee approval in the sale of government assets under Proclamation Number 50.