BF CORPORATION,

Petitioner,

- versus -

MANILA INTERNATIONAL

AIRPORT AUTHORITY,

Respondent.

G.R. No. 164517

Present:

QUISUMBING, J., Chairperson,

CARPIO MORALES,

TINGA,

VELASCO, JR., and

BRION, JJ.

Promulgated:

June 30, 2008

x-----------------------------------------------------------------------------------------x

D E C I S I O N

VELASCO, JR., J.:

In this petition for review under Rule 45, petitioner BF Corporation (BF) assails the Decision

of the Court of Appeals (CA) that disallowed BF to re-implead the Manila International Airport

Authority (MIAA) as a party-defendant in Civil Case No. 66060 entitled BF Corporation v. Tokyu

Construction Co., Ltd., Mitsubishi Corporation, A.M. Oreta & Co., Inc., and Manila International

Airport Authority.

Mitsubishi Corporation (Mitsubishi), Tokyu Construction Co., Ltd. (Tokyu), A.M. Oreta &

Co., Inc. (Oreta), and BF formed themselves into the MTOB Consortium (Consortium) to

participate in the bidding for the construction of the Ninoy Aquino International Airport Terminal

II (NAIA II) Project. MIAA awarded the contract to the Consortium, recognizing that the

Consortium was a distinct and separate entity from the four member corporations.

Unfortunately, the four members had serious business differences, including the division of

the contract price, forcing BF to file on January 10, 1997, with the Regional Trial Court (RTC) in

Pasig City, an action for Specific Performance, Rescission, and Damages with application for a

Temporary Restraining Order (TRO), docketed as Civil Case No. 66060. BF alleged in its complaint

that Tokyu and Mitsubishi invited BF to form a consortium for the NAIA II Project and after the

members of the Consortium reached an agreement couched in general terms, for the purpose

of prequalification bidding, Tokyu allegedly refused to execute a final consortium agreement;

unreasonably demanded that BF reduce its asking prices for its assigned work; engaged the

services of other subcontractors to do BF’s portion of the project; and refused to remit to BF its

20% share of the down payment, thereby easing out BF in the project in breach of the

Consortium agreement. BF prayed that Tokyu be enjoined from further (1) receiving any

payment from MIAA for illegally executing BF’s portion of the work in the project; (2) engaging

the services of other subcontractors to do BF’s portion of the project; (3) acting as lead partner

of the Consortium; and (4) compelling BF to reduce its prices. BF also prayed that MIAA be

enjoined from directly paying Tokyu the collectible compensation vis-à-vis Tokyu’s illegal

execution of BF’s portion in the project.1[1]

The RTC served a TRO on Tokyu, the lead partner of the Consortium. During the hearing

on the preliminary injunction, MIAA stressed its position that it should not be dragged into the

dispute since it was a consortium internal matter. Thereafter, in an amended complaint, BF

dropped MIAA as a party-defendant.

When the RTC issued the Order dated January 21, 1997 extending the TRO, Tokyu filed

with the CA a Petition for Certiorari and Prohibition with prayer for a writ of preliminary injunction

docketed as CA-G.R. SP No. 43133. Tokyu contended that the order violated (1) Presidential

Decree No. 1818 prohibiting any court in the Philippines from issuing any restraining order,

preliminary injunction, or preliminary mandatory injunction on any case, dispute, or controversy

involving an infrastructure project; and (2) Supreme Court Circular No. 68-94 disallowing issuance

of TROs in cases involving government infrastructure projects to obviate complaints against

indiscriminate issuance of TROs.

On May 15, 1997, the CA dismissed the petition and ordered the trial court to continue

hearing the main case. With respect to MIAA’s right to intervene, the CA stressed that MIAA was

no longer a party-defendant since it had been dropped from the complaint by BF and,

therefore, no relief may be had from MIAA. The CA explained that MIAA had nothing to do with

whatever BF alleges were violations of the Consortium agreement by Tokyu because these were

intra-consortium matters.2[2] The CA also said it was convinced that “MIAA had no actual,

direct and immediate interest” in CA-G.R. SP No. 43133.

The CA denied the motion for reconsideration and the RTC proceeded with the case

subsequently issuing the Order dated July 8, 1997, which ordered Tokyu to: (1) retrieve its deposit

in Japan and make it available in the Philippines for the prompt execution of the project; (2)

remit to BF its 20% share in the down payment and its share in the subsequent payments made

by MIAA; and (3) allow BF to execute its portion of the work in the project by terminating the

services of the subcontractors.3[3]

Tokyu filed before the CA a Petition for Certiorari with urgent prayer for a TRO and

preliminary injunction docketed as CA-G.R. SP No. 44729. On October 20, 1997, the Special

Seventh Division of the CA granted Tokyu’s petition and annulled the RTC’s Order dated July 8,

1997.

On November 26, 1999, when the project was nearing completion, BF filed a second

amended complaint. In it, BF pleaded causes of action against Tokyu, Mitsubushi, and Oreta

which have all submitted themselves to the jurisdiction of the court, and also MIAA who had

possession of money to be paid to Tokyu. BF claimed it was entitled to a proportionate share of

the money based on the Consortium agreement. Thus, BF asked that MIAA be re-impleaded as

a party-defendant so it could obtain complete relief.4[4]

In an Order dated May 24, 2001, the RTC directed that MIAA be re-impleaded as a party-

defendant in Civil Case No. 66060. It said that BF’s earlier move to drop MIAA as a party-

defendant should not preclude it from re-impleading MIAA which still has the obligation to pay

the remainder of the contract price. The dispositive portion of the order reads:

WHEREFORE, the order of this Court dated February 23, 2001 is hereby

reconsidered insofar as it ordered the dismissal of this case as against MIAA which

is hereby restored and re-impleaded as a party defendant.

SO ORDERED.

The motion for reconsideration was denied in an Order dated September 13, 2001.5[5]

MIAA appealed to the CA alleging grave abuse of discretion on the part of the RTC when it

ordered MIAA to be re-impleaded as a party-defendant. The petition was docketed as CA-G.R.

SP No. 67765.

In a Decision dated January 9, 2004,6[6] the CA granted MIAA’s petition and annulled

and set aside the May 24, 2001 and September 13, 2001 Orders in Civil Case No. 66060. The CA

said that the RTC committed grave abuse of discretion amounting to lack or excess of

jurisdiction when it issued the orders. According to the CA, MIAA’s refusal to be a part of the

internal squabble among members of the Consortium was not an “act or omission” that gave BF

a cause of action. MIAA had not in any way violated any right of BF. The CA commented that

an interference by MIAA in the Consortium quarrel could even expose MIAA to a suit by the

other members of the Consortium. The CA stressed that MIAA had in fact earlier recognized the

Consortium as a distinct and separate personality from its members. As far as MIAA was

concerned, the CA concluded that BF was a stranger to the contract between MIAA and the

Consortium, and if BF’s interest was its right to a portion of the contract price, its proper recourse

was to first secure an assignment of its proportionate rights from the Consortium.

The CA also pointed out that BF was estopped from treating MIAA as a necessary party,

because when it dropped MIAA as a party in its amended complaint without stating why it did,

BF implicitly admitted that MIAA was not a necessary party.

The CA also ruled that res judicata had set in when the CA denied a reconsideration of

the Decision in CA-G.R. SP No. 43133 and said decision was not appealed. Recall that in the

said decision, the CA Fourteenth Division stressed that MIAA was no longer a party-defendant

since it had been dropped by BF and, therefore, no relief may be had from MIAA; that the case

was not a matter in rem but can only give rise to a judgment in personam; that the CA was

convinced MIAA had no actual, direct, and immediate interest in the dispute since the dispute

was intra-corporate; and that MIAA had nothing to do with BF’s complaint against Tokyu.7[7]

The CA added that since the issue with respect to MIAA was not appealed, the said decision

had become final and another case on the same issue had been barred by res judicata.

The CA also noted that when MIAA was allowed to intervene in the aforementioned

case, the RTC had acquired jurisdiction over MIAA; thus, there was identity of parties between

CA-G.R. SP No. 43133 and CA-G.R. SP No. 67765. According to the CA, although the subject

matter of CA-G.R. SP No. 43133 was the propriety of the grant of the TRO enjoining Tokyu from

receiving any amount from MIAA and the subject matter in CA-G.R. SP No. 67765 was the

propriety in including MIAA as a party-defendant in Civil Case No. 66060, both cases involved

the issue of whether or not MIAA was a proper party-defendant in Civil Case No. 66060. Thus, the

CA concluded that the elements of res judicata were present.

The motion for reconsideration was denied by the CA; hence, BF filed this petition raising

the following as issues:

I.

THE COURT OF APPEALS GRAVELY ERRED IN HOLDING THAT BF HAS NO CAUSE OF

ACTION AGAINST MIAA AS, IN FACT, BF’S SECOND AMENDED COMPLAINT STATES

A CAUSE OF ACTION AGAINST MIAA.

II.

THE COURT OF APPEALS GRAVELY ERRED IN HOLDING THAT BF IS ESTOPPED FROM

IMPLEADING MIAA IN THE CASE.

III.

THE COURT OF APPEALS GRAVELY ERRED IN HOLDING THAT BF IS BARRED UNDER

THE DOCTRINE OF RES JUDICATA FROM IMPLEADING MIAA IN THE MAIN CASE.

The appellate court had correctly granted the petition of MIAA.

In this petition before us, BF would have us believe that it dropped MIAA as a party-

defendant in its first amended complaint because its cause of action against MIAA was not yet

ripe.8[8] It said that it re-impleaded MIAA in the second amended complaint because of the

impending release of the final payment and the retention money to Tokyu. And if the project

were completed and full payment were given to the Consortium, BF could no longer get its

supposed share in the payments.

The ultimate facts, as alleged by BF, that are the bases of its cause of action against

MIAA, are found on items 2.18 to 2.21 of BF’s second amended complaint, as follows :

2.18 To protect its rights and interests, BF, through counsel, wrote MIAA

calling its attention to the contract violations committed by TOKYU in bad

faith, and requesting its intervention to see an early end to the dispute.

More specifically, BF requested MIAA to:

1. Persuade TOKYU to remit to us our rightful 20% share in the

downpayment of the Project;

2. Enjoin TOKYU’s unauthorized and illegally hired subcontractors from

executing BF’s portion of the NAIA II project;

3. Directly remit to us our 20% share in the subsequent payments to be

made under the construction contract; and

4. Should TOKYU stubbornly refuse to heed any of the above, expel

TOKYU from the consortium and let BF, MITSUBISHI and ORETA take

over the entire project.

x x x x

2.19 Later, BF, through counsel, wrote TOKYU revoking [its] authority as lead

partner to represent BF in dealing with MIAA in connection with the

execution of the Project x x x.

2.20 Despite the revocation made by BF and its request for MIAA to resolve

the dispute, TOKYU continued to act as the lead partner and has in fact

taken its role to the extreme by hiring other subcontractors to do BF’s

portion of the work. On the other hand, MIAA has opted to take a

nonchalant hands-off policy, choosing to ignore TOKYU’s bullying tactics

and iniquitous actions by even awarding the latter with prompt payments

of the contract price. Worse, in coddling and protecting TOKYU despite its

illegal acts, MIAA has allowed this foreign country to unduly profit from this

centerpiece project and stash away the Philippine money it has collected

in commercial banks in Japan.

2.21 Further, as a result of MIAA’s inaction, the Project is now complete with

TOKYU ready and raring to collect the remainder of the contract price

from MIAA, including the 10% retention money being held by MIAA and

now ready to be released after the Project had been completed.9[9]

(Emphasis supplied.)

On the bases of these allegations, we can hardly rule that BF has a cause of action

against MIAA.

Section 2, Rule 2 of the Rules of Court defines “cause of action” as an act or omission by

which one party violates a right of another. It has three elements: (1) a right existing in favor of

the plaintiff, (2) a duty on the part of the defendant to respect the right of the plaintiff, and (3) a

breach of the defendant’s duty.10[10]

A close reading of the aforecited portions of the second amended complaint discloses

that the rights of BF that have allegedly been violated are those contained in the Consortium

agreement. A scrutiny of the agreement, however, would readily show that there is nothing in it

that would constitute acts or omissions of MIAA that violate BF’s rights. Even if BF wrote MIAA and

called the latter’s attention to the contract violations of Tokyu and asked MIAA to persuade

Tokyu to remit to BF its 20% share in the down payment; enjoin Tokyu from illegally hiring

subcontractors to do BF’s part of the project; and expel Tokyu from the Consortium, these facts

are insufficient to constitute the bases of BF’s cause of action against MIAA. The test of

sufficiency of the facts alleged in the complaint as constituting a cause of action is whether or

not admitting the facts alleged; the court could render a valid verdict in accordance with the

prayer of the complaint.11[11] Even if we assume that the facts alleged were true, we still

cannot grant any of BF’s prayers against MIAA as we would have no basis to do so in fact and in

law.

The best evidence to show whether or not BF has a cause of action against MIAA is the

contract/agreement itself. The Agreement12[12] awarding the NAIA II Project to the Consortium

was between MIAA and the Consortium, as contractor, represented by the Consortium’s project

manager. BF was not a party to the Agreement. From the very start, MIAA had categorically said

it recognized the Consortium as a distinct and separate entity.

The Agreement laid down all the rights and obligations of MIAA to the Consortium and

vice-versa, and as aptly pointed out by MIAA, payment to BF was not among them. The

Agreement does not say that MIAA shall withhold payment in the event that a dispute arises

amongst the members of the Consortium. Neither does the contract require MIAA to mediate in

any intra-consortium dispute that may arise within the Consortium. The primary obligation of

MIAA is found in Article III of the Agreement which stipulates that “MIAA agrees to pay the

CONTRACTOR the Contract Price x x x in the manner prescribed by the Contract.” Note that the

CONTRACTOR refers to the Consortium not to the individual members of the Consortium. BF by

itself is not a party to the Agreement. If MIAA is prevented from making payments to the

Consortium, MIAA will be considered in breach of the Agreement. Verily, a preliminary

prohibitory injunction, enjoining MIAA from releasing to Tokyu the remainder of the contract

price owing to the Consortium or any amount for that matter, including the 10% retention fee

now ready for release after the project had been completed, cannot be validly issued. If BF

wants its share in what was yet due to the Consortium, BF’s recourse is against the Consortium. It

can present to MIAA an assignment of its alleged rights from the Consortium. Impleading MIAA is

not the remedy to enable BF to collect its share in the NAIA II Project of the Consortium. In short,

MIAA cannot be ordered to be a collecting agent for BF.

To sum up, none of the elements required in Sec. 2, Rule 2 of the Rules of Court that

constitute a cause of action are present in this case. BF cannot ask MIAA to persuade Tokyu to

remit to BF its 20% share in the down payment; cannot enjoin Tokyu from hiring subcontractors to

do BF’s part of the project; and cannot expel Tokyu from the Consortium. MIAA is a stranger to

the Consortium agreement among Tokyu, Mitsubishi, Oreta, and BF. Under both the Consortium

agreement and the Agreement between MIAA and the Consortium, MIAA has no obligation to

have the terms of the Consortium agreement enforced, MIAA not being privy to it. Lastly, BF

even admits that the Consortium agreement does not embody any specific agreement

between the parties as the agreement amongst them was couched in general terms. In fact,

the only clear agreement among the members was that Tokyu is the appointed lead partner.

As to the issue of estoppel, we agree with the CA that BF is now estopped from re-

impleading MIAA. While the Rules allow amendments to pleadings by leave of court, in our view,

in this case, it would be an affront to the judicial process to first include a party as defendant,

then voluntarily drop the party off from the complaint, only to ask that it be re-impleaded. When

BF dropped MIAA as defendant in its first amended complaint, it had performed an affirmative

act upon which MIAA based its subsequent actions, e.g. payments to Tokyu, on the faith that

there was no cause of action against it, and so on. BF cannot now deny that it led MIAA to

believe BF had no cause of action against it only to make a complete turn-about and renege

on the effects of dropping MIAA as a party-defendant months after,

to the prejudice of MIAA. MIAA had all reasons to rely on the CA’s decision that it was no longer

a party to the suit. Under the doctrine of estoppel, an admission or representation is conclusive

on the person making it and cannot be denied or disproved as against the person relying on

it.13[13] A person, who by deed or conduct has induced another to act in a particular manner,

is barred from adopting an inconsistent position, attitude, or course of conduct that thereby

causes loss or injury to another.14[14]

Finally, we tackle the issue of res judicata. Did the decision in CA-G.R. SP No. 43133

constitute a bar to CA-G.R. SP No. 67765? For res judicata to exist, the following elements must

be present: (1) the judgment must be final; (2) the court that rendered judgment must have

jurisdiction over the parties and the subject matter; (3) it must be a judgment on the merits; and

(4) there must be between the first and second actions identity of parties, subject matter, and

cause of action. There is no dispute on the presence of the first three elements enumerated

above. However, the same cannot be said regarding the last element. As BF has correctly

pointed out, CA-G.R. SP No. 43133 was filed by Tokyu against the trial judge and BF, while CA-

G.R. SP No. 67765 was filed by MIAA in which Tokyu is not even a party. It is also apparent that

the subject matter in CA-G.R. SP No. 43133 was the propriety of the TRO granted by the RTC, and

the subject matter in CA-G.R. SP No. 67765 is the propriety of including MIAA as a party-

defendant in Civil Case No. 66060. While it may be true that both cases touched on MIAA as a

party-defendant, we are unable to say that the subject matters of CA-G.R. SP No. 43133 and

CA-G.R. SP No. 67765 are identical. As to the cause of action, CA-G.R. SP No. 43133 is the off-

shoot of the alleged abuse of discretion of the trial judge in issuing the TRO, while CA-G.R. SP No.

67765 is the result of the alleged grave abuse of discretion of the trial court judge in allowing

MIAA to be re-impleaded as a party-defendant. Lacking the identity of parties, subject matter,

and cause of action, the doctrine of res judicata is inapplicable. This, however, should not

detract from the fact that the CA was correct in granting the petition.

WHEREFORE, we DENY this petition and AFFIRM the CA’s Decision dated January 9, 2004

and Resolution dated July 13, 2004 in CA-G.R. SP No. 67765.

SO ORDERED.

[G.R. NO. 125267 : February 18, 2008]

EL ORO ENGRAVER CORPORATION, Petitioner, v. COURT OF APPEALS and

EVERETT CONSTRUCTION SUPPLY, INC., Respondents.

D E C I S I O N

CARPIO, J.:

The Case

Before the Court is a Petition for Review 1 assailing the 29 February 1996 Decision

2 and 13 June

1996 Resolution3 of the Court of Appeals in CA-G.R. CV No. 44782.

The Antecedent Facts

Everett Construction Supply, Inc. (respondent) is engaged in the sale of construction supplies. El

Oro Engraver Corporation (petitioner) is one of its customers. Whenever respondent sold

merchandise to its customers, it would prepare a Sales Invoice for the transaction in

quadruplicate copies. An employee of respondent would bring the original and duplicate copies

of the Sales Invoice to the customer for signature upon receipt of the merchandise. Respondent

would either append the original copy of the Sales Invoice to the Statement of Account or return

it to the customer upon payment of the merchandise.

During the period from August to December 1980 and from January to March 1981, respondent

delivered merchandise to petitioner in the total amount of P681,316.70. The transactions were

covered by separate Sales Invoices. Petitioner failed to pay its obligations. On 20 February 1981,

respondent sent petitioner Statements of Account which indicated the price for each purchase

and the totality of petitioner's liability as of that date. Respondent appended to the Statements of

Account the original copies of the Sales Invoices for the period from 4 August 1980 to 15

January 1981. Respondent retained the original Sales Invoices which were not yet due when it

sent the Statements of Account on 20 February 1981. Petitioner neither responded to the

Statements of Account nor made any payment to respondent.

On 12 March 1985, respondent sent petitioner a demand letter for the payment of P681,316.70.

Petitioner ignored the demand letter. On 25 March 1985, respondent filed an action for

Collection of Sum of Money with Damages against petitioner.

The Ruling of the Trial Court

In a Decision4 dated 30 September 1993, the Regional Trial Court of Kalookan City, Branch 127

(trial court) ruled, as follows:

WHEREFORE, judgment is rendered in favor of the plaintiff and against the defendant:

1. Ordering the defendant to pay a total amount of P37,055.20 plus 12% [interest per annum] as

of the filing of the complaint;

2. Ordering the payment of P3,016.00 as litigation expenses;

3. Ordering defendant to pay attorney's fees in the amount of P10,000.00; andcralawlibrary

Dismissing the counterclaim.

SO ORDERED.5

The trial court ruled that respondent has the burden of showing that a valid debt exists. The trial

court did not accept respondent's argument that the original of some Sales Invoices were already

with petitioner. The trial court ruled that if the Sales Invoices were already with petitioner, it

gives rise to the presumption that the debt had been paid. The trial court concluded that petitioner

did not receive the goods and such goods might have been delivered to somebody else.

Respondent appealed from the trial court's Decision.

The Ruling of the Court of Appeals

In its 29 February 1996 Decision, the Court of Appeals affirmed with modification the trial

court's Decision. The Court of Appeals ruled that while the copies of the Sales Invoices which

were not considered by the trial court did not bear the signatures of petitioner's representatives,

the merchandise were sold and delivered to petitioner. The Court of Appeals noted that petitioner

never objected to nor denied the Statements of Account it received from respondent for more

than four years. Petitioner also failed to respond to respondent's demand letter. The Court of

Appeals ruled that petitioner's silence for more than four years is an admission of its liability to

respondent under the Sales Invoices and the Statements of Account.

The dispositive portion of the Court of Appeals' Decision reads:

IN THE LIGHT OF ALL THE FOREGOING, the Decision appealed from is hereby

AFFIRMED with the modification that the Appellee is hereby ordered to pay to the Appellant

the principal amount of P681,316.70 with interests thereon at the rate of 12% per annum, from

February 20, 1981 until the said amount is paid in full, and the amount of P20,000.00 as and by

way of attorney's fees. Without pronouncement as to costs.

SO ORDERED.6

Petitioner filed a motion for reconsideration. In its 13 June 1996 Resolution, the Court of

Appeals denied the motion for lack of merit.

Hence, the petition before this Court.

The Issue

The sole issue in this case is whether the Court of Appeals committed a reversible error in

modifying the trial court's Decision and in increasing petitioner's liability to Respondent.

The Ruling of this Court

The petition has no merit.

As a general rule, factual findings of the Court of Appeals are binding on this Court. This rule is

subject to exceptions, such as when the factual findings of the Court of Appeals and the trial

court are contradictory.7

In this case, the trial court only considered the original copies of the Sales Invoices presented by

respondent. The trial court did not consider the Sales Invoices which did not have the signature

of petitioner's representative. The trial court concluded that the merchandise must have been

delivered to someone else instead of to petitioner.

We have reviewed the records of the case and we are more convinced with the factual findings of

the Court of Appeals. Rosita P. Lee (Lee), respondent's Treasurer, explained that it is the

company practice to prepare four copies of Sales Invoices. Respondent's delivery personnel

would bring two copies of the Sales Invoices at the time of the delivery - the original and a

duplicate copy. Both copies were supposed to be signed by petitioner's representative.

Respondent's delivery personnel would leave the duplicate copy with petitioner and retain the

original copy of the Sales Invoice. Whenever respondent made a collection, it would prepare a

Statement of Account and it would send the Statement of Account, together with the original

copies of the Sales Invoices, to petitioner.8

Considering this practice, it is impossible for respondent to present the original or duplicate

copies of the Sales Invoices which bore the signatures of petitioner's representative because they

are both in petitioner's possession. The Sales Invoices accepted by the trial court, which bore the

signatures of petitioner's representatives, were retained by respondent and not delivered to

petitioner because they were not yet due at the time the Statement of Account was prepared.

The Court also notes that the Sales Invoices state: "PAYMENT NOT VALID WITHOUT OUR

OFFICIAL RECEIPT."9 The Sales Invoices are not evidence of payment. They are only

evidence of the receipt of the goods. The best evidence to prove payment of the goods is the

official receipt. Petitioner failed to present any official receipt to prove that it had already paid

the goods to respondent.

We agree with the Court of Appeals' observation that petitioner did not object to the entries in

the Statements of Account. Petitioner did not do anything despite the clear reminder in the

Statements of Account which states: "IMPORTANT: If this statement does not agree with your

record, please notify us at once."10

Petitioner remained silent for four years from the time it

received the Statements of Account until the filing of the case against it. Petitioner did not even

bother to respond to the demand letter sent by respondent. Petitioner's silence is uncharacteristic

of persons who have just been asked to pay an obligation to which they are not liable.11

In one

case,12

the petitioner received a statement of account from the respondent without protest, and

the petitioner did not controvert the respondent's demand letter. The Court applied estoppel in

pais where one, by his acts, representations or admissions, or by his own silence when he ought

to speak out, intentionally or through culpable negligence, induces another to believe certain

facts to exist and such other rightfully relies and acts on such belief, so that he will be prejudiced

if the former is permitted to deny the existence of such facts.13

We agree with the Court of

Appeals that petitioner's silence for four years is tantamount to admission of the entries in the

Statements of Account sent by respondent.

The Court of Appeals did not even have to rely on estoppel. Petitioner received the Statements of

Account as well as the Sales Invoices as evidenced by the handwritten statement of petitioner's

representative, Alicia Alcaraz,14

who wrote the words "rec d original" on the Statements of

Account.15

Lee testified:

Atty. Meris:

Do you have a proof that the originals of the said invoices are already in the hands of the

defendant?

Witness:

Yes, we have given them the statements of accounts which together with the originals as shown

by the signature of their employee Alicia Alcaras.

x x x

Atty. Meris:

(to witness)

How do you know that this is the signature of Miss Alcaras?

Witness:

Because I am very familiar with her signature as I have been receiving communications with her

frequently during the time that we are having business transaction with the defendant.16

Petitioner failed to rebut that it received the Statements of Accounts and the Sales Invoices

attached to them. In sum, respondent proved during the trial that it delivered the goods, and that

it had not received payment for the goods so delivered.

In its Answer With Counterclaim,17

petitioner alleged that all its purchases from respondent had

already been fully paid and satisfied. Petitioner alleged:

and by way of SPECIAL and AFFIRMATIVE DEFENSES, defendant avers:

4. That there is no cause of action;

5. That the claim is unenforceable under the statute of fraud;

6. That the claim or demand had been paid, waived and/or otherwise extinguished;

7. That in the alternative, granting arguendo that the defendant received some of the said

construction materials, the same are defective and not suitable for the purpose of which they

have been purchased and/or some of these materials were not received by the defendant

corporation. Consequently, it should not be obliged to pay for the same[.]

x x x x18

During the trial, petitioner did not show which of the materials covered by the Sales Invoices had

been paid, waived or extinguished, which materials were defective, and which materials were not

received. Petitioner only insisted that it had no obligation to respondent. Thus, petitioner failed to

prove that it did not receive the goods, or that it already paid respondent for the goods delivered.

WHEREFORE, we AFFIRM the 29 February 1996 Decision and 13 June 1996 Resolution of

the Court of Appeals in CA-G.R. CV No. 44782. Costs against petitioner.

SO ORDERED.

Endnotes:

SECOND DIVISION

ROCKLAND CONSTRUCTION

COMPANY, INC.,

Petitioner,

G.R. No. 164587

Present:

- versus -

QUISUMBING, J., Chairperson,

CARPIO,

CARPIO MORALES,

TINGA, and

VELASCO, JR., JJ.

MID-PASIG LAND DEVELOPMENT

CORPORATION,

Respondent.

Promulgated:

February 4, 2008

x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x

DECISION

QUISUMBING, J.:

This petition for review seeks the reversal of the Decision15[1] and

Resolution16[2] dated February 27, 2004 and July 21, 2004, respectively, of the

Court of Appeals in CA-G.R. CV No. 76370. The appellate court had reversed and

set aside the Decision17[3] dated September 2, 2002 of the Regional Trial Court

(RTC), Branch 67 of Pasig City, in Civil Case No. 68350; dismissed petitioner’s

complaint; and held that there was no perfected contract of lease between the

parties.

The antecedents facts, culled from the records, are as follows:

Rockland Construction Company, Inc. (Rockland), in a letter18[4] dated

March 1, 2000, offered to lease from Mid-Pasig Land Development Corporation

(Mid-Pasig) the latter’s 3.1-hectare property in Pasig City. This property is

covered by Transfer Certificate of Title Nos. 469702 and 337158 under the control

of the Presidential Commission on Good Government (PCGG). Upon instruction

of Mid-Pasig to address the offer to the PCGG, Rockland wrote the PCGG on April

15, 2000. The letter,19[5] addressed to PCGG Chairman Magdangal Elma,

included Rockland’s proposed terms and conditions for the lease. This letter was

also received by Mid-Pasig on April 18, 2000, but Mid-Pasig made no response.

Again, in another letter20[6] dated June 8, 2000 addressed to the Chairman

of Mid-Pasig, Mr. Ronaldo Salonga, Rockland sent a Metropolitan Bank and Trust

Company Check No. 293005016821[7] for P1 million as a sign of its good faith and

readiness to enter into the lease agreement under the certain terms and

conditions stipulated in the letter. Mid-Pasig received this letter on July 28, 2000.

In a subsequent follow-up letter22[8] dated February 2, 2001, Rockland

then said that it presumed that Mid-Pasig had accepted its offer because the P1

million check it issued had been credited to Mid-Pasig’s account on December 5,

2000.23[9]

Mid-Pasig, however, denied it accepted Rockland’s offer and claimed that no check was attached to

the said letter. It also vehemently denied receiving the P1 million check, much less depositing it in

its account.

In its letter24[10] dated February 6, 2001, Mid-Pasig replied to Rockland that it was only upon

receipt of the latter’s February 2 letter that the former came to know where the check came from

and what it was for. Nevertheless, it categorically informed Rockland that it could not entertain the

latter’s lease application. Mid-Pasig reiterated its refusal of Rockland’s offer in a letter25[11] dated

February 13, 2001.

Rockland then filed an action for specific performance docketed as Civil

Case No. 68350 in the RTC, Branch 67 of Pasig City. Rockland sought to compel

Mid-Pasig to execute in Rockland’s favor, a contract of lease over a 3.1-hectare

portion26[12] of Mid-Pasig’s property in Pasig City.

On September 2, 2002, the trial court rendered a decision, the dispositive portion of which reads in

part:

WHEREFORE, judgment is rendered, as follows:

1. Declaring that the plaintiff and the defendant have duly agreed upon a valid and

enforceable lease agreement of subject portions of [defendant’s] properties

designated in Exh. A as areas “A”, “B” and “C”, comprising an area of 5,000 square

meters, 11,000 square meters and 15,000 square meters, or a total of 31,000

square meters;

2. Holding that the principal terms and conditions of the aforesaid lease

agreement are as stated in plaintiff’s June 8, 2000 letter (Exh. D), to wit:

x x x x

3. Ordering the defendant to execute a written lease contract in favor of the

plaintiff containing the principal terms and conditions mentioned in the next-

preceding paragraph, within sixty (60) days from finality of this judgment, and

likewise ordering the plaintiff to pay rent to the defendant as specified in said

terms and conditions;

4. Ordering the defendant to keep and maintain the plaintiff in the peaceful

possession and enjoyment of the leased premises during the term of said

contract;

5. Ordering the defendant to pay plaintiff [attorney’s] fees in the sum of One

Million Pesos (P1,000,000.00), plus P2,000.00 for every appearance made by

counsel in court;

6. The temporary restraining order dated April 2, 2001 is hereby made

PERMANENT;

7. Dismissing defendant’s counterclaim.

With costs against the defendant.

SO ORDERED.27[13]

On appeal, the Court of Appeals reversed and set aside the trial court’s decision on the following

grounds: (1) there was no meeting of the minds as to the offer and acceptance between the parties; (2)

there was no implied acceptance of the P1 million check as Mid-Pasig was not aware of its source at the

time Mid-Pasig discovered the existence of the P1 million in its account; and (3) Rockland’s subsequent

acts and/or omissions contradicted its claim that there was already a contract of lease, as it neither took

possession of the property, nor did it pay for the corresponding monthly rentals. Accordingly, the Court

of Appeals dismissed Rockland’s complaint, as well as Mid-Pasig’s counterclaim. Rockland sought

reconsideration, but it was denied.

Petitioner Rockland now comes before us raising a complex issue:

. . . WHETHER OR NOT RESPONDENT’S ACT OF DEPOSITING INTO ITS CORPORATE BANK

ACCOUNT PETITIONER’S P1 MILLION CHECK AND COLLECTING THE PROCEEDS THEREOF:

(A) PRODUCES THE LEGAL EFFECT OF AN ACCEPTANCE OF PETITIONER’S OFFER AND

CONSIDERED AS CONSENT TO THE PAYMENT FOR WHICH IT WAS INTENDED; AND/OR

[(B)] CONSTITUTES IN LEGAL CONTEMPLATION ESTOPPEL IN PAIS, SUFFICIENT TO

APPRECIATE RESPONDENT’S CONSENT TO THE LEASE.28[14]

Simply stated, the issue may be rephrased into two questions: Was there a

perfected contract of lease? Had estoppel in pais set in?

Rockland contends that the contract of lease had been perfected and that

Mid-Pasig is in estoppel in pais because it impliedly accepted its offer when the P1

million check was credited to Mid-Pasig’s account.

Mid-Pasig counters that it never accepted Rockland’s offer. It avers it

immediately rejected Rockland’s offer upon learning of the mysterious deposit of

the P1 million check in its account.

Since the re-stated issues are intertwined, we shall discuss them jointly.

A contract has three distinct stages: preparation, perfection, and

consummation. Preparation or negotiation begins when the prospective

contracting parties manifest their interest in the contract and ends at the moment of

their agreement. Perfection or birth of the contract occurs when they agree upon

the essential elements thereof. Consummation, the last stage, occurs when the

parties “fulfill or perform the terms agreed upon in the contract, culminating in the

extinguishment thereof.”29[15]

Negotiation is formally initiated by an offer. Accordingly, an offer that is

not accepted, either expressly or impliedly,30[16] precludes the existence of

consent, which is one of the essential elements31[17] of a contract. Consent, under

Article 1319 of the Civil Code, is manifested by the meeting of the offer and

acceptance upon the thing which are to constitute a contract. To produce a

contract, the offer must be certain and the acceptance absolute.32[18]

A close review of the events in this case, in the light of the parties’ evidence,

shows that there was no perfected contract of lease between the parties. Mid-Pasig

was not aware that Rockland deposited the P1 million check in its account. It only

learned of Rockland’s check when it received Rockland’s February 2, 2001 letter.

Mid-Pasig, upon investigation, also learned that the check was deposited at the

Philippine National Bank (PNB) San Juan Branch, instead of PNB Ortigas Branch

where Mid-Pasig maintains its account. Immediately, Mid-Pasig wrote Rockland

on February 6, 2001 rejecting the offer, and proposed that Rockland apply the P1

million to its other existing lease instead. These circumstances clearly show that

there was no concurrence of Rockland’s offer and Mid-Pasig’s acceptance.

Mid-Pasig is also not in estoppel in pais. The doctrine of estoppel is based

on the grounds of public policy, fair dealing, good faith and justice, and its purpose

is to forbid one to speak against his own act, representations, or commitments to

the injury of one to whom they were directed and who reasonably relied

thereon.33[19] Since estoppel is based on equity and justice, it is essential that

before a person can be barred from asserting a fact contrary to his act or conduct, it

must be shown that such act or conduct has been intended and would unjustly

cause harm to those who are misled if the principle were not applied against

him.34[20]

From the start, Mid-Pasig never falsely represented its intention that could lead Rockland

to believe that Mid-Pasig had accepted Rockland’s offer. Mid-Pasig consistently rejected

Rockland’s offer. Further, Rockland never secured the approval of Mid-Pasig’s Board of

Directors and the PCGG to lease the subject property to Rockland. As noted by the Court of

Appeals, if indeed Rockland believed that Mid-Pasig impliedly accepted the offer, then it should

have taken possession of the property and paid the monthly rentals. But it did not. For estoppel

to apply, the action giving rise thereto must be unequivocal and intentional because, if

misapplied, estoppel may become a tool of injustice.35[21]

WHEREFORE, the instant petition is DENIED. The Decision and Resolution

dated February 27, 2004 and July 21, 2004, respectively, of the Court of Appeals

in CA-G.R. CV No. 76370 are AFFIRMED. Costs against the petitioner.

SO ORDERED.