Bar Question:

Grace Baptist Church applied to purchase lots from National Housing Authority which was approved by
the latter. The Church possessed the land and made improvements thereon and later on received a
letter from NHA approving the sale but in a price different from that which was qouted to them. The
Church tendered a manager’s check in the amount purporting to be the full payment thereof, however,
NHA returned it for being insufficient as the price had changed. The Church made several demands until
it instituted complaint for specific performance. Considering that the Church had been occupying the
said lots and even introduced improvements thereon, is it considered in bad faith? If you were the
counsel of the Church, what would be your defense?

Answer:

Yes. The offer of the NHA to sell the subject property was not accepted by the respondent. Thus, the
alleged contract involved in this case should be more accurately denominated as inexistent. There being
no concurrence of the offer and acceptance, it did not pass the stage of generation to the point of
perfection. The Church, despite knowledge that its intended contract of sale with the NHA had not been
perfected, proceeded to introduce improvements on the disputed land.

If I were the counsel of the Church, I would argue that the NHA knowingly granted the Church
temporary use of the subject properties and did not prevent the Church from making improvements
thereon.Thus, the Church and the NHA both acted in bad faith, in which case, it shall be treated as if
they were both in good faith, as provided under Article 448 of the Civil Code.

Case Digest

Facts: Respondent Church applied to purchase lots from a Resettlement Project in Cavite. Petitioner
approved the respondent’s application. Respondents then proceeded to possess the land and made
improvements. The Respondents received the letter from the petitioner duly approving the sale of the
subject lots but in a price not declared to them by the NHA Field Office. Petitioner returned the check
stating that the amount was insufficient considering that the price of the properties had changed. The
Church made demands to the petitioner but the latter refused to accept the payment.

The Church instituted a complaint for specific performance and the trial court ruled that there was a
valid contract of sale between the parties and ordered that the petitioners reimburse the respondent
Church the overpayment made for the lots. NHA appealed the case and the appellate court affirmed the
trial court’s decision that there was a valid contract of sale but held that the petitioner sell the lots at
the price approved by the NHA.

A motion for reconsideration was filed but was denied.

Issue: WON there was a valid contract of sale

Ruling: There was no contract at all.

Ratio Decidendi: The principle of estoppel will not apply in this case because it does not operate against
the Government for the acts or inaction of its agents. The case will cover the principle of equity under
the law ad will require the determination of the laws that will govern. Contracts, once perfected, are
binding upon the parties and obligations arising from it have the force of law between them and should
be complied in good faith. However, contracts are not the only source of law that govern obligations. A
contract must not run in contrary to law, morals, good customs, public order and public policy.

The offer of the NHA to sell the subject property was not accepted by the respondent. Thus, the alleged
contract involved in this case should be more accurately denominated as inexistent. There being no
concurrence of the offer and acceptance, it did not pass the stage of generation to the point of
perfection. As such, it is without force and effect from the very beginning or from its incipiency, as if it
had never been entered into, and hence, cannot be validated either by lapse of time or ratification.
Equity cannot give validity to a void contract, and this rule should apply with equal force to inexistent
contracts.

The Church, despite knowledge that its intended contract of sale with the NHA had not been perfected,
proceeded to introduce improvements on the disputed land. On the other hand, the NHA knowingly
granted the Church temporary use of the subject properties and did not prevent the Church from
making improvements thereon. Thus, the Church and the NHA, who both acted in bad faith, shall be
treated as if they were both in good faith.

The case was remanded back to the trial court to access the value of the improvements made on the
land and fix the terms of the lease if the parties so agree.

Bar Question:

Grace Baptist Church