NATIONAL HOUSING AUTHORITY, petitioner, vs.

GRACE BAPTIST CHURCH (The Church) and CA,

respondents
G.R. No. 156437. March 1, 2004

TOPIC: Contracts

FACTS:
 Started when the Church instituted a complaint for specific performance and damages against
NHA with the RTC of Quezon City
 This is a petition for review, seeking to reverse the decision of the CA, and its resolution, which
modified the decision of the RTC of Quezon City, Branch 90
 The Church is interested in acquiring two lots numbered 4 and 17, to acquire the lots, they wrote a
letter to NHA, which the NHA granted the request of purchase
 NHA offered to sell the lots at the selling price 700 pesos per sq. meter or a total price of 430,500
pesos as embodied in the contract
 The Church entered into possession and introduced improvements
 The Church issued a manager's check to NHA amounting to 55,350 pesos as a full payment,
insisting that it is the price quoted to them by the NHA Field Office and showed an unsigned piece
of paper with a handwritten computation

ISSUES:
Whether or not the Court can compel the sale of the lots in the absence of any perfected contract
of sale?

Petitioner's Arguments
 The Court cannot compel the sale of lots for it will violate the freedom to contact
 Law on sales and contracts should apply to this case
 Equity is only applied in the absence of any law governing the relationship between parties

Findings of the RTC

 NHA to reimburse 4,290 pesos to the Church for overpayment of Lots 1,2,3,18,19,20
 Declared that Lots 4 &17 has no perfected contract of sale, ordered the Church to return
possession of lots to the NHA and pay the latter rental for 200 pesos per month computed from
the time it took possession until finally vacated

Findings of the CA
 Affirmed the RTC that there was no perfected contract of sale
 Ordered NHA to sell to the Church Lots 4 & 17at 700 pesos per sq. meter with 6 % interest per
annum from March 1991

RULING: Petition is granted

Rule:
Cannot compel the sale of lots for it will violate the freedom to contract. The fundamental rule
of contracts, once perfected, binds both contracting, and obligations arising therefrom have the force of
law between the parties and should be complied. No contractual stipulation may contradict law, morals,
good customs, public policy or public order. And in the absence of a perfected contract between the
parties, their relationship may be governed by other existing laws which provide for their reciprocal
rights and obligations; for contracts are not the only source of law that governs the rights and
obligations between the parties. If in the contract the gov't is a party it is subject to same rules of
contract law which govern the validity an sufficiency of contract between individuals. As to the
application of equity it cannot give validity to a void contract.

Application:
In the case at bar, the offer sale of lots of the NHA to the Church was not accepted therefore,
the alleged contract is inexistent. As there no concurrence and acceptance of the offer, it did not pass
the stage of perfection. So, from the start there was no point of perfection and no force and effect- like
it had never been entered into. And the Church's knowledge that the contract of sale was not perfected
but still proceeded to introduce improvements of the lots and the NHA not preventing the
improvements. Both actions are in bad faith so, they shall be treated as if they were in good faith.

Conclusion:
Thus, the Court NHA to reimburse 4,290 pesos to the Church for overpayment of Lots
1,2,3,18,19,20 and declared that Lots 4 &17 has no perfected contract of sale, ordered the Church to
return possession of lots to the NHA and pay the latter rental for 200 pesos per month computed from
the time it took possession until finally vacated. (Reinstating the RTC ruling)