CONTRACTS: CONTRACT OF SALE; DELIVERY; INTERPRETATION; STATUTE

OFFRAUDSCase Name: Virgilio S. David vs. Misamis Occidental II Electric

Cooperative, Inc.G.R. No.: G.R. No. 194785Date: July 11, 2012Petitioner:
Virgilio S. DavidRespondent: Misamis Occidental II Electric Cooperative,
Inc
.FACTS:The petitioner Virgilio David was the proprietor of of VSD Electric Sales, a
companyengaged in the business of supplying electrical hardware including
transformers for rural electriccooperatives. It entered into a contract with the
respondent Misamis Occidental II ElectricCooperative, Inc. (MOELCI) in order to solve
its problem of power shortage affecting someareas within its coverage, MOELCI
expressed its intention to purchase a 10 MVA power transformer from David. The
General Manager of MOELCI, Engr. Reynaldo Rada (Engr. Rada),went to meet David
in the
latters office in Quezon City. David agreed to supply the power
transformer provided that MOELCI would secure a board resolution because the item
would stillhave to be imported. Both parties agreement on the purchase of
transformers and its termsamounting to P 5,000,000 and it was shipped even
without the down payment of MOELCI.
After such time, nothing was heard from MOELCI and David went to Ozamis City
toconfirm if the shipment was made, which subsequently MOELCI had said that they
were not stillin physical possession of the shipment. Contrary to what MOELCI had
said, the shipment wasactually received by them and copies of the bill of lading
evidenced the receipt of the companyof the said shipment.Several demand letters
have been made to collect the amount of the transformers andDavid filed a
complaint with the RTC for specific performance. MOELCI replied that there wasno
contract of sale because it was under the Statute of Frauds and that there was only
a quotationletter that could not be considered as a binding contract. The RTC
dismissed the complaint for the reason that although a contract of sale was
perfected, it was not consummated because Davidfailed to prove that there was
indeed a delivery of the subject item and that MOELCI received it.David appealed to
the CA but it was also dismissed but in an opposed view of the decision of theRTC
.ISSUE: Whether or not there is a perfected contract of sale and the delivery
consummated thecontract?
HELD:Yes, the Court ruled that there was a perfected contract of sale since there
was a meetingof the minds, there was consent on the part of David to transfer
ownership of the power transformer to MOELCI in exchange for the price, thereby
complying with the first element.
Macasaet v. R. Transport CorporationFacts:
R. Transport and Macasaet entered into a Deedof Sale with Assumption of Mortgage
over 4 passenger buses whereby Macasaet undertook to pay theconsideration of
P12M and assume the existingmortgage obligation on the said buses in favor of
Phil.Hino Sales Corp. Accordingly, R. Transport delivered toMacasaet 2 passenger
buses. Despite demands,however, Macasaet failed to pay the stipulatedpurchased

price. This prompted R. Transport to file acomplaint seeking the issuance of a writ of
replevin,praying for judgment declaring R. Transport as the lawfulowner and
possessor of the passenger buses andordering Macasaet to remit the amount of
P660,000representing the income generated by the 2 buses. Prior
to the execution of the contract, Special Trip Contract
was entered into by the parties wherein it stipulated thatR. Transport would lease
the 4 subject of the deed of sale to Macasaet for the sum of P10,000 a day per
bus.For his defense, petitioner alleged that he had paidrespondent the full
consideration of P12M and hadagreed to assume the mortgage obligation. He
claimedownership over the 4 buses. He further contented thathe had already
remitted P120,000 to respondent aspartial payment of the mortgage obligation.
Petitioner admitted that he had been earning at least P7,000 per day on each bus.
For his counterclaim, he prayed for thereturn of the bus units seized and the
immediate deliveryof the other 2 units, as well as payment for damages.
Issue:
W/N respondent has the right to rescind or cancel
the deed of sale in view of petitioners failure to pay
stipulated consideration.
Ruling:
The CA erred in stating that the deed of salewas not perfected, for it was. There was
noconsummation though. However, the rescission or resolution of the deed of sale is
in order.Being a consensual contract, sale is perfected at themoment there is a
meeting of minds upon the thingwhich is the object of the contract and upon the
price.From that moment, the parties may reciprocally demandperformance, subject
to the provisions of the lawgoverning the form of contracts. A perfected contract
of sale imposes reciprocal obligations on the partieswhereby the vendor obligates
himself to transfer theownership of and to deliver a determinate thing to thebuyer
who, in turn, is obligated to pay a price certain inmoney or its equivalent. Failure of
either party to complywith his obligation entitles the other to rescission as thepower
to rescind is implied in reciprocal obligations. Applying these legal precepts to
the case at bar, we holdthat respondent has the right to rescind or cancel the
deed of sale in view of petitioners failure to
paystipulated consideration.Non-payment of the purchase price of
propertyconstitutes a very good reason to rescind a sale for itviolates the very
essence of the contract of sale. While itis preferable that respondent instead should
have filedan action to resolve or cancel the deed as the right to doso must be
invoked judicially, this shortcoming wascured when the complaint itself made out a
case for rescission or resolution for failure of petitioner to complywith his obligation
to pay the full purchase price.

TAU MU SCROLL NO. 490 3

As previously noted, petitioner did not pay the fullpurchase price as stipulated in
the contract whereasrespondent complied with its obligation when it deliveredthe 2
buses. A necessary consequence of rescission isrestitution with payment of
damages under Art. 1191. Also, corollary to the rescission of the contract of
sale isthe recovery of possession of the object thereof. Thus,
petitioners possession over the subject buses became

unlawful when upon demand for return, he wrongfullyretained possession over the
same. As to damages, a party is entitled only up to suchcompensation for the
pecuniary loss that he has dulyproven. Since the amount of damages was
foundedmerely on speculations, we return to the provisions of the Special Trip
Contract wherein the rental is fixed atP10,000 a day per bus. This duly executed
contract waspresented, marked and formally offered in evidence. Thefact that
Macasaet voluntarily signed the contractevinced his acquiescence to its terms,
particularly theamount of rentals.

SANTOS vs. COURT OF APPEALSG.R. No. 120820. August 1, 2000Facts:

Spouses Santos owned the house and lot in Better Living Subdivision,
Paranaque, Metro Manila. The landtogether with the house, was
mortgaged with the Rural Bank of Salinas, Inc., to secure a loan of
P150K. The bank sent Rosalinda Santos a letter demanding payment of P16K in
unpaid interest and other charges. Since theSantos couple had no funds, Rosalinda
offered to sell the house and lot to Carmen Caseda. After inspecting thereal
property, Carmen and her husband agreed.Carmen and Rosalinda signed a
document, involving the sale of the house P350K as full amount, P54K
asdownpayment. Among other condition set is that Caseda will pay the balance of
the mortgage in the bank, realestate taxes and the electric and water bills.The
Casedas complied with the bank mortgage and the bills. The Santoses,
seeing that the Casedas lacked
them e a n s t o p a y t h e r e m a i n i n g i n s t a l l m e n t s a n d / o r a m o r t i z a t i o
n o f t h e l o a n , r e p o s s e s s e d t h e p r o p e r t y. T h e Santoses
then collected the rentals from the tenants. Carmen approached
petitioners and off ered to pay the balance of the purchase price for the
house and lot. The parties, however, could not agree, and the deal
couldnot push through because the Santoses wanted a higher price.Carmen is now
praying that the Santoses execute the final deed of conveyance over the property.
Issue:
WON there was a perfected contract of sale?
NOHeld:
A contract is what the law defi nes it to be, taking into consideration its
essential elements, and not what the contracting parties call it. Article 1458
expressly obliges the vendor to transfer ownership of the thing sold as anessential
element of a contract of sale. This is because the transfer of ownership in exchange
for a price paid or promised is the very essence of a contract of sale.There was no
transfer of ownership simultaneously with the delivery of the property
purportedly sold. The r e c o r d s c l e a r l y s h o w t h a t , n o t w i t h s t a n d i n g
t h e f a c t t h a t t h e C a s e d a s fi r s t t o o k t h e n l o s t p o s s e s s i o n o f
t h e disputed house and lot, the title to the property has remained always in the
name of Rosalinda Santos. Althoughthe parties had agreed that the Casedas would
assume the mortgage, all amortization payments made by CarmenCaseda to the
bank were in the name of Rosalinda Santos. The foregoing
circumstances categorically and clearly show that no valid transfer
of ownership was made by the Santoses to the Casedas. Absent this
essentialelement, their agreement cannot be deemed a contract of sale.

It was a contract to sell.

Ownership is reserved by the vendor and is not to pass until full
payment of the purchase price. This we find fully applicable and understandable
in this case, given that the property involvedis a titled realty under mortgage to a
bank and would require notarial and other formalities of law before transfer thereof
could be validly effected.
The CA cannot order rescission.
If the vendor should eject the vendee for failure to meet the
condition precedent, he is
enforcing the contract and not rescinding it.
W h e n t h e p e t i t i o n e r s i n t h e i n s t a n t c a s e repossessed the disputed
house and lot for failure of private respondents to pay the purchase price in full,
theywere merely enforcing the contract and not rescinding it.

Lorence G. Valencia
Heirs of San Andres v. RodriguezG.R. No. 135634, May 31, 2000
Facts:Juan San Andres (Juan) was theowner of the lot situated in Liboton, NagaCity. The
sale was evidenced by a deed ofsale. Upon the death of Juan, Ramon SanAndres
was appointed as administrator.

Vicente Rodriguez (respondent) hadpurchased the lot from Juan. Theadministrator sent a
letter to therespondent to vacate the said portion inwhich the latter refused.

Respondent alleged that the paymentfor such would be affected in 5 yearsfrom the execution of
formal deed ofsale after a survey is conducted.

On September 20, 1994, the trial courtrendered judgment in favor ofpetitioner.

Respondent appealed to the Court ofAppeals, which on April 21, 1998rendered a decision
reversing thedecision of the trial court.
Issue: Whether or not the object of thesale determinable?Ruling:
The object of the sale is certainand determinable. Under Art. 1460 of theNew Civil
Code, a thing sold isdeterminable if at the time the contract isentered into, the thing is
capable of beingdeterminate without necessity of a new orfurther agreement
between the parties.Without any doubt, the receipt profoundlyspeaks of a meeting
of the mind betweenJuan San Andres and Rodriguez for thesale. Evidently this is a
perfected contractof sale on a deferred payment of thepurchase price. All the prerequisiteelements for a valid purchase transactionare present.A deed of sale is
considered absolute innature where there is neither astipulation in the deed that
title to theproperty sold is reserved in the selleruntil full payment of the price, nor
onegiving the vendor the right to unilaterallyresolve the contract the moment
thebuyer fails to pay within a fixed period.