VILLONCO REALTY vs BORMAHECO, INC.

This action was instituted by Villonco Realty Company against Bormaheco, Inc. and the
spouses Francisco N. Cervantes and Rosario N. Cervantes for the specific performance of a
supposed contract for the sale of land and the improvements thereon for one million four
hundred thousand pesos. Edith Perez de Tagle, as agent, intervened in order to recover her
commission. The lower court enforced the sale. Bormaheco, Inc. and the Cervantes
spouses, as supposed vendors, appealed.
FACTS:
Spouses Cervantes owned the lot in Buendia Avenue, Makati, Rizal with a total area of three
thousand five hundred square meters The lots were mortgaged to the Development Bank of
the Phil (DBP) on April 21, 1959 as security for a loan of P441,000. The mortgage debt was
fully paid on July 10, 1969.
Cervantes is the president of Bormaheco, Inc., a dealer and importer of industrial and
agricultural machinery. The lot is adjacent to the property of Villonco Realty Company
( Buendia Avenue.)
In the early part of February, 1964 there were negotiations for the sale of the said lots and
the improvements thereon between Romeo Villonco of Villonco Realty Company "and
Bormaheco, Inc., represented by its president, Francisco N. Cervantes, through the
intervention of Edith Perez de Tagle, a real estate broker".
In the course of the negotiations, the brothers Romeo Villonco and Teofilo Villonco conferred
with Cervantes in his office to discuss the price and terms of the sale. Later, Cervantes "went
to see Villonco for the same reason until some agreement" was arrived at. On a subsequent
occasion, Cervantes, accompanied by Edith Perez de Tagle, discussed again the terms of
the sale with Villonco.
During the negotiations, Villonco Realty Company assumed that the lots belonged to
Bormaheco, Inc. and that Cervantes was duly authorized to sell the same. Cervantes did
not disclose to the broker and to Villonco Realty Company that the lots were conjugal
properties of himself and his wife and that they were mortgaged to the DBP.
(1) That we are offering to sell to you the above property
(2) That a deposit of P100,000.00 must be placed as earnest
money on the purchase of the above property which will
become part payment of the property in the event that the
sale is consummated;
(3) That this sale is to be consummated only after I shall have
also consummated my purchase of another property located
at Sta. Ana, Manila;
(4) That if my negotiations with said property will not be
consummated by reason beyond my control, I will return to

you your deposit of P100,000 and the sale of my property to

you will not also b
The property mentioned in Bormaheco was awarded to them.
The check was delivered by Edith Perez de Tagle to Bormaheco, and was received by
Cervantes. In the voucher-receipt evidencing the delivery the broker indicated in her
handwriting that the earnest money was "subject to the terms and conditions embodied in
Bormaheco's letter"
Then, unexpectedly, in a letter dated March 30, 1964, or twenty-six days after the signing of
the contract of sale, Cervantes returned the earnest money, with interest amounting to
P694.24 (at ten percent per annum). Cervantes cited as an excuse the circumstance that
"despite the lapse of 45 days from February 12, 1964 there is no certainty yet" for the
acquisition of the Punta property Villonco Realty Company refused to accept the letter and
the checks of Bormaheco, Inc. Cervantes sent them by registered mail. When he rescinded
the contract, he was already aware that the Punta lot had been awarded to Bormaheco, Inc.
Edith Perez de Tagle, the broker, in a letter to Cervantes dated March 31, 1964 articulated
her shock and surprise at Bormaheco's turnabout. She reviewed the history of the deal and
explained why Romeo Villonco could not agree to the rescission of the sale
Cervantes a reply to Miss Tagle's letter, alleged that the forty-five day period had already
expired and the sale to Bormaheco, Inc. of the Punta property had not been consummated.
Cervantes said that his letter was a "manifestation that we are no longer interested to sell"
In a letter dated April 7, 1964 Villonco Realty Company returned the two checks to
Bormaheco, Inc., stating that the condition for the cancellation of the contract had not arisen
and at the same time announcing that an action for breach of contract would be filed against
Bormaheco, Inc.
On that same date, April 7, 1964 Villonco Realty Company filed the complaint for specific
performance against Bormaheco,
Bormaheco, Inc. in its answers dated May 5 and 25, 1964 pleaded the defense that the
perfection of the contract of sale was subject to the conditions (a) "that final acceptance or
not shall be made after 45 days" (sic) and (b) that Bormaheco, Inc. "acquires the Sta. Ana
property".
during the pendency of this case, the Nassco sent a letter approving the sale of Punta to
bormacheo, the deed of sale for the Punta land was executed.
Miss Tagle testified that for her services Bormaheco, Inc., through Cervantes, obligated itself
to pay her a three percent commission on the price of P1,400,000 or the amount of forty-two
thousand pesos (14 tsn).
After trial, the lower court in favor of Villonco
Cervantes spouses appealed.
Their principal contentions are:

(a) that no contract of sale was perfected because Cervantes made a supposedly qualified
acceptance of the revised offer contained in Exhibit D, which acceptance amounted to a
counter-offer, and because the condition that Bormaheco, inc. would acquire the Punta land
within the forty-five-day period was not fulfilled; (2) that Bormaheco, Inc. cannot be
compelled to sell the land which belongs to the Cervantes spouses and (3) that Francisco N.
Cervantes did not bind the conjugal partnership and his wife when, as president of
Bormaheco, Inc., he entered into negotiations with Villonco Realty Company regarding the
said land.
We hold that the appeal, except as to the issue of damages, is devoid of merit.
"By the contract of sale one of the contracting parties obligates himself to transfer the
ownership of and to deliver a determining thing, and the other to pay therefor a price certain
in money or its equivalent. A contract of sale may be absolute or conditional
"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. From that moment, the parties may
reciprocally demand performance, subject to the provisions of the law governing the form of
contracts" (Art. 1475, Ibid.).
"Contracts are perfected by mere consent, and from that moment the parties are bound not
only to the fulfillment of what has been expressly stipulated but also to all the consequences
which, according to their nature, may be in keeping with good faith, usage and law" (Art.
1315, Civil Code).
"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" (Art. 1319, Civil Code). "An
acceptance may be express or implied" (Art. 1320, Civil Code).
Bormaheco's acceptance of Villonco Realty Company's offer to purchase the Buendia
Avenue property, as shown in Teofilo Villonco's letter dated indubitably proves that there was
a meeting of minds upon the subject matter and consideration of the sale.

Therefore, on that date the sale was perfected. acceptance of the part payment of one
hundred ,thousand pesos shows that the sale was conditionally consummated or partly
executed subject to the purchase by Bormaheco, Inc. of the Punta property. The
nonconsummation of that purchase would be a negative resolutory condition
On February 18, 1964 Bormaheco's bid for the Punta property was already accepted by the
Nassco which had authorized its General Manager to sign the corresponding deed of sale.
What was necessary only was the approval of the sale by the Economic Coordinator and a
request for that approval was already pending in the office of that functionary on March 4,
1964.

Bormaheco, Inc. and the Cervantes spouses contend that the sale was not perfected
because Cervantes allegedly qualified his acceptance of Villonco's revised offer and,
therefore, his acceptance amounted to a counter-offer which Villonco Realty Company
should accept but no such acceptance was ever transmitted to Bormaheco, Inc. which,
therefore, could withdraw its offer.

That contention is not well-taken. It should be stressed that there is no evidence as to what
changes were made by Cervantes in Villonco's revised offer. And there is no evidence
that Villonco Realty Company did not assent to the supposed changes and that such
assent was never made known to Cervantes.
What the record reveals is that the broker, Miss Tagle, acted as intermediary between the
parties. It is safe to assume that the alleged changes or qualifications made by Cervantes
were approved by Villonco Realty Company and that such approval was duly communicated
to Cervantes or Bormaheco, Inc. by the broker as shown by the fact that Villonco Realty
Company paid, and Bormaheco, Inc. accepted, the sum of P100,000 as earnest money or
down payment. That crucial fact implies that Cervantes was aware that Villonco Realty
Company had accepted the modifications which he had made in Villonco's counter-offer. Had
Villonco Realty Company not assented to those insertions and annotations, then it would
have stopped payment on its check for P100,000. The fact that Villonco Realty Company
allowed its check to be cashed by Bormaheco, Inc. signifies that the company was in
conformity with the changes made by Cervantes and that Bormaheco, Inc. was aware of that
conformity. Had those insertions not been binding, then Bormaheco, Inc. would not have paid
interest at the rate of ten percent per annum, on the earnest money of P100,000.
The truth is that the alleged changes or qualifications in the revised counter offer are not
material or are mere clarifications of what the parties had previously agreed upon.
Appellants Bormaheco, Inc. and Cervantes further contend that Cervantes, in clarifying in the
voucher for the earnest money of P100,000 that Bormaheco's acceptance thereof was
subject to the terms and conditions embodied in Bormaheco's letter and your (Villonco's)
letter of March 4, 1964" made Bormaheco's acceptance "qualified and conditional".
That contention is not correct. There is no incompatibility between Bormaheco's offer and
Villonco's counter-offer. The revised counter-offer merely amplified Bormaheco's original
offer.
The controlling fact is that there was agreement between the parties on the subject matter,
the price and the mode of payment and that part of the price was paid . "Whenever earnest
money is given in a contract of sale, it shall be considered as part of the price and as
proof of the perfection of the contract" (Art. 1482, Civil Code).
"It is true that an acceptance may contain a request for certain changes in the terms of the
offer and yet be a binding acceptance. 'So long as it is clear that the meaning of the
acceptance is positively and unequivocally to accept the offer, whether such request is
granted or not, a contract is formed.'
Thus, it was held that the vendor's change in a phrase of the offer to purchase, which
change does not essentially change the terms of the offer, does not amount to a rejection of
the offer and the tender of a counter-offer (Stuart vs. Franklin Life Ins. Co., supra).
The instant case is different from Laudico and Harden vs. Arias Rodriguez, 43 Phil. 270
where the written offer to sell was revoked by the offer or before the offeree's acceptance
came to the offeror's knowledge.
"Obligations arising from contracts have the force of law between the contracting parties and
should be complied with in good faith" (Art. 1159, Civil Code). Inasmuch as the sale was

perfected and even partly executed, Bormaheco, Inc., and the Cervantes spouses, as a
matter of justice and good faith, are bound to comply with their contractual commitments.
We hold that the trial court did not err in adjudging that Bormaheco, Inc. should pay Miss
Tagle her three percent commission.
WHEREFORE, the trial court's decision is modified as follows:
1. Within ten (10) days from the date the defendants-appellants receive notice from the clerk
of the lower court that the records of this case have been received from this Court, the
spouses Francisco N. Cervantes and Rosario P. Navarra-Cervantes should execute a deed
conveying to Bormaheco, Inc. their three lots covered by Transfer Certificate of Title Nos.
43530, 43531 and 43532 of the Registry of Deeds of Rizal.
2. Within five (5) days from the execution of such deed of conveyance, Bormaheco, Inc.
should execute in favor of Villonco Realty Company, V. R. C. Building, 219 Buendia Avenue,
Makati, Rizal a registerable deed of sale for the said three lots and all the improvements
thereon, free from all lien and encumbrances, at the price of four hundred pesos per square
meter, deducting from the total purchase price the sum of P100,000 previously paid by
Villonco Realty Company to Bormaheco, Inc.
3. Upon the execution of such deed of sale, Villonco Realty Company is obligated to pay
Bormaheco, Inc. the balance of the price in the sum of one million three hundred thousand
pesos (P1,300,000).
4. Bormaheco, Inc. is ordered (a) to pay Villonco Realty Company twenty thousand pesos
(P20,000) as attorney's fees and (b) to pay Edith Perez de Tagle the sum of forty-two
thousand pesos (P42,000) as commission. Costs against the defendants-appellants.
SO ORDERED.
BARREDO, J., concurring:.
My conclusion, therefore, is that said acts of Cervantes of signing his conformity to Villonco's
counter-offer of March 4 and accepting the P100,000 earnest money therein offered resulted
in a completely perfected contract of sale between the parties per Article 1482 of the Civil
Code, needing only the execution of the corresponding deed of sale for its consummation
and subject solely to the negative resolutory condition that the "sale shall be cancelled, only
if your (Cervantes') deal with another property in Sta. Ana (indisputably the Nassco
transaction) shall not be consummated", without stipulating anymore a period for such
consummation, since evidently, with the sale thereof having been authorized already by the
Nassco Board on February 18,
I have no doubt whatsoever that the whole trouble here is that after Cervantes had already
signed his conformity and received earnest money on March 4, he had a change of heart,
perhaps dictated by reasons of better economic advantage, and banking on the idea, albeit

Spouses RAMON DOROMAL vs.CA

"Luis, Soledad, Fe, Rosita, Carlos and Esperanza,"
all surnamed Horilleno, and since Esperanza had already died, she was
succeeded by her only daughter and heir herein plaintiff. Filomena Javellana,
in the proportion of 1/7 undivided ownership each; now then, even though
their right had not as yet been annotated in the title, the co-owners led by
Carlos, and as to deceased Justice Antonio Horilleno, his daughter Mary,
sometime since early 1967, had wanted to sell their shares, or if possible if
Filomena Javellana were agreeable, to sell the entire property, and they hired
an acquaintance Cresencia Harder, to look for buyers, and the latter came to
interest defendants, the father and son, named Ramon Doromal, Sr. and Jr.,
and in preparation for the execution of the sale, since the brothers and sisters
Horilleno were scattered in various parts of the country, Carlos in Ilocos Sur,
Mary in Baguio, Soledad and Fe, in Mandaluyong, Rizal, and Rosita in
Basilan City, they all executed various powers of attorney in favor of their
niece, Mary H. Jimenez Exh. 1-8, they also caused preparation of a power of
attorney of identical tenor for signature by plaintiff, Filomena Javellana, Exh.
M, and sent it with a letter of Carlos, Exh. 7 dated 18 January, 1968 unto her
thru Mrs. Harder, and here, Carlos informed her that the price was P4.00 a
square meter, although it now turns out according to Exh. 3 that as early
as 22 October, 1967, Carlos had received in check as earnest money from
defendant Ramon Doromal, Jr., the sum of P5,000.00 and the price therein
agreed upon was five (P5.00) pesos a square meter as indeed in another
letter also of Carlos to Plaintiff in 5 November, 1967, Exh. 6, he had told her
that the Doromals had given the earnest money of P5,000.00 at P5.00 a

square meter, at any rate, plaintiff not being agreeable, did not sign the
power of attorney, and the rest of the co-owners went ahead with their sale of
their 6/7, Carlos first seeing to it that the deed of sale by their common
attorney in fact, Mary H. Jimenez be signed and ratified as it was signed and
ratified in Candon, Ilocos Sur, on 15 January, 1968, Exh. 2, then brought to
Iloilo by Carlos in the same month, April, 1968, the Doromals paid unto
Carlos by check, the sum of P97,000.00 Exh. 1, of Chartered Bank which
was later substituted by check of Phil. National Bank, because there was no
Chartered Bank Branch in Ilocos Sur, but besides this amount paid in check,
the Doromals according to their evidence still paid an additional amount in
cash of P18,250.00 since the agreed price was P5.00 a square meter; and
thus was consummated the transaction, but it is here where complications
set in,
On 10 June, 1968, there came to the residence of the Doromals in Dumangas, Iloilo,
plaintiff's lawyer, Atty. Arturo H. Villanueva, bringing with him her letter of that date, reading,

THE PLAINTIFF THEN SENT A LETTER REPURCHASING THE SAID LAND, WITH THE
SAME AMOUNT OF 30K.
defendants in answer, and in their evidence, oral and documentary sought to
show that plaintiff had no more right to redeem and that if ever she should
have, that it should be at the true and real price by them paid, namely, the
total sum of P115,250.00
We cannot agree with petitioners.
Petitioners do not question respondent's right to redeem, she being admittedly a 1/7 coowner of the property in dispute. The thrust of their first assignment of error is that for
purposes of Article 1623 of the Civil Code which provides that:
ART. 1623. The right of legal pre-emption or redemption shall not be
exercised except within thirty days from the notice in writing by the
prospective vendor, or by the vendor, as the case may be. The deed of sale
shall not be recorded in the Registry of Property, unless accompanied by an
affidavit of the vendor that he has given written notice thereof to all possible
redemptioners.
The right of redemption of co-owners excludes that of adjoining owners.
the letters sent by Carlos Horilleno to respondent and dated January 18, 1968, Exhibit 7, and
November 5, 1967, Exhibit 6, constituted the required notice in writing from which the 30-day
period fixed in said provision should be computed. But to start with, there is no showing that
said letters were in fact received by respondent and when they were actually received.
Besides, petitioners do not pinpoint which of these two letters, their dates being more than
two months apart, is the required notice. In any event, as found by the appellate court,
neither of said letters referred to a consummated sale. As may be observed, it was Carlos
Horilleno alone who signed them, and as of January 18, 1968, powers of attorney from the
various co-owners were still to be secured. Indeed, the later letter of January 18, 1968
mentioned that the price was P4.00 per square meter whereas in the earlier letter of

November 5, 1967 it was P5.00, as in fact, on that basis, as early as October 27, 1967,
Carlos had already received P5,000 from petitioners supposedly as earnest money, of
which, however, mention was made by him to his niece only in the later letter of January 18,
1968, the explanation being that "at later negotiation it was increased to P5.00 per square
meter."
In other words, while the letters relied upon by petitioners could convey the idea that more or
less some kind of consensus had been arrived at among the other co-owners to sell the
property in dispute to petitioners, it cannot be said definitely that such a sale had even been
actually perfected. The fact alone that in the later letter of January 18, 1968 the price
indicated was P4.00 per square meter while in that of November 5, 1967, what was stated
was P5.00 per square meter negatives the possibility that a "price definite" had already been
agreed upon. While P5,000 might have indeed been paid to Carlos in October, 1967, there is
nothing to show that the same was in the concept of the earnest money contemplated in
Article 1482 of the Civil Code, invoked by petitioner, as signifying perfection of the sale.
Viewed in the backdrop of the factual milieu thereof extant in the record, We are more
inclined to believe that the said P5,000 were paid in the concept of earnest money as the
term was understood under the Old Civil Code, that is, as a guarantee that the buyer would
not back out, considering that it is not clear that there was already a definite agreement as to
the price then and that petitioners were decided to buy 6/7 only of the property should
respondent Javellana refuse to agree to part with her 1/7 share.
ISSUE: W the amount of 30k as redemption price is proper?
RULING: yes
Being patently violative of public policy and injurious to public interest, the seemingly wide
practice of understating considerations of transactions for the purpose of evading taxes and
fees due to the government must be condemned and all parties guilty thereof must be made
to suffer the consequences of their ill-advised agreement to defraud the state. Verily, the trial
court fell short of its devotion and loyalty to the Republic in officially giving its stamp of
approval to the stand of petitioners and even berating respondent Javellana as wanting to
enrich herself "at the expense of her own blood relatives who are her aunts, uncles and
cousins." On the contrary, said "blood relatives" should have been sternly told, as We here
hold, that they are in pari-delicto with petitioners in committing tax evasion and should not
receive any consideration from any court in respect to the money paid for the sale in dispute.
Their situation is similar to that of parties to an illegal contract. 1
Of course, the Court of Appeals was also eminently correct in its considerations supporting
the conclusion that the redemption in controversy should be only for the price stipulated in
the deed, regardless of what might have been actually paid by petitioners

GOLDENROD, INCORPORATED vs CA
FACTS:
Respondents Barreto realty owns 43 parcels of land in Quiapo Manila which they mortgaged in
UCPB. Respondent sold the property to petitioner Goldenrod who In turn pays 1M earnest money
and promise to pay respondents debt to UCPB. Respondent caused 2 land titles to the property.
Petitioner was not able to pay UCPB and the latter did not agree for and extension. Hence,
petitioner rescinded the contact and demands the return of the earnest money.
Respondent did not oppose the recession but did not gave the earnest money. They even sold
the first lot to Asiaworld Trade Center and the other lot to UCPB for payment of their mortgage.
ISSUE:
WON respondent should return the earnest money of the petitioner.
HELD:
Earnest money is a part of payment of a sale. Art. 1385 of the Civil Code provides that rescission
creates the obligation to return the things which were the object of the contract together with their
fruits and interest. Since the respondent did not oppose the extra-judicial recission, they should
return the earnest money of the petitioner. It would be most inequitable if resondent BARRETTO
REALTY would be allowed to retain petitioner's payment of P1,000,000.00 and at the same time
appropriate the proceeds of the second sale made to another.

EDRADA VS. RAMOS

In this Petition[1] under Rule 45, petitioner Spouses
Alfredo and Rosella Edrada (petitioners) seek the reversal of
the
Former
Second
Division
of
the
Court
of
[2]
[3]
Appeals Decision and Resolution in CA-G.R. CV No. 66375,
which affirmed the Decision of Regional Trial Court (RTC) of
Antipolo City, Branch 71,[4] in Civil Case No. 96-4057, and
denied the Motion for Reconsideration[5] therein.
Respondent spouses Eduardo and Carmencita Ramos
(respondents) are the owners of two (2) fishing vessels, the
Lady Lalaine and the Lady Theresa. On 1 April 1996,
respondents and petitioners executed an untitled handwritten
document which lies at the center of the present controversy.
Its full text is reproduced below:
1st April 1996
This is to acknowledge that Fishing Vessels Lady
Lalaine and Lady Theresa owned by Eduardo O.
Ramos are now in my possession and received in good
running and serviceable order. As such, the vessels
are now my responsibility.
Documents pertaining to the sale and agreement
of payments between me and the owner of the vessel
to follow. The agreed price for the vessel is Nine
Hundred Thousand Only (P900,000.00).
(SGD.) (SGD.)
EDUARDO O. RAMOS ALFREDO R. EDRADA
(Seller) (Purchaser)

CONFORME: CONFORME:
(SGD.) (SGD.)
CARMENCITA RAMOS ROSIE ENDRADA[6]

Upon the signing of the document, petitioners delivered

to respondents four (4) postdated Far East Bank and Trust
Company (FEBTC) checks payable to cash drawn by petitioner
Rosella Edrada, in various amounts totaling One Hundred
Forty Thousand Pesos (P140,000.00). The first three (3) checks
were honored upon presentment to the drawee bank while the
fourth check for One Hundred Thousand Pesos (P100,000.00)
was dishonored because of a stop payment order.
On 3 June 1996, respondents filed an action against
petitioners for specific performance with damages before the
RTC, praying that petitioners be obliged to execute the
necessary deed of sale of the two fishing vessels and to pay the
balance of the purchase price. In their Complaint,
[7]
respondents alleged that petitioners contracted to buy the
two fishing vessels for the agreed purchase price of Nine
Hundred Thousand Pesos (P900,000.00), as evidenced by the
above-quoted document, which according to them evinced a
contract to

buy. However, despite delivery of said vessels and repeated oral

demands, petitioners failed to pay the balance, so respondents
further averred.
Belying the allegations of respondents, in their Answer
with Counterclaim,[8] petitioners averred that the document
sued upon merely embodies an agreement brought about by
the loans they extended to respondents. According to
petitioners, respondents allowed them to manage or
administer the fishing vessels as a business on the
understanding that should they find the business profitable,
the vessels would be sold to them for Nine Hundred Thousand
Pesos (P900,000.00). But petitioners decided to call it quits
after spending a hefty sum for the repair and maintenance of
the vessels which were already in dilapidated condition.
After trial, the RTC rendered a Decision[9] dated 22
February 1999, the dispositive portion of which reads:
WHEREFORE, judgment is hereby rendered in
favor of the plaintiffs and against the defendants and
the latter are ordered to pay to the former the amount
of Eight Hundred Sixty Thousand Pesos (P860,000.00)
with legal interests thereon from June 30, 1996 until
fully paid; the amount of P20,000.00 as attorneys fees
and the cost of suit.
The counterclaim of the defendants for moral
and exemplary damages and for attorneys fees is
dismissed for lack of merit.
SO ORDERED.[10]

The RTC treated the action as one for collection of a sum

of money and for damages and considered the document as a
perfected contract of sale. On 19 April 1999, petitioners filed
a Motion for Reconsideration which the RTC denied in
an Order[11] dated 2 July 1999.
Both parties appealed the RTC Decision. However, finding
no reversible error in the appealed decision, the Court of
Appeals, in its Decision,[12]affirmed the same and dismissed
both appeals. Only petitioners elevated the controversy to this
Court.
Petitioners raised the nature of the subject document as
the primary legal issue. They contend that there was no
perfected contract of sale as distinguished from a contract to
sell. They likewise posed as sub-issues the purpose for which
the checks were issued, whether replacement of the crew was
an act of ownership or administration, whether petitioners
failed to protest the dilapidated condition of the vessels, and
whether the instances when the vessels went out to sea proved
that the vessels were not seaworthy.[13] It is also alleged in the
petition that the true agreement as between the parties was
that of a loan.
Evidently, the petition hinges on the true nature of the
document dated 1 April 1996. Normally, the Court is bound by
the factual findings of the lower courts, and accordingly,
should affirm the conclusion that the document in question
was a perfected contract of sale. However, we find that both
the RTC and the Court of Appeals gravely misapprehended the
nature of the said document, and a reevaluation of the
document is in order.[14] Even if such reevaluation would lead
the court to examine issues not raised by the parties, it should
be remembered that the Court has authority to review matters

even if not assigned as errors in the appeal, if it is found that

their consideration is necessary in arriving at a just decision
of the case.[15]
In doing so, we acknowledge that the contending parties
offer vastly differing accounts as to the true nature of the
agreement. Still, we need not look beyond the document dated
1 April 1996 and the stipulations therein in order to ascertain
what obligations, if any, have been contracted by the party.
The parol evidence rule forbids any addition to or
contradiction of the terms of a written agreement by testimony
or other evidence purporting to show that different terms were
agreed upon by the parties, varying the purport of the written
contract. Whatever is not found in the writing is understood to
have been waived and abandoned.[16]
We disagree with the RTC and the Court of Appeals that
the document is a perfected contract of sale. A contract of sale
is defined as an agreement whereby one of the contracting
parties obligates himself to transfer the ownership of and to
deliver a determinate thing, and the other to pay therefore a
price certain in money or its equivalent. [17] It must evince the
consent on the part of the seller to transfer and deliver and on
the part of the buyer to pay.[18]
An examination of the document reveals that there is no
perfected contract of sale. The agreement may confirm the
receipt by respondents of the two vessels and their purchase
price. However, there is no equivocal agreement to transfer
ownership of the vessel, but a mere commitment that
documents pertaining to the sale and agreement of
payments[are] to follow. Evidently, the document or documents
which would formalize the transfer of ownership and contain
the terms of payment of the purchase price, or the period
when such would become due and demandable, have yet to be

executed. But no such document was executed and no such

terms were stipulated upon.
The fact that there is a stated total purchase price should
not lead to the conclusion that a contract of sale had been
perfected. In numerous cases,[19] the most recent of which
is Swedish Match, AB v. Court of Appeals,[20] we held that
before a valid and binding contract of sale can exist, the
manner of payment of the purchase price must first be
established, as such stands as essential to the validity of the
sale. After all, such agreement on the terms of payment is
integral to the element of a price certain, such that a
disagreement on the manner of payment is tantamount to a
failure to agree on the price.
Assuming arguendo that the document evinces a
perfected contract of sale, the absence of definite terms of
payment therein would preclude its enforcement by the
respondents through the instant Complaint. A requisite for the
judicial enforcement of an obligation is that the same is due
and demandable. The absence of a stipulated period by which
the purchase price should be paid indicates that at the time of
the filing of the complaint, the obligation to pay was not yet
due and demandable.
Respondents, during trial, did claim the existence of a period.
Respondent Carmencita Ramos, during cross-examination,
claimed that the supposed balance shall be paid on 30 June
1996.[21] But
how
do
respondents
explain
why
the Complaint was filed on 3 June 1996? Assuming that the
30 June 1996 period was duly agreed upon by the parties, the
filing of the Complaint was evidently premature, as no cause of
action had accrued yet. There could not have been any breach
of obligation because on the date the action was filed, the

alleged maturity date for the payment of the balance had not
yet arrived.
In order that respondents could have a valid cause of
action, it is essential that there must have been a stipulated
period within which the payment would have become due and
demandable. If the parties themselves could not come into
agreement, the courts may be asked to fix the period of the
obligation, under Article 1197 of the Civil Code.[22] The
respondents did not avail of such relief prior to the filing of the
instant Complaint; thus, the action should fail owing to its
obvious prematurity.
Returning to the true nature of the document, we neither
could conclude that a contract to sell had been established. A
contract to sell is defined as a bilateral contract whereby the
prospective seller, while expressly reserving the ownership of
the subject property despite delivery thereof to the prospective
buyer, binds himself to sell the said property exclusively to the
prospective buyer upon fulfillment of the condition agreed
upon, that is, full payment of the purchase price. [23]
A contract is perfected when there is concurrence of the
wills of the contracting parties with respect to the object and
the cause of the contract. In this case, the agreement merely
acknowledges that a purchase price had been agreed on by the
parties. There was no mutual promise to buy on the part of
petitioners and to sell on the part of respondents. Again, the
aforestated proviso in the agreement that documents
pertaining to the sale and agreement of payments between the
parties will follow clearly manifests lack of agreement between
the parties as to the terms of the contract to sell, particularly
the object and cause of the contract.

The agreement in question does not create any obligatory

force either for the transfer of title of the vessels, or the
rendition of payments as part of the purchase price. At most,
this agreement bares only their intention to enter into either a
contract to sell or a contract of sale.
Consequently, the courts below erred in ordering the
enforcement of a contract of sale that had yet to come into
existence. Instead, the instantComplaint should be dismissed.
It prays for three reliefs arising from the enforcement of the
document: execution by the petitioners of the necessary deed
of sale over the vessels, the payment of the balance of the
purchase price, and damages. The lower courts have already
ruled that damages are unavailing. Our finding that there is
no perfected contract of sale precludes the finding of any
cause of action that would warrant the granting of the first two
reliefs. No cause of action arises until there is a breach or
violation thereof by either party.[24] Considering that the
documents create no obligation to execute or even pursue a
contract of sale, but only manifest an intention to eventually
contract one, we find no rights breached or violated that would
warrant any of the reliefs sought in the Complaint.
WHEREFORE, the petition is GRANTED. The assailed
Decision and Resolution of the Court of Appeals
are REVERSED and SET ASIDE. The case before the Regional
Trial Court is ordered DISMISSED. No pronouncement as to
costs.
SO ORDERED.