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Swedish Match v CA F: Swedish Match, AB (SMAB) is a Swedish corporation that had three

subsidiary corporations in the Philippines: Phimco Industries, Inc., Provident Tree Farms, Inc.
(PTFI), and OTT/Louie, Inc.-SMAB was sold by its parent company to Eemland Management
Services which is now known asSwedish Match NV. SMNV initiated steps to sell its business as
such, it instructed Ed Enriquez, VP of the management company of Swedish Match group to sell
the Phimco shares on or before June 30, 1990. Enriquez came to the Philippines in November
1989 and informed the Philippine financial and business circles that the Phimco shares were for
sale.ALS Management with its President and GM Antonio Litonjua submitted to SMAB a firm
offer to buy all of the latters shares in Phimco and all of Phimcos shares in PTFI and
OTT/Louie (Phils.), Inc. for the sum of P750M.SMAB informed respondents that the price offer
was below their expectations but urged them to undertake a comprehensive review and analysis
of the value and profit potentials of the Phimco shares. Thereafter, an exchange of
correspondence ensued between petitioners and respondents. Litonjua offered to buy the disputed
shares, excluding the lighter division for $30.6M, which per another letter of the same date was
increased to US$36 million. Litonjua stressed that the bid amount could be adjusted subject to
availability of additional information and audit verification of the company finances.Rossi, CEO
of SMAB, sent a letter informing Litonjua that ALS should undertake a due diligenceprocess or
pre-acquisition audit and review of the draft contract for their convenience. Rossi made it clear
that the final offer must be submitted on or before June 30, 1990.Litonjua informed Rossi that it
is not possible for them to comply with their request since the financial audits would be
completed only until the end of July. Enriquez sent notice to Litonjua that they would be
constrained to entertain bids from other parties in view of Litonjuas failure to make a firm
commitment for the Phimco shares. Rossi wrote a letter to Litonjua on 3 July 1990 informing the
latter that they already signed an agreement with a local group. He told Litonjua that his bid
would no longer be considered unless the local group would fail to consummate the transaction
on or before 15 September 1990. Litonjua asserted that, for all intents and purposes, the US$36
million bid which he submitted on 21 May 1990 was their final bid based on the financial
statements for the year 1989. Two months after, Enrique wrote Litonjua again informing him that
the sale did not prosper. He then invited Litonjua to resume negotiations with SMAB for the
Phimco shares. He indicated thatSMAB would be prepared to negotiate with ALS on an
exclusive basis for a period of fifteen (15)days from 26 September 1990 subject to the terms
contained in the letter . Litonjua objected to the totally new set of terms and conditions for the
sale of the Phimco shares. He emphasized that the contract between ALS and SMAB had already
been perfected. Thus, ALSfiled before the RTC of Pasig a complaint for specific performance
with damages, with a prayer for the issuance of a writ of preliminary injunction , against SMAB.
ALS arguments: Specific performance for ALS to comply with their alleged agreement.
Damages they alleged that there was an abuse of right on the part of Phimco because they
induced SMAB to not comply with their agreement with ALS; because it was through Phimcos
delay in the submission of their documents to the auditing firm that they were not able to submit
their offer on the prescribed dateSMABs arguments: no cause of action, no perfected contract.
Statute of Frauds bars the cause of action of ALS because there was no written instrument
evidencing the alleged sale of the Phimco shares to respondents. (I dont know why they had to
include the Statute of Frauds argument; it negated their first argument that no contract was
perfected. Nahirapan pa sila tuloy haha)The RTC dismissed respondents complaint. No
perfected contract. The letter indicating the 36 million dollars for the shares was a mere offer.
The due diligence process was merely a preparatory stage of the contract. CA reversed the

decision. The correspondences between the parties constitute a valid memorandum supporting
Art. 1403 of the NCC. Case remanded for further proceedings. ISSUES 1. WON the CA erred in
reversing the trial courts decision dismissing the complaint for being unenforceable under the
Statute of FraudsSMABs argument: Statute of Frauds requires not just the existence of any note
or memorandum but that such note or memorandum be an evidence of an agreement to sell.
Lintojua made it clear that the offer of $36 M is not their final offer. Besides, subsequent to said
offer, Lintojua again wrote SMAB informing them that they cannot submit their final offer on or
before June 30. ALS argument: Contract was perfected. They orally accepted their revised offer.
As a matter of fact, SMAB promised to reimburse 20,000 dollars for the due diligence process.
There was also partial performance of the perfected contract on their part as they engaged in the
audit process with the approval of the SMAB so the Statute of Frauds is no longer necessary.H:
YES. The CA erred. The term Statute of Frauds is descriptive of statutes which require certain
classes of contracts to be in writing. The Statute does not deprive the parties of the right to
contract with respect to the matters therein involved, but merely regulates the formalities of the
contract necessary to render it enforceable. Evidence of the agreement cannot be received
withoutthe writing or a secondary evidence of its contents. Clearly, the purpose of the form is for
evidentiary purposes only. The purpose of the Statute is to prevent fraud and perjury in the
enforcement of obligations depending for their evidence on the unassisted memory of witnesses,
by requiring certain enumerated contracts and transactions to be evidenced by a writing signed
by the party to be charged. However, for a note or memorandum to satisfy the Statute, it must be
complete in itself. It must contain the names of the parties, the terms and conditions of the
contract, and a description of the property sufficient to render it capable of identification. In the
case at bar, the exchange of correspondence between the parties hardly constitutes the note or
memorandum within the context of Art 1403. Rossis letter, is not complete in itself. First, it does
not indicate at what price the shares were being sold. In paragraph (5) of the letter, respondents
were supposed to submit their final offer in U.S. dollar terms, at that after the completion of the
due diligence process. The paragraph undoubtedly proves that there was as yet no definite
agreement as to the price. Second, the letter does not state the mode of payment of the price. In
fact, Litonjua was supposed to indicate in his final offer how and where payment for the shares
was planned to be made. 2. WON there was a perfected contract of sale between petitioners and
respondents with respect to the Phimco shares?H: NO. Requisites for a valid contract of sale: (a)
consent or meeting of the minds, that is, consent totransfer ownership in exchange for the price;
(b) determinate subject matter, and (c) price certain in money or its equivalent. Case at bar,
Litonjuas letter proposing the acquisition of the Phimco shares for US$36 million was merely an
offer . This offer, however, in Litonjuas own words, is understood to be subject to adjustment
on the basis of an audit of the assets, liabilities and net worth of Phimco andits subsidiaries and
on the final negotiation between ourselves. Litonjua repeatedly stressed in his letters that they
would not be able to submit their final bid by 30 June 1990. With indubitable inconsistency,
respondents later claimed that for all intents and purposes, the US$36 million was their final bid.
Respondents attempt to prove the alleged verbal acceptance of their US$36 million bid becomes
futile in the face of the overwhelming evidence on record that there was in the first place no
meeting of the minds with respect to the price . Respondents failure to submit theirfinal bid on
the deadline set by petitioners prevented the perfection of the contract of sale. Itwas not
perfected due to the absence of one essential element which was the price certain in money or its
equivalent.Respondents plea of partial performance should likewise fail because SMAB cannot
be compelled to comply with the terms of the alleged contract for the simple reason that it is

inexistent. The Statute of Frauds is applicable only to contracts which are executory and not to
those which have been consummated either totally or partially. If a contract has been totally or
partially performed, the exclusion of parol evidence would promote fraud or bad faith, for it
would enable the defendant to keep the benefits already derived by him from the transaction in
litigation, and atthe same time, evade the obligations, responsibilities or liabilities assumed or
contracted by him thereby. This rule, however, is predicated on the fact of ratification of the
contract within the