Yu Tek & Co. v.

Gonzales
Facts:
A contract was executed between the herein parties, whereby Mr. Basilio Gonzales
acknowledges the receipt of P3,000 from Yu Tek & Co., and that in consideration of which he
obligates himself to deliver to the latter 600 piculs of sugar of the first and second grade,
according to the result of polarization, within 3 months. There is a stipulation providing for
rescission with P1,200 penalty in case of failure to deliver. No sugar was delivered, so plaintiff
filed a case praying for the judgment of P3,000 plus P1,200. P3,000 was awarded, thus, both
parties appealed.
Issues:
(1) Whether compliance of the obligation to deliver depends upon the production in defendant’s
plantation
(2) Whether there is a perfected sale
(3) Whether liquidated damages of P1,200 should be awarded to the plaintiff
Held:
(1) There is not the slightest intimation in the contract that the sugar was to be raised by the
defendant. Parties are presumed to have reduced to writing all the essential conditions of their
contract. While parol evidence is admissible in a variety of ways to explain the meaning of written
contracts, it cannot serve the purpose of incorporating into the contract additional
contemporaneous conditions which are not mentioned at all in the writing, unless there has been
fraud or mistake. It may be true that defendant owned a plantation and expected to raise the
sugar himself, but he did not limit his obligation to his own crop of sugar. Our conclusion is that
the condition which the defendant seeks to add to the contract by parol evidence cannot be
considered. The rights of the parties must be determined by the writing itself.
(2) We conclude that the contract in the case at bar was merely an executory agreement; a
promise of sale and not a sale. At there was no perfected sale, it is clear that articles 1452, 1096,
and 1182 are not applicable. The defendant having defaulted in his engagement, the plaintiff is
entitled to recover the P3,000 which it advanced to the defendant, and this portion of the
judgment appealed from must therefore be affirmed.
(3) The contract plainly states that if the defendant fails to deliver the 600 piculs of sugar within
the time agreed on, the contract will be rescinded and he will be obliged to return the P3,000
and pay the sum of P1,200 by way of indemnity for loss and damages. There cannot be the
slightest doubt about the meaning of this language or the intention of the parties. There is no
room for either interpretation or construction. Under the provisions of article 1255 of the Civil
Code contracting parties are free to execute the contracts that they may consider suitable,
provided they are not in contravention of law, morals, or public order. In our opinion there is
nothing in the contract under consideration which is opposed to any of these principles.

INCHAUSTI AND CO. vs. ELLIS CROMWELL, Collector of Internal Revenue

G.R. No. L-6584 October 16, 1911

FACTS: Inchausti is engaged in the business of buying and selling at wholesale hemp. It is
customary to sell hemp in bales. The operation of bailing hemp is designated among merchants
by the word "prensaje." In all sales of hemp by the plaintiff firm, the price is quoted to the buyer
at so much per picul, no mention being made of bailing; but with the tacit understanding, unless
otherwise expressly agreed, that the hemp will be delivered in bales and that, according to the
custom prevailing among hemp merchants and dealers in the Philippine Islands, a charge, is to
be made against the buyer under the denomination of "prensaje." This charge is made in the
same manner in all cases, even when the operation of bailing was performed by the plaintiff or
by its principal long before the contract of sale was made. Plaintiff Inchausti has always paid to
the defendant Collector of Internal Revenue or to his predecessor in the office of the Collector of
Internal Revenue the tax collectible upon the selling price expressly agreed upon for all hemp
sold by the plaintiff firm, but has not, until compelled to do so paid the said tax upon sums
received from the purchaser of such hemp under the denomination of "prensaje." Subsequently,
the defendant, acting in his official capacity as Collector of Internal Revenue of the Philippine
Islands, made demand in writing upon the plaintiff firm for the payment as tax on the sums of
money collected from purchasers of hemp under the denomination of "prensaje." The plaintiff
firm paid to the defendant under protest that the tax for the collected money under the
denomination of "prensaje" is illegal upon the ground that the said charge does not constitute a
part of the selling price of the hemp, but is a charge made for the service of baling the hemp. It
is the contention of the defendant that the said charge made under the denomination of
"prensaje" is in truth and in fact a part of the gross value of the hemp sold and of its actual selling
price.
ISSUE: Whether or not the amount collected under the denomination “pensaje” is part of the
selling price of the hemp.
RULING: Yes. It is considered part of the selling price and the tax was properly imposed. The
distinction between a contract of sale and one for work, labor, and materials is tested by the
inquiry whether the thing transferred is one no in existence and which never would have existed
but for the order of the party desiring to acquire it, or a thing which would have existed and been
the subject of sale to some other person, even if the order had not been given. It is clear that in
the case at bar the hemp was in existence in baled form before the agreements of sale were
made, or, at least, would have been in existence even if none of the individual sales here in
question had been consummated. It would have been baled, nevertheless, for sale to someone
else, since, according to the agreed statement of facts, it is customary to sell hemp in bales. When
a person stipulates for the future sale of articles which he is habitually making, and which at the
time are not made or finished, it is essentially a contract of sale and not a contract for labor. It is
otherwise when the article is made pursuant to agreement. Where labor is employed on the
materials of the seller he cannot maintain an action for work and labor. If the article ordered by
the purchaser is exactly such as the plaintiff makes and keeps on hand for sale to anyone, and no
change or modification of it is made at the defendant's request, it is a contract of sale, even
though it may be entirely made after, and in consequence of, the defendant's order for it. A
contract to make is a contract of sale if the article ordered is already substantially in existence at
the time of the order and merely requires some alteration, modification, or adoption to the
buyer's wishes or purposes. It is also held in that state that a contract for the sale of an article
which the vendor in the ordinary course of his business manufactures or procures for the general
market, whether the same is on hand at the time or not, is a contract for the sale of goods to
which the statute of frauds applies. But if the goods are to be manufactured especially for the
purchaser and upon his special order, and not for the general market, the case is not within the
statute. It is clear to our minds that in the case at bar the baling was performed for the general
market and was not something done by plaintiff which was a result of any peculiar wording of
the particular contract between him and his vendee. It is undoubted that the plaintiff prepared
his hemp for the general market.

Castillo vs. Castillo Gr L-18238 Jan. 22, 1980

FACTS:
Castillo died leaving as his heirs his wife Katigbak and their nine children. Intestateproceedings
for the settlement of the deceased's estate were instituted. Katigbak was
appointedadministratrix. On June 21, 1948, she filed an inventory of the properties as well as
theobligations left by the deceased. Two months thereafter, she was ordered to submit a project
ofpartition. On November 11, 1948, the surviving spouse as administratrix submitted a project
ofpartition. Despite approval of the project of partition and the closing of the intestate
proceedings,the properties remained under the administration of Enriqueta K. Vda. de Castillo.
On February4, 1960, after an extrajudicial demand for partition, herein plaintiff-appellant
Zenaida, assistedby her husband, filed an action for partition with accounting and receivership
against her motherEnriqueta Katigbak and her brothers and sisters. Alleging that the project of
partition omitted toinclude certain properties acquired by the defendants using community
funds in theiracquisition, she prayed that said properties be divided and partitioned accordingly.
Hence, thispetition.
ISSUE:
Whether or not the contention of appellant is meritorious.
HELD:
Yes, indeed, the right of plaintiff-appellant Zenaida Castillo to demand partition is indisputable,
such right being embodied in paragraph 1, Article 494 of the New Civil Code. The finding of the
trial court that the firing of the complaint in the case at bar was not malicious is a finding of fact
which is binding and conclusive upon Us, thereby negating any award of damages against
plaintiffs-appellants, following the ruling that it is not a sound policy to place a penalty on the
right to litigate and that in order that a person may be made liable to the payment of moral
damages, the law requires that his act be wrongful. The adverse result of an action does notper
semake the act wrongful and subject the actor to the payment of moral damages. The law could
not have meant to impose a penalty on the right to litigate; such right is so precious that moral
damages may not be charged on those who may exercise it erroneously

Obaña vs. Court of Appeals and Sandoval 135 SCRA 557, March 29, 1985 First Division
Facts:
On November 21, 1964, Anicleto Sandoval (owner of Sandoval’s and Sons Rice Mill) was
approached by Chan Lin who offered to purchase from him 170 cavans of rice at the price of
P37.25 per cavan. The driver attempted to collect the payment from Chan Lin and
Petitioner Anacleto Sandoval but the latter refused, stating that he had already made the
payment to Chan Lin. Further demands having been met with refusal, Sandoval, as plaintiff, filed
suit for Replevin against petitioner, before the Municipal Court of San Fernando, La Union which
ordered petitioner- defendant to pay to Sandoval ½ of the cost of the rice or P2,805. On appeal
by the petitioner to the court of First Instance, judgment was rendered dismissing the complaint.
On appeal to respondent Appellate Court, Sandoval obtained a reversal in his favor. Hence, the
present petition seeks for the review of the decision of Court of Appeals ordering Obaña inaction
for Replevin to return to Sandoval, Private Respondent herein, 170 cavans of rice or topay its
value in the amount P37.25 per cavan, with legal interest from the filing of the complaint until
fully paid.
Issue:
Whether or not the petitioner-dependent had unjustly enriched himself at the expense
of another by holding on to property no longer belonging to him.
Held:
The judgment under review is hereby affirmed. Costs against petitioner. No person should be
benefited without a valid basis or justification, shall enrich himself at the expense of another and
hold on to a property no longer belonging to him. The petition- defendant in his own testimony
said that he was repaid the sum of P5,600 by Chan Lin and claimed that he delivered the rice back
to them. However, the driver denied that the rice had ever been returned. The driver’s version is
more credible since Sandoval’s lawyer had manifested in open court that they would have
withdrawn the complaint if the return of the rice had been effected. In law and equity, therefore,
Sandoval is entitled to recover the rice, or the value thereof since he was not paid the price
therefor

Roman vs. Grimalt 6 Phil 96

April 1906

FACTS:
In between the 13th to the 23d of June, 1904, petitioner Pedro Roman, the owner, and
respondent Andres Grimalt, the purchaser, verbally agreed upon the sale of the schooner Santa
Marina. In his letter on June 23, Grimalt agreed to buy the vessel and offered to pay in three
installments of P500 each on July 15, September 15, and November 15, provided the title
papers to the vessel were in proper form. The title of the vessel, however, was in the name of
one Paulina Giron and not in the name of Roman as the alleged owner. Roman promised to
perfect his title to the vessel, but failed so the papers he presented did not show that he was
the owner of the vessel. On June 25, 1904, the vessel sank in the Manila harbor during a severe
storm, even before Roman was able to produce for Grimalt the proper papers showing that the
former was in fact the owner of the vessel in question and not Paulina Giron. As a result,
Grimalt refused to pay the purchase price when Roman made a demand on June 30, 1904.

On July 2, 1904, Roman filed this complaint in the CFI of Manila, which found that the parties
had not arrived at a definite understanding, and later dismissed said complaint.

ISSUE:

Who should bear the risk of loss?

COURT RULING:

The Supreme Court affirmed the decision of the lower court and declared Roman as the one
who should bear the risk of lost because there was no actual contract of sale. If no contract of
sale was actually executed by the parties, the loss of the vessel must be borne by its owner and
not by a party who only intended to purchase it and who was unable to do so on account of
failure on the part of the owner to show proper title to the vessel and thus enable them to
draw up the contract of sale. Grimalt was under no obligation to pay the price of the vessel, the
purchase of which had not been concluded. The conversations between the parties and the
letter Grimalt had written to Roman did not establish a contract sufficient in itself to create
reciprocal rights between the parties.

Quiroga vs Parsons Hardware

G.R. No. L-11491
Subject: Sales
Doctrine: Contract of Agency to Sell vs Contract of Sale
Facts: On Jan 24, 1911, plaintiff and the respondent entered into a contract making the latter an
“agent” of the former. The contract stipulates that Don Andres Quiroga, here in petitioner, grants
exclusive rights to sell his beds in the Visayan region to J. Parsons. The contract only stipulates
that J.Parsons should pay Quiroga within 6 months upon the delivery of beds.
Quiroga files a case against Parsons for allegedly violating the following stipulations: not to sell
the beds at higher prices than those of the invoices; to have an open establishment in Iloilo; itself
to conduct the agency; to keep the beds on public exhibition, and to pay for the advertisement
expenses for the same; and to order the beds by the dozen and in no other manner. With the
exception of the obligation on the part of the defendant to order the beds by the dozen and in
no other manner, none of the obligations imputed to the defendant in the two causes of action
are expressly set forth in the contract. But the plaintiff alleged that the defendant was his agent
for the sale of his beds in Iloilo, and that said obligations are implied in a contract of commercial
agency. The whole question, therefore, reduced itself to a determination as to whether the
defendant, by reason of the contract hereinbefore transcribed, was a purchaser or an agent of
the plaintiff for the sale of his beds.
Issue: Whether the contract is a contract of agency or of sale.
Held: In order to classify a contract, due attention must be given to its essential clauses. In the
contract in question, what was essential, as constituting its cause and subject matter, is that the
plaintiff was to furnish the defendant with the beds which the latter might order, at the price
stipulated, and that the defendant was to pay the price in the manner stipulated. Payment was
to be made at the end of sixty days, or before, at the plaintiff’s request, or in cash, if the
defendant so preferred, and in these last two cases an additional discount was to be allowed for
prompt payment. These are precisely the essential features of a contract of purchase and sale.
There was the obligation on the part of the plaintiff to supply the beds, and, on the part of the
defendant, to pay their price. These features exclude the legal conception of an agency or order
to sell whereby the mandatory or agent received the thing to sell it, and does not pay its price,
but delivers to the principal the price he obtains from the sale of the thing to a third person, and
if he does not succeed in selling it, he returns it. By virtue of the contract between the plaintiff
and the defendant, the latter, on receiving the beds, was necessarily obliged to pay their price
within the term fixed, without any other consideration and regardless as to whether he had or
had not sold the beds.
In respect to the defendant’s obligation to order by the dozen, the only one expressly imposed
by the contract, the effect of its breach would only entitle the plaintiff to disregard the orders
which the defendant might place under other conditions; but if the plaintiff consents to fill them,
he waives his right and cannot complain for having acted thus at his own free will.
For the foregoing reasons, we are of opinion that the contract by and between the plaintiff and
the defendant was one of purchase and sale, and that the obligations the breach of which is
alleged as a cause of action are not imposed upon the defendant, either by agreement or by law.