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LA FUERZA, INC., vs. THE HON.

COURT OF APPEALS
FACTS:
The plaintiff (Associated Engineering, Co., Inc.) is a corporation engaged in the manufacture and
installation of flat belt conveyors. The defendant (La Fuerza, Inc.) is also a corporation engaged in the
manufacture of wines.
Sometime in the month of January, 1960, Antonio Co, the manager of the plaintiff corporation called the
office of the defendant and offered his services to manufacture and install a conveyor system which,
according to him, would increase production and efficiency of his business.
The president of the defendant corporation then expressed his conformity to the offer made in Exhibit A by
writing at the foot thereof under the word "confirmation" his signature. He caused, however, to be added
to this offer at the foot a note which reads: "All specifications shall be in strict accordance with the
approved plan made part of this agreement hereof."
A few days later, Antonio Co made the demand for the down payment of P5,000.00 which was readily
delivered by the defendant in the form of a check for the said amount. After that agreement, the plaintiff
started to prepare the premises for the installations of the conveyor system . It seems that the work was
completed during the month of May, 1960. Trial runs were made in the presence of the president and
general manager of the defendant corporation, Antonio Co, the technical manager of the plaintiff, and
some other people.
As a result of this trial or experimental runs, it was discovered, according to the defendant's general
manager, that the conveyor system did not function to their satisfaction as represented by the technical
manager of the plaintiff Antonio Co for the reason that, when operated several bottles collided with each
other, some jumping off the conveyor belt and were broken, causing considerable damage.
After the last trial run made in the month of July and defects indicated by the said president and general
manager of the defendant had not been remedied with the result that when the plaintiff billed the
defendant for the balance of the contract price, the latter refused to pay for the reason that according to
the defendant the conveyor system installed by the plaintiff did not serve the purpose for which the same
was manufactured and installed at such a heavy expense.
On March 22, 1961, the contractor commenced the present action to recover the sums of P8,250,
balance of the stipulated price of the aforementioned conveyors, and P2,000, as attorney's fees, in
addition to the costs.
La Fuerza maintains that plaintiff is deemed not to have delivered the conveyors, within the purview of Art.
1571, until it shall have complied with the conditions or requirements of the contract between them that
is to say, until the conveyors shall meet La Fuerza's "need of a conveyor system that would mechanically
transport empty bottles from the storage room to the bottle workers in the production room thus increasing
the production and efficiency" of its business-and La Fuerza had accepted said conveyors.
ISSUE: WON there was delivery. YES
RULING:
Upon the completion of the installation of the conveyors, in May, 1960, particularly after the last trial run,
in July 1960, La Fuerza was in a position to decide whether or not it was satisfied with said conveyors,
and, hence, to state whether the same were a accepted or rejected. The failure of La Fuerza to express
categorically whether they accepted or rejected the conveyors does not detract from the fact that the
same were actually in its possession and control; that, accordingly, the conveyors had already been
delivered by the plaintiff; and that, the period prescribed in said Art. 1571 had begun to run.
With respect to the second point raised by La Fuerza, Art. 1571 of the Civil Code provides:

Actions arising from the provisions of the preceding ten articles shall be barred after six months, from the
delivery of the thing sold.
xxAmong the "ten articles" referred to in this provision, are Articles 1566 and 1567, reading:
Art. 1566. The vendor is responsible to the vendee for any hidden faults or defects in the thing sold, even
though he was not aware thereof. ."This provision shall not apply if the contrary has been stipulated, and
the vendor was not aware of the hidden faults or defects in the thing sold.
Art. 1567. In the cases of articles 1561, 1562, 1564, 1565 and 1566, the vendee may elect between
withdrawing from the contract and demanding a proportionate reduction of the price, with damages in
either case.
xxx

xxx

xxx

Pursuant to these two (2) articles, if the thing sold has hidden faults or defects as the conveyors are
claimed to have the vendor in the case at bar, the plaintiff shall be responsible therefor and the
vendee or La Fuerza, in the present case "may elect between withdrawing from the contract and
demanding a proportional reduction of the price, with damages in either case."
In the exercise of this right of election, La Fuerza had chosen to withdraw from the contract, by praying
for its rescission; but the action therefor in the language of Art. 1571 "shall be barred after six
months, from the delivery of the thing sold." The period of four (4) years, provided in Art. 1389 of said
Code, for "the action to claim rescission," applies to contracts, in general , and must yields, in the instant
case, to said Art. 1571, which refers to sales in particular.
Indeed, in contracts of the latter type, especially when goods, merchandise, machinery or parts or
equipment thereof are involved, it is obviously wise to require the parties to define their position, in
relation thereto, within the shortest possible time. Public interest demands that the status of the relations
between the vendor and the vendee be not left in a condition of uncertainty for an unreasonable length of
time, which would be the case, if the lifetime of the vendee's right of rescission were four (4) years.

DAVID VS MISAMIS OCCIDENTAL


FACTS:
Petitioner Virgilio S. David (David) was the owner or proprietor of VSD Electric Sales, a company
engaged in the business of supplying electrical hardware including transformers for rural electric
cooperatives like respondent Misamis Occidental II Electric Cooperative, Inc. (MOELCI), with principal
office located in Ozamis City.
To solve its problem of power shortage affecting some areas within its coverage, MOELCI expressed its
intention to purchase a 10 MVA power transformer from David. For this reason, its General Manager,
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 still have to be imported.
The board resolution was thereafter attached to the proposal.
As stated in the proposal, the subject transformer, together with the basic accessories, was valued at
P5,200,000.00. It was also stipulated therein that 50% of the purchase price should be paid as
downpayment and the remaining balance to be paid upon delivery. Freight handling, insurance, customs
duties, and incidental expenses were for the account of the buyer.

The Board Resolution, on the other hand, stated that the purchase of the said transformer was to be
financed through a loan from the National Electrification Administration (NEA). As there was no immediate
action on the loan application, Engr. Rada returned to Manila in early December 1992 and requested
David to deliver the transformer to them even without the required downpayment. David granted the
request provided that MOELCI would pay interest at 24% per annum. Engr. Rada acquiesced to the
condition. On December 17, 1992, the goods were shipped to Ozamiz City via William Lines. In the Bill of
Lading, a sales invoice was included which stated the agreed interest rate of 24% per annum.
When no payment was made after several months, Medina was constrained to send a demand letter,
dated September 15, 1993, which MOELCI duly received. Engr. Rada replied in writing that the goods
were still in the warehouse of William Lines again reiterating that the loan had not been approved by NEA.
This prompted Medina to head back to Ozamiz City where he found out that the goods had already been
released to MOELCI evidenced by the shipping companys copy of the Bill of Lading which was stamped
"Released," and with the notation that the arrastre charges in the amount of P5,095.60 had been paid.
This was supported by a receipt of payment with the corresponding cargo delivery receipt issued by the
Integrated Port Services of Ozamiz, Inc.
On February 17, 1994, David filed a complaint for specific performance with damages with the RTC. In
response, MOECLI moved for its dismissal on the ground that there was lack of cause of action as there
was no contract of sale, to begin with, or in the alternative, the said contract was unenforceable under the
Statute of Frauds. MOELCI argued that the quotation letter could not be considered a binding contract
because there was nothing in the said document from which consent, on its part, to the terms and
conditions proposed by David could be inferred. David knew that MOELCIs assent could only be
obtained upon the issuance of a purchase order in favor of the bidder chosen by the Canvass and Awards
Committee.
ISSUE: Whether or not there was a perfected contract of sale.
Whether or not there was a delivery that consummated the contract.
RULING: The Court finds merit in the petition.
First issue: The elements of a contract of sale are, to wit: a) Consent or meeting of the minds, that is,
consent to transfer ownership in exchange for the price; b) Determinate subject matter; and c) Price
certain in money or its equivalent.9 It is the absence of the first element which distinguishes a contract of
sale from that of a contract to sell.
An examination of the alleged contract to sell, "Exhibit A," despite its unconventional form, would show
that said document, with all the stipulations therein and with the attendant circumstances surrounding it,
was actually a Contract of Sale. The rule is that it is not the title of the contract, but its express terms or
stipulations that determine the kind of contract entered into by the parties.12 First, there was meeting of
minds as to the transfer of ownership of the subject matter. The letter (Exhibit A), though appearing to be
a mere price quotation/proposal, was not what it seemed. It contained terms and conditions, so that, by
the fact that Jimenez, Chairman of the Committee on Management, and Engr. Rada, General Manager of
MOELCI, had signed their names under the word "CONFORME," they, in effect, agreed with the terms
and conditions with respect to the purchase of the subject 10 MVA Power Transformer. As correctly
argued by David, if their purpose was merely to acknowledge the receipt of the proposal, they would not
have signed their name under the word "CONFORME."
Besides, the uncontroverted attending circumstances bolster the fact that there was consent or meeting of
minds in the transfer of ownership. To begin with, a board resolution was issued authorizing the purchase
of the subject power transformer. Next, armed with the said resolution, top officials of MOELCI visited
Davids office in Quezon City three times to discuss the terms of the purchase. Then, when the loan that
MOELCI was relying upon to finance the purchase was not forthcoming, MOELCI, through Engr. Rada,
convinced David to do away with the 50% downpayment and deliver the unit so that it could already

address its acute power shortage predicament, to which David acceded when it made the delivery,
through the carrier William Lines, as evidenced by a bill of lading.
Second, the document specified a determinate subject matter which was one (1) Unit of 10 MVA Power
Transformer with corresponding KV Line Accessories. And third, the document stated categorically the
price certain in money which was P5,200,000.00 for one (1) unit of 10 MVA Power Transformer and
P2,169,500.00 for the KV Line Accessories.
In sum, since there was a meeting of 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. Thus, the said document cannot just be considered a contract to sell but rather a perfected
contract of sale.
Second issue: MOELCI, in denying that the power transformer was delivered to it, argued that the Bill of
Lading which David was relying upon was not conclusive. It argued that although the bill of lading was
stamped "Released," there was nothing in it that indicated that said power transformer was indeed
released to it or delivered to its possession. For this reason, it is its position that it is not liable to pay the
purchase price of the 10 MVA power transformer.
To begin with, among the terms and conditions of the proposal to which MOELCI agreed stated:
2. Delivery Ninety (90) working days upon receipt of your purchase order and downpayment.
C&F Manila, freight, handling, insurance, custom duties and incidental expenses shall be for the account
of MOELCI II. 13 (Emphasis supplied)
On this score, it is clear that MOELCI agreed that the power transformer would be delivered and that the
freight, handling, insurance, custom duties, and incidental expenses shall be shouldered by it.
On the basis of this express agreement, Article 1523 of the Civil Code becomes applicable.1wphi1 It
provides:
Where, in pursuance of a contract of sale, the seller is authorized or required to send the goods to the
buyer delivery of the goods to a carrier, whether named by the buyer or not, for the purpose of
transmission to the buyer is deemed to be a delivery of the goods to the buyer, except in the cases
provided for in Article 1503, first, second and third paragraphs, or unless a contrary intent appears.
(Emphasis supplied)
Thus, the delivery made by David to William Lines, Inc., as evidenced by the Bill of Lading, was deemed
to be a delivery to MOELCI. David was authorized to send the power transformer to the buyer pursuant to
their agreement. When David sent the item through the carrier, it amounted to a delivery to MOELCI.
Furthermore, in the case of Behn, Meyer & Co. (Ltd.) v. Yangco,14 it was pointed out that a specification
in a contract relative to the payment of freight can be taken to indicate the intention of the parties with
regard to the place of delivery. So that, if the buyer is to pay the freight, as in this case, it is reasonable to
suppose that the subject of the sale is transferred to the buyer at the point of shipment. In other words,
the title to the goods transfers to the buyer upon shipment or delivery to the carrier.
Of course, Article 1523 provides a mere presumption and in order to overcome said presumption,
MOELCI should have presented evidence to the contrary. The burden of proof was shifted to MOELCI,
who had to show that the rule under Article 1523 was not applicable. In this regard, however, MOELCI
failed.
There being delivery and release, said fact constitutes partial performance which takes the case out of the
protection of the Statute of Frauds. It is elementary that the partial execution of a contract of sale takes
the transaction out of the provisions of the Statute of Frauds so long as the essential requisites of consent

of the contracting parties, object and cause of the obligation concur and are clearly established to be
present.15

BEHN MEYER VS. YANGCO


FACTS:
A sale of 80 drums of caustic soda was agreed between Behn, Meyer & Co. and Teodoro Yanco. The
merchandise was shipped from New York to Manila.
However, the ship carrying the cargo was detained at Penang and the 71 of the 80 drums were removed.
Respondent Yangco also refused to accept the 9 remaining and also refused to accept the offer of Behn
Meyer to have the products substituted with other merchandise, which however were different from what
was ordered.
It must be noted that the contract provided for "c.i.f. Manila, pagadero against delivery of documents."
Yanco filed an action seeking for damages for alleged breach of contract.

ISSUE: WON Behn, Meyer & Co. should bear the burden of the loss of the merchandise? YES

RULING:
Rule as to delivery of goods by a vendor via a common carrier (If contract is silent delivery of seller to
common carrier transfer ownership to buyer)
Determination of the place of delivery always resolves itself into a question of act. If the contract be silent
as to the person or mode by which the goods are to be sent, delivery by the vendor to a common carrier,
in the usual and ordinary course of business, transfers the property to the vendee.
Payment of freight by the buyer = acquires ownership at the point of shipment
A specification in a contact relative to the payment of freight can be taken to indicate the intention of the
parties in regard to the place of delivery. If the buyer is to pay the freight, it is reasonable to suppose that
he does so because the goods become his at the point of shipment.
Payment of freight by the seller = title of property does not pass until the goods have reached their
destination
On the other hand, if the seller is to pay the freight, the inference is equally so strong that the duty of the
seller is to have the goods transported to their ultimate destination and that title to property does not pass
until the goods have reached their destination.
c.i.f. means Cost, Insurance and Freight = CFI is paid by the seller
The letters "c.i.f." found in British contracts stand for cost, insurance, and freight. They signify that the
price fixed covers not only the cost of the goods, but the expense of freight and insurance to be paid by
the seller.
F.O.B. stands for Free on Board = seller bear all expenses until goods are delivered
In this case, in addition to the letters "c.i.f.," has the word following, "Manila." In mercantile contracts of
American origin the letters "F.O.B." standing for the words "Free on Board," are frequently used. The

meaning is that the seller shall bear all expenses until the goods are delivered where they are to be
"F.O.B."
According as to whether the goods are to be delivered "F.O.B." at the point of shipment or at the point of
destination determines the time when property passes. However, both the terms "c.i.f." and "F.O.B."
merely make rules of presumption which yield to proof of contrary intention.
Delivery was to be made at Manila
Hence, we believe that the word Manila in conjunction with the letters "c.i.f." must mean that the contract
price, covering costs, insurance, and freight, signifies that delivery was to made at Manila. If petitioner
Behn Meyer has seriously thought that the place of delivery was New York and Not Manila, it would not
have gone to the trouble of making fruitless attempts to substitute goods for the merchandise named in
the contract, but would have permitted the entire loss of the shipment to fall upon the defendant.
Behn Meyer failed to prove that it performed its part in the contract
In this case, the place of delivery was Manila and plaintiff (Behn Meyer) has not legally excused default in
delivery of the specified merchandise at that place. In resume, we find that the plaintiff has not proved the
performance on its part of the conditions precedent in the contract.
For breach of warranty, the buyer (Yanco) may demand rescission of the contract of sale
The warranty the material promise of the seller to the buyer has not been complied with. The buyer
may therefore rescind the contract of sale because of a breach in substantial particulars going to the
essence of the contract. As contemplated by article 1451 of the Civil Code, the vendee can demand
fulfillment of the contract, and this being shown to be impossible, is relieved of his obligation. There thus
being sufficient ground for rescission, the defendant is not liable.

CORONEL vs CA

Facts: The petition involves a complaint for specific performance to compel petitioners to consummate
the sale of a parcel of land with its improvements located along Roosevelt Avenue in Quezon City entered
into by the parties sometime in January 1985 for the price of P1,240,000.00.
On January 19, 1985, defendants-appellants Romulo Coronel, et al. (Coronels) executed a document
entitled "Receipt of Down Payment" in favor of plaintiff Ramona Patricia Alcaraz (hereinafter referred to as
Ramona)
Clearly, the conditions appurtenant to the sale are the following: 1. Ramona will make a down payment
P50,000.00 upon execution of the document aforestated; 2. The Coronels will cause the transfer in their
names of the title of the property registered in the name of their deceased father upon receipt of the
P50,000.00 down payment; 3. Upon the transfer in their names of the subject property, the Coronels will
execute the deed of absolute sale in favor of Ramona and the latter will pay the former the whole balance
of P1,190,000.00.
On the same date (January 15, 1985), Concepcion D. Alcaraz (Concepcion), mother of Ramona, paid the
down payment of P50,000.00.
On February 6, 1985, the property originally registered in the name of the Coronels' father was
transferred in their names under TCT No. 327043.
On February 18, 1985, the Coronels sold the property covered by TCT No. 327043 to intervenor-appellant
Catalina B. Mabanag (Catalina) for P1,580,000.00 after the latter has paid P300,000.00. For this reason,

Coronels canceled and rescinded the contract with Ramona by depositing the down payment paid by
Concepcion in the bank in trust for Ramona Patricia Alcaraz .
On February 22, 1985, Concepcion, et al., filed a complaint for specific performance against the Coronels
and caused the annotation of a notice of lis pendens at the back of TCT No. 327403.
On April 2, 1985, Catalina caused the annotation of a notice of adverse claim covering the same property
with the Registry of Deeds of Quezon City (Exh. "F"; Exh. "6").
On April 25, 1985, the Coronels executed a Deed of Absolute Sale over the subject property in favor of
Catalina to which a new title over the subject property was issued in her name.
ISSUE: WON the "Receipt of Down Payment" embodied a perfected contract of sale, which perforce, they
seek to enforce by means of an action for specific performance or signified only a mere executory
contract to sell, subject to certain suspensive conditions/ WON double sale applies.
RULING: The parties (Coronel and Alcaraz) had agreed to a conditional contract of sale, consummation
of which is subject only to the successful transfer of the certificate of title from the name of petitioners'
father, Constancio P. Coronel, to their names. Thus, the sale of Coronel to Catalina gave rise to a case of
It is essential to distinguish between a contract to sell and a conditional contract of sale specially in cases
where the subject property is sold by the owner not to the party the seller contracted with, but to a third
person, as in the case at bench. In a contract to sell, there being no previous sale of the property, a third
person buying such property despite the fulfillment of the suspensive condition such as the full payment of
the purchase price, for instance, cannot be deemed a buyer in bad faith and the prospective buyer cannot
seek the relief of reconveyance of the property. There is no double sale in such case. Title to the property
will transfer to the buyer after registration because there is no defect in the owner-seller's title per se , but
the latter, of course, may be used for damages by the intending buyer.
In a conditional contract of sale, however, upon the fulfillment of the suspensive condition, the sale
becomes absolute and this will definitely affect the seller's title thereto. In fact, if there had been previous
delivery of the subject property, the seller's ownership or title to the property is automatically transferred to
the buyer such that, the seller will no longer have any title to transfer to any third person. Applying Article
1544 of the Civil Code, such second buyer of the property who may have had actual or constructive
knowledge of such defect in the seller's title, or at least was charged with the obligation to discover such
defect, cannot be a registrant in good faith. Such second buyer cannot defeat the first buyer's title. In case
a title is issued to the second buyer, the first buyer may seek reconveyance of the property subject of the
sale.
The agreement could not have been a contract to sell because the sellers herein made no express
reservation of ownership or title to the subject parcel of land . Furthermore, the circumstance which
prevented the parties from entering into an absolute contract of sale pertained to the sellers themselves
(the certificate of title was not in their names) and not the full payment of the purchase price. Under the
established facts and circumstances of the case, the Court may safely presume that, had the certificate of
title been in the names of petitioners-sellers at that time, there would have been no reason why an
absolute contract of sale could not have been executed and consummated right there and then.
Thus, the parties did not merely enter into a contract to sell where the sellers, after compliance by the
buyer with certain terms and conditions, promised to sell the property to the latter. What may be perceived
from the respective undertakings of the parties to the contract is that petitioners had already agreed to sell
the house and lot they inherited from their father, completely willing to transfer full ownership of the
subject house and lot to the buyer if the documents were then in order. It just happened, however, that the
transfer certificate of title was then still in the name of their father. It was more expedient to first effect the
change in the certificate of title so as to bear their names. That is why they undertook to cause the
issuance of a new transfer of the certificate of title in their names upon receipt of the down payment in the

amount of P50,000.00. As soon as the new certificate of title is issued in their names, petitioners were
committed to immediately execute the deed of absolute sale. Only then will the obligation of the buyer to
pay the remainder of the purchase price arise.
What is clearly established by the plain language of the subject document is that when the said "Receipt
of Down Payment" was prepared and signed by petitioners Romeo A. Coronel, et al., the parties had
agreed to a conditional contract of sale, consummation of which is subject only to the successful transfer
of the certificate of title from the name of petitioners' father, Constancio P. Coronel, to their names.
The Court significantly notes this suspensive condition was, in fact, fulfilled on February 6, 1985 (Exh.
"D"; Exh. "4"). Thus, on said date, the conditional contract of sale between petitioners and private
respondent Ramona P. Alcaraz became obligatory, the only act required for the consummation thereof
being the delivery of the property by means of the execution of the deed of absolute sale in a public
instrument, which petitioners unequivocally committed themselves to do as evidenced by the "Receipt of
Down Payment."
With the foregoing conclusions, the sale to the other petitioner, Catalina B. Mabanag, gave rise to a case
of double sale where Article 1544 of the Civil Code will apply, to wit:
Art. 1544. If the same thing should have been sold to different vendees, the ownership shall be
transferred to the person who may have first taken possession thereof in good faith, if it should be
movable property. Should if be immovable property, the ownership shall belong to the person acquiring it
who in good faith first recorded it in Registry of Property. Should there be no inscription, the ownership
shall pertain to the person who in good faith was first in the possession; and, in the absence thereof to the
person who presents the oldest title, provided there is good faith.
The above-cited provision on double sale presumes title or ownership to pass to the first buyer, the
exceptions being: (a) when the second buyer, in good faith, registers the sale ahead of the first buyer, and
(b) should there be no inscription by either of the two buyers, when the second buyer, in good faith,
acquires possession of the property ahead of the first buyer. Unless, the second buyer satisfies these
requirements, title or ownership will not transfer to him to the prejudice of the first buyer.
Petitioner point out that the notice of lis pendens in the case at bar was annoted on the title of the subject
property only on February 22, 1985, whereas, the second sale between petitioners Coronels and
petitioner Mabanag was supposedly perfected prior thereto or on February 18, 1985. The idea conveyed
is that at the time petitioner Mabanag, the second buyer, bought the property under a clean title, she was
unaware of any adverse claim or previous sale, for which reason she is buyer in good faith.
We are not persuaded by such argument.
In a case of double sale, what finds relevance and materiality is not whether or not the second buyer was
a buyer in good faith but whether or not said second buyer registers such second sale in good faith, that
is, without knowledge of any defect in the title of the property sold.
As clearly borne out by the evidence in this case, petitioner Mabanag could not have in good faith,
registered the sale entered into on February 18, 1985 because as early as February 22, 1985, a notice of
lis pendens had been annotated on the transfer certificate of title in the names of petitioners, whereas
petitioner Mabanag registered the said sale sometime in April, 1985. At the time of registration, therefore,
petitioner Mabanag knew that the same property had already been previously sold to private respondents,
or, at least, she was charged with knowledge that a previous buyer is claiming title to the same property.
Petitioner Mabanag cannot close her eyes to the defect in petitioners' title to the property at the time of
the registration of the property.

Thus, the sale of the subject parcel of land between petitioners and Ramona P. Alcaraz, perfected on
February 6, 1985, prior to that between petitioners and Catalina B. Mabanag on February 18, 1985, was
correctly upheld by both the courts below.