Schubach & Sons v Court of Appeals,G.R. No.

105387, November 11, 1993

An acceptance may be express or implied.

FACTS:
 In 1981, defendant established a contract with plaintiff through the Philippine Consulate General in
Germany because he wanted to purchase MAN bus spare parts from Germany.
 Plaintiff communicated with its trading partner, Johannes Schuback and Sohne Handelsgesellschaft m.b.n.
& Co.(Schuback Hamburg) regarding the spare parts defendant wanted to order.
 Defendant submitted to plaintiff a list of the parts he wanted to purchase with specific part numbers and
description. Plaintiff referred the list to Schuback Hamburg for quotations.
 Upon receipt of the quotations, plaintiff sent to defendant a letter enclosing its offer on the items listed by
defendant. Plaintiff then submitted its formal offer containing the item number, quantity, part number,
etc. and total to defendant.
 On December 24,1981, defendant informed plaintiff of his desire to avail of the prices of the parts at that
time and enclosed its Purchase Order No. 0101 dated 14 December 1981.
 Said Purchase Order contained the item number, part number and description.
 Five (5) days later, defendant personally, submitted the quantities he wanted to Mr. Dieter Reichert,
General Manager of plaintiff, at the latter’s residence. The quantities were written in ink by defendant in
the same Purchase Order previously submitted.
 At the bottom of said Purchase Order, defendant wrote in ink above his signature: ‘NOTE: Above P.O. will
include a 3% discount. The above will serve as our initial P.O.’
 Plaintiff immediately ordered the items needed by defendant from Schuback Hamburg to enable
defendant to avail of the old prices.
 Schuback Hamburg in turn ordered (Order No. 12204) the items from NDK, a supplier of MAN spare parts
in West Germany.
 On January 4, 1982, Schuback Hamburg sent plaintiff a proforma invoice to be used by defendant in
applying for a letter of credit.
 Said invoice required that the letter of credit be opened in favor of Schuback Hamburg. Defendant
acknowledged receipt of the invoice.
 An order confirmation was later sent by Schuback Hamburg to plaintiff which was forwarded to and
received by defendant on February 3, 1981. Thirteen (13) days later, plaintiff reminded defendant to open
the letter of credit to avoid delay in shipment and payment of interest.
 Defendant replied, mentioning, among others, the difficulty he was encountering in securing the required
dollar allocations and applying for the letter of credit.
 In the meantime, Schuback Hamburg received invoices from NDK for partial deliveries on Order No.
12204. Schuback Hamburg paid NDK. The latter confirmed receipt of payments made on February16,
1984.
 On October 18, 1982, plaintiff again reminded defendant of his order and advised that the case may be
endorsed to its lawyers.
 Defendant replied that he did not make any valid Purchase Order and that there was no definite contract
between him and plaintiff.

ISSUE: Whether or not a contract of sale has been perfected between the parties.

RULING: YES.

 It bears emphasizing that a “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 x x x.”
 Article 1319 of the Civil Code states: “Consent is manifested by the meeting of the offer and 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 counteroffer.”
 APPLICATION:
 The facts presented to us indicate that consent on both sides has been manifested.
 The offer by petitioner was manifested on December 17,1981 when petitioner submitted its proposal
containing the item number, quantity, part number, description, the unit price and total to private
respondent.
 On December 24, 1981, private respondent informed petitioner of his desire to avail of the prices of the
parts at the time and simultaneously enclosed its Purchase Order No. 0101 dated December 14,1981.
 At this stage, a meeting of the minds between vendor and vendee has occurred, the object of the
contract being the spare parts and the consideration, the price stated in petitioner’s offer dated
December 17, 1981 and accepted by the respondent on December 24, 1981.
 Although said purchase order did not contain the quantity he wanted to order, private respondent made
good his promise to communicate the same on December 19,1981.
 At this juncture, it should be pointed out that private respondent was already in the process of executing
the agreement previously reached between the parties.
 Below Exh. G-3, marked as Exhibit G-3-A, there appears this statement made by private respondent:
“Note: above P.O. will include a 3% discount. The above will serve as ourinitial P.O.”
 This notation on the purchase order was another indication of acceptance on the part of the vendee, for
by requesting a 3% discount, he implicitly accepted the price as first offered by the vendor.
 The immediate acceptance by the vendee of the offer was impelled by the fact that on January 1, 1982,
prices would go up, as in fact, the petitioner informed him that there would be a 7% increase effective
January 1982.
 On the other hand, concurrence by the vendor with the said discount requested by the vendee was
manifested when petitioner immediately ordered the items needed by private respondent from Schuback
Hamburg which in turn ordered from NDK, a supplier of MAN spare parts in West Germany.
 When petitioner forwarded its purchase order to NDK, the price was still pegged at the old one.
 Thus, the pronouncement of the Court of Appeals that there was no confirmed price on or about the last
week of December 1981 and/or the first week of January 1982 was erroneous.
 While we agree with the trial court’s conclusion that indeed a perfection of the contract was reached
between the parties, we differ as to the exact date when it occurred, for perfection took place, not on
December 29, 1981, but rather on December24, 1981.
 Although the quantity to be ordered was made determinate only on December 29, 1981, quantity is
immaterial in the perfection of a sales contract.
 What is of importance is the meeting of the minds as to the object and cause, which from the facts
disclosed, show that as of December 24, 1981, these essential elements had already concurred.

NOTES:

Opening of a letter of credit is not to be deemed a suspensive condition.

 On the part of the buyer, the situation reveals that private respondent failed to open an irrevocable letter
of credit without recourse in favor of Johannes Schuback of Hamburg, Germany.
 This omission, however, does not prevent the perfection of the contract between the parties, for the
opening of a letter of credit is not to be deemed a suspensive condition. The facts herein do not show that
petitioner reserved title to the goods until private respondent had opened a letter of credit.
 Petitioner, in the course of its dealings with private respondent, did not incorporate any provision
declaring their contract of sale without effect until after the fulfillment of the act of opening a letter of
credit.
 The opening of a letter of credit in favor of a vendor is only a mode of payment. It is not among the
essential requirements of a contract of sale enumerated in Article1305 and 1474 of the Civil Code, the
absence of any of which will prevent the perfection of the contract from taking place.
Coquia v Fieldman Insurance, G.R. No. L- 23276, November 29, 1968

Stipulation pour autrui is a stipulation clearly conferring a benefit to a third person beneficiary provided neither
contracting parties represent the third party.

FACTS:
 On December 1, 1961, appellant Fieldmen's Insurance Company, Inc.—hereinafter referred to as the
Company—issued, in favor of the Manila Yellow Taxicab Co., Inc.—hereinafter referred to as the Insured
—a common carrier accident insurance policy, covering the period from December 1, 1961 to December
1, 1962.
 It was stipulated in said policy that:

"The Company will, subject to the Limits of Liability and under the Terms of this Policy,
indemnify the Insured in the event of accident caused by or arising out of the use of
Motor Vehicle against all sums which the Insured will become legally liable to pay in
respect of: Death or bodily injury to any fare paying passenger including the Driver.
Conductor and/or Inspector who is riding in the Motor Vehicle insured at the time of
accident o rinjury."

 While the policy was in force, a taxicab of the Insured, driven by Carlito Coquia, met a vehicular accident,
inconsequence of which Carlito died.
 The Insured filed therefor a claim for P5,000.00 to which the Company replied with an offer to pay
P2,000.00, by way of compromise.
 The Insured rejected the same and made a counter-offer for P4,000.00, but the Company did not accept
it.
 Hence, on September 18, 1962, the Insured and Carlito's parents, namely, Melecio Coquia and Maria
Espanueva—hereinafter referred to as the Coquias—filed a complaint against the Company to collect the
proceeds of the aforementioned policy.
 In its answer, the Company admitted the existence thereof, but pleaded lack of cause of action on the part
of the plaintiffs.

ISSUE: WON Coquias do not have a cause of action for having no contractual relation with the Company.

RULING: NO. Art 1311 of the NCC is applicable.

 It should be noted that, although, in general, only parties to a contract may bring an action based thereon,
this rule is subject to exceptions, one of which is found in the second paragraph of Article 1311 of the Civil
Code of the Philippines, reading:

"If a contract should contain some stipulation in favor of a third person, he may demand
its fulfillment provided he communicated his acceptance to the obligor before its
revocation. A mere incidental benefit or interest of a person is not sufficient. The
contracting parties must have clearly and deliberately conferred a favor upon a third
person."

 This is but the restatement of a well-known principle concerning contracts pour autrui, the enforcement
of which may be demanded by a third party for whose benefit it was made, although not a party to the
contract, before the stipulation in his favor has been revoked by the contracting parties.
 In this connection, said policy provides, inter alia:
"Section I—Liability to Passengers. 1. The Company will, subject to the Limits of Liability and under the
Terms of this Policy, indemnify the Insured in the event of accident caused by or arising out of the use of
Motor Vehicle against all sums which the Insured will become legally liable to pay in respect of: Death or
 bodily injury to any fare-paying passenger including the Driver xx x who is riding in the Motor Vehicle insured
at the time of accident or injury.
"Section II—Liability to the Public
xxxxxxxxx
"3. In terms of and subject to the limitations of and for the purposes of this Section, the Company will
indemnify any authorized Driver who is driving the Motor Vehicle x x x."
"Conditions
xxxxxxxxx
"7. In the event of death of any person entitled to indemnity under this Policy, the Company will, in
respect of the liability incurred by such person, indemnify his personal representatives in terms of and
subject to the limitations of this Policy, provided, that such representatives shall, as though they were the
Insured, observe, fulfill and be subject to the Terms of this Policy insofar as. they can apply.
"8. The Company may, at its option, make indemnity payable directly to the claimants or heirs of
claimants, with or without securing the consent of or prior notification to the Insured, it being the true
intention of this Policy to protect, to the extent herein specified and subject always to the Terms of this
Policy, the liabilities of the Insured towards the passengers of the Motor Vehicle and the Public.

APPLICATION:

 Pursuant to these stipulations, the Company "will indemnify any authorized Driver who is driving the
Motor Vehicle" of the Insured and, in the event of death of said driver, the Company shall, likewise,
"indemnify his personal representatives."
 In fact, the Company "may, at its option, make indemnity payable directly to the claimants or heirs
of claimants x x x it being the true intention of this Policy to protect x x x the liabilities of the Insured
towards the passengers of the Motor Vehicle and the Public"—in other words, third parties.
 Thus, the policy under consideration is typical of contracts pour autriu, this character being made
more manifest by the fact that the deceased driver paid fifty percent (50%) of the corresponding
premiums, which were deducted from his weekly commissions.
 Under these conditions, it is clear that the Coquias—who, admittedly, are the sole heirs of the
deceased—have a direct cause of action against the Company, and, since they could have
maintained this action by themselves, without the assistance of the Insured, it goes without saying
that they could and did properly join the latter in filing the complaint herein.

Balete v. Lim, G.R. No. 152168, December 10, 2004

A relative simulation is when the parties conceal their real agreement; it is binding if it does not prejudice a third
person and is not intended for any purpose contrary to law.

FACTS:
 The spouses Aurelio and Esperanza Balite were the owners of a parcel of land with an area of 17,551
square meters & covered by OCT No. 10824.
 When Aurelio died intestate [in 1985, his wife], Esperanza Balite, and their children, petitioners Antonio,
Flor, Visitacion, Pedro, Pablo, Gaspar, Cristeta (Tita) and Aurelio, inherited the property and became co-
owners thereof, with Esperanza x x x inheriting an undivided [share] of [9,751] square meters.
 In the meantime, Esperanza became ill and was in dire need of money for her hospital expenses.
 She, through her daughter, Cristeta, offered to sell to Rodrigo Lim, her undivided share for the price of
P1,000,000.00.
 Esperanza and Rodrigo agreed that, under the “ Deed of Absolute Sale,” to be executed by Esperanza x x x
over the property, it will be made to appear that the purchase price of the property would be
P150,000.00, although the actual price agreed upon by them for the property was P1,000,000.00.
  On April 16, 1996, Esperanza executed a “Deed of Absolute Sale” in favor of Rodrigo N. Lim over a portion
of the property, covered by [OCT] No. 10824, with an area of 10,000 square meters, for the price of
P150,000.00.
 They also executed, on the same day, a “Joint Affidavit” under which they declared that the real price of
the property wasP1,000,000.00, payable to Esperanza by installments.
 Only Esperanza and two of her children, namely, Antonio and Cristeta, knew about the said transaction.
 Geodetic Engineer Bonifacio G. Tasic conducted a subdivision survey of the property and prepared a
“Sketch Plan” showing a portion of the property, identified as Lot 243 with an area of10,000 square
meters, under the name Rodrigo N. Lim.
 The “Sketch Plan” was signed by Rodrigo and Esperanza.
 Thereafter, Rodrigo took actual possession of the property and introduced improvements thereon. He
remitted to Esperanza and Cristeta sums of money in partial payments of the property for which he signed
“Receipts.”
 Gaspar, Visitacion, Flor, Pedro and Aurelio, Jr. learned of the sale, and on August 21, 1996, they wrote a
letter to the Register of Deeds [RD], saying that they were not informed of the sale of a portion of the said
property by their mother nor did they give their consent thereto. They requested the [RD] to hold in
abeyance any process or approval of any application for registration of title of ownership in the name of
the buyer of said lot.
 On October 31, 1996, Esperanza died intestate and was survived by her aforenamed children.
 Meanwhile, Rodrigo caused to be published, in the Samar Reporter, on November 14, 21 and 28, 1996,
the aforesaid “Deed of Absolute Sale.”
 The [RD] refused to issue a title over the property to and under the name of Rodrigo unless and until the
owner’s duplicate of OCT No. 10824 was presented to [it].
 Rodrigo filed a “Petition for Mandamus” against the RD with the Regional Trial Court
 The court issued an Order to the RD to cancel OCT No. 10824 and to issue a certificate of title over Lot 243
under the name of Rodrigo.
 Petitioners filed a complaint against Rodrigo with the Regional Trial Court for Annulment of Sale, Quieting
of Title, Injunction and Damages x x x, [the origin of the instant case.]
 In the meantime, the RD cancelled, on July 10, 1997, OCT No.10824 and issued Transfer Certificate of Title
[TCT] No. 6683 to and under the name of Rodrigo over Lot 243. The “Notice of Lis Pendens” x x x was
carried over in TCT No. 6683.
 Subsequently, Rodrigo secured a loan from the Rizal Commercial Banking Corporation in the amount of
P2,000,000.00 and executed a “Real Estate Mortgage” over the [subject] property as security therefor.
 On November 26, 1997, [petitioners] filed their “Amended Complaint.”
 Trial court dismissed the Complaint and ordered the cancellation of the lis pendens annotated at the back
of TCT No. 6683. It held that, pursuant to Article 493 of the Civil Code, a co-owner has the right to sell
his/her undivided share.
 The CA held that the sale was valid and binding insofar as Esperanza Balite’s undivided share of the
property was concerned. It affirmed the trial court’s ruling that the lack of consent of the co-owners did
not nullify the sale.
 The CA likewise rejected petitioners’ claim that the sale was void allegedly because the actual purchase
price of the property was not stated in the Deed of Absolute Sale. It found that the true and correct
consideration for the sale was P1,000,000 as declared by Esperanza and respondent in their Joint
Affidavit. Applying Article 1353 of the Civil Code, it held that the falsity of the price or consideration stated
in the Deed did not render it void

ISSUE: Was there a simulated contract? If so, was it an absolute simulated contract or a relative simulated
contract?

RULING: Yes. A relative simulated contract.

  We have before us an example of a simulated contract.
 Article 1345 of the Civil Code provides that the simulation of a contract may either be absolute or relative.
 In absolute simulation, there is a colorable contract but without any substance, because the parties have
no intention to be bound by it.
 An absolutely simulated contract is void, and the parties may recover from each other what they may
have given under the “contract.”
 On the other hand, if the parties state a false cause in the contract to conceal their real agreement, such
a contract is relatively simulated. Here, the parties’ real agreement binds them.

APPLICATION:
 In the present case, the parties intended to be bound by the Contract, even if it did not reflect the actual
purchase price of the property.
 That the parties intended the agreement to produce legal effect is revealed by the letter of Esperanza
Balite to respondent dated October 23, 1996 and petitioners’ admission that there was a partial payment
of P320,000 made on the basis of the Deed of Absolute Sale.
 There was an intention to transfer the ownership of over 10,000 square meters of the property.
 Clear from the letter is the fact that the objections of her children prompted Esperanza to unilaterally
withdraw from the transaction.
 Since the Deed of Absolute Sale was merely relatively simulated, it remains valid and enforceable.
 All the essential requisites prescribed by law for the validity and perfection of contracts are present.
 However, the parties shall be bound by their real agreement for a consideration of P1,000,000 as
reflected in their Joint Affidavit.
 The juridical nature of the Contract remained the same.
 What was concealed was merely the actual price.
 Where the essential requisites are present and the simulation refers only to the content or terms of the
contract, the agreement is absolutely binding and enforceable between the parties and their successors
in interest.
 Petitioners cannot be permitted to unmake the Contract voluntarily entered into by their predecessor,
even if the stated consideration was included therein for an unlawful purpose. “The binding force of a
contract must be recognized as far as it is legally possible to do so.”
 Being onerous, the Contract had for its cause or consideration the price of P1,000,000. Both this
consideration as well as the subject matter of the contract—Esperanza’s share in the property covered by
OCT No.10824—are lawful.
 The motives of the contracting parties for lowering the price of the sale—in the present case, the
reduction of capital gains tax liability— should not be confused with the consideration. Although illegal,
the motives neither determine nor take the place of the consideration.

NOTES:

Deed of Sale not an Equitable Mortgage

 For Articles 1602 and 1604 to apply, two requisites must concur: one, the parties entered into a contract
denominated as a contract of sale; and, two, their intention was to secure an existing debt by way of
mortgage.
 Indeed, the existence of any of the circumstances enumerated in Article 1602, not a concurrence or an
overwhelming number thereof, suffices to give rise to the presumption that a contract purporting to be an
absolute sale is actually an equitable mortgage.
 In the present case, however, the Contract does not merely purport to be an absolute sale.
 The records and the documentary evidence introduced by the parties indubitably show that the Contract
is, indeed, one of absolute sale.
 There is no clear and convincing evidence that the parties agreed upon a mortgage of the subject
property.
  Furthermore, the voluntary, written and unconditional acceptance of contractual commitments negates
the theory of equitable mortgage.
 There is nothing doubtful about the terms of, or the circumstances surrounding, the Deed of Sale that
would call for the application of Article 1602.
 The Joint Affidavit indisputably confirmed that the transaction between the parties was a sale.
 We find no basis to conclude that the purchase price of the property was grossly inadequate.
 Petitioners did not present any witness to testify as to the market values of real estate in the subject’s
locale.
 They made their claim on the basis alone of the P2,000,000 loan that respondent had been able to obtain
from the Rizal Commercial Banking Corporation. This move did not sufficiently show the alleged
inadequacy of the purchase price.
 A mortgage is a mere security for a loan. There was no showing that the property was the only security
relied upon by the bank; orthat the borrowers had no credit worthiness, other than the property offered
as collateral.

Co-Ownership

 The appellate court was correct in affirming the validity of the sale of the property insofar as the pro
indiviso share of Esperanza Balite was concerned.
 The co-owner, however, has no right to sell or alienate a specific or determinate part of the thing owned
in common, because such right over the thing is represented by an aliquot or ideal portion without any
physical division.
 Nonetheless, the mere fact that the deed purports to transfer a concrete portion does not per se render
the sale void.
 The sale is valid, but only with respect to the aliquot share of the selling co-owner. Furthermore, the sale
is subject to the results of the partition upon the termination of the co-ownership.
 Hence, the transaction between Esperanza Balite and respondent could be legally recognized only in
respect to the former’s pro indiviso share in the co-ownership.
 As a matter of fact, the Deed of Absolute Sale executed between the parties expressly referred to the
10,000-square-meterportion of the land sold to respondent as the share of Esperanza in the conjugal
property.
 Her clear intention was to sell merely her ideal or undivided share in it.
 No valid objection can be made against that intent. Clearly then, the sale can be given effect to the extent
of 9,751square meters, her ideal share in the property as found by both the trial and the appellate courts.