Oblicon Case #23 and 24

7/27/2019 Oblicon Case #23 and 24

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CEMBRANO vs. CITY OF BUTUAN

G.R. No. 163605 September 20, 2006

FACTS:

CVC Lumber Industries, Inc. (CVC) was a timber concession licensee while GilCembrano (Cembrano) was CVC’s Marketing Manager. CVC, through Cembrano, participatedin a bidding for the supply of piles and poles which were to be used for the construction of the

new City Hall of Butuan City (City). The contract was awarded to CVC, under which it was to

deliver to Butuan, 757 timber piles amounting to P1,124,145.00 within 60 days from receipt ofthe order. In 1991, the City of Butuan issued a Purchase Order for the timber piles to “CVC or

Gil Cembrano.” To partly finance the purchase of the merchandise, petitioner Cembrano, along

with Gener Cembrano, secured a loan from the DBP and executed a real estate mortgage over his

property. Within the 60-day period, CVC was able to make 2 deliveries of 174 pieces which theMayor of Butuan accepted and paid for. Months later, Cembrano received corresponding

payment evidenced by the disbursement vouchers issued by the City in favor of CVC. It appears

on the face of the vouchers that the payee is “CVC or

Gil Cembrano.”

When the 60-day period to make deliveries of the timber piles expired, CVC offered to

deliver 100 timber piles, but respondent refused. Thereafter, CVC, through Cembrano, requested

for an extension, until December to complete the delivery of timber piles but was again denied by the City Engineer. He then recommended that a new bidding be held on the unexecuted

portion of the contract. The re-bidding was held with the approval of former City Mayor but

without notice to CVC.

CVC and Cembrano filed a complaint for breach of contract and damages against City

and Cembrano alleged therein that he was the Marketing Supervisor and an agent of CVC; that

he secured a loan from the DBP and executed a real estate mortgage over his uncle Dollfuss Go’s(Go) property as collateral to partly finance the purchase of the timber poles/piles. Meanwhile,

during a meeting of the CVC Board of Directors, Monico Pag-Ong (Pag-Ong) was elected

President and Isidro Plaza (Plaza) as Corporate Secretary.

RTC ruled dismissed the case stating that the contract had already been terminated for

failure of CVC and Cembrano to complete deliveries on the original period. Since the request forextension by the plaintiff was denied, the Butuan City was no longer obliged to accept any

delivery as said acceptance can be considered a waiver or abandonment of the right to rescind.

CA reversed RTC’s decisions ordering Butuan City to pay its liability and affirming the report

made by the City Legal Officer, and CVC’s entitlement to damages.

In 2002, Cembrano executed a Deed of Assignment covering ½ of the monetary award of

the CA in favor of Go, his uncle. Months later, City signed a check with “CVC LUMBER

INDUSTRIES, INC/MONICO E. PAG-ONG” as payee. The check was received by Pag-Ongfor CVC. Thereafter, Atty. Go, acting as counsel for CVC and Cembrano, filed a filed a separate

case to enforce execution of payment but were told that the City had already remitted the

amount. The CA ruled that either respondent Cembrano or Pag-Ong could receive the awardof P926,845.00 for respondent CVC, reversing the RTC’s decision. Moreover, the City



of Butuan acted in good faith in delivering the check to the Pag-Ong, hence, the City was

released of its obligation.

Go and Cembrano filed a Motion for Reconsideration alleging that the transaction was

between Cembrano and the City of Butuan, Pag-Ong had no participation or involvement therein

whatsoever. Cembrano maintained that it was he who funded the purchase and delivery of thetimber poles and piles to the City of Butuan, since he secured a loan from the DBP, the amountCVC used to finance the purchase of timber poles and piles.

For its part, the respondent City of Butuan avers that it complied with the decision whenit remitted the full amount of P926,845.00 to respondent CVC. It further maintains that it acted

on its honest belief that respondent Pag-Ong, as CVC president, was authorized to receive

payment in behalf of said corporation. For their part, respondents Pag-Ong and Plaza aver that as

president of CVC and chief executive officer, Pag-ong was authorized to receive the amountof P926,845.00 from respondent Butuan City.

ISSUES: Whether or not the remittance of the P926,845.00 made by City to CVC, through Pag-

Ong, released it from its obligation

HELD:

The SC held that the respondent City, as judgment debtor, is burdened to prove that its

obligation under the CA decision has been discharged by payment, which under Article 1240 of

the Civil Code, is a mode of extinguishing an obligation. Article 1240 of the Civil Code providesthat payment shall be made to the person in whose favor the obligation has been constituted, or

his successor-in-interest, or any person authorized to receive it.

In general, a payment in order to be effective to discharge an obligation, must be made tothe proper person. Thus, payment must be made to the obligee himself or to an agent havingauthority, express or implied, to receive the particular payment. When there is a concurrence of

several creditors or of several debtors or of several creditors and debtors in one and the same

obligation, it is presumed that the obligation is joint and not solidary. Hence, City of Butuan is

directed to pay the plaintiffs the total sum of P926,845.00 plus legal interest of 6% since petitioner Cembrano did not receive any centavo out of the P926,845.00 remitted to respondent

CVC, the obligation to remit one-half of the amount to petitioner Cembrano was not

extinguished.

Since respondent CVC was entitled to only P490,605.955 but received P926,845.00,

there was an overpayment of P490,605.955 made by respondent City. Thus, respondent CVC isobliged to return the amount of P490,605.955 to respondent City. Since petitioner Cembrano hadalready assigned P490,609.955 to petitioner Go, the latter likewise had the right to

receive the P490,609.955 from DBP. Petitioner Cembrano should thus be made to return the

amount of P490,609.955 he received from the DBP to respondent City.



EDRADA vs. RAMOS

G.R. No. 154413

FACTS:

Respondent spouses Ramos are the owners of two (2) fishing vessels, the “Lady Lalaine”

and the “Lady Theresa.” On 1 April 1996, respondents and petitioners executed an untitledhandwritten document which acknowledged that: (1.) the stated fishing vessels respondent arenow in the possession and received in good running and serviceable order by petitioner Edrada

and (2.) the agreed price for the vessel is P900,000.00. (3.) documents pertaining to the sale and

agreement of payments between me and the owner of the vessel to followUpon the signing of the document, petitioners delivered to respondents four (4) postdated

checks in various amounts for a total of P140,000.00. The first 3 checks were honored while the

fourth check for P100,000.00 was dishonored because of a “stop payment” order.

On 3 June 1996, respondents filed an action against petitioners for specific performancewith 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. Respondents

alleged that petitioners contracted to buy the two fishing vessels for the agreed purchase pricewhich 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.

However, 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; 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.The RTC rendered a decision which rendered in favor of the herein respondents Ramos

spouses, while herein petitioners were ordered to pay the amount P860,000.00

The petitioners appealed to the CA which was denied, hence raised the issue to theSC. 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, whetherreplacement 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. It is also alleged in the petition that thetrue agreement as between the parties was that of a loan.

ISSUE: Whether or not the agreement between petitioners and respondents was a valid contract

of sale

HELD:

The Supreme Court held that both the RTC and the CA gravely misapprehended the

nature of the said document, and a re-evaluation of the document is in order. Both contending parties offer vastly differing accounts as to the true nature of the agreement. The Court disagreed

with the RTC and the CA 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 theownership of and to deliver a determinate thing, and the other to pay therefore a price certain in



money or its equivalent. It must evince the consent on the part of the seller to transfer and

deliver and on the part of the buyer to pay. An examination of the document reveals that there is

no perfected contract of sale. The agreement may confirm the receipt by respondents of the twovessels 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 thetransfer of ownership and contain the terms of payment of the purchase price, or the period whensuch would become due and demandable, have yet to be executed. But no such document was

executed and no such terms were stipulated upon.

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 absenceof 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 dueand demandable.

During cross-examination, Ramos claimed that the supposed balance shall be paid on 30June 1996. But how do respondents explain why the Complaint was filed on 3 June 1996? The

filing of the Complaint was evidently premature, as no cause of action had accrued yet.

A contract to sell is defined as a bilateral contract whereby the prospective seller, whileexpressly 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.

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 merelyacknowledges that a purchase price had been agreed on by the parties. 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. Considering that thedocuments 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.

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.

Oblicon Case #23 and 24

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