swedish match v ca digest

3/11/2015 SwedishMatchvsCA:128120:October20,2004:J.Tinga:SecondDivision:Decision

http://sc.judiciary.gov.ph/jurisprudence/2004/oct2004/128120.htm 1/11

SECONDDIVISION

[G.R.No.128120.October20,2004]

SWEDISH MATCH, AB, JUAN ENRIQUEZ, RENE DIZON, FRANCISCORAPACON, FIEL SANTOS, BETH FLORES, LAMBRTODE LAEVA,GLORIAREYES,RODRIGOORTIZ, NICANORESCALANTE, PETERHODGSON, SAMUEL PARTOSA, HERMINDA ASUNCION, JUANITOHERRERA, JACOBUS NICOLAAS, JOSEPH PEKELHARING (nowRepresenting himself without court sanction as JOOSTPEKELHARING),MASSIMOROSSIandEDENRIQUEZ,petitioners,vs.COURT OF APPEALS, ALS MANAGEMENT & DEVELOPMENTCORPORATIONandANTONIOK.LITONJUA,respondents.

DECISIONTINGA,J.:

Petitioners seek a reversal of the twin Orders[1] of the Court of Appeals dated 15November 1996[2] and 31 January 1997,[3] in CAG.R. CV No. 35886, entitled ALSManagement et al., v. SwedishMatch, AB et al. The appellate court overturned the trialcourts Order[4] dismissing the respondents complaint for specific performance andremandedthecasetothetrialcourtforfurtherproceedings.

SwedishMatch, AB (hereinafter SMAB) is a corporation organized under the laws ofSweden not doing business in the Philippines. SMAB, however, had three subsidiarycorporationsinthePhilippines,allorganizedunderPhilippinelaws,towit:PhimcoIndustries,Inc.(Phimco),ProvidentTreeFarms,Inc.,andOTT/Louie(Phils.),Inc.

Sometimein1988,STORA,thethenparentcompanyofSMAB,decidedtosellSMABofSwedenandthelattersworldwidematch,lighterandshavingproductsoperationtoEemlandManagement Services, now known as Swedish Match NV of Netherlands, (SMNV), acorporation organized and existing under the laws of Netherlands. STORA, however,retainedforitselfthepackagingbusiness.

SMNVinitiatedstepstoselltheworldwidematchandlighterbusinesseswhileretainingforitselftheshavingbusiness.SMNVadoptedatwoprongedstrategy,thefirstbeingtosellitsshares inPhimco Industries, Inc.andamatchcompany inBrazil,whichproposedsalewouldstaveoffdefaults in the loancovenantsofSMNVwith itssyndicateof lenders.TheothermovewastosellatonceorinonepackagealltheSMNVcompaniesworldwidewhichwereengagedinmatchandlighteroperationsthruaglobaldeal(hereinafter,globaldeal).

EdEnriquez(Enriquez),VicePresidentofSwedishMatchSociedadAnonimas(SMSA)themanagementcompanyoftheSwedishMatchgroupwascommissionedandgrantedfullpowerstonegotiatebySMNV,withtheresultingtransaction,however,madesubjecttofinal approval by the board. Enriquezwas held under strict instructions that the sale ofPhimco shares should be executed on or before 30 June 1990, in view of the tight loancovenantsofSMNV.EnriquezcametothePhilippinesinNovember1989andinformedthePhilippinefinancialandbusinesscirclesthatthePhimcoshareswereforsale.



Several interestedparties tenderedoffers toacquire thePhimcoshares,amongwhomwere the AFP Retirement and Separation Benefits System, herein respondent ALSManagement &Development Corporation and respondent Antonio Litonjua (Litonjua), thepresidentandgeneralmanagerofALS.

Inhisletterdated3November1989,LitonjuasubmittedtoSMABafirmoffertobuyallofthe lattersshares inPhimcoandallofPhimcosshares inProvidentTreeFarm, Inc.andOTT/Louie(Phils.),Inc.forthesumofP750,000,000.00.[5]

ThroughitsChiefExecutiveOfficer,MassimoRossi(Rossi),SMAB,initsletterdated1December 1989, thanked respondents for their interest in the Phimco shares. Rossiinformedrespondents that theirpriceofferwasbelowtheirexpectationsbuturgedthemtoundertake a comprehensive review and analysis of the value and profit potentials of thePhimcoshares,withtheassurancethatrespondentswouldenjoyacertainpriorityalthoughseveralpartieshadindicatedtheirinteresttobuytheshares.[6]

Thereafter, an exchange of correspondence ensued between petitioners andrespondentsregardingtheprojectedsaleofthePhimcoshares.Inhisletterdated21May1990,Litonjuaofferedtobuythedisputedshares,excludingthelighterdivisionforUS$30.6million,whichperanotherletterofthesamedatewasincreasedtoUS$36million.[7]Litonjuastressed that the bid amount could be adjusted subject to availability of additionalinformationandauditverificationofthecompanyfinances.

RespondingtoLitonjuasoffer,Rossisenthis letterdated11June1990, informingtheformer that ALS should undertake a due diligence process or preacquisition audit andreview of the draft contract for the Match and Forestry activities of Phimco at ALSconvenience. However, Rossi made it clear that at the completion of the due diligenceprocess,ALSshouldsubmititsfinalofferinUSdollartermsnotlaterthan30June1990,forthesharesofSMABcorresponding toninetysixpercent (96%)of theMatchandForestryactivitiesofPhimco.Rossiaddedthatincasetheglobaldealpresentlyundernegotiationfor the Swedish Match Lights Group would materialize, SMAB would reimburse up toUS$20,000.00ofALScostsrelatedtotheduediligenceprocess.[8]

Litonjua in a letter dated 18 June 1990, expressed disappointment at the apparentchangeinSMABsapproachtothebiddingprocess.Hepointedoutthatintheir4June1990meeting, he was advised that one final bidder would be selected from among the fourcontendinggroupsasofthatdateandthatthedecisionwouldbemadeby6June1990.Hecriticized SMABs decision to accept a new bidder who was not among those whoparticipatedinthe25May1990bidding.HeinformedRossithatitmaynotbepossibleforthemtosubmittheirfinalbidon30June1990,citingtheadvicetohimoftheauditingfirmthat thefinancialstatementswouldnotbecompleteduntil theendofJuly. Litonjuaaddedthathewouldindicateintheirfinaloffermorespecificdetailsofthepaymentmechanicsandconsiderthepossibilityofsigningaconditionalsaleatthattime.[9]

Two days prior to the deadline for submission of the final bid, Litonjua again advisedRossithattheywouldbeunabletosubmitthefinalofferby30June1990,consideringthatthe acquisition audit of Phimco and the review of the draft agreements had not yet beencompleted.Hesaid,however,thattheywouldbeabletofinalizetheirbidon17July1990andthat incasetheirbidwouldturnoutbetterthananyotherproponent, theywouldremitpaymentwithinten(10)daysfromtheexecutionofthecontracts.[10]

Enriquez sent notice toLitonjua that theywouldbe constrained toentertainbids fromother parties in view of Litonjuas failure to make a firm commitment for the shares ofSwedishMatchinPhimcoby30June1990.[11]



Inaletterdated3July1990,RossiinformedLitonjuathaton2July1990,theysignedaconditionalcontractwithalocalgroupforthedisposalofPhimco.HetoldLitonjuathathisbid would no longer be considered unless the local group would fail to consummate thetransactiononorbefore15September1990.[12]

Apparently irked by SMABs decision to junk his bid, Litonjua promptly responded byletterdated4July1990.Contrarytohispriormanifestations,heassertedthat,forallintentsandpurposes,theUS$36millionbidwhichhesubmittedon21May1990wastheirfinalbidbasedonthefinancialstatementsfortheyear1989.Hepointedoutthattheysubmittedthebestbidandtheywerealreadyfinalizingthetermsofthesale.HestressedthattheywerefirmlycommittedtotheirbidofUS$36millionandifevertherewouldbeadjustmentsinthebid amount, the adjustmentswere brought about by SMABs subsequent disclosures andvalidatedaccounts,suchastheaspectthatonlyninetysixpercent(96%)ofPhimcoshareswasactuallybeingsoldandnotonehundredpercent(100%).[13]

More than two months from receipt of Litonjuas last letter, Enriquez sent a faxcommunication to the former, advising him that the proposed sale of SMABs shares inPhimco with local buyers did not materialize. Enriquez then invited Litonjua to resumenegotiationswithSMAB for thesaleofPhimcoshares.He indicated thatSMABwouldbepreparedtonegotiatewithALSonanexclusivebasisforaperiodoffifteen(15)daysfrom26 September 1990 subject to the terms contained in the letter. Additionally, Enriquezclarified that if the salewould not be completed at the end of the fifteen (15)day period,SMABwouldenterintonegotiationswithotherbuyers.[14]

Shortlythereafter,LitonjuasentaletterexpressinghisobjectionstothetotallynewsetoftermsandconditionsforthesaleofthePhimcoshares.Heemphasizedthatthenewofferconstitutedanattempttoreopenthealreadyperfectedcontractofsaleofthesharesinhisfavor. He intimated that he could not accept the new terms and conditions containedtherein.[15]

On14December1990,respondents,asplaintiffs, filedbeforetheRegionalTrialCourt(RTC) of Pasig a complaint for specific performancewith damages, with a prayer for theissuance of a writ of preliminary injunction, against defendants, now petitioners. Theindividualdefendantsweresuedintheirrespectivecapacitiesasofficersofthecorporationsorentitiesinvolvedintheabortedtransaction.

Aside from the averments related to their principal cause of action for specificperformance,respondentsallegedthatthePhimcomanagement,inutterbadfaith,inducedSMAB to violate its contract with respondents. They contended that the Phimcomanagement tookan interest inacquiring for itself thePhimcosharesand thatpetitionersconspired to thwart the closing of such sale by interposing various obstacles to thecompletionof theacquisitionaudit.[16]Respondents claimed that thePhimcomanagementmaliciouslyanddeliberatelydelayedthedeliveryofdocumentstoLayaManabatSalgado&Co.whichpreventedthemfromcompletingtheacquisitionaudit intimeforthedeadlineon30June1990setbypetitioners.[17]RespondentsaddedthatSMABsrefusaltoconsummatethe perfected sale of the Phimco shares amounted to an abuse of right and constitutedconductwhichiscontrarytolaw,morals,goodcustomsandpublicpolicy.[18]

RespondentsprayedthatpetitionersbeenjoinedfromsellingortransferringthePhimcoshares, or otherwise implementing the sale or transfer thereof, in favor of any person orentityother than respondents,and thatanysuchsale to thirdpartiesbeannulledandsetaside. Respondents also asked that petitioners be ordered to execute all documents orinstruments and perform all acts necessary to consummate the sales agreement in theirfavor.



Traversingthecomplaint,petitionersallegedthatrespondentshavenocauseofaction,contending that no perfected contract, whether verbal or written, existed between them.Petitioners added that respondents cause of action, if any, was barred by the Statute ofFraudssincetherewasnowritteninstrumentordocumentevidencingtheallegedsaleofthePhimcosharestorespondents.

PetitionersfiledamotionforapreliminaryhearingoftheirdefenseofbarbytheStatuteofFrauds,which the trialcourtgranted. Bothpartiesagreedtoadoptas theirevidence insupportoforagainst themotion todismiss,as thecasemaybe, theevidencewhich theyadducedinsupportoftheirrespectivepositionsonthewritofpreliminaryinjunctionincident.

InitsOrderdated17April1991,theRTCdismissedrespondentscomplaint.[19] It ruledthattherewasnoperfectedcontractofsalebetweenpetitionersandrespondents.Thecourtaquo said that the letter dated 11 June 1990, relied upon by respondents, showed thatpetitionersdidnotacceptthebidofferofrespondentsastheletterwasamereinvitationforrespondentstoconductaduediligenceprocessorpreacquisitionauditofPhimcosmatchandforestryoperationstoenablethemtosubmittheirfinalofferon30June1990.Assumingthat respondents bid was favored by an oral acceptance made in private by officers ofSMAB, the trial court noted, such acceptance was merely preparatory to a formalacceptancebytheSMABtheacceptancethatwouldeventuallyleadtotheexecutionandsigningofthecontractofsale.Moreover,thecourtnotedthatrespondentsfailedtosubmittheirfinalbidonthedeadlinesetbypetitioners.

RespondentsappealedtotheCourtofAppeals,assigningthefollowingerrors:

A.THETRIALCOURTEXCEEDEDITSAUTHORITYANDJURISDICTIONWHENITERREDPROCEDURALLYINMOTUPROPIO(sic)DISMISSINGTHECOMPLAINTINITSENTIRETYFORLACKOFAVALIDCAUSEOFACTIONWITHOUTTHEBENEFITOFAFULLBLOWNTRIALANDONTHEMEREMOTIONTODISMISS.

B.THETRIALCOURTERREDINIGNORINGPLAINTIFFAPPELLANTSCAUSEOFACTIONBASEDONTORTWHICH,HAVINGBEENSUFFICIENTLYPLEADED,INDEPENDENTLYWARRANTEDAFULLBLOWNTRIAL.

C.THETRIALCOURTERREDINIGNORINGPLAINTIFFSAPPELLANTSCAUSEOFACTIONBASEDONPROMISSORYESTOPPELWHICH,HAVINGBEENSUFFICIENTLYPLEADED,WARRANTEDAFULLBLOWNTRIAL,INDEPENDENTLYFORTHEOTHERCAUSESOFACTION.

D.THETRIALCOURTJUDGEERREDINFORSWEARINGJUDICIALOBJECTIVITYTOFAVORDEFENDANTSAPPELLEESBYMAKINGUNFOUNDEDFINDINGS,ALLINVIOLATIONOFPLAINTIFFSAPPELLANTSRIGHTTODUEPROCESS.[20]

Afterassessingtherespectiveargumentsoftheparties,theCourtofAppealsreversedthe trial courts decision. It ruled that the series of written communications betweenpetitioners and respondents collectively constitute a sufficient memorandum of theiragreement under Article 1403 of the Civil Code thus, respondents complaint should nothavebeendismissedonthegroundthatitwasunenforceableundertheStatuteofFrauds.Theappellatecourtopinedthatanydocumentorwriting,whetherformalorinformal,writteneither for thepurposeof furnishingevidenceof the contract or for anotherpurposewhichsatisfiesalltheStatutesrequirementsastocontentsandsignaturewouldbesufficientand,that twoormorewritingsproperlyconnectedcouldbeconsideredtogether. Theappellatecourtconcludedthatthelettersexchangedbyandbetweentheparties,takentogether,weresufficient to establish that an agreement to sell the disputed shares to respondents wasreached.



TheCourtofAppealsclarified,however,thatbyreversingtheappealeddecisionitwasnottherebydeclaringthatrespondentsareentitledtothereliefsprayedforintheircomplaint,but only that the case should not have been dismissed on the ground of unenforceabilityundertheStatuteofFrauds.Itorderedtheremandofthecasetothetrialcourtforfurtherproceedings.

Hence,thispetition.PetitionersarguethattheCourtofAppealserredinfailingtoconsiderthattheStatuteof

Frauds requires not just the existenceof anynote ormemorandumbut that suchnote ormemorandumshould evidenceanagreement to sell and, that in this case, therewasnoword,phrase,orstatementinthelettersexchangedbetweenthetwopartiestoshoworevenimplythatanagreementhadbeenreachedforthesaleofthesharestorespondent.

Petitioners stress that respondent Litonjuamade it clear in his letters that the quotedpricesweremerely tentative and still subject to further negotiations between him and theseller. Theypoint out that therewasnomeetingof themindson theessential termsandconditionsof thesalebecauseSMABdidnotaccept respondentsoffer that considerationwouldbepaidinPhilippinepesos.Moreover,Litonjuasignifiedtheir inabilitytosubmittheirfinal bid on 30 June 1990, at the same time stating that the broad terms and conditionsdescribed in theirmeetingwere inadequate for them tomake a response at that time somuchsothathewouldhavetoawaitthecorrespondingspecifics.Petitionersarguethattheforegoing circumstances prove that they failed to reach an agreement on the sale of thePhimcoshares.

In theirComment, respondentsmaintain that theCourt ofAppeals correctly ruled thattheStatuteofFraudsdoesnotapplytotheinstantcase.Respondentsassertthatthesaleofthesubjectsharestothemwasperfectedasshownbythefollowingcircumstances,namely:petitionersassuredthemthatshouldthey increasetheirbid, thesalewouldbeawardedtothemandthattheydidinfactincreasetheirpreviousbidofUS$30.6milliontoUS$36millionpetitioners orally accepted their revisedoffer and theacceptancewas relayed to thembyReneDizonpetitionersdirectedthemtoproceedwiththeacquisitionauditandtosubmitacomfort letter from the United Coconut Planters Bank (UCPB) petitioner corporationconfirmeditspreviousverbalacceptanceof theiroffer ina letterdated11June1990withthe prior approval of petitioners, respondents engaged the services of Laya, Manabat,Salgado&Co., an independent auditing firm, to immediately proceedwith the acquisitionauditand,petitionercorporationreiterateditscommitmenttobeboundbytheresultoftheacquisition audit and promised to reimburse respondents cost to the extent ofUS$20,000.00.Alltheseincidents,accordingtorespondents,overwhelminglyprovethatthecontractofsaleofthePhimcoshareswasperfected.

Further,respondentsarguedthattherewaspartialperformanceoftheperfectedcontracton their part. They alleged that with the prior approval of petitioners, they engaged theservices of Laya,Manabat,Salgado&Co. to conduct the acquisition audit. They averredthatpetitionersagreedtobeboundbytheresultsoftheauditandofferedtoreimbursethecosts thereof to theextentofUS$20,000.00. Respondentsadded that incompliancewiththeirobligationsunderthecontract,theyhavesubmittedacomfortletterfromUCPBtoshowpetitionersthatthebankwaswillingtofinancetheacquisitionofthePhimcoshares.[21]

Thebasic issuestoberesolvedare:(1)whethertheappellatecourterred inreversingthetrialcourtsdecisiondismissingthecomplaintforbeingunenforceableundertheStatuteofFraudsand(2)whether therewasaperfectedcontractofsalebetweenpetitionersandrespondentswithrespecttothePhimcoshares.

The Statute of Frauds embodied in Article 1403, paragraph (2), of the Civil Code[22]requires certain contracts enumerated therein to be evidenced by some note ormemorandum in order to be enforceable. The term Statute of Frauds is descriptive of



statuteswhich require certain classesof contracts to be inwriting. TheStatute doesnotdeprive thepartiesof the right tocontractwith respect to thematters therein involved,butmerely regulates the formalities of the contract necessary to render it enforceable.[23]Evidenceoftheagreementcannotbereceivedwithoutthewritingorasecondaryevidenceofitscontents.

TheStatute,however,simplyprovides themethodbywhich thecontractsenumeratedthereinmaybeprovedbutdoesnotdeclare theminvalidbecausetheyarenotreducedtowriting.Bylaw,contractsareobligatoryinwhateverformtheymayhavebeenenteredinto,providedall theessential requisites for their validity arepresent. However,when the lawrequiresthatacontractbeinsomeforminorderthatitmaybevalidorenforceable,orthatacontract be proved in a certain way, that requirement is absolute and indispensable.[24]Consequently,theeffectofnoncompliancewiththerequirementoftheStatuteissimplythatno action can be enforced unless the requirement is complied with.[25] Clearly, the formrequired is for evidentiary purposes only. Hence, if the parties permit a contract to beproved,withoutanyobjection,it isthenjustasbindingasiftheStatutehasbeencompliedwith.[26]

The purpose of the Statute is to prevent fraud and perjury in the enforcement ofobligations depending for their evidence on the unassisted memory of witnesses, byrequiringcertainenumeratedcontractsandtransactionstobeevidencedbyawritingsignedbythepartytobecharged.[27]

However,foranoteormemorandumtosatisfytheStatute,itmustbecompleteinitselfandcannotrestpartlyinwritingandpartlyinparol.Thenoteormemorandummustcontainthenamesoftheparties,thetermsandconditionsofthecontract,andadescriptionofthepropertysufficienttorender itcapableof identification.[28]Suchnoteormemorandummustcontain the essential elements of the contract expressed with certainty that may beascertainedfromthenoteormemorandumitself,orsomeotherwritingtowhichitrefersorwithinwhichitisconnected,withoutresortingtoparolevidence.[29]

ContrarytotheCourtofAppealsconclusion,theexchangeofcorrespondencebetweenthepartieshardlyconstitutesthenoteormemorandumwithinthecontextofArticle1403oftheCivilCode.Rossisletterdated11June1990,heavilyrelieduponbyrespondents,isnotcomplete in itself. First, it doesnot indicate atwhat price the shareswerebeing sold. Inparagraph (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 paragraphundoubtedlyprovesthattherewasasyetnodefiniteagreementastotheprice.Second,theletter doesnot state themodeof payment of theprice. In fact, Litonjuawas supposed toindicateinhisfinalofferhowandwherepaymentfortheshareswasplannedtobemade.[30]

Evidently, the trial courtsdismissalof thecomplainton thegroundofunenforceabilityundertheStatuteofFraudsiswarranted.[31]

Evenifweweretoconsiderthelettersbetweenthepartiesasasufficientmemorandumfor purposes of taking the case out of the operation of the Statute the action for specificperformancewouldstillfail.

Acontractisdefinedasajuridicalconventionmanifestedinlegalform,byvirtueofwhichoneormorepersonsbind themselves in favorofanother,orothers,or reciprocally, to thefulfillmentofaprestationtogive,todo,ornottodo.[32]Therecanbenocontractunlessthefollowingrequisitesconcur:(a)consentofthecontractingparties(b)objectcertainwhichisthe subject matter of the contract (c) cause of the obligation which is established.[33]Contractsareperfectedbymereconsent,which ismanifestedby themeetingof theoffer



andtheacceptanceuponthethingandthecausewhicharetoconstitutethecontract.[34]

Specifically, in the case of a contract of sale, required is the concurrence of threeelements,towit:(a)consentormeetingoftheminds,thatis,consenttotransferownershipinexchangefortheprice(b)determinatesubjectmatter,and(c)pricecertaininmoneyoritsequivalent.[35]Suchcontractisbornfromthemomentthereisameetingofmindsuponthethingwhichistheobjectofthecontractandupontheprice.[36]

Ingeneral,contractsundergothreedistinctstages,towit:negotiationperfectionorbirthand consummation. Negotiation begins from the time the prospective contracting partiesmanifesttheir interest inthecontractandendsatthemomentofagreementoftheparties.Perfection or birth of the contract takes placewhen the parties agree upon the essentialelementsofthecontract.Consummationoccurswhenthepartiesfulfillorperformthetermsagreeduponinthecontract,culminatingintheextinguishmentthereof.[37]

Anegotiationisformallyinitiatedbyanoffer.Aperfectedpromisemerelytendstoinsureand pave the way for the celebration of a future contract. An imperfect promise(policitacion), on the other hand, is amere unaccepted offer.[38] Public advertisements orsolicitationsandthelikeareordinarilyconstruedasmereinvitationstomakeoffersoronlyasproposals.Atanytimepriortotheperfectionofthecontract,eithernegotiatingpartymaystopthenegotiation.[39]Theoffer,atthisstage,maybewithdrawnthewithdrawaliseffectiveimmediately after its manifestation, such as by its mailing and not necessarily when theoffereelearnsofthewithdrawal.[40]

Anofferwouldrequire,amongotherthings,aclearcertaintyonboththeobjectandthecauseorconsiderationoftheenvisionedcontract.Consentinacontractofsaleshouldbemanifestedby themeetingof theoffer and theacceptanceupon the thingand the causewhicharetoconstitutethecontract.Theoffermustbecertainandtheacceptanceabsolute.Aqualifiedacceptanceconstitutesacounteroffer.[41]

Quite obviously, Litonjuas letter dated 21May 1990, proposing the acquisition of thePhimcosharesforUS$36millionwasmerelyanoffer.Thisoffer,however,inLitonjuasownwords, is understood to be subject to adjustment on the basis of an audit of the assets,liabilitiesandnetworthofPhimcoanditssubsidiariesandonthefinalnegotiationbetweenourselves.[42]

Was the offer certain enough to satisfy the requirements of the Statute of Frauds?Definitelynot.

Litonjuarepeatedlystressedinhislettersthattheywouldnotbeabletosubmittheirfinalbidby30June1990.[43]Withindubitableinconsistency,respondentslaterclaimedthatforallintentsandpurposes,theUS$36millionwastheirfinalbid.Ifthiswereso,itwouldbeinanefor Litonjua to state, as he did, in his letter dated 28 June 1990 that theywould be in apositiontosubmittheirfinalbidonlyon17July1990.Thelackofadefiniteofferonthepartof respondents could not possibly serve as the basis of their claim that the sale of thePhimcoshares intheir favorwasperfected,foroneessentialelementofacontractofsalewas obviously wantingthe price certain in money or its equivalent. The price must becertain, otherwise there is no true consent between the parties.[44] There can be no salewithout a price.[45] Quite recently, this Court reiterated the longstanding doctrine that themannerofpaymentofthepurchasepriceisanessentialelementbeforeavalidandbindingcontractofsalecanexistsincetheagreementonthemannerofpaymentgoesintothepricesuchthatadisagreementonthemannerofpaymentistantamounttoafailuretoagreeontheprice.[46]



Granting arguendo, that the amount of US$36 million was a definite offer, it wouldremainasamereofferintheabsenceofevidenceofitsacceptance.Toproduceacontract,theremustbeacceptance,whichmaybeexpressorimplied,butitmustnotqualifythetermsoftheoffer.[47]Theacceptanceofanoffermustbeunqualifiedandabsolute toperfect thecontract.[48]Inotherwords,itmustbeidenticalinallrespectswiththatoftheoffersoastoproduceconsentormeetingoftheminds.[49]

RespondentsattempttoprovetheallegedverbalacceptanceoftheirUS$36millionbidbecomesfutileinthefaceoftheoverwhelmingevidenceonrecordthattherewasinthefirstplace nomeeting of themindswith respect to the price. It is dramatically clear that theUS$36millionwasnottheactualpriceagreeduponbutmerelyapreliminaryofferwhichwassubject to adjustment after the conclusion of the audit of the company finances.Respondentsfailuretosubmittheirfinalbidonthedeadlinesetbypetitionerspreventedtheperfectionofthecontractofsale.Itwasnotperfectedduetotheabsenceofoneessentialelementwhichwasthepricecertaininmoneyoritsequivalent.

At any rate, from the procedural stand point, the continuing objections raised bypetitioners to the admission of parol evidence[50] on the alleged verbal acceptance of theofferrenderedanyevidenceofacceptanceinadmissible.

Respondentspleaofpartialperformanceshouldlikewisefail.Theacquisitionauditandsubmissionofacomfortletter,evenifconsideredtogether,failedtoprovetheperfectionofthe contract. Quite the contrary, they indicated that the sale was far from concluded.Respondentsconductedtheauditaspartoftheduediligenceprocesstohelpthemarriveatandmake their final offer. On the other hand, the submission of the comfort letter wasmerelyaguaranteethatrespondentshadthefinancialcapacitytopaythepriceintheeventthattheirbidwasacceptedbypetitioners.

The Statute of Frauds is applicable only to contracts which are executory and not tothose which have been consummated either totally or partially.[51] If a contract has beentotally or partially performed, the exclusion of parol evidencewould promote fraud or badfaith,foritwouldenablethedefendanttokeepthebenefitsalreadyderivedbyhimfromthetransaction in litigation, and at the same time, evade the obligations, responsibilities orliabilitiesassumedorcontractedbyhimthereby.[52]Thisrule,however,ispredicatedonthefactofratificationofthecontractwithinthemeaningofArticle1405oftheCivilCodeeither(1)byfailuretoobjecttothepresentationoforalevidencetoprovethesame,or(2)bytheacceptance of benefits under them. In the instant case, respondents failed to prove thattherewaspartialperformanceofthecontractwithinthepurviewoftheStatute.

RespondentsinsistthatevenontheassumptionthattheStatuteofFraudsisapplicableinthiscase,thetrialcourterredindismissingthecomplaintaltogether.Theypointoutthatthecomplaintpresentsseveralcausesofaction.

Acloseexaminationofthecomplaintrevealsthatitallegestwodistinctcausesofaction,thefirstisforspecificperformance[53]premisedontheexistenceofthecontractofsale,whiletheotherissolelyfordamages,predicatedonthepurporteddilatorymaneuversexecutedbythePhimcomanagement.[54]

Withrespecttothefirstcauseofactionforspecificperformance,apartfrompetitionersalleged refusal to honor the contract of salewhich has never been perfected in the firstplacerespondentsmadeanumber of averments in their complaint all in support of saidcauseofaction.Respondentsclaimedthatpetitionerswereguiltyofpromissoryestoppel,[55]

warranty breaches[56] and tortious conduct[57] in refusing to honor the alleged contract ofsale. These averments are predicated on or at least interwoven with the existence or



perfectionof thecontractofsale. As therewasnosuchperfectedcontract, the trialcourtproperlyrejectedtheavermentsinconjunctionwiththedismissalofthecomplaintforspecificperformance.

However, respondents second cause of action due to the alleged malicious anddeliberatedelayofthePhimcomanagementinthedeliveryofdocumentsnecessaryforthecompletionof theaudit on time,notbeingbasedon theexistenceof thecontractof sale,couldstandindependentlyoftheactionforspecificperformanceandshouldnotbedeemedbarred by the dismissal of the cause of action predicated on the failed contract. Ifsubstantiated, this cause of actionwould entitle respondents to the recovery of damagesagainsttheofficersofthecorporationresponsiblefortheactscomplainedof.

Thus, the Court cannot forthwith order dismissal of the complaint without affordingrespondents an opportunity to substantiate their allegations with respect to its cause ofactionfordamagesagainsttheofficersofPhimcobasedonthelattersallegedselfservingdilatorymaneuvers.

WHEREFORE, the petition is in part GRANTED. The appealed Decision is herebyMODIFIEDinsofarasitdeclaredtheagreementbetweenthepartiesenforceableundertheStatuteofFrauds.ThecomplaintbeforethetrialcourtisorderedDISMISSEDinsofarasthecauseofactionforspecificperformanceisconcerned.ThecaseisorderedREMANDEDtothe trial court for further proceedingswith respect to the cause of action for damages asabovespecified.

SOORDERED.Puno,J.,(Chairman),AustriaMartinez,Callejo,Sr.andChicoNazario,JJ.,concur.

[1]PennedbyJusticePedroA.Ramirez,concurredinbyJusticesPacitaCaizaresNyeandRomeoJ.Callejo,Sr.(nowAssociateJusticeofthisCourt)

[2]Rollo,pp.7499.[3]Id.at103.[4]IssuedbyJudgeArmieE.ElmaoftheRegionalTrialCourtofPasig.[5]AnnexA,Rollo,p.101.[6]AnnexB,Id.at104.[7]AnnexD,Id.at110.[8]Id.at114115.[9]Id.at116117.[10]Id.at121.[11]Id.at123.[12]AnnexK,Rollo,p.125.[13]AnnexL,Id.at126.[14]AnnexM,Id.at128.[15]Rollo,p.130.



[16]RTCRollo,p.17[17]Id.at19.[18]Id.at23.[19]Thedispositiveportionofthetrialcourtsdecisionreads:

WHEREFORE, inviewofall the foregoingconsiderations, thisCourtgivesduecourse todefendants (exceptReneDizon)affirmativedefenseofbarby thestatuteof frauds.Thiscase isorderedDISMISSED forlackofavalidcauseofactionwithcostsagainstplaintiffs.ThewritofpreliminaryinjunctionissuedonJanuary14,1991isherebydissolved.

[20]Rollo,pp.8182.[21]Id.at164.[22]Art.1403.Thefollowingcontractsareunenforceable,unlesstheyareratified:

xxx

(2)Thosethatdonotcomplywith theStatuteofFraudsasset forth in thisnumber. In thefollowingcasesanagreement hereafter made shall be unenforceable by action, unless the same, or some note ormemorandum thereof, be in writing, and subscribed by the party charged, or by his agent evidence,therefore, of the agreement cannot be received without the writing, or a secondary evidence of itscontents:

(a)Anagreementthatbyitstermsisnottobeperformedwithinayearfromthemakingthereof

(b)Aspecialpromisetoanswerforthedebt,default,ormiscarriageofanother

(c)Anagreementmadeinconsiderationofmarriage,otherthanamutualpromisetomarry

(d)Anagreementforthesaleofgoods,chattelsorthingsinaction,atapricenotlessthanfivehundredpesos,unlessthebuyeracceptandreceivepartofsuchgoodsandchattels,ortheevidences,orsomeofthem,ofsuchthingsinaction,orpayatthetimesomepartofthepurchasemoneybutwhenasaleismadebyauctionandentryismadebytheauctioneerinhissalesbook,atthetimeofthesale,oftheamountandkindofpropertysold, termsofsale,price,namesof thepurchasersandpersononwhoseaccountthesaleismade,itisasufficientmemorandum

(e)Anagreementfortheleasingforalongerperiodthanoneyear,orforthesaleofrealpropertyorofaninteresttherein

(f)Arepresentationastothecreditofathirdperson.[23]RosencorDevelopmentCorporationv.CourtofAppeals,G.R.No.140479,March8,2001,354SCRA119.[24]Article1356,CivilCode.[25]Gallemitv.Tabilaran,20Phil.241(1911).[26]Domalaganv.Bolifer,33Phil.471(19151916).[27]AsiaProductionsCo.,Inc.v.Pano,et.al.,G.R.No.51058,January27,1992,205SCRA458.[28]Litonjuav.Fernandez,et.al.,G.R.No.148116,April14,2004,citingHolszv.Stephen,200N.E.601(1936).[29] Ibid.,citingFranklinSugarRefiningCo.v.Egerton,288Fed.Rep.698(1923)Williamsv.Morris, 95U.S.

360(1877).[30]AnnexE,Rollo,p.114.[31]Rule16,par.(i),RulesofCivilProcedure.[32]4SanchezRoman146.



[33]Article1318,CivilCode.[34]Gomezv.CourtofAppeals,G.R.No.120747,September21,2000,340SCRA720.[35]Roblev.Arbasa,414Phil.434(2001).[36] Lafortezav.Machuca,389Phil. 167 (2000)Katipunanv.Katipunan, Jr., 425Phil. 818 (2002) Londres v.

CourtofAppeals,G.R.No.136427,December17,2002,394SCRA133.[37]Bugattiv.CourtofAppeals,G.R.No.138113,October17,2000,343SCRA335.[38] 8 Manresa, 5th Ed., Bk. 2, pp. 268270 cited in Jurado, COMMENTS AND JURISPRUDENCE ON

OBLIGATIONSANDCONTRACTS,1993Ed.,p.354.[39]AngYuv.Asuncion,G.R.No.109125,December2,1994,238SCRA1994.[40]Laudicov.Arias,43Phil.270(1922).[41]Article1319,CivilCode.[42]AnnexD,Rollo,p.111.[43]AnnexesD&F,Id.at111116.[44]See10Manresa4546.[45]Villanuevav.CourtofAppeals,334Phil.750(1997).[46]Montecillov.Reynes,434Phil.456(2002),citingSanMiguelPropertiesPhilippines,Inc.v.Huang,G.R.No.

137290,July31,2000,336SCRA737Navarrov.SugarProducersCooperativeMarketingAssociation,Inc.,1SCRA1181(1961)ToyotaShaw,Inc.v.CourtofAppeals,244SCRA320(1995).

[47]JardineDavies,Inc.v.CourtofAppeals,389Phil.204(2000).[48]MetropolitanBankandTrustCompanyv.Tonda,392Phil.797(2000).[49]LimketkaiSonsMilling,Inc.v.CourtofAppeals,325Phil.967(1996).[50]TSN,January3,1991,pp.12,4748,8081.[51]Arroyovs.Azur,76Phil.493(1946)Almirolv.Monserrat,48Phil.67(1925)AsturiasSugarCentral,Inc.v.

Montinola,69Phil.725(1940).[52]Carbonnelv.Poncio,103Phil.655(1958).[53]Seee.g.,par.3.2,ComplaintVide,RTCRecords,p.21.[54]Seee.g.,pars.2.11,2.11.1,ComplaintVide,RTCRecords,p.17.[55]Seee.g.,par.4.1,ComplaintVide,RTCRecords,p.22.[56]Seee.g.,par.2.8.1.3,2.9,ComplaintVide,RTCRecords,pp.16&18.[57]Seee.g.,par.5.1.1,5.1.2,ComplaintVide,RTCRecords,p.23.

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