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SECOND DIVISION

SPS. ALFREDO R. EDRADA G.R. No. 154413

and ROSELLA L. EDRADA,
Petitioners, Present:
PUNO, J.,
versus Chairman,
AUSTRIAMARTINEZ ,
CALLEJO, SR.,
TINGA, and
SPS. EDUARDO RAMOS CHICONAZARIO, JJ.
and CARMENCITA RAMOS,
Respondents.
Promulgated:

August 31, 2005

x x

DECISION

TINGA, J.:

In this Petition

[1]

under Rule 45, petitioner Spouses Alfredo and Rosella

Edrada (petitioners) seek the reversal of the Former Second Division of the Court
of Appeals Decision

[2]

[3]
and Resolution
in CAG.R. CV No. 66375, which

affirmed the Decision of Regional Trial Court (RTC) of Antipolo City, Branch 71,
[4]

in Civil Case No. 964057, and denied the Motion for Reconsideration

[5]

therein.

Respondent spouses Eduardo and Carmencita Ramos (respondents) are the

owners of two (2) fishing vessels, the Lady Lalaine and the Lady Theresa. On 1
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April 1996, respondents and petitioners executed an untitled handwritten

document which lies at the center of the present controversy. Its full text is
reproduced below:

1st April 1996

This is to acknowledge that Fishing Vessels Lady Lalaine and Lady Theresa
owned by Eduardo O. Ramos are now in my possession and received in good
running and serviceable order. As such, the vessels are now my responsibility.

Documents pertaining to the sale and agreement of payments between me

and the owner of the vessel to follow. The agreed price for the vessel is Nine
Hundred Thousand Only (P900,000.00).

(SGD.) (SGD.)
EDUARDO O. RAMOS ALFREDO R. EDRADA
(Seller) (Purchaser)

CONFORME: CONFORME:

(SGD.) (SGD.)
[6]
CARMENCITA RAMOS ROSIE ENDRADA

Upon the signing of the document, petitioners delivered to respondents four

(4) postdated Far East Bank and Trust Company (FEBTC) checks payable to
cash drawn by petitioner Rosella Edrada, in various amounts totaling One
Hundred Forty Thousand Pesos (P140,000.00). The first three (3) checks were
honored upon presentment to the drawee bank while the fourth check for One
Hundred Thousand Pesos (P100,000.00) was dishonored because of a stop
payment order.

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

performance with 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
[7]
balance of the purchase price. In their Complaint,
respondents alleged that
petitioners contracted to buy the two fishing vessels for the agreed purchase
price of Nine Hundred Thousand Pesos (P900,000.00), as evidenced by the
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abovequoted document, which 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.

Belying the allegations of respondents, in their Answer with Counterclaim,

[8]

petitioners averred that the document sued upon merely embodies an

agreement brought about by the loans they extended to respondents. 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 Nine Hundred Thousand Pesos
(P900,000.00). 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.

After trial, the RTC rendered a Decision

[9]

dated 22 February 1999, the

dispositive portion of which reads:

WHEREFORE, judgment is hereby rendered in favor of the plaintiffs and

against the defendants and the latter are ordered to pay to the former the amount
of Eight Hundred Sixty Thousand Pesos (P860,000.00) with legal interests thereon
from June 30, 1996 until fully paid the amount of P20,000.00 as attorneys fees
and the cost of suit.

The counterclaim of the defendants for moral and exemplary damages and
for attorneys fees is dismissed for lack of merit.

[10]
SO ORDERED.

The RTC treated the action as one for collection of a sum of money and for
damages and considered the document as a perfected contract of sale. On 19
April 1999, petitioners filed a Motion for Reconsideration which the RTC denied in
[11]
an Order
dated 2 July 1999.

Both parties appealed the RTC Decision. However, finding no reversible

[12]
error in the appealed decision, the Court of Appeals, in its Decision,
affirmed
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the same and dismissed both appeals. Only petitioners elevated the controversy
to this Court.

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 subissues the purpose for which
the checks were issued, whether replacement 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.

[13]

It is also alleged in the

petition that the true agreement as between the parties was that of a loan.

Evidently, the petition hinges on the true nature of the document dated 1
April 1996. Normally, the Court is bound by the factual findings of the lower
courts, and accordingly, should affirm the conclusion that the document in
question was a perfected contract of sale. However, we find that both the RTC
and the Court of Appeals gravely misapprehended the nature of the said
[14]
document, and a reevaluation of the document is in order.
Even if such
reevaluation would lead the court to examine issues not raised by the parties, it
should be remembered that the Court has authority to review matters even if not
assigned as errors in the appeal, if it is found that their consideration is
[15]
necessary in arriving at a just decision of the case.

In doing so, we acknowledge that the contending parties offer vastly

differing accounts as to the true nature of the agreement. Still, we need not look
beyond the document dated 1 April 1996 and the stipulations therein in order to
ascertain what obligations, if any, have been contracted by the party. The parol
evidence rule forbids any addition to or contradiction of the terms of a written
agreement by testimony or other evidence purporting to show that different
terms were agreed upon by the parties, varying the purport of the written
contract. Whatever is not found in the writing is understood to have been waived
[16]
and abandoned.
We disagree with the RTC and the Court of Appeals that the document is a
perfected contract of sale. A contract of sale is defined as an agreement whereby
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one of the contracting parties obligates himself to transfer the ownership of and
to deliver a determinate thing, and the other to pay therefore a price certain in
money or its equivalent.

[17]

It must evince the consent on the part of the seller

[18]
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 two vessels
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 the transfer of ownership and contain the
terms of payment of the purchase price, or the period when such would become
due and demandable, have yet to be executed. But no such document was
executed and no such terms were stipulated upon.

The fact that there is a stated total purchase price should not lead to the
[19]
conclusion that a contract of sale had been perfected. In numerous cases,
[20]
the most recent of which is Swedish Match, AB v. Court of Appeals,
we held
that 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 absence of 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 due and demandable.

Respondents, during trial, did claim the existence of a period. Respondent

Carmencita Ramos, during crossexamination, claimed that the supposed
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[21]
balance shall be paid on 30 June 1996.
But how do respondents explain why
the Complaint was filed on 3 June 1996? Assuming that the 30 June 1996
period was duly agreed upon by the parties, the filing of the Complaint was
evidently premature, as no cause of action had accrued yet. There could not
have been any breach of obligation because on the date the action was filed, the
alleged maturity date for the payment of the balance had not yet arrived.

In order that respondents could have a valid cause of action, it is essential

that there must have been a stipulated period within which the payment would
have become due and demandable. If the parties themselves could not come into
agreement, the courts may be asked to fix the period of the obligation, under
[22]
Article 1197 of the Civil Code.
The respondents did not avail of such relief
prior to the filing of the instant Complaint thus, the action should fail owing to
its obvious prematurity.

Returning to the true nature of the document, we neither could conclude that a
contract to sell had been established. A contract to sell is defined as a bilateral
contract whereby the prospective seller, while expressly 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
[23]
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 merely acknowledges that a purchase price had been
agreed on by the parties. There was no mutual promise to buy on the part of
petitioners and to sell on the part of respondents. Again, the aforestated proviso
in the agreement that documents pertaining to the sale and agreement of
payments between the parties will follow clearly manifests lack of agreement
between the parties as to the terms of the contract to sell, particularly the object
and cause of the contract.

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
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purchase price. At most, this agreement bares only their intention to enter into
either a contract to sell or a contract of sale.

Consequently, the courts below erred in ordering the enforcement of a

contract of sale that had yet to come into existence. Instead, the instant
Complaint should be dismissed. It prays for three reliefs arising from the
enforcement of the document: execution by the petitioners of the necessary deed
of sale over the vessels, the payment of the balance of the purchase price, and
damages. The lower courts have already ruled that damages are unavailing. Our
finding that there is no perfected contract of sale precludes the finding of any
cause of action that would warrant the granting of the first two reliefs. No cause
of action arises until there is a breach or violation thereof by either party.

[24]

Considering that the documents 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.
WHEREFORE, the petition is GRANTED. 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. No pronouncement as to
costs.

SO ORDERED.

DANTE O. TINGA Associate Justice

WE CONCUR:

REYNATO S. PUNO
Associate Justice
Chairman

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MA. ALICIA AUSTRIAMARTINEZ ROMEO J. CALLEJO, SR.

Associate Justice Associate Justice

MINITA V. CHICONAZARIO
Associate Justice

ATTESTATION

I attest that the conclusions in the above Decision were reached in consultation
before the case was assigned to the writer of the opinion of the Courts Division.

REYNATO S. PUNO
Associate Justice
Chairman, Second Division

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution, and the Division
Chairmans Attestation, it is hereby certified that the conclusions in the above
Decision were reached in consultation before the case was assigned to the writer
of the opinion of the Courts Division.

HILARIO G. DAVIDE, JR.

Chief Justice

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[1]

Rollo, pp. 1328.

[2]

Penned by Associate Justice Cancio C. Garcia (now Supreme Court Associate Justice), and concurred
in by Associate Justices Marina L. Buzon and Eliezer R. Delos Santos. Id. at 8393.

[3]
Id. at 100.

[4]
Presided by Judge Felix S. Caballes.

[5]
Rollo, pp. 5679.

[6]
Id. at 38.

[7]
Id. at 2933.

[8]
Id. at 4044.

[9]
Id. at 4954.

[10]
Id. at 54.

[11]
Id. at 81.

[12]
Id. at 83 93.

[13]
Rollo, p. 19.

[14]
One of the recognized exceptions to the rule that findings of fact of the lower courts are binding on
this Court is if the judgment is based on a misapprehension of facts. See, e.g., Maglucotaw v. Maglucot, G.R. No.
132518, 28 March 2000, 329 SCRA 78, citing Sta. Maria v. Court of Appeals, G.R. No. 127549, 28 January 1998,
285 SCRA 351 Medina v. Asistio, G.R. No. 75450, 8 November 1990, 191 SCRA 218.
[15]
See Heirs of Enrique Zambales v. Court of Appeals, G.R. No. L54070, 28 February 1983, 120 SCRA
897 citing Saura Import & Export Co., Inc. v. Phil. International Surety Co., Inc., 8 SCRA 143 (1963).

[16]
Soriano v. Compania General de Barbados de Filipinas, 125 Phil. 80 (1966).

[17]
Article 1458, Civil Code.

[18]
Art. 1475, Civil Code.

[19]
Velasco v. Court of Appeals, G.R. No. L31018, 29 June 1973, 51 SCRA 439, citing Navarro v. Sugar
Producers Cooperative Marketing Association, G.R. No. L12888, 29 April 1961, 1 SCRA 1180 Toyota Shaw, Inc.
v. Court of Appeals, 314 Phil. 201 (1995) Limketkai Sons Milling, Inc. v. Court of Appeals, 330 Phil. 171 (1996)
Uraca v. Court of Appeals, 228 SCRA 702 (1997) Co v. Court of Appeals, 349 Phil 745 (1998) San Miguel
Properties, Inc. v. Huang, 391 Phil. 636 (2000) Montecillo v. Reynes, 434 Phil. 456 (2002).

[20]
G.R. No. 128120, 20 October 2004, 441 SCRA 1.

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[21]

Rollo, p. 24.

[22]

If the obligation does not fix a period, but from its nature and the circumstances it can be inferred
that a period was intended, the courts may fix the duration thereof. We can reasonably conclude that the parties
in this case intended a period, considering that respondents did claim during trial that there was one, and that
the petitioners had started making installment payments.

[23]
Coronel v. Court of Appeals, 331 Phil. 294 (1996).

[24]
Cole v. Vda. de Gregorio, 202 Phil. 226 (1982).

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