CEMBRANO vs. CITY OF BUTUAN G.R. No. 163605 September 20, 2006 FACTS: CVC Lumber Industries, Inc.

(CVC) was a timber concession licensee while Gil Cembrano (Cembrano) was CVCs Marketing Manager. CVC, through Cembrano, participated in 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 of the 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 the Mayor 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 Gos (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 for extension 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 RTCs decisions ordering Butuan City to pay its liability and affirming the report made by the City Legal Officer, and CVCs entitlement to damages. In 2002, Cembrano executed a Deed of Assignment covering 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-Ong for 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 award of P926,845.00 for respondent CVC, reversing the RTCs 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 the timber poles and piles to the City of Butuan, since he secured a loan from the DBP, the amount CVC 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 when it 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 amount of P926,845.00 from respondent Butuan City. ISSUES: Whether or not the remittance of the P926,845.00 made by City to CVC, through PagOng, 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 provides that 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 to the proper person. Thus, payment must be made to the obligee himself or to an agent having authority, 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 is obliged to return the amount of P490,605.955 to respondent City. Since petitioner Cembrano had already 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 untitled handwritten document which acknowledged that: (1.) the stated fishing vessels respondent are now 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 follow Upon 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 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 balance of the purchase price. Respondents alleged that petitioners contracted to buy the two fishing vessels for the agreed purchase price 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. 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 the SC. 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, 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. It is also alleged in the petition that the true 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 the ownership 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 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. 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. During cross-examination, Ramos claimed that the supposed balance shall be paid on 30 June 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, 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 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. 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 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. 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.