DBP vs Medrano

Owner: Medrano
Buyer: DBP
Object: shares of stock

Facts
Medrano was the President and General Manager of Paragon Paper
Industries wherein he owned a huge number of shares.
DBP then sought to consolidate its ownership in Paragon. The Chariman of
the Paragon Execuitve Committee instructed Merano to contract or sound off
the minority stockholders and to convince them to sell their shares to DBP at
Php 65.00/share.
Medrano followed said instruction. He testified that all, including himself,
agreed to sell, and all took steps to have their shares surrendered to DBP for
payment.
They (the stockholders who sole their shares) made proposals, and they
were approved by DBP under a Resolution. Said Resolution included the
following terms and ocnditions which shall be followed, otherwise the sale
will be deemed cancelled
o That before the implementation of the approval, the shares shall be
surrendered to DBP
o All parties shall submit a written conformity
o Transaction shall be implemented within 45 days from the date of
approval
Medrano then indorsed all his shares to DBP. DBP accepted said shares and
took over Paragon.
DPB subsequently offered Medrano a commission if he could persuade all
other Paragon minority stockholders to sell their shares. Medrano was able
to convince only two, so his commission was partly reduced. He then
demanded DBP to pay the value of his shares which he already turned over.
DBP did not heed to his demand so he filed a complaint for specific
performance and damages.
RTC ruled in favor of Medrano and dismissed DPBs cross-claim against
APT (DPB conveyed the shares to APT)
CA affirmed RTC decision but refused to grant Medrano payment for his
commission because such issue was not raised in the appeal
o CA also heald that there existed between DBP and Medrano a contract
of sale and the conditions imposed by the Resolution were merely
conditions imposed on the performance of an obligation
o Under 1548, DBP had the right not to proceed with the agreement
upon Medranos failure to comply with the conditions. However, DBP
was deemed to have waived the performance of the conditions when
it chose to retain Medranos shares.
o The argument of DBP that the sale is already rescinded is contrary to
their act of retaining Medranos shares. If there was really rescission,
DBP should have returned to Medrano his shares together with their
fruits and the price with interests, as provided by Art. 1359.
Hence, this petition where the following arguments are raised
o Argument of DBP
Art. 1454 only applies to a perfected contract of sale and since
there is no perfected contract in this case because of Medranos
failure to meet all the conditions agreed upon, the application
of the provision is misplaced
o Argument of Medrano
By retaining the shares of stock transferred to it and later even
appropriating and transferring them to APT, DBP is deemed to
have exercised the 2
nd
option under Art. 1545 that it waived
performance of the conditions imposed by the Resolution.
Thus, the original conditional sale was converted into an
absolute sale.

Issue + Ratio
WON the CA erred in applying Art. 1545 and holding that DBP exercised the
2
nd
option under the said provision to justify the order against DBP to pay the
value of Medranos shares of stock No
o Medranos offfer to sell the shares of the minority stockholders was
not absolutely and unconditionally accepted by DBP. DBP imposed
several conditions to its aceptance and it is clear that Medrano tried to
comply with them, but did not succeed. Hence, there was no birth of a
perfected contract of sale between the parties.
o Par. 1, Art. 1545 speaks of a party to a contract of sale who fails in the
performnce of his/her obligation. The application of this provision
presupposes that there is a perfected contract between the parties
and that one of them fails in the performance of an obligation under
the contract.
The case at bar does not fall under this provision because there
is no perfected contract of sale since Medranos failure to
comply with the conditions set forth by DBP prevented the
perfection of the contract of sale.
o Equity however demands that though there is no perfected contract,
DBP should still be ordered to pay Medrano for the shares.
DBPs act of keeping the shares delivered by Medrano without
paying for them constitutes unjust enrichment. The prudent
thing to do for DBP was to return Medranos shares because
DBP had no just or legal ground to retain them.