[Link] case of San Miguel Foods, Inc. v. Magtuto, G.R. No. 225007, sell.
sell. This decision overturned the findings of both the
July 24, 2019 involved a dispute between San Miguel Foods, Inc. Regional Trial Court (RTC) and the Court of Appeals (CA)
which had previously characterized the agreement as a
(SMFI), a poultry company, and Ernesto Raoul V. Magtuto, a
contract to sell.
businessman engaged in growing broiler chicks. The case centered Background of the Case
around an agreement between Magtuto and James A. Vinoya, The case involved a dispute over a 300-square-meter
SMFI's veterinarian and production supervisor, for Magtuto to grow residential lot in Tagum City, Davao del Norte. The
broiler chicks for SMFI. respondents, Spouses Apolonio Cangayda, Jr. and Loreta
E. Cangayda, had verbally agreed to sell the property to the
petitioners, Spouses Antonio Beltran and Felisa Beltran,
The Facts of the Case for P35,000.00 in August 1989. The Beltrans made an initial
In July 2002, Magtuto attended a gathering of broiler chick growers payment and took possession of the property, building their
organized by SMFI. At the gathering, SMFI presented its chick family home there. They subsequently made additional
growing scheme, payment system, and benefits. Several months payments, totaling P29,690.00. However, they failed to pay
later, Magtuto and Vinoya reached an agreement where Magtuto the remaining balance of P5,310.00 despite repeated
demands from the Cangaydas.
would grow broiler chicks for SMFI, with SMFI providing all The Cangaydas referred the matter to the barangay chairman,
necessary supplies and technical support. This agreement was not resulting in an amicable settlement agreement in 1992. This
formalized in writing, but Vinoya showed Magtuto a copy of SMFI's agreement stipulated that the Beltrans would pay the
standard contract growing agreement and told him he was bound by remaining balance within a week and that the Cangaydas
the same terms and conditions. would sign a deed of sale upon full payment. The Beltrans
failed to meet the deadline, and the Cangaydas eventually
Magtuto posted a cash bond of P72,000 to guarantee his
filed a complaint for recovery of possession and damages in
performance and protect both parties. SMFI delivered chicks to 2009.
Magtuto four times between October 2002 and April 2003.
However, in June 2003, SMFI delivered only 32,000 chicks instead of Lower Court Decisions
the agreed 36,000. Vinoya explained the shortage was due to low The RTC ruled in favor of the Cangaydas, finding that the oral
supply from the hatchery and declining demand for chicken. agreement was a contract to sell and that ownership of the
property never passed to the Beltrans due to their failure to
Magtuto demanded more chicks but was told that SMFI's priority pay the full purchase price. The RTC ordered the Beltrans to
was its official contract growers. vacate the property and ordered the Cangaydas to return the
Magtuto felt Vinoya was arrogant and unprofessional in his P29,600.00 already paid.
response. He sent a letter of complaint to SMFI's regional manager,
Rene C. Ogilvie, but no action was taken. On August 12, 2003, Vinoya The Beltrans appealed the decision to the CA, arguing that the
agreement was a contract of sale and that ownership had
informed Magtuto that their arrangement was terminated due to a
transferred to them upon delivery of the property. They also
"poor working relationship." Magtuto believed the termination was argued, for the first time on appeal, that the sale was covered
prompted by his complaint against Vinoya. by the Maceda Law (Republic Act No. 6552), which governs
sales on installment. The CA affirmed the RTC’s decision,
Magtuto's Lawsuit rejecting the Beltrans' arguments on the grounds of due
Magtuto filed a complaint for damages against SMFI, Vinoya, and process and fair play.
Ogilvie, alleging that the abrupt termination of the agreement Supreme Court Decision
deprived him of income, caused him expenses, and damaged his The Supreme Court, in its review of the case, reversed the
reputation. He also claimed that the shortage of chicks in June 2003 decisions of the lower courts. The Court held that the oral
resulted in lost income and demanded the return of his bond. agreement between the parties constituted a contract of
sale and that ownership of the disputed property had passed
to the Beltrans upon delivery.
The Court's Ruling
The Regional Trial Court (RTC) ruled in favor of Magtuto, finding that 3. This case digest examines Desiderio Dalisay
the verbal agreement between him and Vinoya constituted a Investments, Inc. v. Social Security System (SSS), G.R.
contract growing agreement, even without a written contract. The No. 231053, decided by the Supreme Court of the Philippines
RTC awarded Magtuto actual damages, moral damages, nominal on April 4, 2018. The case revolves around a dispute
damages, exemplary damages, attorney's fees, and expenses of regarding a dacion en pago agreement between the
litigation. petitioner, Desiderio Dalisay Investments, Inc. (DDII), and the
The Court of Appeals (CA) modified the RTC's decision, increasing respondent, SSS.
the amount of actual damages but deleting the awards for moral
Background
and exemplary damages. The CA also deleted the award for nominal The dispute arose from DDII's failure to fulfill its obligations
damages, finding it improper. under a dacion en pago agreement with SSS. DDII, along with
The Supreme Court (SC) partially granted SMFI's petition for review, other companies under the Dalisay Group of Companies
finding that the CA erred in awarding actual damages without a (DGC), owed SSS significant sums for unpaid premium
written contract. The SC reasoned that under the Civil Code, a contributions, penalties, and salary/calamity loan
contract requires the consent of the contracting parties, a certain amortizations. To settle these debts, DDII offered a parcel of
object, and a cause for the obligation. land and a building to SSS in 1977. However, the parties
The SC held that the agreement between Magtuto and Vinoya was initially failed to agree on the appraised value of the property.
not a contract because it lacked the consent of SMFI. Vinoya had no The Dacion en Pago Agreement
authority to enter into a contract growing agreement on behalf of In 1982, after a series of negotiations and appraisals, DDII
SMFI, and the agreement was made without SMFI's knowledge or offered the property to SSS for P2 million. SSS accepted the
consent. The SC also noted that the agreement lacked a definite offer, subject to certain conditions, including the application of
duration. the P2 million first to unpaid premiums and the excess to
2. The Supreme Court of the Philippines, in the case of Sps. penalties. DDII also agreed to vacate the premises and
Beltran v. Sps. Cangayda, GR No. 225033, August 15, transfer the property's title to SSS.
2018, ruled that an oral agreement between the parties
constituted a contract of sale rather than a contract to
Despite DDII's assurances, the transfer of title never occurred. The Supreme Court, in its decision dated January 23, 2013,
DDII continued to occupy the property, and its debt to SSS upheld the CA's ruling. The Court found that the trial court
continued to grow. In 1998, SSS demanded the title from DDII, erred in concluding that a valid contract of sale existed
but DDII failed to comply. between Ignacio and the bank.
The Court emphasized that the bank had valid title to the
The Legal Dispute properties after the foreclosure sale and was therefore
DDII filed a complaint for quieting of title, recovery of entitled to dispose of them. The Court also found that
possession, and damages against SSS. DDII argued that there Ignacio's payments did not constitute a valid repurchase
was no perfected dacion en pago agreement due to a lack of agreement, as they were not made pursuant to a formal
contract.
meeting of the minds between the parties. SSS countered that
the offer for dacion en pago had been categorically accepted,
The Civil Code of the Philippines, specifically Articles 1319
thereby perfecting the agreement.
to 1379, deals with the essential elements of contracts,
The Supreme Court's Ruling particularly focusing on consent, object, and cause. These
The Supreme Court ruled in favor of SSS, finding that a articles are crucial in understanding the formation and validity
perfected dacion en pago agreement existed. The Court of contracts in the Philippines.
emphasized that the acceptance of the offer by SSS, along
with the agreed-upon terms and conditions, constituted a Consent: The Meeting of Minds
meeting of the minds.
Article 1319 defines consent as the meeting of the offer and
The Court also rejected DDII's argument that the agreement
acceptance upon the thing and the cause which are to
was not consummated due to the failure to transfer the title.
constitute the contract. This signifies that for a contract to be
The Court held that the failure to transfer the title did not
valid, there must be a clear and mutual understanding
invalidate the agreement. DDII was obligated to transfer the
between the parties regarding the subject matter of the
title as part of the dacion en pago, and its failure to do so
agreement and the reason for entering into it.
constituted a breach of contract.
4. The case of Heirs of Fausto Ignacio v. Home Bankers
Savings and Trust Company, GR No. 177783, January
23, 2013, involved a dispute over the ownership of two
parcels of land in Cabuyao, Laguna. The case originated from
The offer must be certain and
a loan Fausto Ignacio took from Home Savings Bank and Trust
the acceptance must be absolute. A qualified
Company (the predecessor of Home Bankers Savings and acceptance constitutes a counter-offer, which
Trust Company) in 1981, secured by a real estate mortgage essentially rejects the original offer and proposes a
on the two properties. new one3.
The Foreclosure and Repurchase Attempt Acceptance made by letter or telegram does not
bind the offerer except from the time it came to his
When Ignacio defaulted on his loan, the bank foreclosed on knowledge. In such cases, the contract is presumed
the mortgage. At the foreclosure sale in 1983, the bank to have been entered into in the place where the
emerged as the highest bidder. Subsequently, title to the offer was made3.
properties was consolidated in favor of the bank.
Despite the lapse of the redemption period, Ignacio offered to Object: The Subject Matter of the Contract
repurchase the properties. While the bank considered his
offer, no formal repurchase contract was executed. The heart
of the dispute lay in Ignacio's claim that a verbal Articles 1347 to 1349 focus on the object of the
repurchase/compromise agreement was reached and contract, which refers to the subject matter of the
implemented. agreement. The object must be:
The Bank's Dispositions and Ignacio's Actions Determinate or determinable: The object must be
Meanwhile, the bank proceeded to dispose of portions of the
clearly defined or capable of being identified with
foreclosed properties, selling them to various individuals and
certainty.
entities. Ignacio, claiming to have made substantial payments
towards the repurchase price, expressed his willingness to
Licit: The object must be lawful and not against
pay the remaining balance and requested the bank to release public policy or morals.
the remaining properties. This request was denied. Possible: The object must be capable of existing and
In response, Ignacio annotated an adverse claim on the titles being delivered.
of the remaining properties. However, before this, the bank Cause: The Reason for Entering into the Contract
had sold the properties to the respondent spouses, Phillip and
Thelma Rodriguez, and their children. Articles 1350 to 1355 address the cause of the contract,
which is the essential reason or purpose for entering into the
The Legal Proceedings
agreement. The cause must be
Ignacio filed an action for specific performance and damages
against the bank, seeking reconveyance of the properties
True: The cause must be real and not merely simulated or
after paying the remaining repurchase price. The trial court
fictitious.
found in favor of Ignacio, declaring the sales to the Rodriguez
family null and void and ordering the bank to reconvey the
Licit: The cause must be lawful and not against public policy
properties to Ignacio upon full payment of the repurchase
or morals.
price.
The Court of Appeals (CA) reversed the trial court's decision,
Determinate: The cause must be clearly defined and not
finding that no valid repurchase agreement existed. The CA
vague or uncertain.
held that the bank was within its rights to sell the properties
to third parties, as it held valid title to them.
Vices of Consent: Invalidating Factors
The Supreme Court's Decision
Articles 1330 to 1344 discuss vices of consent, which are
factors that can invalidate consent and render a contract
voidable. These vices include
Mistake: A false notion of a fact material to the
contract.
Violence: Physical force employed to compel a
person to enter into a contract.
Intimidation: A threat of serious harm to compel a
person to enter into a contract.
Undue influence: Taking advantage of a person's
weakness or dependence to induce him or her to
enter into a contract.
Fraud: Deliberate deception used to induce a person
to enter into a contract.
Other Relevant Articles:
Articles 1356 to 1379 cover various aspects of contracts,
including:
Form of contracts: The specific form required for
certain types of contracts.
Interpretation of contracts: Rules for interpreting
the meaning of contractual terms.
Reformation of contracts: Correcting errors or
omissions in a contract.
Rescission of contracts: Setting aside a contract
due to certain grounds, such as fraud or undue
influence.
Annulment of contracts: Declaring a contract void
due to a lack of essential elements or a vice of
consent.