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VIRGILIO S. DAVID v. MISAMIS OCCIDENTAL II ELECTRIC COOPERATIVE

FACTS:

The case involves a dispute between Virgilio S. David, the owner of VSD Electric Sales, and Misamis Occidental II Electric Cooperative, Inc. (MOELCI). MOELCI expressed interest in purchasing a power transformer from David. After negotiations, a proposal was presented and signed by MOELCI representatives. The proposal stated the value of the transformer and required a downpayment. A board resolution authorized the purchase and stated that it would be financed through a loan from the National Electrification Administration.

When the loan was not approved immediately, MOELCI requested David to deliver the transformer without the required downpayment. David agreed, on the condition that MOELCI would pay interest at 24% per annum. The goods were shipped to Ozamiz City, but MOELCI did not make the payment and the loan was still pending. David's Marketing Manager discovered that the goods had already been released to MOELCI in Ozamiz City. David sent demand letters for payment, but MOELCI disputed the existence of a binding contract and filed a motion to dismiss the complaint.

The trial court denied the motion and allowed David to present his evidence ex parte. However, the trial court eventually dismissed the complaint, ruling that while a contract of sale was perfected, it was not consummated.

David appealed the case to the Court of Appeals, but it affirmed the ruling of the trial court. The CA stated that David failed to provide textual support for his claim that it was a contract of sale instead of just a price quotation. David's motion for reconsideration was also denied. Consequently, David filed a petition before the Supreme Court, raising issues regarding the existence of a perfected contract of sale and the delivery that would consummate the contract.

ISSUES:

  1. Whether the contract between the parties was a contract of sale or a contract to sell.

  2. Whether there was a meeting of the minds to transfer ownership.

  3. Whether there was a meeting of the minds and consent between the parties regarding the sale of the power transformer.

  4. Whether there was delivery and release of the power transformer to the buyer.

  5. Whether or not attorney's fees should be awarded as part of damages.

  6. Whether or not the winning party is entitled to attorney's fees in the absence of stipulation.

  7. Whether or not David's claim for the balance and stipulated interest is substantiated.

RULING:

  1. The Court held that the contract between the parties was a contract of sale. The document, despite its unconventional form, contained terms and conditions that showed the parties' intention to transfer ownership of the subject matter. The fact that the representatives of MOELCI signed their names under the word "CONFORME" indicated their agreement with the terms and conditions of the purchase. The attending circumstances, such as the issuance of a board resolution authorizing the purchase and the discussions between the parties, further supported the finding that there was a meeting of the minds to transfer ownership.

  2. The Court found that there was a meeting of the minds to transfer ownership. The elements of a contract of sale, namely consent or meeting of the minds, determinate subject matter, and price certain in money or its equivalent, were present. The fact that the contract was subject to a suspensive condition, such as the full payment of the purchase price, did not negate the presence of consent to transfer ownership. Once the suspensive condition was fulfilled, the contract of sale was perfected and ownership transferred to the buyer by operation of law.

  3. There was a meeting of the minds and consent between the parties regarding the sale of the power transformer. The document agreed upon by the parties contains the essential elements of a contract of sale, including the subject matter, price, and consensus. Therefore, it is deemed a perfected contract of sale rather than a contract to sell.

  4. There was delivery and release of the power transformer to the buyer. The buyer agreed to have the power transformer delivered, and the freight, handling, insurance, custom duties, and incidental expenses were to be shouldered by the buyer. The delivery made by the seller to the carrier, as evidenced by the Bill of Lading, was deemed a delivery to the buyer. The buyer failed to present evidence to overcome the presumption of delivery under Article 1523 of the Civil Code. Consequently, partial performance of the contract of sale took the case out of the protection of the Statute of Frauds.

  5. Attorney's fees as part of damages are only awarded in instances specified in Article 2208 of the Civil Code, which requires factual, legal, and equitable justification. In this case, no such justification was proven.

  6. In the absence of stipulation, the winning party may be awarded attorney's fees only if the losing party's action or stand is so untenable as to amount to gross and evident bad faith. However, MOELCI's case cannot be classified as such.

  7. David's claim for the balance and stipulated interest is denied for being unsubstantiated.

PRINCIPLES:

  • The absence of consent to transfer ownership distinguishes a contract of sale from a contract to sell.

  • In a contract to sell, the seller reserves the transfer of title until the happening of a contingent event, such as the full payment of the purchase price.

  • In a contract of sale, the title to the property passes to the buyer upon delivery, and the transfer of ownership is not dependent on a suspensive condition.

  • The title of the contract does not determine its nature; what matters are the express terms or stipulations of the contract.

  • A document containing the essential elements of a contract of sale constitutes a perfected contract of sale rather than a contract to sell.

  • Delivery to a carrier authorized by the buyer is deemed a delivery to the buyer, unless a contrary intent appears.

  • The presumption of delivery under Article 1523 of the Civil Code applies when the buyer is to pay the freight.

  • Partial execution of a contract of sale takes the transaction out of the provisions of the Statute of Frauds, as long as the essential requisites of the contract are present.

  • Excessive interest rates stipulated in a sales invoice may be reduced to a reasonable and fair level, even after the suspension of the Usury Law ceiling on interest rates.

  • The award of attorney's fees is the exception rather than the rule, and it is not granted simply because a party prevails in a lawsuit.

  • Attorney's fees represent reasonable compensation paid to a lawyer for legal services rendered by him to the client.

  • Attorney's fees may be awarded as part of damages in certain instances specified in the law.

  • In the absence of stipulation, a winning party may be awarded attorney's fees if the losing party's action or stand amounts to gross and evident bad faith.