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401 Phil. 307


[ G.R. No. 135495, December 14, 2000 ]




Unless otherwise provided by law, a contract is obligatory in whatever form it is entered into, provided all the essential requisites are present.  When a verbal contract has already been completed, executed or partially consummated, its enforceability will not be barred by the Statute of Frauds, which applies only to an executory agreement.

The Case

Before us is a Petition for Review on Certiorari under Rule 45 of the Rules of Court, seeking to nullify the August 31, 1998 Decision[1] of the Court of Appeals (CA)[2] in CA-GR CV 48938 which reversed and set aside the October 12, 1994 Decision[3] of the Regional Trial Court (RTC) of Naga City (Branch 22), in Civil Case No. RTC-93-2810.  The assailed CA Decision disposed as follows:[4]

"WHEREFORE, the appealed decision is hereby REVERSED and SET ASIDE and another is rendered dismissing the complaint."

The Facts

A detailed presentation of the facts was rendered by the trial court in this wise:[5]

"[Respondent] David Miranda, a businessman from Angeles City, was engaged in rattan business since 1980.  He buys large quantit[ies] of rattan poles from suppliers coming from Palawan, Isabela, Ilocos Sur, Baler, Quezon and Cagayan de Oro City.  Among his many regular suppliers, of particular interest in this case, were Roberto Savilla, Her Villanueva, Roberto Santiago, and in 1990 one Gener Buelva.

"Gener Buelva was an employee of one Mike Samaya, who was also a supplier of rattan to [Respondent] Miranda.  Gener Buelva, wanting to become an independent rattan supplier in January 1990, was recommended by his employer Samaya to [Respondent] Miranda who readily accepted him, thus, started such business relationship.

"In the business relations between Buelva and Miranda, the former was given cash advances by the latter, to buy rattan in Palawan, shipping said purchased rattan by boat to Manila, paid ex-Manila, after liquidating cash advances. Buelva also paid forest royalties to the concessionaire, thru Roberto Savilla.  The business transactions, however, did not last long because Buelva then in Manila met an accident and died on June 19, 1990 (TSN, June 2, 1994, p. 25).

"Buelva's widow, Cecilla Buelva, resided in the Municipality of Lagonoy, Camarines Sur.  Sometime in early April 1992, she had a conversation with [Petitioner] Genaro Cordial in her barrio, San Isidro.  They conversed about business prospects in Palawan province and [the] rattan business. Cordial became interested and asked Cecillia Buelva to introduce him to David Miranda, the businessman to whom her husband supplied rattan, to which she agreed (TSN, November 18, 1993, pp. 22-23).

"In the last week of April 1992, Cecilia Buelva accompanied Genaro Cordial to David Miranda in the latter's residence at Belen Homes Subdivision, MacArthur Highway, Angeles City where Cecilia Buelva introduced Cordial to Miranda, and to deliver rattan to Miranda (TSN, November 18, 1993, pp. 24-25) to which proposal Miranda allegedly agreed to be supplied with rattan poles (TSN, March 15, 1994) at the following quoted sizes and prices, ex-Angeles City:

"a) 1½ cm. x 10 ft. @ P22.00;
b) 1½ cm. x 10 ft.  @ P18.00;
c) ¾ cm. x 10 ft.    @ P10.00;
d) 5/8 cm. 10 ft.     @ P 5.00;
e) ½ cm. x. 10 ft.   @ P 4.00;
f)  7/6 cm. x. 10 ft. @ P  2.45.

(TSN, March 15, 1994, p. 5)

"[Respondent] Miranda allegedly informed Cordial to see Roberto Savilla, his long time supplier regarding forest license, charges and royalty fees, because Savilla holds a forestry concession in Palawan (TSN, supra, p. 7; TSN, November 18, 1993, p. 25).

"From Angeles City, Cordial, accompanied by Cecilia Buelva, went to see Roberto Savilla at his residence in RP St., Novaliches, Quezon City (TSN, March 15, 1994, p. 8; TSN, November 18, 1993, p. 25), who was personally known to Buelva, both being natives of San Isidro, Lagonoy, Camarines Sur.  Roberto Savilla agreed to permit Cordial to use Savilla's license in Palawan (TSN, November 18, 1993, p. 26) subject to payment of royalty fees for rattan poles cut and gathered from the forestry concession, with the documentation paper from the forestry office in Palawan (TSN, March 15, 1994, pp. 8-10).

"Cordial with Roberto Savilla, Efren Esteban, Leo Marcena and Nestor Cordial boarded a vessel, `M/B Doña Virginia', for Palawan, arriving on May 29, 1992.  He established his buying station in New Ibahay, El Nido, Palawan.  There he found  x x x Jaime Cariño, Joel Savilla and Oning Villaraza, who supplied him rattan poles at the following price quotations:

`a) 1½ cm. x 10 ft.     P6.00;
b)  11/8 cm. x 10 ft. P5.00;
c)  ¾ cm. x 10 ft.       P4.00;
d)  5/8 cm. 10 ft.        P2.00;
e)  ½ cm. x. 10 ft.      P1.50;
f)   7/16 cm. x. 10 ft.  P1.00.'

(TSN, March 15, 1994, pp. 10-12)

"[Having] [s]tarted buying on June 30, 1992 until the month of October 1992, Cordial, using his own money, was able to buy 50,540 pieces of rattan poles at a cost of about P164,000.00 (TSN, March 15, 1994, pp. 22-23, pp. 28-29).

"Cordial recorded his rattan poles purchases in a `notebook' (Exh. E) as the rattan poles were delivered by his suppliers and paid by him (Exh. E-1 to Exh. E-8-B, with submarkings, inclusive).

"On October 29, 1992, Cordial shipped the 50,540 pieces of rattan poles to Manila, loaded in `M/V Mana', and on November 2, 1992 the vessel docked [in] Malabon, Metro Manila (TSN, supra, pp. 24-25).

"Immediately after the vessel `M/V Mana' docked, Cordial personally notified x x x David Miranda at his house in Belen Homes Subdivision, MacArthur Highway, Angeles City x x x  of the arrival of the rattan poles, with Miranda promising that a truck would follow to load the unloaded rattan poles from the vessel.  True enough, a truck was sent to carry the rattan poles to Angeles City and had to make seven trips to haul the shipped rattan poles.  On the last trip, Cordial went with the truck and the rattan poles were allegedly personally received by  x x x  David Miranda in his Angeles City residence (TSN, March 15, 1994, pp. 24-25).

"The rattan poles were `scaled' (measured) and a scale report (Exh. A) was issued, however, in the name of Roberto Savilla.

"Cordial allegedly protested to  x x x  Miranda regarding the total volume (number of pieces) and the amount `Ex-Manila' of rattan poles reflected in the scale report (Exh. A) as well as why the scale report was in the name of Roberto Savilla, but said protest was brushed aside, saying: `not to worry because that would be settled' (TSN, March 15, 1994, p. 30).

"Cordial waited [at] Miranda's house the whole day to be paid, but Miranda, who left that morning, did not return.  Repeated [trips] to Angeles City resulted in no payment.

"A letter of demand dated January 5, 1993 for payment of P375,000.00, representing cost of the rattan poles delivered was sent by [petitioner] thru counsel (Exh. B).

"In a reply, dated January 12, 1993 (Exh. C), x x x Miranda stressed that there exist no privity of contract between Miranda and Cordial.

`Please be informed that I and your said client have no privity of contract. I do not know him personally nor did [I] transact business with him at any time.  The person whom I deal with [as regards] the deliveries of rattan poles is Mr. Berting Savilla and not your client.  I have no more outstanding obligation to said Mr. Berting Savilla as all deliveries were all paid.  (Exh. C, Records, p. 49).' "

On April 19, 1993, Petitioner Genaro Cordial filed a Complaint against Respondent David Miranda.  The former alleged that he was the supplier who had delivered to the latter in "the first week" of November, 1992, rattan poles valued at about P375,000, which the latter undervalued at P141,679. Petitioner further claimed that despite repeated demands, respondent failed to pay.

In his Answer, respondent maintained that he had no direct or indirect dealings with petitioner.  He further claimed that the document, which had been annexed to the Complaint, was a mere scrap of paper because it did not bear any signature or any mention of petitioner's name.  Although respondent admitted that he used to buy rattan products from Roberto Savilla, the former denied knowledge of, much less participation in, any arrangement or agreement between the latter and petitioner.

After trial in due course, the RTC rendered judgment in favor of petitioner, disposing as follows:

"WHEREFORE, premises considered, decision is hereby rendered in favor of the [Petitioner] Cordial and against  [Respondent] David Miranda, as follows:

a)  Declaring the verbal, consensual agreement to deliver rattan poles between [Petitioner]  Genaro Cordial and [Respondent] David Miranda as valid and enforceable;

b)  Declaring that the 45,145 pieces of rattan poles delivered to and received by [Respondent] David Miranda on November 3, 1992 at Angeles City belong[ed] to and [were] deliver[ed] by [Petitioner] Genaro Cordial and not `Roberto Savilla';

c)  Ordering [Respondent] David Miranda to pay [Petitioner] Gen[a]ro Cordial the amount of Three Hundred Seventy Five Thousand (P375,000) Pesos, with interest thereon at twelve (12%) per cent per annum, representing the value, ex-Angeles City, of the 45,415 pieces of rattan poles delivered;

d)  [Respondent] to pay P15,000 as litigation expenses, and P20,000.00 as attorney's fees;

e)  Dismissing [respondent's] counter claim, and with costs against said [respondent]."[6]

Ruling of the Court of Appeals

Reversing the trial court, the CA held that there was no written memorandum of the alleged contract between the parties.  It further ruled that the RTC had erred in relying heavily on the testimonial evidence presented by petitioner.  Said the appellate court:

"Considering the fee being charged for the freight of the rattan -- P100,000.00 --, it is incredible why there was no written memorandum or receipt of its shipment and/or the assessment of its freightage even assuming that it would be paid after the value of the rattan is collected.  Just as it is incredible why there was no written memorandum of the delivery to the [respondent] of the rattan, especially considering that the [petitioner] is not as naïve as he attempts to portray himself, he being engaged in [the] transportation business (vide TSN June 6. 1994, p. 10).

"A little insight prods us to believe that what perhaps happened was that it was Savilla with whom the [respondent] contracted for the purchase of the rattan in question and that the [petitioner] was a partner or agent but that Savilla, to whom cash was advanced against which the value of the rattan was charged did not give him his share.  That that must have been the case gains light from the fact that the written memorandum-Annex "A" to the complaint allegedly reflecting the rattan delivery bears the name of Savilla and from the fact that after the delivery, [petitioner] went to Savilla who, however, had allegedly left his residential address in Novaliches along with his family.  Why would the [petitioner] allow the scale report to be in the name of Savilla if he indeed invested a grand amount for the rattan.  Why would he go to Savilla following the delivery of the rattan.  And why would Savilla go to Palawan and accompany the [petitioner] to purchase rattan when Savilla himself could directly transact business with the [respondent].

"That the documentary evidence for the [respondent] consisting of cash vouchers reflecting cash advances made by Savilla before the November 3, 1992 delivery of rattan jibes with the [respondent's] thesis that it was x x x Savilla with whom he transacted and gave cash advances against which the November 3, 1992 rattan delivery was charged, to Us, seals the case in favor of the [respondent]."[7]

Hence, this Petition.[8]


Petitioner avers two reversible errors, which the Court of Appeals allegedly committed as follows:[9]

"I.  The Honorable Court of Appeals, Eighth Division, erred in reversing and setting aside the Decision of the Regional Trial Court and entering a new one dismissing the complaint, as said Decision of the Court of Appeals is without factual and legal basis;

"II.The Honorable Court of Appeals, Eighth Division, erred in completely brushing aside the findings of fact of the trial court and supplant[ing them] by its own findings which are based merely on suppositions, surmises and conjectures."

In fine, this Court will determine whether the CA erred in reversing the factual findings of the trial court.  In addition, it will discuss the applicability of the Statute of Frauds to the present case.

This Court's Ruling

The Petition is meritorious.

Main Issue:
Factual Findings of the RTC and the CA

Petitioner contends that there was a contract between him and respondent, under which the former allegedly agreed to supply rattan poles to the latter at the stipulated price.  He further alleges that he had already delivered rattan poles to respondent, who thereafter refused to pay for them despite repeated demands. Petitioner prays that the CA Decision be reversed and the RTC judgment sustaining his position be reinstated.

Respondent, on the other hand, reiterates the CA ruling that he contracted with Savilla, not with petitioner.  He further alleges that petitioner was merely a partner or an agent of Savilla.

Generally, questions of fact should not be raised in a petition for review under Rule 45 of the Rules of Court.  This rule, however, does not apply when the factual findings of the RTC and the CA are opposite, as in this case.[10] Hence, we waded into the records, and found cogent basis to reverse the factual findings of the appellate court and to uphold those of the trial court.

No Proof of Agency or Partnership

As earlier noted, the CA had ruled that petitioner was a mere agent or partner of Savilla, with whom respondent had admittedly contracted.  It relied on two pieces of documentary evidence:  (1) the Scale Report, indicating the weight of the rattan delivered and bearing the name "B. Savilla" and not that of petitioner; and (2) the cash vouchers reflecting several cash advances that had allegedly been made by Savilla, not petitioner, before the rattan was delivered on November 3, 1992.  Allegedly,  the rattan delivered to respondent was offset by Savilla's cash advances.

These documents, however, do not prove the existence of a partnership[11] or an agency.[12] First, it should be stressed that the bulk of the alleged cash advances had been obtained by Savilla even before petitioner and respondent met for the first time in April 1992.  The cash advances, therefore, were personal to Savilla and should not be charged to petitioner.

Second, that the Scale Report bears the name "B. Savilla," not that of petitioner, does not necessarily support the cause of respondent.  He did not controvert the claim of petitioner that on November 3, 1992, the latter had indeed delivered rattan poles to the former's house in Angeles City.  He merely testified that petitioner had delivered the poles in the latter's alleged capacity as Savilla's partner or agent.  But such contention amounts only to a general denial, because respondent did not set forth the substance of the matters which he had relied upon to support his denial.[13] At the very least, to prove his allegations, he should have presented Savilla as his witness or filed a third-party claim against the latter. Allegations, after all, are not proofs.

The other bases of the CA's ruling are mere conjectures and surmises.  That petitioner went to the residence of Savilla when no payment was made does not at all prove that the former was an agent or a partner of the latter.  That Savilla accompanied petitioner to Palawan where the latter was to get the rattan poles does not support respondent's thesis.  Indeed, that Savilla did so is consistent with the assertion of petitioner that the former, who had been in the trade for a longer period, agreed to help him secure the required permits.

Privity Between Petitioner and Respondent 

At bottom, we agree with the RTC that there was proof of privity of contract between petitioner and respondent.

The Civil Code upholds the spirit over the form, and an agreement will be deemed to exist provided the essential requisites are present.[14] A contract will be upheld as long as there is proof of consent, subject matter and cause.  Moreover, it is generally obligatory in whatever form it may have been entered into.[15] From the moment there is a meeting of minds between the parties, it is perfected. In the present case, the perfection of a valid contract between respondent and petitioner is evident in the latter's testimony, which we quote:

"Q -After Cecilia Buelva told Mr. David Miranda that you were interested in supplying rattan poles to Mr. David Miranda, what did Mr. David Miranda say, if any?

A -  He agreed to be supplied with rattan poles.

Q - After David Miranda had agreed that you supply him with rattan poles, were there other matters which you and Mr. David Miranda talked about?

A -  Yes, sir.

Q - Will you tell the Honorable Court those things or matters which you and Mr. David Miranda talked about and agreed upon?

A -  We talked about the price of the rattan poles.  1 1/4 cm. x 10 ft. is P22.00 each; 1 1/8 cm. x 10 ft. is P18.00.

Q - How about the other sizes?

A -  ¾ cm. x 10 ft. is P10.00; 5/8 cm. x 10 ft. is P5.00; ½ cm. x 10 ft. is P4.00; 7/16 cm. x 10 ft. is P2.45.  This is what we have agreed upon.  As a matter of fact, I was given a piece of paper with the price list.

Q - Those prices which Mr. David Miranda gave you for the rattan poles, what is the place of reference of those prices?

A  -  Angeles City."[16]

Petitioner's testimony was corroborated by Buelva, who testified as follows:

"A -  I told Mr. David Miranda that I have a companion, a certain (Genaro) Cordial who wanted to engage in rattan business, to deliver x x x rattan.

Q - So what was the reaction of David Miranda upon having introduced Genaro Cordial to him?

A -  Miranda agreed that Genaro Cordial may deliver rattan to him.

Q - What else was agreed upon during that conversation between Miranda and Genaro Cordial?

A -  David said as far as I am concerned it is alright for Genaro Cordial to deliver rattan but he should talk the matter over with Berting Savilla who is knowledgeable in Palawan."[17]

In this case, we find no reason to reject the foregoing testimonies.   Indeed, the CA did not show any cogent justification for overruling the assessment of the trial court, which had had firsthand opportunity to observe all the witnesses during the trial.

Secondary  Issue:
Applicability of the Statute of Frauds

The CA and Respondent Miranda stress the absence of a "written memorandum of the alleged contract between the parties."[18] Respondent implicitly argues that the alleged contract is unenforceable under the Statute of Frauds, contained in Article 1403 of the Civil Code which reads:

"Art. 1403.  The following contracts are unenforceable, unless they are ratified:

x x x                                                x x x                                        x x x

"(2)             Those that do not comply with the Statute of Frauds as set forth in this number.  In the following cases an agreement hereafter made shall be unenforceable by action, unless the same, or some note or memorandum thereof, be in writing, and subscribed by the parties charged, or by his agent; evidence, therefore, of the agreement cannot be received without the writing, or a secondary evidence of its contents:

x x x                             x x x                                  x x x

"(d)     An agreement for the sale of goods, chattels or things in action, at a price not less than five hundred pesos, unless the buyer accept and receive part of such goods and chattels, or the evidences, or some of them, of such things in action, or pay at the time some part of the purchase money; but when a sale is made by auction and entry is made by the auctioneer in his sales book, at the time of the sale, of the amount and kind of property sold, terms of sale, price, names of the purchasers and person on whose account the sale is made, it is a sufficient memorandum;

x x x                             x x x                             x x x."

However, the Statute of Frauds applies only to executory and not to completed, executed, or partially executed contracts.[19] Thus, where one party has performed one's obligation, oral evidence will be admitted to prove the agreement.[20] In the present case, it has clearly been established that petitioner had delivered the rattan poles to respondent on November 3, 1992.  Because the contract was partially executed, the Statute of Frauds does not apply.

WHEREFORE, the Petition is hereby GRANTEDThe assailed Decision is SET ASIDE and the trial court Decision REINSTATED.


Melo, (Chairman), Vitug, and Gonzaga-Reyes, JJ., concur.

[1]  Rollo, pp. 49-56.

[2]  Eighth Division composed of Justices Salome A. Montoya, chairman; Conchita Carpio Morales, ponente; and Bernardo P. Abesamis, member.  Justices Montoya and Abesamis concurred in the ponencia.

[3]  Penned by Judge Angel S. Malaya.

[4]  CA Decision, p. 7; rollo, p. 55.

[5]  RTC Decision, pp. 1-4; rollo, pp. 39-42.

[6]   RTC Decision, p. 9; rollo, p. 47.

[7]   CA Decision, pp. 6-7; rollo, pp. 54-55.

[8]  This case was deemed submitted for decision on June 30, 1999, upon receipt by this Court of respondent's Memorandum, signed by Atty. Andres S. Pangilinan Jr. of Pangilinan, Pangilinan & Associates Law Office.  Filed earlier was petitioner's Memorandum, signed by Atty. Amador L. Simando of Simando & Villanueva.

[9]   Petitioner's Memorandum, p. 7; rollo, p. 82.

[10]   In Fuentes v. Court of Appeals (268 SCRA 703, February 26, 1997, per Panganiban, J.), the Court enumerated the exceptions to the general rule as follows:

"(1) When the factual findings of the Court of Appeals and the trial court are contradictory;

(2) When the conclusion is a finding grounded entirely on speculation, surmises or conjectures;

(3) When the inference made by the Court of Appeals from its findings of fact is manifestly mistaken, absurd or impossible;

(4) When there is grave abuse of discretion in the appreciation of facts;

(5) When the appellate court, in making its findings, went beyond the issues of the case, and such findings are contrary to the admissions of both appellant and appellee;

(6)When the judgment of the Court of Appeals is premised on misapprehension of facts;

(7) When the Court of Appeals failed to notice certain relevant facts which, if properly considered, would justify a different conclusion;

(8) When the findings of fact are themselves conflicting;

(9) When the findings of fact are conclusions without citation of the specific evidence on which they are based; and

(10) When the findings of fact of the Court of Appeals are premised on the  absence of evidence but such findings are contradicted by the evidence on record."

[11]   The essential points upon which the parties must agree in a contract of partnership are: (1) mutual contribution to a common stock and (2) joint interest in the profits.

[12]  The essential elements of agency are:  (1) there is an express or implied consent to establish the relationship, (2) a juridical act is executed in relation to a third person, (3) the agent acts as a representative and not for himself, and (4) the agent acts within the scope of his authority.

[13]   § 10, Rule 8 of the Rules of Court.

[14]  The requisites of a valid and perfected contract are:  (1) consent of the contracting parties, (2) an object certain which is the subject matter of the contract and (3) a cause of the obligation which is established.  First Philippine International Bank v. Court of Appeals, 252 SCRA 259, 294, January 24, 1996; Jovan Land, Inc. v. Court of Appeals, 268 SCRA 160, 164, February 12, 1997; San Juan Structural & Steel Fabricators, Inc. v. Court of Appeals, 296 SCRA 631, 648, September 29, 1998; Archipelago Management & Management Corporation v. Court of Appeals, 299 SCRA 43, 52, November 20, 1998.

[15] Tan v. Lim, 296 SCRA 455, 472, September 25, 1998.

[16]   TSN, March 15, 1994, pp. 5-6.

[17]   TSN, November 18, 1993, p. 24.

[18] CA Decision, p. 5; rollo, p. 53.  See also respondent's Memorandum, p. 4; rollo, p. 96.

[19]   Hernandez v. Andal, 78 Phil. 196, 204, March 29, 1947; Pascual v. Realty Investment, Inc., 91 Phil. 257, 260, May 12, 1952; and Diwa v. Donato, 234 SCRA 608, 615-615, July 29, 1994.

[20]   National Bank v. Philippine Vegetable Oil Co., 49 Phil. 857, 867, January 14, 1927.

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