Swedish Match v CA



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  Swedish Match v CA F: Swedish Match, AB (SMAB) is a Swedish corporation that had three subsidiary corporations in the Philippines: Phimco Industries, Inc, Provident Tree Farms, Inc (PTFI), and OTT/Louie, Inc-SMAB was sold by its parent company to Eemland Management Services which is now known asSwedish Match NV SMNV initiated steps to sell its business as such, it instructed Ed Enriquez, VP of the management company of Swedish Match group to sell the Phimco shares on or before June 30, 1990 Enriquez came to the Philippines in November 1989 and informed the Philippine financial and business circles that the Phimco shares were for saleALS Management with its President and GM Antonio Litonjua submitted to SMAB a firm offer to buy all of the latter’s shares in Phimco and all of Phimco’s shares in PTFI and OTT/Louie (Phils), Inc for the sum of P750MSMAB informed respondents that the price offer was below their expectations but urged them to undertake a comprehensive review and analysis of the value and profit potentials of the Phimco shares Thereafter, an exchange of correspondence ensued between petitioners and respondents Litonjua offered to buy the disputed shares, excluding the lighter division for 306M, which per another letter of the same date was increased to US36 million Litonjua stressed that the bid amount could be   adjusted subject to availability of additional information and audit verification of the company financesRossi, CEO of SMAB, sent a letter informing Litonjua that ALS should undertake a due diligenceprocess or pre-acquisition audit and review of the draft contract for their convenience Rossi made it clear that the final offer must be submitted on or before June 30, 1990Litonjua informed Rossi that it is not possible for them to comply with their request since the financial audits would be completed only until the end of July Enriquez sent notice to Litonjua that they would be constrained to entertain bids from other parties in view of Litonjua’s failure to make a firm commitment for the Phimco shares Rossi wrote a letter to Litonjua on 3 July 1990 informing the latter that they already signed an agreement with a local group He told Litonjua that his bid would no longer be considered unless the local group would fail to consummate the transaction on or before 15 September 1990 Litonjua asserted that, for all intents and purposes, the US36 million bid which he submitted on 21 May 1990 was their final bid based on the financial statements for the year 1989 Two months after, Enrique wrote Litonjua again informing him that the sale did not prosper He then invited Litonjua to resume negotiations with SMAB for the Phimco shares He indicated thatSMAB would be prepared to negotiate with ALS on an exclusive basis for a period of fifteen (15)days from 26 September 1990 subject to the terms contained in the letter   Litonjua objected to the totally new set of terms and conditions for the sale of the Phimco shares He emphasized that the contract between ALS and SMAB had already been perfected Thus, ALSfiled before the RTC of Pasig a complaint for specific performance   with damages, with a prayer for the issuance of a writ of preliminary injunction , against SMAB ALS’ arguments: Specific performance   for ALS to comply with their alleged agreement Damages   they alleged that there was an abuse of right on the part of Phimco because they induced SMAB to not comply with their agreement with ALS; because it was through Phimco’s delay in the submission of their documents to the auditing firm that they were not able to submit their offer on the prescribed dateSMAB’s arguments: no cause of action, no perfected contract Statute of Frauds bars the cause of action of ALS because there was no written instrument evidencing the alleged sale of the Phimco shares to respondents (I don’t know why they had to include the Statute of Frauds argument; it negated their first argument that no contract was perfected Nahirapan pa sila tuloy haha)The RTC dismissed respondents’ complaint No perfected contract The letter indicating the 36 million dollars for the shares was a mere offer The due diligence process was merely a preparatory stage of the contract CA reversed the decision The correspondences between the parties constitute a valid memorandum supporting Art 1403 of the NCC Case remanded for further proceedings ISSUES 1 WON the CA erred in reversing the trial court’s decision dismissing the complaint for being unenforceable under the Statute of FraudsSMAB’s argument: Statute of Frauds requires not just the existence of any note or memorandum but that such note or memorandum be an evidence of an agreement to sell Lintojua made it clear that the offer of 36 M is not their final offer Besides, subsequent to said offer, Lintojua again wrote SMAB informing them that they cannot submit their final offer on or before June 30 ALS’ argument: Contract was perfected They orally accepted their revised offer As a matter of fact, SMAB promised to reimburse 20,000 dollars for the due diligence process There was also partial performance of the perfected contract on their part as they engaged in the audit process with the approval of the SMAB so the Statute of Frauds is no longer necessaryH: YES The CA erred The term “Statute of Frauds” is descriptive of statutes which require certain classes of contracts to be in writing The Statute does not deprive the parties of the right to contract with respect to the matters therein involved, but merely regulates the formalities of the contract necessary to render it enforceable Evidence of the agreement cannot be received withoutthe writing or a secondary evidence of its contents Clearly, the purpose of the form is for evidentiary purposes only The purpose of the Statute is to prevent fraud and perjury in the enforcement of obligations depending for their evidence on the unassisted memory of witnesses, by requiring certain  enumerated contracts and transactions to be evidenced by a writing signed by the party to be charged However, for a note or memorandum to satisfy the Statute, it must be complete in itself It must contain the names of the parties, the terms and conditions of the contract, and a description of the property sufficient to render it capable of identification In the case at bar, the exchange of correspondence between the parties hardly constitutes the note or memorandum within the context of Art 1403 Rossi’s letter, is not complete in itself First, it does not indicate at what price the shares were being sold In paragraph (5) of the letter, respondents were supposed to submit their final offer in US dollar terms, at that after the completion of the due diligence process The paragraph undoubtedly proves that there was as yet no definite agreement as to the price Second, the letter does not state the mode of payment of the price In fact, Litonjua was supposed to indicate in his final offer how and where payment for the shares was planned to be made 2 WON there was a perfected contract of sale between petitioners and respondents with respect to the Phimco shares?H: NO Requisites for a valid contract of sale: (a) consent or meeting of the minds, that is, consent totransfer ownership in exchange for the price; (b) determinate subject matter, and (c) price certain in money or its equivalent Case at bar, Litonjua’s letter proposing the acquisition of the Phimco shares for US36 million was merely an offer This offer, however, in Litonjua’s own words, “is understood to be subject to adjustment on the basis of an audit of the assets, liabilities and net worth of Phimco andits subsidiaries and on the final negotiation between ourselves” Litonjua repeatedly stressed in his letters that they would not be able to submit their final bid by 30 June 1990 With indubitable inconsistency, respondents later claimed that for all intents and purposes, the US36 million was their final bid Respondents’ attempt to prove the alleged verbal acceptance of their US36 million bid becomes futile in the face of the overwhelming evidence on record that there was in the first place no meeting of the minds with respect to the price Respondents’ failure to submit theirfinal bid on the deadline set by petitioners prevented the perfection of the contract of sale  Itwas not perfected due to the absence of one essential element which was the price certain in money or its equivalentRespondents’ plea of partial performance should likewise fail because SMAB cannot be compelled to comply with the terms of the alleged contract for the simple reason that it is inexistent The Statute of Frauds is applicable only to contracts which are executory and not to those which have been consummated either totally or partially If a contract has been totally or partially performed, the exclusion of parol evidence would promote fraud or bad faith, for it would enable the defendant to keep the benefits already derived by him from the transaction in litigation, and atthe same time, evade the obligations, responsibilities or liabilities assumed or contracted by him thereby This rule, however, is predicated on the fact of ratification of the contract within the