Republic of the Philippines Avenue, Quezon City doing business under the name "España

SUPREME COURT Extension Iceplant and Cold Storage."

Manila
In July 1972, two letter-quotations were submitted by Delta to
THIRD DIVISION Hector Genuino offering to sell black iron pipes. T

G.R. No. L-55665 February 8, 1989 The letter dated July 3, 1972 quoted Delta's selling price for 1,200
length of black iron pipes schedule 40, 2" x 20' including delivery
DELTA MOTOR CORPORATION, petitioner,  at P66,000.00 with the following terms of payment:
vs.
EDUARDA SAMSON GENUINO, JACINTO S. GENUINO, Jr., a. 20% of the net contract price or P13,200.00 will
VICTOR S. GENUINO, HECTOR S. GENUINO, EVELYN S. be due and payable upon signing of the contract
GENUINO, and The COURT OF APPEALS, respondents. papers.

Alcasid, Villanueva & Associates for petitioner. b. 20% of the net contract price or P13,200.00 will
be due and payable before commencement of
Luna, Puruganan, Sison & Ongkiko for respondents. delivery.

c. The balance of 60% of the net contract price or

P39,600.00 with 8% financing charge per annum
CORTES, J.: will be covered by a Promissory Note bearing
interest at the rate of 14% per annum and payable
Petitioner, through this petition for review by certiorari, appeals in TWELVE (12) equal monthly installment (sic), the
from the decision of respondent appellate court in CA-G.R. No. first of which will become due thirty (30) days after
59848-R entitled "Eduarda Samson Genuino, et al. v. Delta Motor the completion of delivery. Additional 14% will be
Corporation" promulgated on October 27, 1980. charged for all delayed payments. [Exh. "A"; Exh.
1.]
The facts are as follows:
The second letter-quotation dated July 18, 1972 provides for the
Petitioner Delta Motor Corporation (hereinafter referred to as selling price of 150 lengths of black iron pipes schedule 40, 1 1/4"
Delta) is a corporation duly organized and existing under x 20' including delivery at P5,400.00 with the following terms of
Philippine laws. payment:

On the other hand, private respondents are the owners of an a. 50% of the net contract price or P 2,700.00 will
iceplant and cold storage located at 1879 E. Rodriguez Sr. be due and payable upon signing of the contract
papers.

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 b. 50% of the net contract price or P 2,700.00 will the Genuinos did not accept the offer because the construction of
be due and payable before commencement of the ice plant building where the pipes were to be installed was not
delivery. [Exh. "C"; Exh. "2".] yet finished.

Both letter-quotations also contain the following stipulations as to Almost three years later, on April 15, 1975, Hector Genuino, in
delivery and price offer: behalf of España Extension Ice Plant and Cold Storage, asked
Delta to deliver the iron pipes within thirty (30) days from its
DELIVERY receipt of the request. At the same time private respondents
manifested their preparedness to pay the second installment on
Ex-stock subject to prior sales. both contracts upon notice of Delta's readiness to deliver.

xxx xxx xxx Delta countered that the black iron pipes cannot be delivered on
the prices quoted as of July 1972. The company called the
Our price offer indicated herein shall remain firm attention of the Genuinos to the stipulation in their two (2)
within a period of thirty (30) days from the date contracts that the quoted prices were good only within thirty (30)
hereof. Any order placed after said period will be days from date of offer. Whereupon Delta sent new price
subject to our review and confirmation. [Exh. "A" quotations to the Genuinos based on its current price of black iron
and "C"; Exhs. "l" and "2".] pipes, as follows:

Hector Genuino was agreeable to the offers of Delta hence, he P241,800.00 for 1,200 lengths of black iron pjpes
manifested his conformity thereto by signing his name in the schedule 40, 2" x 20' [Exh. "G-1".]
space provided on July 17, 1972 and July 24, 1972 for the first
and second letter-quotations, respectively. P17,550.00 for 150 lengths of black iron pipes
schedule 40, 1 1/4" x 20' [Exh. "G-2".]
It is undisputed that private respondents made initial payments on
both contracts — for the first contract, P13,200.00 and, for the The Genuinos rejected the new quoted prices and instead filed a
second, P2,700.00 — for a total sum of P15,900.00 on July 28, complaint for specific performance with damages seeking to
1972 (Exhs. "B" and "D"]. compel Delta to deliver the pipes. Delta, in its answer prayed for
rescission of the contracts pursuant to Art. 1191 of the New Civil
Likewise unquestionable are the following. the non-delivery of the Code. The case was docketed as Civil Case No. Q-20120 of the
iron pipes by Delta; the non-payment of the subsequent then Court of First Instance of Rizal, Branch XVIII, Quezon City.
installments by the Genuinos; and the non-execution by the
Genuinos of the promissory note called for by the first contract. After trial the Court of First Instance ruled in favor of Delta,the
dispositive portion of its decision reading as follows:
The evidence presented in the trial court also showed that
sometime in July 1972 Delta offered to deliver the iron pipes but

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 WHEREFORE, premises considered, judgment is the Genuinos refused to accept its offer of delivery.
rendered: [CA Decision, pp. 16-17; Rollo, pp. 71-72.]

1. Declaring the contracts, Annexes "A" and "C" of 2. Delta's refusal to make delivery in 1975 unless
the complaint rescinded; the Genuinos pay a price very much higher than
the prices it previously quoted would mean an
2. Ordering defendant to refund to plaintiffs the sum amendment of the contracts. It would be too unfair
of P15,900.00 delivered by the latter as for the plaintiffs if they will be made to bear the
downpayments on the aforesaid contracts; increase in prices of the black iron pipes when they
had already paid quite an amount for said items
3. Ordering plaintiffs to pay defendant the sum of and defendant had made use of the advance
P10,000.00 as attorney's fees; and, payments. That would be unjust enrichment on the
part of the defendant at the expense of the plaintiffs
4. To pay the costs of suit. [CFI Decision, pp. 13- and is considered an abominable business
14; Rollo, pp. 53-54.] practice. [CA Decision, pp. 18-19; Rollo, pp. 73-74.]

On appeal, the Court of Appeals reversed and ordered private Respondent court denied Delta's motion for reconsideration hence
respondents to make the payments specified in "Terms of this petition for review praying for the reversal of the Court of
Payment — (b)" of the contracts and to execute the promissory Appeals decision and affirmance of that of the trial court.
note required in the first contract and thereafter, Delta should
immediately commence delivery of the black iron pipes.* [CA Petitioner argues that its obligation to deliver the goods under both
Decision, p. 20; Rollo, p. 75.] contracts is subject to conditions required of private respondents
as vendees. These conditions are: payment of 20% of the net
The Court of Appeals cited two main reasons why it reversed the contract price or P13,200.00 and execution of a promissory note
trial court, namely: called for by the first contract; and payment of 50% of the net
contract price or P2,700.00 under the second contract. These,
1. As Delta was the one who prepared the Delta posits, are suspensive conditions and only upon their
contracts and admittedly, it had knowledge of the performance or compliance would its obligation to deliver the
fact that the black iron pipes would be used by the pipes arise [Petition, pp. 9-12; Rollo, pp. 1720.] Thus, when
Genuinos in their cold storage plant which was then private respondents did not perform their obligations; when they
undergoing construction and therefore, would refused to accept petitioner's offer to deliver the goods; and, when
require sometime before the Genuinos would it took them three (3) long years before they demanded delivery of
require delivery, Delta should have included in said the iron pipes that in the meantime, great and sudden fluctuation
contracts a deadline for delivery but it did not. As a in market prices have occurred; Delta is entitled to rescind the two
matter of fact neither did it insist on delivery when (2) contracts.

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Delta relies on the following provision of law on rescission: breach, let alone a breach of contract, as would warrant
rescission.
Art. 1191. The power to rescind obligations is
implied in reciprocal ones, in case one of the Firstly, it is undisputed that a month after the execution of the two
obligors should not comply with what is incumbent (2) contracts, Delta's offer to deliver the black iron pipes was
upon him. rejected by the Genuinos who were "not ready to accept delivery
because the cold storage rooms have not been constructed yet.
The injured party may choose between the Plaintiffs (private respondents herein) were short-funded, and did
fulfillment and the rescission of the obligation, with not have the space to accommodate the pipes they ordered" [CFI
the payment of damages in either case. He may Decision, p. 9; Rollo, p. 49].
also seek rescission, even after he has chosen
fulfillment, if the latter should become impossible. Given this answer to its offer, Delta did not do anything. As
testified by Crispin Villanueva, manager of the Technical Service
The court shall decree the rescission claimed, department of petitioner:
unless there be just cause authorizing the fixing of
a period. Q You stated that you sent a certain
Evangelista to the España Extension
This is understood to be without prejudice to the and Cold Storage to offer the
rights of third persons who have acquired the thing, delivery subject matter of the
in accordance with articles 1385 and 1388 and the contract and then you said that Mr.
Mortgage Law. Evangelista reported (sic) to you that
plaintiff would not accept delivery, is
In construing Art. 1191, the Supreme Court has stated that, that correct, as a summary of your
"[r]escission will be ordered only where the breach complained of statement?
is substantial as to defeat the object of the parties in entering into
the agreement. It will not be granted where the breach is slight or A A Yes, sir.
casual." [Phil. Amusement Enterprises, Inc. v. Natividad, G.R. No.
L-21876, September 29, 1967, 21 SCRA 284, 290.] Further, "[t]he Q Now, what did you do in the
question of whether a breach of a contract is substantial depends premises (sic)?
upon the attendant circumstances." [Universal Food Corporation
v. Court of Appeals, G. R. No. L-29155, May 13,1970,33 SCRA 1, A Yes, well, we take the word of Mr.
18]. Evangelista. We could not deliver
the said black iron pipes, because
In the case at bar, the conduct of Delta indicates that the as per information the Ice Plant is
Genuinos' non-performance of its obligations was not a substantial not yet finished.

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 Q Did you not report that fact to ... We are, therefore, enclosing our re-quoted
any other defendant-officials of the proposal based on our current price. [Exh. "G".]
Delta Motor Corporation?
Moreover, the power to rescind under Art. 1191 is not
A No. absolute. "[T]he act of a party in treating a contract as cancelled
or resolved on account of infractions by the other contracting party
Q And you did not do anything after must be made known to the other and is always provisional, being
that? ever subject to scrutiny and review by the proper court."
[University of the Phils. v. De los Angeles, G. R. No. L-28602,
A Because taking the word of my September 29, 1970, 35 SCRA 102, 107; Emphasis supplied.]
Engineer we did not do anything.
[TSN, December 8, 1975, pp. 18- In the instant case, Delta made no manifestation whatsoever that
19.] it had opted to rescind its contracts with f-he Genuinos. It only
raised rescission as a defense when it was sued for specific
xxx xxx xxx performance by private respondents.

And secondly, three (3) years later when the Genuinos offered to Further, it would be highly inequitable for petitioner Delta to
make payment Delta did not raise any argument but merely rescind the two (2) contracts considering the fact that not only
demanded that the quoted prices be increased. Thus, in its does it have in its possession and ownership the black iron pipes,
answer to private respondents' request for delivery of the pipes, but also the P15,900.00 down payments private respondents have
Delta countered: paid. And if petitioner Delta claims the right to rescission, at the
very least, it should have offered to return the P15,900.00 down
Thank you for your letter dated April 15, 1975, payments [See Art. 1385, Civil Code and Hodges v. Granada, 59
requesting for delivery of Black Iron pipes;. Phil. 429 (1934)].

We regret to say, however, that we cannot base our It is for these same reasons that while there is merit in Delta's
price on our proposals dated July 3 and July 18, claim that the sale is subject to suspensive conditions, the Court
1972 as per the following paragraph quoted on said finds that it has, nevertheless, waived performance of these
proposal: conditions and opted to go on with the contracts although at a
much higher price. Art. 1545 of the Civil Code provides:
Our price offer indicated herein shall
remain firm within a period of thirty Art. 1545. Where the obligation of either party to a
(30) days from the date hereof. Any contract of sale is subject to any condition which is
order placed after said period will be not performed, such party may refuse to proceed
subject to our review and with the contract or he may waived performance of
confirmation. the condition. . . . [Emphasis supplied.]

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Finally, Delta cannot ask for increased prices based on the price stipulation in the two (2) contracts as to delivery, ex-stock subject
offer stipulation in the contracts and in the increase in the cost of to prior sales, means that "the goods have not been delivered and
goods. Reliance by Delta on the price offer stipulation is that there are no prior commitments other than the sale covered
misplaced. Said stipulation makes reference to Delta's price offer by the contracts.. . once the offer is accepted, the company has
as remaining firm for thirty (30) days and thereafter, will be subject no more option to change the price." [CFI Decision, p. 5; Rollo, p.
to its review and confirmation. The offers of Delta, however, were 45; Emphasis supplied.] Thus, petitioner cannot claim for higher
accepted by the private respondents within the thirty (30)-day prices for the black iron pipes due to the increase in the cost of
period. And as stipulated in the two (2) letter-quotations, goods. Based on the foregoing, petitioner Delta and private
acceptance of the offer gives rise to a contract between the respondents Genuinos should comply with the original terms of
parties: their contracts.

In the event that this proposal is acceptable to you, WHEREFORE, the decision of the Court of Appeals is hereby
please indicate your conformity by signing the AFFIRMED.
space provided herein below which also serves as
a contract of this proposal. [Exhs. "A" and "C"; SO ORDERED.
Exhs. "1" and "2".]
Fernan, C.J., Gutierrez, Jr., Feliciano and Bidin, JJ., concur.
And as further provided by the Civil Code:
 
Art. 1319. Consent is manifested by the meeting of
the offer and the acceptance upon the thing and the Footnotes
cause which are to constitute the contract.
* The Court of Appeals decision was penned by
Art. 1475. The contract of sale is perfected at the Justice German. Justice de la Fuente wrote a
moment there is a meeting of minds upon thing separate concurring opinion. Justice Cenzon
which is the object of the contract and upon the concurred both with Justice German's decision and
price. Justice de la Fuente's opinion. Justice Gancayco,
however, wrote a separate dissenting opinion to
Thus, the moment private respondents accepted the offer of Delta, which Justice Patajo concurred.
the contract of sale between them was perfected and neither party
could change the terms thereof.

Neither could petitioner Delta rely on the fluctuation in the market

price of goods to support its claim for rescission. As testified to by
petitioner's Vice-President of Marketing for the Electronics,
Airconditioning and Refrigeration division, Marcelino Caja, the

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