DBP v. Medrano (G.R. No. 167004; February 7, 2011)


FACTS: Respondent Ben Medrano was the President and General Manager of Paragon Paper Industries, Inc. (Paragon) wherein he owned 37,681 shares. Sometime in 1980, petitioner DBP sought to consolidate its ownership in Paragon. In one of the meetings of the Paragon Executive Committee, the Chairman Jose B. de Ocampo, instructed Medrano, as President and General Manager of Paragon, to contact or sound off the minority stockholders. Medrano testified that all, including himself, agreed to sell, and all took steps to have their shares surrendered to DBP for payment.

DBP, through Jose de Ocampo, who was also a member of its Board of Governors, also offered Medrano a commission ofP185,010.00 if the latter could persuade all the other Paragon minority stockholders to sell their shares. Since Medrano was able to convince only two stockholders, his commission was reduced to P155,455.00.

Thereafter, Medrano demanded that DBP pay the value of his shares, which he had already turned over, and his P155,455.00 commission. When DBP did not heed his demand, Medrano filed a complaint for specific performance and damages against DBP. While under Article 1545 of the Civil Code, DBP had the right not to proceed with the agreement upon Medrano’s failure to comply with the conditions, DBP was deemed to have waived the performance of the conditions when it chose to retain Medrano’s shares and later transfer them to the APT.

ISSUE: Did the CA erred in applying Article 1545 of the Civil Code?

HELD: As a rule, a contract is perfected upon the meeting of the minds of the two parties. Under Article 1475 of the Civil Code, a contract of sale is perfected the moment there is a meeting of the minds on the thing which is the object of the contract and on the price.The present case does not fall under this article because there is no perfected contract of sale to speak of. Medrano’s failure to comply with the conditions set forth by DBP prevented the perfection of the contract of sale. Hence, Medrano and DBP remained as prospective-seller and prospective-buyer and not parties to a contract of sale.

This notwithstanding, however, the Court still did not agree with DBP’s argument that since there is no perfected contract of sale, DBP should not be ordered to pay Medrano any amount.

It was not proper for DBP to hold on to Medrano’s shares of stock after it became obvious that he will not be able to comply with the conditions for the contract of sale. From that point onwards, the prudent and fair thing to do for DBP was to return Medrano’s shares because DBP had no just or legal ground to retain them. Equitable considerations militate against DBP’s claimed right over the subject shares. DENIED.