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Visayan Sawmill vs. Court of Appeals Case

The Supreme Court ruled in favor of Visayan Sawmill Company in a case regarding the cancellation of a contract for the sale of scrap iron. Visayan Sawmill and RJH Trading entered into a contract for the sale of scrap iron, subject to RJH opening a letter of credit. RJH began gathering scrap iron but did not open the letter of credit on time. Visayan Sawmill then cancelled the contract. The lower courts had ruled in favor of RJH, but the Supreme Court held that the failure to comply with the condition of opening the letter of credit justified cancellation of the contract.

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Benedicto Pintor
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59 views2 pages

Visayan Sawmill vs. Court of Appeals Case

The Supreme Court ruled in favor of Visayan Sawmill Company in a case regarding the cancellation of a contract for the sale of scrap iron. Visayan Sawmill and RJH Trading entered into a contract for the sale of scrap iron, subject to RJH opening a letter of credit. RJH began gathering scrap iron but did not open the letter of credit on time. Visayan Sawmill then cancelled the contract. The lower courts had ruled in favor of RJH, but the Supreme Court held that the failure to comply with the condition of opening the letter of credit justified cancellation of the contract.

Uploaded by

Benedicto Pintor
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd

VISAYAN SAWMILL COMPANY, INC. VS.

COURT of APPEALS

G.R. No. 83851.

March 3, 1993

219 SCRA 378

FACTS:

On May 1, 1983, RJH Trading and Visayan Sawmill Company, Inc. entered into a sale involving scrap iron
located at the stockyard of petitioner company at Cawitan, Sta. Catalina, Negros Oriental, subject to the
condition that RJH Trading will open a leter of credit in the amount of P250,000 in favor of petitioner
company on or before May 15, 1983. This is evidenced by a contract entitled “Purchase and Sale of
Scrap Iron” duly signed by both parties.

RJH Trading started to dig and gather scrap iron at the defendant- appellant’s premises until May 30
when Visayan Sawmill Company Inc. allegedly directed private respondent to desist from pursuing the
work in view of an alleged case filed against private respondent by a certain Alberto Pursuelo. However,
on May 23, 1983, petitioner company alleged that they sent a telegram to private respondent canceling
the contract of sale because of failure of the latter to comply with the conditions. On May 24, 1983, RJH
Trading informed petitioner company by telegram that the letter of credit was opened May 12, 1983 at
BPI main office in Ayala, but that the transmittal was delayed. On May 26, 1983, petitioner company
received a letter of advice from the Dumaguete City Branch of the BPI. On July 19, 1983, RJH Trading
sent a series of telegrams stating that the case filed against him by Pursuelo had been dismissed and
demanding that petitioner company comply with the Deed of Sale, otherwise a case will be filed against
them.

Petitioner company’s counsel on July 20, 1983 informed private respondent’s counsel that petitioner
company is unwilling to continue with the sale due to private respondent’s failure to comply with
essential preconditions of the contract. Private respondent filed an action for specific performance and
damages with the trial court.

The trial court rendered its decision in favor of the private respondent. The petitioner appealed from
said decision to the Court of Appeals; however, the appellate court affirmed with modification the
decision of the lower court. Hence, this petition.

ISSUE:

Whether or not the private respondent’s non-compliance with essential precondition justified the
cancellation of the contract.
RULING:

The Supreme Court held that the nature of the transaction between the petitioner company and the
private respondent is a mere contract to sell, and not a contract of sale. The petitioner company’s
obligation is subject to a positive suspensive condition, which is the private respondent’s opening,
making or indorsing of an irrevocable and unconditional letter of credit. The failure of the private
respondent to comply with the positive suspensive condition cannot even be considered a breach but
simply an event that prevented the obligation of petitioner company to convey title from acquiring
binding force. Hence, the petition is granted and the assailed decision is reversed.

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