7/19/2016

G.R.No.L116650

TodayisTuesday,July19,2016

RepublicofthePhilippines
SUPREMECOURT
Manila
FIRSTDIVISION

G.R.No.L116650May23,1995
TOYOTASHAW,INC.,petitioner,
vs.
COURTOFAPPEALSandLUNAL.SOSA,respondents.

DAVIDE,JR.,J.:
AttheheartofthepresentcontroversyisthedocumentmarkedExhibit"A" 1fortheprivaterespondent,whichwassigned
byasalesrepresentativeofToyotaShaw,Inc.namedPopongBernardo.Thedocumentreadsasfollows:

4
June
1989
AGREEMENTSBETWEENMR.SOSA
&POPONGBERNARDOOFTOYOTA
SHAW,INC.
1. all necessary documents will be submitted to TOYOTA SHAW, INC. (POPONG BERNARDO) a week
after,uponarrivalofMr.SosafromtheProvince(Marinduque)wheretheunitwillbeusedonthe19thof
June.
2.thedownpaymentofP100,000.00willbepaidbyMr.SosaonJune15,1989.
3.theTOYOTASHAW,INC.LITEACEyellow,willbepickup[ sic]andreleasedbyTOYOTASHAW,INC.
onthe17thofJuneat10a.m.
Verytrulyyours,
(Sgd.)POPONGBERNARDO.
Wasthisdocument,executedandsignedbythepetitioner'ssalesrepresentative,aperfectedcontractofsale,binding
upon the petitioner, breach of which would entitle the private respondent to damages and attorney's fees?The trial
court and the Court ofAppeals took the affirmative view.The petitioner disagrees. Hence, this petition for review on
certiorari.
The antecedents as disclosed in the decisions of both the trial court and the Court of Appeals, as well as in the
pleadingsofpetitionerToyotaShaw,Inc.(hereinafterToyota)andrespondentLunaL.Sosa(hereinafterSosa)areas
follows.SometimeinJuneof1989,LunaL.SosawantedtopurchaseaToyotaLiteAce.Itwasthenaseller'smarket
andSosahaddifficultyfindingadealerwithanavailableunitforsale.ButuponcontactingToyotaShaw,Inc.,hewas
toldthattherewasanavailableunit.Soon14June1989,Sosaandhisson,Gilbert,wenttotheToyotaofficeatShaw
Boulevard,Pasig,MetroManila.TheretheymetPopongBernardo,asalesrepresentativeofToyota.
SosaemphasizedtoBernardothatheneededtheLiteAcenotlaterthan17June1989becausehe,hisfamily,anda
balikbayanguestwoulduseiton18June1989togotoMarinduque,hishomeprovince,wherehewouldcelebratehis
birthdayonthe19thofJune.Headdedthatifhedoesnotarriveinhishometownwiththenewcar,hewouldbecome
a "laughing stock." Bernardo assured Sosa that a unit would be ready for pick up at 10:00 a.m. on 17 June 1989.
Bernardo then signed the aforequoted "Agreements Between Mr. Sosa & Popong Bernardo of Toyota Shaw, Inc." It
wasalsoagreeduponbythepartiesthatthebalanceofthepurchasepricewouldbepaidbycreditfinancingthrough
B.A.Finance,andforthisGilbert,onbehalfofhisfather,signedthedocumentsofToyotaandB.A.Financepertaining
totheapplicationforfinancing.
http://www.lawphil.net/judjuris/juri1995/may1995/gr_116650_1995.html

1/6

7/19/2016

G.R.No.L116650

Thenextday,15June1989,SosaandGilbertwenttoToyotatodeliverthedownpaymentofP100,000.00.Theymet
Bernardo who then accomplished a printed Vehicle Sales Proposal (VSP) No. 928,2 on which Gilbert signed under the
subheadingCONFORME.Thisdocumentshowsthatthecustomer'snameis"MR.LUNASOSA"withhomeaddressatNo.2316
Guijo Street, United Paraaque II that the model series of the vehicle is a "LiteAce 1500" described as "4 Dr minibus" that
paymentisby"installment,"tobefinancedby"B.A.,"3withtheinitialcashoutlayofP100,000.00brokendownasfollows:

a)
b)
c)

downpayment
insurance
BLTregistrationfee
CHMOfee
servicefee
accessories

P53,148.00
P13,970.00
P1,067.00
P2,715.00
P500.00
P29,000.00

and that the "BALANCE TO BE FINANCED" is "P274,137.00." The spaces provided for "Delivery Terms" were not
filledup.Italsocontainsthefollowingpertinentprovisions:
CONDITIONSOFSALES
1.Thissaleissubjecttoavailabilityofunit.
2.StatedPriceissubjecttochangewithoutpriornotice,Priceprevailingandineffectattimeofsellingwill
apply....
RodrigoQuirante,theSalesSupervisorofBernardo,checkedandapprovedtheVSP.
On17June1989,ataround9:30a.m.,BernardocalledGilberttoinformhimthatthevehiclewouldnotbereadyfor
pickupat10:00a.m.aspreviouslyagreeduponbutat2:00p.m.thatsameday.At2:00p.m.,SosaandGilbertmet
Bernardo at the latter's office.According to Sosa, Bernardo informed them that the LiteAce was being readied for
delivery.Afterwaitingforaboutanhour,Bernardotoldthemthatthecarcouldnotbedeliveredbecause"nasulotang
unitngibangmalakas."
Toyotacontends,however,thattheLiteAcewasnotdeliveredtoSosabecauseofthedisapprovalbyB.A.Financeof
the credit financing application of Sosa. It further alleged that a particular unit had already been reserved and
earmarkedforSosabutcouldnotbereleasedduetotheuncertaintyofpaymentofthebalanceofthepurchaseprice.
ToyotathengaveSosatheoptiontopurchasetheunitbypayingthefullpurchasepriceincashbutSosarefused.
AfteritbecameclearthattheLiteAcewouldnotbedeliveredtohim,Sosaaskedthathisdownpaymentberefunded.
ToyotadidsoontheverysamedaybyissuingaFarEastBankcheckforthefullamountofP100,000.00, 4thereceipt
of which was shown by a check voucher of Toyota, 5 which Sosa signed with the reservation, "without prejudice to our future
claimsfordamages."

Thereafter,SosasenttwoletterstoToyota.Inthefirstletter,dated27June1989andsignedbyhim,hedemandedthe
refund,withinfivedaysfromreceipt,ofthedownpaymentofP100,000.00plusinterestfromthetimehepaiditandthe
payment of damages with a warning that in case of Toyota's failure to do so he would be constrained to take legal
action. 6 The second, dated 4 November 1989 and signed by M. O. Caballes, Sosa's counsel, demanded one million pesos
representinginterestanddamages,again,withawarningthatlegalactionwouldbetakenifpaymentwasnotmadewithinthree
days.7Toyota'scounselansweredthroughaletterdated27November1989 8refusing to accede to the demands of Sosa. But
even before this answer was made and received by Sosa, the latter filed on 20 November 1989 with Branch 38 of the Regional
Trial Court (RTC) of Marinduque a complaint againstToyota for damages underArticles 19 and 21 of the Civil Code in the total
amountofP1,230,000.00.9Healleges,interalia,that:

9. As a result of defendant's failure and/or refusal to deliver the vehicle to plaintiff, plaintiff suffered
embarrassment,humiliation,ridicule,mentalanguishandsleeplessnightsbecause:(i)heandhisfamily
wereconstrainedtotakethepublictransportationfromManilatoLucenaCityontheirwaytoMarinduque
(ii) his balikbayanguest canceled his scheduled first visit to Marinduque in order to avoid the
inconvenience of taking public transportation and (iii) his relatives, friends, neighbors and other
provincemates,continuouslyirkedhimabout"hisBrandNewToyotaLiteAcethatneverwas."Under
the circumstances, defendant should be made liable to the plaintiff for moral damages in the amount of
OneMillionPesos(P1,000,000.00).10
Initsanswertothecomplaint,ToyotaallegedthatnosalewasenteredintobetweenitandSosa,thatBernardohadno
authority to sign Exhibit "A" for and in its behalf, and that Bernardo signed Exhibit "A" in his personal capacity. As
special and affirmative defenses, it alleged that: the VSP did not state date of delivery Sosa had not completed the
documents required by the financing company, and as a matter of policy, the vehicle could not and would not be
releasedpriortofullcompliancewithfinancingrequirements,submissionofalldocuments,andexecutionofthesales
http://www.lawphil.net/judjuris/juri1995/may1995/gr_116650_1995.html

2/6

7/19/2016

G.R.No.L116650

agreement/invoicetheP100,000.00wasreturnedtoandreceivedbySosathevenuewasimproperlylaidandSosa
didnothaveasufficientcauseofactionagainstit.Italsointerposedcompulsorycounterclaims.
Aftertrialontheissuesagreeduponduringthepretrialsession,11thetrialcourtrenderedon18February1992adecision
in favor of Sosa. 12 It ruled that Exhibit "A," the "AGREEMENTS BETWEEN MR. SOSAAND POPONG BERNARDO," was a
validperfectedcontractofsalebetweenSosaandToyotawhichboundToyotatodeliverthevehicletoSosa,andfurtheragreed
withSosathatToyotaactedinbadfaithinsellingtoanothertheunitalreadyreservedforhim.

As to Toyota's contention that Bernardo had no authority to bind it through Exhibit "A," the trial court held that the
extentofBernardo'sauthority"wasnotmadeknowntoplaintiff,"forastestifiedtobyQuirante,"theydonotvolunteer
anyinformationastothecompany'ssalespolicyandguidelinesbecausetheyareinternalmatters."13Moreover,"[f]rom
the beginning of the transaction up to its consummation when the downpayment was made by the plaintiff, the defendants had
madeknowntotheplaintifftheimpressionthatPopongBernardoisanauthorizedsalesexecutiveasitpermittedthelattertodo
actswithinthescopeofanapparentauthorityholdinghimouttothepublicaspossessingpowertodotheseacts." 14 Bernardo
then"wasanagentofthedefendantToyotaShaw,Inc.andhenceboundthedefendants."15

The court further declared that "Luna Sosa proved his social standing in the community and suffered besmirched
reputation,woundedfeelingsandsleeplessnightsforwhichheoughttobecompensated."16Accordingly,itdisposedas
follows:

WHEREFORE,viewedfromtheabovefindings,judgmentisherebyrenderedinfavoroftheplaintiffand
againstthedefendant:
1.orderingthedefendanttopaytotheplaintiffthesumofP75,000.00formoraldamages
2.orderingthedefendanttopaytheplaintiffthesumofP10,000.00forexemplarydamages
3. ordering the defendant to pay the sum of P30,000.00 attorney's fees plus P2,000.00
lawyer'stransportationfarepertripinattendingtothehearingofthiscase
4.orderingthedefendanttopaytheplaintiffthesumofP2,000.00transportationfarepertrip
oftheplaintiffinattendingthehearingofthiscaseand
5.orderingthedefendanttopaythecostofsuit.
SOORDERED.
Dissatisfiedwiththetrialcourt'sjudgment,ToyotaappealedtotheCourtofAppeals.ThecasewasdocketedasCA
G.R. CV No. 40043. In its decision promulgated on 29 July 1994,17 the Court of Appeals affirmed in toto the appealed
decision.

ToyotanowcomesbeforethisCourtviathispetitionandraisesthecoreissuestatedatthebeginningoftheponencia
and also the following related issues: (a) whether or not the standard VSP was the true and documented
understanding of the parties which would have led to the ultimate contract of sale, (b) whether or not Sosa has any
legalanddemandablerighttothedeliveryofthevehicledespitethenonpaymentoftheconsiderationandthenon
approvalofhiscreditapplicationbyB.A.Finance,(c)whetherornotToyotaactedingoodfaithwhenitdidnotrelease
thevehicletoSosa,and(d)whetherornotToyotamaybeheldliablefordamages.
Wefindmeritinthepetition.
Neither logic nor recourse to one's imagination can lead to the conclusion that Exhibit "A" is a perfected contract of
sale.
Article1458oftheCivilCodedefinesacontractofsaleasfollows:
Art.1458.Bythecontractofsaleoneofthecontractingpartiesobligateshimselftotransfertheownership
of and to deliver a determinate thing, and the other to pay therefor a price certain in money or its
equivalent.
Acontractofsalemaybeabsoluteorconditional.
andArticle1475specificallyprovideswhenitisdeemedperfected:
Art. 1475. The contract of sale is perfected at the moment there is a meeting of minds upon the thing
whichistheobjectofthecontractandupontheprice.
Fromthatmoment,thepartiesmayreciprocallydemandperformance,subjecttotheprovisionsofthelaw
governingtheformofcontracts.
WhatisclearfromExhibit"A"isnotwhatthetrialcourtandtheCourtofAppealsappeartosee.Itisnotacontractof
http://www.lawphil.net/judjuris/juri1995/may1995/gr_116650_1995.html

3/6

7/19/2016

G.R.No.L116650

sale. No obligation on the part of Toyota to transfer ownership of a determinate thing to Sosa and no correlative
obligationonthepartofthelattertopaythereforapricecertainappearstherein.Theprovisiononthedownpayment
ofP100,000.00madenospecificreferencetoasaleofavehicle.Ifitwasintendedforacontractofsale,itcouldonly
refer to a sale on installment basis, as the VSP executed the following day confirmed. But nothing was mentioned
aboutthefullpurchasepriceandthemannertheinstallmentsweretobepaid.
ThisCourthadalreadyruledthatadefiniteagreementonthemannerofpaymentofthepriceisanessentialelement
intheformationofabindingandenforceablecontractofsale. 18 This is so because the agreement as to the manner of
paymentgoesintothepricesuchthatadisagreementonthemannerofpaymentistantamounttoafailuretoagreeontheprice.
Definitenessastothepriceisanessentialelementofabindingagreementtosellpersonalproperty.19

Moreover,Exhibit"A"showstheabsenceofameetingofmindsbetweenToyotaandSosa.Foronething,Sosadidnot
evensignit.Foranother,Sosawaswellawarefromitstitle,writteninboldletters,viz.,
AGREEMENTSBETWEENMR.SOSA&POPONGBERNARDOOFTOYOTASHAW,INC.
thathewasnotdealingwithToyotabutwithPopongBernardoandthatthelatterdidnotmisrepresentthathehadthe
authority to sell any Toyota vehicle. He knew that Bernardo was only a sales representative of Toyota and hence a
mereagentofthelatter.ItwasincumbentuponSosatoactwithordinaryprudenceandreasonablediligencetoknow
theextentofBernardo'sauthorityasan
agent20inrespectofcontractstosellToyota'svehicles.Apersondealingwithanagentisputuponinquiryandmustdiscover
uponhisperiltheauthorityoftheagent.21

At the most, Exhibit "A" may be considered as part of the initial phase of the generation or negotiation stage of a
contractofsale.Therearethreestagesinthecontractofsale,namely:
(a)preparation,conception,orgeneration,whichistheperiodofnegotiationandbargaining,endingatthe
momentofagreementoftheparties
(b)perfectionorbirthofthecontract,whichisthemomentwhenthepartiescometoagreeontheterms
ofthecontractand
(c) consummation or death, which is the fulfillment or performance of the terms agreed upon in the
contract.22
The second phase of the generation or negotiation stage in this case was the execution of the VSP. It must be
emphasizedthatthereunder,thedownpaymentofthepurchasepricewasP53,148.00whilethebalancetobepaidon
installment should be financed by B.A. Finance Corporation. It is, of course, to be assumed that B.A. Finance Corp.
wasacceptabletoToyota,otherwiseitshouldnothavementionedB.A.FinanceintheVSP.
FinancingcompaniesaredefinedinSection3(a)ofR.A.No.5980,asamendedbyP.D.No.1454andP.D.No.1793,
as "corporations or partnerships, except those regulated by the Central Bank of the Philippines, the Insurance
Commission and the CooperativesAdministration Office, which are primarily organized for the purpose of extending
creditfacilitiestoconsumersandtoindustrial,commercial,oragriculturalenterprises,eitherbydiscountingorfactoring
commercial papers or accounts receivables, or by buying and selling contracts, leases, chattel mortgages, or other
evidence of indebtedness, or by leasing of motor vehicles, heavy equipment and industrial machinery, business and
officemachinesandequipment,appliancesandothermovableproperty."23
Accordingly,inasaleoninstallmentbasiswhichisfinancedbyafinancingcompany,threepartiesarethusinvolved:
thebuyerwhoexecutesanoteornotesfortheunpaidbalanceofthepriceofthethingpurchasedoninstallment,the
seller who assigns the notes or discounts them with a financing company, and the financing company which is
subrogated in the place of the seller, as the creditor of the installment buyer. 24 Since B.A. Finance did not approve
Sosa'sapplication,therewasthennomeetingofmindsonthesaleoninstallmentbasis.

We are inclined to believe Toyota's version that B.A. Finance disapproved Sosa's application for which reason it
suggestedtoSosathathepaythefullpurchaseprice.Whenthelatterrefused,ToyotacancelledtheVSPandreturned
tohimhisP100,000.00.Sosa'sversionthattheVSPwascancelledbecause,accordingtoBernardo,thevehiclewas
delivered to another who was "masmalakas" does not inspire belief and was obviously a delayed afterthought. It is
claimedthatBernardosaid,"Pasensiyakayo,nasulotangunitngibangmalakas,"whiletheSosashadalreadybeen
waiting for an hour for the delivery of the vehicle in the afternoon of 17 June 1989. However, in paragraph 7 of his
complaint,Sosasolemnlystates:
On June 17, 1989 at around 9:30 o'clock in the morning, defendant's sales representative, Mr. Popong
Bernardo,calledplaintiff'shouseandinformedtheplaintiff'ssonthatthevehiclewillnotbereadyforpick
up at 10:00 a.m. of June 17, 1989 but at 2:00 p.m. of that day instead. Plaintiff and his son went to
defendant's office on June 17 1989 at 2:00 p.m. in order to pickup the vehicle but the defendant for
reasons known only to its representatives, refused and/or failed to release the vehicle to the plaintiff.
Plaintiffdemandedforanexplanation,butnothingwasgiven...(Emphasissupplied).25
http://www.lawphil.net/judjuris/juri1995/may1995/gr_116650_1995.html

4/6

7/19/2016

G.R.No.L116650

The VSP was a mere proposal which was aborted in lieu of subsequent events. It follows that the VSP created no
demandablerightinfavorofSosaforthedeliveryofthevehicletohim,anditsnondeliverydidnotcauseanylegally
indemnifiableinjury.
Theawardthenofmoralandexemplarydamagesandattorney'sfeesandcostsofsuitiswithoutlegalbasis.Besides,
the only ground upon which Sosa claimed moral damages is that since it was known to his friends, townmates, and
relatives that he was buying a Toyota LiteAce which they expected to see on his birthday, he suffered humiliation,
shame,andsleeplessnightswhenthevanwasnotdelivered.Thevanbecamethesubjectmatteroftalksduringhis
celebration that he may not have paid for it, and this created an impression against his business standing and
reputation.Atthebottomofthisclaimisnothingbutmisplacedprideandego.Heshouldnothaveannouncedhisplan
to buy a Toyota LiteAce knowing that he might not be able to pay the full purchase price. It was he who brought
embarrassmentuponhimselfbybraggingaboutathingwhichhedidnotownyet.
Since Sosa is not entitled to moral damages and there being no award for temperate, liquidated, or compensatory
damages, he is likewise not entitled to exemplary damages. Under Article 2229 of the Civil Code, exemplary or
correctivedamagesareimposedbywayofexampleorcorrectionforthepublicgood,inadditiontomoral,temperate,
liquidated,orcompensatorydamages.
Also,itissettledthatforattorney'sfeestobegranted,thecourtmustexplicitlystateinthebodyofthedecision,and
not only in the dispositive portion thereof, the legal reason for the award of attorney's fees. 26 No such explicit
determinationthereonwasmadeinthebodyofthedecisionofthetrialcourt.Noreasonthusexistsforsuchanaward.

WHEREFORE,theinstantpetitionisGRANTED.ThechallengeddecisionoftheCourtofAppealsinCAG.R.CVNO.
40043aswellasthatofBranch38oftheRegionalTrialCourtofMarinduqueinCivilCaseNo.8914areREVERSED
and SET ASIDE and the complaint in Civil Case No. 8914 is DISMISSED. The counterclaim therein is likewise
DISMISSED.
Nopronouncementastocosts.
SOORDERED.
Padilla,BellosilloandKapunan,JJ.,concur.
Quiason,J.,isonleave.

Footnotes
1Annex"A"ofComplaintinCivilCaseNo.8914ofBranch38oftheRegionalTrialCourtofMarinduque
Rollo,70.
2AnnexofAnswerinCivilCaseNo.8914Rollo,82Annex"E"ofPetitionRollo,85.
3ReferringtoB.A.Finance.
4Exhibit"3,"Annex"G"ofPetitionRollo,86.
5Exhibit"4,"Annex"H"ofPetitionRollo,87.
6Annex"C"ofComplaintinCivilCaseNo.8914Id.,7172.Thisdownpaymenthadalreadybeen
refundedandreceivedbySosahimselfasshownbytheCheckVoucher,Exhibit"4."
7Annex"C1,"Id.Id.,7374.
8Annex"I"ofPetitionId.,8889.
9Annex"B,"Id.Id.,6469.
10Rollo67.
11Id.,8384.
12Id.,90108.PerJudgeRomuloA.Lopez.
13Rollo,104.
14Id.
15Id.
http://www.lawphil.net/judjuris/juri1995/may1995/gr_116650_1995.html

5/6

7/19/2016

G.R.No.L116650

16Id.,107.
17Annex"A"ofPetitionRollo,4562.PerTayaoJaguros,L.,J.,withElbinias,J.andSalas,B.,JJ.,
concurring.
18Velascovs.CourtofAppeals,51SCRA439[1973],citingNavarrovs.SugarProducersCooperative
MarketingAssociation,1SCRA1180[1961].
1967AmJur2dSales105[1973].
20SeeHarryKeelerElectricCo.vs.Rodriguez,44Phil.19[1922]B.A.FinanceCorp.vs.Courtof
Appeals,211SCRA112[1992].
21Cruzvs.CourtofAppeals,201SCRA495[1991]Pinedavs.CourtofAppeals,226SCRA754[1993].
22ARTUROM.TOLENTINO,CommentariesandJurisprudenceontheCivilCodeofthePhilippines,vol.
4,1985ed.,411EDGARDOL.PARAS,CivilCodeofthePhilippinesAnnotated,vol.4,1989ed.,490.
23SeeBeltranvs.PAICFinanceCorp.,209SCRA105[1992].
24InternationalHarvesterMacLeod,Inc.vsMedina,183SCRA485[1990].
25Rollo,66.
26SeeCentralAzucareradeBaisvs.CourtofAppeals,188SCRA328[1990]Koavs.CourtofAppeals,
219SCRA541[1993]ScottConsultants&ResourceDevelopmentCorp.vs.CourtofAppeals,G.R.No.
112916,16March1995.
TheLawphilProjectArellanoLawFoundation

http://www.lawphil.net/judjuris/juri1995/may1995/gr_116650_1995.html

6/6