1

Republic of the Philippines On October 18, 1965 the PHHC board of directors passed Resolution No. 218, withdrawing the
SUPREME COURT tentative award of Lot 4 to the Mendoza -spouses under Resolution No. 513 and re-awarding said lot
Manila jointly and in equal shares to Miguela Sto. Domingo, Enrique Esteban, Virgilio Pinzon, Leonardo
Redublo and Jose Fernandez, subject to existing PHHC rules and regulations. The prices would be the
SECOND DIVISION same as those of the adjoining lots. The awardees were required to deposit an amount equivalent to
20% of the total selling price (Exh. F).
G.R. No. L-61623 December 26, 1984
The five awardees made the initial deposit. The corresponding deeds of sale were executed in their
PEOPLE'S HOMESITE & HOUSING CORPORATION, petitioner-appellant, favor. The subdivision of Lot 4 into five lots was approved by the city council and the Bureau of Lands.
vs.
COURT OF APPEALS, RIZALINO L. MENDOZA and ADELAIDA R. MENDOZA, respondents-appellees. On March 16, 1966 the Mendoza spouses asked for reconsideration of the withdrawal of the previous
award to them of Lot 4 and for the cancellation of the re-award of said lot to Sto. Domingo and four
Manuel M. Lazaro, Pilipinas Arenas Laborte and Antonio M. Brillantes for petitioner PHHC. others. Before the request could be acted upon, the spouses filed the instant action for specific
performance and damages.
Tolentino, Cruz, Reyes, Lava and Manuel for private respondents.
The trial court sustained the withdrawal of the award. The Mendozas appealed. The Appellate Court
reversed that decision and declared void the re-award of Lot 4 and the deeds of sale and directed the
PHHC to sell to the Mendozas Lot 4 with an area of 2,603.7 square meters at P21 a square meter and
pay to them P4,000 as attorney's fees and litigation expenses. The PHHC appealed to this Court.
AQUINO, J.:
The issue is whether there was a perfected sale of Lot 4, with the reduced area, to the Mendozas
The question in this case is whether the People's Homesite & Housing Corporation bound itself to sell
which they can enforce against the PHHC by an action for specific performance.
to the Mendoza spouses Lot 4 (Road) Pcs- 4564 of the revised consolidation subdivision plan with an
area of 2,6,08.7 (2,503.7) square meters located at Diliman, Quezon City.
We hold that there was no perfected sale of Lot 4. It was conditionally or contingently awarded to the
Mendozas subject to the approval by the city council of the proposed consolidation subdivision plan
The PHHC board of directors on February 18, 1960 passed Resolution No. 513 wherein it stated
and the approval of the award by the valuation committee and higher authorities.
"that subject to the approval of the Quezon City Council of the above-mentioned Consolidation
Subdivision Plan, Lot 4. containing 4,182.2 square meters be, as it is hereby awarded to Spouses
The city council did not approve the subdivision plan. The Mendozas were advised in 1961 of the
Rizalino Mendoza and Adelaida Mendoza, at a price of twenty-one pesos (P21.00) per square meter"
disapproval. In 1964, when the plan with the area of Lot 4 reduced to 2,608.7 square meters was
and "that this award shall be subject to the approval of the OEC (PHHC) Valuation Committee and
approved, the Mendozas should have manifested in writing their acceptance of the award for the
higher authorities".
purchase of Lot 4 just to show that they were still interested in its purchase although the area was
reduced and to obviate ally doubt on the matter. They did not do so. The PHHC board of directors
The city council disapproved the proposed consolidation subdivision plan on August 20, 1961 (Exh.
acted within its rights in withdrawing the tentative award.
2). The said spouses were advised by registered mail of the disapproval of the plan (Exh. 2-PHHC).
Another subdivision plan was prepared and submitted to the city council for approval. The revised
"The contract of sale is perfected at the moment there is a meeting of minds upon the thing which is
plan, which included Lot 4, with a reduced area of 2,608.7, was approved by the city council on
the object of the contract and upon the price. From that moment, the parties may reciprocally
February 25, 1964 (Exh. H).
demand performance, subject to the law governing the form of contracts." (Art. 1475, Civil Code).
On April 26, 1965 the PHHC board of directors passed a resolution recalling all awards of lots to
persons who failed to pay the deposit or down payment for the lots awarded to them (Exh. 5). The
Mendozas never paid the price of the lot nor made the 20% initial deposit.
 2

"Son, sin embargo, excepcion a esta regla los casos en que por virtud de la voluntad de las partes o de
la ley, se celebra la venta bajo una condicion suspensiva, y en los cuales no se perfecciona la venta
hasta el cumplimiento de la condicion" (4 Castan Tobenas, Derecho Civil Español 8th ed. p. 81).

"In conditional obligations, the acquisition of rights, as well as the extinguishment or loss of those
already acquired, shall depend upon the happening of the event which constitutes the condition. (Art.
1181, Civil Code). "Se llama suspensive la condicion de la que depende la perfeccion, o sea el principio
del contrato". (9 Giorgi, Teoria de las Obligaciones, p. 57).

Under the facts of this case, we cannot say there was a meeting of minds on the purchase of Lot 4
with an area of 2,608.7 square meters at P21 a square meter.

The case of Lapinig vs. Court of Appeals, 115 SCRA 213 is not in point because the awardee in that
case applied for the purchase of the lot, paid the 10% deposit and a conditional contract to sell was
executed in his favor. The PHHC could not re-award that lot to another person.

WHEREFORE, the decision of the Appellate Court is reversed and set aside and the judgment of the
trial court is affirmed. No costs.

SO ORDERED.
 3

Republic of the Philippines damages and attorney's fees? The trial court and the Court of Appeals took the affirmative view. The
SUPREME COURT petitioner disagrees. Hence, this petition for review on certiorari.
Manila
The antecedents as disclosed in the decisions of both the trial court and the Court of Appeals, as well
FIRST DIVISION as in the pleadings of petitioner Toyota Shaw, Inc. (hereinafter Toyota) and respondent Luna L. Sosa
(hereinafter Sosa) are as follows. Sometime in June of 1989, Luna L. Sosa wanted to purchase a
Toyota Lite Ace. It was then a seller's market and Sosa had difficulty finding a dealer with an available
unit for sale. But upon contacting Toyota Shaw, Inc., he was told that there was an available unit. So
G.R. No. L-116650 May 23, 1995 on 14 June 1989, Sosa and his son, Gilbert, went to the Toyota office at Shaw Boulevard, Pasig, Metro
Manila. There they met Popong Bernardo, a sales representative of Toyota.
TOYOTA SHAW, INC., petitioner,
vs. Sosa emphasized to Bernardo that he needed the Lite Ace not later than 17 June 1989 because he, his
COURT OF APPEALS and LUNA L. SOSA, respondents. family, and a balikbayan guest would use it on 18 June 1989 to go to Marinduque, his home province,
where he would celebrate his birthday on the 19th of June. He added that if he does not arrive in his
hometown with the new car, he would become 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 was also agreed upon by
DAVIDE, JR., J.: the parties that the balance of the purchase price would be paid by credit financing through B.A.
Finance, and for this Gilbert, on behalf of his father, signed the documents of Toyota and B.A. Finance
At the heart of the present controversy is the document marked Exhibit "A" 1 for the private pertaining to the application for financing.
respondent, which was signed by a sales representative of Toyota Shaw, Inc. named Popong
Bernardo. The document reads as follows: The next day, 15 June 1989, Sosa and Gilbert went to Toyota to deliver the downpayment of
P100,000.00. They met Bernardo who then accomplished a printed Vehicle Sales Proposal (VSP) No.
AGREEMENTS BETWEEN MR. SOSA 928,2 on which Gilbert signed under the subheading CONFORME. This document shows that the
& POPONG BERNARDO OF TOYOTA customer's name is "MR. LUNA SOSA" with home address at No. 2316 Guijo Street, United Parañaque
SHAW, INC. II; that the model series of the vehicle is a "Lite Ace 1500" described as "4 Dr minibus"; that payment
is by "installment," to be financed by "B.A.," 3 with the initial cash outlay of P100,000.00 broken down
1. all necessary documents will be submitted to TOYOTA SHAW, INC. (POPONG as follows:
BERNARDO) a week after, upon arrival of Mr. Sosa from the Province (Marinduque)
where the unit will be used on the 19th of June. a) downpayment — P 53,148.00
b) insurance — P 13,970.00
2. the downpayment of P100,000.00 will be paid by Mr. Sosa on June 15, 1989.
c) BLT registration fee — P 1,067.00
3. the TOYOTA SHAW, INC. LITE ACE yellow, will be pick-up [sic] and released by CHMO fee — P 2,715.00
TOYOTA SHAW, INC. on the 17th of June at 10 a.m. service fee — P 500.00
accessories — P 29,000.00
(Sgd.) POPONG BERNARDO.

Was this document, executed and signed by the petitioner's sales representative, a perfected
contract of sale, binding upon the petitioner, breach of which would entitle the private respondent to
 4

and that the "BALANCE TO BE FINANCED" is "P274,137.00." The spaces provided for "Delivery Terms" complaint against Toyota for damages under Articles 19 and 21 of the Civil Code in the total amount
were not filled-up. It also contains the following pertinent provisions: of P1,230,000.00.9 He alleges, inter alia, that:

CONDITIONS OF SALES 9. As a result of defendant's failure and/or refusal to deliver the vehicle to plaintiff,
plaintiff suffered embarrassment, humiliation, ridicule, mental anguish and
1. This sale is subject to availability of unit. sleepless nights because: (i) he and his family were constrained to take the public
transportation from Manila to Lucena City on their way to Marinduque; (ii) his
2. Stated Price is subject to change without prior notice, Price prevailing and in balikbayan-guest canceled his scheduled first visit to Marinduque in order to avoid
effect at time of selling will apply. . . . the inconvenience of taking public transportation; and (iii) his relatives, friends,
neighbors and other provincemates, continuously irked him about "his Brand-New
Toyota Lite Ace — that never was." Under the circumstances, defendant should be
Rodrigo Quirante, the Sales Supervisor of Bernardo, checked and approved the VSP.
made liable to the plaintiff for moral damages in the amount of One Million Pesos
(P1,000,000.00). 10
On 17 June 1989, at around 9:30 a.m., Bernardo called Gilbert to inform him that the vehicle would
not be ready for pick up at 10:00 a.m. as previously agreed upon but at 2:00 p.m. that same day. At
In its answer to the complaint, Toyota alleged that no sale was entered into between it and Sosa, that
2:00 p.m., Sosa and Gilbert met Bernardo at the latter's office. According to Sosa, Bernardo informed
Bernardo had no authority to sign Exhibit "A" for and in its behalf, and that Bernardo signed Exhibit
them that the Lite Ace was being readied for delivery. After waiting for about an hour, Bernardo told
"A" in his personal capacity. As special and affirmative defenses, it alleged that: the VSP did not state
them that the car could not be delivered because "nasulot ang unit ng ibang malakas."
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 released prior to full compliance with
Toyota contends, however, that the Lite Ace was not delivered to Sosa because of the disapproval by
financing requirements, submission of all documents, and execution of the sales agreement/invoice;
B.A. Finance of the credit financing application of Sosa. It further alleged that a particular unit had
the P100,000.00 was returned to and received by Sosa; the venue was improperly laid; and Sosa did
already been reserved and earmarked for Sosa but could not be released due to the uncertainty of
not have a sufficient cause of action against it. It also interposed compulsory counterclaims.
payment of the balance of the purchase price. Toyota then gave Sosa the option to purchase the unit
by paying the full purchase price in cash but Sosa refused.
After trial on the issues agreed upon during the pre-trial session, 11 the trial court rendered on 18
February 1992 a decision in favor of Sosa. 12 It ruled that Exhibit "A," the "AGREEMENTS BETWEEN
After it became clear that the Lite Ace would not be delivered to him, Sosa asked that his
MR. SOSA AND POPONG BERNARDO," was a valid perfected contract of sale between Sosa and
downpayment be refunded. Toyota did so on the very same day by issuing a Far East Bank check for
Toyota which bound Toyota to deliver the vehicle to Sosa, and further agreed with Sosa that Toyota
the full amount of P100,000.00, 4 the receipt of which was shown by a check voucher of
acted in bad faith in selling to another the unit already reserved for him.
Toyota,5 which Sosa signed with the reservation, "without prejudice to our future claims for
damages."
As to Toyota's contention that Bernardo had no authority to bind it through Exhibit "A," the trial court
held that the extent of Bernardo's authority "was not made known to plaintiff," for as testified to by
Thereafter, Sosa sent two letters to Toyota. In the first letter, dated 27 June 1989 and signed by him, Quirante, "they do not volunteer any information as to the company's sales policy and guidelines
he demanded the refund, within five days from receipt, of the downpayment of P100,000.00 plus
because they are internal matters." 13 Moreover, "[f]rom the beginning of the transaction up to its
interest from the time he paid it and the payment of damages with a warning that in case of Toyota's
consummation when the downpayment was made by the plaintiff, the defendants had made known
failure to do so he would be constrained to take legal action. 6 The second, dated 4 November 1989
to the plaintiff the impression that Popong Bernardo is an authorized sales executive as it permitted
and signed by M. O. Caballes, Sosa's counsel, demanded one million pesos representing interest and
the latter to do acts within the scope of an apparent authority holding him out to the public as
damages, again, with a warning that legal action would be taken if payment was not made within
possessing power to do these acts." 14 Bernardo then "was an agent of the defendant Toyota Shaw,
three days.7 Toyota's counsel answered through a letter dated 27 November 1989 8 refusing to
Inc. and hence bound the defendants." 15
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

The court further declared that "Luna Sosa proved his social standing in the community and suffered
besmirched reputation, wounded feelings and sleepless nights for which he ought to be
compensated." 16 Accordingly, it disposed as follows:
WHEREFORE, viewed from the above findings, judgment is hereby rendered in favor
of the plaintiff and against the defendant:
1. ordering the defendant to pay to the plaintiff the sum of
P75,000.00 for moral damages;
2. ordering the defendant to pay the plaintiff the sum of
P10,000.00 for exemplary damages;
3. ordering the defendant to pay the sum of P30,000.00 attorney's
fees plus P2,000.00 lawyer's transportation fare per trip in
attending to the hearing of this case;
4. ordering the defendant to pay the plaintiff the sum of
P2,000.00 transportation fare per trip of the plaintiff in attending
the hearing of this case; and
5. ordering the defendant to pay the cost of suit.
SO ORDERED.
Dissatisfied with the trial court's judgment, Toyota appealed to the Court of Appeals. The case was
docketed as CA-G.R. CV No. 40043. In its decision promulgated on 29 July 1994,17 the Court of
Appeals affirmed in toto the appealed decision.
Toyota now comes before this Court via this petition and raises the core issue stated at the beginning
of the ponenciaand 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 legal and demandable right to the delivery of the vehicle despite
the non-payment of the consideration and the non-approval of his credit application by B.A. Finance,
(c) whether or not Toyota acted in good faith when it did not release the vehicle to Sosa, and (d)
whether or not Toyota may be held liable for damages.
We find merit in the petition.
5
Neither logic nor recourse to one's imagination can lead to the conclusion that Exhibit "A" is
a perfected contract of sale.
Article 1458 of the Civil Code defines a contract of sale as follows:
Art. 1458. By the contract of sale one of the contracting parties obligates himself to
transfer the ownership of and to deliver a determinate thing, and the other to pay
therefor a price certain in money or its equivalent.
A contract of sale may be absolute or conditional.
and Article 1475 specifically provides when it is deemed perfected:
Art. 1475. The contract of sale is perfected at the moment there is a meeting of
minds upon the thing which is the object of the contract and upon the price.
From that moment, the parties may reciprocally demand performance, subject to
the provisions of the law governing the form of contracts.
What is clear from Exhibit "A" is not what the trial court and the Court of Appeals appear to see. It is
not a contract of sale. No obligation on the part of Toyota to transfer ownership of a determinate
thing to Sosa and no correlative obligation on the part of the latter to pay therefor a price certain
appears therein. The provision on the downpayment of P100,000.00 made no specific reference to a
sale of a vehicle. If it was intended for a contract of sale, it could only refer to a sale on installment
basis, as the VSP executed the following day confirmed. But nothing was mentioned about the full
purchase price and the manner the installments were to be paid.
This Court had already ruled that a definite agreement on the manner of payment of the price is an
essential element in the formation of a binding and enforceable contract of sale. 18 This is so because
the agreement as to the manner of payment goes into the price such that a disagreement on the
manner of payment is tantamount to a failure to agree on the price. Definiteness as to the price is an
essential element of a binding agreement to sell personal property. 19
Moreover, Exhibit "A" shows the absence of a meeting of minds between Toyota and Sosa. For one
thing, Sosa did not even sign it. For another, Sosa was well aware from its title, written in bold
letters, viz.,
AGREEMENTS BETWEEN MR. SOSA & POPONG BERNARDO OF
TOYOTA SHAW, INC.

that he was not dealing with Toyota but with Popong Bernardo and that the latter did not
misrepresent that he had the authority to sell any Toyota vehicle. He knew that Bernardo was only
a sales representative of Toyota and hence a mere agent of the latter. It was incumbent upon Sosa to
act with ordinary prudence and reasonable diligence to know the extent of Bernardo's authority as an
agent20 in respect of contracts to sell Toyota's vehicles. A person dealing with an agent is put upon
inquiry and must discover upon his peril the authority of the agent. 21
At the most, Exhibit "A" may be considered as part of the initial phase of the generation or
negotiation stage of a contract of sale. There are three stages in the contract of sale, namely:
(a) preparation, conception, or generation, which is the period of negotiation and
bargaining, ending at the moment of agreement of the parties;
(b) perfection or birth of the contract, which is the moment when the parties come
to agree on the terms of the contract; and
(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 emphasized that thereunder, the downpayment of the purchase price was P53,148.00 while
the balance to be paid on installment should be financed by B.A. Finance Corporation. It is, of course,
to be assumed that B.A. Finance Corp. was acceptable to Toyota, otherwise it should not have
mentioned B.A. Finance in the VSP.
Financing companies are defined in Section 3(a) of R.A. No. 5980, as amended by P.D. No. 1454 and
P.D. No. 1793, as "corporations or partnerships, except those regulated by the Central Bank of the
Philippines, the Insurance Commission and the Cooperatives Administration Office, which are
primarily organized for the purpose of extending credit facilities to consumers and to industrial,
commercial, or agricultural enterprises, either by discounting or factoring 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 office machines and equipment, appliances and other movable property." 23
Accordingly, in a sale on installment basis which is financed by a financing company, three parties are
thus involved: the buyer who executes a note or notes for the unpaid balance of the price of the thing
purchased on installment, 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's application, there was then no
meeting of minds on the sale on installment basis.
6
We are inclined to believe Toyota's version that B.A. Finance disapproved Sosa's application for which
reason it suggested to Sosa that he pay the full purchase price. When the latter refused, Toyota
cancelled the VSP and returned to him his P100,000.00. Sosa's version that the VSP was cancelled
because, according to Bernardo, the vehicle was delivered to another who was "mas malakas" does
not inspire belief and was obviously a delayed afterthought. It is claimed that Bernardo said,
"Pasensiya kayo, nasulot ang unit ng ibang malakas," while the Sosas had already been waiting for an
hour for the delivery of the vehicle in the afternoon of 17 June 1989. However, in paragraph 7 of his
complaint, Sosa solemnly states:
On June 17, 1989 at around 9:30 o'clock in the morning, defendant's sales
representative, Mr. Popong Bernardo, called plaintiff's house and informed the
plaintiff's son that the vehicle will not be ready for pick-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 pick-up the vehicle but the defendant
for reasons known only to its representatives, refused and/or failed to release the
vehicle to the plaintiff. Plaintiff demanded for an explanation, but nothing was
given; . . . (Emphasis supplied). 25
The VSP was a mere proposal which was aborted in lieu of subsequent events. It follows that the VSP
created no demandable right in favor of Sosa for the delivery of the vehicle to him, and its non-
delivery did not cause any legally indemnifiable injury.
The award then of moral and exemplary damages and attorney's fees and costs of suit is without legal
basis. 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 Lite Ace which they expected to see
on his birthday, he suffered humiliation, shame, and sleepless nights when the van was not delivered.
The van became the subject matter of talks during his celebration that he may not have paid for it,
and this created an impression against his business standing and reputation. At the bottom of this
claim is nothing but misplaced pride and ego. He should not have announced his plan to buy a Toyota
Lite Ace knowing that he might not be able to pay the full purchase price. It was he who brought
embarrassment upon himself by bragging about a thing which he did not own yet.
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 corrective damages are imposed by way of example or correction for the
public good, in addition to moral, temperate, liquidated, or compensatory damages.
Also, it is settled that for attorney's fees to be granted, the court must explicitly state in the body of
the decision, and not only in the dispositive portion thereof, the legal reason for the award of
attorney's fees. 26 No such explicit determination thereon was made in the body of the decision of the
trial court. No reason thus exists for such an award.
 7

WHEREFORE, the instant petition is GRANTED. The challenged decision of the Court of Appeals in CA-
G.R. CV NO. 40043 as well as that of Branch 38 of the Regional Trial Court of Marinduque in Civil Case
No. 89-14 are REVERSED and SET ASIDE and the complaint in Civil Case No. 89-14 is DISMISSED. The
counterclaim therein is likewise DISMISSED.

No pronouncement as to costs.

SO ORDERED.
 8

Republic of the Philippines On June 29, 1953, the Atlantic Gulf withdraw its "offer of option" with due notices to the
SUPREME COURT Southwestern Company stating as reason therefor that the option was granted merely as a favor. The
Manila Atlantic Gulf set up as a defense the option to sell made by it to the Southwestern Company is null
and void because it is not supported by any consideration.
EN BANC
After due trial, the lower court rendered judgment granting plaintiff's prayer for specific
G.R. No. L-7382 June 29, 1955 performance. It further ordered the defendant to pay damages in an amount equivalent to 6 per
centum per annum on the sum of P30,000 from the date of the filing of the complaint, and to pay the
SOUTHWESTERN SUGAR AND MOLASSES COMPANY, plaintiff-appellee, sum of P600 as attorney's fees, plus the costs of action.
vs.
ATLANTIC GULF & PACIFIC COMPANY, defendant-appellant. The case before us on the assertion that the only issue involved is one of law.

Arturo A. Alafriz and A. B. Alcera for appellant. The option granted by appellant to appellee is contained in a letter dated March 24, 1953 which
Mariano Agoncillo for appellee. reads as follows:

BAUTISTA ANGELO, J.: March 24, 1953

This is an action for specific performance.

Southwestern Sugar & Molasses Co. Far East, Inc.
On March 24, 19 53, the Atlantic Gulf & Pacific Company of Manila, hereafter called Atlantic Gulf for 145 Muelle de Binondo
short, granted an option to Southwestern Sugar & Molasses Co. (Far East) Inc., hereafter called Manila, Philippines
Southwestern Company, to buy its barge No. 10 for the sum of P30,000 to be exercised within a Gentlemen:
period of ninety days.
This is to confirm our conversion of today whereby we offer you our Barge No. 10, which is
On May 11, 1953, the Southwestern Company wrote to Atlantic Gulf advising the latter that it wanted 120' 00" long by 44"-0 wide and 9'-0" deep, for the sum of of P30,000. Barge to cleaned of
"to exercise our option at your earliest convenience" and requested that it be notified as soon as the creosote and fuel oil.
barge was available.
This option is to be good for ninety (90) days, or until June 30, 1953.
On May 12, 1953, the Atlantic Gulf replied stating that their understanding was that the "offer of
option" is to be a cash transaction and to be effected "at the time the lighter is available", and, on
Yours very truly,
June 25, 1953, reiterating the unavailability of the barge, it further advised the Southwestern
Company that since there is still further work for it, and as this situation still applies" the barge could
ATLANTIC, GULF & PACIFIC CO. OF MANILA
not be turned over to the latter company.
(Sgd.) W. H. SCHOENING
On June 27, 1953, in view if such vacillating attitude, the Southwestern Company instituted the
present action to compel the Atlantic Gulf to sell the barge in line with the option, depositing with the The main contention of appellant is that the option granted to appellee to sell to it barge No. 10 for
court a check covering the sum of P30,000. This check however was later withdrawn with the the sum of P30,000 under the terms stated above has no legal effect because it is not supported by
approval of the court. any consideration and in support thereof it invokes article 1479 of the new Civil Code. This article
provides:
 9

ART. 1479. A promise to buy and sell a determinate thing for a price certain is reciprocally withdraw its offer, this Court cannot adopt a different attitude because the law on the matter is clear.
demandable. Our imperative duty is to apply it unless modified by Congress.

An accepted unilateral promise to buy or sell a determinate thing for a price certain is Wherefore, the decision appealed from is reversed, without pronouncement as to costs.
binding upon the promisor if the promise is supported by a consideration distinct from the
price.

On the other hand, appellee contends that, even granting that the "offer of option" is not supported
by any consideration, that option became binding on appellant when the appellee gave notice to its
acceptance, and that having accepted it within the period of option, the offer can no longer be
withdrawn and in any event such withdrawal is ineffective. In support of this contention, appellee
invokes article 1324 of the Civil Code which provides:

ART. 1324. When the offerer has allowed the offeree a certain period to accept, the offer
may be withdrawn at any time before acceptance by communicating such withdrawal,
except when the option is founded upon consideration, as something paid or promised.

There is no question that under article 1479 of the new Civil Code "an option to sell", or a "promise to
buy or to sell", as used in said article, to be valid must be "supported by a consideration distinct from
the price." This is clearly inferred from the context of said article that a unilateral promise to buy or
sell, even if accepted, is only binding if supported by a consideration. In other words, "an accepted
unilateral promise" can only have a binding effect if supported by a consideration, which means that
the option can still be withdrawn, even if accepted, if the same is not supported by any consideration.
Here it is not disputed that the option is without consideration. It can therefore be withdrawn
notwithstanding the acceptance made of it by appellee.

It is true that under article 1324 of the new Civil Code, the general rule regarding offer and
acceptance is that, when the offerer gives to the offeree a certain period to accept, "the offer may be
withdrawn at any time before acceptance" except when the option is founded upon consideration,
but this general rule must be interpreted as modified by the provision of article 1479 above referred
to, which applies to "a promise to buy and sell" specifically. As already stated, this rule requires that a
promise to sell to be valid must be supported by a consideration distinct from the price.

We are not oblivious of the existence of American authorities which hold that an offer, once
accepted, cannot be withdrawn, regardless of whether it is supported or not by a consideration (12
Am. Jur. 528). These authorities, we note, uphold the general rule applicable to offer and acceptance
as contained in our new Civil Code. But we are prevented from applying them in view of the specific
provision embodied in article 1479. While under the "offer of option" in question appellant has
assumed a clear obligation to sell its barge to appellee and the option has been exercised in
accordance with its terms, and there appears to be no valid or justifiable reason for appellant to
 10

Republic of the Philippines 300 Ctns. Luneta brand Sardines in Tomato Sauce 100/5-oz. talls at $7.48 Ct.
SUPREME COURT
Manila Price(s):

EN BANC All prices C ad F Manila Cosular Fees of $6.00 to be added.

G.R. No. L-9871 January 31, 1958 Shipmet:

ATKINS, KROLL and CO., INC., petitioner, Durig September/October from US Ports.
vs.
B. CUA HIAN TEK, respondent. Supplier:

Ross Selph, Carrascoso and Janda for petitioner. Atkins, Kroll & Co., Sa Frasisco, Cal. U.S.A.
Ponciano T. Castro for respondent.
We are looking forward to receive your valued order and remain .
BENGZON, J.:

Review of a Court of Appeals' decision. For its failure to deliver one thousand cartons of sardines, Very truly yours,
which it had sold to B. Cua Hian Tek, petitioner was sued, and after trial was ordered by the Manila
court of first instance to Pay damages, which on appeal was reduced by the Court of Appeals to
P3,240.15 representing unrealized profits. The Court of first instance and the Court of Appeals1 found that B. Cua Hian Tek accepted the offer
unconditionally and delivered his letter of acceptance Exh. B on September 21, 1951. However, due
to shortage of catch of sardines by the packers in California, Atkins Kroll & Co., failed to deliver the
There was no such contract of sale, says petitioner, but only an option to buy, which was not
commodities it had offered for sale. There are other details to which reference shall not be made, as
enforceable for lack of consideration because in accordance with Art. 1479 of the New Civil Code "an
they touch the question whether the acceptance had been handed on time; and on that issue of
accepted unilatateral promise to buy or to sell a determinate thing for a price certain is binding upon
Court of Appeals definitely found for plaintiff.
the promisor if the promise is supported by a consideration distinct from the price.
Ayway, in presenting its case before this Court petitioner does not dispute such timely acceptance. It
Simple are the facts of this case: Dated September 13, 1951, petitioner sent to respondent a letter of
merely raises the point that the acceptance only created an option, which, lacking consideration, had
the following tenor:
no obligatory force.

Sir (s) /Madam:

We are pleased to make you herewith the following firm offer, subject to reply by
September 23, 1951:
Quantity and Commodity:
400 Ctns. Luneta brand Sardines in Tomato Sauce 48/15-oz. Ovals at $8.25 Ctn.
300 Ctns. Luntea brand Sardines Natural 48/15 oz. talls at $6.25 Ct.
The offer Exh. A, petitioner argues, "was a promise to sell a determinate thing for a price certain.
Upon its acceptance by respondent, the offer became an accepted unilateral promise to sell a
determinate thing for price certain. Inasmuch as there was no consideration to support the promise
to sell distinct from the price, it follows that under Art. 1479 aforequoted, the promise is not binding
on the petitioner even if it was accepted by respondent." (p. 12 brief of petitioner.).
The argument, maifestly assumes that only a unilateral promise arose when the offeree accepted.
Such assumption is a mistake, because a bilateral cotract to sell and to buy was created upon
acceptance. So much so that B. Cua Hian Tek could be sued, he had backed out after accepting, by
refusing to get the sardines and/or to pay for their price. Indeed, the word "option" is found neither
 11

in the offer nor in the acceptance. On the copntrary Exh. B accepted "the firm offer for the sale" and The concurrence of both acts—the offer and the acceptance—could at all events have
adds, "the undersigned buyer has immediately filed an application for import license . . ." (Emphasis generated a contract, if none there was before (atrs. 1254 and 1262 of the Civil Code).
Ours.). (Zayco vs. Serra, 44 Phil. 331.).

Petitioner, however, insists the offer was a mere offer of option, because the "firm offer" Exh. A. was
a continuing offer to sell until September 23, "an option is nothing more than a continuing offer" for a
specified time. In our opinion implies more than that: it implies the legal obligation to keep open for
the time specified.2 Yet the letter Exh. A did not by itself produce the legal obligation of keeping the
offer open up ot Septmber 23. It could be withdrawn before acceptance, because it is admitted, there
was no consideration for it.
ART. 1324. When the offerer has showed the offeree a certain period to accept, the offer
may be withdrawn at any time before acceptance by communicating such withdrawal,
except when the option is founded upon a consideration, as somnething paid or promissed.
(n) (New Civil Code.).
Ordinarily an offer to buy or sell may be withdrawn or countermanded before accepatnce,
even though the offer provides that it will not be withdrawn or countermanded, or allows
the offeree a certain time within which to accept it, unless such provision or agreement is
supported by an independent consideration. . . (77 Corpus Juris Secundum p. 636.).
Furthermore, an option is unilateral: a promise to sell3 at the price fixed whenever the offeree should
decide to exercise his option within the specified time. After accepting the promise and before he
exercises his option, the holder of the option is not bound to buy. He is free either to buy or not to
later. In this case, however, upon accepeting herein petitioner's offer a bilateral promise to sell and to
buy ensued, and the respondent ipso facto assumed the obligations of a purchaser. He did not just
get the right subsequently to buy or not to buy. It was not a mere option then; it was bilalteral
contract of sale.
One additional observation should be made before the closing this opinion. The defense in the court
of first instance rested on the proposition or propositions that the offer had not been precedent had
not been fulfilled. This option-without-consideration idea was never mentioned in the answer. A
Change of theory in the appellate courts is not permitted.
In order that a question may be raised on appeal, it is essential that it be within the issues
made by the parties in their pleadings. Consequently, when a party deliberately adopts a
certain theory, and the case is tried and decided upon that theory in the court below, he will
not be permitted to change his theory on appeal because, to permit him to do so, would be
unfair to the adverse party. (Rules of Court by Moran—1957 Ed. Vol. I p.715 citing Agoncillo
vs. Javier, 38 Phil. 424; American Express Company vs. Natividad, 46 Phil. 207; San Agustin vs.
Barrios, 68 Phil. 465, 480; Toribio vs. Dacasa, 55 Phil. 461.) .
We must therefore hold, as the lower courts have held that there was a contract of sale between the
parties. And as no legal excuse has been proven, the seller's failure to comply therewith gave around
to an award for damages, which has been fixed by the Court of Appeals at P3,240.15-amount which
petitioner does not dispute in this final instance.
Consequently, the decision under review should be, and it is hereby affirmed, with cost against
petitioner.

Lastly, even supposing that Exh. A granted an option which is not binding for lack of consideration,
the authorities hold that .

If the option is given without a consideration, it is a mere offer of a contract of sale, which is
not binding until accepted. If, however, acceptance is made before a withdrawal, it
constitutes a binding contract of sale, even though the option was not supported by a
sufficient consideration. . . (77 Corpus Juris Secundum p. 652. See also 27 Ruling Case Law
339 and cases cited.).

It can be taken for granted, as contended by the defendants, that the option contract was
not valid for lack of consideration. But it was, at least, an offer to sell, which was accepted by
letter, and of this acceptance the offerer had knowledge before said offer was withdrawn.

Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-25494 June 14, 1972
NICOLAS SANCHEZ, plaintiff-appellee,
vs.
SEVERINA RIGOS, defendant-appellant.
Santiago F. Bautista for plaintiff-appellee.
Jesus G. Villamar for defendant-appellant.
CONCEPCION, C.J.:p
Appeal from a decision of the Court of First Instance of Nueva Ecija to the Court of Appeals, which
certified the case to Us, upon the ground that it involves a question purely of law.
The record shows that, on April 3, 1961, plaintiff Nicolas Sanchez and defendant Severina Rigos
executed an instrument entitled "Option to Purchase," whereby Mrs. Rigos "agreed, promised and
committed ... to sell" to Sanchez the sum of P1,510.00, a parcel of land situated in the barrios of Abar
and Sibot, municipality of San Jose, province of Nueva Ecija, and more particularly described in
Transfer Certificate of Title No. NT-12528 of said province, within two (2) years from said date with
the understanding that said option shall be deemed "terminated and elapsed," if "Sanchez shall fail to
exercise his right to buy the property" within the stipulated period. Inasmuch as several tenders of
payment of the sum of Pl,510.00, made by Sanchez within said period, were rejected by Mrs. Rigos,
on March 12, 1963, the former deposited said amount with the Court of First Instance of Nueva Ecija
and commenced against the latter the present action, for specific performance and damages.
After the filing of defendant's answer — admitting some allegations of the complaint, denying other
allegations thereof, and alleging, as special defense, that the contract between the parties "is a
unilateral promise to sell, and the same being unsupported by any valuable consideration, by force of
the New Civil Code, is null and void" — on February 11, 1964, both parties, assisted by their
12
respective counsel, jointly moved for a judgment on the pleadings. Accordingly, on February 28, 1964,
the lower court rendered judgment for Sanchez, ordering Mrs. Rigos to accept the sum judicially
consigned by him and to execute, in his favor, the requisite deed of conveyance. Mrs. Rigos was,
likewise, sentenced to pay P200.00, as attorney's fees, and other costs. Hence, this appeal by Mrs.
Rigos.
This case admittedly hinges on the proper application of Article 1479 of our Civil Code, which
provides:
ART. 1479. A promise to buy and sell a determinate thing for a price certain is
reciprocally demandable.
An accepted unilateral promise to buy or to sell a determinate thing for a price
certain is binding upon the promissor if the promise is supported by a consideration
distinct from the price.
In his complaint, plaintiff alleges that, by virtue of the option under consideration, "defendant agreed
and committed to sell" and "the plaintiff agreed and committed to buy" the land described in the
option, copy of which was annexed to said pleading as Annex A thereof and is quoted on the
margin.1 Hence, plaintiff maintains that the promise contained in the contract is "reciprocally
demandable," pursuant to the first paragraph of said Article 1479. Although defendant had really
"agreed, promised and committed" herself to sell the land to the plaintiff, it is not true that the latter
had, in turn, "agreed and committed himself " to buy said property. Said Annex A does not bear out
plaintiff's allegation to this effect. What is more, since Annex A has been made "an integral part" of
his complaint, the provisions of said instrument form part "and parcel"2 of said pleading.
The option did not impose upon plaintiff the obligation to purchase defendant's property. Annex A
is not a "contract to buy and sell." It merely granted plaintiff an "option" to buy. And both parties so
understood it, as indicated by the caption, "Option to Purchase," given by them to said instrument.
Under the provisions thereof, the defendant "agreed, promised and committed" herself to sell the
land therein described to the plaintiff for P1,510.00, but there is nothing in the contract to indicate
that her aforementioned agreement, promise and undertaking is supported by a consideration
"distinct from the price" stipulated for the sale of the land.
Relying upon Article 1354 of our Civil Code, the lower court presumed the existence of said
consideration, and this would seem to be the main factor that influenced its decision in plaintiff's
favor. It should be noted, however, that:
(1) Article 1354 applies to contracts in general, whereas the second paragraph of Article 1479 refers
to "sales" in particular, and, more specifically, to "an accepted unilateral promise to buy or to sell." In
other words, Article 1479 is controlling in the case at bar.

(2) In order that said unilateral promise may be "binding upon the promisor, Article 1479 requires the
concurrence of a condition, namely, that the promise be "supported by a consideration distinct from
the price." Accordingly, the promisee can not compel the promisor to comply with the promise,
unless the former establishes the existence of said distinct consideration. In other words,
the promisee has the burden of proving such consideration. Plaintiff herein has not even alleged the
existence thereof in his complaint.
(3) Upon the other hand, defendant explicitly averred in her answer, and pleaded as a special
defense, the absence of said consideration for her promise to sell and, by joining in the petition for a
judgment on the pleadings, plaintiff has impliedly admitted the truth of said averment in defendant's
answer. Indeed as early as March 14, 1908, it had been held, in Bauermann v. Casas,3 that:
One who prays for judgment on the pleadings without offering proof as to the truth
of his own allegations, and without giving the opposing party an opportunity to
introduce evidence, must be understood to admit the truth of all the material and
relevant allegations of the opposing party, and to rest his motion for judgment on
those allegations taken together with such of his own as are admitted in the
pleadings. (La Yebana Company vs. Sevilla, 9 Phil. 210). (Emphasis supplied.)
This view was reiterated in Evangelista v. De la Rosa4 and Mercy's Incorporated v. Herminia Verde.5
Squarely in point is Southwestern Sugar & Molasses Co. v. Atlantic Gulf & Pacific Co.,6 from which We
quote:
The main contention of appellant is that the option granted to appellee to sell to it
barge No. 10 for the sum of P30,000 under the terms stated above has no legal
effect because it is not supported by any consideration and in support thereof it
invokes article 1479 of the new Civil Code. The article provides:
"ART. 1479. A promise to buy and sell a determinate thing for a
price certain is reciprocally demandable.
An accepted unilateral promise to buy or sell a determinate thing
for a price certain is binding upon the promisor if the promise is
supported by a consideration distinct from the price."
On the other hand, Appellee contends that, even granting that the "offer of option"
is not supported by any consideration, that option became binding on appellant
when the appellee gave notice to it of its acceptance, and that having accepted it
within the period of option, the offer can no longer be withdrawn and in any event
13
such withdrawal is ineffective. In support this contention, appellee invokes article
1324 of the Civil Code which provides:
"ART. 1324. When the offerer has allowed the offeree a certain
period to accept, the offer may be withdrawn any time before
acceptance by communicating such withdrawal, except when the
option is founded upon consideration as something paid or
promised."
There is no question that under article 1479 of the new Civil Code "an option to
sell," or "a promise to buy or to sell," as used in said article, to be valid must be
"supported by a consideration distinct from the price." This is clearly inferred from
the context of said article that a unilateral promise to buy or to sell, even if
accepted, is only binding if supported by consideration. In other words, "an
accepted unilateral promise can only have a binding effect if supported by a
consideration which means that the option can still be withdrawn, even if accepted,
if the same is not supported by any consideration. It is not disputed that the option
is without consideration. It can therefore be withdrawn notwithstanding the
acceptance of it by appellee.
It is true that under article 1324 of the new Civil Code, the general rule regarding
offer and acceptance is that, when the offerer gives to the offeree a certain period
to accept, "the offer may be withdrawn at any time before acceptance" except
when the option is founded upon consideration, but this general rule must be
interpreted as modified by the provision of article 1479 above referred to, which
applies to "a promise to buy and sell" specifically. As already stated, this rule
requires that a promise to sell to be valid must be supported by a consideration
distinct from the price.
We are not oblivious of the existence of American authorities which hold that an
offer, once accepted, cannot be withdrawn, regardless of whether it is supported or
not by a consideration (12 Am. Jur. 528). These authorities, we note, uphold
the general rule applicable to offer and acceptance as contained in our new Civil
Code. But we are prevented from applying them in view of the specific provision
embodied in article 1479. While under the "offer of option" in question appellant
has assumed a clear obligation to sell its barge to appellee and the option has been
exercised in accordance with its terms, and there appears to be no valid or
justifiable reason for appellant to withdraw its offer, this Court cannot adopt a
different attitude because the law on the matter is clear. Our imperative duty is to
apply it unless modified by Congress.
 14

However, this Court itself, in the case of Atkins, Kroll and Co., Inc. v. Cua Hian Tek,8 decided later
that Southwestern Sugar & Molasses Co. v. Atlantic Gulf & Pacific Co.,9 saw no distinction between
Articles 1324 and 1479 of the Civil Code and applied the former where a unilateral promise to sell
similar to the one sued upon here was involved, treating such promise as an option which, although
not binding as a contract in itself for lack of a separate consideration, nevertheless generated a
bilateral contract of purchase and sale upon acceptance. Speaking through Associate Justice, later
Chief Justice, Cesar Bengzon, this Court said:
Furthermore, an option is unilateral: a promise to sell at the price fixed whenever
the offeree should decide to exercise his option within the specified time. After
accepting the promise and before he exercises his option, the holder of the option is
not bound to buy. He is free either to buy or not to buy later. In this case, however,
upon accepting herein petitioner's offer a bilateral promise to sell and to buy
ensued, and the respondent ipso facto assumed the obligation of a purchaser. He
did not just get the right subsequently to buy or not to buy. It was not a mere
option then; it was a bilateral contract of sale.
Lastly, even supposing that Exh. A granted an option which is not binding for lack of
consideration, the authorities hold that:
"If the option is given without a consideration, it is a mere offer of
a contract of sale, which is not binding until accepted. If, however,
acceptance is made before a withdrawal, it constitutes a binding
contract of sale, even though the option was not supported by a
sufficient consideration. ... . (77 Corpus Juris Secundum, p. 652.
See also 27 Ruling Case Law 339 and cases cited.)
This view has the advantage of avoiding a conflict between Articles 1324 — on the general principles
on contracts — and 1479 — on sales — of the Civil Code, in line with the cardinal rule of statutory
construction that, in construing different provisions of one and the same law or code, such
interpretation should be favored as will reconcile or harmonize said provisions and avoid a conflict
between the same. Indeed, the presumption is that, in the process of drafting the Code, its author
has maintained a consistent philosophy or position. Moreover, the decision in Southwestern Sugar &
Molasses Co. v. Atlantic Gulf & Pacific Co., 10 holding that Art. 1324 is modified by Art. 1479 of the Civil
Code, in effect, considers the latter as an exception to the former, and exceptions are not favored,
unless the intention to the contrary is clear, and it is not so, insofar as said two (2) articles are
concerned. What is more, the reference, in both the second paragraph of Art. 1479 and Art. 1324, to
an option or promise supported by or founded upon a consideration, strongly suggests that the two
(2) provisions intended to enforce or implement the same principle.
Upon mature deliberation, the Court is of the considered opinion that it should, as it hereby
reiterates the doctrine laid down in the Atkins, Kroll & Co. case, and that, insofar as inconsistent
therewith, the view adhered to in the Southwestern Sugar & Molasses Co. case should be deemed
abandoned or modified.
WHEREFORE, the decision appealed from is hereby affirmed, with costs against defendant-appellant
Severina Rigos. It is so ordered.

"It can be taken for granted, as contended by the defendant, that

the option contract was not valid for lack of consideration. But it
was, at least, an offer to sell, which was accepted by letter, and of
the acceptance the offerer had knowledge before said offer was
withdrawn. The concurrence of both acts — the offer and the
acceptance — could at all events have generated a contract, if
none there was before (arts. 1254 and 1262 of the Civil Code)."
(Zayco vs. Serra, 44 Phil. 331.)

In other words, since there may be no valid contract without a cause or consideration, the promisor is
not bound by his promise and may, accordingly, withdraw it. Pending notice of its withdrawal, his
accepted promise partakes, however, of the nature of an offer to sell which, if accepted, results in a
perfected contract of sale.