Toyota Shaw Inc., petitioner vs CA and Luna L.

Sosa, respondents
(GR No. 116650, 244 SCRA 320, 23 May 1995)
Doctrines:
Obligations and Contracts/Sales Stages of contract: There are three stages in a contract of sale
(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.
Sales - Parties in installment sale: 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.
Agency Diligence to find agents authority to represent principal: A person dealing with an agent is
put upon inquiry and must discover upon his peril the authority of the agent.
Torts and Damages Exemplary damages: Art. 2229 of the New Civil Code states that 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.
Facts:
Exhibit A
4 June 1989
AGREEMENTS BETWEEN MR. SOSA & POPONG BERNARDO OF TOYOTA SHAW, INC.
1. all necessary documents will be submitted to TOYOTA SHAW, INC. (POPONG BERNARDO) a week
after, upon arrival of Mr. Sosa from the Province (Marinduque) where the unit will be used on the 19th of
June.
2. the downpayment of P100,000.00 will be paid by Mr. Sosa on June 15, 1989.
3. the TOYOTA SHAW, INC. LITE ACE yellow, will be pick-up [sic] and released by TOYOTA SHAW, INC.
on the 17th of June at 10 a.m.
Very truly yours,
(Sgd.) POPONG BERNARDO.
Mr. Luna L. Sosa wanted to purchase a Toyota Lite Ace but had difficulty in finding a dealer selling an
available unit. When he was told upon contacting Toyota Shaw that there was an available unit, he and
his son Gilbert went to its office at Shaw Blvd., Pasig, Metro Manila on 14 June 1989. They met there a
Toyota sales representative named Popong Bernardo and he emphasized to Bernardo that he needed the
Lite Ace not later than 17 June 1989 because he, his family, and a balikbayan guest would use it on 18
June 1989 to go to his home province Marinduque and celebrate his birthday on 19 th of June 1989.
Mr. Sosa was assured by Bernardo that the unit will be ready for pickup on 10 a.m. of 17 June 1989 and
he signed an agreement between him and Bernardo. They also agreed that the purchase prices balance
will be paid through BA Finances credit financing while Gilbert signed on his behalf the financing
application with Toyota Shaw and BA Finance.
On 15 June 1989, he and his son Gilbert went back to give Toyota Shaw the PhP100,000 downpayment
(initial cash outlay) and his son signed the printed Vehicle Sales Proposal (VSP) No. 928 Bernardo
accomplished under CONFORME. VSP No. 928 showed Luna Sosas name, his home address, the
vehicles model series Lite Ace 1500 and described as 4 Dr minibus, payment terms on installment,
balance to be financed by BA (PhP274,137) and the mentioned initial cash outlay the delivery were not
filled out. It also contained the following conditions: First, the sale is subject to units availability. Second,

the price stated is subject to change without prior notice, and that applicable price will be the one in effect
and prevailing at selling time. Bernardos supervisor Rodrigo Quirante checked and approved the VSP.
On 17 June 1989, Bernardo called around 9:30 a.m. informing Gilbert that the vehicle would not be ready
for pick up at 10:00 a.m. as previously agreed, but at 2:00 p.m. the same day. Sosa and Gilbert met
Bernardo 2 p.m. at the latter's office and Bernardo informed them that the Lite Ace was being readied for
delivery. But after waiting for about an hour, Bernardo told them that the car could not be delivered.
The RTC Marinduque Br. 38 decided that there was a contract of sale between Toyota Shaw through its
agent Mr. Popong Bernardo and Mr. Luna Sosa. The said trial court also held that Toyota Shaw did gave
impression that Bernardo has an (apparent) authority to transact with Sosa in its behalf, and it did not
made known to Sosa that Bernardo dealt beyond his capacity. Thus, the RTC ordered Toyota Shaw to
pay damages to Mr. Sosa:
1. The sum of P75,000.00 for moral damages;
2. The sum of P10,000.00 for exemplary damages;
3. 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 the case;
4. The sum of P2,000.00 transportation fare per trip of the plaintiff in attending the hearing of this
case; and to pay the costs of suit.
Dissatisfied with the trial courts decision, Toyota Shaw appealed the RTC judgment to the Court of
Appeals, but the appellate court affirmed in totality the lower trial courts judgment via its 29 July 1994
decision.
Issues and Held by the Supreme Court: Toyota Shaw appealed decision of Court of Appeals that
affirmed in toto Regional Trial Court (RTC) Marinduque Br. 38s decision raising the following issues,
1. W/N agreement signed by Popong Bernardo (as sales agent of Toyota Shaw) and Mr. Luna Sosa
constituted a perfected contract of sale?
The Supreme Court held that there was no perfected contract between Toyota Shaw and Mr.
Luna Sosa, in relation to the agreement signed by Sosa and Bernardo. The court reasoned the
following things: (1) there was no obligation for Toyota Shaw to deliver the vehicle to Sosa and
that the PhP100,000 initial cash outlay did not specifically refer to a sale of vehicle. (2) The
document did not show the meeting of the minds contemplated in Art. 1475 of the New Civil Code
needed for perfection of a sale contract. For one thing, Mr. Sosa did not sign the agreement. Also,
it is clear from the agreement that Mr. Bernardo is a mere agent of Toyota Shaw and it is
incumbent for Sosa to know if Bernardo has the authority to act in Toyota Shaws behalf. The
Court stated that at most, the agreement may be considered as part of the negotiation stage of
the sale contract.
2. W/N Mr. Luna Sosa can demand delivery of the Lite Ace despite Toyota Shaws allegation that BA
Finance disapproved his credit application and for non-payment of the consideration for the
vehicle?
As to this issue, the Supreme Court upheld the argument of Toyota Shaw that the disapproval of
Sosas credit financing application by BA Finance because he refused to pay the full purchase
price, causing cancellation of the VSP. Moreover, Toyota returned the PhP100,000 through a
check they issued to Mr. Luna Sosa (its receipt proven by Toyota Shaws check voucher signed
by Sosa). The VSP was mere proposal and in view of the events after it was signed, there was no
demandable rights for Sosa to ask the vehicles delivery.
3. W/N Mr. Luna Sosa is entitled to damages?

The Supreme Court held that Sosa is not entitled to awarding of moral and exemplary damages,
as well as payment for attorneys fees and costs of suit, since the only ground Sosa used to claim
moral damages is 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 and because of vans failure of
delivery, he suffered humiliation, shame, and sleepless nights. The Court reasoned that he should
not have announced his plan to buy the car knowing that he might not be able to pay its full
purchase price and therefore, he was the one himself who brought embarrassment by bragging
about a thing which he did not own yet.
The petition of Toyota Shaw is granted and the decision of Court of Appeals affirming the Marinduque
RTCs decision is reversed. The counterclaims are likewise dismissed.