Toyota Shaw, Inc. vs. Court of Appeals and Luna L. Sosa
### Facts:
– **June 1989**: Luna L. Sosa sought to purchase a Toyota Lite Ace amidst a seller’s market. Toyota Shaw, Inc. (Toyota) confirmed availability.
– **14 June 1989**: Sosa and his son Gilbert visited Toyota’s showroom and met sales representative Popong Bernardo. Sosa emphasized needing the vehicle by 17 June for a trip on 18 June. Bernardo assured Sosa the vehicle would be ready at 10 a.m. on 17 June. Bernardo signed a document titled “Agreements Between Mr. Sosa & Popong Bernardo of Toyota Shaw, Inc.” outlining this arrangement.
– **15 June 1989**: Sosa paid a P100,000 downpayment. Bernardo processed a Vehicle Sales Proposal (VSP) showing installment payment via B.A. Finance.
– **17 June 1989, 9:30 a.m.**: Bernardo called Gilbert to reschedule vehicle pickup from 10 a.m. to 2 p.m.
– **17 June 1989, 2:00 p.m.**: After waiting an hour, Sosa was informed the vehicle could not be delivered due to it being sold to another buyer. Toyota claimed non-delivery was due to B.A. Finance not approving Sosa’s credit application.
– **20 November 1989**: Sosa filed a complaint for damages in Marinduque’s RTC, alleging moral damages due to embarrassment and inconvenience.
### Procedural Posture:
– **Regional Trial Court (RTC) Ruling**: The RTC found Exhibit “A” to be a valid contract of sale binding Toyota, awarded Sosa damages.
– **Court of Appeals**: Affirmed RTC’s decision in toto.
– **Supreme Court**: Petition for review filed by Toyota contesting the lower courts’ rulings.
### Issues:
1. Whether Exhibit “A” constituted a perfected contract of sale binding Toyota.
2. Whether the VSP or Exhibit “A” represented the true understanding between the parties.
3. Whether Sosa had a legal and demandable right to vehicle delivery despite non-approval of his credit application.
4. Whether Toyota acted in good faith in not releasing the vehicle.
5. Whether Toyota was liable for damages.
### Court’s Decision:
– **On the Nature of Exhibit “A”**:
– Exhibit “A” was not a perfected contract of sale since it lacked mutual obligations (Article 1458 and 1475 of the Civil Code) and specific price modalities.
– It constituted merely an initial negotiation, and not all essential terms of the sale were agreed upon.
– **Effect of Non-Approval by B.A. Finance**:
– The absence of meeting minds due to B.A. Finance’s disapproval meant no legally binding commitment existed.
– The VSP being a mere proposal invalidated any demand for the vehicle’s delivery.
– **Authority of Bernardo**:
– Sosa should have verified Bernardo’s authority, recognizing him as only an agent.
– **On Moral and Exemplary Damages**:
– The claim for moral damages due to embarrassment from non-delivery is deemed unwarranted.
– No basis for exemplary damages exists absent moral, temperate, or compensatory damages.
– The award for attorney’s fees was similarly unfounded due to lack of statutory basis.
### Doctrine:
– A definitive agreement on the manner of payment is essential for a binding sale contract.
– A person dealing with an agent must ascertain the agent’s authority at their peril.
– For contracts involving financing, approval by the financing company is crucial for perfection of the sale.
### Class Notes:
– **Contract of Sale (Article 1458, Civil Code)**: Obligations to deliver and to pay a price certain.
– **Perfection of Sale (Art. 1475, Civil Code)**: Requires agreement on both object and price.
– **Agent’s Authority**: Responsibility lies with the third party to verify the scope of the agent’s power (Article 1911, Civil Code).
– **Damages (Article 2220, Civil Code)**: Claims for moral damages require a direct act of bad faith or gross mistake; public embarrassment does not suffice.
### Historical Background:
Contextualized within the Philippine legal sense of contract negotiations, the case reflects typical issues involving dealership agreements and third-party financing. It underscores the legal principles surrounding obligations, agency, and the process of bringing cases to fore when personal and commercial interests clash.
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