Southwestern Sugar & Molasses Co. vs.

Atlantic Gulf & Pacific Company

(L-7382, June 29 1955)
FACTS: On March 24, 1953, defendant-appellant Atlantic granted plaintiff-appellee
Southwestern an option period of ninety days to buy the formers barge No. 10 for
the sum of P30,000. On May 11 of the same year, Southwestern Company
communicated its acceptance of the option to Atlantic through a letter, to which
the latter replied 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." On June
25, Atlantic advised the Southwestern Company that since there is still further work
for it, the barge could not be turned over to the latter company.
On June 27, 1953, the Southwestern Company filed this action to compel
Atlantic to sell the barge in line with the option, depositing with the court a check
covering the sum of P30,000, but said check was later withdrawn with the approval
of the court. On June 29, the Atlantic withdrew its "offer of option" with due
notices to Southwestern Company stating that the option was granted merely as a
favor. The Atlantic contended that the option to sell it made to Southwestern
Company is null and void because said option to sell is not supported by any
consideration. 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no longer be withdrawn and in any event such withdrawal is ineffective.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.
The trial court granted herein plaintiff-appellee Southwestern Companys
action for specific performance

ISSUE: Is the option to sell given by Atlantic to Southwestern valid and binding,
giving rise to Southwesterns cause of action for specific performance

HELD: 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. 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.

Atkins Kroll & Co. vs. Cu Hian Tek (G.R. No. L-9871 January 31, 1958)
FACTS: On September 13, 1951, petitioner Atkins Kroll & Co. (Atkins) sent a letter
to respondent B. Cu Hian Tek (Hian Tek) offering (a) 400 cartons of Luneta brand
Sardines in Tomato Sauce 48 / 15-oz. Ovals at $8.25 per carton, (b) 300 cartons of
Luneta brand Sardines Natural 48/15 oz. talls at $6.25 per carton, and (c) 300
cartons of Luneta brand Sardines in Tomato Sauce 100/5-oz. talls at $7.48 per
carton, with all of the offers subject to reply by September 23, 1951. Hian Tek
unconditionally accepted the said offer through a letter delivered on September 21,
1951, but Atkins failed to deliver the commodities due to the shortage of catch of
sardines by the packers in California.
Hian Tek, therefore, filed an action for damages in the CFI of Manila which
granted the same in his favor. Upon Atkins appeal, the Court of Appeals affirmed
said decision but reduced the damages to P3,240.15 representing unrealized
profits. Atkins herein contends that there was no such contract of sale but only an
option to buy, which was not enforceable for lack of consideration because it is
provided under the 2nd paragraph of Article 1479 of the New Civil Code that "an
accepted unilatateral promise to buy or to 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. Atkins also insisted that the offer was a mere offer of
option, because the "firm offer" was a continuing offer to sell until September 23.
ISSUE: Was there a contract of sale between the parties or only a unilateral
promise to buy?

HELD: 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 in the offer nor in the acceptance. On the copntrary Exh. B accepted "the
firm offer for the sale" and adds, "the undersigned buyer has immediately filed an
application for import license . . ." 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.
Furthermore, an option is unilateral: a promise to sell
3
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.

NICOLAS SANCHEZ vs. SEVERINA RIGOS (G.R. No. L-25494 June 14, 1972)
FACTS: Nicolas Sanchez and Severina Rigos executed an instrument entitled "Option
to Purchase," whereby Mrs. Rigos agreed, promised and committed to sell to
Sanchez a parcel of land 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 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. Rigos contended that the contract between
them was only 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.
Sanchez alleged in his compliant 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. The lower court rendered
judgment in favor of Sanchez.

ISSUE: Whether there was a contract to buy and sell between the parties or only a
unilateral promise to sell.

HELD: 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
unilaterall 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.
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.
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.
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., 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 theSouthwestern
Sugar & Molasses Co. case should be deemed abandoned or modified.
Sps. NATINO vs IAC, Rural Bank of Aguilar (G.R. No. 73573 May 23, 1991)
FACTS: petitioners executed a real estate mortgage in favor of respondent bank as
security for a loan of P2,000.00. Petitioners failed to pay the loan on due date. The
bank applied for the extrajudicial foreclosure of the mortgage. The respondent bank
was the highest and winning bidder at the foreclosure sale so a certificate of sale
was executed in its favor by the sheriff and the same was registered with the Office
of the Register of Deeds. The certificate of sale, a copy of which was furnished the
petitioners by registered mail, expressly provided that the redemption period shall
be two years from the registration thereof. Since no redemption was made by
petitioners within the two-year period, which expired on 29 January 1977, the
sheriff issued a Final Deed of Sale on 15 February 1977. Petitioners, however,
claimed that they were granted by respondent bank an extension of the
redemption period; but the latter denied it. Later on, respondent bank file
a petition for a writ of possession, which petitioners later opposed on the ground
that they had consigned the redemption money of P4,000.00 on 12 December
1979. The court rejected the opposition and issued the writ of possession. However,
to prevent its execution, petitioners instituted with the then CFI of Pangasinan a
complaint against respondent bank and the Ex-Officio Provincial Sheriff for the
annulment of the aforementioned final deed of sale and for the issuance of a writ of
preliminary injunction. In their complaint petitioners alleged that the final deed of
sale was prematurely issued since they were granted an extension of time to
redeem the property. Trial court ruled in favour of P, but CA reversed.
ISSUE:
HELD: We find the petition to be devoid of merit.
The contrary conclusion made by the trial court is drawn from inferences which are
not supported by adequate or sufficient facts or is based on erroneous
assumptions. If indeed the offer was made within the redemption period, but the
Bank refused to accept the redemption money, petitioners should have made the
tender to the sheriff who made the sale and who then had the duty to accept the
tender and execute the certificate of redemption. There was no such tender to the
Sheriff. Again, if indeed this occurred during the redemption period, then, as
correctly pointed out by respondent IAC, it was not necessary to ask for extension
of the period to redeem.
In respect to the alleged assurance given by Mrs. Brodeth, the President
and Manager of the Bank, sometime in May of 1978 to the effect that petitioners
can redeem the property as soon as they have the money, it is obvious that this
took place after the expiration of the redemption period. As correctly pointed out
by the respondent IAC, this could only relate to the matter of resale of the property,
not redemption. Furthermore, even assuming for the sake of argument that Mrs.
Brodeth gave the assurance, the same could bind the bank only if its Board of
Directors approved or ratified it. No evidence was offered to prove such action by
the Board. Moreover, Mrs. Brodeth denied that during that meeting in May 1978
she made the assurance; according to her petitioner Epifanio neither mentioned
the loan nor offered to redeem, although earlier he was told that to 'redeem" the
property he should pay P30,000.00. The latter statement supports the conclusion of
respondent IAC that this was the Bank's offer for the re-sell (not redemption of the
property), which, logically took place after the expiration of the redemption period.
Even if Mrs. Brodeth is to be understood to have promised to allow the
petitioners to buy the property at any time they have the money, the Bank was not
bound by the promise not only because it was not approved or ratified by the Board
of Directors but also because, and more decisively, it was a promise unsupported by
a consideration distinct from the re-purchase price. The second paragraph of
Article 1479 of the Civil Code expressly provides: An accepted unilateral. promise to
buy or to sell a determinate thing for a price certain is binding upon the promissory
if the promise is supported by a consideration distinct from the price.

Serra vs. Court of Appeals, and RCBC (G.R. No. 103338 January 4, 1994)
FACTS: Petitioner Federico Serra, who is the owner of a 374
square meter parcel of land located at Masbate, Masbate, and private respondent
Rizal Commercial Banking Corporation (RCBC) entered into a "Contract of Lease
with Option to Buy" in May 25, 1975 which provided that Serra will lease the
subject land to RCBC for a period of 25 years from June 1, 1975 to June 1, 2000, that
the RCBC has the option to purchase the same at P210.00 per square meter within a
period of 10 years from May 25, 1975, the date of the signing of the Contract, and
that Serra will have to register said land under the Torrens System to the Register of
Deeds of Province of Masbate within the same 10-year option period. Pursuant to
said contract, RCBC constructed improvements on the subject land to house its
branch office, while the petitioner had the property, within 3 years from 1975, duly
registered with OCT No. 0-232 under the Torrens System. Later, petitioner alleged
that as soon as he had the property registered, he kept on pursuing the branch
manager for the sale of the lot as per their agreement, but it was not until
September 4, 1984, that RCBC decided to exercise the option.
RCBC informed petitioner, through a letter, of its intention to buy the
property at the agreed price of not greater than P210.00 per square meter or a
total of P78,430.00, but petitioner replied that he is no longer selling the property.
RCBC then filed an action for specific performance and damages against Serra in
March 1985 alleging that during the negotiations it made clear to petitioner that it
intends to stay permanently on property once its branch office is opened unless the
exigencies of the business requires otherwise.
Although finding that the contract was valid, the lower court ruled that the
option to buy is unenforceable because it lacked a consideration distinct from the
price and RCBC did not exercise its option within the reasonable time. Upon motion
for reconsideration, however, the lower court reversed itself on the 2nd issue,
declared the contract as valid, and ordered Serra to deliver the proper deed of sale
to RCBC. The Court of Appeals likewise affirmed said decision.

ISSUE: Was there a consideration distinct from the price to support the option
given to RCBC?
HELD: The petition is devoid of merit.
There is no dispute that the contract is valid and existing between the
parties, as found by both the trial court and the appellate court. Neither do we find
the terms of the contract unfairly lopsided to have it ignored. (Contract of adhesion
issue, P is a highly educated man kaya.)
Petitioner contends that the doctrines laid down in the cases of
Atkins Kroll v. Cua Hian Tek,
11
Sanchez v. Rigos,
12
and Vda. de Quirino
v. Palarca
13
were misapplied in the present case, because 1) the option given to the
respondent bank was not supported by a consideration distinct from the price; and
2) that the stipulated price of "not greater than P210.00 per square meter" is not
certain or definite.
Article 1324 of the Civil Code provides that when an offeror has allowed
the offeree a certain period to accept, the offer maybe withdrawn at anytime
before acceptance by communicating such withdrawal, except when the option is
founded upon consideration, as something paid or promised. On the other hand,
Article 1479 of the Code provides that an accepted unilateral promise to buy and
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.
In a unilateral promise to sell, where the debtor fails to withdraw the
promise before the acceptance by the creditor, the transaction becomes a bilateral
contract to sell and to buy, because upon acceptance by the creditor of the offer to
sell by the debtor, there is already a meeting of the minds of the parties as to the
thing which is determinate and the price which is certain.
14
In which case, the
parties may then reciprocally demand performance.
Jurisprudence has taught us that an optional contract is a privilege existing
only in one party the buyer. For a separate consideration paid, he is given the
right to decide to purchase or not, a certain merchandise or property, at any time
within the agreed period, at a fixed price. This being his prerogative, he may not be
compelled to exercise the option to buy before the time
expires.
In the present case, the consideration is even more onerous on the part of
the lessee since it entails transferring of the building and/or improvements on the
property to petitioner, should respondent bank fail to exercise its option within the
period stipulated.
18

The bugging question then is whether the price "not greater than TWO
HUNDRED PESOS" is certain or definite. A price is considered certain if it is so with
reference to another thing certain or when the determination thereof is left to the
judgment of a specified person or persons.
19
And generally, gross inadequacy of
price does not affect a contract of sale. Contracts are to be construed according to
the sense and meaning of the terms which the parties themselves have used. In the
present dispute, there is evidence to show that the intention of the parties is to peg
the price at P210 per square meter.


ROMAN vs. GRIMALT (G.R. No. L-2412 April 11, 1906)
FACTS: In between the 13th to the 23d of June, 1904, petitioner Pedro Roman, the
owner, and respondent Andres Grimalt, the purchaser, verbally agreed upon the
sale of the schooner Santa Marina. In his letter on June 23, Grimalt agreed to buy
the vessel and offered to pay in three installments of P500 each on July 15,
September 15, and November 15, provided the title papers to the vessel were in
proper form. The title of the vessel, however, was in the name of one Paulina Giron
and not in the name of Roman as the alleged owner. Roman promised to perfect his
title to the vessel, but failed so the papers he presented did not show that he was
the owner of the vessel. On June 25, 1904, the vessel sank in the Manila harbor
during a severe storm, even before Roman was able to produce for Grimalt the
proper papers showing that the former was in fact the owner of the vessel in
question and not Paulina Giron. As a result, Grimalt refused to pay the purchase
price when Roman made a demand on June 30, 1904.
On July 2, 1904, Roman filed this complaint in the CFI of Manila, which
found that the parties had not arrived at a definite understanding, and later
dismissed said complaint.

ISSUE: Who should bear the risk of loss?

HELD: The court below found that the parties had not arrived at a definite
understanding. We think that this finding is supported by the evidence introduced
at the trial.
The sale of the schooner was not perfected and the purchaser did not
consent to the execution of the deed of transfer for the reason that the title of the
vessel was in the name of one Paulina Giron and not in the name of Pedro Roman,
the alleged owner. Roman promised, however, to perfect his title to the vessel, but
he failed to do so.
If no contract of sale was actually executed by the parties the loss of the
vessel must be borne by its owner and not by a party who only intended to
purchase it and who was unable to do so on account of failure on the part of the
owner to show proper title to the vessel and thus enable them to draw up the
contract of sale. The defendant was under no obligation to pay the price of the
vessel, the purchase of which had not been concluded. The conversations had
between the parties and the letter written by defendant to plaintiff did not
establish a contract sufficient in itself to create reciprocal rights between the
parties.
It follows, therefore, that article 1452 of the Civil Code relative to the
injury or benefit of the thing sold after a contract has been perfected and articles
1096 and 1182 of the same code relative to the obligation to deliver a specified
thing and the extinction of such obligation when the thing is either lost or
destroyed, are not applicable to the case at bar.


EQUATORIAL REALTY V. MAYFAIR (November 21, 1996)
FACTS: Petitioner Carmelo and Bauermann Inc. leased its parcel of land with 2-
storey building to respondent Mayfair Theater Inc. They entered a contract which
provides that if the LESSOR should desire to sell the leased premises, the LESSEE
shall be given 30-days exclusive option to purchase the same.
Carmelo informed Mayfair that it will sell the property to
Equatorial. Mayfair made known its interest to buy the property but only to the
extent of the leased premises. Notwithstanding Mayfairs intention, Carmelo sold
the property to Equatorial.
ISSUE: WON the sale of the property to Equatorial is valid.

HELD: The sale of the property should be rescinded because Mayfair has the right of
first refusal. Both Equatorial and Carmelo are in bad faith because they knew of the
stipulation in the contract regarding the right of first refusal.
The stipulation is a not an option contract but a right of first refusal and as
such the requirement of a separate consideration for the option, has no
applicability in the instant case. The consideration is built in the reciprocal
obligation of the parties.In recipro cal contract, the obligation or promise of each
party is the consideration for that of the other. (Promise to lease in return of the
right to first refusal)
An accepted unilateral promise which specifies the thing to be sold and the
price to be paid, when coupled with a valuable consideration distinct and separate
from the price, is what may properly be termed a perfected contract of
option. Observe, however, that the option is not the contract of sale itself. The
optionee has the right, but not the obligation, to buy. Once the option is exercised
timely, i.e., the offer is accepted before a breach of the option, a bilateral promise
to sell and to buy ensues and both parties are then reciprocally bound to comply
with their respective undertakings. Where a period is given to the offeree within
which to accept the offer, the following rules generally govern: (1) If the period is
not itself founded upon or supported by a consideration, the offeror is still free and
has the right to withdraw the offer before its acceptance, or if an acceptance has
been made, before the offeror's coming to know of such fact, by communicating
that withdrawal to the offeree; (2) If the period has a separate consideration, a
contract of "option" deemed perfected, and it would be a breach of that contract to
withdraw the offer during the agreed period. The option, however, is an
independent contract by itself; and it is to be distinguished from the projected main
agreement (subject matter of the option) which is obviously yet to be concluded. If,
in fact, the optioner-offeror withdraws the offer before its acceptance (exercise of
the option) by the optionee-offeree, the latter may not sue for specific performance
on the proposed contract ("object" of the option) since it has failed to reach its own
stage of perfection.
We so hold that no option to purchase in contemplation of the second
paragraph of Article 1479 of the Civil Code, has been granted to Mayfair under the
said lease contracts.
Norkis Distributors Inc. vs. CA &Nepales (G.R. No. 91029 February 7, 1991)
FACTS: Private respondent Alberto Nepales bought from the Norkis Distributors a
brand new Yamaha Wonderbike motorcycle. The Branch Manager Avelino Labajo
agreed to accept the P7,500.00 price payable by means of a Letter of Guaranty from
the DBP. Hence, credit was extended to Nepales, and as security for the loan, he
executed a chattel mortgage on the motorcycle in favor of DBP. Labajo issued the
Norkis Sales Invoice perfecting the contract of sale, and Nepales signed the same
while the unit remained in Norkis' possession. It was later registered under Alberto
Nepales name in the Land Transportation Commission. On January 22, 1980,
the motorcycle was delivered to a certain Julian Nepales who was allegedly the
agent of Alberto Nepales but the latter denies it. The record shows, however, that
Alberto and Julian Nepales presented the unit to DBP's Appraiser-Investigator
Ernesto Arriesta at the DBP offices. Later, the motorcycle met an accident and the
unit was a total wreck, was returned, and stored inside Norkis' warehouse.
On March 20, 1980, DBP released the proceeds of private respondent's
motorcycle loan to Norkis in the total sum of P7,500. As the price of the motorcycle
later increased to P7,828 in March, 1980, Nepales paid the difference of P328 and
demanded the delivery of the motorcycle. Norkis failed to deliver the unit, and
Nepales filed an action for specific performance with damages. Norkis answered
that the motorcycle had already been delivered to private respondent before the
accident, hence, he should bear the risk of loss or damage as owner of the unit.
Norkis concedes that there was no "actual" delivery of the vehicle, but insists that
there was constructive delivery of the unit upon the issuance of the sales invoice,
upon the registration of the unit in Nepales name, and upon the issuance of the
official receipt.
ISSUE: Who should bear the risk of loss?

HELD: As pointed out by the private respondent, the issuance of a sales invoice
does not prove transfer of ownership of the thing sold to the buyer. An invoice is
nothing more than a detailed statement of the nature, quantity and cost of the
thing sold and has been considered not a bill of sale. In all forms of delivery, it is
necessary that the act of delivery whether constructive or actual, be coupled with
the intention of delivering the thing. The act, without the intention, is insufficient.
When the motorcycle was registered by Norkis in the name of private respondent,
Norkis did not intend yet to transfer the title or ownership to Nepales, but only to
facilitate the execution of a chattel mortgage in favor of the DBP for the release of
the buyer's motorcycle loan.
Article 1496 of the Civil Code which provides that "in the absence of an
express assumption of risk by the buyer, the things sold remain at seller's risk until
the ownership thereof is transferred to the buyer," is applicable to this case, for
there was neither an actual nor constructive delivery of the thing sold, hence, the
risk of loss should be borne by the seller, Norkis, which was still the owner and
possessor of the motorcycle when it was wrecked. This is in accordance with the
well-known doctrine of res perit domino.