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EN BANC

G.R. No. L-7382 June 29, 1955

SOUTHWESTERN SUGAR AND MOLASSES COMPANY, Plaintiff-Appellee, vs. ATLANTIC GULF & PACIFIC COMPANY, Defendant-Appellant.

Arturo A. Alafriz and A. B. Alcera for appellant.
Mariano Agoncillo for appellee.

BAUTISTA ANGELO, J.:

This is an action for specific performance.chanroblesvirtualawlibrary chanrobles virtual law library

On March 24, 19 53, the Atlantic Gulf & Pacific Company of Manila, hereafter called Atlantic Gulf for short, granted an option to Southwestern Sugar & Molasses Co. (Far East) Inc., hereafter called Southwestern Company, to buy its barge No. 10 for the sum of P30,000 to be exercised within a period of ninety days.chanroblesvirtualawlibrary chanrobles virtual law library

On May 11, 1953, the Southwestern Company wrote to Atlantic Gulf advising the latter that it wanted "to exercise our option at your earliest convenience" and requested that it be notified as soon as the barge was available.chanroblesvirtualawlibrary chanrobles virtual law library

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 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 not be turned over to the latter company.chanroblesvirtualawlibrary chanrobles virtual law library

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 court a check covering the sum of P30,000. This check however was later withdrawn with the approval of the court.chanroblesvirtualawlibrary chanrobles virtual law library

On June 29, 1953, the Atlantic Gulf withdraw its "offer of option" with due notices to the Southwestern Company stating as reason therefor that the option was granted merely as a favor. The 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.chanroblesvirtualawlibrary chanrobles virtual law library

After due trial, the lower court rendered judgment granting plaintiff's prayer for specific 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 sum of P600 as attorney's fees, plus the costs of action.chanroblesvirtualawlibrary chanrobles virtual law library

The case before us on the assertion that the only issue involved is one of law.chanroblesvirtualawlibrary chanrobles virtual law library

The option granted by appellant to appellee is contained in a letter dated March 24, 1953 which reads as follows:

March 24, 1953

Southwestern Sugar & Molasses Co. Far East, Inc.
145 Muelle de Binondo
Manila, Philippines
Gentlemen:chanrobles virtual law library

This is to confirm our conversion of today whereby we offer you our Barge No. 10, which is 120' 00" long by 44"-0 wide and 9'-0" deep, for the sum of of P30,000. Barge to cleaned of creosote and fuel oil.chanroblesvirtualawlibrary chanrobles virtual law library

This option is to be good for ninety (90) days, or until June 30, 1953.

Yours very truly,chanrobles virtual law library ATLANTIC, GULF & PACIFIC CO. OF MANILA (Sgd.) W. H. SCHOENING

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. This article provides:

ART. 1479. A promise to buy and sell a determinate thing for a price certain is reciprocally demandable.chanroblesvirtualawlibrary chanrobles virtual law library

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 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.chanroblesvirtualawlibrary chanrobles virtual law library

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.chanroblesvirtualawlibrary chanrobles virtual law library

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.chanroblesvirtualawlibrary chanrobles virtual law library

Wherefore, the decision appealed from is reversed, without pronouncement as to costs.chanroblesvirtualawlibrary chanrobles virtual law library

Bengzon, Acting C.J., Padilla, Montemayor, Reyes, A., Jugo, Labrador, Concepcion, and Reyes, J.B.L., JJ., concur.