Fornilda vs.

RTC motorcycle payable by DBP upon release of his

motorcycle loan.
There was already a decision in a prior case
involving the same parties. The court then ruled As security for the loan, Nepales would execute a
that a lawyer is prohibited from acquiring either by chattel mortgage on the motorcycle in favor of DBP.
Branch Manager Labajo issued Norkis Sales Invoice
purchase or assignment the property or rights
No. 0120 (Exh.1) showing that the contract of sale of
involved which are the object of litigation in which the motorcycle had been perfected. Nepales signed
they interfere by virtue of their profession. The the sales invoice to signify his conformity with the
prohibition on purchase is all embracing to include terms of the sale. In the meantime, however, the
not only sales to private individuals but also pubic motorcycle remained in Norkis' possession.
of judicial sales.
The motorcycle was registered under the name of
A motion for reconsideration was filed by Nepales. Later on, the said motorcycle was delivered
to a certain Julian Nepales allegedly an agent of
Respondent Amonoy. Aleberto (which he denies). It so happened that the
motorcycle met an accident, and it was found out that
Respondent contends that at the time of the a certain Zacarias Payba who has the one driving it at
execution of the mortgage on 20 January 1965, the the time of accident. It was a total wreck and it was
subject properties were no longer properties in returned to Norkis warehouse.
litigation since the Project of Partition covering said
properties was approved by the lower court as early DBP released the proceeds of respondents loan to
as 12 January 1965. Norkis. Nepales demanded the delivery of the
motorcycle but Norkis could not deliver. He filed an
action for specific performance with damages against
This argument should fail for the reason that while
Norkis.
the Project of Partition was approved on 12
January 1965, it was only on 6 August 1969, and Norkis answered that the motorcycle had already
after all the charges against the estate had been been delivered to private respondent before the
paid, that the estate was declared closed and accident, hence, the risk of loss or damage had to be
terminated. In fact, he has acted as counsel from borne by him as owner of the unit.
1959 until 1968. Thus, at the time of the execution
RTC ruled in favor of Respondent. CA affirmed.
of the mortgage contract, the controverted parcels
were still in litigation and fiduciary relationship of Issue: who should bear the loss of the motorcycle.
lawyer and client, which Art. 1981[5] precisely
seeks to protect, still existed between the parties. Contention of Norkis The is already a constructive
To state that mortgages are not included within the delivery of the unit upon 1) issuance of Sales Invoice,
prohibited is to open the door to an indirect 2) registration of the vehicle with LTO, 3)) issuance of
circumvention of that statutory injunction, official receipt and payment of registration fees.
acquisition of the property being merely postponed
No. As pointed out by the private respondent, the
till eventual foreclosure. issuance of a sales invoice does not prove transfer of
ownership of the thing sold to the buyer. An invoice is
Norkis Distributors Inc vs. CA nothing more than a detailed statement of the nature,
quantity and cost of the thing sold and has been
Petitioner Norkis Distributors, Inc. (Norkis for brevity), considered not a bill of sale.
is the distributor of Yamaha motorcycles in Negros
Occidental with office in Bacolod City with Avelino In all forms of delivery, it is necessary that the act of
Labajo as its Branch Manager. Respondent Alberto delivery whether constructive or actual, be coupled
Nepales bought from the Norkis-Bacolod branch a with the intention of delivering the thing. The act,
brand new Yamaha Wonderbike motorcycle without the intention, is insufficient.

The price of P7,500.00 was payable by means of a When the motorcycle was registered by Norkis in the
Letter of Guaranty from the Development Bank of the name of private respondent, Norkis did not intend yet
Philippines (DBP), Kabankalan Branch, which Norkis' to transfer the title or ownership to Nepales, but only
Branch Manager Labajo agreed to accept. Hence, to facilitate the execution of a chattel mortgage in
credit was extended to Nepales for the price of the
favor of the DBP for the release of the buyer's GAISANO CAGAYAN, INC. Petitioner,
motorcycle loan. The Letter of Guarantee (Exh. 5) vs.
issued by the DBP, reveals that the execution in its INSURANCE COMPANY OF NORTH AMERICA,
favor of a chattel mortgage over the purchased Respondent.
vehicle is a pre-requisite for the approval of the
buyer's loan. If Norkis would not accede to that Intercapitol Marketing Corporation (IMC) is the maker
arrangement, DBP would not approve private of Wrangler Blue Jeans. Levi Strauss (Phils.) Inc.
respondent's loan application and, consequently, (LSPI) is the local distributor of products bearing
there would be no sale. trademarks owned by Levi Strauss & Co.. IMC and
LSPI separately obtained from respondent fire
The Court of Appeals correctly ruled that the purpose insurance policies with book debt endorsements. The
of the execution of the sales invoice dated September insurance policies provide for coverage on "book
20, 1979 (Exh. B) and the registration of the vehicle in debts in connection with ready-made clothing
the name of plaintiff-appellee (private respondent) materials which have been sold or delivered to
with the Land Registration Commission (Exhibit C) various customers and dealers of the Insured
was not to transfer to Nepales the ownership and anywhere in the Philippines.
dominion over the motorcycle, but only to comply with
the requirements of the Development Bank of the Petitioner is a customer and dealer of the products of
Philippines for processing private respondent's IMC and LSPI. the Gaisano Superstore Complex in
motorcycle loan. On March 20, 1980, before private Cagayan de Oro City, owned by petitioner, was
respondent's loan was released and before he even consumed by fire. Included in the items lost or
paid Norkis, the motorcycle had already figured in an destroyed in the fire were stocks of ready-made
accident while driven by one Zacarias Payba. Payba clothing materials sold and delivered by IMC and
was not shown by Norkis to be a representative or LSPI.
relative of private respondent. The latter's supposed
relative, who allegedly took possession of the vehicle Respondent filed a complaint for damages against
from Norkis did not explain how Payba got hold of the petitioner. It alleges that IMC and LSPI filed with
vehicle on February 3, 1980. Norkis' claim that Julian respondent their claims under their respective fire
Nepales was acting as Alberto's agent when he insurance policies with book debt endorsements; that
allegedly took delivery of the motorcycle (p. 20, as of February 25, 1991, the unpaid accounts of
Appellants' Brief), is controverted by the latter. Alberto petitioner on the sale and delivery of ready-made
denied having authorized Julian Nepales to get the clothing materials with IMC was P2,119,205.00 while
motorcycle from Norkis Distributors or to enter into with LSPI it was P535,613.00; that respondent paid
any transaction with Norkis relative to said the claims of IMC and LSPI and, by virtue thereof,
motorcycle. (p. 5, t.s.n., February 6, 1985). This respondent was subrogated to their rights against
circumstances more than amply rebut the disputable petitioner; that respondent made several demands for
presumption of delivery upon which Norkis anchors its payment upon petitioner but these went unheeded.
defense to Nepales' action (pp. 33-34, Rollo).
Petitioner contends that it should not be held liable
Article 1496 of the Civil Code which provides that "in because the property covered by the insurance
the absence of an express assumption of risk by the policies were destroyed due to fortuitous event.
buyer, the things sold remain at seller's risk until the
ownership thereof is transferred to the buyer," is
The RTC rendered its decision dismissing
applicable to this case, for there was neither an actual
respondent's complaint. It held that the fire was purely
nor constructive delivery of the thing sold, hence, the
accidental; that the cause of the fire was not
risk of loss should be borne by the seller, Norkis,
attributable to the negligence of the petitioner; that it
which was still the owner and possessor of the
has not been established that petitioner is the debtor
motorcycle when it was wrecked. This is in
of IMC and LSPI; that since the sales invoices state
accordance with the well-known doctrine of res perit
that "it is further agreed that merely for purpose of
domino.
securing the payment of purchase price, the above-
described merchandise remains the property of the
vendor until the purchase price is fully paid", IMC and
LSPI retained ownership of the delivered goods and
must bear the loss.

CA set aside the decision.

The CA held that the sales invoices are proofs of sale, agreed that merely for purpose of securing the
being detailed statements of the nature, quantity and payment of the purchase price the above described
cost of the thing sold; that loss of the goods in the fire merchandise remains the property of the vendor until
must be borne by petitioner since the proviso the purchase price thereof is fully paid." 26
contained in the sales invoices is an exception under
Article 1504 (1) of the Civil Code, to the general rule The Court is not persuaded.
that if the thing is lost by a fortuitous event, the risk is
borne by the owner of the thing at the time the loss The present case clearly falls under paragraph (1),
under the principle of res perit domino; that Article 1504 of the Civil Code:
petitioner's obligation to IMC and LSPI is not the
delivery of the lost goods but the payment of its
ART. 1504. Unless otherwise agreed, the goods
unpaid account and as such the obligation to pay is
remain at the seller's risk until the ownership therein is
not extinguished, even if the fire is considered a
transferred to the buyer, but when the ownership
fortuitous event; that by subrogation, the insurer has
therein is transferred to the buyer the goods are at the
the right to go against petitioner; that, being a fire
buyer's risk whether actual delivery has been made or
insurance with book debt endorsements, what was
not, except that:
insured was the vendor's interest as a creditor.
(1) Where delivery of the goods has been made to the
As to the second error, petitioner avers that despite
buyer or to a bailee for the buyer, in pursuance of the
delivery of the goods, petitioner-buyer IMC and LSPI
contract and the ownership in the goods has been
assumed the risk of loss when they secured fire
retained by the seller merely to secure performance
insurance policies over the goods.
by the buyer of his obligations under the contract, the
goods are at the buyer's risk from the time of such
Concerning the third ground, petitioner submits that delivery; (Emphasis supplied)
there is no subrogation in favor of respondent as no
valid insurance could be maintained thereon by IMC
xxxx
and LSPI since all risk had transferred to petitioner
upon delivery of the goods; that petitioner was not
privy to the insurance contract or the payment Thus, when the seller retains ownership only to insure
between respondent and its insured nor was its that the buyer will pay its debt, the risk of loss is borne
consent or approval ever secured; that this lack of by the buyer.27 Accordingly, petitioner bears the risk of
privity forecloses any real interest on the part of loss of the goods delivered.
respondent in the obligation to pay, limiting its interest
to keeping the insured goods safe from fire.

For its part, respondent counters that while ownership

over the ready- made clothing materials was
transferred upon delivery to petitioner, IMC and LSPI
have insurable interest over said goods as creditors
who stand to suffer direct pecuniary loss from its
destruction by fire; that petitioner is liable for loss of
the ready-made clothing materials since it failed to
overcome the presumption of liability under Article
126516 of the Civil Code; that the fire was caused
through petitioner's negligence in failing to provide
stringent measures of caution, care and maintenance
on its property because electric wires do not usually
short circuit unless there are defects in their
installation or when there is lack of proper
maintenance and supervision of the property; that
petitioner is guilty of gross and evident bad faith in
refusing to pay respondent's valid claim and should
be liable to respondent for contracted lawyer's fees,
litigation expenses and cost of suit.17

Petitioner argues that IMC bears the risk of loss

because it expressly reserved ownership of the goods
by stipulating in the sales invoices that "[i]t is further