EFFECT ON A PERFECTED CONTRACT OF SALE & LOSS OF THE THINGSOLD

G.R. No. 117187 July 20, 2001 UNION MOTOR CORPORATION,petitioner-appellant,vs.THE COURT OF
APPEALS, JARDINE-MANILA FINANCE, INC., SPOUSESALBIATO BERNAL andMILAGROS
BERNAL,respondents-appelles.
Ponente: De Leon Jr.
Facts: Bernal spouses purchased from (petitioner) Union Motor Corporation one CimarronJeepney to be
paid in installments and executed a promissory note and a deed of chattelmortgage in favor of the
petitioner, and entered into a contract of assignment of the promissory note and chattel mortgage with
Jardine-Manila Finance, Inc through ManuelSosmea, an agent of the petitioner, although the
respondent spouses have not yet physically possessed the vehicle, Sosmea required them to sign the
receipt as acondition for the delivery of the vehicle Spouses continued paying the installments even if
the subject motor vehicle remainedundelivered inasmuch as Jardine-Manila Finance, Inc. promised to
deliver the subject jeepney. The respondent spouses have paid a total of worth of installments before
theydiscontinued paying on account of non-delivery of the subject motor vehicle, the reasonwhy the
vehicle was not delivered was due to the fact that Sosmea allegedly took thesubject motor vehicle in
his personal capacity.Jardine-Manila Finance, Inc., filed a complaint for a sum of money, against
therespondent Bernal spouses before the then Court of First Instance of Manila.Thecomplaint was
amended and transferred to the Regional Trial Court of Makati to include petitioner Union Motor
Corporation as alternative defendant, after the petitioner filed itsanswer, the respondent spouses filed
their amended answer with cross-claim against theformer and counterclaim against Jardine-Manila
Finance, Inc. The respondent spouses presented witnesses in support of their defense and counterclaim
against the plaintiff andcross-claim against the petitioner.The trial court deemed the presentation of the
saidwitness as having been waived by the petitioner.Trial court rendered a decision ordering petitioner
to pay the spouses. Not satisfied the petitioner interposed an appeal before the Court of Appeals while
the respondent spousesappealed to hold the petitioner solidarily liable with Jardine-Manila Finance,
Inc.Theappellate court denied both appeals and affirmed the trial courts decision. Hence this petition

Issue1: Whether there has been a delivery, physical or constructive, of the subject motor vehicle.Issue 2:
Whether spouses must bear the risk of the loss of the thing sold.Held 1: NO to both. The respondent
Bernal spouses should bear the loss thereof in accordancewith Article 1504 that when the ownership of
goods is transferred to the buyer, the goodsare at the buyers risk. But Bernal spouses never came into
possession of the subjectmotor vehicle. It is but appropriate that they be reimbursed by the petitioner
of the initial payment which they made. The court ruled in favor of the respondent Bernal
spouses.Undisputed is the fact that the respondent Bernal spouses did not come into possession of the
subject Cimarron jeepney that was supposed to be delivered to them by the petitioner.The registration
certificate, receipt and sales invoice that the respondent Bernal spousessigned were signed as a part of
the processing and for the approval of their application to buy the subject motor vehicle. Without such
signed documents, no sale, much lessdelivery, of the subject jeepney could be made. The documents
were not therefore anacknowledgment by respondent spouses of the physical acquisition of the subject
motor vehicle but merely a requirement of delivery.
Issuance of a sales invoice does not provetransfer of ownership of the thing sold to the buyer; an invoice
is nothing more thana detailed statement of the nature, quantity and cost of the thing sold and has
beenconsidered not a bill of sale.
The thing is considered to be delivered when it is placed in the hands and possession of the vendee.
(Civil Code, Art. 1462). It is true that the same article declares that theexecution of a public instrument is
equivalent to the delivery of the thing which is theobject of the contract, but,
in order that this symbolic delivery may produce the effect, it is necessary that the vendor shall have
had control over the thing sold that, at themoment of the sale, its material delivery could have been
made. It is not enough to confer upon the purchaser the ownership and the right of possession. The
thing sold must be placed in his control.
When there is no impediment whatever to prevent the thing sold passing into the tenancy of the
purchaser by the sole will of the vendor, symbolicdelivery through the execution of a public instrument
is sufficient
. But if,notwithstanding the execution of the instrument, the purchaser cannot have theenjoyment and
material tenancy of the thing and make use of it himself or throughanother in his name, because such
tenancy and enjoyment are opposed by theinterposition of another will, then the delivery has not been
effected
.Held 2:Inasmuch as there was neither physical nor constructive delivery of a determinate thing,(in this
case, the subject motor vehicle) the thing sold remained at the sellers risk.The petitioner should
therefore bear the loss of the subject motor vehicle after Sosmeaallegedly stole the same.
Decision AFFIRMED.

Norkis Distributors Inc. vs. Court of Appeals, and Nepales
193 SCRA 694
February 1991
FACTS:

On September 20, 1979, private respondent Alberto Nepales bought from the Norkis Distributors, Inc.
(Norkis) in its Bacolod branch a brand new Yamaha Wonderbike motorcycle Model YL2DX with Engine
No.L2-329401K Frame No.NL2-0329401, color maroon, which was then on display in the Norkis
showroom. The Branch Manager Avelino Labajo agreed to accept the P7,500.00 price payable by means
of a Letter of Guaranty from the Development Bank of the Philippines (DBP), Kabankalan. 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 No. 0120 perfecting the contract of
sale, and Nepales signed the same to conform to the terms of the sale, while the unit remained in
Norkis' possession. On November 6, 1979, it was 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 in
Kabankalan, Negros Occidental Branch. On February 3, 1980, the motorcycle met an accident at
Binalbagan, Negros Occidental while being driven by a certain Zacarias Payba. 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 in the RTC of Himamaylan,
Negros Occidental. 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.
The lower court ruled in favor of Nepales, and the Court of Appeals affirmed the decision but deleted
the award of damages "in the amount of P50.00 a day from February 3, 1980 until payment of the
present value of the damaged vehicle." 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?
COURT RULING:

Affirming the decision of the Court of Appeals, the Supreme Court reiterated that 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 in the
case at bar for there was neither an actual nor constructive delivery of the thing sold.

The Court of Appeals correctly ruled that the purpose of the execution of the sales invoice dated
September 20, 1979 and the registration of the vehicle in the name of Alberto Nepales with the Land
Registration Commission was not to transfer the ownership and dominion over the motorcycle to him,
but only to comply with the requirements of the DBP for processing private respondent's motorcycle
loan. The circumstances in the case itself more than amply rebut the disputable presumption of delivery
upon which Norkis anchors its defense to Nepales' action.

Chrysler Philippines Corp. v. Court of Appeals
Facts:
Petitioner is a domestic corporation engaged in the assembling and sale of motor vehicles and other
automotive products. Respondent Sambok Motors Co., a general partnership, during the period relevant
to these proceedings, was its dealer for automotive products with offices at Bacolod (Sambok, Bacolod)
and Iloilo (Sambok, Iloilo).

On October 2, 1970, Sambok, Bacolod, ordered from petitioner various automotive products worth
P30,909.61, payable in 45 days; that on November 25, 1970, petitioner delivered said products to its
forwarding agent, Allied Brokerage Corporation, for shipment; that Allied Brokerage loaded the goods
on board the M/S Doa Florentina, a vessel owned and operated by Negros Navigation Company, for
delivery to Sambok, Bacolod; that when petitioner tried to collect from the latter the amount of
P31,037.56, representing the price of the spare parts plus handling charges, Sambok, Bacolod, refused
to pay claiming that it had not received the merchandise; that petitioner also demanded the return of
the merchandise or their value from Allied Brokerage and Negros Navigation, but both denied any
liability.In its Answer, Sambok, Bacolod, denied having received from petitioner or from any of its co-
defendants, the automotive products referred to in the Complaint, and professed no knowledge of
having ordered from petitioner said articles.

Issue:
WON Sambok Bacolod bears the loss of the cargo for which it is liable in damages to Chrysler.

Held:
No, Sambok Bacolod cannot be faulted for not accepting or refusing to accept the shipment from Negros
Navigation four years after shipment.

It was found out that upon receipt of the Bill of Lading, Sambok Bacolod initiated, but did not pursue
stepts to take delivery as they were advised by Negros Navigation that because some party were
missing, they would just be informed as soon as the missing parts were located. It was only four years
later that the said parts were found in their off-shore bodega but were already deteriorated and
valueless.The evidence is clear that Negros Navigation could not produce the merchandise nor ascertain
its whereabouts at the time Sambok, Bacolod, was ready to take delivery. Where the seller delivers to
the buyer a quantity of goods less than he contracted to sell, the buyer may reject them.

From the evidentiary record, Negros Navigation was the party negligent in failing to deliver the
complete shipment either to Sambok, Bacolod, or to Sambok, Iloilo, but as the Trial Court found,
petitioner failed to comply with the conditions precedent to the filing of a judicial action. Thus, in the
last analysis, it is petitioner that must shoulder the resulting loss. The general rule that before, delivery,
the risk of loss is home by the seller who is still the owner, under the principle of "res petit domino", is
applicable in petitioner's case.

In sum, the judgment of respondent Appellate Court, will have to be sustained not on the basis of
misdelivery but on non-delivery since the merchandise was never placed in the control and possession
of Sambok, Bacolod, the vendee.

Roman vs. Grimalt
6 Phil 96
April 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?

COURT RULING:

The Supreme Court affirmed the decision of the lower court and declared Roman as the one who should
bear the risk of lost because there was no actual contract of sale. 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. Grimalt was under
no obligation to pay the price of the vessel, the purchase of which had not been concluded. The
conversations between the parties and the letter Grimalt had written to Roman did not establish a
contract sufficient in itself to create reciprocal rights between the parties.

SANCHEZ v RIGOS
FACTS: Sanchez and Rigos executed an Option to Purchase where Rigos agreed, promised, and
committed to sell to Sanchez a parcel of land in Nueva Ecija for P1,510. In spite of the repeated tenders
made by Sanchez, Rigos refused to sell the same. Thus, Sanchez consigned the amounts and filed a case
for specific performance. Rigos alleged that the contract between them was a unilateral promise to sell,
which is not supported by any consideration, hence, it is not binding. ISSUE: W/N there was a valid
option contract HELD: NO. The promisee (Sanchez) cannot compel the promissor (Rigos) to comply with
the promise unless the former can establish that the promise was for a consideration. The burden of
proof to establish the existence of the consideration lies with Sanchez. Therefore, there was no valid
option contract in this case. However, an option without consideration is a mere offer, which is not
binding until accepted. But from the moment it is accepted before it is withdrawn


ANTONIO | HIPOLITO | IMPERIAL | ZARAGOSA 11
a valid contract of sale arises. In this case, even though there was no option contract, there was
nevertheless an offer and acceptance enough to constitute a valid contract of sale.

Southern Motors vs Moscoso
2 SCRA 168, G.R. No. L-14475
May 30, 1961

FACTS:
Plaintiff Southern Motors, Inc. sold to defendant Angel Moscoso one Chevrolet truck on installment
basis, for P6,445.00. Upon making a down payment, the defendant executed a promissory note for the
sum of P4,915.00, representing the unpaid balance of the purchase price to secure the payment of
which, a chattel mortgage was constituted on the truck in favor of the plaintiff. Of said account, the
defendant had paid a total of P550.00, of which P110.00 was applied to the interest and P400.00 to the
principal, thus leaving an unpaid balance of P4,475.00. The defendant failed to pay 3 installments on the
balance of the purchase price.

Plaintiff filed a complaint against the defendant, to recover the unpaid balance of the promissory note.
Upon plaintiffs petition, a writ of attachment was issued by the lower court on the properties of the
defendant. Pursuant thereto, the said Chevrolet truck, and a house and lot belonging to defendant,
were attached by the Sheriff and said truck was brought to the plaintiffs compound for safe keeping.
After attachment and before the trial of the case on the merits, acting upon the plaintiffs motion for the
immediate sale of the mortgaged truck, the Provincial Sheriff of Iloilo sold the truck at public auction in
which plaintiff itself was the only bidder for P1,OOO.OO. The trial court condemned the defendant to
pay the plaintiff the amount of P4,475.00 with interest at the rate of 12% per annum from August 16,
1957, until fully paid, plus 10% thereof as attorneys fees and costs. Hence, this appeal by the defendant.

ISSUE:
Whether or not the attachment caused to be levied on the truck and its immediate sale at public
auction, was tantamount to the foreclosure of the chattel mortgage on said truck.

HELD:
No.Article 1484 of the Civil Code provides that in a contract of sale of personal property the price of
which is payable in installments, the vendor may exercise any of the following remedies: (I) Exact
fulfillment of the obligation, should the vendee fail to pay; (2) Cancel the sale, should the vendees
failure to pay cover two or more installments; and (3) Foreclose the chattel mortgage on the thing sold,
if one has been constituted, should the vendees failure to pay cover two or more installments. In this
case, he shall have no further action against the purchaser to recover any unpaid balance of the price.
Any agreement to the contrary shall be void.

The plaintiff had chosen the first remedy. The complaint is an ordinary civil action for recovery of the
remaining unpaid balance due on the promissory note. The plaintiff had not adopted the procedure or
methods outlined by Sec. 14 of the Chattel Mortgage Law but those prescribed for ordinary civil actions,
under the Rules of Court. Had the plaintiff elected the foreclosure, it would not have instituted this case
in court; it would not have caused the chattel to be attached under Rule 59, and had it sold at public
auction, in the manner prescribed by Rule 39. That the plaintiff did not intend to foreclose the mortgage
truck, is further evinced by the fact that it had also attached the house and lot of the appellant at San
Jose, Antique.

We perceive nothing unlawful or irregular in plaintiffs act of attaching the mortgaged truck itself. Since
the plaintiff has chosen to exact the fulfillment of the appellants obligation, it may enforce execution of
the judgment that may be favorably rendered hereon, on all personal and real properties of the latter
not exempt from execution sufficient to satisfy such judgment. It should be noted that a house and lot
at San Jose, Antique were also attached. No one can successfully contest that the attachment was
merely an incident to an ordinary civil action. The mortgage creditor may recover judgment on the
mortgage debt and cause an execution on the mortgaged property and may cause an attachment to be
issued and levied on such property, upon beginning his civil action.

PCI LEASING AND FINANCE INC v GIRAFFE-X
CREATIVE IMAGING INC
FACTS: PCI Leasing and Giraffe entered into a Lease
Agreement whereby PCI Leasing leased several
machineries for a rent of P116, 878. 21/month for 36
months and P181, 362/month for 36 months for a total
of P10, 736, 647.56. Giraffe paid the amount of P3, 120,
000 as guaranty deposit. However, after 1 year, Giraffe
defaulted in its monthly-rental payment obligations.
After a 3-month default, PCI demanded a formal pay-orsurrender-equipment type but the demand went
unheeded thus PCI instituted the instant case and
prayed for the issuance for the writ of replevin. The
trial court issued a writ of replevin. Giraffe filed a
motion to dismiss arguing that PCI was barred from
pursuing any other claim since the seizure of the 2
leased equipments because the contract was in reality a
lease with option to buy. The RTC granted the motion to
dismiss ruling that it was akin to a contract covered by
art. 1485 hence can no longer pursue its claim. Hence
the case at bar.
ISSUE: W/N the contract was covered by Art. 1485 and
1484 hence barred PCI from recovering
HELD: YES
A financial lease is one where a financing company
would, in effect, initially purchase a mobile equipmentand turn around to lease it to a client who gets, in
addition, an option to purchase the property at the
expiry of the lease period.
In the case at bar, PCI acquired the office equipments
for their subsequent lease to Giraffe, with the latter
undertaking to pay a monthly fixed rental for the whole
36 months. Giraffe made a guaranty deposit. Their
agreement was that in case Giraffe fails to pay any
rental due, PCI will have cumulative remedies, such as,
to recover all rentals for the remaining term of the
lease and recover all amounts advanced for Giraffes
account.
When PCI demanded for payment of the balance, it
made a demand for either of the choices. Either to pay
the balance hence Giraffe can keep the equipment or
surrender them if he cannot. The so-called monthly
rentals were in fact monthly amortizations of the price
of the leased office equipment.
The imperatives of equity, the contractual stipulations
and the actuations of the parties, the SC has treated a
purported financial lease as actually a sale of movable
property on installments and prevented recovery. The
Lease Agreement is in reality a lease with an option to
purchase the equipment. This has been made manifest
by the actions of PCI itself.
In choosing replevin, PCI waived its right to bring an
action to recover unpaid rentals.

Facts:
-On December 4, 1996, petitioner PCI LEASING and respondent GIRAFFE entered into a Lease
Agreement, whereby the former leased out to the latter one (1) set of Silicon High Impact Graphics and
accessories worth P3,900,00.00 and one (1) unit of Oxberry Cinescan 6400-10 worth P6,500,000.00.
- A year into the life of the Lease Agreement, GIRAFFE defaulted in its monthly rental-payment
obligations. And following a three-month default, PCI LEASING addressed a formal pay-or-surrender-
equipment type of demand letter dated February 24, 1998 to GIRAFFE.
- The demand went unheeded.
- PCI Leasing instituted a case against GIRAFFE. PCI prayed for the issuance of a writ of replevin for the
recovery of the leased property
- Upon PCI LEASINGs posting of a replevin bond, the trial court issued a writ of replevin, paving the way
for PCI LEASING to secure the seizure and delivery of the equipment covered by the basic lease
agreement.
- Instead of an answer, GIRAFFE filed a Motion to Dismiss,arguing that the seizure of the two (2) leased
equipment stripped PCI LEASING of its cause of action.
-GIRAFFE argues that, pursuant to Article 1484 of the Civil Code on installment sales of personal
property, PCI LEASING is barred from further pursuing any claim arising from the lease agreement and
the companion contract documents, adding that the agreement between the parties is in reality a lease
of movables with option to buy.
-GIRAFFE asserts in its Motion to Dismiss that the civil complaint filed by PCI LEASING is proscribed by
the application to the case of Articles 1484 and 1485, supra, of the Civil Code.
- PCI Leasing on the other hand maintains that its contract with GIRAFFE is a straight lease without an
option to buy.
- petitioner contends that the financial leasing arrangement it concluded with the respondent
represents a straight lease covered by R.A. No. 5980, the Financing Company Act, as last amended by
R.A. No. 8556, otherwise known as Financing Company Act of 1998, and is outside the application and
coverage of the Recto Law. To the petitioner, R.A. No. 5980 defines and authorizes its existence and
business.
-the trial court granted GIRAFFEs motion to dismiss
- motion for reconsideration was denied, hence this petition for review.

Issue:

Whether the agreement between PCI Leasing and GIRAFFE is governed by Articles 1484 and 1485 of the
Civil Code?

Held:

Petition denied. Trial Courts decision affirmed

Ratio:
-The PCI LEASING- GIRAFFE lease agreement is in reality a lease with an option to purchase the
equipment. This has been made manifest by the actions of the petitioner itself, foremost of which is
the declarations made in its demand letter to the respondent. There could be no other explanation than
that if the respondent paid the balance, then it could keep the equipment for its own; if not, then it
should return them. This is clearly an option to purchase given to the respondent. Being so, Article 1485
of the Civil Code should apply.
- The present case reflects a situation where the financing company can withhold and conceal - up to the
last moment - its intention to sell the property subject of the finance lease, in order that the provisions
of the Recto Law may be circumvented. It may be, as petitioner pointed out, that the basic lease
agreement does not contain a purchase option clause. The absence, however, does not necessarily
argue against the idea that what the parties are into is not a straight lease, but a lease with option to
purchase. This Court has, to be sure, long been aware of the practice of vendors of personal property of
denominating a contract of sale on installment as one of lease to prevent the ownership of the object of
the sale from passing to the vendee until and unless the price is fully paid.
-Being leases of personal property with option to purchase as contemplated in the above article, the
contracts in question are subject to the provision that when the lessor in such case has chosen to
deprive the lessee of the enjoyment of such personal property, he shall have no further action
against the lessee for the recovery of any unpaid balance owing by the latter, agreement to the
contrary being null and void.
-In choosing, through replevin, to deprive the respondent of possession of the leased equipment, the
petitioner waived its right to bring an action to recover unpaid rentals on the said leased items.
Paragraph (3), Article 1484 in relation to Article 1485 of the Civil Code, which we are hereunder re-
reproducing, cannot be any clearer.