G.R. No. 193577; September 7, 2011
ANTONIO FRANCISCO, substituted by his heirs: NELIA E.S. FRANCISCO, EMILIA F. BERTIZ, REBECCA E.S. FRANCISCO, ANTONIO E.S. FRANCISCO, JR., SOCORRO F. FONTANILLA, and JOVITO E.S. FRANCISCO, Petitioners, vs. CHEMICAL BULK CARRIERS, INCORPORATED, Respondent.

FACTS

Since 1965, petitioner Antonio Francisco was the owner and manager of a Caltex station in Teresa, Rizal. In March 1993, Gregorio Bacsa, along with three others, introduced themselves as employees of respondent Chemical Bulk Carriers, Incorporated (CBCI) and offered to sell CBCI’s diesel fuel to Francisco. After checking Bacsa’s identification card, Francisco agreed to purchase the fuel subject to conditions: (1) delivery must be made by Petron Corporation to Francisco’s business address with his name and address properly indicated in Petron’s invoice; (2) the delivery tank must be sealed; and (3) Bacsa must issue a separate receipt. Seventeen deliveries were made from April 5, 1993, to January 25, 1994, all complying with these conditions.
In February 1996, CBCI sent a demand letter to Francisco for payment of ₱1,053,527 for the diesel fuel, which CBCI claimed had been paid for by CBCI but delivered to and received by Francisco without authority. Francisco refused to pay. CBCI filed a complaint for sum of money and damages, alleging Francisco unlawfully acquired possession of the fuel and violated Articles 19, 20, 21, and 22 of the Civil Code, or alternatively, that an innominate contract of do ut des was created obligating Francisco to pay ₱1,119,905, the value of the fuel.
Francisco, who was blind, claimed he acted in good faith, having verified Bacsa’s identity as a radio operator and confidential secretary of CBCI’s manager for operations, Mr. Inawat. He asserted Bacsa assured him the fuel was not stolen and that CBCI needed immediate cash. The Regional Trial Court dismissed CBCI’s complaint, ruling Francisco was a buyer in good faith and Bacsa was CBCI’s authorized representative. The trial court also awarded Francisco moral damages and attorney’s fees on his counterclaim. The Court of Appeals reversed the trial court, set aside its decision, and ordered Francisco to pay CBCI ₱1,119,905 as actual damages, holding that Bacsa’s act was his personal act and did not bind CBCI, and that Francisco failed to verify Bacsa’s authority and could not invoke good faith.

ISSUE

Whether the Court of Appeals erred in holding petitioner Antonio Francisco liable to pay respondent CBCI the value of the diesel fuel.

RULING

The Supreme Court REVERSED the Decision of the Court of Appeals and REINSTATED the Decision of the Regional Trial Court dismissing CBCI’s complaint.
The Court held that petitioner Antonio Francisco was a purchaser in good faith and for value. The diesel fuel was sold to him in the ordinary course of business by a person (Gregorio Bacsa) who had possession of the goods and documents of title (the Petron invoices). Under Article 1505 of the Civil Code, where goods are sold by a person who is not the owner thereof, and who does not sell them under authority or with the consent of the owner, the buyer acquires no better title to the goods than the seller had, unless the owner of the goods is by his conduct precluded from denying the seller’s authority to sell. Furthermore, when goods are sold in a store or market, in the ordinary course of business, the buyer is deemed to have acted in good faith in the absence of proof to the contrary.
The Court found that the sales were made in the ordinary course of Francisco’s business as a gas station owner/manager. The deliveries were made by Petron, a reputable company, via sealed tankers with official invoices indicating Francisco as the consignee. Francisco imposed prudent conditions and verified the first delivery. He had no knowledge or notice of any defect in Bacsa’s authority. The fact that the receipts issued by Bacsa were on plain bond paper did not negate good faith, as the official Petron invoices were the primary documents evidencing the transaction. CBCI, by entrusting its confidential secretary (Bacsa) with the invoices and allowing him to handle the fuel transactions, was precluded from denying his authority to sell under the principle of estoppel. The loss suffered by CBCI was due to the acts of its own employee, for which Francisco, an innocent purchaser, should not be held liable. Therefore, Francisco acquired valid title to the diesel fuel and has no obligation to pay CBCI for its value.