Case Digest: Francisco vs. Chemical Bulk Carriers, G.R. No. 193577, September 7, 2011

Carpio, J.:

Petitioners:

• 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

• Jovito E.S. Francisco

Respondent:

• Chemical Bulk Carriers, Incorporated 

Facts:

• Since 1965, Antonio Francisco has owned and managed a Caltex station in Teresa, Rizal.

• In March 1993, Gregorio Bacsa, claiming to be an employee of Chemical Bulk Carriers, Incorporated (CBCI), offered to sell CBCI diesel fuel to Francisco.

• Francisco agreed under conditions: 

• Petron Corporation (Petron) must deliver the fuel to his business address;

• The delivery tank must be sealed;

• Bacsa must issue a separate receipt.

• Between April 1993 and January 1994, 17 deliveries of diesel were made to Francisco, and all conditions were met.

• In February 1996, CBCI demanded ₱1,053,527 for diesel it had paid for Francisco. Francisco refused to pay.

• In April 1996, CBCI filed a complaint for sum of money and damages against Francisco and other unnamed defendants.

• Allegations:

• Petron sold diesel fuel to CBCI, but the fuel was delivered to Francisco, who then sold it to third parties and received payment, without CBCI's authority. Francisco's actions deprived CBCI of the use of the diesel fuel it had paid for.

• CBCI argued that Francisco should have known that only Petron, Shell, and Caltex were authorized to sell petroleum products in the Philippines, suggesting that the diesel fuel came from illegal or criminal activities.

• CBCI claimed Francisco violated Articles 19, 20, 21, and 22 of the Civil Code.

• CBCI alternatively argued that Francisco entered into a contract of do ut des (I give and you give) by accepting the diesel fuel, obligating him to pay CBCI ₱1,119,905, the value of the fuel.

• Defense:

• Francisco explained that due to blindness from sickness in 1978, he operated the Caltex station with the help of his family.

• Francisco had his son, Jovito, verify Gregorio Bacsa’s identity. Bacsa presented himself as a radio operator and confidential secretary of Mr. Inawat, CBCI’s manager for operations. Francisco was satisfied with the proof provided.

• Bacsa explained that CBCI needed cash to pay its daily workers and assured Francisco that the diesel fuel was not stolen and CBCI had a large credit line with Petron.

• Francisco imposed strict conditions for purchasing the diesel fuel:

1. Petron must deliver the fuel with his name and address indicated on the invoice, and the delivery tank must be sealed.

2. Despite the invoice being sufficient for payment, Bacsa had to issue a separate signed receipt acknowledging the amount on CBCI’s behalf.

• Francisco’s son confirmed that the first delivery on 5 April 1993 met all of Francisco’s conditions. This process was followed for all 17 deliveries from 5 April 1993 to 25 January 1994.

• Francisco argued he acquired the diesel fuel in good faith and for value, believing the transaction was legitimate.

• RTC-Pasig: Ruled in favor of Francisco, dismissing CBCI’s complaint and awarding Francisco ₱150,000 in damages.

• The 17 deliveries were covered by original and genuine invoices.

• Bacsa, as the confidential secretary of Inawat, was CBCI’s authorized representative who received full payment from Francisco for the diesel fuel. If Bacsa was not authorized, CBCI should have sued Bacsa, not Francisco.

• Francisco was considered a buyer in good faith, having paid in full without knowledge of any other claims to the diesel fuel.

• CBCI appealed, asserting Francisco should have questioned the legitimacy of Bacsa’s sale.

• CA: Reversed the trial court's decision and ruled in favor of CBCI, ordering Francisco to pay ₱1,119,905.

• Bacsa’s sale of diesel fuel to Francisco was a personal act and did not bind CBCI, even if he had colluded with Inawat.

• Francisco’s blindness was not a barrier to conducting business, and with his experience, he should have verified Bacsa’s authority with CBCI.

• Francisco could not claim good faith, as he had doubts about Bacsa’s authority but did not seek confirmation and accepted improvised receipts on plain paper, which indicated Bacsa’s lack of authority.

• Francisco’s failure to verify showed an ulterior motive, and he ignored signs of petroleum diversion.

• Since CBCI was unlawfully deprived of its paid diesel fuel, it had the right to recover either the fuel or its value.

• In 2001, Francisco died.

• Francisco’s heirs filed a motion for substitution.

Issues:

1. Whether the CA erred in not finding that defendant Antonio Francisco exercised the required diligence of a blind person in the conduct of his business;

2. Whether on the basis of the factual findings of the CA and the trial court and admitted facts, it can be concluded that the plaintiff approved expressly or tacitly the transactions.

Held:

The petition has no merit.

Required Diligence of a Blind Person

The heirs of Francisco argue that the Court of Appeals erred when it ruled that Francisco was liable to CBCI because he failed to exercise the diligence of a good father of a family when he bought the diesel fuel. They argue that since Francisco was blind, the standard of conduct that was required of him was that of a reasonable person under like disability. Moreover, they insist that Francisco exercised due care in purchasing the diesel fuel by doing the following:

1. Francisco asked his son to check the identity of Bacsa; 

2. Francisco required direct delivery from Petron;

3. Francisco required that he be named as the consignee in the invoice; and

4. Francisco required separate receipts from Bacsa to evidence actual payment.

Standard of conduct is the level of expected conduct that is required by the nature of the obligation and corresponding to the circumstances of the person, time and place. The most common standard of conduct is that of a good father of a family or that of a reasonably prudent person. To determine the diligence which must be required of all persons, we use as basis the abstract average standard corresponding to a normal orderly person.

However, one who is physically disabled is required to use the same degree of care that a reasonably careful person who has the same physical disability would use. Physical handicaps and infirmities, such as blindness or deafness, are treated as part of the circumstances under which a reasonable person must act. Thus, the standard of conduct for a blind person becomes that of a reasonable person who is blind.

We note that Francisco, despite being blind, had been managing and operating the Caltex station for 15 years and this was not a hindrance for him to transact business until this time. In this instance, however, we rule that Francisco failed to exercise the standard of conduct expected of a reasonable person who is blind.

1. First, Francisco merely relied on the identification card of Bacsa to determine if he was authorized by CBCI. Francisco did not do any other background check on the identity and authority of Bacsa. 

2. Second, Francisco already expressed his misgivings about the diesel fuel, fearing that they might be stolen property, yet he did not verify with CBCI the authority of Bacsa to sell the diesel fuel. 

3. Third, Francisco relied on the receipts issued by Bacsa which were typewritten on a half sheet of plain bond paper. If Francisco exercised reasonable diligence, he should have asked for an official receipt issued by CBCI.

4. Fourth, the delivery to Francisco, as indicated in Petron’s invoice, does not show that CBCI authorized Bacsa to sell the diesel fuel to Francisco. 

Clearly, Francisco failed to exercise the standard of conduct expected of a reasonable person who is blind.

Express or Tacit Approval of the Transaction

The heirs of Francisco argue that CBCI approved expressly or tacitly the transactions. According to them, there was apparent authority for Bacsa to enter into the transactions. They argue that even if the agent has exceeded his authority, the principal is solidarily liable with the agent if the former allowed the later to act as though he had full powers. They insist CBCI was not unlawfully deprived of its property because Inawat gave Bacsa the authority to sell the diesel fuel and that CBCI is bound by such action. Lastly, they argue that CBCI should be considered in estoppel for failure to act during the ten month period that deliveries were being made to Francisco.

The general principle is that a seller without title cannot transfer a better title than he has. Only the owner of the goods or one authorized by the owner to sell can transfer title to the buyer. Therefore, a person can sell only what he owns or is authorized to sell and the buyer can, as a consequence, acquire no more than what the seller can legally transfer.

Moreover, the owner of the goods who has been unlawfully deprived of it may recover it even from a purchaser in good faith. Thus, the purchaser of property which has been stolen from the owner has been held to acquire no title to it even though he purchased for value and in good faith.

The exception from the general principle is the doctrine of estoppel where the owner of the goods is precluded from denying the seller’s authority to sell. But in order that there may be estoppel, the owner must, by word or conduct, have caused or allowed it to appear that title or authority to sell is with the seller and the buyer must have been misled to his damage. 

In this case, it is clear that Bacsa was not the owner of the diesel fuel. Francisco was aware of this but he claimed that Bacsa was authorized by CBCI to sell the diesel fuel. However, Francisco’s claim that Bacsa was authorized is not supported by any evidence except his self-serving testimony. 

1. First, Francisco did not even confirm with CBCI if it was indeed selling its diesel fuel since it is not one of the oil companies known in the market to be selling petroleum products. This fact alone should have put Francisco on guard. 

2. Second, it does not appear that CBCI, by some direct and equivocal act, has clothed Bacsa with the indicia of ownership or apparent authority to sell CBCI’s diesel fuel. Francisco did not state if the identification card presented by Bacsa indicated that he was CBCI’s agent or a mere employee. 

3. Third, the receipt issued by Bacsa was typewritten on a half sheet of plain bond paper. There was no letterhead or any indication that it came from CBCI.  We agree with the Court of Appeals that this was a personal receipt issued by Bacsa and not an official receipt issued by CBCI. 

Consequently, CBCI is not precluded by its conduct from denying Bacsa’s authority to sell. CBCI did not hold out Bacsa or allow Bacsa to appear as the owner or one with apparent authority to dispose of the diesel fuel.

Clearly, Bacsa cannot transfer title to Francisco as Bacsa was not the owner of the diesel fuel nor was he authorized by CBCI to sell its diesel fuel. CBCI did not commit any act to clothe Bacsa with apparent authority to sell the diesel fuel that would have misled Francisco. Francisco, therefore, did not acquire any title over the diesel fuel. Since CBCI was unlawfully deprived of its property, it may recover from Francisco, even if Francisco pleads good faith.

WHEREFORE, we DENY the petition. We AFFIRM the 31 May 2010 Decision and 31 August 2010 Resolution of the Court of Appeals.

SO ORDERED.