G.R. No. 91029. February 7, 1991.* * SECOND DIVISION.
NORKIS DISTRIBUTORS, INC., petitioner, us. THE COURT OF APPEALS &
ALBERTO NEPALES, respondents.
Civil Law; Sale; Ownership; The issuance of a sales invoice does not
prove transfer of ownership of the thing sold to the buyer; An invoice is
nothing more than a detailed statement of the nature, quantity and cost of
the thing sold and has been considered not a bill of sale.—As pointed out by
the private respondent, the issuance of a sales invoice does not prove
transfer of ownership of the thing sold to the buyer. An invoice is nothing
more than a detailed statement of the nature, quantity and cost of the
thing sold and has been considered not a bill of sale.
Same; Same; Same; In all forms of delivery, it is necessary that the act
of delivery whether constructive or actual be coupled with the intention of
delivering the thing.—In all forms of delivery, it is necessary that the act of
delivery, whether constructive or actual, be coupled with the intention of
delivering the thing. The act, without the intention, is insufficient.
Same; Same; Same; Same; The critical factor in the different modes of
effecting delivery which gives legal effect to the act is the actual intention
of the vendor to deliver and its acceptance by the
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vendee.—In other words, the critical factor in the different modes of
effecting delivery, which gives legal effect to the act, is the actual intention
of the vendor to deliver, and its acceptance by the vendee. Without that
intention, there is no tradition.
Same; Same; Same; Same; Provision 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 to this
case.—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 to this case, for there was neither an actual nor constructive
delivery of the thing sold, hence, the risk of loss should be borne by the
seller, Norkis, which was still the owner and possessor of the motorcycle
when it was wrecked. This is in accordance with the well-known doctrine
of res perit domino.
PETITION for review of the decision of the Court of Appeals.
The facts are stated in the opinion of the Court.
 Jose D. Palma for petitioner.
Public Attorney’s Officefor private respondent.
GRIÑO-AQUINO, J.:
Subject of this petition for review is the decision of the Court of Appeals
(Seventeenth Division) in CA-G.R. No. 09149, affirming with modification
the judgment of the Regional Trial Court, Sixth (6th) Judicial Region, Branch
LVI. Himamaylan, Negros Occidental, in Civil Case No. 1272, which was
private respondent Alberto Nepales’ action for specific performance of a
contract of sale with damages against petitioner Norkis Distributors, Inc.
The facts borne out by the record are as follows:
Petitioner Norkis Distributors, Inc. (Norkis for brevity), is the distributor
of Yamaha motorcycles in Negros Occidental with office in Bacolod City
with Avelino Labajo as its Branch Manager. On September 20, 1979, private
respondent Alberto Nepales bought from the Norkis-Bacolod branch a
brand new Yamaha Wonderbike motorcycle Model YL2DX with Engine No.
L2-329401K, Frame No. NL2-0329401, Color Maroon, then displayed in the
Norkis showroom. The price of P7,500.00 was
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Norkis Distributors, Inc. vs. Court
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payable by means of a Letter of Guaranty from the Development Bank of
the Philippines (DBP), Kabankalan Branch, which Norkis’ Branch Manager
Labajo agreed to accept. Hence, credit was extended to Nepales for the
price of the motorcycle payable by DBP upon release of his motorcycle loan.
As security for the loan, Nepales would execute a chattel mortgage on the
motorcycle in favor of DBP. Branch Manager Labajo issued Norkis Sales
Invoice No. 0120 (Exh. 1) showing that the contract of sale of the
motorcycle had been perfected. Nepales signed the sales invoice to signify
his conformity with the terms of the sale. In the meantime, however, the
motorcycle remained in Norkis’ possession.
On November 6, 1979, the motorcycle was registered in the Land
Transportation Commission in the name of Alberto Nepales. A registration
certificate (Exh. 2) in his name was issued by the Land Transportation
Commission on November 6, 1979 (Exh. 2-b). The registration fees were
paid by him, evidenced by an official receipt, Exhibit 3.
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 (p. 15, t.s.n., August 2, 1984). The record shows that Alberto and
Julian Nepales presented the unit to DBP’s Appraiser-Investigator Ernesto
Arriesta at the DBP offices in Kabankalan, Negros Occidental Branch (p. 12,
Rollo). The motorcycle met an accident on February 3,1980 at Binalbagan,
Negros Occidental. An investigation conducted by the DBP revealed that
the unit was being driven by a certain Zacarias Payba at the time of the
accident (p. 33, Rollo). The unit was a total wreck (p. 36, t.s.n., August 2,
1984; p. 13, Rollo), 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 (p. 13, Rollo) and demanded the delivery of the
motorcycle. When Norkis could not deliver, he filed an action for specific
performance with damages against Norkis in the Regional Trial Court of
Himamaylan, Negros Occidental, Sixth (6th) Judicial Region, Branch LVI,
where it was docketed as Civil Case No. 1272. He alleged that Norkis failed
to deliver the motorcycle which he
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purchased, thereby causing him damages.
Norkis answered that the motorcycle had already been delivered to
private respondent before the accident, hence, the risk of loss or damage
had to be borne by him as owner of the unit.
 After trial on the merits, the lower court rendered a decision dated
August 27, 1985 ruling in favor of private respondent (p. 28, Rollo) thus:
“WHEREFORE, judgment is rendered in favor of the plaintiff and against the
defendants. The defendants are ordered to pay solidarity to the plaintiff
the present value of the motorcycle which was totally destroyed, plus
interest equivalent to what the Kabankalan SubBranch of the Development
Bank of the Philippines will have to charge the plaintiff on his account, plus
P50.00 per day from February 3, 1980 until full payment of the said present
value of the motorcycle, plus P1,000.00 as exemplary damages, and costs
of the litigation. In lieu of paying the present value of the motorcycle, the
defendants can deliver to the plaintiff a brand-new motorcycle of the same
brand, kind, and quality as the one which was totally destroyed in their
possession last February 3, 1980.” (pp. 28-29, Rollo.)
On appeal, the Court of Appeals affirmed the appealed judgment on August
21,1989, but deleted the award of damages “in the amount of Fifty (P50.00)
Pesos a day from February 3, 1980 until payment of the present value of
the damaged vehicle” (p. 35, Rollo). The Court of Appeals denied Norkis’
motion for reconsideration. Hence, this Petition for Review.
The principal issue in this case is who should bear the los& of the
motorcycle. The answer to this question would depend on whether there
had already been a transfer of ownership of the motorcycle to private
respondent at the time it was destroyed.
Norkis’ theory is that:
“x x x. After the contract of sale has been perfected (Art. 1475) and even
before delivery, that is, even before the ownership is transferred to the
vendee, the risk of loss is shifted from the vendor to the vendee. Under Art.
1262, the obligation of the vendor to deliver a determinatething becomes
extinguished if the thing is lost by fortuitous event (Art. 1174), that is,
without the fault or fraud of the vendor and before he has incurred in delay
(Art. 1165, par. 3). If the thing sold is generic, the loss or destruction does
not extinguish the obligation (Art. 1263). A thing is determinate when it is
particularly designated or physically
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segregated from all others of the same class (Art. 1460). Thus, the vendor
becomes released from his obligation to deliver the determinate thing sold
while the vendee’s obligation to pay the price subsists. If the vendee had
paid the price in advance the vendor may retain the same. The legal effect,
therefore, is that the vendee assumes the risk of loss by fortuitous event
(Art. 1262) after the perfection of the contract to the time of delivery.”
(Civil Cede of the Philippines, Ambrosio Padilla, Vol. 5, 1987 Ed., p. 87.)
Norkis concedes that there was no “actual” delivery of the vehicle.
However, it insists that there was constructive delivery of the unit upon: (1)
the issuance of the Sales Invoice No. 0120 (Exh. 1) in the name of the
private respondent and the affixing of his signature thereon; (2) the
registration of the vehicle on November 6, 1979 with the Land
Transportation Commission in private respondent’s name (Exh. 2); and (3)
the issuance of official receipt (Exh. 3) for payment of registration fees (p.
33, Rollo).
That argument is not well taken. As pointed out by the private
respondent, the issuance of a sales invoice does not prove transfer of
ownership of the thing sold to the buyer. An invoice is nothing more than a
detailed statement of the nature, quantity and cost of the thing sold and
has been considered not a bill of sale (Am. Jur. 2nd Ed., Vol. 67, p. 378).
In all forms of delivery, it is necessary that the act of delivery whether
constructive or actual, be coupled with the intention of delivering the thing.
The act, without the intention, is insufficient (De Leon, Comments and
Cases on Sales, 1978 Ed., citing Manresa, p. 94).
When the motorcycle was registered by Norkis in the name of private
respondent, Norkis did not intend yet to transfer the title or ownership to
Nepales, but only to facilitate the execution of a chattel mortgage in favor
of the DBP for the release of the buyer’s motorcycle loan. The Letter of
Guarantee (Exh. 5) issued by the DBP, reveals that the execution in its favor
of a chattel mortgage over the purchased vehicle is a pre-requisite for the
approval of the buyer’s loan. If Norkis would not accede to that
arrangement, DBP would not approve private respondent’s loan
application and, consequently, there would be no sale.
In other words, the critical factor in the different modes of
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effecting delivery, which gives legal effect to the act, is the actual intention
of the vendor to deliver, and its acceptance by the vendee. Without that
intention, there is no tradition (Abuan vs. Garcia, 14 SCRA 759).
In the case of Addison vs. Felix and Tioco (38 Phil. 404, 408), this Court
held:
“The Code imposes upon the vendor the obligation to deliver the thing sold.
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 the execution of a public instrument is equivalent to
the delivery of the thing which is the object of the contract, but, in order
that this symbolic delivery may produce the effect of tradition, it is
necessary that the vendor shall have had such control over the thing sold
that, at the moment 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, symbolic delivery
through the execution of a public instrument is sufficient. But if,
notwithstanding the execution of the instrument, the purchaser cannot
have the enjoyment and material tenancy of the thing and make use of it
himself or through another in his name, because such tenancy and
enjoyment are opposed by the interposition of another will, then fiction
yields to reality—the delivery has not been effected.” (Italics suppplied.)
The Court of Appeals correctly ruled that the purpose of the execution of
the sales invoice dated September 20, 1979 (Exh. B) and the registration of
the vehicle in the name of plaintiff-appellee (private respondent) with the
Land Registration Commission (Exhibit C) was not to transfer to Nepales
the ownership and dominion over the motorcycle, but only to comply with
the reguirements of the Development Bank of the Philippines for
processing private respondent’s motorcycle loan. On March 20, 1980,
before private respondent’s loan was released and before he even paid
Norkis, the motorcycle had already figured in an accident while driven by
one Zacarias Payba. Payba was not shown by Norkis to be a representative
or relative of private respondent. The latter’s supposed relative, who
allegedly took possession of the vehicle from Norkis md not explain how
Payba got hold of the vehicle on February 3, 1980. Norkis’ claim that
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Norkis Distributors, Inc. vs. Court
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Julian Nepales was acting as Alberto’s agent when he allegedly took
delivery of the motorcycle (p. 20, Appellants’ Brief), is controverted by the
latter. Alberto denied having authorized Julian Nepales to get the
motorcycle from Norkis Distributors or to enter into any transaction with
Norkis relative to said motorcycle, (p. 5, t.s.n., February 6, 1985). This
circumstances more than amply rebut the disputable presumption of
delivery upon which Norkis anchors its defense to Nepales’ action (pp.
33-34, Rollo).
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 to
this case, for there was neither an actual nor constructive delivery of the
thing sold, hence, the risk of loss should be borne by the seller, Norkis,
which was still the owner and possessor of the motorcycle when it was
wrecked. This is in accordance with the well-known doctrine of res perit
domino.
WHEREFORE, finding no reversible error in the decision of the Court of
Appeals in CA-G.R. No. 09149, we deny the petition for review and hereby
affirm the appealed decision, with costs against the petitioner.
SO ORDERED.
Narvasa (Chairman), Cruz, Gancayco and Medialdea, JJ., concur.
Decision affirmed.
Note.—The Civil Code provides that ownership of the thing sold shall be
transferred to the vendee upon actual or constructive delivery thereof.
(Alliance Tobacco Corporation Inc. vs. Philippine Virginia Tobacco
Administration, 179 SCRA 336.)
G.R. No. 147839. June 8, 2006.*
GAISANO CAGAYAN, INC., petitioner, vs. INSURANCE COMPANY OF NORTH
AMERICA, respondent.
Actions; Pleadings and Practice; Appeals; Petition for Review; Findings
of fact of the appellate court are generally conclusive on the Supreme
Court.—As a general rule, in petitions for review, the jurisdiction of this
Court in cases brought before it from the CA is limited to reviewing
questions of law which involves no examination of the probative value of
the evidence presented by the litigants or any of them. The Supreme Court
is not a trier of facts; it is not its function to analyze or weigh evidence all
over again. Accordingly, findings of fact of the appellate court are generally
conclusive on the Supreme Court.
Same; Same; Same; Same; Exceptions; Nevertheless, jurisprudence has
recognized several exceptions in which factual issues may be resolved by
the Supreme Court.—Jurisprudence has recognized several exceptions in
which factual issues may be resolved by this Court, such as: (1) when the
findings are grounded entirely on specu-
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* FIRST DIVISION.
287
VOL. 490, JUNE 8, 287
2006
Gaisano Cagayan, Inc. vs.
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lation, surmises or conjectures; (2) when the inference made is
manifestly mistaken, absurd or impossible; (3) when there is grave abuse of
discretion; (4) when the judgment is based on a misapprehension of facts;
(5) when the findings of facts are conflicting; (6) when in making its findings
the CA went beyond the issues of the case, or its findings are contrary to
the admissions of both the appellant and the appellee; (7) when the
findings are contrary to the trial court; (8) when the findings are
conclusions without citation of specific evidence on which they are based;
(9) when the facts set forth in the petition as well as in the petitioner’s
main and reply briefs are not disputed by the respondent; (10) when the
findings of fact are premised on the supposed absence of evidence and
contradicted by the evidence on record; and (11) when the CA manifestly
overlooked certain relevant facts not disputed by the parties, which, if
properly considered, would justify a different conclusion.
Statutory Construction; When the words of a contract are plain and
readily understood, there is no room for construction.—It is well-settled
that when the words of a contract are plain and readily understood, there
is no room for construction. In this case, the questioned insurance policies
provide coverage for “book debts in connection with ready-made clothing
materials which have been sold or delivered to various customers and
dealers of the Insured anywhere in the Philippines;” and defined book
debts as the “unpaid account still appearing in the Book of Account of the
Insured 45 days after the time of the loss covered under this Policy.”
Nowhere is it provided in the questioned insurance policies that the subject
of the insurance is the goods sold and delivered to the customers and
dealers of the insured. Indeed, when the terms of the agreement are clear
and explicit that they do not justify an attempt to read into it any alleged
intention of the parties, the terms are to be understood literally just as
they appear on the face of the contract.
Civil Law; Contracts; Sales; Loss; When the seller retains ownership
only to insure that the buyer will pay its debt, the risk of loss is borne by the
buyer.—The present case clearly falls under paragraph (1), Article 1504 of
the Civil Code: ART. 1504. Unless otherwise agreed, the goods remain at
the seller’s risk until the ownership therein is transferred to the buyer, but
when the ownership therein is transferred to the buyer the goods are at
the buyer’s risk whether actual delivery has been made or not,except that:
(1) Where delivery
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Gaisano Cagayan, Inc. vs.
Insurance Company of North
America
of the goods has been made to the buyer or to a bailee for the buyer,
in pursuance of the contract and the ownership in the goods has been
retained by the seller merely to secure performance by the buyer of his
obligations under the contract, the goods are at the buyer’s risk from the
time of such delivery; (Emphasis supplied) x x x x Thus, when the seller
retains ownership only to insure that the buyer will pay its debt, the risk of
loss is borne by the buyer. Accordingly, petitioner bears the risk of loss of
the goods delivered.
Same; Same; Insurance; Insurable Interest; Kinds; An insurable interest
in property may consist in the following.—Section 13 of our Insurance Code
defines insurable interest as “every interest in property, whether real or
personal, or any relation thereto, or liability in respect thereof, of such
nature that a contemplated peril might directly damnify the insured.”
Parenthetically, under Section 14 of the same Code, an insurable interest in
property may consist in: (a) an existing interest; (b) an inchoate interest
founded on existing interest; or (c) an expectancy, coupled with an existing
interest in that out of which the expectancy arises.
Same; Same; Same; Same; Anyone has an insurable interest in property
who derives a benefit from its existence or would suffer loss from its
destruction.—An insurable interest in property does not necessarily imply a
property interest in, or a lien upon, or possession of, the subject matter of
the insurance, and neither the title nor a beneficial interest is requisite to
the existence of such an interest, it is sufficient that the insured is so
situated with reference to the property that he would be liable to loss
should it be injured or destroyed by the peril against which it is insured.
Anyone has an insurable interest in property who derives a benefit from its
existence or would suffer loss from its destruction. Indeed, a vendor or
seller retains an insurable interest in the property sold so long as he has
any interest therein, in other words, so long as he would suffer by its
destruction, as where he has a vendor’s lien. In this case, the insurable
interest of IMC and LSPI pertain to the unpaid accounts appearing in their
Books of Account 45 days after the time of the loss covered by the policies.
289
VOL. 490, JUNE 8, 289
2006
Gaisano Cagayan, Inc. vs.
Insurance Company of North
America
Same; Same; Subrogation; There is no evidence that respondent has
been subrogated to any right which Levi Strauss (Phils.) Inc. (LSPI) may have
against petitioner.—There is no proof of full settlement of the insurance
claim of LSPI; no subrogation receipt was offered in evidence. Thus, there is
no evidence that respondent has been subrogated to any right which LSPI
may have against petitioner. Failure to substantiate the claim of
subrogation is fatal to petitioner’s case for recovery of the amount of
P535,613.00.
PETITION for review on certiorari of the decision and resolution of the
Court of Appeals.
The facts are stated in the opinion of the Court.
Lawrence L. Ko Teh for petitioner.
Omar U. Obias for respondent.
AUSTRIA-MARTINEZ, J.:
Before the Court is a petition for review on certiorari of the
Decision1 dated October 11, 2000 of the Court of Appeals (CA) in CA-G.R.
CV No. 61848 which set aside the Decision dated August 31, 1998 of the
Regional Trial Court, Branch 138, Makati (RTC) in Civil Case No. 92-322and
upheld the causes of action for damages of Insurance Company of North
America (respondent) against Gaisano Cagayan, Inc. (petitioner); and the
CA Resolution dated April 11, 2001 which denied petitioner’s motion for
reconsideration.
The factual background of the case is as follows:
Intercapitol Marketing Corporation (IMC) is the maker of Wrangler Blue
Jeans. Levi Strauss (Phils.) Inc. (LSPI) is the local distributor of products
bearing trademarks owned by Levi Strauss & Co., IMC and LSPI separately
obtained from respondent fire insurance policies with book debt endorse-
_______________
1 Penned by Associate Justice Portia Aliño-Hormachuelos and concurred
in by Associate Justices Angelina Sandoval-Gutierrez (now Associate Justice
of this Court) and Elvi John S. Asuncion.
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America
ments. The insurance policies provide for coverage on “book debts in
connection with ready-made clothing materials which have been sold or
delivered to various customers and dealers of the Insured anywhere in the
Philippines.”2 The policies defined book debts as the “unpaid account still
appearing in the Book of Account of the Insured 45 days after the time of
the loss covered under this Policy.”3 The policies also provide for the
following conditions:
. 1.Warranted that the Company shall not be liable for any unpaid
account in respect of the merchandise sold and delivered by the
Insured which are outstanding at the date of loss for a period in
excess of six (6) months from the date of the covering invoice or
actual delivery of the merchandise whichever shall first occur.
 . 2.Warranted that the Insured shall submit to the Company within
twelve (12) days after the close of every calendar month all
amount shown in their books of accounts as unpaid and thus
become receivable item from their customers and dealers. x x x4
xxxx
Petitioner is a customer and dealer of the products of IMC and LSPI. On
February 25, 1991, the Gaisano Superstore Complex in Cagayan de Oro City,
owned by petitioner, was consumed by fire. Included in the items lost or
destroyed in the fire were stocks of ready-made clothing materials sold and
delivered by IMC and LSPI.
On February 4, 1992, respondent filed a complaint for damages against
petitioner. It alleges that IMC and LSPI filed with respondent their claims
under their respective fire insurance policies with book debt endorsements;
that as of February 25, 1991, the unpaid accounts of petitioner on the sale
and delivery of ready-made clothing materials with IMC was P2,119,205.00
while with LSPI it was P535,613.00; that re-
_______________
2 Records, pp. 146, 190.
3 Id., at pp. 149 and 200; Exhibits “A-3-a” and “E-2-a Levi Strauss.”
4 Id., Exhibits “A-3” and “E-2 Levi Strauss.”
291
VOL. 490, JUNE 8, 2006 291
Gaisano Cagayan, Inc. vs.
Insurance Company of North
America
spondent paid the claims of IMC and LSPI and, by virtue thereof,
respondent was subrogated to their rights against petitioner; that
respondent made several demands for payment upon petitioner but these
went unheeded.5
In its Answer with Counter Claim dated July 4, 1995, petitioner contends
that it could not be held liable because the property covered by the
insurance policies were destroyed due to fortuities event or force majeure;
that respondent’s right of subrogation has no basis inasmuch as there was
no breach of contract committed by it since the loss was due to fire which
it could not prevent or foresee; that IMC and LSPI never communicated to
it that they insured their properties; that it never consented to paying the
claim of the insured.6
At the pre-trial conference the parties failed to arrive at an amicable
settlement.7 Thus, trial on the merits ensued.
On August 31, 1998, the RTC rendered its decision dismissing
respondent’s complaint.8 It held that the fire was purely accidental; that
the cause of the fire was not attributable to the negligence of the
petitioner; that it has not been established that petitioner is the debtor of
IMC and LSPI; that since the sales invoices state that “it is further agreed
that merely for purpose of 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.
Dissatisfied, petitioner appealed to the CA.9 On October 11, 2000, the
CA rendered its decision setting aside the decision of the RTC. The
dispositive portion of the decision reads:
_______________
5 Id., at p. 1.
6 Id., at p. 63.
7 Id., at p. 93.
 8 Id., at p. 540. unpaid account and as such the obligation to pay is not extinguished, even
if the fire is considered a fortuitous event; that by subrogation, the insurer
has the right to go against petitioner; that, being a fire insurance with book
9 CA Rollo, p. 18.
debt endorsements, what was insured was the vendor’s interest as a
292 creditor.11
292 SUPREME COURT REPORTS Petitioner filed a motion for reconsideration12 but it was denied by the
ANNOTATED CA in its Resolution dated April 11, 2001.13
Gaisano Cagayan, Inc. vs. Hence, the present petition for review on certiorari anchored on the
Insurance Company of North following Assignment of Errors:
America
“WHEREFORE, in view of the foregoing, the appealed decision is REVERSED _______________
and SET ASIDE and a new one is entered ordering defendant-appellee
Gaisano Cagayan, Inc. to pay: 10 Id., at pp. 101-102.

. 1.the amount of P2,119,205.60 representing the amount paid by

the plaintiff-appellant to the insured Inter Capitol Marketing 11 Id., at pp. 98-100.
Corporation, plus legal interest from the time of demand until fully
paid; 12 Id., at p. 105.
. 2.the amount of P535,613.00 representing the amount paid by the
plaintiff-appellant to the insured Levi Strauss Phil., Inc., plus legal 13 Id., at p. 135.
interest from the time of demand until fully paid. With costs
against the defendant-appellee. 293
VOL. 490, JUNE 8, 2006 293
SO ORDERED.”10 Gaisano Cagayan, Inc. vs.
Insurance Company of North
The CA held that the sales invoices are proofs of sale, being detailed America
statements of the nature, quantity and cost of the thing sold; that loss of THE COURT OF APPEALS ERRED IN HOLDING THAT THE INSURANCE IN THE
the goods in the fire must be borne by petitioner since INSTANT CASE WAS ONE OVER CREDIT.
the proviso contained in the sales invoices is an exception under Article
1504 (1) of the Civil Code, to the general rule that if the thing is lost by a THE COURT OF APPEALS ERRED IN HOLDING THAT ALL RISK OVER THE
fortuitous event, the risk is borne by the owner of the thing at the time the SUBJECT GOODS IN THE INSTANT CASE HAD TRANSFERRED TO PETITIONER
loss under the principle of res perit domino; that petitioner’s obligation to UPON DELIVERY THEREOF.
IMC and LSPI is not the delivery of the lost goods but the payment of its
 THE COURT OF APPEALS ERRED IN HOLDING THAT THERE WAS
AUTOMATIC SUBROGATION UNDER ART. 2207 OF THE CIVIL CODE IN
FAVOR OF RESPONDENT.14
Anent the first error, petitioner contends that the insurance in the present
case cannot be deemed to be over credit since an insurance “on credit”
belies not only the nature of fire insurance but the express terms of the
policies; that it was not credit that was insured since respondent paid on
the occasion of the loss of the insured goods to fire and not because of the
non-payment by petitioner of any obligation; that, even if the insurance is
deemed as one over credit, there was no loss as the accounts were not yet
due since no prior demands were made by IMC and LSPI against petitioner
for payment of the debt and such demands came from respondent only
after it had already paid IMC and LSPI under the fire insurance policies.15
As to the second error, petitioner avers that despite delivery of the
goods, petitioner-buyer IMC and LSPI assumed the risk of loss when they
secured fire insurance policies over the goods.
Concerning the third ground, petitioner submits that there is no
subrogation in favor of respondent as no valid insurance could be
maintained thereon by IMC 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 between respondent and its insured nor
was its consent or approval ever secured; that this lack of privity forecloses
_______________
14 Rollo, p. 36.
15 Id., at p. 28 (Petition), 132 (Memorandum).
294
294 SUPREME COURT REPORTS
ANNOTATED
Gaisano Cagayan, Inc. vs.
Insurance Company of North
America
any real interest on the part of 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
As a general rule, in petitions for review, the jurisdiction of this Court in
cases brought before it from the CA is limited to reviewing questions of law
which involves no examination of the probative value of the evidence
presented by the litigants or any of them.18 The Supreme Court is not a
trier of facts; it is not its function to analyze or weigh evidence all over
_______________
16 Art. 1265. Whenever the thing is lost in the possession of the debtor,
it shall be presumed that the loss was due to his fault, unless there is proof
to the contrary, and without prejudice to the provisions of Article 1165.
This presumption does not apply in case of earthquake, flood, storm, or
other natural calamity.
 17 Rollo, pp. 105 (Comment), 153 (Memorandum). book debts as one covering the unpaid accounts of IMC and LSPI since such
insurance ap-
18 Spouses Hanopol v. Shoemart, Incorporated, 439 Phil. 266, 277; 390 _______________
SCRA 439, 447 (2002); St. Michael’s Institute v. Santos, 422 Phil. 723,
737; 371 SCRA 383, 396 (2001).
19 Go v. Court of Appeals, G.R. No. 158922, May 28, 2004, 430 SCRA 358,
295 364; Spouses Hanopol v. Shoemart, Incorporated, supra.
VOL. 490, JUNE 8, 2006 295
Gaisano Cagayan, Inc. vs.
20 Custodio v. Corrado, G.R. No. 146082, July 30, 2004, 435 SCRA 500,
Insurance Company of North
511; Spouses Hanopol v. Shoemart, Incorporated, supra.
America
again.19 Accordingly, findings of fact of the appellate court are generally
conclusive on the Supreme Court.20 21 The Insular Life Assurance Company, Ltd. v. Court of Appeals, G.R. No.
Nevertheless, jurisprudence has recognized several exceptions in which 126850, April 28, 2004, 428 SCRA 79, 86; Aguirre v. Court of Appeals, G.R.
factual issues may be resolved by this Court, such as: (1) when the findings No. 122249, January 29, 2004, 421 SCRA 310, 319.
are grounded entirely on speculation, surmises or conjectures; (2) when
the inference made is manifestly mistaken, absurd or impossible; (3) when 296
there is grave abuse of discretion; (4) when the judgment is based on a 296 SUPREME COURT REPORTS
misapprehension of facts; (5) when the findings of facts are conflicting; (6) ANNOTATED
when in making its findings the CA went beyond the issues of the case, or Gaisano Cagayan, Inc. vs.
its findings are contrary to the admissions of both the appellant and the Insurance Company of North
America
appellee; (7) when the findings are contrary to the trial court; (8) when
plies to loss of the ready-made clothing materials sold and delivered to
the findings are conclusions without citation of specific evidence on which
petitioner.
they are based; (9) when the facts set forth in the petition as well as in the
The Court disagrees with petitioner’s stand.
petitioner’s main and reply briefs are not disputed by the respondent; (10)
It is well-settled that when the words of a contract are plain and readily
when the findings of fact are premised on the supposed absence of
understood, there is no room for construction.22 In this case, the
evidence and contradicted by the evidence on record; and (11) when the
questioned insurance policies provide coverage for “book debts in
CA manifestly overlooked certain relevant facts not disputed by the
connection with ready-made clothing materials which have been sold or
parties, which, if properly considered, would justify a different
delivered to various customers and dealers of the Insured anywhere in the
conclusion.21Exceptions (4), (5), (7), and (11) apply to the present petition.
Philippines;”23and defined book debts as the “unpaid account still
At issue is the proper interpretation of the questioned insurance policy.
appearing in the Book of Account of the Insured 45 days after the time of
Petitioner claims that the CA erred in construing a fire insurance policy on
the loss covered under this Policy.”24 Nowhere is it provided in the
questioned insurance policies that the subject of the insurance is the goods
sold and delivered to the customers and dealers of the insured.
Indeed, when the terms of the agreement are clear and explicit that
they do not justify an attempt to read into it any alleged intention of the
parties, the terms are to be understood literally just as they appear on the
face of the contract.25 Thus, what were insured against were the accounts
of IMC and LSPI with petitioner which remained unpaid 45 days after the
loss through fire, and not the loss or destruction of the goods delivered.
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 agreed that merely for purpose of securing the payment of
the purchase price the
_______________
22 De Mesa v. Court of Appeals, 375 Phil. 432, 443; 317 SCRA 24, 32
(1999).
23 Records, pp. 146, 190.
24 Id.
25 First Fil-Sin Lending Corporation v. Padillo, G.R. No. 160533, January
12, 2005, 448 SCRA 71, 76; Azarraga v. Rodriguez, 9 Phil. 637 (1908).
297
VOL. 490, JUNE 8, 2006 297
Gaisano Cagayan, Inc. vs.
Insurance Company of North
America
above described merchandise remains the property of the vendor until the
purchase price thereof is fully paid.”26
The Court is not persuaded.
The present case clearly falls under paragraph (1), Article 1504 of the
Civil Code:
ART. 1504. Unless otherwise agreed, the goods remain at the seller’s risk
until the ownership therein is transferred to the buyer, but when the
ownership therein is transferred to the buyer the goods are at the buyer’s
risk whether actual delivery has been made or not, except that:
(1) Where delivery of the goods has been made to the buyer or to a
bailee for the buyer, in pursuance of the contract and the ownership in the
goods has been retained by the seller merely to secure performance by
the buyer of his obligations under the contract, the goods are at the
buyer’s risk from the time of such delivery; (Emphasis supplied)
xxxx
Thus, when the seller retains ownership only to insure that the buyer will
pay its debt, the risk of loss is borne by the buyer.27Accordingly, petitioner
bears the risk of loss of the goods delivered.
IMC and LSPI did not lose complete interest over the goods. They have
an insurable interest until full payment of the value of the delivered goods.
Unlike the civil law concept of res perit domino, where ownership is the
basis for consideration of who bears the risk of loss, in property insurance,
one’s interest is not determined by concept of title, but whether insured
has substantial economic interest in the property.28
_______________
26 Records, at the back of pp. 151-173; Exhibits “C” to “C-22.”
27 See Lawyers Cooperative Publishing Co. v. Tabora, 121 Phil. 737,
741; 13 SCRA 762, 764-765 (1965).
 28 Aetna Ins. Co. v. King, 265 So 2d 716, cited in 43 Am. Jur. 2d §943.
298
298 SUPREME COURT REPORTS
ANNOTATED
Gaisano Cagayan, Inc. vs.
Insurance Company of North
America
Section 13 of our Insurance Code defines insurable interest as “every
interest in property, whether real or personal, or any relation thereto, or
liability in respect thereof, of such nature that a contemplated peril might
directly damnify the insured.” Parenthetically, under Section 14 of the
same Code, an insurable interest in property may consist in: (a) an existing
interest; (b) an inchoate interest founded on existing interest; or (c) an
expectancy, coupled with an existing interest in that out of which the
expectancy arises.
Therefore, an insurable interest in property does not necessarily imply a
property interest in, or a lien upon, or possession of, the subject matter of
the insurance, and neither the title nor a beneficial interest is requisite to
the existence of such an interest, it is sufficient that the insured is so
situated with reference to the property that he would be liable to loss
should it be injured or destroyed by the peril against which it is
insured.29Anyone has an insurable interest in property who derives a
benefit from its existence or would suffer loss from its
destruction.30Indeed, a vendor or seller retains an insurable interest in the
property sold so long as he has any interest therein, in other words, so long
as he would suffer by its destruction, as where he has a vendor’s lien.31 In
this case, the insurable interest of IMC and LSPI pertain to the unpaid
accounts appearing in their Books of Account 45 days after the time of the
loss covered by the policies.
The next question is: Is petitioner liable for the unpaid accounts?
Petitioner’s argument that it is not liable because the fire is a fortuitous
event under Article 117432 of the Civil Code is
_______________
29 43 Am. Jur. 2d §943.
30 Id.
31 43 Am. Jur. 2d §962.
32 Art. 1174. Except in cases expressly specified by the law, or when it is
otherwise declared by stipulation, or when the nature of the obligation
requires the assumption of risk, no person shall be
299
VOL. 490, JUNE 8, 2006 299
Gaisano Cagayan, Inc. vs.
Insurance Company of North
America
misplaced. As held earlier, petitioner bears the loss under Article 1504 (1)
of the Civil Code.
Moreover, it must be stressed that the insurance in this case is not for
loss of goods by fire but for petitioner’s accounts with IMC and LSPI that
remained unpaid 45 days after the fire. Accordingly, petitioner’s obligation
is for the payment of money. As correctly stated by the CA, where the
obligation consists in the payment of money, the failure of the debtor to
make the payment even by reason of a fortuitous event shall not relieve
him of his liability.33The rationale for this is that the rule that an obligor
should be held exempt from liability when the loss occurs thru a fortuitous
event only holds true when the obligation consists in the delivery of a
determinate thing and there is no stipulation holding him liable even in
case of fortuitous event. It does not apply when the obligation is pecuniary
in nature.34
 Under Article 1263 of the Civil Code, “[i]n an obligation to deliver a
generic thing, the loss or destruction of anything of the same kind does not
extinguish the obligation.” If the obligation is generic in the sense that the
object thereof is designated merely by its class or genus without any
particular designation or physical segregation from all others of the same
class, the loss or destruction of anything of the same kind even without the
debtor’s fault and before he has incurred in delay will not have the effect of
extinguishing the obligation.35 This rule is based on the principle that the
genus
_______________
responsible for those events which could not be foreseen, or which,
though foreseen were inevitable.
33 CA Decision, p. 11; CA Rollo, p. 100.
34 Lawyers Cooperative Publishing v. Tabora, supra note 27, at p. 741; p.
765.
35 Jurado, Comments and Jurisprudence on Obligations and
Contracts (1993), pp. 289-290. See also Republic v. Grijaldo, 122 Phil. 1060,
1066; 15 SCRA 681, 687 (1965); De Leon v. Soriano, 87 Phil. 193, 196
(1950).
300
300 SUPREME COURT REPORTS
ANNOTATED
Gaisano Cagayan, Inc. vs.
Insurance Company of North
America
of a thing can never perish. Genus nunquan perit.36 An obligation to pay
money is generic; therefore, it is not excused by fortuitous loss of any
specific property of the debtor.37
Thus, whether fire is a fortuitous event or petitioner was negligent are
matters immaterial to this case. What is relevant here is whether it has
been established that petitioner has outstanding accounts with IMC and
LSPI. With respect to IMC, the respondent has adequately established its
claim. Exhibits “C” to “C-22”38 show that petitioner has an outstanding
account with IMC in the amount of P2,119,205.00. Exhibit “E”39 is the
check voucher evidencing payment to IMC. Exhibit “F”40 is the subrogation
receipt executed by IMC in favor of respondent upon receipt of the
insurance proceeds. All these documents have been properly identified,
presented and marked as exhibits in court. The subrogation receipt, by
itself, is sufficient to establish not only the relationship of respondent as
insurer and IMC as the insured, but also the amount paid to settle the
insurance claim. The right of subrogation accrues simply upon payment by
the insurance company of the insurance claim.41 Respondent’s action
against petitioner is squarely sanctioned by Article 2207 of the Civil Code
which provides:
Art. 2207. If the plaintiff’s property has been insured, and he has received
indemnity from the insurance company for the injury or loss arising out of
the wrong or breach of contract complained of, the
_______________
36 Bunge Corp. and Universal Comm. Agencies v. Elena Camenforte &
Company, 91 Phil. 861, 865 (1952). See also Republic v. Grijaldo, supra; De
Leon v. Soriano, supra.
37 Ramirez v. Court of Appeals, 98 Phil. 225, 228 (1956).
38 Records, pp. 151-173.
 39 Id., at p. 182. that the order to pay the amount of P535,613.00 to respondent is DELETED
for lack of factual basis.
No pronouncement as to costs. SO ORDERED.
40 Id., at p. 183.

Panganiban (C.J., Chairperson), Callejo, Sr. and Chico-Nazario, JJ.,

41 Delsan Transport Lines, Inc. v. Court of Appeals, 420 Phil. 824,
concur.
834; 369 SCRA 24, 31 (2001); Philippine American General Insurance
Company, Inc. v. Court of Appeals, 339 Phil. 455, 466; 273 SCRA 262, 275
(1997). Ynares-Santiago, J., On Leave.

301
VOL. 490, JUNE 8, 2006 301 _______________
Gaisano Cagayan, Inc. vs.
Insurance Company of North 42 Records, p. 201.
America
insurance company shall be subrogated to the rights of the insured against 302
the wrongdoer or the person who has violated the contract. x x x 302 SUPREME COURT REPORTS
Petitioner failed to refute respondent’s evidence. ANNOTATED
As to LSPI, respondent failed to present sufficient evidence to prove its Racaza vs. Gozum
cause of action. No evidentiary weight can be given to Exhibit “F Levi Petition partly granted, assailed decision and resolution affirmed with
Strauss,”42 a letter dated April 23, 1991 from petitioner’s General Manager, modification.
Stephen S. Gaisano, Jr., since it is not an admission of petitioner’s unpaid
account with LSPI. It only confirms the loss of Levi’s products in the amount Note.—The filing of a claim with the carrier within the time limitation
of P535,613.00 in the fire that razed petitioner’s building on February 25, therefore actually constitutes a condition precedent to the accrual of a
1991. right of action against a carrier for loss of or damage to the goods. (Federal
Moreover, there is no proof of full settlement of the insurance claim of Express Corporation vs. American Home Assurance Company, 437 SCRA
LSPI; no subrogation receipt was offered in evidence. Thus, there is no 50 [2004])
evidence that respondent has been subrogated to any right which LSPI may
have against petitioner. Failure to substantiate the claim of subrogation is
fatal to petitioner’s case for recovery of the amount of P535,613.00.
WHEREFORE, the petition is partly GRANTED. The assailed Decision
dated October 11, 2000 and Resolution dated April 11, 2001 of the Court of
Appeals in CA-G.R. CV No. 61848 are AFFIRMED with the MODIFICATION