Bank of the Philippine Islands v. SMP, Inc.
REITERATIONFacts
The Antecedents: In January 1995, SMP, Inc. (SMP) sold 4,000 bags of polystyrene products to Clothespak Manufacturing Phils. (Clothespak) for U.S. $118,500.00. SMP's sales executive issued a provisional receipt to Clothespak containing the handwritten notation: 'Materials belong to SMP Inc. until your checks clear.' Clothespak issued postdated checks as payment, but these were subsequently dishonored and returned by the drawee bank for the reason 'Account Closed.' Procedural History: Far East Bank and Trust Company (FEBTC), the predecessor-in-interest of Bank of the Philippine Islands (BPI), filed a collection suit against Clothespak and obtained a writ of preliminary attachment. The goods sold by SMP were among the properties levied. SMP filed an Affidavit of Third Party Claim and later a vindicatory action under Section 17, Rule 39 of the Rules of Court to recover the value of the goods. The Regional Trial Court (RTC) ruled in favor of SMP, finding that ownership remained with SMP and the attachment was wrongful. The Court of Appeals (CA) affirmed the RTC decision in toto. The Petition: BPI filed a petition for review on certiorari under Rule 45, arguing that the transaction was a contract of sale where ownership passed to Clothespak upon delivery, especially since the invoices were 'F.O.B.' (Free on Board). BPI also contended that the provisional receipt was inadmissible under the Best Evidence Rule because SMP only presented a triplicate copy rather than the original.
Issue(s)
Whether the transaction between SMP and Clothespak was a contract of sale or a contract to sell, thereby determining if ownership had passed to the buyer at the time of attachment. Whether the triplicate copy of the provisional receipt is admissible as an original document under the Best Evidence Rule.
Ruling
The petition is DENIED. The Decision and Resolution of the Court of Appeals are AFFIRMED.
Ratio Decidendi
On Issue 1: The Court ruled that the agreement was a contract to sell pursuant to Article 1478 of the Civil Code. Applying the distinction established in Rivera v. del Rosario, the Court noted that in a contract to sell, ownership is reserved by the vendor until full payment, which acts as a positive suspensive condition. The handwritten reservation on the provisional receipt clearly indicated the parties' intent that title would not pass until the checks cleared. Since the checks were dishonored, the condition for the transfer of ownership was never fulfilled. The Court further clarified that the 'Free on Board' (F.O.B.) stipulation, which places the risk of loss on the buyer during transit, can coexist with a contract to sell and does not automatically result in the transfer of ownership upon delivery. Consequently, SMP remained the owner of the goods at the time of the levy, making the attachment by FEBTC/BPI wrongful. On Issue 2: The Court held that the triplicate copy of the provisional receipt was admissible as an original document. Under Section 4(b), Rule 130 of the Rules of Court, when a document is executed in two or more copies at or about the same time with identical contents, all such copies are equally regarded as originals. The evidence showed that the triplicate copy was produced simultaneously with the original and duplicate as part of the regular course of the transaction. Therefore, the triplicate copy is primary evidence, not secondary evidence. The petitioner's objection based on the Best Evidence Rule was misplaced because the rule requires the production of the 'original,' and the law defines simultaneous copies as originals. Thus, the RTC and CA correctly admitted the receipt to prove the reservation of ownership.
Main Doctrine
The Supreme Court distinguishes between a contract of sale and a contract to sell. In a contract of sale, title passes to the vendee upon delivery, and non-payment is a negative resolutory condition. Conversely, in a contract to sell, ownership is reserved by the vendor until full payment of the price, which serves as a positive suspensive condition. Additionally, under the Rules of Court, when a document is executed in two or more copies at the same time with identical contents, all such copies are equally regarded as originals for the purpose of the Best Evidence Rule.