Title
Spouses Garcia vs. Northern Islands Co., Inc.
Case
G.R. No. 226495
Decision Date
Feb 5, 2020
Ecolamp, designated as Northern's exclusive distributor, failed to pay for goods received, leading to a sum-of-money case. The Supreme Court affirmed Ecolamp's obligation, citing preponderance of evidence, and imposed applicable interest rates.
contract of sale
burden of proof
affirmative of the issue

Case Summary (G.R. No. 226495)

Factual Background

Northern Islands, Co., Inc. designated Ecolamp Multi-Resources as its exclusive distributor in Southern Mindanao. From March to July 2004, Ecolamp ordered 3D household appliances allegedly aggregating P8,040,825.17. Northern asserted that the goods were shipped and delivered to Ecolamp’s place of business in Davao City via Sulpicio Lines and other carriers and that the contractual term required payment within 120 days, with unpaid balances earning interest at 18% per annum. When payment did not follow, Northern sent demands and filed a complaint for sum of money.

Trial Evidence for Plaintiff

Northern presented several witnesses including its Vice President for Finance, accounting personnel, a warehouse coordinator, a claims officer, and a shipping branch manager. Northern introduced delivery cargo receipts, bills of lading, and proforma bills of lading as evidence of delivery. Witnesses testified that purchase orders and sales invoices were prepared from facsimile transmissions and that duplicate sales invoices or statements of account were delivered to Ecolamp. Northern explained that original sales invoices and certain packing and picking lists were not produced because a stockholder, Gilbert Guy, had taken possession of those documents. Witnesses identified a person named Alvin as the recipient whose signature appeared on delivery cargo receipts.

Defense's Case

Only Cherrylyn Garcia testified for the defense. She denied receipt of the deliveries for March to July 2004 and asserted that the signatures on the delivery cargo receipts were not made on behalf of Ecolamp. She emphasized that Northern failed to produce the original sales invoices, and explained that Northern issued a “pink” sales invoice before payment and a “blue” sales invoice after payment; no pink invoices for March to July 2004 were produced. She denied that any obligation of Ecolamp became due within 120 days for that period and averred that transactions in October 2004 were fully paid.

Procedural Acts: Attachment and Levy

Acting on Northern’s application, the RTC issued an order granting a writ of preliminary attachment on October 13, 2005. Pursuant to the writ issued November 7, 2005, Sheriff Adolfo P. Garcia, Jr. levied six real properties registered in the name of Dennis married to Cherrylyn.

Ruling of the RTC

On September 21, 2011, the RTC dismissed Northern’s complaint. The RTC held that delivery documents and bills of lading acquired significance only upon proof of the existence of the purchase orders and original sales invoices. Because Northern failed to prove the existence, execution, and the reason for loss of the purchase orders and sales invoices, the RTC concluded that the rule on secondary evidence did not apply and that Northern had not established its claim.

Ruling of the Court of Appeals

On November 26, 2015, the Court of Appeals reversed the RTC and granted Northern’s complaint, ordering Spouses Dennis and Cherrylyn "Cherry" Garcia to pay P5,200,900.00 with interest at 12% per annum from the date of last extrajudicial demand on May 4, 2005 until June 30, 2013, and 6% per annum thereafter. After motions, the CA issued an Amended Decision on August 17, 2016 modifying the award to P6,478,700.00 while retaining the same interest scheme. Northern’s motion for partial reconsideration was partially granted; the Garcias’ motion for reconsideration was denied.

Issues Raised in the Petition

Petitioners argued that the CA erred as a matter of law and that the finding of a perfected contract of sale rested on speculation and conjecture without specific evidentiary support. They contended that the bills of lading and contracts of carriage were not contracts of sale and that Northern failed to prove a cause of action against them.

Supreme Court Ruling

The Supreme Court denied the petition and affirmed the CA Amended Decision dated August 17, 2016. The Court held that Northern proved its cause of action by preponderance of evidence. The Court found that, although Northern did not present the original sales invoices for March to July 2004, the delivery cargo receipts and bills of lading in the record, coupled with witness testimony that a person named Alvin received the goods at Ecolamp’s address, established deliveries to Ecolamp for the period of April to July 2004. Cherrylyn’s testimony that employees were authorized to receive deliveries and her failure to expressly disavow Alvin’s authority supported the conclusion that Ecolamp received the goods. The Court therefore upheld the CA’s award of P6,478,700.00 and the imposition of interest at 12% per annum from May 4, 2005 until June 30, 2013, then 6% per annum from July 1, 2013 until finality, with the principal adjusted by interest to earn 6% per annum thereafter until full satisfaction.

Legal Basis and Reasonin

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