G.R. No.

L-30351 September 11, with a census of occupants and

1974 squatters taken some time later.

AUREA BAÑEZ and RAMON Notwithstanding respondent Arcilla's

BAÑEZ Substituted by their legal occupancy, the lot was awarded, on
heir, OSCAR VIRATA May 20, 1960, to Cristeta L. Laquihon
BAÑEZ, petitioners, pursuant to a conditional contract to
vs. sell executed by the PHHC, subject to
COURT OF APPEALS and PIO the standard resolutory conditions
ARCILLA, respondents. imposed upon grants of similar
nature, including the grantee's
Domingo A. Songalia for petitioners. undertaking to eject trespassers,
intruders or squatters on the land,
Arsenio R. Reyes for respondent. and to construct a residential house
on the lot within a period of one year
from the signing of the contract, non-
ZALDIVAR, J.:p compliance with, which conditions
would result in the contract being
A petition for review of the decision of the Court of Appeals in C.A. G.R. No.
36227-R (Pio Arcilla, plaintiff-appellant, versus Aurea Bañez, Ramon Bañez "deemed annulled and cancelled".
and People's Homesite and Housing Corporation, defendants-appellees).
Respondent Arcilia had no notice of
The pertinent facts or the case are as this award, and neither did the
follows: In 1956 respondent Pio grantee nor the PHHC take any step
Arcilla occupied a parcel of land, later to oust him from the premises
known as Lot 5, Block E-130 East occupied by him. It was only on April
Avenue Subdivision, Diliman, Quezon 29, 1963 that he was first required to
City, owned by the People's Homesite leave the area aforesaid.
and Housing Corporation (hereinafter
Meanwhile, on May 9, 1962, grantee
referred to as PHHC). He fenced the Cristeta L. Laquihon died, survived by
lot with wire, and erected a house
her father, Basilio Laquihon, who, on
and made some plantings thereon. July 27, 1962, executed a deed of
His moves to apply for the acquisition
adjudication in his favor of the rights
of the lot from the PHHC when the and interests thus far acquired by his
same became available for
deceased daughter over the lot in
disposition came to naught because question. In said deed Basilio
the employees of the PHHC whose
Laquihon also acknowledged an
help he sought merely regaled him indebtedness of the deceased to
with promises that the matter would
herein petitioner Aurea V. Bañez in
be attended to. Nevertheless, his the sum of P3,000.00 and agreed to
occupancy was made a matter of
assign the rights thus adjudicated by
record with the PHHC in connection way of payment of the debt. The
corresponding request for the transfer
of the rights from Cristeta to Basilio L.
Laquihon was made by the latter to
the PHHC on August 9, 1962, while
an undated request for the approval
of the assignment of said land to
Aurea V. Bañez as above stated was
similarly filed with the PHHC.
The PHHC referred the requests for
transfer and for assignment to its
Head Executive Assistant, Olimpio N.
Epis, for study. Mr. Epis. in his
memorandum, opined that, because
the grantee failed, among others, to
construct a residential house on the
land within the period provided in the
conditional contract, the grantee's
rights under the contract were
forfeited and, accordingly, she did not
acquire any right which could be
transmitted upon her death to her
alleged successor, Basilio Laquihon.
Hence, he recommended the
disapproval of the petition for transfer.
It appears, however, that the
unfavorable recommendation of Mr.
Epis was not acted upon by the
Board of the PHHC but, instead, was
returned by the General Manager to
Mr. Epis with verbal instructions to
restudy the matter. After a restudy,
Mr. Epis changed his opinion, and
considered the transfers from Cristeta
L. Laquihon to Basilio Laquihon, and
from the latter to Aurea V. Bañez, to
be proper and meritorious, and
recommended the approval of the
same. This was in conformity with a
previous recommendation made by
PHHC's Homesite Sales Supervisor,
Roman Carreaga, to the PHHC's
General Manager. On November 15,
1962, PHHC's Board of Directors
adopted Resolution No. 200
approving the transfer of rights from
Basilio Laquihon to Aurea V. Bañez
as a meritorious case. The transfer
thus approved, petitioner Aurea V.
Bañez continued paying the
installments on the purchase price of
the land.
Respondent Pio Arcilia did not know
of the foregoing developments until
sometime in 1963 when he was given
notice to vacate the lot occupied by
him. He then interposed a protest
against the award and transfer to
petitioner Aurea V. Bañez, claiming
that the original awardee acquired no
rights to the aforesaid lot and that the
transferee was disqualified from
acquiring lots of the PHHC. Since the
PHHC's Board of Directors had
theretofore approved the transfer
objected to, the Administrative
Investigating Committee, to whom the
protest was referred for resolution,
considered itself without any further
power to review the action of the
Board, and accordingly dismissed the
protest. In the meantime, petitioner
Aurea V. Bañez completed the
installment payments on the land,
and on October 29, 1964, the PHHC
executed the corresponding deed of
sale over the lot in her favor.
Thus left without recourse before the
PHHC, respondent Arcilla went to
court with his complaint to nullify the
award of the lot in question in favor of
petitioner Aurea V. Bañez and to
compel the PHHC to award the same
to him, with prayer for attorney's fees
and costs. After trial on the merits, the
court a quo found for petitioners and
accordingly decreed the dismissal of
respondent's complaint, without
costs.
Respondent Arcilla appealed to the
Court of Appeals, which rendered the
decision sought to be reviewed, the
dispositive portion of which decision
reads thus:
WHEREFORE, the
judgment appealed from is
hereby reversed and, in
lieu thereof, another is
hereby rendered declaring
null and void the transfer
of rights over and award of
lot 5, Block B-130, East
Avenue Subdivision of
appellee PHHC, in favor of
appellee Aurea Bañez and
ordering appellee People's
Homesite and Housing
Corporation to afford
appellant Pio Arcilla the
opportunity, within thirty
(30) days from the finality
of this decision, to perfect
his preferential right to
purchase said lot and
thereafter to execute and
deliver such deed and
documents necessary to
consummate the sale to
said appellant.
Seeking a review of the decision,
petitioners filed the instant petition.
During its pendency, petitioner
Ramon Bañez died on March 30,
1972, and petitioner Aurea Bañez
also died on August 11, 1972, and the
motion to have their heir, Oscar Virata
Bañez, substituted for them, was
granted by this Court on October 9,
1972.
Petitioners in their Brief made
assignments of error, as follows:
1. That the Court of
Appeals erred in holding
that the respondent Pio
Arcilla has the personality
to seek the annulment of
the award and sale, of Lot
5, Block E-130, East
Avenue Subdivision,
Diliman, Quezon City,
belonging to the PHHC, to
the applicant Cristela L.
Laquihon on May 20,
1960, by PHHC, and the
transfer of her rights over
the lot by her father Basilio
Laquihon to the petitioner
Aurea Bañez in payment
of the indebtedness of
Cristeta L. Laquihon to the
petitioner Aurea Bañez in
the amount of P3,000.00;
2. The Court of Appeals
erred in holding that the
respondent Pio Arcilla has
a preferential right to
purchase the lot in
question, lot 5, block E-
130, East Avenue
Subdivision, Quezon City,
of the People's Homesite
and Housing Corporation;
3. That the Court of
Appeals erred in holding
that the award of the lot in
question to Cristeta L.
Laquihon, made on May
20, 1960 was null and
void, because said
awardee failed to construct
a house in the lot within a
period of one (1) year from
the signing of the contract
to sell and, therefore, upon
the death of Cristeta L.
Laquihon on May 9, 1962,
she transferred no rights to
her father Basilio Laquihon
and said Basilio Laquihon
could not validly sell his
rights of the lot in question
to the petitioners;
4. That the Court of
Appeals erred in holding
that the approval of the
transfer of rights of the late
Cristeta L. Laquihon by
her father Basilio Laquihon
to the petitioner Aurea
Bañez was due to the
intercession of the then
Senator Estanislao
Fernandez; and
5. That the Court of
Appeals erred in holding
that the petitioners are not
qualified to acquire the lot
in question for having
allegedly a lot in San Juan,
Rizal.
1. Article 1397 of the Civil Code
provides that the action for annulment
of contracts may be instituted by all
who are thereby obliged principally or
subsidiarily. Hence strangers to the
contract who are not bound thereby
have neither the right nor the
personality to bring an action to annul
such contract. It cannot be gainsaid
that respondent Pio Arcilla was a
stranger to, and not bound principally
or subsidiarily by, the conditional
contract to sell executed on May 20,
1960 by the PHHC in favor of Cristeta
L. Laquihon, and the transfer of rights
over the same lot from Basilio
Laquihon to Aurea V. Bañez. Hence
respondent Pio Arcilla could not bring
an action to annul the same.
There is, however, an exception to
the rule laid down in Article 1397.
This Court, in Teves vs. People's
Homesite and Housing Corporation,
L-21498, June 27, 1968 citing Ibañez
1
vs. Hongkong and Shanghai Bank , 2
held that "a person who is not a partly
obliged principally or subsidiarily in a
contract may exercise an action for
nullity of the contract if he is
prejudiced in his rights with respect to
one of the contracting parties, and
can show the detriment which would
positively result to him from the
contract in which he had no
intervention." Pursuant to said
doctrine, in order that respondent Pio
Arcilla might bring an action for the
nullity of the contracts aforesaid, he
should have been not only prejudiced
in his rights with respect to one of the
contracting parties, but must have
also shown the detriment which he
would positively suffer from the
contracts. It becomes, therefore,
necessary to inquire, whether
respondent Pio Arcilla's rights were
prejudiced by the aforesaid contracts,
and as to what detriment, if any, he
suffered because of those contracts.
What rights of respondent Pio Arcilla
were prejudiced? The Court of
Appeals found that Pio Arcilla "makes
no pretense that he entered into and
built his land upon appellee PHHC's
land with the consent of the latter."
Pio Arcilia was, therefore, a
trespasser, or a squatter, he being a
person who settled or located on
land, in closed or uninclosed with "no
bona fide claim or color of title and
without consent of the owner." He
3
began his material possession of the
lot in bad faith, knowing that he did
not have a right thereto, and it is
presumed that his possession
continued to be enjoyed in the same
character in which it was acquired,
i.e. in bad faith until the contrary is
proved. And what right can a
4
squatter have to the land into which
he has intruded against the owner of
the land? The answer is not hard to
find, A squatter can have no
possessory rights whatsoever, and
his occupancy of the land is only at
the owner's sufferance, his acts are
merely tolerated and cannot affect the
owner's possession. The squatter is
5
necessarily bound to an implied
promise, that he will vacate upon
demand.
This Court, in Bernardo et al. vs.
Bernardo and Court of Appeals , laid
6
down the doctrine that:
In carrying out its social re-
adjustment policies, the
government could not
simply lay aside moral
standards, and aim to
favor usurpers, squatters,
and intruders, unmindful of
the lawful or unlawful
origin and character of
their occupancy. Such a
policy would perpetuate
conflicts instead of
attaining their just solution.
Respondent Pio Arcilla, having no
possessory rights whatsoever, what
detriment could be have suffered
from the aforesaid contracts?
The Court of Appeals, however, held
that respondent Pio Arcilia had a right
to purchase the lot occupied by him.
The discussion of this alleged right
brings us to the second assignment
of error.
2. We find merit in petitioners' second
assignment of error. Relying on the
decision of the Court of Appeals,
respondent Arcilia anchored his
alleged preferential right to purchase
Lot 5, Block E-130 on Resolution No.
562 of PHHC's Board of Directors,
dated June 27, 1963, which reads as
follows:
(1) No preference,
advantage or benefit shall
be given to squatters in
the allocation of PHHC
residential lots by reason
alone of their prior
occupancy thereof, but
they shall be treated on
the same footing as other
qualified applicants.
Squatters who are found
qualified and deserving
shall be given preferential
awards only in PHHC
resettlement projects, if
they voluntarily comply
with PHHC rules and
policies without waiting to
be evicted thru court
proceedings.
and on Resolution No. 558, dated
April 16, 1962, which approved the
recommendations of its Acting Legal
Officer. The recommendations
included the proposed "Application
Forms No. 6-D and No. 6-F" for non-
occupants and occupants or
squatters, respectively, and provided,
among others, that:
(6) The Sales and
Management Department
should have a ready and
up-to- date census of all
lots occupied by squatters
within PHHC subdivisions
open for sale or award, in
order that lots occupied by
squatters who are not
qualified to buy the same,
or who do not merit an
award shall not be
awarded to anybody until
the PHHC has obtained a
final court decision for the
eviction of such squatter.
(Exhibit 1-B).
It should not be lost sight of, however,
that according to the decision of the
Court of Appeals, "Time there may
have been, perhaps, when
occupancy of a lot without the
consent of said appellee was not
recognized at all as basis for a claim
to a right to purchase said lot;" and
that "on the face of the evidence
presented before us in this case, we
note a clear shift in policy in the
disposition of lots of appellee PHHC,"
and the shift in policy was evidenced
by the afore-quoted resolutions.
If the afore-quoted resolutions relied
upon by respondent Arcilla were
evidence of the shift of policy, then, it
stands to reason that before the
adoption of said resolutions, the
policy of the PHHC was different;
otherwise, there would have been no
reason for a change of policy.
Resolution No. 562 was dated June
27, 1963. Hence the policy before
June 27, 1963 was different. In fact
even the Court of Appeals noted that
before said date, "occupancy of a lot"
was perhaps "not recognized at all as
a basis for a claim of a right to
purchase said lot." Hence at the time
Lot No. 5 was awarded to Cristeta L.
Laquihon on May 20, 1960, and at
the time the PHHC approved the
transfer of original awardee's rights to
herein petitioners on Nov. 15, 1962, it
was not yet the policy of the PHHC to
recognize mere occupancy of a lot as
giving a right to purchase the same,
for said Policy was adopted only later,
i.e. on June 27, 1963.
Moreover, it is not stated expressly in
the above-quoted resolutions, and
neither can it be necessarily implied
therefrom, that the occupant was
given a preferential right to purchase
the lot he occupied. In fact Resolution
No. 562 explicitly states that although
a squatter shall be treated on the
same footing as other qualified
applicants, said occupant has no
preference at all by reason of said
occupancy. In the instant case, it is
not even shown, although it was
taken for granted, that respondent Pio
Arcilia was a qualified applicant who
should be treated on the Same
footing as others. The fact is that said
respondent never filed an application
for the lot, so he cannot be a qualified
applicant. A squatter found to be
qualified and deserving was to be
given preferential award, not
necessarily to the same lot he
occupies but only in PHHC
resettlement projects; and it does not
appear that Lot 5, Block E-130, in
question, is in a resettlement project.
Furthermore, said preferential award
in resettlement projects is granted
only in case the squatter is not
evicted through court proceedings. In
the instant case, respondent Arcilla
had been ejected from the lot through
court proceedings in Civil Case No.
IV-11691 of the City Court of Quezon
City. If a squatter was given a
Preferential right to the lot he
occupies, how come that the same
resolution No. 562 also provided that
"No administrative case shall be
entertained on the basis alone of a
squatter's claim of prior or actual
occupancy of PHHC lot?"
We hold that the claim, of respondent
Pio Arcilla to the alleged preferential
right to purchase Lot 5, Block E-130,
had not been substantiated.
3. Respondent Arcilla argues that the
awardee of the lot, Cristeta L.
Laquihon, did not comply with the
resolutory condition of building a
house; so, she acquired no rights that
could be transmitted to her father.
This Court cannot sustain
respondent's stand.
This Court of Appeals stated in its
decision that the contract to sell,
dated May 20, 1960, executed by the
PHHC in favor of Cristeta L. Laquihon
was.
Subject to the standard
resolutory conditions
imposed upon grants of
similar nature, including
the grantee's undertaking
to eject trespassers,
intruders or squatters on
the land and to 'construct a
 residential house on the lot
and shall complete the
same within a period of (1)
year from the signing of
this contract with no
extension,' the non-
compliance with which
results in the contract
being 'deemed annulled
and cancelled (Exhibit 7).
Because no residential house,
continued the Court of Appeals, was
ever erected by the awardee on the
premises — not even until she died
on May 9, 1962, "she failed to comply
with a condition of the award, the
non-compliance with which has a
resolutory effect upon the award,"
such that when Cristeta L. Laquihon
died, she acquired no vested right in
the land, and she transmitted nothing
to her father, Basilio Laquihon, who,
on his part, could not have
transferred any right to petitioners
Bañez.
It is granted that by virtue of the
resolutory condition, the resolution of
the contract took place by force of law
and that there was no need of judicial
declaration to resolve the contract.
Civilists, however, are not agreed on
whether the injured party retains the
option of demanding fulfillment or
rescission of the obligation as
provided in Article 1191 or not. Thus
Collin y Capitant, Curson Elemental
de Derecho Civil, Vol. III, p. 750 says:
En la hipotesis de una
clausula del contrato que
pronuncie una resolucion
eventual, hay que
proclamar la validez de tal
clausula en el Derecho
espanol siempre que no
aparezca por sus
circumstancias como
contraria a la ley o a las
buenas costumbres.
El efecto de tal clausula
sera que la resolucion se
produzca de pleno
derecho, sin intervencion
judicial; pero entendemos
que, a pesar de ella el
acreedor conservara el
derecho de opcion que le
concede el art. 1124 [Art.
1191 of the Civil Code of
the Philippines] a no ser
que la clausula misma
resulte otra cosa.
Manresa, in Commentaries al Codigo
Civil Espanol, 1967, Vol. VIII, p. 416,
however, says that the stipulated
resolution of the contract in case one
of the parties does not comply with
his undertaking is produced by force
of law, but the option of the injured
party disappears.
If the creditor could still demand, in
spite of the resolution ipso jure of the
contract, then the resolution would
not be mandatory on the creditor and
the resolution would produce its effect
when the creditor notified the debtor
of his decision. (Tolentino, Civil Code
of the Philippines, Vol. IV, p. 175.)
It is certain, therefore, that the said
contract to sell in the instant case
was by virtue of the stipulated
resolutory conditions resolved by
operation of law. But the Court of
Appeals overlooked in the instant
case the express provision of the
contract to sell that said resolution
becomes effective only from the date
written notice thereof is sent by the
PHHC to the applicant. Thus
paragraph 12 of the contract to sell
(Exhibit 7) provides:
12. Should the
APPLICANT violate,
refuse or fail to comply
with any of the terms and
conditions stipulated
herein or default in the
payment of three monthly
installments as provided
for in paragraph 1 hereof,
this contract shall be
deemed annulled and
cancelled and the
CORPORATION shall be
at liberty to dispose of said
property to any other
person in the same
manner as if the contract
had never been made ...
The annulment and
cancellation and the right
of the CORPORATION to
repossess the property
shall become effective
from the date written
notice thereof is sent by
the CORPORATION to the
APPLICANT at his last
known post-office
address ...
The record does not show, and the
decision of the Court of Appeals does
not state, that the PHHC ever notified
in writing the awardee of the
cancellation of the contract to sell.
Hence, the resolution of the contract
never became effective.
Consequently, whatever rights the
original awardee Cristeta Laquihon
had over the disputed lot were
transmitted upon her death to her
only legal and compulsory heir, her
father Basilio (Art. 777, Civil Code)
which rights the latter could also
convey to herein petitioners.
But even if it be assumed gratia
argumenti, that the original awardee
Cristeta Laquihon acquired no vested
right to the lot upon her death
because of her failure to comply with
the resolutory condition of
constructing a house on the lot, and
the lot had to revert to the PHHC, still
it cannot be denied that the PHHC
waived the effects of said resolutory
condition when its Board of Directors
approved, on November 15, 1962,
the transfer to Aurea Bañez. In
consenting to the transfer, the PHHC
necessarily waived any right that
might have accrued to it by virtue of
the resolution of the contract before
the transfer.
Regarding the other resolutory
condition mentioned by the decision
sought to be reviewed, and
emphasized by private respondent,
that the original awardee did not file
an action for ejectment, it is to be
noted that the awardee was not
obliged to file said ejectment suit
against respondent, the latter having
squatted on the land since 1956 and
the award to Cristeta Laquihon
having been made only on May 20,
1960. On this matter, the
Constitutional Contract to Sell (Exhibit
7) explicitly provides that:
3. ... The applicant shall
undertake the ejectment of
any trespasser, intruder or
squatter who shall build on
the lot or who shall deprive
him of the right to possess
the same from the date of
this contract.
The awardee was obliged to eject
squatters 44 who shall build on the lot
... from the date of this contract."
Hence, respondent Arcilla having built
his house or squatted on the land
very much before, i.e. 4 years before
the land was awarded to awardee,
the latter was not under contractual
obligation to eject him.
Resolution No. 558 does not require,
furthermore, that the applicant for, or
transferee of, a PHHC lot should
reside in Quezon City. What the
Resolution requires is that he should
have his "permanent residence or
principal place of work or business in
Quezon City, Manila or suburbs ..."
San Juan, the address of petitioners
herein, is certainly included in the
term "suburbs."
4. In support of their fourth
assignment of error, that
the Court of Appeals erred
in holding that the
approval of the transfer of
the rights to the lot to
petitioners was due to the
intercession of the then
Senator Estanislao
Fernandez, petitioners
argued that the issue of
whether the letter of
Senator Fernandez
influenced the approval of
the transfer was not
assigned as error in
respondent Arcilla's brief in
the Court of Appeals, and
neither was such influence
alleged in the complaint,
hence the Court of
Appeals could not decide
said issue; and that the
Board of Directors,
uninfluenced by politicians,
used its discretion in
approving the transfer.
Section 7 of Rule 51 of the Rules of
Court provides that in order that a
question may be considered by the
Court of Appeals, said question must
be stated in the assignment of errors
and it must be properly argued in the
brief. (Traders Insurance and Surety
Co. vs. Golangco, et al., 95 Phil. 824,
830; Tan Si Kick v. Tiacho, 79 Phil.
696, 698.) We note that there were
only two errors assigned in
appellant's brief in the Court of
Appeals, namely: that the trial court
erred in holding that (1) the claim of
plaintiff that defendant was
disqualified to acquire lot 5 for she
already owned lot in San Juan was
not substantiated, and (2) there was a
valid perfected contract of sale
between the PHHC and the late
Cristeta Laquihon, and between the
PHHC and Aurea Bañez and Ramon
Bañez, and that they are bound by
the terms and conditions thereof.
Hence the alleged intercession of the
then Senator Estanislao Fernandez in
the transfer of right by Basilio
Laquihon to petitioners, which was
not stated in the assignment of errors
and not argued in the brief, should
have not been considered by the
Court of Appeals.
Moreover, the evidence on which the
finding of the Court of Appeals that
the PHHC accommodated petitioners
because of the intercession of
whoever wrote "Exhibit C, has no
evidentiary basis, for Exhibit C was
rejected by the trial court "for being
immaterial, irrelevant, impertinent and
not properly identified (TSN, Nov. 4,
1964, p. 90)." The party introducing it
did not even ask permission from the
Court that the same be attached to
the record so that the appellate court
may review the ruling of the trial court
(U.S. vs. Cabaraban, 36 Phil. 251,
253-254; Velez vs. Chaves, 50 Phil.
676, 678-679). Evidence ruled out at
the trial of the case cannot be taken
into consideration in the decision, for
that would infringe the constitutional
right of the adverse party to due
process of law (Tinsay vs. Yusay and
Yusay, 47 Phil. 639, 643). Documents
forming no part of the proofs before
the appellate court will not be
considered in disposing of the issues
of an action (De Castro v. Court of
Appeals, 75 Phil., 824, 835, citing
Dayrit v. Gonzalez, 7 Phil. 182; 5
Encyc. of Evidence, 469). Although
said letter was written on stationery
bearing the letterhead of the then
Senator Fernandez, it does not
conclusively follow that it was Senator
Fernandez himself who wrote the
letter. Even the signature of the letter
was "illegible".
But assuming that the letter was
written by Senator Fernandez, it
cannot be implied from the facts of
the case that the transfer of rights
from Basilio Laquihon to petitioners
herein was approved solely on the
strength of such letter, for the
approval of the transfer was
recommended as "extremely
meritorious" by the Head Executive
Assistant (Exh. "2"), and by the
Homesite Sales Supervisor (Exh. F).
Neither can it be said that the
approval of the transfer by the Board
of Directors was vitiated by undue
influence or that it was illegal. That
letter, even if it was written really by
Senator Fernandez, could not destroy
the free agency of the PHHC Board
of Directors, and it could not have
interfered with the exercise of Board's
independent discretion. This Court
has already said that solicitation,
importunity, argument and persuasion
are not undue influence, and a
contract is not to be set aside merely
because one party used these means
to obtain the consent of the others.
Influence obtained by persuasion or
argument or by appeals to the
affections is not prohibited either in
law or morals, and i s not obnoxious
even in courts of equity. Such may be
termed "due influence." (Martinez vs.
Hongkong and Shanghai Bank, 15
Phil. 252, 270.)
5. In support of their fifth assignment
of error, petitioners argued that the
Court of Appeals erred in relying
merely on the certification of the
Municipal Treasurer of San Juan to
the effect that his office "has a record
of real property holding of Ramon and
Aurea Bañez" consisting of a lot
located at M. J. Paterno Street and
assessed at P31,190.00 under Tax
Declaration No. 23804 of the land
records of said municipality, for a tax
declaration is not evidence of title of
property, and respondent Arcilla did
not present any other evidence to
prove that petitioners are really
owners of a lot in San Juan, Rizal;
that even granting that they are
owners of a lot, still as maintained by
the PHHC, they are not disqualified to
acquire the lot in question as they
merely stepped into the shoes of the
original purchaser Cristeta Laquihon;
that R. A. No. 498, relied upon by
respondent in his complaint in
asserting that the award of the lot to
petitioner Aurea Bañez was null and
void, is not applicable to the case and
could not therefore have been
violated.
In the decision under review, the
Court of Appeals said that to be an
awardee of PHHC's lots, one must
not "already own or hold under a
contract to buy residential lot or lots in
any subdivision situated in ... San
Juan ... (Exhibits D-2 and Z)."
Paragraph 9 of the Conditional
Contract to Sell (Exhibit 7) also
provides that "any transfer that may
be authorized or permitted by the
CORPORATION shall be under the
condition that the transferee is
qualified to acquire a lot under the
rules and regulations of the
CORPORATION ..."
The sole evidence submitted by
respondent Arcilla to prove that
petitioners herein were disqualified to
be transferees of the lot in question
was the certification of the Treasurer
of San Juan (Exhibit I) that there is a
tax declaration No. 23804 of the land
records of said municipality in the
name of Ramon and Aurea Bañez.
Said Tax declaration is insufficient to
prove ownership. It has been held
anent this matter that —
Assessment alone is of
little value as proof of title.
Mere tax declaration does
not vest ownership of the
property in the declarant"
(Province of Camarines
Sur vs. Director of Lands,
64 Phil. 600, 613 citing
 Evangelista vs.
Tabayuyong, 7 Phil., 607;
Casimiro vs. Fernandez, 9
Phil., 562; Elumbaring vs.
Elumbaring, 12 Phil. 384).
It is well-settled that neither tax
receipts nor declaration of ownership
for taxation purposes are evidence of
ownership or of the right to possess
realty when not supported by other
effective proofs. (Elumbaring vs.
Elumbaring, 12 Phil. 384, 388389).
It has not been proven, therefore, that
petitioners herein are owners of a lot
in San Juan, and consequently
disqualified to be transferees of the
questioned lot.
R.A. No. 498, relied upon by herein
respondent in his complaint, in
asserting that the award to petitioners
was null and void, is not applicable to
the instant case. Said Act authorizes
cities, municipalities and provinces to
purchase and/or expropriate home
sites and landed estates and
subdivide them for resale at cost, and
provides in Section 3 that 14 no such
lot shall be sold to any person, who
already owns a residential lot, and
any sale made to such person shall
be void." The PHHC not being a city,
municipality, or province, it is
apparent that Act is not applicable to
the instant case.
IN VIEW OF THE FOREGOING, the
decision of the Court of Appeals,
dated January 9, 1969, in CA-G. R.
No. 36227-R, is set aside, and the
decision of the Court of First Instance
of Quezon City in Civil Case No. Q-
7679, is affirmed. Costs against
respondent Pio Arcilla.
IT IS SO ORDERED.
Fernando, Barredo, Antonio and
Aquino, JJ., concur.
Fernandez, J., took no part.
G.R. No. L-54526 August 25, 1986
METROPOLITAN WATERWORKS AND
SEWERAGE SYSTEM, petitioner,
vs.
THE COURT OF APPEALS and THE CITY OF
DAGUPAN, respondents.
Miguel T. Caguioa, Ireneo B. Orlino and Manuel D.
Victorio for respondent City of Dagupan.
FERIA, J.:
This is a petition for review on certiorari of the
decision of the Court of Appeals which affirmed the
decision of the then Court of First Instance of
Pangasinan. The lower court had declared
respondent City of Dagupan the lawful owner of the
Dagupan Waterworks System and held that the
National Waterworks and Sewerage Authority, now
petitioner Metropolitan Waterworks and Sewerage
System, was a possessor in bad faith and hence not
entitled to indemnity for the useful improvements it
had introduced.
Before proceeding further, it may be necessary to
invite attention to the common error of joining the
court (be it a Regional Trial Court, the Intermediate
Appellate Court, or the Sandiganbayan) as a party
respondent in an appeal by certiorari to this Court
under Rule 45 of the Rules of Court. The only parties
in an appeal by certiorari are the appellant as
petitioner and the appellee as respondent. (Cf. Elks
Club vs. Rovira, 80 Phil. 272) The court which
rendered the judgment appealed from is not a party in
said appeal. It is in the special civil action of certiorari
under Section 5 of Rule 65 of the Rules of Court
where the court or judge is required to be joined as
party defendant or respondent. The joinder of the
Intermediate Appellate Court or the Sandiganbayan
as party respondent in an appeal by certiorari is
necessary in cases where the petitioner-appellant
claims that said court acted without or in excess of its
jurisdiction or with grave abuse of discretion. An
example of this is a case where the petitioner-
appellant claims that the Intermediate Appellate Court
or the Sandiganbayan acted with grave abuse of
discretion in making its findings of fact, thus justifying
the review by this court of said findings of fact. (See
the exceptions to the rule of conclusiveness of the
findings of fact of the Intermediate Appellate Court or
the Sandiganbayan in the case of Sacay vs.
Sandiganbayan, G.R. Nos. 66497-98, July 10, 1986.)
In such a case, the petition for review on certiorari
under Rule 45 of the Rules of Court is at the same
time a petition for certiorari under Rule 65, and the
joinder of the Intermediate Appellate Court or the
Sandiganbayan becomes necessary. (Cf. Lianga
Lumber Company vs. Lianga Timber Co., Inc., March
31, 1977, 76 SCRA 197).
The City of Dagupan (hereinafter referred to as the
CITY) filed a complaint against the former National
Waterworks and Sewerage Authority (hereinafter
referred to as the NAWASA), now the Metropolitan
Waterworks and Sewerage System (hereinafter
referred to as MWSS), for recovery of the ownership
and possession of the Dagupan Waterworks System.
NAWASA interposed as one of its special defenses
R.A. 1383 which vested upon it the ownership,
possession and control of all waterworks systems
throughout the Philippines and as one of its
counterclaims the reimbursement of the expenses it
had incurred for necessary and useful improvements
amounting to P255,000.00. Judgment was rendered
by the trial court in favor of the CITY on the basis of a
stipulation of facts. The trial court found NAWASA to
be a possessor in bad faith and hence not entitled to
the reimbursement claimed by it. NAWASA appealed
to the then Court of Appeals and argued in its lone
assignment of error that the CITY should have been
held liable for the amortization of the balance of the
loan secured by NAWASA for the improvement of the
Dagupan Waterworks System. The appellate court
affirmed the judgment of the trial court and ruled as
follows:
However, as already found above,
these useful expenses were made in
utter bad faith for they were instituted
after the complaint was filed and after
numerous Supreme Court decisions
were promulgated declaring
unconstitutional the taking by
NAWASA of the patrimonial
waterworks systems of cities,
municipalities and provinces without
just compensation.
Under Article 546 of the New Civil
Code cited by the appellant, it is clear
that a builder or a possessor in bad
faith is not entitled to indemnity for any
useful improvement on the premises.
(Santos vs. Mojica, L-25450, Jan. 31,
1969). In fact, he is not entitled to any
right regarding the useful expenses (II
Paras (1971) 387). He shall not have
any right whatsoever. Consequently,
the owner shall be entitled to all of the
useful improvements without any
obligation on his part (Jurado, Civil
Law Reviewer (1974) 223).
Petitioner-Appellant MWSS, successor-in-interest of
the NAWASA, appealed to this Court raising the sole
issue of whether or not it has the right to remove all
the useful improvements introduced by NAWASA to
the Dagupan Waterworks System, notwithstanding
the fact that NAWASA was found to be a possessor in
bad faith. In support of its claim for removal of said
useful improvements, MWSS argues that the
pertinent laws on the subject, particularly Articles 546,
547 and 549 of the Civil Code of the Philippines, do
not definitely settle the question of whether a
possessor in bad faith has the right to remove useful
improvements. To bolster its claim MWSS further cites
the decisions in the cases of Mindanao Academy, Inc.
vs. Yap (13 SCRA 190) and Carbonell vs. Court of
Appeals (69 SCRA 99).
The CITY in its brief questions the raising of the issue
of the removal of useful improvements for the first
time in this Court, inasmuch as it was not raised in the
trial court, much less assigned as an error before the
then Court of Appeals. The CITY further argues that
petitioner, as a possessor in bad faith, has absolutely
no right to the useful improvements; that the rulings in
the cases cited by petitioner are not applicable to the
case at bar; that even assuming that petitioner has
the right to remove the useful improvements, such
improvements were not actually identified, and hence
a rehearing would be required which is improper at
this stage of the proceedings; and finally, that such
improvements, even if they could be identified, could
not be separated without causing substantial injury or
damage to the Dagupan Waterworks System.
The procedural objection of the CITY is technically
correct. NAWASA should have alleged its additional
counterclaim in the alternative-for the reimbursement
of the expenses it had incurred for necessary and
useful improvements or for the removal of all the
useful improvements it had introduced.
Petitioner, however, argues that although such issue
of removal was never pleaded as a counterclaim
nevertheless it was joined with the implied consent of
the CITY, because the latter never filed a counter-
manifestation or objection to petitioner's manifestation
wherein it stated that the improvements were
separable from the system, and quotes the first part of
Sec. 5 of Rule 10 of the Rules of Court to support its
contention. Said provision reads as follows:
SEC. 5. Amendment to conform to or
authorize presentation of evidence.-
When issues not raised by the
pleadings are tried by express or
implied consent of the parties, they
shall be treated in all respects, as if
they had been raised in the pleadings.
Such amendment of the pleadings as
may be necessary to cause them to
conform to the evidence and to raise
these issues may be made upon
motion of any party at any time, even
after judgment; but failure so to amend
does not affect the result of the trial of
these issues. ...
This argument is untenable because the above-
quoted provision is premised on the fact that evidence
had been introduced on an issue not raised by the
pleadings without any objection thereto being raised
by the adverse party. In the case at bar, no evidence
whatsoever had been introduced by petitioner on the
issue of removability of the improvements and the
case was decided on a stipulation of facts.
Consequently, the pleadings could not be deemed
amended to conform to the evidence.
However, We shall overlook this procedural defect
and rule on the main issue raised in this appeal, to
wit: Does a possessor in bad faith have the right to
remove useful improvements? The answer is clearly
in the negative. Recognized authorities on the subject
are agreed on this point. *
Article 449 of the Civil Code of the Philippines
provides that "he who builds, plants or sows in bad
faith on the land of another, loses what is built,
planted or sown without right to indemnity." As a
builder in bad faith, NAWASA lost whatever useful
improvements it had made without right to indemnity
(Santos vs. Mojica, Jan. 31, 1969, 26 SCRA 703).
Moreover, under Article 546 of said code, only a
possessor in good faith shall be refunded for useful
expenses with the right of retention until reimbursed;
and under Article 547 thereof, only a possessor in
good faith may remove useful improvements if this
can be done without damage to the principal thing
and if the person who recovers the possession does
not exercise the option of reimbursing the useful
expenses. The right given a possessor in bad faith is
to remove improvements applies only to
improvements for pure luxury or mere pleasure,
provided the thing suffers no injury thereby and the
lawful possessor does not prefer to retain them by
paying the value they have at the time he enters into
possession (Article 549, Id.).
The decision in the case of Mindanao Academy, Inc.
vs. Yap (13 SCRA 190) cited by petitioner does not
support its stand. On the contrary, this Court ruled in
said case that "if the defendant constructed a new
building, as he alleges, he cannot recover its value
because the construction was done after the filing of
the action for annulment, thus rendering him a builder
in bad faith who is denied by law any right of
reimbursement." What this Court allowed appellant
Yap to remove were the equipment, books, furniture
and fixtures brought in by him, because they were
outside of the scope of the judgment and may be
retained by him.
Neither may the decision in the case of Carbonell vs.
Court of Appeals (69 SCRA 99), also cited by
petitioner, be invoked to modify the clear provisions of
the Civil Code of the Philippines that a possessor in
bad faith is not entitled to reimbursement of useful
expenses or to removal of useful improvements.
In said case, both the trial court and the Court of
Appeals found that respondents Infantes were
possessors in good faith. On appeal, the First Division
of this Court reversed the decision of the Court of
Appeals and declared petitioner Carbonell to have the
superior right to the land in question. On the question
of whether or not respondents Infantes were
possessors in good faith four Members ruled that they
were not, but as a matter of equity allowed them to
remove the useful improvements they had introduced
on the land. Justice Teehankee (now Chief Justice)
concurred on the same premise as the dissenting
opinion of Justice Munoz Palma that both the
conflicting buyers of the real property in question,
namely petitioner Carbonell as the first buyer and
respondents Infantes as the second buyer, may be
deemed purchasers in good faith at the respective
dates of their purchase. Justice Munoz Palma
dissented on the ground that since both purchasers
were undoubtedly in good faith, respondents Infantes'
prior registration of the sale in good faith entitled them
to the ownership of the land. Inasmuch as only four
Members concurred in ruling that respondents
Infantes were possessors in bad faith and two
Members ruled that they were possessors in good
faith said decision does not establish a precedent.
Moreover, the equitable consideration present in said
case are not present in the case at bar.
WHEREFORE, the decision of the appellate court is
affirmed with costs against petitioner.
SO ORDERED.
Fernan, Gutierrez, Jr., Paras and Cruz, JJ., concur.
Alampay, ** J., took no part.
Metropolitan Waterworks and Sewerage System
v. Court of Appeals
G.R. No. L-54526, August 25, 1986, 143 SCRA
623
Martinez, J.
FACTS: Sometime in 1965, petitioner MWSS
(then known as NAWASA) leased around one
hundred twenty eight (128) hectares of its land
(hereafter, subject property) to respondent
CHGCCI (formerly the International Sports
Development Corporation) for twenty five (25)
years and renewable for another fifteen (15)
years or until the year 2005, with the stipulation
allowing the latter to exercise a right of first
refusal should the subject property be made
open for sale. The terms and conditions of
respondent CHGCCI's purchase thereof shall
nonetheless be subject to presidential
approval. Pursuant to Letter of instruction (LOI)
No. 440 issued on July 29,1976 by then
President Ferdinand E. Marcos directing
petitioner MWSS to negotiate the cancellation
of the MWSS-CHGCCI lease agreement for
the disposition of the subject property, Oscar
Ilustre, then General Manager of petitioner
MWSS, sometime in November of 1980
informed respondent CHGCCI, through its
president herein respondent Pablo Roman, Jr.,
of its preferential right to buy the subject
property which was up for sale. Valuation
thereof was to be made by an appraisal
company of petitioner MWSS' choice, the Asian
Appraisal Co., Inc. which, on January 30, 1981,
pegged a fair market value of P40.00 per
square meter or a total of P53,800,000.00 for
the subject property. Upon being informed that
petitioner MWSS and respondent CHGCCI had
already agreed in principle on the purchase of
the subject property, President Marcos
expressed his approval of the sale as shown in
his marginal note on the letter sent by
respondents Jose Roxas and Pablo Roman, Jr.
dated December 20, 1982.The Board of
Trustees of petitioner MWSS thereafter passed
Resolution 36-83, approving the sale of the
subject property in favor of respondent
SILHOUETTE, as assignee of respondent
CHGCCI. The MWSS-SILHOUETTE sales
agreement eventually pushed through. Per the
Agreement dated May 11, 1983 covering said
purchase, the total price for the subject
property is P50,925,200, P25 Million of which
was to be paid upon President Marcos'
approval of the contract and the balance to be
paid within one (1) year from the transfer of the
title to respondent SILHOUETTE as vendee
with interest at 12% per annum. The balance
was also secured by an irrevocable letter of
credit. A Supplemental Agreement was forged
between petitioner MWSS and respondent
SILHOUETTE on August 11, 1983 to
accurately identify the subject property.
Subsequently, respondent SILHOUETTE,
under a deed of sale dated July 26, 1984, sold
to respondent AYALA about sixty-seven (67)
hectares of the subject property at P110.00 per
square meter. Of the total price of around P74
Million, P25 Million was to be paid by
respondent AYALA directly to petitioner MWSS
for respondent SILHOUETTE's account and P2
Million directly to respondent SILHOUETTE.
P11,600,000 was to be paid upon the issuance
of title in favor of respondent AYALA, and the
remaining balance to be payable within one (1)
year with 12% per annum interest. Respondent
AYALA developed the land it purchased into a
prime residential area now known as the Ayala
Heights Subdivision. Almost a decade later,
petitioner MWSS on March 26, 1993 filed an
action against all herein named respondents
before the Regional Trial Court of Quezon City
seeking for the declaration of nullity of the
MWSS-SILHOUETTE sales agreement and all
subsequent conveyances involving the subject
property, and for the recovery thereof with
damages.
ISSUE: Whether or not MWSS failed to provide
appropriate security measures over its own
records; Circumstances led NBI to believe that the
fraudulent encashment as an “inside job”.
HELD: Yes. The records likewise show that MWSS
failed to provide appropriate security measures
over its own records thereby laying confidential
records open to unauthorized persons. MWSS's
own Fact Finding Committee, in its report submitted
to their General Manager underscored this laxity of
records control. It observed that the "office of Mr.
Ongtengco (Cashier VI of the Treasury Department
at the NAWASA) is quite open to any person known
to him or his staff members and that the check
writer is merely on top of his table. Relying on the
foregoing statement of Mr. Ongtengco, the NBI
concluded in its Report dated 2 November 1970
that the fraudulent encashment of the 23 checks in
question was an "inside job". Thus the NBI believe
that the fraudulent act was an inside job or one
pulled with inside connivance at NAWASA. The
serial numbers of the checks in question conform
with the numbers in current use of NAWASA, aside
from the fact that these fraudulent checks were
found to be of the same kind and design as that of
NAWASA's own checks. While knowledge as to
such facts may be obtained through the possession
of a NAWASA check of current issue, an outsider
without information from the inside can not possibly
pinpoint which of NAWASA's various accounts has
sufficient balance to cover all these fraudulent
checks. None of these checks, it should be noted,
was dishonored for insufficiency of funds.
G.R. No. 77266 July 19, 1989
ARTHUR PAJUNAR and INVENCIA
PAJUNAR, petitioners,
vs.
HON. COURT OF APPEALS, MAURO ELUNA and TEOFILA
ELUNA, respondents.
PARAS, J.:
This is a petition for review on certiorari seeking to set
aside the decision of the Second Division of the Court of
Appeals ** in C.A. G.R. No. SP. 02247 (UDK 7544),
entitled "Arthur & Invencia Pajunar v. Hon. Pedro
Gabaton, Judge, RTC, Branch XLI, Negros Oriental,
Mauro Eluna and Teofila Eluna" for Recovery of Personal
Property with Writ of Replevin which affirmed the Order
of the aforenamed Regional Trial Court of Negros
Oriental *** which reads:
This is a case of Recovery of Personal
Property with a Writ of Replevin filed by
one Arthur and Invencia Pajunar as
plaintiffs, against one Mauro and Teofila
Eluna as defendants, tried and decided
by the Municipal Court of Siaton.
The decision is in favor of the
defendants and against the plaintiffs
apparently based primarily on the
preponderance of evidence and
prescription.
Upon close reading of the exhaustive
memorandum submitted by each of the
parties in this case and a close perusal
of all the evidences on record and
checking them against the decision
itself appealed, this court is of the
opinion and so holds that the grounds
upon which this decision is based are
well taken, so that there is nothing that
this court can add neither can deduct
for the same conforms to the thinking
of this court.
WHEREFORE, premises considered, the
appealed decision of the above-entitled
case rendered by the Municipal Court of
Siaton is hereby affirmed. (Rollo, p. 9)
The facts of the case as found by public respondent
Court of Appeals are as follows:
Sometime in 1969, respondent Mauro Eluna bartered
his three-year old male cow for one year old female
carabao then in the possession of Aurelio Enopia. The
female carabao, which is the one in question, bore the
brand "ART" in her front and hind legs at the time she
was acquired by Mauro. Although the animal was
branded, said respondent did not or could not register
the transfer to him.
In March, 1980, petitioner Arthur Pajunar learned that
the disputed carabao was in the possession of
respondent Eluna. Claiming that he was the original
owner of the carabao which got lost in 1974, petitioner
demanded her return. He demanded also the delivery
to him of the two offsprings of the carabao which were
five years and eight months old at the time they were
registered in 1980. When Eluna refused to do so despite
repeated demands, petitioner went to court to recover
possession (Rollo, pp. 10-11).
From the adverse order of the Regional Trial Court,
plaintiff appealed to public respondent Court of
Appeals.
In its decision dated October 30, 1986, the Court of
Appeals affirmed the decision of the lower court, with
appellate tribunal declaring:
Consequently, since respondent Eluna
had possessed the carabao since 1969,
that is, for more than ten (10) years, he
acquired ownership by prescription
under Article 1132 of the Civil Code.
ART. 1132. The ownership of movables
prescribes through uninterrupted
possession for four years in good faith.
The ownership of personal property
also prescribes through uninterrupted
possession for eight years, without need
of any other condition.
With regard to the right of the owner to
recover personal property lost or of
which he has been illegally deprived, as
well as with respect to movables
acquired in a public sale, fair or market,
or from a merchant's store, the
provisions of articles 559 and 1505 of
this Code shall be observed. (1955a).
On March 23, 1987, the Court resolved, after
considering the pleadings filed by both respondent and
petitioner, to give due course to the petition.
The three assignments of error raised by the petitioner
(Rollo, p. 4) in this case, may be reduced to one main
issue:
Whether or not the findings of the
lower court which were affirmed by the
Court of Appeals are supported by
substantial evidence.
Petitioner contends that private respondent Eluna has
failed to establish his ownership of the mestisa carabao
found in his possession. Since the female carabao bears
the brand "ART" on the fore and hind legs of the animal
as branded by petitioners before it got lost (Rollo, p. 4),
failure of defendant Mauro Eluna to register in his name
the said carabao, constitutes a flaw in his ownership as
required by law (Rollo, pp. 10-11).
Private respondents claim that the female carabao has
been in their possession for more than ten (10) years as
the subject carabao was acquired by the defendants
now respondents through barter from one Aurelio
Enopia in 1969. The incident was discovered by the
plaintiffs only in March, 1980. Hence respondents
acquired ownership of said carabao by prescription
under Article 1132 of the Civil Code (Rollo, p. 12) as
found by public respondent Court of Appeals.
The trial court's findings of facts carry great weight for
having the advantage of having examined the
deportment and demeanor of the witnesses. The only
exception to the rule is when the trial court plainly
overlooked certain facts and circumstances of weight
and influence which, if considered, will materially alter
the result of the case (People v. Ramos, 153 SCRA 276
[1987]; People v. Camay, 152 SCRA 401 [1987]).
A careful examination of the records shows that there
are circumstances of substance and value which were
overlooked and which affect the result of the case.
This can be gleaned from the decision of the Court of
Appeals, when it stated:
In issuing the foregoing order, the
respondent Judge apparently relied on
the findings of fact and conclusions of
law made by the Municipal Court of
Siaton, Negros Oriental. Unfortunately,
the decision of the Municipal Court was
wanting in many respects particularly in
its findings. It failed, for instance, to
make a determination of certain factual
matters which could have helped in the
faster disposition of the case. Instead of
general statements explaining why he
was adopting the decision of the
Municipal Court, it would have been
better if the respondent Judge had
made his own finding and analysis of
the evidence on record. This was called
for because the respondent Judge was
acting in the exercise of the appellate
jurisdiction of his court. (Emphasis
supplied) (Rollo, p. 10)
Well-settled is the rule that findings of facts of the
Appellate Court are generally binding on this Court
(People v. Atanacio, 128 SCRA 22 [1984] Aguirre v.
People, 155 SCRA 337 [1987]; Cue Bie v. Intermediate
Appellate Court, 154 SCRA 599 [1987]). However, there
are exceptions to the general rule that findings of facts
of the Court of Appeals are binding upon the Supreme
Court as when the Court of Appeals clearly
misconstrued and misapplied the law, drawn from
incorrect conclusions of fact established by evidence
and otherwise at certain conclusions which are based
on misapprehension of facts and pure conjectures, and
made inferences which are manifestly mistaken and
absurd (Chase v. Buencamino, Jr., 136 SCRA 365 [1985];
Baliwag Transit, Inc. v. CA, 147 SCRA 82 [1987];
International Harvester, Inc. v. Joson & CA, 149 SCRA
641 [1987]; Maclan v. Santos, 156 SCRA 542 [1987];
Mendoza v. CA, 156 SCRA 597 [1987]).
From the records it is clear that although the animal was
branded "ART" in her front and hind legs at the time she
was acquired by respondent Mauro, said respondent did
not or could not register the transfer to him in
accordance with Section 529 of the Revised
Administrative Code (Rollo, p. 11).
Section 529 of the Revised Administrative Code
provides:
Registration necessary to validity of
transfer. No transfer shall be valid
unless the same is registered and a
certificate of transfer obtained as herein
provided, but the large cattle under two
years of age may be registered and
branded gratis for the purpose of
effecting a valid transfer, if the
registration and transfer are made at
the same time.
The records show that respondents did not comply with
this requirement (Petition, p. 2; Rollo, p. 3).
Respondents are not possessors in good faith, as a
possessor in good faith is one not aware that there
exists in his title or mode of acquisition any flaw which
invalidates it. Furthermore, failure of a party to exercise
precaution to acquaint himself with the defects in the
title of his vendor precludes him claiming possession in
good faith (Caram v. Laureta, 103 SCRA [1981] cited in
Manotok Realty, Inc. v. Court of Appeals, 134 SCRA 325
[1985]).
This duty to make a closer inquiry into the certificate of
registration of the female carabao which was the
subject of the barter, defendant Mauro Eluna should
have performed but did not. Thus, his being in bad faith,
in acquiring the carabao from his vendor, Aurelio
Enopia.
Thus, as has been stressed by this Court:
A purchaser cannot close his eyes to
facts which should put a reasonable
man upon his guard, and then claim
that he acted in good faith under the
belief that there was no defect in the
title of the vendor. His mere refusal to
believe that such defect exists, or his
willful closing of the eyes to the
possibility of the existence of a defect in
his vendor's title will not make him an
innocent purchaser for value, if it
afterwards develops that the title was in
fact defective and it appears that he had
such notice of the defect would have
led to its discovery had he acted with
the measure of precaution which may
reasonably be required of a prudent
man in a like situation. (Leung Lee v.
Strong, 37 Phil. 644, see also Emos v.
Zusuarregui, 53 Phil. 197, cited in
Francisco v. Court of Appeals, 153 SCRA
330).
It is clear from the foregoing that possession in good
faith for four (4) years is not applicable, neither can
possession in bad faith of eight (8) years benefit
respondents, for when the owner of a movable has lost
or has been illegally deprived of his property he can
recover the same without need to reimburse the
possessor, as provided in Art. 559 of the Civil Code
which states:
Art. 559. The possession of movable
property acquired in good faith is
equivalent to a title. Nevertheless, one
who has lost any movable or has been
unlawfully deprived thereof, may
recover it from the person in possession
of the same.
If the possessor of a movable lost or of
which the owner has been unlawfully
deprived, has acquired it in good faith
at a public sale, the owner cannot
obtain its return without reimbursing
the price paid therefor. (464a)
Neither can Art. 716 of the Civil Code apply, for this
article evidently refers to a possessor in good faith. Art.
716 say:
The owner of a swarm of bees shall
have a right to pursue them to
another's land, indemnifying the
possessor of the latter for the damage.
If the owner has not pursued the
swarm, or ceases to do so within two
consecutive days, the possessor of the
land may occupy or retain the same.
The owner of domesticated animals
may also claim them within twenty days
to be counted from their occupation by
another person. This period having
expired, they shall pertain to him who
has caught and kept them. (612a)
PREMISES CONSIDERED, the decision of the Court of
Appeals in CA-G.R. SP No. 02247 is REVERSED and SET
ASIDE and petitioners Arthur Pajunar and Invencia
Pajunar are declared the owners of the carabaos in
question.
SO ORDERED.
Melencio-Herrera, (Chairperson), Padilla, Sarmiento and
Regalado, JJ., concur.

DIVISION
[ GR No. 77266, Jul 19, 1989 ]
ARTHUR PAJUNAR v. CA +
DECISION
256 Phil. 895
PARAS, J.:
This is a petition for review on certiorari seeking to set
aside the decision of the Second Division of the Court of
Appeals* in C.A. G.R. No. SP. 02247 (UDK 7544), entitled
"Arthur & Invencia Pajunar v. Hon. Pedro Gabaton,
Judge, RTC, Branch XLI, Negros Oriental,
Mauro Eluna and Teofila Eluna" for Recovery of Personal
Property with Writ of Replevin which affirmed the Order
of the aforenamed Regional Trial Court
of Negros Oriental** which reads:
"This is a case of Recovery of Personal Property with a
Writ of Replevin filed by one Arthur
and Invencia Pajunar as plaintiffs, against one Mauro
and Teofila Eluna as defendants, tried and decided by
the Municipal Court of Siaton.
"The decision is in favor of the defendants and against
the plaintiffs apparently based primarily on the
preponderance of evidence and prescription.
"Upon close reading of the exhaustive memorandum
submitted by each of the parties in this case and a close
perusal of all the evidences on record and checking
them against the decision itself appealed, this court is
of the opinion and so holds that the grounds
upon which this decision is based are well taken, so
that there is nothing that this court can add neither can
deduct for the same conforms to the thinking of this
court.
"WHEREFORE, premises considered, the appealed
decision of the above-entitled case rendered by the
Municipal Court of Siaton is hereby affirmed." (Rollo, p.
9)
The facts of the case as found by public respondent
Court of Appeals are as follows:
Sometime in 1969, respondent Mauro Eluna bartered
his three year old male cow for one year old
female carabao then in the possession of
Aurelio Enopia. The female carabao, which is the one in
question, bore the brand "ART" in her front and hind
legs at the time she was acquired by Mauro. Although
the animal was branded, said respondent did not or
could not register the transfer to him.
In March 1980, petitioner Arthur Pajunar learned that
the disputed carabao was in the possession of
respondent Eluna. Claiming that he was the original
owner of the carabao which got lost in 1974, petitioner
demanded her return. He demanded also the delivery
to him of the two offsprings of the carabao which were
five years and eight months old at the time they were
registered in 1980. When Eluna refused to do so
despite repeated demands, petitioner went to court to
recover possession. (Rollo, pp. 10-11).
From the adverse order of the Regional Trial Court,
plaintiff appealed to public respondent Court of
Appeals.
In its decision dated October 30, 1986, the Court of
Appeals affirmed the decision of the lower court, with
appellate tribunal declaring:
"Consequently, since respondent Eluna had possessed
the carabao since 1969, that is, for more than ten (10)
years, he acquired ownership by prescription under
Article 1132 of the Civil Code.
"ART. 1132. The ownership of movables prescribes
through uninterrupted possession for four years in good
faith.
"The ownership of personal property also prescribes
through uninterrupted possession for eight years,
without need of any other condition.
"With regard to the right of the owner to recover
personal property last or of which he has been illegally
deprived, as well as with respect to movables acquired
in a public sale, fair or market, or from a merchant's
store, the provisions of articles 559 and 1505 of this
Code shall be observed. (1955a)."
On March 23, 1987, the Court resolved, after
considering the pleadings filed by both respondent and
petitioner, to give due course to the petition.
The three assignments of error raised by the petitioner
(Rollo, p. 4) in this case, may be reduced to one main
issue:
"Whether or not the findings of the lower court which
were affirmed by the Court of, Appeals are supported by
substantial evidence."
Petitioner contends that private respondent Eluna has
failed to establish his ownership of
the mestisa carabao found in his possession. Since the
female carabao bears the brand "ART" on the fore and
hind legs of the animal as branded by petitioners before
it got lost (Rollo, p. 4), failure of defendant
Mauro Eluna to register in his name the said carabao,
constitutes a flaw in his ownership as required by law
(Rollo, pp. 10-11).
Private respondents claim that the female carabao has
been in their possession for more than ten (10) years as
the subject carabao was acquired by the defendants
now respondents through barter
from one Aurelio Enopia in 1969. The incident was
discoverer by the plaintiffs only in March, 1980. Hence
respondents acquired ownership of said carabao by
prescription under Article 1132 of the Civil Code (Rollo,
p. 12) as found by public respondent Court of Appeals.
The trial court's findings of facts carry great weight for
having the advantage of having examined the
deportment and demeanor of the witnesses. The only
exception to the rule is when the trial court plainly
overlooked certain facts and circumstances of weight
and influence which, if considered, will materially alter
the result of the case (People v. Ramos, 153 SCRA 276
[1987]; People v. Camay, 152 SCRA 401 [1987]).
A careful examination of the records shows that there
are circumstances of substance and value which were
overlooked and which affect the result of the case.
This can be gleaned from the decision of the Court of
Appeals, when it stated:
"In issuing the foregoing order, the respondent Judge
apparently relied on the findings of fact and conclusions
of law made by the Municipal Court
of Siaton, Negros Oriental. Unfortunately, the decision
of
the Municipal Court was wanting in many respects parti
cularly in its findings. It failed, for instance, to make a d
etermination of certain factual matters which could hav
e helped in the faster disposition of the case. Instead of
general statements explaining why he was adopting the
decision of the Municipal Court, it would have been bett
er if the respondent Judge had made his own finding an
d analysis of the evidence on record. This was called for
because the respondent Judge was acting in the exercis
e of the appellate jurisdiction of his court."
(Underscoring supplied) (Rollo, p. 10)
Well-settled is the rule that findings of facts of the
Appellate Court are generally binding on this Court
(People v. Atanacio, 128 SCRA 22 [1984]; Aguirre v.
People, 155 SCRA 337 [1987]; Cue Bie v. Intermediate
Appellate Court, 154 SCRA 599 [1987]. However, there
are exceptions to the general rule that findings of facts
of the Court of Appeals are binding upon the Supreme
Court as when the Court of Appeals clearly
misconstrued and misapplied the law, drawn from
incorrect conclusions of fact established by evidence
and otherwise at certain conclusions which are based
on misapprehension of facts and pure conjectures, and
made inferences which are manifestly mistaken and
absurd (Chase v. Buencamino, Jr., 136 SCRA 365
[1985]; Baliwag Transit, Inc. v. CA, 147 SCRA 82 [1987];
International Harvester, Inc. v. Joson & CA, 149 SCRA
641 [1987]; Maclan v. Santos, 156 SCRA 542 [1987];
Mendoza v. CA, 156 SCRA 597 [1987].
From the records it is clear that although the
animal was branded "ART" in her front and hind legs at
the time she was acquired by respondent Mauro, said
respondent did not or could not register the transfer to
him in accordance with Section 529 of the Revised
Administrative Code (Rollo, p. 11).
Section 529 of the Revised Administrative Code
provides:
"Registration necessary to validity of transfer. No
transfer shall be valid unless the same is registered and
a certificate of transfer obtained as herein provided, but
the large cattle under two years of age may be
registered and branded gratis for the purpose of
effecting a valid transfer, if the registration and transfer
are made at the same time."
The records show that respondents did not comply with
this requirement (Petition, p. 2; Rollo, p.
3). Respondents are not possessors in good faith, as a
possessor in good faith is one not aware that there
exists in his title or mode of acquisition any flaw which
invalidates it. Furthermore, failure of a party to exercise
precaution to acquaint himself with the defects in the
title of his vendor precludes him claiming possession in
good faith (Caram v. Laureta, 103 SCRA [1981] cited
in Manotok Realty, Inc. v. Court of Appeals, 134 SCRA
325 [1985]).
This duty to make a closer inquiry into the certificate of
registration of the female carabao which was the
subject of the barter, defendant Mauro Eluna should
have performed but did not. Thus, his being in bad
faith, in acquiring the carabao from his vendor,
Aurelio Enopia.
Thus, as has been stressed by this Court:
"A purchaser cannot close his eyes to facts which should
put a reasonable man upon his guard, and then claim
that he acted in good faith under the belief that there
was no defect in the title of the vendor. His mere
refusal to believe that such defect exists, or his willful
closing of the eyes to the possibility of the existence of a
defect in his vendor's title will not make him an
innocent purchaser for value, if it afterwards develops
that the title was in fact defective and it appears that he
had such notice of the defect would have led to its
discovery had he acted with the measure of precaution
which may reasonably be required of a prudent man in
a like situation." (Leung Lee v. Strong, 37 Phil. 644, see
also Emos v. Zusuarregui, 53 Phil. 197, cited in Francisco
v. Court of Appeals, 153 SCRA 330).
It is clear from the foregoing that possession in good
faith for four (4) years is not applicable, neither can
possession in bad faith of eight (8) years benefit
respondents, for when the owner of a movable has lost
or has been illegally deprived of his property he can
recover the same without need to reimburse
the possessor, as provided in Art. 559 of the Civil Code
which states:
"Art. 559. The possession of movable property acquired
in good faith is equivalent to a title. Nevertheless,
one who has lost any movable or has been unlawfully
deprived thereof, may recover it from the person in
possession of the same.
"If the possessor of a movable lost or of which the
owner has been unlawfully deprived, has acquired it in
good faith at a public sale, the owner cannot obtain its
return without reimbursing the price paid therefor."
(464a)
Neither can Art. 716 of the Civil Code apply, for this
articled evidently refers to a possessor in good
faith. Art. 716 say:
"The owner of a swarm of bees shall have a right to
pursue them to another's land, indemnifying the
possessor of the latter for the damage. If the owner has
not pursued the swarm, or ceases to do so within two
consecutive days, the possessor of the land may occupy
or retain the same. The owner of domesticated animals
may also claim them within twenty days to be counted
from their occupation by another person. This period
having expired, they shall pertain to him who has caught
and kept them." (612a)
PREMISES CONSIDERED, the decision of the Court of
Appeals in CA-G.R. SP No. 02247 is REVERSED and SET
ASIDE and
petitioners Arthur Pajunar and Invencia Pajunar are
declared the owners of the carabaos in question.
SO ORDERED.
Melencio-Herrera, (Chairman),
Padilla, Sarmiento, and Regalado, JJ., concur.
G.R. No. 80298 April 26, 1990
EDCA PUBLISHING & DISTRIBUTING CORP., petitioner,
vs.
THE SPOUSES LEONOR and GERARDO SANTOS, doing
business under the name and style of "SANTOS
BOOKSTORE," and THE COURT OF
APPEALS, respondents.
Emiliano S. Samson, R. Balderrama-Samson, Mary Anne
B. Samson for petitioner.
Cendana Santos, Delmundo & Cendana for private
respondents.
CRUZ, J.:
The case before us calls for the interpretation of Article
559 of the Civil Code and raises the particular question
of when a person may be deemed to have been
"unlawfully deprived" of movable property in the hands
of another. The article runs in full as follows:
Art. 559. The possession of movable property
acquired in good faith is equivalent to a title.
Nevertheless, one who has lost any movable or
has been unlawfully deprived thereof, may
recover it from the person in possession of the
same.
If the possessor of a movable lost or of which
the owner has been unlawfully deprived has
acquired it in good faith at a public sale, the
owner cannot obtain its return without
reimbursing the price paid therefor.
The movable property in this case consists of books,
which were bought from the petitioner by an impostor
who sold it to the private respondents. Ownership of
the books was recognized in the private respondents by
the Municipal Trial Court, 1 which was sustained by the
Regional Trial Court, 2 which was in turn sustained by
the Court of Appeals. 3 The petitioner asks us to declare
that all these courts have erred and should be reversed.
This case arose when on October 5, 1981, a person
identifying himself as Professor Jose Cruz placed an
order by telephone with the petitioner company for 406
books, payable on delivery. 4 EDCA prepared the
corresponding invoice and delivered the books as
ordered, for which Cruz issued a personal check
covering the purchase price of P8,995.65. 5 On October
7, 1981, Cruz sold 120 of the books to private
respondent Leonor Santos who, after verifying the
seller's ownership from the invoice he showed her, paid
him P1,700.00. 6
Meanwhile, EDCA having become suspicious over a
second order placed by Cruz even before clearing of his
first check, made inquiries with the De la Salle College
where he had claimed to be a dean and was informed
that there was no such person in its employ. Further
verification revealed that Cruz had no more account or
deposit with the Philippine Amanah Bank, against which
he had drawn the payment check. 7 EDCA then went to
the police, which set a trap and arrested Cruz on
October 7, 1981. Investigation disclosed his real name
as Tomas de la Peña and his sale of 120 of the books he
had ordered from EDCA to the private respondents. 8
On the night of the same date, EDCA sought the
assistance of the police in Precinct 5 at the UN Avenue,
which forced their way into the store of the private
respondents and threatened Leonor Santos with
prosecution for buying stolen property. They seized the
120 books without warrant, loading them in a van
belonging to EDCA, and thereafter turned them over to
the petitioner. 9
Protesting this high-handed action, the private
respondents sued for recovery of the books after
demand for their return was rejected by EDCA. A writ of
preliminary attachment was issued and the petitioner,
after initial refusal, finally surrendered the books to the
private respondents. 10 As previously stated, the
petitioner was successively rebuffed in the three courts
below and now hopes to secure relief from us.
To begin with, the Court expresses its disapproval of the
arbitrary action of the petitioner in taking the law into
its own hands and forcibly recovering the disputed
books from the private respondents. The circumstance
that it did so with the assistance of the police, which
should have been the first to uphold legal and peaceful
processes, has compounded the wrong even more
deplorably. Questions like the one at bar are decided
not by policemen but by judges and with the use not of
brute force but of lawful writs.
Now to the merits
It is the contention of the petitioner that the private
respondents have not established their ownership of
the disputed books because they have not even
produced a receipt to prove they had bought the stock.
This is unacceptable. Precisely, the first sentence of
Article 559 provides that "the possession of movable
property acquired in good faith is equivalent to a title,"
thus dispensing with further proof.
The argument that the private respondents did not
acquire the books in good faith has been dismissed by
the lower courts, and we agree. Leonor Santos first
ascertained the ownership of the books from the EDCA
invoice showing that they had been sold to Cruz, who
said he was selling them for a discount because he was
in financial need. Private respondents are in the
business of buying and selling books and often deal with
hard-up sellers who urgently have to part with their
books at reduced prices. To Leonor Santos, Cruz must
have been only one of the many such sellers she was
accustomed to dealing with. It is hardly bad faith for any
one in the business of buying and selling books to buy
them at a discount and resell them for a profit.
But the real issue here is whether the petitioner has
been unlawfully deprived of the books because the
check issued by the impostor in payment therefor was
dishonored.
In its extended memorandum, EDCA cites numerous
cases holding that the owner who has been unlawfully
deprived of personal property is entitled to its recovery
except only where the property was purchased at a
public sale, in which event its return is subject to
reimbursement of the purchase price. The petitioner is
begging the question. It is putting the cart before the
horse. Unlike in the cases invoked, it has yet to be
established in the case at bar that EDCA has been
unlawfully deprived of the books.
The petitioner argues that it was, because the impostor
acquired no title to the books that he could have validly
transferred to the private respondents. Its reason is that
as the payment check bounced for lack of funds, there
was a failure of consideration that nullified the contract
of sale between it and Cruz.
The contract of sale is consensual and is perfected once
agreement is reached between the parties on the
subject matter and the consideration. According to the
Civil Code:
Art. 1475. The contract of sale is perfected at
the moment there is a meeting of minds upon
the thing which is the object of the contract and
upon the price.
From that moment, the parties may reciprocally
demand performance, subject to the provisions
of the law governing the form of contracts.
xxx xxx xxx
Art. 1477. The ownership of the thing sold shall
be transferred to the vendee upon the actual or
constructive delivery thereof.
Art. 1478. The parties may stipulate that
ownership in the thing shall not pass to the
purchaser until he has fully paid the price.
It is clear from the above provisions, particularly the last
one quoted, that ownership in the thing sold shall not
pass to the buyer until full payment of the
purchase only if there is a stipulation to that effect.
Otherwise, the rule is that such ownership shall pass
from the vendor to the vendee upon the actual or
constructive delivery of the thing sold even if the
purchase price has not yet been paid.
Non-payment only creates a right to demand payment
or to rescind the contract, or to criminal prosecution in
the case of bouncing checks. But absent the stipulation
above noted, delivery of the thing sold will effectively
transfer ownership to the buyer who can in turn transfer
it to another.
In Asiatic Commercial Corporation v. Ang,11 the plaintiff
sold some cosmetics to Francisco Ang, who in turn sold
them to Tan Sit Bin. Asiatic not having been paid by Ang,
it sued for the recovery of the articles from Tan, who
claimed he had validly bought them from Ang, paying
for the same in cash. Finding that there was no
conspiracy between Tan and Ang to deceive Asiatic the
Court of Appeals declared:
Yet the defendant invoked Article 464 12 of the
Civil Code providing, among other things that
"one who has been unlawfully deprived of
personal property may recover it from any
person possessing it." We do not believe that
the plaintiff has been unlawfully deprived of the
cartons of Gloco Tonic within the scope of this
 legal provision. It has voluntarily parted with
them pursuant to a contract of purchase and
sale. The circumstance that the price was not
subsequently paid did not render illegal a
transaction which was valid and legal at the
beginning.
In Tagatac v. Jimenez,13 the plaintiff sold her car to Feist,
who sold it to Sanchez, who sold it to Jimenez. When
the payment check issued to Tagatac by Feist was
dishonored, the plaintiff sued to recover the vehicle
from Jimenez on the ground that she had been
unlawfully deprived of it by reason of Feist's deception.
In ruling for Jimenez, the Court of Appeals held:
The point of inquiry is whether plaintiff-
appellant Trinidad C. Tagatac has been
unlawfully deprived of her car. At first blush, it
would seem that she was unlawfully deprived
thereof, considering that she was induced to
part with it by reason of the chicanery practiced
on her by Warner L. Feist. Certainly, swindling,
like robbery, is an illegal method of deprivation
of property. In a manner of speaking, plaintiff-
appellant was "illegally deprived" of her car, for
the way by which Warner L. Feist induced her to
part with it is illegal and is punished by law. But
does this "unlawful deprivation" come within
the scope of Article 559 of the New Civil Code?
xxx xxx xxx
. . . The fraud and deceit practiced by Warner L.
Feist earmarks this sale as a voidable contract
(Article 1390 N.C.C.). Being a voidable contract,
it is susceptible of either ratification or
annulment. If the contract is ratified, the action
to annul it is extinguished (Article 1392, N.C.C.)
and the contract is cleansed from all its defects
(Article 1396, N.C.C.); if the contract is annulled,
the contracting parties are restored to their
respective situations before the contract and
mutual restitution follows as a consequence
(Article 1398, N.C.C.).
However, as long as no action is taken by the
party entitled, either that of annulment or of
ratification, the contract of sale remains valid
and binding. When plaintiff-appellant Trinidad
C. Tagatac delivered the car to Feist by virtue of
said voidable contract of sale, the title to the car
passed to Feist. Of course, the title that Feist
acquired was defective and voidable.
Nevertheless, at the time he sold the car to Felix
Sanchez, his title thereto had not been avoided
and he therefore conferred a good title on the
latter, provided he bought the car in good faith,
for value and without notice of the defect in
Feist's title (Article 1506, N.C.C.). There being no
proof on record that Felix Sanchez acted in bad
faith, it is safe to assume that he acted in good
faith.
The above rulings are sound doctrine and reflect our
own interpretation of Article 559 as applied to the case
before us.
Actual delivery of the books having been made, Cruz
acquired ownership over the books which he could then
validly transfer to the private respondents. The fact that
he had not yet paid for them to EDCA was a matter
between him and EDCA and did not impair the title
acquired by the private respondents to the books.
One may well imagine the adverse consequences if the
phrase "unlawfully deprived" were to be interpreted in
the manner suggested by the petitioner. A person
relying on the seller's title who buys a movable property
from him would have to surrender it to another person
claiming to be the original owner who had not yet been
paid the purchase price therefor. The buyer in the
second sale would be left holding the bag, so to speak,
and would be compelled to return the thing bought by
him in good faith without even the right to
reimbursement of the amount he had paid for it.
It bears repeating that in the case before us, Leonor
Santos took care to ascertain first that the books
belonged to Cruz before she agreed to purchase them.
The EDCA invoice Cruz showed her assured her that the
books had been paid for on delivery. By contrast, EDCA
was less than cautious — in fact, too trusting in dealing
with the impostor. Although it had never transacted
with him before, it readily delivered the books he had
ordered (by telephone) and as readily accepted his
personal check in payment. It did not verify his identity
although it was easy enough to do this. It did not wait to
clear the check of this unknown drawer. Worse, it
indicated in the sales invoice issued to him, by the
printed terms thereon, that the books had been paid for
on delivery, thereby vesting ownership in the buyer.
Surely, the private respondent did not have to go
beyond that invoice to satisfy herself that the books
being offered for sale by Cruz belonged to him; yet she
did. Although the title of Cruz was presumed under
Article 559 by his mere possession of the books, these
being movable property, Leonor Santos nevertheless
demanded more proof before deciding to buy them.
It would certainly be unfair now to make the private
respondents bear the prejudice sustained by EDCA as a
result of its own negligence.1âwphi1 We cannot see the
justice in transferring EDCA's loss to the Santoses who
had acted in good faith, and with proper care, when
they bought the books from Cruz.
While we sympathize with the petitioner for its plight, it
is clear that its remedy is not against the private
respondents but against Tomas de la Peña, who has
apparently caused all this trouble. The private
respondents have themselves been unduly
inconvenienced, and for merely transacting a customary
deal not really unusual in their kind of business. It is
they and not EDCA who have a right to complain.
WHEREFORE, the challenged decision is AFFIRMED and
the petition is DENIED, with costs against the petitioner.
Narvasa, Gancayco, Griño-Aquino and Medialdea, JJ.,
concur.
G.R. No. 80298 April 26, 1990
EDCA PUBLISHING & DISTRIBUTING CORP., petitioner,
vs.
THE SPOUSES LEONOR and GERARDO SANTOS, doing
business under the name and style of "SANTOS
BOOKSTORE," and THE COURT OF APPEALS,
respondents.
Facts:
Petitioner is in the business of publishing text books. In
one of their dealings, petitioner sold
books to one person who introduced himself as Mr.
Cruz. Mr. Cruz ordered books by telephone and
upon delivery issued a check as payment. The
respondent is in the business of buying and re-selling
books. Mr. Cruz then sold some these books to the
respondent at a discounted price with proof of
invoice that it has been paid. Petitioner upon
encashment of the check bounced and made inquiry as
to
the identity of Mr. Cruz who introduced himself of a
college dean of DLSU and after due investigation
they found out that Mr. Cruz in not connected with
DLSU. After a while petitioner had known that their
books was now in possession of the respondent.
Without judicial proceeding, petitioner sought the help
of the police to recover said books from the respondent.
Respondent being aggrieved by the situation,
filed a petition for the return of books to them alleging
they are purchaser in good faith thereby
establishing ownership.
Petitioner contends that the private respondents have
not established their ownership of the
disputed books because they have not even produced a
receipt to prove they had bought the stock.
Issue:
Whether or not possession in good faith has the right to
retain possession?
Held:
The Court held Art. 559 states that the possession of
movable property acquired in good faith is
equivalent to a title. Nevertheless, one who has lost any
movable or has been unlawfully deprived
thereof, may recover it from the person in possession of
the same. If the possessor of a movable lost or
of which the owner has been unlawfully deprived has
acquired it in good faith at a public sale, the owner
cannot obtain its return without reimbursing the price
paid therefor.
Further, Art. 1477 states that the ownership of the thing
sold shall be transferred to the vendee
upon the actual or constructive delivery thereof. Art.
1478 states that the parties may stipulate that
ownership in the thing shall not pass to the purchaser
until he has fully paid the price. It is clear from the
above provisions, particularly the last one quoted, that
ownership in the thing sold shall not pass to the
buyer until full payment of the purchase only if there is
a stipulation to that effect. Otherwise, the rule is
that such ownership shall pass from the vendor to the
vendee upon the actual or constructive delivery
of the thing sold even if the purchase price has not yet
been paid. Non-payment only creates a right to
demand payment or to rescind the contract, or to
criminal prosecution in the case of bouncing checks.
But absent the stipulation above noted, delivery of the
thing sold will effectively transfer ownership to
the buyer who can in turn transfer it to another.
The above rulings are sound doctrine and reflect our
own interpretation of Article 559 as
applied to the case before us. Actual delivery of the
books having been made, Cruz acquired ownership
over the books which he could then validly transfer to
the private respondents. The fact that he had not
yet paid for them to EDCA was a matter between him
and EDCA and did not impair the title acquired by
the private respondents to the books.
Petition is denied. [G.R. No. 86051. September 1, 1992.]
JAIME LEDESMA, Petitioner, v. THE HONORABLE
COURT OF APPEALS and CITIWIDE MOTORS,
INC., Respondents.
Ledesma, Saludo & Associates for Petitioner.
Magtanggol C. Gunigundo for Private Respondent.
SYLLABUS
1. CIVIL LAW; POSSESSION; REQUISITES TO MAKE
POSSESSION OF MOVABLE PROPERTY EQUIVALENT TO
TITLE. — It is quite clear that a party who (a) has lost
any movable or (b) has been unlawfully deprived
thereof can recover the same from the present
possessor even if the latter acquired it in good faith and
has, therefore, title thereto for under the first sentence
of Article 559, such manner of acquisition is equivalent
to a title. There are three (3) requisites to make
possession of movable property equivalent to title,
namely: (a) the possession should be in good faith; (b)
the owner voluntarily parted with the possession of the
thing; and (c) the possession is in the concept of owner.
(TOLENTINO, A.M., Civil Code of the Philippines, Vol. II,
1983 ed., 275-276, citing 2-II Colin and Capitant 942; De
Buen: Ibid., 1009, 2 Salvat 165; 4 Manresa 339).
Undoubtedly, one who has lost a movable or who has
been unlawfully deprived of it cannot be said to have
voluntarily parted with the possession thereof. This is
the justification for the exceptions found under the
second sentence of Article 559 of the Civil Code.
2. CIVIL LAW; SPECIAL CONTRACTS; CONTRACT OF SALE;
ABSENCE OF CONSIDERATION; EFFECT THEREOF. —
There was a perfected unconditional contract of sale
between private respondent and the original vendee.
The former voluntarily caused the transfer of the
certificate of registration of the vehicle in the name of
the first vendee — even if the said vendee was
represented by someone who used a fictitious name —
and likewise voluntarily delivered the cars and the
certificate of registration to the vendee’s alleged
representative Title thereto was forthwith transferred to
the vendee. The subsequent dishonor of the check
because of the alteration merely amounted to a failure
of consideration which does not render the contract of
sale void, but merely allows the prejudiced party to sue
for specific performance or rescission of the contract,
and to prosecute the impostor for estafa under Article
315 of the Revised Penal Code.
DECISION
DAVIDE, JR., J.:
Petitioner impugns the Decision of 22 September 1988
of respondent Court of Appeals 1 in C.A.-G.R. CV No.
05955 2 reversing the decision of then Branch XVIII-B
(Quezon City) of the then Court of First Instance (now
Regional Trial Court) of Rizal in a replevin case, Civil Case
No. Q-24200, the dispositive portion of which
reads:chanroblesvirtualawlibrary
"Accordingly, the Court orders the plaintiff to return the
repossessed Isuzu Gemini, 1977 Model vehicle, subject
of this case to the defendant Ledesma. The incidental
claim (sic) for damages professed by the plaintiff are
dismissed for lack of merit. On defendant’s
counterclaim, Court (sic) makes no pronouncement as
to any form of damages, particularly, moral, exemplary
and nominal in view of the fact that Citiwide has a
perfect right to litigate its claim, albeit by this
pronouncement, it did not succeed." 3
which was supplemented by a Final Order dated 26 June
1980, the dispositive portion of which
reads:jgc:chanrobles.com.ph
"IN VIEW OF THE FOREGOING, the Court grants
defendant Ledesma the sum of P35,000.00 by way of
actual damages recoverable upon plaintiff’s replevin
bond. Plaintiff and its surety, the Rizal Surety and
Insurance Co., are hereby ordered jointly and severally
to pay defendant Jaime Ledesma the sum of P10,000.00
as damages for the wrongful issue of the writ of seizure,
in line with Rule 57, Sec. 20, incorporated in Rule 60,
Sec. 10.
In conformity with the rules adverted to, this final order
shall form part of the judgment of this Court on
September 5, 1979.
The motion for reconsideration of the judgment filed by
the plaintiff is hereby DENIED for lack of merit. No costs
at this instance." 4
The decision of the trial court is anchored on its findings
that (a) the proof on record is not persuasive enough to
show that defendant, petitioner herein, knew that the
vehicle in question was the object of a fraud and a
swindle 5 and (b) that plaintiff, private respondent
herein, did not rebut or contradict Ledesma’s evidence
that valuable consideration was paid for it.
The antecedent facts as summarized by the respondent
Court of Appeals are as follows:jgc:chanrobles.com.ph
"On September 27, 1977, a person representing himself
to be Jojo Consunji, purchased purportedly for his
father, a certain Rustico T. Consunji, two (2) brand new
motor vehicles from plaintiff-appellant Citiwide Motors,
Inc., more particularly described as follows:chanrobles
lawlibrary : rednad
a) One (1) 1977 Isuzu Gemini, 2-door Model PF 50ZIK,
with Engine No. 751214 valued at P42,200.00; and
b) One (1) 1977 Holden Premier Model 8V41X with
Engine No. 198-1251493, valued at P58,800.00.
Said purchases are evidenced by Invoices Nos. 3054 and
3055, respectively. (See Annexes A and B).
On September 28, 1977, plaintiff-appellant delivered the
two-above described motor vehicles to the person who
represented himself as Jojo Consunji, allegedly the son
of the purported buyers Rustico T. Consunji, and said
person in turn issued to plaintiff-appellant Manager’s
Check No. 066-110-0638 of the Philippine Commercial
and Industrial Bank dated September 28, 1977 for the
amount of P101,000.00 as full payment of the value of
the two (2) motor vehicles.
However, when plaintiff-appellant deposited the said
check, it was dishonored by the bank on the ground that
it was tampered with, the correct amount of P101.00
having been raised to P101,000.00 per the bank’s notice
of dishonor (Annexes F and G).
On September 30, 1977, plaintiff-appellant reported to
the Philippine Constabulary the criminal act perpetrated
by the person who misrepresented himself as Jojo
Consunji and in the course of the investigation, plaintiff-
appellant learned that the real identity of the
wrongdoer/impostor is Armando Suarez who has a long
line of criminal cases against him for estafa using this
similar modus operandi.
On October 17, 1977, plaintiff-appellant was able to
recover the Holden Premier vehicle which was found
abandoned somewhere in Quezon City.
On the other hand, plaintiff-appellant learned that the
1977 Isuzu Gemini was transferred by Armando Suarez
to third persona and was in the possession of one Jaime
Ledesma at the time plaintiff-appellant instituted this
action for replevin on November 16, 1977.
In his defense, Jaime Ledesma claims that he purchases
(sic) and paid for the subject vehicle in good faith from
its registered owner, one Pedro Neyra, as evidenced by
the Land Transportation Commission Registration
Certificate No. RCO1427249.chanrobles.com.ph : virtual
law library
After posting the necessary bond in the amount double
the value of the subject motor vehicle, plaintiff-
appellant was able to recover possession of the 1977
Isuzu Gemini as evidenced by the Sheriff’s Return dated
January 23, 1978." 6
After trial on the merits, the lower court rendered the
decision and subsequently issued the Final Order both
earlier adverted to, which plaintiff (private respondent
herein) appealed to the respondent Court of Appeals; it
submitted the following assignment of
errors:jgc:chanrobles.com.ph
"The trial court erred.
I
IN HOLDING THAT THE DEFENDANT IS ENTITLED TO THE
POSSESSION OF THE CAR;
II
IN HOLDING THAT THE DEFENDANT IS AN INNOCENT
PURCHASER IN GOOD FAITH AND FOR VALUE;
III
IN RULING THAT THE PLAINTIFF SHOULD RETURN THE
CAR TO DEFENDANT, DISMISSING ITS CLAIM FOR
DAMAGES, AND GRANTING DEFENDANT P35,000.00
DAMAGES RECOVERABLE AGAINST THE REPLEVIN BOND
AND P101,000.00 DAMAGES FOR ALLEGED WRONGFUL
SEIZURE;
IV
IN RENDERING THE DECISION DATED SEPTEMBER 3,
1979 AND THE FINAL ORDER DATED JUNE 26, 1980." 7
In support of its first and second assigned errors, private
respondent cites Article 559 of the Civil Code which
provides:jgc:chanrobles.com.ph
"ARTICLE 559. The possession of movable property
acquired in good faith is equivalent to a title.
Nevertheless, one who has lost any movable or has
been unlawfully deprived thereof, may recover it from
the person in possession of the same.
If the possessor of a movable lost or of which the owner
has been unlawfully deprived, has acquired it in good
faith at a public sale, the owner cannot obtain its return
without reimbursing the price paid therefor."cralaw
virtua1aw library
Without in any way reversing the findings of the trial
court that herein petitioner was a buyer in good faith
and for valuable consideration, the respondent Court
ruled that:chanroblesvirtualawlibrary

"‘Under Article 559, Civil Code, the rule is to the effect
that if the owner has lost a thing, or if he has been
unlawfully deprived of it, he has a right to recover it not
only from the finder, thief or robber, but also from third
persons who may have acquired it in good faith from
such finder, thief or robber. The said article establishes
two (2) exceptions to the general rule of
irrevendicability (sic), to wit: when the owner (1) has
lost the thing, or (2) has been unlawfully deprived
thereof. In these cases, the possessor cannot retain the
thing as against the owner who may recover it without
paying any indemnity, except when the possessor
acquired it in a public sale.’ (Aznar v. Yapdiangco, 13
SCRA 486).
Put differently, where the owner has lost the thing or
has been unlawfully deprived thereof, the good faith of
the possessor is not a bar to recovery of the movable
unless the possessor acquired it in a public sale of which
there is no pretense in this case. Contrary to the court a
assumption, the issue is not primarily the good faith of
Ledesma for even if this were true, this may not be
invoked as a valid defense, if it be shown that Citiwide
was unlawfully deprived of the vehicle.
In the case of Dizon v. Suntay, 47 SCRA 160, the
Supreme Court had occasion to define the phrase
unlawfully deprived, to wit:chanrob1es virtual 1aw
library
‘. . . it extends to all cases where there has been no valid
transmission of ownership including depositary or
lessee who has sold the same. It is believed that the
owner in such a case is undoubtedly unlawfully deprived
of his property and may recover the same from a
possessor in good faith.’
x x x There is merit in the petition. The assailed decision must
In the case at bar, the person who misrepresented
himself to be the son of the purported buyer, Rustico T.
Consunji, paid for the two (2) vehicles using a check
whose amount has been altered from P101.00 to
P101,000.00. There is here a case of estafa. Plaintiff was
unlawfully deprived of the vehicle by false pretenses
executed simultaneously with the commission of fraud
(Art. 315 2(a) R.P.C.). Clearly, Citiwide would not have
parted with the two (2) vehicles were it not for the false
representation that the check issued in payment
thereupon (sic) is in the amount of P101,000.00, the
actual value of the two (2) vehicles." 8
In short, said buyer never acquired title to the property;
hence, the Court rejected the claim of herein petitioner
that at least, Armando Suarez had a voidable title to the
property.
His motion for reconsideration having been denied in
the resolution of the respondent Court of 12 December
1988, 9 petitioner filed this petition alleging therein
that:chanrobles virtualawlibrary
chanrobles.com:chanrobles.com.ph
"A
THE HONORABLE COURT OF APPEALS ERRED IN
APPLYING ARTICLE 559 OF THE NEW CIVIL CODE TO THE
INSTANT CASE DESPITE THE FACT THAT PRIVATE
RESPONDENT CITIWIDE MOTORS, INC. WAS NOT
UNLAWFULLY DEPRIVED OF THE SUBJECT CAR, AS IN
FACT CITIWIDE VOLUNTARILY PARTED WITH THE TITLE
AND POSSESSION OR (sic) THE SAME IN FAVOR OF ITS
IMMEDIATE TRANSFEREE.
B
THE FACTUAL MILIEU OF THE INSTANT CASE FALLS
WITHIN THE OPERATIVE EFFECTS OF ARTICLES 1505
AND 1506 OF THE NEW CIVIL CODE CONSIDERING THAT
THE IMMEDIATE TRANSFEREE OF THE PRIVATE
RESPONDENT CITIWIDE MOTORS, INC., ACQUIRED A
VOIDABLE TITLE OVER THE CAR IN QUESTION WHICH
TITLE WAS NOT DECLARED VOID BY A COMPETENT
COURT PRIOR TO THE ACQUISITION BY THE PETITIONER
OF THE SUBJECT CAR AND ALSO BECAUSE PRIVATE
RESPONDENT, BY ITS OWN CONDUCT, IS NOW
PRECLUDED FROM ASSAILING THE TITLE AND
POSSESSION BY THE PETITIONER OF THE SAID CAR." 10
be reversed.
The petitioner successfully proved that he acquired the
car in question from his vendor in good faith and for
valuable consideration. According to the trial court, the
private respondent’s evidence was not persuasive
enough to establish that petitioner had knowledge that
the car was the object of a fraud and a swindle and that
it did not rebut or contradict petitioner’s evidence of
acquisition for valuable consideration. The respondent
Court concedes to such findings but postulates that the
issue here is not whether petitioner acquired the
vehicle in that concept but rather, whether private
respondent was unlawfully deprived of it so as to make
Article 559 of the Civil Code apply.

It is quite clear that a party who (a) has lost any
movable or (b) has been unlawfully deprived thereof
can recover the same from the present possessor even
if the latter acquired it in good faith and has, therefore,
title thereto for under the first sentence of Article 559,
such manner of acquisition is equivalent to a title. There
are three (3) requisites to make possession of movable
property equivalent to title, namely: (a) the possession
should be in good faith; (b) the owner voluntarily parted
with the possession of the thing; and (c) the possession
is in the concept of owner. 11
Undoubtedly, one who has lost a movable or who has
been unlawfully deprived of it cannot be said to have
voluntarily parted with the possession thereof. This is
the justification for the exceptions found under the
second sentence of Article 559 of the Civil Code.
The basic issue then in this case is whether private
respondent was unlawfully deprived of the cars when it
sold the same to Rustico Consunji, through a person
who claimed to be Jojo Consunji, allegedly the latter’s
son, but who nevertheless turned out to be Armando
Suarez, on the faith of a Manager’s Check with a face
value of P101,000.00, dishonored for being altered, the
correct amount being only P101.00.chanrobles virtual
lawlibrary
Under this factual milieu, the respondent Court was of
the opinion, and thus held, that private respondent was
unlawfully deprived of the car by false pretenses.
We disagree. There was a perfected unconditional
contract of sale between private respondent and the
original vendee. The former voluntarily caused the
transfer of the certificate of registration of the vehicle in
the name of the first vendee — even if the said vendee
was represented by someone who used a fictitious
name — and likewise voluntarily delivered the cars and
the certificate of registration to the vendee’s alleged
representative Title thereto was forthwith transferred to
the vendee. The subsequent dishonor of the check
because of the alteration merely amounted to a failure
of consideration which does not render the contract of
sale void, but merely allows the prejudiced party to sue
for specific performance or rescission of the contract,
and to prosecute the impostor for estafa under Article
315 of the Revised Penal Code. This is the rule
enunciated in EDCA Publishing and Distributing Corp. v.
Santos, 12 the facts of which do not materially and
substantially differ from those obtaining in the instant
case. In said case, a person identifying himself as
Professor Jose Cruz, dean of the De la Salle College,
placed an order by telephone with petitioner for 406
books, payable upon delivery. Petitioner agreed,
prepared the corresponding invoice and delivered the
books as ordered, for which Cruz issued a personal
check covering the purchase price. Two (2) days later,
Cruz sold 120 books to private respondent Leonor
Santos who, after verifying the seller’s ownership from
the invoice the former had shown her, paid the
purchase price of P1,700.00. Petitioner became
suspicious over a second order placed by Cruz even
before his first check had cleared, hence, it made
inquiries with the De la Salle College. The latter
informed the petitioner that Cruz was not in its employ.
Further verification revealed that Cruz had no more
account or deposit with the bank against which he drew
the check. Petitioner sought the assistance of the police
which then set a trap and arrested Cruz. Investigation
disclosed his real name, Tomas de la Peña, and his sale
of 120 of the books to Leonor Santos. On the night of
the arrest; the policemen whose assistance the
petitioner sought, forced their way into the store of
Leonor’ and her husband, threatened her with
prosecution for the buying of stolen property, seized the
120 books without a warrant and thereafter turned said
books over to the petitioner. The Santoses then sued for
recovery of the books in the Municipal Trial Court which
decided in their favor; this decision was subsequently
affirmed by the Regional Trial Court and sustained by
the Court of Appeals. Hence, the petitioner came to this
Court by way of a petition for review wherein it insists
that it was unlawfully deprived of the books because as
the check bounced for lack of funds, there was failure of
consideration that nullified the contract of sale between
it and the impostor who then acquired no title over the
books. We rejected said claim in this
wise:jgc:chanrobles.com.ph
"The contract of sale is consensual and is perfected once
agreement is reached between the parties on the
subject matter and the consideration. According to the
Civil Code:chanrob1es virtual 1aw library
ART. 1475. The contract of sale is perfected at the
moment there is a meeting of minds upon the thing
which is the object of the contract and upon the price.
From that moment, the parties may reciprocally
demand performance, subject to the provisions of the
law governing the form of contracts.chanrobles.com :
virtual law library
x x x

ART. 1477. The ownership of the thing sold shall be
transferred to the vendee upon the actual or
constructive delivery thereof.
ART. 1478. The parties may stipulate that ownership in
the thing shall not pass to the purchaser until he has
fully paid the price.
It is clear from the above provisions, particularly the last
one quoted, that ownership in the thing sold shall not
pass to the buyer until full payment of the purchase
price only if there is a stipulation to that effect.
Otherwise, the rule is that such ownership shall pass
from the vendor to the vendee upon the actual or
constructive delivery of the thing sold even if the
purchase price has not yet been paid.
Non-payment only creates a right to demand payment
or to rescind the contract, or to criminal prosecution in
the case of bouncing checks. But absent the stipulation
above noted, delivery of the thing sold will effectively
transfer ownership to the buyer who can in turn transfer
it to another." 13
In the early case of Chua Hai v. Hon. Kapunan, 14 one
Roberto Soto purchased from the Youngstown
Hardware, owned by private respondent, corrugated
galvanized iron sheets and round iron bars for
P6,137.70, in payment thereof, he issued a check drawn
against the Security Bank and Trust Co. without
informing Ong Shu that he (Soto) had no sufficient funds
in said bank to answer for the same. In the meantime,
however, Soto sold the sheets to, among others,
petitioner Chua Hai. In the criminal case filed against
Soto, upon motion of the offended party, the
respondent Judge ordered petitioner to return the
sheets which were purchased from Soto. Petitioner’s
motion for reconsideration having been denied, he
came to this Court alleging grave abuse of discretion
and excess of jurisdiction. In answer to the petition, it is
claimed that inter alia, even if the property was
acquired in good faith, the owner who has been
unlawfully deprived thereof may recover it from the
person in possession of the same unless the property
was acquired in good faith at a public sale. 15 Resolving
this specific issue, this Court ruled that Ong Shu was not
illegally deprived of the possession of the
property:jgc:chanrobles.com.ph
". . . It is not denied that Ong Shu delivered the sheets
to Soto upon a perfected contract of sale, and such
delivery transferred title or ownership to the purchaser.
Says Art. 1496:chanrob1es virtual 1aw library
‘Art. 1496. The ownership of the thing sold is acquired
by the vendee from the moment it is delivered to him in
any of the ways specified in articles 1497 to 1501, or in
any other manner signifying an agreement that the
possession is transferred from the vendor to the
vendee.’ (C.C.)
The failure of the buyer to make good the price does
not, in law, cause the ownership to revest in the seller
until and unless the bilateral contract of sale is first
rescinded or resolved pursuant to Article 1191 of the
new Civil Code.chanrobles lawlibrary : rednad
And, assuming that the consent of Ong Shu to the sale
in favor of Soto was obtained by the latter through fraud
or deceit, the contract was not thereby rendered void
ab initio, but only voidable by reason of the fraud, and
Article 1390 expressly provides that:chanrob1es virtual
1aw library
‘ART. 1390. The following contracts are voidable or
annullable, even though there may have been no
damage to the contracting parties:chanrob1es virtual
1aw library
(1) Those where one of the parties is incapable of giving
consent to a contract;
(2) Those where the consent is vitiated by mistake,
violence, intimidation, undue influence or fraud.
These contracts are binding, unless they are annulled by
a proper action in court. They are susceptible of
ratification.’
Agreeably to this provision, Article 1506
prescribes:chanrob1es virtual 1aw library
‘ARTICLE 1506. Where the seller of goods has a voidable
title thereto, but his title has not been avoided at the
time of the sale, the buyer acquires a good title to the
goods, provided he buys them in good faith, for value,
and without notice of the seller’s defect of title.’ (C.C.)
Hence, until the contract of Ong Shu with Soto is set
aside by a competent court (assuming that the fraud is
established to its satisfaction), the validity of appellant’s
claim to the property in question can not be disputed,
and his right to the possession thereof should be
respected." 16

It was therefore erroneous for the respondent Court to
declare that the private respondent was illegally
deprived of the car simply because the check in
payment therefor was subsequently dishonored; said
Court also erred when it divested the petitioner, a buyer
in good faith who paid valuable consideration therefor,
of his possession thereof.chanrobles virtualawlibrary
chanrobles.com:chanrobles.com.ph
WHEREFORE, the challenged decision of the respondent
Court of Appeals of 22 September 1988 and its
Resolution of 12 December 1988 in C.A.-G.R. CV No.
05955 are hereby SET ASIDE and the Decision of the trial
court of 3 September 1979 and its Final Order of 26
June 1980 in Civil Case No. Q-24200 are hereby
REINSTATED, with costs against private respondent
Citiwide Motors, Inc.
SO ORDERED.
Gutierrez, Jr., Bidin and Romero, JJ., concur.
Feliciano, J., is on leave.
Ledesma v. Court of Appeals
G.R. No. 86051, September 1, 1992, 213 SCRA 195
Davide, J.
FACTS: Two motor vehicles—Honda Gemini and Holden
Premiere Model—were purchased from Citiwide Motors
by a person who identified himself as Jojo Consunji. He
bought the vehicles purportedly for his father. Upon
delivery to him of the vehicles, he paid a manager’s
check drawn against PCIB. The check though was
dishonored by the bank on the ground that the check’s
value has been materially altered. This was reported to
the police authorities and it was found out that the
person misrepresenting himself was actually Suarez who
had a long line of criminal cases against him for his
modus operandi. The Holden car was recovered after
being abandoned somewhere in Quezon City. The
Honda on the other hand, was discovered to be sold to
Ledesma. Ledesma averred he purchased the vehicle in
good faith from one Neyra, as evidenced by his
certificate of registration. Citiwide Motors was able to
recover.
ISSUE: Whether or not CITIWIDE MOTORS has been
unlawfully deprived.
HELD: No. There was a perfected unconditional contract
of sale between Citiwide Motors and Suarez. The
subsequent dishonor of the check merely amounted to
failure of consideration which doesn't render a contract
of sale void, but merely allows the prejudiced party to
sue for specific performance or rescission of the sale.
This being the case, Citiwide motors wasn't unlawfully
deprived of the property. It is thus not entitled to the
return of the vehicle from Ledesma who bought the
property in good faith and for consideration.
G.R. No. L-20264 January 30, 1971
CONSUELO S. DE GARCIA and ANASTACIO
GARCIA, petitioners,
vs.
HON. COURT OF APPEALS, ANGELINA D. GUEVARA and
JUAN B. GUEVARA, respondents.
Deogracias T. Reyes and Jose M. Luison for petitioners.
Tolentino and Garcia and D.R. Cruz for private
respondents.
FERNANDO, J.:
This petition for certiorari to review a decision of
respondent Court of Appeals was given due course
because it was therein vigorously asserted that legal
questions of gravity and of moment, there being
allegations of an unwarranted departure from and a
patent misreading of applicable and controlling
decisions, called for determination by this Tribunal. The
brief for petitioners-spouses, however, failed to
substantiate such imputed failings of respondent Court.
The performance did not live up to the promise. On the
basis of the facts as duly found by respondent Court,
which we are not at liberty to disregard, and the
governing legal provisions, there is no basis for reversal.
We affirm.
The nature of the case presented before the lower court
by private respondent Angelina D. Guevara, assisted by
her spouse, Juan B. Guevara, as plaintiffs, was noted in
the decision of respondent Court of Appeals thus:
"Plaintiff seeks recovery of `one (1) lady's diamond ring
18 cts. white gold mounting, with one (1) 2.05 cts.
diamond-solitaire, and four (4) brills 0.10 cts. total
weight' which she bought on October 27, 1947 from R.
Rebullida, Inc."1 Then came a summary of now
respondent Guevara of her evidence: "Plaintiff's
evidence tends to show that around October 11, 1953
plaintiff while talking to Consuelo S. de Garcia, owner of
La Bulakeña restaurant recognized her ring in the finger
of Mrs. Garcia and inquired where she bought it, which
the defendant answered from her comadre. Plaintiff
explained that that ring was stolen from her house in
February, 1952. Defendant handed the ring to plaintiff
and it fitted her finger. Two or three days later, at the
request of plaintiff, plaintiff, her husband Lt. Col. Juan
Guevara, Lt. Cementina of Pasay PD, defendant and her
attorney proceeded to the store of Mr. Rebullida to
whom they showed the ring in question. Mr. Rebullida a
examined the ring with the aid of high power lens and
after consulting the stock card thereon, concluded that
it was the very ring that plaintiff bought from him in
1947. The ring was returned to defendant who despite a
written request therefor failed to deliver the ring to
plaintiff. Hence, this case. Later on when the sheriff
tried to serve the writ of seizure (replevin), defendant
refused to deliver the ring which had been examined by
Mr. Rebullida, claiming it was lost."2
How the defendant, Consuelo S. de Garcia, the present
petitioner before us, along with her husband Anastacio
Garcia, sought to meet plaintiff's claim was narrated
thus: "On the other hand, defendant denied having
made any admission before plaintiff or Mr. Rebullida or
the sheriff. Her evidence tends to show that the ring
(Exhibit 1) was purchased by her from Mrs. Miranda
who got it from Miss Angelita Hinahon who in turn got it
from the owner, Aling Petring, who was boarding in her
house; that the ring she bought could be similar to, but
not the same ring plaintiff purchased from Mr. Rebullida
which was stolen; that according to a pawn-shop owner
the big diamond on Exhibit 1 was before the trial never
dismantled. When dismantled, defendant's diamond
was found to weigh 2.57 cts."3
Plaintiff lost in the lower court. She elevated the matter
to respondent Court of Appeals with the judgment of
the lower court being reversed. It is this decision now
under review.
These are the facts as found by respondent Court of
Appeals: "That the ring brought by the parties for
examination by Rafael Rebullida on December 14, 1953
was the same ring purchased by plaintiff from R.
Rebullida, Inc. on October 27, 1947 and stolen in
February, 1952 has been abundantly established by
plaintiff's evidence. Before plaintiff lost the ring, she had
been wearing it for six years and became familiar with
it. Thus, when she saw the missing ring in the finger of
defendant, she readily and definitely identified it. Her
identification was confirmed by Mr. Rafael Rebullida,
whose candid testimony is entitled to great weight, with
his 30 years experience behind him in the jewelry
business and being a disinterested witness since both
parties are his customers. Indeed, defendant made no
comment when in her presence Rebullida after
examining the ring and stock card told plaintiff that that
was her ring, nor did she answer plaintiff's letter of
demand, ... asserting ownership. Further confirmation
may be found in the extra-judicial admissions, contained
in defendant's original and first amended answers ..." 4
These further facts likewise appeal therein: "The
foregoing proof is not counter-balanced by the denial on
the part of defendant or the presentation of the ring,
Exhibit I, which has a diamond-solitaire 2.57 cts., or
much heavier than the lost diamond weighing 2.05 cts.
only. It is noteworthy that defendant gave a rather
dubious source of her ring. Aling Petring from whom the
ring supposedly came turned out to be a mysterious and
ephemeral figure. Miss Hinahon did not even know her
true and full name, nor her forwarding address. She
appeared from nowhere, boarded three months in the
house of Miss Hinahon long enough to sell her diamond
ring, disappearing from the scene a week thereafter.
Indeed, the case was terminated without any hearing on
the third-party and fourth-party complaints, which
would have shown up the falsity of defendant's theory.
Moreover, Mrs. Baldomera Miranda, third-party
defendant, who tried to corroborate defendant on the
latter's alleged attempt to exchange the ring defendant
bought through her, is [belied] by her judicial admission
in her Answer that appellee `suggested that she would
make alterations to the mounting and structural design
of the ring to hide the true identity and appearance of
the original one' (Cunanan vs. Amparo, 45 O.G. 3796).
Finally, defendant is refuted by her own extra-judicial
admissions ... although made by defendant's counsel.
For an attorney who acts as counsel of record and is
permitted to act such, has the authority to manage the
cause, and this includes the authority to make
admission for the purpose of the litigation... Her
proffered explanation that her counsel misunderstood
her is puerile because the liability to error as to the
identity of the vendor and the exchange of the ring with
another ring of the same value, was rather remote." 5
It is in the light of the above facts as well as the finding
that the discrepancy as to the weight between the
diamond-solitaire in Exhibit I and the lost diamond was
due to defendant having "substituted a diamond-
solitaire of plaintiff with a heavier stone" that the
decision was rendered, respondent Court reversing the
lower court and ordering defendant, now petitioner
Consuelo S. de Garcia, to return plaintiff's ring or fact
value of P1,000.00 and costs, as well as to pay plaintiff
P1,000.00 as attorney's fee and P1,000.00 as exemplary
damages. Hence this appeal.
To repeat, there is no occasion to reverse respondent
Court. It correctly applied the law to the facts as found.
1. The controlling provision is Article 559 of the Civil
Code. It reads thus: "The possession of movable
property acquired in good faith is equivalent to a title.
Nevertheless, one who has lost any movable or has
been unlawfully deprived thereof may recover it from
the person in possession of the same. If the possessor
of a movable lost of which the owner has been
unlawfully deprived, has acquired it in good faith at a
public sale, the owner cannot obtain its return without
reimbursing the price paid therefor." Respondent
Angelina D. Guevara, having been unlawfully deprived
of the diamond ring in question, was entitled to recover
it from petitioner Consuelo S. de Garcia who was found
in possession of the same. The only exception the law
allows is when there is acquisition in good faith of the
possessor at a public sale, in which case the owner
cannot obtain its return without reimbursing the price.
As authoritative interpreted in Cruz v. Pahati, 6 the right
of the owner cannot be defeated even by proof that
there was good faith by the acquisition by the
possessor. There is a reiteration of this principle
in Aznar v. Yapdiangco.7 Thus: "Suffice it to say in this
regard that the right of the owner to recover personal
property acquired in good faith by another, is based on
his being dispossessed without his consent. The
common law principle that where one of two innocent
persons must suffer by a fraud perpetrated by the
another, the law imposes the loss upon the party who,
by his misplaced confidence, has enabled the fraud to
be committed, cannot be applied in a case which is
covered by an express provision of the new Civil Code,
specifically Article 559. Between a common law
principle and statutory provision, the latter must prevail
in this jurisdiction."8
2. It is thus immediately apparent that there is no merit
to the contention raised in the first assigned error that
her possession in good faith, equivalent to title, sufficed
to defeat respondent Guevara's claim. As the above
cases demonstrate, even on that assumption the owner
can recover the same once she can show illegal
deprivation. Respondent Court of Appeals was so
convinced from the evidence submitted that the owner
of the ring in litigation is such respondent. That is a
factual determination to which we must pay heed.
Instead of proving any alleged departure from legal
norms by respondent Court, petitioner would stress
Article 541 of the Civil Code, which provides: 'A
possessor in the concept of owner has in his favor the
legal presumption that he possesses with a just title and
he cannot be obliged to show or prove it." She would
accord to it a greater legal significance than that to
which under the controlling doctrines it is
entitled.lâwphî1.ñèt The brief for respondents did
clearly point out why petitioner's assertion is lacking in
support not only from the cases but even from
commentators. Thus: "Actually, even under the first
clause, possession in good faith does not really amount
to title, for the reason that Art. 1132 of the Code
provides for a period of acquisitive prescription for
movables through `uninterrupted possession for four
years in good faith' (Art. 1955 of the old Spanish Code,
which provided a period of three years), so that many
Spanish writers, including Manresa, Sanchez Roman,
Scaevola, De Buen, and Ramos, assert that under Art.
464 of the Spanish Code (Art. 559 of the New Civil
Code), the title of the possessor is not that of
ownership, but is merely a presumptive title sufficient to
serve as a basis of acquisitive prescription (II Tolentino,
Civil Code of the Phil. p. 258: IV Manresa, Derecho Civil
Español, 6th Ed., p. 380). And it is for the very reason
that the title established by the first clause of Art. 559 is
only a presumptive title sufficient to serve as a basis for
acquisitive prescription, that the clause immediately
following provides that `one who has lost any movable
or has been unlawfully deprived thereof, may recover it
from the person in possession of the same.' As stated by
the Honorable Justice Jose B. L. Reyes of this Court in
Sotto vs. Enage (C.A.), 43 Off. Gaz. 5075, Dec. 1947:
`Article 559 in fact assumes that possessor is as yet not
the owner; for it is obvious that where the possessor
has come to acquire indefeasible title by, let us say,
adverse possession for the necessary period, no proof of
loss or illegal deprivation could avail the former owner
of the chattel. He would no longer be entitled to recover
it under any condition.' "9
The second assigned error is centered on the alleged
failure to prove the identity of the diamond ring. Clearly
the question raised is one of the fact. What the Court of
Appeals found is conclusive. Again, petitioner could not
demonstrate that in reaching such a conclusion the
Court of Appeals acted in an arbitrary manner. As made
mention of in the brief for respondents two
disinterested witnesses, Mr. Rafael Rebullida as well as
Lt. Col. Reynaldo Cementina of the Pasay City Police
Department, both of whom could not be accused of
being biased in favor of respondent Angelina D.
Guevara, did testify as to the identity of the ring.
The third assigned error of petitioners would find fault
with respondent Court relying "on the weakness of the
title or evidence" of petitioner Consuelo S. de Garcia. It
is true, in the decision under review, mention was made
of petitioner Consuelo S. de Garcia making no comment
when in her presence Rebullida, after examining the
ring the stock card, told respondent Angelina L. Guevara
that that was her ring, nor did petitioner answer a letter
of the latter asserting ownership. It was likewise stated
in such decision that there were extra-judicial
admissions in the original and first amended answers of
petitioner. In the appraisal of her testimony, respondent
Court likewise spoke of her giving a rather dubious
source of her ring, the person from whom she allegedly
bought it turning out "to be a mysterious and
ephemeral figure." As a matter of fact, as set forth a few
pages back, respondent Court did enumerate the flaws
in the version given by petitioner. From the weakness of
the testimony offered which, as thus made clear,
petitioner, did not even seek to refute, she would raise
the legal question that respondent Court relied on the
"weakness of [her] title or evidence" rather than on the
proof justifying respondent Angelina D. Guevara's claim
of ownership. Petitioner here would ignore the finding
of fact of respondent Court that such ownership on her
part "has been abundantly established" by her
evidence. Again here, in essence, the question raised is
one of fact, and there is no justification for us to reverse
respondent Court.
The legal question raised in the fourth assignment of
error is that the matter of the substitution of the
diamond on the ring was a question raised for the first
time on appeal as it was never put in issue by the
pleadings nor the subject of reception of evidence by
both parties and not touched upon in the decision of
the lower court. Why no such question could be raised
in the pleadings of respondent Angelina D. Guevara was
clarified by the fact that the substitution came after it
was brought for examination to Mr. Rebullida. After the
knowledge of such substitution was gained, however,
the issue was raised at the trial according to the said
respondent resulting in that portion of the decision
where the lower court reached a negative conclusion.
As a result, in the motion for reconsideration, one of the
points raised as to such decision being contrary to the
evidence is the finding that there was no substitution. It
is not necessary to state that respondent Court,
exercising its appellate power reversed the lower court.
What was held by it is controlling. What is clear is that
there is no factual basis for the legal arguments on
which the fourth assigned error is predicated.
What is said takes care of the fifth assigned error that
respondent Court was mistaken in its finding that there
was such a substitution. Again petitioner would have us
pass on a question of credibility which is left to
respondent Court of Appeals. The sixth assigned error
would complain against the reversal of the lower court
judgment as well as petitioner Consuelo S. de Garcia
being made to pay respondent Angelina D. Guevara
exemplary damages, attorney's fees and costs. The
reversal is called for in the light of the appraisal of the
evidence of record as meticulously weighed by
respondent Court. As to the attorney's fees and
exemplary damages, this is what respondent Court said
in the decision under review: "Likewise, plaintiff is
entitled to recover reasonable attorney's fees in the sum
of P1,000, it being just and equitable under the
circumstances, and another P1,000 as exemplary
damages for the public good to discourage litigants from
resorting to fraudulent devices to frustrate the ends of
justice, as defendant herein tried to substitute the ring,
Exhibit 1, for plaintiff's ring." 10 Considering the
circumstances, the cursory discussion of the sixth
assigned error on the matter by petitioner fails to
demonstrate that respondent Court's actuation is
blemished by legal defects.
WHEREFORE, the decision of respondent Court of
Appeals of August 6, 1962 is hereby affirmed. With
costs.
Concepcion, C.J., Dizon, Makalintal, Zaldivar, Castro,
Teehankee, Barredo, Villamor and Makasiar JJ., concur.
Reyes, J.B.L., J., concurs in the result, Art. 85 of the Code
of Commerce not being applicable.
DE GARCIA V. CA
37 SCRA 160
FACTS:
Guevarra was the owner of a lady’s diamond ring with
white gold mounting, solitaire 2-karat diamond as well
as 4 brills. It was stolen from her house. On a relevant
date, while she was talking to Garcia, an owner of a
restaurant, she recognized the ring on the latter’s finger
and asked how she acquired the same. Garcia averred
that she bought it from her comadre. Guevarra made
Garcia know that the ring was stolen from her place
days before. It was ascertained the ring was indeed
Guevarra’s but despite written demands, Garcia refused
to return the ring.
HELD:
One who has lost or has been unlawfully deprived of a
movable may recover the same from the person in
possession of the same and the only defense the latter
may have is if he has acquired it in good faith at a public
sale in which case the owner cannot obtain its return
without reimbursing the price paid therefore. Guevarra
who was unlawfully deprived of the ring
was entitled to recover it from de Garcia who was found
in possession of the same. The only exception provided
by law is when the possessor acquired the property
through a public sale, in which case, the owner cannot
recover without reimbursement.
G.R. No. L-30817 September 29, 1972
DOMINADOR DIZON, doing business under the firm
name "Pawnshop of Dominador Dizon", petitioner,
vs.
LOURDES G. SUNTAY, respondent.
Andres T. Velarde for petitioner.
Rafael G. Suntay for respondent.
FERNANDO, J.:p
In essence there is nothing novel in this petition for
review of a decision of the Court of Appeals affirming a
lower court judgment sustaining the right of an owner
of a diamond ring, respondent Lourdes G. Suntay, as
against the claim of petitioner Dominador Dizon, who
owns and operates a pawnshop. The diamond ring was
turned over to a certain Clarita R. Sison, for sale on
commission, along with other pieces of jewelry of
respondent Suntay. It was then pledged to petitioner.
Since what was done was violative of the terms of the
agency, there was an attempt on her part to recover
possession thereof from petitioner, who refused. She
had to file an action then for its recovery. She was
successful, as noted above, both in the lower court and
thereafter in the Court of Appeals. She prevailed as she
had in her favor the protection accorded by Article 559
of the Civil
Code.1 The matter was then elevated to us by petitioner.
Ordinarily, our discretion would have been exercised
against giving due course to such petition for review.
The vigorous plea however, grounded on estoppel, by
his counsel, Atty. Andres T. Velarde, persuaded us to act
otherwise. After a careful perusal of the respective
contentions of the parties, we fail to perceive any
sufficient justification for a departure from the literal
language of the applicable codal provision as uniformly
interpreted by this Court in a number of decisions. The
invocation of estoppel is therefore unavailing. We
affirm.
The statement of the case as well as the controlling facts
may be found in the Court of Appeals decision penned
by Justice Perez. Thus: "Plaintiff is the owner of a three-
carat diamond ring valued at P5,500.00. On June 13,
1962, the plaintiff and Clarita R. Sison entered into a
transaction wherein the plaintiff's ring was delivered to
Clarita R. Sison for sale on commission. Upon receiving
the ring, Clarita R. Sison executed and delivered to the
plaintiff the receipt ... . The plaintiff had already
previously known Clarita R. Sison as the latter is a close
friend of the plaintiff's cousin and they had frequently
met each other at the place of the plaintiff's said cousin.
In fact, about one year before their transaction of June
13, 1962 took place, Clarita R. Sison received a piece of
jewelry from the plaintiff to be sold for P500.00, and
when it was sold, Clarita R. Sison gave the price to the
plaintiff. After the lapse of a considerable time without
Clarita R. Sison having returned to the plaintiff the
latter's ring, the plaintiff made demands on Clarita R.
Sison for the return of her ring but the latter could not
comply with the demands because, without the
knowledge of the plaintiff, on June 15, 1962 or three
days after the ring above-mentioned was received by
Clarita R. Sison from the plaintiff, said ring was pledged
by Melia Sison, niece of the husband of Clarita R. Sison,
evidently in connivance with the latter, with the
defendant's pawnshop for P2,600.00 ... ."2 Then came
this portion of the decision under review: "Since the
plaintiff insistently demanded from Clarita R. Sison the
return of her ring, the latter finally delivered to the
former the pawnshop ticket ... which is the receipt of
the pledge with the defendant's pawnshop of the
plaintiff's ring. When the plaintiff found out that Clarita
R. Sison pledged, she took steps to file a case of estafa
against the latter with the fiscal's office. Subsequently
thereafter, the plaintiff, through her lawyer, wrote a
letter ... dated September 22, 1962, to the defendant
asking for the delivery to the plaintiff of her ring
pledged with defendant's pawnshop under pawnshop
receipt serial-B No. 65606, dated June 15, 1962 ... .
Since the defendant refused to return the ring, the
plaintiff filed the present action with the Court of First
Instance of Manila for the recovery of said ring, with
P500.00 as attorney's fees and costs. The plaintiff asked
for the provisional remedy of replevin by the delivery of
the ring to her, upon her filing the requisite bond,
pending the final determination of the action. The lower
court issued the writ of replevin prayed for by plaintiff
and the latter was able to take possession of the ring
during the pendency of the action upon her filing the
requisite bond."3 It was then noted that the lower court
rendered judgment declaring that plaintiff, now
respondent Suntay, had the right to the possession of
the ring in question. Petitioner Dizon, as defendant,
sought to have the judgment reversed by the Court of
Appeals. It did him no good. The decision of May 19,
1969, now on review, affirmed the decision of the lower
court.
In the light of the facts as thus found by the Court of
Appeals, well-nigh conclusive on use, with the
applicable law being what it is, this petition for review
cannot prosper. To repeat, the decision of the Court of
Appeals stands.
1. There is a fairly recent restatement of the force and
effect of the governing codal norm in De Gracia v. Court
of Appeals.4 Thus: "The controlling provision is Article
559 of the Civil Code. It reads thus: 'The possession of
movable property acquired in good faith is equivalent to
a title. Nevertheless, one who has lost any movable or
has been unlawfully deprived thereof may recover it
from the person in possession of the same. If the
possessor of a movable lost of which the owner has
been unlawfully deprived, has acquired it in good faith
at a public sale, the owner cannot obtain its return
without reimbursing the price paid therefor.'
Respondent Angelina D. Guevara, having been
unlawfully deprived of the diamond ring in question,
was entitled to recover it from petitioner Consuelo S. de
Garcia who was found in possession of the same. The
only exception the law allows is when there is
acquisition in good faith of the possessor at a public
sale, in which case the owner cannot obtain its return
without reimbursing the price. As authoritatively
interpreted in Cruz v. Pahati, the right of the owner
cannot be defeated even by proof that there was good
faith in the acquisition by the possessor. There is a
reiteration of this principle in Aznar v. Yapdiangco. Thus:
'Suffice it to say in this regard that the right of the
owner to recover personal property acquired in good
faith by another, is based on his being dispossessed
without his consent. The common law principle that
were one of two innocent persons must suffer by a
fraud perpetrated by another, the law imposes the loss
upon the party who, by his misplaced confidence, has
enabled the fraud to be committed, cannot be applied
in a case which is covered by an express provision of the
new Civil Code, specifically Article 559. Between a
common law principle and a statutory provision, the
latter must prevail in this jurisdiction." "5
2. It must have been a recognition of the compulsion
exerted by the above authoritative precedents that
must have caused petitioner to invoke the principle of
estoppel. There is clearly a misapprehension. Such a
contention is devoid of any persuasive force.
Estoppel as known to the Rules of Court 6 and prior to
that to the Court of Civil Procedure, 7 has its roots in
equity. Good faith is its basis.8 It is a response to the
demands of moral right and natural justice. 9 For
estoppel to exist though, it is indispensable that there
be a declaration, act or omission by the party who is
sought to be bound. Nor is this all. It is equally a
requisite that he, who would claim the benefits of such
a principle, must have altered his position, having been
so intentionally and deliberately led to comport himself
thus, by what was declared or what was done or failed
to be done. If thereafter a litigation arises, the former
would not be allowed to disown such act, declaration or
omission. The principle comes into full play. It may
successfully be relied upon. A court is to see to it then
that there is no turning back on one's word or a
repudiation of one's act. So it has been from our earliest
decisions. As Justice Mapa pointed out in the first case,
a 1905 decision, Rodriguez v. Martinez, 10 a party should
not be permitted "to go against his own acts to the
prejudice of [another]. Such a holding would be
contrary to the most rudimentary principles of justice
and law." 11 He is not, in the language of Justice Torres,
in Irlanda v. Pitargue, 12 promulgated in 1912, "allowed
to gainsay [his] own acts or deny rights which [he had]
previously recognized." 13 Some of the later cases are to
the effect that an unqualified and unconditional
acceptance of an agreement forecloses a claim for
interest not therein provided. 14 Equally so the
circumstance that about a month after the date of the
conveyance, one of the parties informed the other of his
being a minor, according to Chief Justice Paras, "is of no
moment, because [the former's] previous
misrepresentation had already estopped him from
disavowing the contract. 15 It is easily understandable
why, under the circumstances disclosed, estoppel is a
frail reed to hang on to. There was clearly the absence
of an act or omission, as a result of which a position had
been assumed by petitioner, who if such elements were
not lacking, could not thereafter in law be prejudiced by
his belief in what had been misrepresented to him. 16 As
was put by Justice Labrador, "a person claimed to be
estopped must have knowledge of the fact that his
voluntary acts would deprive him of some rights
because said voluntary acts are inconsistent with said
rights." 17 To recapitulate, there is this pronouncement
not so long ago, from the pen of Justice Makalintal, who
reaffirmed that estoppel "has its origin in equity and,
being based on moral right and natural justice, finds
applicability wherever and whenever the special
circumstances of a case so demand." 18
How then can petitioner in all seriousness assert that his
appeal finds support in the doctrine of estoppel?
Neither the promptings of equity nor the mandates of
moral right and natural justice come to his rescue. He is
engaged in a business where presumably ordinary
prudence would manifest itself to ascertain whether or
not an individual who is offering a jewelry by way of a
pledge is entitled to do so. If no such care be taken,
perhaps because of the difficulty of resisting
opportunity for profit, he should be the last to complain
if thereafter the right of the true owner of such jewelry
should be recognized. The law for this sound reason
accords the latter protection. So it has always been
since Varela v.
Finnick, 19 a 1907 decision. According to Justice Torres:
"In the present case not only has the ownership and the
origin of the jewels misappropriated been
unquestionably proven but also that the accused, acting
fraudulently and in bad faith, disposed of them and
pledged them contrary to agreement, with no right of
ownership, and to the prejudice of the injured party,
who was thereby illegally deprived of said jewels;
therefore, in accordance with the provisions of article
464, the owner has an absolute right to recover the
jewels from the possession of whosoever holds them, ...
." 20 There have been many other decisions to the same
effect since then. At least nine may be cited. 21 Nor could
any other outcome be expected, considering the civil
code provisions both in the former Spanish
legislation 22 and in the present Code. 23 Petitioner ought
to have been on his guard before accepting the pledge
in question. Evidently there was no such precaution
availed of. He therefore, has only himself to blame for
the fix he is now in. It would be to stretch the concept of
estoppel to the breaking point if his contention were to
prevail. Moreover, there should have been a realization
on his part that courts are not likely to be impressed
with a cry of distress emanating from one who is in a
business authorized to impose a higher rate of interest
precisely due to the greater risk assumed by him. A
predicament of this nature then does not suffice to call
for less than undeviating adherence to the literal terms
of a codal provision. Moreover, while the activity he is
engaged in is no doubt legal, it is not to be lost sight of
that it thrives on taking advantage of the necessities
precisely of that element of our population whose lives
are blighted by extreme poverty. From whatever angle
the question is viewed then, estoppel certainly cannot
be justly invoked.
WHEREFORE, the decision of the Court of Appeals of
May 19, 1969 is affirmed, with costs against petitioner.
Concepcion, C.J., Zaldivar, Makasiar, Antonio and
Esguerra, JJ., concur.
Makalintal and Barredo, JJ., took no part.
Castro, J., reserves his vote.
Separate Opinions
TEEHANKEE, J., concurring:
I concur in the main opinion of Mr. Justice Fernando,
tracing and confirming the long settled and uniform
jurisprudence since 1905 based on the express statutory
provision of article 559 of our Civil Code (formerly
article 464 of the old Civil Code) that the owner "who
has lost any movable or has been unlawfully
deprived thereof may recover it from the person in
possession of the same," the only exception expressly
provided in the codal article being that "if the possessor
of a movable lost of which the owner has
been unlawfully deprived, has acquired it in good faith
at a public sale, the owner cannot obtain its
return without reimbursing the price paid therefor."1
Senator Tolentino's submittal in his commentaries on
the Civil Code "that the better view is to consider
'unlawfully deprived' as limited to unlawful taking, such
as theft or robbery, and should not include disposition
through abuse of confidence. Thus, if the owner has
entrusted personal property to a bailee, such as for
transportation, pledge, loan or deposit, without
transmitting ownership, and the latter alienates it to a
third person who acquires it in good faith, the owner
cannot recover it from such third person, "is, as he
himself admits, based on the express provision of the
French Code which allows the true owner of personal
property to recover it from the possessor in good faith
without reimbursement only "if it has been stolen from
him." He concedes likewise that "our Code, following
the Spanish code, uses broader language than that used
in the French code" — since our Code provides that the
owner who has been "unlawfully deprived" of personal
property may recover it from the possessor without
reimbursement, with the sole exception where the
possessor acquired the article in good faith at a public
sale.2
He thus concedes finally that "(T)here are writers who
believe that the phrase 'unlawfully deprived' in our
Code does not have the same meaning as stolen in the
French code; that it is used in the general sense, and is
not used in the specific sense of deprivation by robbery
or theft. Under this view, it extends to all cases where
there has been no valid transmission of ownership,
including the case where the proprietor has entrusted
the thing to a borrower, depositary, or lessee who has
sold the same. It is believed that the owner in such case
is undoubtedly unlawfully deprived of his property, and
may recover the same from a possessor in good faith"
(citing De Buen: 2-II Colin & Capitant 1008; 1 Bonet
234)3 and cites the long unbroken line of decisions of
the Court of Appeals and of this Court upholding the
import of the broader language of the codal article in
question.
Indeed, if our legislature had intended to narrow the
scope of the term "unlawfully deprived" to "stolen" as
advocated by Tolentino, it certainly would have adopted
and used such a narrower term rather than the broad
language of article 464 of the old Spanish Civil Code
with its long-established and accepted meaning in
accordance with our jurisprudence.
Petitioner's contentions at bar had long been disposed
of in the Court's 1911 decision of Arenas vs.
Raymundo,4 per Mr. Justice Florentino Torres, reiterating
the doctrine of the earlier cases and holding that
Even supposing that the defendant
Raymundo had acted in good faith in
accepting the pledge of the jewelry in
litigation, even then he would not be
entitled to retain it until the owner
thereof reimburse him for the amount
loaned to the embezzler, since the said
owner of the jewelry, the plaintiff, did
not make any contract with the
pledgee, that would obligate him to pay
the amount loaned to Perello, and the
trial record does not disclose any
evidence, even circumstantial, that the
plaintiff Arenas consented to or had
knowledge of the pledging of her
jewelry in the pawnshop of the
defendant.
For this reason, and because
Concepcion Perello was not the
legitimate owner of the jewelry which
she pledged to the defendant
Raymundo, for a certain sum that she
received from the latter as a loan, the
contract of pledge entered into by both,
is of course, null and void, and,
consequently the jewelry so pawned
can not serve as security for the
payment of the sum loaned, nor can the
latter be collected out of the value of
the said jewelry.
Article 1857 of the Civil Code prescribes
as one of the essential requisites of the
contracts of pledge and of mortgage,
that the thing pledged or mortgaged
must belong to the person who pledges
or mortgages it. This essential requisite
for the contract of pledge between
Perello and the defendant being absent
as the former was not the owner of the
jewelry given in pledge, the contract is
as devoid of value and force as if it had
not been made, and as it was executed
with marked violation of an express
provision of the law, it can not confer
upon the defendant any rights in the
pledged jewelry, nor impose any
obligation toward him on the part of the
owner thereof, since the latter was
deprived of her possession by means of
the illegal pledging of the said jewelry, a
criminal act.
Between the supposed good faith of the
defendant Raymundo and the
undisputed good faith of the plaintiff
Arenas, the owner of the jewelry,
neither law nor justice permit that the
latter, after being the victim of
embezzlement, should have to choose
one of the two extremes of a dilemma,
both of which, without legal ground or
reason, are injurious and prejudicial to
her interests and rights, that is, she
must either lose her jewelry or pay a
large sum received by the embezzler as
a loan from the defendant, when the
plaintiff Arenas is not related to the
latter by any legal or contractual bond
out of which legal obligations arise.
xxx xxx xxx
The business of pawnshops, in exchange
for the high and onerous interest which
constitutes its enormous profits, is
always exposed to the contingency of
receiving in pledge or security for the
loans, jewels and other articles that
have been robbed, stolen, or embezzled
from their legitimate owners; and as the
owner of the pawnshop accepts the
pledging of jewelry from the first bearer
who offers the same and asks for
money on it, without assuring himself
whether such bearer is or is not the
owner thereof, he can not, by such
procedure, expect from the law better
and more preferential protection than
the owner of the jewels or other
articles, who was deprived thereof by
means of a crime and is entitled to be
excused by the courts.
Antonio Matute, the owner of another
pawnshop, being convinced that he was
wrong, refrained from appealing from
the judgment wherein he was
sentenced to return, without
redemption, to the plaintiffs, another
jewel of great value which had been
pledged to him by the same Perello. He
undoubtedly had in mind some of the
previous decisions of this court, one of
which was against himself.
By the same token, the contention that the owner may
recover the lost article of which he has been unlawfully
deprived without reimbursement of the sum received
by the embezzler from the pawnshop only after a
criminal conviction of the embezzler, is to add a
requirement that is not in the codal article and to
unduly prejudice the victim of embezzlement, as
pointed out by the Court in Arenas, supra.
The civil action that the owner must resort to for the
recovery of his personal property of which he has been
unlawfully deprived as against the possessor (where the
latter refuses to honor the claim, presumably on same
valid doubts as to the genuineness of the claim) gives
the possessor every adequate protection and
opportunity to contest the owner's claim of recovery.
The owner must therein establish by competent
evidence his lawful claim, and show to the court's
satisfaction his lawful ownership of the article claimed
and that he had been unlawfully deprived thereof.
I therefore find no reason to set aside the long settled
interpretation given by our jurisprudence to article 559
(formerly article 464) of our Civil Code in accordance
with its clear and unambiguous language, as reaffirmed
in the case at bar.
Separate Opinions
TEEHANKEE, J., concurring:
I concur in the main opinion of Mr. Justice Fernando,
tracing and confirming the long settled and uniform
jurisprudence since 1905 based on the express statutory
provision of article 559 of our Civil Code (formerly
article 464 of the old Civil Code) that the owner "who
has lost any movable or has been unlawfully
deprived thereof may recover it from the person in
possession of the same," the only exception expressly
provided in the codal article being that "if the possessor
of a movable lost of which the owner has
been unlawfully deprived, has acquired it in good faith
at a public sale, the owner cannot obtain its
return without reimbursing the price paid therefor."1
Senator Tolentino's submittal in his commentaries on
the Civil Code "that the better view is to consider
'unlawfully deprived' as limited to unlawful taking, such
as theft or robbery, and should not include disposition
through abuse of confidence. Thus, if the owner has
entrusted personal property to a bailee, such as for
transportation, pledge, loan or deposit, without
transmitting ownership, and the latter alienates it to a
third person who acquires it in good faith, the owner
cannot recover it from such third person, "is, as he
himself admits, based on the express provision of the
French Code which allows the true owner of personal
property to recover it from the possessor in good faith
without reimbursement only "if it has been stolen from
him." He concedes likewise that "our Code, following
the Spanish code, uses broader language than that used
in the French code" — since our Code provides that the
owner who has been "unlawfully deprived" of personal
property may recover it from the possessor without
reimbursement, with the sole exception where the
possessor acquired the article in good faith at a public
sale.2
He thus concedes finally that "(T)here are writers who
believe that the phrase 'unlawfully deprived' in our
Code does not have the same meaning as stolen in the
French code; that it is used in the general sense, and is
not used in the specific sense of deprivation by robbery
or theft. Under this view, it extends to all cases where
there has been no valid transmission of ownership,
including the case where the proprietor has entrusted
the thing to a borrower, depositary, or lessee who has
sold the same. It is believed that the owner in such case
is undoubtedly unlawfully deprived of his property, and
may recover the same from a possessor in good faith"
(citing De Buen: 2-II Colin & Capitant 1008; 1 Bonet
234)3 and cites the long unbroken line of decisions of
the Court of Appeals and of this Court upholding the
import of the broader language of the codal article in
question.
Indeed, if our legislature had intended to narrow the
scope of the term "unlawfully deprived" to "stolen" as
advocated by Tolentino, it certainly would have adopted
and used such a narrower term rather than the broad
language of article 464 of the old Spanish Civil Code
with its long-established and accepted meaning in
accordance with our jurisprudence.
Petitioner's contentions at bar had long been disposed
of in the Court's 1911 decision of Arenas vs.
Raymundo,4 per Mr. Justice Florentino Torres, reiterating
the doctrine of the earlier cases and holding that
Even supposing that the defendant
Raymundo had acted in good faith in
accepting the pledge of the jewelry in
litigation, even then he would not be
entitled to retain it until the owner
thereof reimburse him for the amount
loaned to the embezzler, since the said
owner of the jewelry, the plaintiff, did
not make any contract with the
pledgee, that would obligate him to pay
the amount loaned to Perello, and the
trial record does not disclose any
evidence, even circumstantial, that the
plaintiff Arenas consented to or had
knowledge of the pledging of her
jewelry in the pawnshop of the
defendant.
For this reason, and because
Concepcion Perello was not the
legitimate owner of the jewelry which
she pledged to the defendant
Raymundo, for a certain sum that she
received from the latter as a loan, the
contract of pledge entered into by both,
is of course, null and void, and,
consequently the jewelry so pawned
can not serve as security for the
payment of the sum loaned, nor can the
latter be collected out of the value of
the said jewelry.
Article 1857 of the Civil Code prescribes
as one of the essential requisites of the
contracts of pledge and of mortgage,
that the thing pledged or mortgaged
must belong to the person who pledges
or mortgages it. This essential requisite
for the contract of pledge between
Perello and the defendant being absent
as the former was not the owner of the
jewelry given in pledge, the contract is
as devoid of value and force as if it had
not been made, and as it was executed
with marked violation of an express
provision of the law, it can not confer
upon the defendant any rights in the
pledged jewelry, nor impose any
obligation toward him on the part of the
owner thereof, since the latter was
deprived of her possession by means of
the illegal pledging of the said jewelry, a
criminal act.
Between the supposed good faith of the
defendant Raymundo and the
undisputed good faith of the plaintiff
Arenas, the owner of the jewelry,
neither law nor justice permit that the
latter, after being the victim of
embezzlement, should have to choose
one of the two extremes of a dilemma,
both of which, without legal ground or
reason, are injurious and prejudicial to
her interests and rights, that is, she
must either lose her jewelry or pay a
large sum received by the embezzler as
a loan from the defendant, when the
plaintiff Arenas is not related to the
latter by any legal or contractual bond
out of which legal obligations arise.
xxx xxx xxx
The business of pawnshops, in exchange
for the high and onerous interest which
constitutes its enormous profits, is
always exposed to the contingency of
receiving in pledge or security for the
loans, jewels and other articles that
have been robbed, stolen, or embezzled
from their legitimate owners; and as the
owner of the pawnshop accepts the
pledging of jewelry from the first bearer
who offers the same and asks for
money on it, without assuring himself
whether such bearer is or is not the
owner thereof, he can not, by such
procedure, expect from the law better
and more preferential protection than
the owner of the jewels or other
articles, who was deprived thereof by
means of a crime and is entitled to be
excused by the courts.
Antonio Matute, the owner of another
pawnshop, being convinced that he was
wrong, refrained from appealing from
the judgment wherein he was
sentenced to return, without
redemption, to the plaintiffs, another
jewel of great value which had been
pledged to him by the same Perello. He
undoubtedly had in mind some of the
previous decisions of this court, one of
which was against himself.
By the same token, the contention that the owner may
recover the lost article of which he has been unlawfully
deprived without reimbursement of the sum received
by the embezzler from the pawnshop only after a
criminal conviction of the embezzler, is to add a
requirement that is not in the codal article and to
unduly prejudice the victim of embezzlement, as
pointed out by the Court in Arenas, supra.
The civil action that the owner must resort to for the
recovery of his personal property of which he has been
unlawfully deprived as against the possessor (where the
latter refuses to honor the claim, presumably on same
valid doubts as to the genuineness of the claim) gives
the possessor every adequate protection and
opportunity to contest the owner's claim of recovery.
The owner must therein establish by competent
evidence his lawful claim, and show to the court's
satisfaction his lawful ownership of the article claimed
and that he had been unlawfully deprived thereof.
I therefore find no reason to set aside the long settled
interpretation given by our jurisprudence to article 559
(formerly article 464) of our Civil Code in accordance
with its clear and unambiguous language, as reaffirmed
in the case at bar.
Dominador Dizon vs. Lourdes Suntay (G.R. No. L-30817,
September 29, 1972, 47 SCRA 161)
FACTS:
Respondent Lourdes G. Suntay and one Clarita R. Sison
entered into a transaction wherein the Suntay’s three-
carat diamond ring, valued at P5,500.00, was delivered
to Sison for sale on commission. Upon receiving the
ring, Sison executed and delivered to the receipt to
Suntay. After the lapse of a considerable time without
Clarita R. Sison having returned to the ring to her,
Suntay made demands on Clarita R. Sison for the return
of said jewelry. Clarita R. Sison, however, could not
comply with Suntay’s demands because on June 15,
1962, Melia Sison, niece of the husband of Clarita R.
Sison, evidently in connivance with the latter, pledged
the ring with the petitioner Dominador Dizon's
pawnshop for P2,600.00 without Suntay’s knowledge.
When Suntay found out that Clarita R. Sison pledged the
ring, she filed a case of estafa against the latter with the
fiscal's office. Subsequently, Suntay wrote a letter to
Dizon on September 22, 1962 asking for the return of
her ring which was pledged with the latter’s pawnshop
under its Pawnshop Receipt serial B No. 65606, dated
June 15, 1962.
Dizon refused to return the ring, so Suntay filed an
action for its recovery with the CFI of Manila, which
declared that she had the right to its possession. The
Court of Appeals likewise affirmed said decision.
ISSUE:
Who has the right title over the subject property?
COURT RULING:
The Supreme Court affirmed the decision of the lower
courts. The controlling provision is Article 559 of the
Civil Code which provides that “[T]he possession of
movable property acquired in good faith is equivalent
to a title. Nevertheless, one who has lost any movable
or has been unlawfully deprived thereof may recover it
from the person in possession of the same. If the
possessor of a movable lost of which the owner has
been unlawfully deprived, has acquired it in good faith
at a public sale, the owner cannot obtain its return
without reimbursing the price paid therefor.” The only
exception the law allows is when there is acquisition in
good faith of the possessor at a public sale, in which
case the owner cannot obtain its return without,
reimbursing the price. Hanging on to said exception as
his basis, Dizon insisted that the principle of estoppel
should apply in this case but the Supreme Court ruled
otherwise.
In the present case not only has the ownership and the
origin of the jewels misappropriated been
unquestionably proven but also that Clarita R. Sison,
acting fraudulently and in bad faith, disposed of them
and pledged them contrary to agreement with no right
of ownership, and to the prejudice of Suntay, who was
illegally deprived of said jewels and who, as the owner,
has an absolute right to recover the jewels from the
possession of whosoever holds them, which in this case
is Dizon’s pawnshop. Dizon ought to have been on his
guard before accepting the pledge in question, but
evidently there was no such precaution availed of and
he has no one to blame but himself. While the activity
he is engaged in is no doubt legal, it is not to be lost
sight of that it thrives on taking advantage of the
necessities precisely of that element of our population
whose lives are blighted by extreme poverty. From
whatever angle the question is viewed then, estoppel
certainly cannot be justly invoked.
G.R. No. L-18536 March 31, 1965
JOSE B. AZNAR, plaintiff-appellant,
vs.
RAFAEL YAPDIANGCO, defendant-appellee;
TEODORO SANTOS, intervenor-appellee.
Florentino M. Guanlao for plaintiff-appellant.
Rafael Yapdiangco in his own behalf as defendant-
appellee.
Lorenzo Sumulong, R. B. Hilao and B. S. Felipe for
intervenor-appellee.
REGALA, J.:
This is an appeal, on purely legal questions, from a
decision of the Court of First Instance of Quezon City,
Branch IV, declaring the intervenor-appellee, Teodoro
Santos, entitled to the possession of the car in dispute.
The records before this Court disclose that sometime in
May, 1959, Teodoro Santos advertised in two
metropolitan papers the sale of his FORD FAIRLANE 500.
In the afternoon of May 28, 1959, a certain L. De Dios,
claiming to be a nephew of Vicente Marella, went to the
Santos residence to answer the ad. However, Teodoro
Santos was out during this call and only the latter's son,
Irineo Santos, received and talked with De Dios. The
latter told the young Santos that he had come in behalf
of his uncle, Vicente Marella, who was interested to buy
the advertised car.
On being informed of the above, Teodoro Santos
instructed his son to see the said Vicente Marella the
following day at his given address: 1642 Crisostomo
Street, Sampaloc, Manila. And so, in the morning of May
29, 1959, Irineo Santos went to the above address. At
this meeting, Marella agreed to buy the car for
P14,700.00 on the understanding that the price would
be paid only after the car had been registered in his
name.
Irineo Santos then fetched his father who, together with
L. De Dios, went to the office of a certain Atty. Jose
Padolina where the deed of the sale for the car was
executed in Marella's favor. The parties to the contract
thereafter proceeded to the Motor Vehicles Office in
Quezon City where the registration of the car in
Marella's name was effected. Up to this stage of the
transaction, the purchased price had not been paid.
From the Motor Vehicles Office, Teodoro Santos
returned to his house. He gave the registration papers
and a copy of the deed of sale to his son, Irineo, and
instructed him not to part with them until Marella shall
have given the full payment for the car. Irineo Santos
and L. De Dios then proceeded to 1642 Crisostomo
Street, Sampaloc, Manila where the former demanded
the payment from Vicente Marella. Marella said that the
amount he had on hand then was short by some
P2,000.00 and begged off to be allowed to secure the
shortage from a sister supposedly living somewhere on
Azcarraga Street, also in Manila. Thereafter, he ordered
L. De Dios to go to the said sister and suggested that
Irineo Santos go with him. At the same time, he
requested the registration papers and the deed of sale
from Irineo Santos on the pretext that he would like to
show them to his lawyer. Trusting the good faith of
Marella, Irineo handed over the same to the latter and
thereupon, in the company of L. De Dios and another
unidentified person, proceeded to the alleged house of
Marella's sister.
At a place on Azcarraga, Irineo Santos and L. De Dios
alighted from the car and entered a house while their
unidentified companion remained in the car. Once
inside, L. De Dios asked Irineo Santos to wait at the sala
while he went inside a room. That was the last that
Irineo saw of him. For, after a considerable length of
time waiting in vain for De Dios to return, Irineo went
down to discover that neither the car nor their
unidentified companion was there anymore. Going back
to the house, he inquired from a woman he saw for L.
De Dios and he was told that no such name lived or was
even known therein. Whereupon, Irineo Santos rushed
to 1642 Crisostomo to see Marella. He found the house
closed and Marella gone. Finally, he reported the matter
to his father who promptly advised the police
authorities.
That very same day, or on the afternoon of May 29,
1959 Vicente Marella was able to sell the car in question
to the plaintiff-appellant herein, Jose B. Aznar, for
P15,000.00. Insofar as the above incidents are
concerned, we are bound by the factual finding of the
trial court that Jose B. Aznar acquired the said car from
Vicente Marella in good faith, for a valuable
consideration and without notice of the defect
appertaining to the vendor's title.
While the car in question was thus in the possession of
Jose B. Aznar and while he was attending to its
registration in his name, agents of the Philippine
Constabulary seized and confiscated the same in
consequence of the report to them by Teodoro Santos
that the said car was unlawfully taken from him.
In due time, Jose B. Aznar filed a complaint for replevin
against Captain Rafael Yapdiangco, the head of the
Philippine Constabulary unit which seized the car in
question Claiming ownership of the vehicle, he prayed
for its delivery to him. In the course of the litigation,
however, Teodoro Santos moved and was allowed to
intervene by the lower court.
At the end of the trial, the lower court rendered a
decision awarding the disputed motor vehicle to the
intervenor-appellee, Teodoro Santos. In brief, it ruled
that Teodoro Santos had been unlawfully deprived of his
personal property by Vicente Marella, from whom the
plaintiff-appellant traced his right. Consequently,
although the plaintiff-appellant acquired the car in good
faith and for a valuable consideration from Vicente
Marella, the said decision concluded, still the
intervenor-appellee was entitled to its recovery on the
mandate of Article 559 of the New Civil Code which
provides:
ART. 559. The possession of movable property
acquired in good faith is equivalent to title.
Nevertheless, one who lost any movable or has
been unlawfully deprived thereof, may recover
it from the person in possession of the same.
If the possessor of a movable lost or of which
the owner has been unlawfully deprived, has
acquired it in good faith at a public sale, the
owner cannot obtain its return without
reimbursing the price paid therefor.
From this decision, Jose B. Aznar appeals.
The issue at bar is one and simple, to wit: Between
Teodoro Santos and the plaintiff-appellant, Jose B.
Aznar, who has a better right to the possession of the
disputed automobile?
We find for the intervenor-appellee, Teodoro Santos.
The plaintiff-appellant accepts that the car in question
originally belonged to and was owned by the
intervenor-appellee, Teodoro Santos, and that the latter
was unlawfully deprived of the same by Vicente
Marella. However, the appellant contends that upon the
facts of this case, the applicable provision of the Civil
Code is Article 1506 and not Article 559 as was held by
the decision under review. Article 1506 provides:
ART. 1506. Where the seller of goods has a
voidable title thereto, but his, title has not been
voided at the time of the sale, the buyer
acquires a good title to the goods, provided he
buys them in good faith, for value, and without
notice of the seller's defect of title.
The contention is clearly unmeritorious. Under the
aforequoted provision, it is essential that the seller
should have a voidable title at least. It is very clearly
inapplicable where, as in this case, the seller had no title
at all.
Vicente Marella did not have any title to the property
under litigation because the same was never delivered
to him. He sought ownership or acquisition of it by
virtue of the contract. Vicente Marella could have
acquired ownership or title to the subject matter
thereof only by the delivery or tradition of the car to
him.
Under Article 712 of the Civil Code, "ownership and
other real rights over property are acquired and
transmitted by law, by donation, by testate and intestate
succession, and in consequence of certain contracts, by
tradition." As interpreted by this Court in a host of
cases, by this provision, ownership is not transferred by
contract merely but by tradition or delivery. Contracts
only constitute titles or rights to the transfer or
acquisition of ownership, while delivery or tradition is
the mode of accomplishing the same (Gonzales v. Rojas,
16 Phil. 51; Ocejo, Perez and Co. v. International Bank,
37 Phil. 631, Fidelity and Deposit Co. v. Wilson, 8 Phil.
51; Kuenzle & Streiff v. Wacke & Chandler, 14 Phil. 610;
Easton v. Diaz Co., 32 Phil. 180).
For the legal acquisition and transfer of
ownership and other property rights, the thing
transferred must be delivered, inasmuch as,
co
ntemplated by Article 712 of the Civil Code. For then, it
would be indisputable that he turned it over to the
unidentified companion only so that he may drive Irineo
Santos and De Dios to the said place on Azcarraga and
not to vest the title to the said vehicle to him as agent of
Vicente Marella. Article 712 above contemplates that
the act be coupled with the intent of delivering the
thing. (10 Manresa 132)
The lower court was correct in applying Article 559 of
the Civil Code to the case at bar, for under it, the rule is
to the effect that if the owner has lost a thing, or if he
has been unlawfully deprived of it, he has a right to
recover it, not only from the finder, thief or robber, but
also from third persons who may have acquired it in
good faith from such finder, thief or robber. The said
article establishes two exceptions to the general rule of
irrevindicability, to wit, when the owner (1) has lost the
thing, or (2) has been unlawfully deprived thereof. In
these cases, the possessor cannot retain the thing as
against the owner, who may recover it without paying
any indemnity, except when the possessor acquired it in
a public sale. (Del Rosario v. Lucena, 8 Phil. 535; Varela v.
Finnick, 9 Phil. 482; Varela v. Matute, 9 Phil. 479; Arenas
v. Raymundo, 19 Phil. 46. Tolentino, id., Vol. II, p. 261.)
according to settled jurisprudence, the tradition
of the thing is a necessary and indispensable
requisite in the acquisition of said ownership by
virtue of contract. (Walter Laston v. E. Diaz & Co.
& the Provincial Sheriff of Albay, supra.)
So long as property is not delivered, the
ownership over it is not transferred by contract
merely but by delivery. Contracts only constitute
titles or rights to the transfer or acquisition of
ownership, while delivery or tradition is the
method of accomplishing the same, the title
and the method of acquiring it being different in
our law. (Gonzales v. Roxas, 16 Phil. 51)
In the case on hand, the car in question was never
delivered to the vendee by the vendor as to complete or
consummate the transfer of ownership by virtue of the
contract. It should be recalled that while there was
indeed a contract of sale between Vicente Marella and
Teodoro Santos, the former, as vendee, took possession
of the subject matter thereof by stealing the same while
it was in the custody of the latter's son.
There is no adequate evidence on record as to whether
Irineo Santos voluntarily delivered the key to the car to
the unidentified person who went with him and L. De
Dios to the place on Azcarraga where a sister of Marella
allegedly lived. But even if Irineo Santos did, it was not
the delivery
In the case of Cruz v. Pahati, et al., 52 O.G. 3053 this
Court has already ruled
that —
Under Article 559 of the new Civil Code, a
person illegally deprived of any movable may
recover it from the person in possession of the
same and the only defense the latter may have
is if he has acquired it in good faith at a public
sale, in which case, the owner cannot obtain its
return without reimbursing the price paid
therefor. In the present case, plaintiff has been
illegally deprived of his car through the
ingenious scheme of defendant B to enable the
latter to dispose of it as if he were the owner
thereof. Plaintiff, therefore, can still recover
possession of the car even if it is in the
possession of a third party who had acquired it
in good faith from defendant B. The maxim that
"no man can transfer to another a better title
than he had himself" obtains in the civil as well
as in the common law. (U.S. v. Sotelo, 28 Phil.
147)
Finally, the plaintiff-appellant here contends that
inasmuch as it was the intervenor-appellee who had
caused the fraud to be perpetrated by his misplaced
confidence on Vicente Marella, he, the intervenor-
appellee, should be made to suffer the consequences
arising therefrom, following the equitable principle to
that effect. Suffice it to say in this regard that the right
of the owner to recover personal property acquired in
good faith by another, is based on his being
dispossessed without his consent. The common law
principle that where one of two innocent persons must
suffer by a fraud perpetrated by another, the law
imposes the loss upon the party who, by his misplaced
confidence, has enabled the fraud to be committed,
cannot be applied in a case which is covered by an
express provision of the new Civil Code, specifically
Article 559. Between a common law principle and a
statutory provision, the latter must prevail in this
jurisdiction. (Cruz v. Pahati, supra)
UPON ALL THE FOREGOING, the instant appeal is hereby
dismissed and the decision of the lower court affirmed
in full. Costs against the appellant.
Bengzon, C.J., Bautista Angelo, Concepcion, Reyes, J.B.L.,
Barrera, Paredes, Dizon, Makalintal, Bengzon, J.P., and
Zaldivar, JJ., concur.
Jose Aznar and while attending to registration, the car
was seized by Phil. Constabulary due to the report of
the incident.
ISSUE:
Between the two parties, who has the better right?
HELD:
Teodoro Santos has the better right. Marella did not
have any title to the property under litigation because
the same was never delivered to him. He may have the
contract but he never acquired valid title. Although the
keys to the car may have been given to the unidentified
companion, it may be done only because that
companion took them to the place where the sister of
Marella was supposed to live. The car was evidently
stolen and that the buyer did not acquire any valid title
thereto.

The Lawphil Project - Arellano Law Foundation

AZNAR v. YAPDIANGCO- Stolen Goods

True owner has a better right than a buyer in good faith
to possession of a stolen good.

FACTS:
Teodoro Santos advertised the sale of his FORD
FAIRLANE 500 in a newspaper. On L. De Dios went to the
house of Teodoro and talked to his son Ireneo Santos
and said that his uncle Vicente Marella is interested in
buying the said car.

The next day, Ireneo went to the house of Marella and

they agreed to the price of P14,700 on the
understanding that it will be paid after the car has been
registered in the latter’s name.
A deed of sale was executed and the registration was
changed to the name of Marella. Ireneo went to Marella
to get the payment and deliver the car who informed
him that he is P2,000 short of the money and that they
need to go to his sister to get it. Ireneo, together with
De Dios and an unidentified man went to a house.

Once inside, De Dios asked Ireneo to wait in the sale.

After waiting in vain, he went down and discovered that
the car was gone.

Marella was able to sell the car to plaintiff-appellant