Sales Session 9
RTC) of Negros Occidental, 12th Judicial District, Branch IV, Bacolod City, in Civil Case No.
G.R. No. 61584.November 25, 1992.*
DONATO S. PAULMITAN, JULIANA P. FANESA and RODOLFO FANESA, petitioners, vs.
COURT OF APPEALS, ALICIO PAULMITAN, ELENA PAULMITAN, ABELINO PAULMITAN,
ANITA PAULMITAN, BAKING PAULMITAN, ADELINA PAULMITAN and ANITO
PAULMITAN, respondents.
Civil Law; Succession; In every inheritance the relative nearest in degree excludes the more
distant ones.—Since it is well-settled by virtue of Article 777 of the Civil Code that “[t]he rights
to the succession are transmitted from the moment of the death of the decedent,” the right of
ownership, not only of Donato but also of Pascual, over their respective shares in the inheritance
was automatically and by operation of law vested in them in 1953 when their mother died
intestate. At that stage, the children of Donato and Pascual did not yet have any right over the
inheritance since “[i]n every inheritance the relative nearest in degree excludes the more distant
ones.” Donato and Pascual excluded their children as to the right to inherit from Agatona
Sagario Paulmitan, their mother.
Same; Property; Co-ownership; Even if a co-owner sells the whole property as his, the sale will
affect only his own share but not those of the other co-owners who did not consent to the sale.
—This Court has ruled that even if a co-owner sells the whole property as his, the sale will affect
only his own share but not those of the other co-owners who did not consent to the sale
[Punsalan v. Boon Liat, 44 Phil. 320 (1923)].
Same; Same; Same; Same; Since a co-owner is entitled to sell his undivided share, a sale of the
entire property by one co-owner without the consent of the other co-owners is not null and void.
—This is because under the aforementioned codal provision, the sale or other disposition affects
only his undivided share and the transferee gets only what would correspond to his grantor in
the partition of the thing owned in common.
Remedial Law; Appeal; The settled rule is that only questions of law may be raised in a petition
for review; Generally, findings of fact made by the trial court and the Court of Appeals are final
and conclusive and cannot be reviewed on appeal.—Petitioners dispute the order of the trial
court, which the Court of Appeals affirmed, for them to pay private respondents P5,000.00 per
year from 1966 until the partition of the estate which represents the share of private
respondents in the fruits of the land. According to petitioners, the land is being leased for
P2,000.00 per year only. This assigned error, however, raises a factual question. The settled rule
is that only questions of law may be raised in a petition for review. As a general rule, findings of
fact made by the trial court and the Court of Appeals are final and conclusive and cannot be
reviewed on appeal.
PETITION for review on certiorari, from the decision of the Court of Appeals.
The facts are stated in the opinion of the Court. Paulmitan vs. Court of Appeals, 215 SCRA 866,
G.R. No. 61584 November 25, 1992
ROMERO, J.:
This is a petition for review on certiorari seeking the reversal of the decision 1 of the Court of
Appeals, dated July 14, 1982 in CA-G.R. No. 62255-R entitled "AlicioPaulmitan, et al. v. Donato
SagarioPaulmitan, et al." which affirmed the decision 2 of the then Court of First Instance (now
Page |1
11770.
The antecedent facts are as follows:
AgatonaSagarioPaulmitan, who died sometime in 1953, 3 left the two following parcels of land
located in the Province of Negros Occidental: (1) Lot No. 757 with an area of 1,946 square
meters covered by Original Certificate of Title (OCT) No. RO-8376; and (2) Lot No. 1091 with an
area of 69,080 square meters and covered by OCT No. RO-11653. From her marriage with
Ciriaco Paulmitan, who is also now deceased, Agatona begot two legitimate children, namely:
Pascual Paulmitan, who also died in 1953, 4 apparently shortly after his mother passed away,
and Donato Paulmitan, who is one of the petitioners. Petitioner Juliana P. Fanesa is Donato's
daughter while the third petitioner, Rodolfo Fanes, is Juliana's husband. Pascual Paulmitan, the
other son of AgatonaSagario, is survived by the respondents, who are his children, name: Alicio,
Elena, Abelino, Adelina, Anita, Baking and Anito, all surnamed Paulmitan.
Until 1963, the estate of AgatonaSagarioPaulmitan remained unsettled and the titles to the two
lots mentioned above remained in the name of Agatona. However, on August 11, 1963,
petitioner Donato Paulmitan executed an Affidavit of Declaration of Heirship, extrajudicially
adjudicating unto himself Lot No. 757 based on the claim that he is the only surviving heir of
AgatonaSagario. The affidavit was filed with the Register of Deeds of Negros Occidental on
August 20, 1963, cancelled OCT No. RO-8376 in the name of AgatonaSagario and issued
Transfer Certificate of Title (TCT) No. 35979 in Donato's name.
As regards Lot No. 1091, Donato executed on May 28, 1974 a Deed of Sale over the same in
favor of petitioner Juliana P. Fanesa, his daughter. 5
In the meantime, sometime in 1952, for non-payment of taxes, Lot No. 1091 was forfeited and
sold at a public auction, with the Provincial Government of Negros Occidental being the buyer. A
Certificate of Sale over the land was executed by the Provincial Treasurer in favor of the
Provincial Board of Negros Occidental. 6
On May 29, 1974, Juliana P. Fanesa redeemed the property from the Provincial Government of
Negros Occidental for the amount of P2,959.09. 7
On learning of these transactions, respondents children of the late Pascual Paulmitan filed on
January 18, 1975 with the Court of First Instance of Negros Occidental a Complaint against
petitioners to partition the properties plus damages.
Petitioners set up the defense of prescription with respect to Lot No. 757 as an affirmative
defense, contending that the Complaint was filed more than eleven years after the issuance of a
transfer certificate of title to Donato Paulmitan over the land as consequence of the registration
with the Register of Deeds, of Donato's affidavit extrajudicially adjudicating unto himself Lot No.
757. As regards Lot No. 1091, petitioner Juliana P. Fanesa claimed in her Answer to the
Complaint that she acquired exclusive ownership thereof not only by means of a deed of sale
executed in her favor by her father, petitioner Donato Paulmitan, but also by way of redemption
from the Provincial Government of Negros Occidental.
Acting on the petitioners' affirmative defense of prescription with respect to Lot No. 757, the
trial court issued an order dated April 22, 1976 dismissing the complaint as to the said property
 Sales Session 9 Page |2

upon finding merit in petitioners' affirmative defense. This order, which is not the object of the On appeal, the Court of Appeals affirmed the trial court's decision. Hence this petition.
present petition, has become final after respondents' failure to appeal therefrom.
To determine the rights and obligations of the parties to the land in question, it is well to review,
Trial proceeded with respect to Lot No. 1091. In a decision dated May 20, 1977, the trial court initially, the relatives who survived the decedent AgatonaSagarioPaulmitan. When Agatona died
decided in favor of respondents as to Lot No. 1091. According to the trial court, the in 1953, she was survived by two (2) sons, Donato and Pascual. A few months later in the same
respondents, as descendants of AgatonaSagarioPaulmitan were entitled to one-half (1/2) of Lot year, Pascual died, leaving seven children, the private respondents. On the other had, Donato's
No. 1091, pro indiviso.  The sale by petitioner Donato Paulmitan to his daughter, petitioner sole offspring was petitioner Juliana P. Fanesa.
Juliana P. Fanesa, did not prejudice their rights. And the repurchase by Juliana P. Fanesa of the
land from the Provincial Government of Negros Occidental did not vest in Juliana exclusive
At the time of the relevant transactions over the properties of decedent
ownership over the entire land but only gave her the right to be reimbursed for the amount paid
AgatonaSagarioPaulmitan, her son Pascual had died, survived by respondents, his children. It is,
to redeem the property. The trial court ordered the partition of the land and directed petitioners
thus, tempting to apply the principles pertaining to the right of representation as regards
Donato Paulmitan and Juliana P. Fanesa to pay private respondents certain amounts
respondents. It must, however, be borne in mind that Pascual did no predecease his
representing the latter's share in the fruits of the land. On the other hand, respondents were
mother, 8 thus precluding the operation of the provisions in the Civil Code on the right of
directed to pay P1,479.55 to Juliana P. Fanesa as their share in the redemption price paid by
representation 9 with respect to his children, the respondents. When AgatonaSagarioPaulmitan
Fanesa to the Provincial Government of Negros Occidental. The dispositive portion of the trial
died intestate in 1952, her two (2) sons Donato and Pascual were still alive. Since it is well-
court's decision reads:
settled by virtue of Article 777 of the Civil Code that "[t]he rights to the succession are
transmitted from the moment of the death of the decedent," 10 the right of ownership, not only
WHEREFORE, judgment is hereby rendered on the second cause of action of Donato but also of Pascual, over their respective shares in the inheritance was automatically
pleaded in the complain as follows: and by operation of law vested in them in 1953 when their mother died intestate. At that stage,
the children of Donato and Pascual did not yet have any right over the inheritance since "[i]n
every inheritance, the relative nearest in degree excludes the more distant
1. The deed of sale (Exh. "F") dated May 28, 1974 is valid insofar as the
ones." 11 Donato and Pascual excluded their children as to the right to inherit from
one-half undivided portion of Lot 1091 is concerned as to vest ownership
AgatonaSagarioPaulmitan, their mother.
over said half portion in favor of defendant Juliana Fanesa and her husband
Rodolfo Fanesa, while the remaining half shall belong to plaintiffs,  pro-
indiviso; From the time of the death of AgatonaSagarioPaulmitan to the subsequent passing away of her
son Pascual in 1953, the estate remained unpartitioned. Article 1078 of the Civil Code provides:
"Where there are two or more heirs, the whole estate of the decedent is, before its partition,
2. Lot 1091, Cadastral Survey of Pontevedra, Province of Negros Occidental,
owned in common by such heirs, subject to the payment of debts of the deceased." 12 Donato
now covered by TCT No. RO-11653 (N.A.), is ordered partitioned. The
and Pascual Paulmitan were, therefore, co-owners of the estate left by their mother as no
parties must proceed to an actual partition by property instrument of
partition was ever made.
partition, submitting the corresponding subdivision within sixty (60) days
from finality of this decision, and should they fail to agree, commissioners of
partition may be appointed by the Court; When Pascual Paulmitan died intestate in 1953, his children, the respondents, succeeded him in
the co-ownership of the disputed property. Pascual Paulmitan's right of ownership over an
undivided portion of the property passed on to his children, who, from the time of Pascual's
3. Pending the physical partition, the Register of Deeds of Negros
death, became co-owners with their uncle Donato over the disputed decedent estate.
Occidental is ordered to cancel Original Certificate of Title No. RO-11653
(N.A.) covering Lot 1091, Pontevedra Cadastre, and to issue in lieu thereof
a new certificate of title in the name of plaintiffs and defendants, one-half Petitioner Juliana P. Fanesa claims ownership over Lot No. 1091 by virtue of two transactions,
portion each,pro-indiviso, as indicated in paragraph 1 above; namely: (a) the sale made in her favor by her father Donato Paulmitan; and (b) her redemption
of the land from the Provincial of Negros Occidental after it was forfeited for non-payment of
taxes.
4. Plaintiffs are ordered to pay, jointly and severally, defendant Juliana
Fanesa the amount of P1,479.55 with interest at the legal rate from May 28,
1974 until paid; When Donato Paulmitan sold on May 28, 1974 Lot No. 1091 to his daughter Juliana P. Fanesa,
he was only a co-owner with respondents and as such, he could only sell that portion which may
be allotted to him upon termination of the co-ownership. 13 The sale did not prejudice the rights
5 Defendants Donato SagarioPaulmitan and Juliana PaulmitanFanesa are
of respondents to one half (1/2) undivided share of the land which they inherited from their
ordered to account to plaintiffs and to pay them, jointly and severally, the
father. It did not vest ownership in the entire land with the buyer but transferred only the
value of the produce from Lot 1091 representing plaintiffs' share in the
seller's pro-indiviso  share in the property 14 and consequently made the buyer a co-owner of the
amount of P5,000.00 per year from 1966 up to the time of actual partition
land until it is partitioned. In Bailon-Casilao v. Court of Appeals,  15 the Court, through Justice
of the property, and to pay them the sum of P2,000.00 as attorney's fees as
Irene R. Cortes, outlined the effects of a sale by one co-owner without the consent of all the co-
well as the costs of the suit.
owners, thus:

x xx           x xx          x xx
 Sales Session 9 Page |3

The rights of a co-owner of a certain property are clearly specified in Article Essentially, it is the petitioners' contention that the property subject of
493 of the Civil Code, Thus: dispute devolved upon him upon the failure of his co-heirs to join him in its
redemption within the period required by law. He relies on the provisions of
Article 1515 of the old Civil Code, Article 1613 of the present Code, giving
Art. 493. Each co-owner shall have the full ownership of his part and of the
the vendee a retro the right to demand redemption of the entire property.
fruits and benefits pertaining thereto, and he may therefore alienate, assign
or mortgage it and even substitute another person its enjoyment, except
when personal rights are involved. But the effect of the alienation or There is no merit in this petition.
mortgage, with respect to the co-owners, shall be limited to the portion
which may be allotted to him in the division upon the termination of the co-
The right of repurchase may be exercised by co-owner with respect to his
ownership.  [Emphasis supplied.]
share alone (CIVIL CODE, art. 1612, CIVIL CODE (1889), art. (1514.). While
the records show that petitioner redeemed the property in its entirety,
As early as 1923, this Court has ruled that even if a co-owner sells the shouldering the expenses therefor, that did not make him the owner of all
whole property as his, the sale will affect only his own share but not those of it. In other words, it did not put to end the existing state of co-ownership
of the other co-owners who did not consent to the sale [Punsalan v. Boon (Supra,  Art. 489). There is no doubt that redemption of property entails a
Liat, 44 Phil. 320 (1923)]. This is because under the aforementioned codal necessary expense. Under the Civil Code:
provision, the sale or other disposition affects only his undivided share and
the transferee gets only what would correspond to his grantor in the
Art. 488. Each co-owner shall have a right to compel the other co-owners to
partition of the thing owned in common [Ramirez v. Bautista, 14 Phil. 528
contribute to the expenses of preservation of the thing or right owned in
(1909)]. Consequently, by virtue of the sales made by Rosalia and
common and to the taxes. Any one of the latter may exempt himself from
Gaudencio Bailon which are valid with respect to their proportionate shares,
this obligation by renouncing so much of his undivided interest as may be
and the subsequent transfers which culminated in the sale to private
equivalent to his share of the expenses and taxes. No such waiver shall be
respondent Celestino Afable, the said Afable thereby became a co-owner of
made if it is prejudicial to the co-ownership.
the disputed parcel of land as correctly held by the lower court since the
sales produced the effect of substituting the buyers in the enjoyment
thereof [Mainit v. Bandoy, 14 Phil. 730 (1910)]. The result is that the property remains to be in a condition of co-ownership.
While a vendee a retro, under Article 1613 of the Code, "may not be
compelled to consent to a partial redemption," the redemption by one co-
From the foregoing, it may be deduced that since a co-owner is entitled to
heir or co-owner of the property in its totality does not vest in him
sell his undivided share, a sale of the entire property by one co-owner
ownership over it. Failure on the part of all the co-owners to redeem it
without the consent of the other co-owners is not null and void. However,
entitles the vendee a retro to retain the property and consolidate title
only the rights of the co-owner-seller are transferred, thereby making the
thereto in his name (Supra,  art. 1607). But the provision does not give to
buyer a co-owner of the property.
the redeeming co-owner the right to the entire property. It does not provide
for a mode of terminating a co-ownership.
Applying this principle to the case at bar, the sale by petitioner Donato Paulmitan of the land to
his daughter, petitioner Juliana P. Fanesa, did not give to the latter ownership over the entire
Although petitioner Fanesa did not acquire ownership over the entire lot by virtue of the
land but merely transferred to her the one half (1/2) undivided share of her father, thus making
redemption she made, nevertheless, she did acquire the right to reimbursed for half of the
her the co-owner of the land in question with the respondents, her first cousins.
redemption price she paid to the Provincial Government of Negros Occidental on behalf of her
co-owners. Until reimbursed, Fanesa hold a lien upon the subject property for the amount due
Petitioner Juliana P. Fanesa also claims ownership of the entire property by virtue of the fact her. 17
that when the Provincial Government of Negros Occidental bought the land after it was forfeited
for non-payment of taxes, she redeemed it.
Finally, petitioners dispute the order of the trial court, which the Court of Appeals affirmed, for
them to pay private respondents P5,000.00 per year from 1966 until the partition of the estate
The contention is without merit. which represents the share of private respondents in the fruits of the land. According to
petitioners, the land is being leased for P2,000.00 per year only. This assigned error, however
raises a factual question. The settled rule is that only questions of law may be raised in a
The redemption of the land made by Fanesa did not terminate the co-ownership nor give her
petition for review. As a general rule, findings of fact made by the trial court and the Court of
title to the entire land subject of the co-ownership. Speaking on the same issue raised by
Appeals are final and conclusive and cannot be reviewed on appeal. 18
petitioners, the Court, in Adille v. Court of Appeals,  16 resolved the same with the following
pronouncements:
WHEREFORE, the petition is DENIED and the decision of the Court of Appeals AFFIRMED.
The petition raises a purely legal issue: May a co-owner acquire exclusive
ownership over the property held in common?
 Sales Session 9
No. L-17681. February 26, 1965.
MINDANAO ACADEMY, INC., MAURICIO O. BAS, ERLINDA D. DIAZ, accompanied by
her husband ANTOLIN DIAZ, ESTER AIBA D. BAS, accompanied by her husband
MAURICIO O. BAS, ROSALINDA D. BELLEZA, accompanied by her husband
APOLINARIO BELLEZA, LUZ MINDA D. DAJAO, accompanied by her husband ELIGIO
C. DAJAO, ADELAIDA D. NUESA, accompanied by her husband WILSON
NUESA,PEDRO N. ABUTON, SY PAOCO, JOSEFA DIGNUM, and PERFECTO VELASQUEZ,
plaintiffs-appellees, vs. ILDEFONSO D. YAP, ROSENDA A. DE NUQUI, and SOTERO A.
DIONISIO, JR., defendants, ILDEFONSO D. YAP, defendant-appellant.
No. L-17682. February 26, 1965.
ROSENDA A. DE NUQUI,SOTERO DIONISIO,JR., ERLINDA DIONISIO-DIAZ and
ANTOLIN DIAZ, plaintiffs-appellees, vs. ILDEFONSO D. YAP, defendant-appellant.
Sale; Void entirely where vendors ceded also interest belonging to persons not parties and
prestation is indivisible.—A contract of sale is entirely null and void where it purports to sell
properties of which the sellers were not the only owners and the prestation involved was
indivisible, and therefore incapable of partial annulment.
Same; Legal fiction of good faith ceases after complaint is filed in court.—Although the bad faith
of one party neutralizes that of the other and hence as between themselves their rights would
be as if both of them had acted in good faith at the time of the transaction, this legal fiction of
the buyer’s good faith ceased when the complaint against him was filed.
Same; Same; Possessor in good faith not entitled to fruits after legal interruption of possession.
—A possessor in good faith is entitled to the fruits only so long as his possession is not legally
interrupted, and such interruption takes place upon service of judicial summons.
Same; Same; Possessor in good faith not entitled to reimbursement of improvements
constructed after filing of action for annulment.—A possessor in good faith cannot recover the
value of a new building constructed after the filing of an action for annulment of the sale of land
on which it is constructed, thus rendering him a builder in bad faith who is denied by law any
right of reimbursement.
Damages; Nominal and exemplary damages not awarded to stockholders already represented by
the corporation.—Where the interests of the stockholders were already represented by the
corporation itself, which was the proper party plaintiff, and no cause of action accruing to them
separately from the corporation is alleged in the complaint, the trial court’s ruling out the claim
for moral damages to the corporation also rule’s out any award for such nominal and exemplary
damages to the stockholders.
APPEAL from a judgment of the Court of First Instance of Misamis Occidental.
The facts are stated in the opinion of the Court.
     Mauricio O. Bas for and in his own behalf as plaintiff-appellee.
     Eligio C. Dayao for and in his own behalf as plaintiff-appellee.
     Roque Desquitado for other plaintiffs-appellees.
Page |4
     Ambrosio Padilla Law Offices for defendant-appellant.
MAKALINTAL, J.:
By deed entitled "Mutual Agreement," executed on May 10, 1964, Rosenda A. de Nuqui (widow
of deceased Sotero Dionisio) and her son Sotero Dionisio, Jr. sold three parcels of residential
land in Oroquieta, Misamis Occidental, and another parcel in Ozamis City in favor of Ildefonso D.
Yap. Included in the sale were certain buildings situated on said lands as well as laboratory
equipment, books, furniture and fixtures used by two schools established in the respective
properties, the Mindanao Academy in Oroquieta and the Misamis Academy in Ozamis City. The
aggregate price stated in the deed was P100,700.00, to be paid according to the terms and
conditions specified in the contract.
Besides Rosenda and her son Sotero, Jr., both of whom signed the instrument, Adelaida
Dionisio-Nuesa (a daughter of Rosenda) is also named therein as co-vendor, but actually did not
take part either personally or through her uncle and supposed attorney-in-fact, RestitutoAbuton.
These three — Rosenda and her two children above named — are referred to in the deed as the
owners pro-indiviso of the properties sold. The truth, however, was that there were other co-
owners of the lands, namely, Erlinda D. Diaz, Ester Aida D. Bas, Rosalinda D. Belleza, and Luz
Minda D. Dajao, children also of Rosenda by her deceased husband Sotero Dionisio, Sr., and
that as far as the school building, equipment, books, furniture and fixtures were concerned, they
were owned by the Mindanao Academy, Inc., a corporation operating both the Mindanao
Academy in Oroquieta and the Misamis Academy in Ozamis City.
The buyer, Ildefonso D. Yap, obtained possession of the properties by virtue of the sale, took
over the operation of the two schools and even changed their names to Harvardian Colleges. In
view thereof two actions were commenced in the Court of First Instance of Misamis Occidental.
The first was for annulment of the sale and recovery of rents and damages (Civil Case No. 1774,
filed May 3, 1955) with the Mindanao Academy, Inc., the five children of Rosenda Nuqui who did
not take part in the deed of sale, and several other persons who were stockholders of the said
corporation, as plaintiffs, and the parties who signed the deed of sale as defendants. The
second action was for rescission (Civil Case No. 1907, filed July 17, 1956) with Rosenda Nuqui,
Sotero Dionisio, Jr. and Erlinda D. Diaz (and the latter's husband Antolin Diaz) as plaintiffs, and
Ildefonso D. Yap as lone defendant. The other four children of Rosenda did not join, having
previously ceded and quitclaimed their shares in the litigated properties in favor of their sister
Erlinda D. Diaz.
The two actions were tried jointly and on March 31, 1960 the court a quo rendered judgment as
follows:
In both Cases —
(1) The Mutual Agreement is hereby declared null and void ab initio;
(2) Defendant Ildefonso D. Yap is hereby ordered to pay the costs of the proceedings
in both cases.
In Civil Case No. 1907 only —
 Sales Session 9
(1) Defendant Ildefonso D. Yap is hereby ordered to restore to the plaintiffs in said
case all the buildings and grounds described in the Mutual Agreement together with
all the permanent improvements thereon;
(2) To pay to the plaintiffs therein the amount of P300.00 monthly from July 31, 1956
up to the time he shall have surrendered the properties in question to the plaintiffs
herein, plus P1,000.00 as attorney's fees to plaintiffs Antolin and Erlinda D. Diaz.
In Civil Case No. 1774 only —
(1) Defendant Ildefonso D. Yap is hereby ordered to restore to the Mindanao
Academy, Inc., all the books laboratory apparatus, furniture and other equipments
described in the Mutual Agreement and specified in the inventory attached to the
Records of this case; or in default thereof, their value in the amount of P23,500.00;
(2) To return all the Records of the Mindanao Academy and Misamis Academy;
(3) To pay to the plaintiffs stockholders of the Mindanao Academy, Inc., the amount
of P10,000.00 as nominal damages, P3,000.00 as exemplary damages; and P2,000.00
as attorney's fees. These damages shall be apportioned to each of the stockholders
named as plaintiffs in said case in proportion to their respective interests in the
corporation.
Ildefonso D. Yap appealed from the foregoing judgment and has assigned five errors therein.
I. He first contends that the lower court erred "in declaring that the mutual agreement dated
May 10, 1954 ... is entirely void and legally non-existent in that the vendors therein ceded to
defendant-appellant not only their interests, rights, shares and participation in the property sold
but also those that belonged to persons who were not parties thereto."
The lower court did not rule categorically on the question of rescission considering it
unnecessary to do so in view of its conclusion that the contract of sale is null and void. This
conclusion is premised on two grounds: (a) the contract purported to sell properties of which
the sellers were not the only owners, since of the four parcels of land mentioned in the deed
their shares consisted only of 7/12, (6/12 for Rosenda Nuqui and 1/12 for Sotero, Jr.), while in
the buildings, laboratory equipment, books, furniture and fixtures they had no participation at
all, the owner being the Mindanao Academy, Inc.; and (b) the prestation involved in the sale
was indivisible, and therefore incapable of partial annulment, inasmuch as the buyer Yap, by his
own admission, would not have entered into the transaction except to acquire all of the
properties purchased by him.
These premises are not challenged by appellant. But he calls attention to one point, namely,
that the four children of Rosenda Nuqui who did not take part in the sale, besides Erlinda
Dionisio Diaz, quitclaimed in favor of the latter their interests in the properties; and that the trial
court held that Erlinda as well as her husband acted in bad faith, because "having reasonable
notice of defendants' having unlawfully taken possession of the property, they failed to make
reasonable demands for (him) to vacate the premises to respect their rights thereto." It is
argued that being herself guilty of bad faith, Erlinda D. Diaz, as owner of 5/12 undivided interest
in the properties (including the 4/12 ceded to her by her four sisters), is in no position to ask for
annulment of the sale. The argument does not convince us. In the first place the quitclaim, in
the form of an extrajudicial partition, was made on May 6, 1956, after the action for annulment
Page |5
was filed, wherein the plaintiffs were not only Erlinda but also the other co-owners who took no
part in the sale and to whom there has been no imputation of bad faith. Secondly, the trial
court's finding of bad faith is an erroneous conclusion induced by a manifest oversight of an
undisputed fact, namely, that on July 10, 1954, just a month after the deed of sale in question,
Erlinda D. Diaz did file an action against Ildefonso D. Yap and Rosenda Nuqui, among others,
asserting her rights as co-owner of the properties (Case No. 1646). Finally, bad faith on the part
of Erlinda would not militate against the nullity of the sale, considering that it included not only
the lands owned in common by Rosenda Nuqui and her six children but also the buildings and
school facilities owned by the Mindanao Academy, Inc., an entity which had nothing to do with
the transaction and which could be represented solely by its Board of Trustees.
The first assignment of error is therefore without merit.
II. The second and third errors are discussed jointly in appellant's brief. They read as follows:
THE LOWER COURT ERRED IN HOLDING DEFENDANT-APPELLANT LIABLE FOR
RENTS AND ATTORNEY'S FEES IN THE SUM OF P1,000.00 AFTER DECLARING THAT
ALL THE PLAINTIFFS-APPELLEES IN CIVIL CASE NO. 1907 ACTED IN BAD FAITH.
THE LOWER COURT ERRED IN HOLDING THAT PLAINTIFFS-APPELLEES IN SAID
CIVIL CASE NO. 1907 ARE ENTITLED TO RECOVER ALL THE LANDS, BUILDINGS AND
OTHER PERMANENT IMPROVEMENTS DESCRIBED IN THE MUTUAL AGREEMENT
DATED MAY 10, 1954.
The lower court correctly found that both vendors and vendee in the sale acted in bad faith and
therefore must be treated, vis-a-vis each other, as having acted in good faith. The return of the
properties by the vendee is a necessary consequence of the decree of annulment. No part of the
purchase price having been paid, as far as the record shows, the trial court correctly made no
corresponding order for the restitution thereof.
In regard to the rents the trial court found that prior to the sale the Mindanao Academy, Inc.,
was paying P300.00 monthly for its occupancy of the lands on which the buildings are situated.
This is the amount the defendant has been ordered to pay to the plaintiffs in Civil Case No.
1907, beginning July 31, 1956, when he filed his "first pleading" in the case. There can be no
doubt that Erlinda D. Diaz is entitled to recover a share of the said rents in proportion to her
own interests in the lands and the interest in the four co-owners which she had acquired.
Rosenda Nuqui and her son Sotero, it is true, acted in bad faith when they sold the properties as
theirs alone, but so did the defendant Yap when he purchased them with knowledge of the fact
that there were other co-owners. Although the bad faith of one party neutralizes that of the
other and hence as between themselves their rights would be as if both of them had acted in
good faith at the time of the transaction, this legal fiction of Yap's good faith ceased when the
complaint against him was filed, and consequently the court's declaration of liability for the rents
thereafter is correct and proper. A possessor in good faith is entitled to the fruits only so long as
his possession is not legally interrupted, and such interruption takes place upon service of
judicial summons (Arts. 544 and 1123, Civil Code).
In our opinion the award of attorney's fees to Erlinda D. Diaz and her husband is erroneous.
Civil Case No. 1907, in which said fees have been adjudged, is for rescission (more properly
resolution) of the so-called "mutual agreement" on the ground that the defendant Yap failed to
comply with certain undertakings specified therein relative to the payment of the purchase price.
Erlinda Diaz was not a party to that agreement and hence had no cause of action for rescission.
And as already stated, the trial court did not decide the matter of rescission because of the
 Sales Session 9 Page |6

decree of annulment it rendered in the other case (Civil Case No. 1774), wherein the defendants It is unnecessary to pass upon the question posed in this assignment of error in view of the total
are not only Ildefonso D. Yap but also Rosenda Nuqui and her son Sotero. Erlinda D. Diaz could annulment of the sale on grounds concerning which both parties thereto were at fault. The
just as well have refrained from joining as plaintiff in the action for rescission, not being a party nullity of the contract precludes enforcement of any of its stipulations.
to the contract sought to be rescission and being already one of the plaintiffs in the other action.
In other words, it cannot be said with justification that she was constrained to litigate, in Civil
WHEREFORE, the judgment appealed from is modified by eliminating therefrom the award of
Case No. 1907, because of some cause attributable to the appellant.
attorney's fees of P1,000.00 in favor of Erlinda D. Diaz and her husband, plaintiffs in Civil Case
No. 1907, and the award of nominal and exemplary damages in Civil Case No. 1774; and
The appellant claims reimbursement for the value of the improvements he allegedly introduced making the award of attorney's fees in the sum of P2,000.00 payable to counsel for the account
in the schools, consisting of a new building worth P8,000.00 and a toilet costing P800.00, of the Mindanao Academy, Inc. instead of the plaintiff stockholders. In all other respects the
besides laboratory equipment, furniture, fixtures and books for the libraries. It should be noted judgment appealed from is affirmed. No pronouncement as to costs.
that the judgment of the trial court specifies, for delivery to the plaintiffs (in Civil Case No.
1907), only "the buildings and grounds described in the mutual agreement together with all the
permanent improvements thereon." 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.

In connection with the equipment, books, furniture and fixtures brought in by him, he is not
entitled to reimbursement either, because the judgment does not award them to any of the
plaintiffs in these two actions. What is adjudged (in Civil Case No. 1774) is for the defendant to
restore to the Mindanao Academy, Inc. all the books, laboratory apparatus, furniture and other
equipment "described in the Mutual Agreement and specified in the Inventory attached to the
records of this case; or in default thereof, their value in the amount of P23,500.00." In other
words, whatever has been brought in by the defendant is outside the scope of the judgment
and may be retained by him.

III. The appellant's fourth assignment of error refers to the nominal and exemplary damages, as
well as the attorney's fees, granted to the stockholders of the Mindanao Academy, Inc. The trial
court awarded no compensatory damages because the Mindanao Academy, Inc. had been
operating the two schools at a loss before the sale in question, and the defendant himself was
no more successful after he took over. Are the stockholders of the said corporation who joined
as plaintiffs in Civil Case No. 1774 entitled to nominal and exemplary damages? We do not
believe so. According to their second amended complaint they were joined merely  pro forma,
and "for the sole purpose of the moral damage which has been all the time alleged in the
original complaint." Indeed the interests of the said stockholders, if any, were already
represented by the corporation itself, which was the proper party plaintiff; and no cause of
action accruing to them separately from the corporation is alleged in the complaint, other than
that for moral damages due to "extreme mental anguish, serious anxiety and wounded feelings."
The trial court, however, ruled out this claim for moral damages and no appeal from such ruling
has been taken. The award for nominal and exemplary damages should be eliminated in toto.

The award for attorney's fees in the amount of P2,000.00 should be upheld, although the same
should be for the account, not of the plaintiff stockholders of the Mindanao Academy, Inc., but
of the corporation itself, and payable to their common counsel as prayed for in the complaint.

IV. Under the fifth and last assignment of error the appellant insists on the warranty provided
for in clause VI of the deed of sale in view of the claims of the co-owners who did not take part
therein. The said clause provides: "if any claim shall be filed against the properties or any right,
share or interest which are in the possession of the party of the First Part (vendors) which had
been hereby transferred, ceded and conveyed unto the party of the Second Part (vendee) the
party of the First Part assumes as it hereby holds itself answerable.
 Sales Session 9
petitioners, and from said appellate court's resolution, dated February 5, 1973, denying
petitioners' motion for reconsideration.
The facts of the case, as found by the trial court, which have not been disturbed by respondent
Court of Appeals, are as follows:
No. L-36359. January 31, 1974.*
FELIX BUCTON AND NICANORA GABAR BUCTON, petitioners, vs. ZOSIMO
GABAR,JOSEFINA LLAMOSO GABAR AND THE HONORABLE COURT OF APPEALS,
respondents.
Land registration; Sale of land in private instrument is binding upon the parties.—There is no
question that petitioner Nicanora Gabar Bucton paid P1,500 to respondent Josefina Gabar as
purchase price of one-half of the lot now covered by TCT No. II, for respondent Court of
Appeals found as a fact “that plaintiffs really paid for a portion of the lot in question pursuant to
their agreement with the defendants that they would own one-half of the land.” That sale,
although not consigned in a public instrument or formal writing, is nevertheless valid and
binding between petitioners and private respondents, for the time-honored rule is that even a
verbal contract of sale of real estate produces legal effects between the parties.
Obligations and contracts; One who sells something he does not as yet own is bound by the sale
when he acquires the thing later.—Although at the time said petitioner paid P1,000 as part
payment of the purchase price on January 19, 1946, private respondents were not yet the
owners of the lot, they became such owners on January 24, 1947, when a deed of sale was
executed in their favor by the Villarin spouses. In the premises, Article 1434 of the Civil Code,
which provides that “when a person who is not the owner of a thing sells or alienates title
thereto, such title passes by operation of law to the buyer or grantee,” is applicable.
Prescription; Action to quiet title does not prescribe.— The real and ultimate basis of petitioners’
action is their ownership of one-half of the lot coupled with their possession thereof, which
entitles them to a conveyance of the property. In Sapto, et al. vs. Fabiana, 103 Phil. 683, 686-
87, this Court explained that under the circumstances no enforcement of the contract is needed,
since the delivery of possession of the land sold had consummated the sale and transferred title
to the purchases, and that, actually, the action for conveyance is one to quiet title, i.e., to
remove the cloud upon the appellee’s ownership by the refusal of the appellants to recognize
the sale made by their predecessors. We held therein that it is an established rule of American
jurisprudence that actions to quiet title to property in the possession of the plaintiff are
imprescriptible.
APPEAL from a decision of the Court of Appeals.
The facts are stated in the opinion of the Court.
     Rizalindo V. Diaz for petitioners.
     Alfredo Ber. Pallarca for respondents. Bucton vs. Gabar, 55 SCRA 499, No. L-36359 January
31, 1974
ANTONIO, J.
Appeal from the decision of the Court of Appeals in CA-G.R. No. 49091-R, dated January 10,
1973, reversing the judgment of the trial court and dismissing the complaint filed by herein
Page |7
Plaintiff NicanoraGabarBucton (wife of her co-plaintiff Felix Bucton) is the
sister of defendant ZosimoGabar, husband of his co-defendant Josefina
LlamosoGabar.
This action for specific performance prays, inter-alia, that defendants-
spouses be ordered to execute in favor of plaintiffs a deed of sale of the
western half of a parcel of land having an area of 728 sq. m. covered by
TCT No. II (from OCT No. 6337) of the office of the Register of Deeds of
Misamis Oriental.
Plaintiffs' evidence tends to show that sometime in 1946 defendant Josefina
LlamosoGabar bought the above-mentioned land from the spouses Villarin
on installment basis, to wit, P500 down, the balance payable in installments.
Josefina entered into a verbal agreement with her sister-in-law, plaintiff
NicanoraGabarBucton, that the latter would pay one-half of the price
(P3,000) and would then own one-half of the land. Pursuant to this
understanding Nicanora on January 19, 1946 gave her sister-in-law Josefina
the initial amount of P1,000, for which the latter signed a receipt marked as
Exhibit A.
Subsequently, on May 2, 1948 Nicanora gave Josefina P400. She later
signed a receipt marked as Exhibit B.
On July 30, 1951 plaintiffs gave defendants P1,000 in concept of loan, for
which defendant ZosimoGabar signed a receipt marked as Exhibit E.
Meanwhile, after Josefina had received in January, 1946 the initial amount
of P1,000 as above stated, plaintiffs took possession of the portion of the
land indicated to them by defendants and built a modest nipa house
therein. About two years later plaintiffs built behind the nipa house another
house for rent. And, subsequently, plaintiffs demolished the nipa house and
in its place constructed a house of strong materials, with three apartments
in the lower portion for rental purposes. Plaintiffs occupied the upper
portion of this house as their residence, until July, 1969 when they moved
to another house, converting and leasing the upper portion as a dormitory.
In January, 1947 the spouses Villarin executed the deed of sale of the land
abovementioned in favor of defendant Josefina LlamosoGabar, Exhibit I, to
whom was issued on June 20, 1947 TCT No. II, cancelling OCT No. 6337.
Exhibit D.
 Sales Session 9
Plaintiffs then sought to obtain a separate title for their portion of the land
in question. Defendants repeatedly declined to accommodate plaintiffs.
Their excuse: the entire land was still mortgaged with the Philippine
National Bank as guarantee for defendants' loan of P3,500 contracted on
June 16, 1947: Exhibit D-1.
Plaintiffs continued enjoying their portion of the land, planting fruit trees
and receiving the rentals of their buildings. In 1953, with the consent of
defendants (who were living on their portion), plaintiffs had the entire land
surveyed and subdivided preparatory to obtaining their separate title to
their portion. After the survey and the planting of the concrete monuments
defendants erected a fence from point 2 to point 4 of the plan, Exhibit I,
which is the dividing line between the portion pertaining to defendants,
Exhibit I-1, and that pertaining to plaintiffs, Exhibit I-2.
Appeal was interposed by private respondents with the Court of Appeals, which reversed the
judgment of the trial court and ordered petitioners' complaint dismissed, on the following legal
In the meantime, plaintiffs continued to insist on obtaining their separate
disquisition:
title. Defendants remained unmoved, giving the same excuse. Frustrated,
plaintiffs were compelled to employ Atty. Bonifacio Regalado to intercede;
counsel tried but failed. Plaintiffs persevered, this time employing Atty.
Aquilino Pimentel, Jr. to persuade defendants to comply with their obligation
to plaintiffs; this, too, failed. Hence, this case, which has cost plaintiffs
P1,500 in attorney's fees.
Defendants' evidence — based only on the testimony of defendant Josefina
LlamosoGabar — denies agreement to sell to plaintiffs one-half of the land
in litigation. She declared that the amounts she had received from plaintiff
NicanoraGabarBucton — first, P1,000, then P400 — were loans, not
payment of one-half of the price of the land (which was P3,000). This
defense is devoid of merit.
When Josefina received the first amount of P1,000 the receipt she signed,
Exhibit A, reads:
Received from Mrs. NicanoraGabar the sum of one thousand (P1,000) pesos, victory currency,
as part payment of the one thousand five hundred (P1,500.00) pesos, which sum is one-half of
the purchase value of Lot No. 337, under Torrens Certificate of Title No. 6337, sold to me by
Mrs. Carmen RoaVillarin.
"(Sgd.) Josefina Ll. Gabar".
On the basis of the facts quoted above the trial court on February 14, 1970, rendered judgment
the dispositive portion of which reads:
WHEREFORE, judgment is hereby rendered for plaintiffs:
1) Ordering defendants within thirty days from receipt hereof to execute a
deed of conveyance in favor of plaintiffs of the portion of the land covered
by OCT No. II, indicated as Lot 337-B in the Subdivision Plan, Exhibit I, and
described in the Technical Description, Exhibit 1-2; should defendants for
any reason fail to do so, the deed shall be executed in their behalf by the
Provincial Sheriff of Misamis Oriental or his Deputy;
Page |8
2) Ordering the Register of Deeds of Cagayan de Oro, upon presentation to
him of the above-mentioned deed of conveyance, to cancel TCT No. II and
in its stead to issue Transfer Certificates of Title, to wit, one to plaintiffs and
another to defendants, based on the subdivision Plan and Technical
Description above-mentioned; and ordering defendants to present and
surrender to the Register of Deeds their TCT No. II so that the same may
be cancelled; and
3) Ordering defendants to pay unto plaintiffs attorney's fees in the amount
of P1,500 and to pay the costs.
SO ORDERED.
Appellees' alleged right of action was based on the receipt (Exh. A) which
was executed way back on January 19, 1946. An action arising from a
written contract does not prescribe until after the lapse of ten (10) years
from the date of action accrued. This period of ten (10) years is expressly
provided for in Article 1144 of the Civil Code.
From January 19, 1946 to February 15, 1968, when the complaint was filed
in this case, twenty-two (22) years and twenty-six (26) days had elapsed.
Therefore, the plaintiffs' action to enforce the alleged written contract (Exh.
A) was not brought within the prescriptive period of ten (10) years from the
time the cause of action accrued.
The land in question is admittedly covered by a torrens title in the name of
Josefina LlamosoGabar so that the alleged possession of the land by the
plaintiffs since 1947 is immaterial because ownership over registered realty
may not be acquired by prescription or adverse possession (Section 40 of
Act 496).
It is not without reluctance that in this case we are constrained to sustain
the defense of prescription, for we think that plaintiffs really paid for a
portion of the lot in question pursuant to their agreement with the
defendants that they would then own one-half of the land. But we cannot
apply ethical principles in lieu of express statutory provisions. It is by law
provided that:
"ART. 1144. The following actions must be brought
within ten years from the time the right of action
accrues:
1. Upon a written contract;
2. Upon an obligation created by law;
 Sales Session 9 Page |9

3. Upon a judgment."
If eternal vigilance is the price of safety, one cannot sleep on one's right
and expect it to be preserved in its pristine purity.
held therein that "... it is an established rule of American jurisprudence (made applicable in this
jurisdiction by Art. 480 of the New Civil Code) that actions to quiet title to property in the
possession of the plaintiff are imprescriptible (44 Am. Jur. p. 47; Cooper  vs. Rhea, 20 L.R.A.
930; Inland Empire Land Co. vs. Grant County, 138 Wash. 439, 245 Pac. 14).

Petitioners' appeal is predicated on the proposition that owners of the property by purchase
from private respondents, and being in actual, continuous and physical possession thereof since
the date of its purchase, their action to compel the vendors to execute a formal deed of
conveyance so that the fact of their ownership may be inscribed in the corresponding certificate
of title, had not yet prescribed when they filed the present action.
We hold that the present appeal is meritorious.
1. There is no question that petitioner NicanoraGabarBucton paid P1,500.00 to respondent
Josefina Gabar as purchase price of one-half of the lot now covered by TCT No. II, for
respondent Court of Appeals found as a fact "that plaintiffs really paid for a portion of the lot in
question pursuant to their agreement with the defendants that they would own one-half (1/2) of
the land." That sale, although not consigned in a public instrument or formal writing, is
nevertheless valid and binding between petitioners and private respondents, for the time-
honored rule is that even a verbal contract of sale or real estate produces legal effects between
the parties.1 Although at the time said petitioner paid P1,000.00 as part payment of the
purchase price on January 19, 1946, private respondents were not yet the owners of the lot,
they became such owners on January 24, 1947, when a deed of sale was executed in their favor
by the Villarin spouses. In the premises, Article 1434 of the Civil Code, which provides that
"[w]hen a person who is not the owner of a thing sells or alienates and delivers it, and later the
seller or grantor acquires title thereto, such title passes by operation of law to the buyer or
grantee," is applicable. 2 Thus, the payment by petitioner by NicanoraGabarBucton of P1,000.00
on January 19, 1946, her second payment of P400.00 on May 2, 1948, and the compensation,
up to the amount of P100.00 (out of the P1,000.00-loan obtained by private respondents from
petitioners on July 30, 1951), resulted in the full payment of the purchase price and the
consequential acquisition by petitioners of ownership over one-half of the lot. Petitioners
therefore became owners of the one-half portion of the lot in question by virtue of a sale which,
though not evidenced by a formal deed, was nevertheless proved by both documentary and
parole evidence.
The prevailing rule is that the right of a plaintiff to have his title to land
quieted, as against one who is asserting some adverse claim or lien
thereon, is not barred while the plaintiff or his grantors remain in actual
possession of the land, claiming to be owners thereof, the reason for this
rule being that while the owner in fee continues liable to an action,
proceeding, or suit upon the adverse claim, he has a continuing right to the
aid of a court of equity to ascertain and determine the nature of such claim
and its effect on his title, or to assert any superior equity in his favor. He
may wait until his possession is disturbed or his title in attacked before
taking steps to vindicate his right. But the rule that the statute of limitations
is not available as a defense to an action to remove a cloud from title can
only be invoked by a complainant when he is in possession. One who claims
property which is in the possession of another must, it seems, invoke
remedy within the statutory period. (44 Am. Jur., p. 47)
The doctrine was reiterated recently in Gallar v. Husain, et al.,4 where We ruled that by the
delivery of the possession of the land, the sale was consummated and title was transferred to
the appellee, that the action is actually not for specific performance, since all it seeks is to quiet
title, to remove the cloud cast upon appellee's ownership as a result of appellant's refusal to
recognize the sale made by his predecessor, and that as plaintiff-appellee is in possession of the
land, the action is imprescriptible. Considering that the foregoing circumstances obtain in the
present case, We hold that petitioners' action has not prescribed.
WHEREFORE, the decision and resolution of respondent Court of Appeals appealed from are
hereby reversed, and the judgment of the Court of First Instance of Misamis Oriental, Branch IV,
in its Civil Case No. 3004, is revived. Costs against private respondents.

2. The error of respondent Court of Appeals in holding that petitioners' right of action had
already prescribed stems from its belief that the action of petitioners is based on the receipt
Exh. "A" which was executed way back on January 19, 1946, and, therefore, in the view of said
appellate court, since petitioners' action was filed on February 15, 1968, or after the lapse of
twenty-two (22) years and twenty-six (26) days from, the date of said document, the same is
already barred according to the provisions of Article 1144 of the New Civil Code. The aforecited
document (Exh. "A"), as well as the other documents of similar import (Exh. "B" and Exh. "E"),
are the receipts issued by private respondents to petitioners, evidencing payments by the latter
of the purchase price of one-half of the lot.

The real and ultimate basis of petitioners' action is their ownership of one-half of the lot coupled
with their possession thereof, which entitles them to a conveyance of the property. In Sapto, et
al. v. Fabiana,3 this Court, speaking thru Mr. Justice J.B.L. Reyes, explained that, under the
circumstances no enforcement of the contract is needed, since the delivery of possession of the
land sold had consummated the sale and transferred title to the purchaser, and that, actually,
the action for conveyance is one to quiet title, i.e., to remove the cloud upon the appellee's
ownership by the refusal of the appellants to recognize the sale made by their predecessors. We
 Sales Session 9
[No. L-8255. July 11, 1957]
CITY OF MANILA, plaintiff and appellee, vs. BUGSUK LUMBER Co., defendant and
appellant.
1.PRODUCER; DIRECT SALES FROM LUMBER CONCESSION TO DEALERS, EXEMPT FROM
LlCENSE TAX AND PERMIT FEES.—Inasmuch as appellant lumber company sells the produce of
its timber concession direct to the lumber dealers, it can not be considered a dealer in the
common and ordinary acceptation of the word, because "a dealer is not one who buys to keep
or makes to sell, but one who buys to sell again; the middleman between the producer and the
consumer of the community (In re Hemming, 51 F. 2d 850)." Appellant, therefore, is not liable
under Ordinances Nos. 3420, 3364 and 3000 of the City of Manila, imposing taxes in wholesale
and retail dealers because it is not a dealer but a producer selling its own produce.
2.ID. ; ID. ; PRODUCER DOES NOT BECOME DEALER BY MAINTAINING OFFICE, WHERE
ORDERS AND PAYMENTS THEREFOR ARE RECEIVED.—It is contended that a manufacturer
becomes a dealer if he carries on the business of selling goods or the products manufactured by
him at a store or warehouse apart from his own shop or manufactory. (Central Azucarera de
Don Pedro vs. City of Manila et al., 97 Phil., 627), and that the office in Manila where appellant
received orders and receipted payment for such orders is actually a store. The placing of an
order for goods and the making of payment thereto at a principal office does not transform said
office into a store, for it is a necessary element that there must also be goods or wares stored
therein or on display, and provided also that the firm or person maintaining that office is actually
engaged in the business of buying and selling. These elements are wanting in the case at bar
for the principal office of appellant alluded to as a store only serves to faciliate the transactions
relative to the purchase of its produce, but does not act as a dealer or intermediary between its
field office and its customers.
APPEAL from a judgment of the Court of First Instance of Manila. Concepcion, J.
The facts are stated in the opinion of the Court.
City Fiscal Eugenio Angeles and Assistant Fiscal Artemio H. Cusi for appellee.
M. Almario and /. L. Misa for appellant.
DECISION
FELIX, J.:
Bugsuk Lumber Company, Inc., a domestic corporation with field. office at Balabak, Palawan,
and principal office at 703 San Fernando, Binondo, Manila, was organized to:chanrob1es virtual
1aw library
(a) Comprar y vender maderas y para dedicarse, en general a todaclase de
negociossobremaderas;
(To buy and sell lumber and to engage in general, in any kind of business concerning lumber);
(b) Solicitor del Gobierno o adquirir, en la forma permitia por la ley, concessionesmadererassi el
negocloasi lo exige;
P a g e | 10
(To apply from the Government or to acquire in any manner permitted by law, lumber
concessions if the business would so require);
(c) Aserrarmaderas y comprartrozos de madera, encaso de que el negocio de la corporacion lo
exija; y
(To saw lumber and to buy logs, in case the business of the corporation would so demand; and)
(d) Hacertodaclase de negociosrelacionadosdirecta o indirectamente con los fines para los cuales
se ha creadoestacorporacion (Exhibit "A"). 
(To make all kinds of business that may be directly or indirectly in line with the purposes for
which this corporation has been created). 
In 1951 and during the 1st, 2nd and 3rd quarters of 1952, the Bugsuk Lumber Company made
sales of lumber to several firms including Pio Barreto & Sons, Inc., Gotamco& Sons, Co., Basilan
Lumber Co., Dy Pac & So, Inc., Central Sawmill, Woodart Inc., Felipe Yupangco& Sons, Inc.,
Jacinto Music Store and P. E. Domingo & Co., Inc. (Exhibits B to B-23). 
On October 10, 1952, the Office of the Treasurer of the City of Manila sent a demand to the
Company for the payment of the amount of P544.50 for license fees corresponding to the years
1951 and 1952, and P40.00 for the necessary mayor’s permit, on the ground that said business
firm was found to be engaged in the sales of timber products without first securing the required
licenses and permits pursuant to City Ordinances Nos. 3420, 3364 and 3000. (Exhibit C). The
Company must have refused or failed to pay said imposts because on June 11, 1953, the City
Fiscal of Manila filed a complaint against the Bugsuk Lumber Co., Inc., with the Municipal Court
of Manila alleging, among others, that defendant Company sold at wholesale to different lumber
dealers in Manila during the 1st, 2nd, 3rd and 4th quarters of 1951 and the 1st, 2nd and 3rd
quarters of 1952 different kinds of lumber for which it should have paid a quarterly license tax
of P40.00 or a total of P280.00 as provided by Ordinance No. 3000, as amended; that during the
2nd, 3rd and 4th quarters of 1951 and the 1st, 2nd, 3rd and 4th quarters of 1952, defendant
Company sold at retail to different firms lumber for which it should have paid a total amount of
P215.00 for license fees and the mayor’s permit of P20.00; that despite repeated demands,
defendant Company refused and failed to pay the same and, therefore, prayed that judgment
be rendered ordering the defendant Company to pay the City of Manila the amount of P584.50
representing license fees and mayor’s permit fees, with legal interests thereon and surcharges
and for such other relief as may be deemed just and equitable in the premises. 
Defendant Bugsuk Lumber Co., Inc., filed an answer on October 12, 1953, contesting plaintiff’s
allegation that it sold lumber at wholesale transactions because what it actually sold were
unprocessed logs; neither did it sell at retail because the timbers were delivered directly from
the vessel to the lumber dealers, and set up the affirmative defenses that the Bugsuk Lumber
Company was essentially a producer, having no lumber yard of any kind in Manila or elsewhere,
nor kept a store where lumber or logs could be sold, and that its products (logs) were sold
directly from the lumber concession to the dealers in Manila; that as such producer, it had paid
the taxes required by law such as the ordinary Timber License fee, Privilege tax (producer),
sales tax, forestry charges, reforestation fees, residence taxes, and the municipal licenses in
Bugsuk, Palawan; that the taxes in the form of license and permit fees sought to be collected by
the City would constitute double taxation, and prayed for the dismissal of the complaint. 
The record shows that the Municipal Court of Manila rendered judgment in favor of plaintiff and
defendant Company appealed the case to the Court of First Instance of Manila based practically
in the same arguments. On July 18, 1954, the Court of First Instance rendered decision holding
that the Company sold logs to various firms in wholesale and retail transactions and although
 Sales Session 9 P a g e | 11

defendant had no store or lumber yard in the City, this fact alone cannot destroy the findings of
the inspector of the City Treasurer’s Office that it sold logs to different buyers in Manila; that the
imposition of the taxes in question did not constitute double taxation and that the municipal
taxes sought to be collected by the City authorities were not excessive and, consequently,
ordered the defendant Company to pay the sum of P584.50 plus legal interests and costs.  "All articles subject to the payment of percentage taxes or graduated fixed taxes, but not articles
From this decision, therein defendant took the matter to this Court and in this instance alleged
that the lower Court erred:
1. In holding that appellant is a wholesale dealer and not a producer within the meaning of the
tax ordinance;
lumber which appellant disposed of comes within the connotation of "construction materials"
(Group 2, Ordinance No. 3364) and of the term "general merchandise" (used in Ordinances Nos.
3364 and 3420), which was defined as:
subject to the payment of specific taxes under the provisions of the Internal Revenue Code. It
shall also include poultry, livestock, fish and other allied products" (Ordinance No. 3420). 
We see no reason why a producer or manufacturer selling its own produce or manufactured
goods would be considered a dealer just to make it liable for the corresponding dealer’s tax, as
is the case in the instant appeal. 

2. In holding that appellant is a retail dealer and not a producer within the meaning of the tax
ordinance; and
3. In holding that appellant is liable under the municipal ordinances imposing taxes in wholesale
and retail dealers because defendant is not a dealer but a producer.  contention of the City Fiscal that the office at 703 San Fernando, Binondo, Manila, where
We could see from the foregoing set of facts that the only question at issue in this case is
whether or not appellant, maintaining a principal office in Manila, receiving orders for its
products and accepting in said office payments thereto, can be considered a dealer in this City
and is, therefore, subject to the payment of the license tax and permit fees in question.  produce and accept payments therefor, and not for any purpose connected with the business of
Appellant does not dispute the power of the Municipal Board of the City of Manila to enact
Ordinance No. 3000 requiring wholesale and retail dealers to secure and pay the mayor’s permit
annually, neither does it contest the validity of Ordinance No. 3364 which contains the following
provision:
"Group 2. Retail dealers in new (not yet used) merchandise, which dealers are not yet subject to
the payment of any municipal tax, such as; (1) Retail dealers in General Merchandise and (2)
retail dealers exclusively engaged in the sale of electrical supplies; sporting goods; office
equipment and materials; rice; textile including knitted wares; hardwares, including glasswares;
cooking utensils and construction materials; papers; books including stationery:" (Ordinance No.
3364);
Appellee, however, in asserting that appellant Company is a dealer relied on the case of Atlantic
Refining Co. v. Van Valkenburg, 265 Pa. 456; 109 A. 208, wherein it was held that the term
dealer includes "one who carries on the business of selling goods, wares and merchandise
manufactured by him at a store or warehouse apart from his own manufactory", and it was the
appellant received orders and receipted payment for such orders is actually a store. 
Appellant admittedly maintained said principal office but averred that it was used merely to
facilitate the payment of the tax obligations of said Company, to receive orders of its timber
buying and selling. Did the fact that appellant received orders of its goods and accepted
payments thereto in said office make such office a store?
Lexicographers defined a store as:
Any place where goods are kept for sale, whether by wholesale or retail; a shop (Webster’s New
International Dictionary, 2nd ed., p. 2486). 
Any place where goods are deposited and sold by one engaged in buying and selling them
(Black’s Law Dictionary, 4th ed., p. 1589). 
It was also said that:

nor of Ordinance No. 3420 which provides: A store is any place where goods are kept for sale or sold, whether by wholesale or retail
(Standard Oil Co. v. Green, 34 F. Supp. 30). It also applies to a building or room in which goods
"SEC. 1. Municipal Tax on wholesalers in General Merchandise. — There shall be paid by every of any kind or in which goods, wares and merchandise are kept for sale, or to any building used
person, firm or corporation engaging in business as wholesale dealer in general merchandise, a for the sale of goods of any kind (Jackson V. Lane, 59 A. 2d 662; 142 N. J. Eq. 193). 
municipal tax based on wholesales, or on the receipts of exchange value of goods sold.
exchanged or transferred, in accordance with the following:" (Ordinance No. 3420.)  It could be seen that the placing of an order for goods and the making of payment thereto at a
principal office does not transform said office into a store, for it is a necessary element that
A dealer has been defined as: there must also be goods or wares stored therein or on display, and provided also that the firm
or person maintaining that office is actually engaged in the business of buying and selling.
A dealer, in the common acceptation and, therefore, in the legal meaning of the word, is not These elements are wanting in the case at bar for it needs no further clarification that the
one who buys to keep or makes to sell, but one who buys to sell again; the middleman between principal office alluded to as a store only serves to facilitate the transactions relative to the sale
the producer and the consumer of the commodity (In re Hemming, 51 F. 2d 850).  of its produce, but does not act as a dealer or intermediary between its field office and its
customers. 
It has been said that a dealer stands immediately between the producer and the consumer, and
depends for his profit, not upon the labor he bestows on his commodities, but upon the skill and We may further add that this matter was already passed upon by this Court when, through Mr.
foresight with which he watches the markets (State v. J. Watts Kearny & Sons, 160 So. 77).  Justice Alejo Labrador, it held that:

In the light of the above definitions, appellant certainly does not fall within the common and "It may be admitted that the manufacturer becomes a dealer if he carries on the business of
ordinary acceptation of the word "dealer" for there is no controversy as to the fact that what selling goods or the products manufactured by him at a store or warehouse apart from his own
appellant sold was the produce of its concession in Palawan. Even conceding, therefore, that the shop or manufactory. But plaintiff-appellee did not carry on the business of selling sugar at
 Sales Session 9 P a g e | 12

stores or at its warehouses. It entered into the contracts of sale at its central office in Manila
and made deliveries of the sugar sold from its warehouses. It does not appear that the plaintiff
keeps stores at its warehouses and engages in selling sugar in said stores. Neither does it
appear that any one who desires to purchase sugar from it may go to the warehouses and there
purchase sugar. All that it does was to sell the sugar it manufactured; it does not open stores
for the sale of such sugar. Plaintiff-appellee did not, therefore, engage in the business of selling
sugar." (Central Azucarera de Don Pedro v. City of Manila Et. Al., 97 Phil., 627). 

Wherefore, the decision appealed from is hereby reversed and appellant declared exempt from
the liabilities sought to be charged against it under the provisions of the aforementioned
ordinances, without pronouncement as to costs. It is so ordered.
 Sales Session 9
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.
Civil Law; Property; Sales; Possession of movable property acquired in good faith is equivalent
to a title.—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.
Same; Same; Contract of sale is consensual; Ownership shall pass from the vendor to the
vendee upon the actual or constructive delivery of the thing sold.—The contract of sale is
consensual and is perfected once agreement is reached between the parties on the subject
matter and the consideration. x x x It is clear from the above provisions, particularly the last
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.
Same; Same; Same; Non-payment creates a right to demand payment or to rescind the
contract, or to criminal prosecution.—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.
Same; Same; Same; Same; It would be unfair to make the respondents who acted in good faith,
bear the prejudice sustained by EDCA as a result of its own negligence.—It would certainly be
unfair now to make the private respondents bear the prejudice sustained by EDCA as a result of
its own negligence. 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.
PETITION to review the decision of the Court of Appeals. Buena, J.
The facts are stated in the opinion of the Court.
     Emiliano S. Samson, R. Balderrama-Samson, Mary Anne B. Samson for petitioner.
     Cendaña, Santos, Delmundo & Cendaña for private respondents. EDCA Publishing &
Distributing Corp. vs. Santos, 184 SCRA 614, G.R. No. 80298 April 26, 1990
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:
P a g e | 13
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
 Sales Session 9
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.
x xx           x xx          x xx
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.
P a g e | 14
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?
x xx           x xx          x xx
. . . 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
 Sales Session 9 P a g e | 15

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.
 Sales Session 9
No. L-18536. March 31, 1965.
JOSE B. AZNAR, plaintiff-appellant, vs. RAFAEL YAPDIANGCO, defendant-appellee;
TEODORO SANTOS, intervenor-appellee.
Motor Vehicles; True owner has better right than buyer in good faith to possession of stolen car.
—A person unlawfully deprived of the possession of his personal property has a better right to
the possession thereof as against a buyer in good faith for value from a seller who had no title
thereto.
Same; Same; Article 1506 of the Civil Code not applicable whale seller had no title.—Under
Article 1506 of the Civil Code, it is essential that the seller should have a voidable title at least. It
is clearly inapplicable where the seller had no title at all.
Property; Ownership transferred not merely by contract but by tradition and delivery.—
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.
Same; Same; Ownership of car sold not transferred merely by contract of sale where there was
no delivery.—A contract of sale of personal property does not serve to transfer ownership where
the vendee took possession of the subject matter thereof by stealing the same while it was in
the custody of the vendor’s agent.
Same; Rule under Art. 559, Civil Code; When owner may recover lost property from third
persons.—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 establishestwo 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.
Statutory Construction; Statutory provisions prevail over common law principle.—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.
APPEAL from a decision of the Court of First Instance of Quezon City, Branch TV. Caluag, J.
The facts are stated in the opinion of the Court.
     Florentino M. Guanlao for plaintiff-appellant.
     Rafael Yapdiangco in his own behalf as defendant-appellee.
P a g e | 16
     Lorenzo Sumulong, R. B. Hilao & B. S. Felipe for intervenor-appellee. Aznar vs. Yapdiangco,
13 SCRA 486, No. L-18536 March 31, 1965.
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.
 Sales Session 9
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.
P a g e | 17
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, 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 contemplated 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
 Sales Session 9 P a g e | 18

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.)

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.
 Sales Session 9
[No. L-8257. April 13, 1956]
JOSE R. CRUZ, plaintiff and appellant, vs. REYNALDO PAHATI, ET AL., defendants and
appellees.
1.POSSESION; MOVABLES; OWNER ILLEGALLY DEPRIVED THEREOF MAY RECOVER THE SAME;
LAW APPLICABLE.—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
has himself” obtains in the civil as well as in the common law.” (U. S. vs. Sotelo, 28 Phil., 147.)
2.ID. ; ID. ; ID. ; PARTY TO BEAR LOSS UNDER COMMON LAW PRINCIPLE; STATUTORY
PRINCIPLE PREVAILS OVER COMMON LAW PRINCIPLE.—The common law principle that “Where
one of two innocent parties 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.
Between a common law principle and a statutory principle, the latter must prevail in this
jurisdiction.
APPEAL from a judgment of the Court of First Instance of Manila. Concepcion, J.
The facts are stated in the opinion of the Court.
Panganiban Law Offices and Arsenio Roldan for appellant.
Carlos, Laurea, Fernando & Padilla for appellees. Cruz vs. Pahati, et al., 98 Phil. 788, No. L-8257
April 13, 1956
BAUTISTA ANGELO, J.:
This is an action of replevin instituted by plaintiff in the Court of Firts Instance of Manila to
recover the possession of an automobile and certain amount as damages and attorney's fees
resulting from his illegal deprivation thereof.
The original defendants were Reynaldo Pahati and FelixbertoBulahan but, upon amendment of
the complaint, JesusitoBelizo was included as party defendant who was summoned by
publication because his whereabouts were not known. Belizo failed to appear or answer the
complaint and so he was declared default.
Pahati admitted having bought the automobile from Bulahan, for the sum of P4,900 which he
paid in check. When the Manila Police Department impounded the automobile, he cancelled the
sale and stopped the payment of the check and as a result he returned the automobile to
P a g e | 19
Bulahan who in turned surrended the check for cancellation. He set up a counterclaim for the
sum of P2,000 as attorney's fees.
Bulahan on his part claims that he acquired the automobile from JesusitoBelizo for value and
without having any knowledge of any defect in the title of the latter; that plaintiff had previously
acquired title to said automobile by purchase from Belizo as evidenced by a deed of sale
executed to that effect; that later plaintiff delivered the possession of the automobile to Belizo
for resale and to facilitate it he gave the latter a letter of authority to secure a new certificate of
registration in his name (plaintiff's) and that by having clothed Belizo with an apparent
ownership or authority to sell the automobile, plaintiff is now estopped to deny such ownership
or authority. Bulahan claims that between two innocent parties, he who gave occasion, through
his conduct, to the falsification committed by Belizo, should be the one to suffer the loss and
this one is the plaintiff. Bulahan also set up a counterclaim for P17,000 as damages and
attorney's fees.
After the presentation of the evidence, the court rendered judgment declaring defendant
Bulahan entitled to the automobile in question and consequently ordered the plaintiff to return it
to said defendant and, upon his failure to do so, to pay him the sum of P4,900, with legal
interest from the date of the decision. The claim for damages and attorney's fees of Bulahan
was denied. Defendant Belizo was however ordered to indemnify the plaintiff in the amount of
P4,900 and pay the sum of P5,000 as moral damages. The counterclaim of defendant Pahati
was denied for lack of evidence. The case was taken directly to this Court by the plaintiff.
The lower court found that the automobile in question was originally owned by the Nothern
Motors, Inc. which later sold it to Chinaman Lu Dag. This Chinaman sold it afterwards to
JesusitoBelizo and the latter in turn sold it to plaintiff. Belizo was then a dealer in second hand
cars. One year thereafter, Belizo offered the plaintiff to sell the automobile for him claiming to
have a buyer for it. Plaintiff agreed. At that time, plaintiff's certificate of registration was missing
and, upon the suggestion of Belizo, plaintiff wrote a letter addressed to the Motor Section of the
Bureau of Public Works for the issuance of a new registration certificate alleging as reason the
loss of the one previously issued to him and stating that he was intending to sell his car. This
letter was delivered to Belizo on March 3, 1952. He also turned over Belizo the automobile on
the latter's pretext that he was going to show it to a prospective buyer. On March 7, 1952, the
letter was falsified and converted into an authorized deed of sale in favor of Belizo by erasing a
portion thereof and adding in its place the words "sold the above car to Mr. JesusitoBelizo of 25
Valencia, San Francisco del Monte, for Five Thousand Pesos (P5,000)." Armed with this deed of
sale, Belizo succeeded in ontaining a certificate of registration in his name on the same date,
March 7, 1952, and also on the same date, Belizo sold the car to FelixbertoBulahan who in turn
sold it to Reynaldo Pahati, a second hand car dealer. These facts show that the letter was
falsified by Belizo to enable him to sell the car to Bulahan for a valuable consideration.
This is a case which involves a conflict of rights of two persons who claim to be the owners of
the same property; plaintiff and defendant Bulahan. Both were found by the lower court to be
innocent and to have acted in good faith. They were found to be the victims of Belizo who
falsified the letter given him by plaintiff to enable him to sell the car of Bulahan for profit. Who
has, therefore, a better right of the two over the car?.
The law applicable to the case is Article 559 of the new Civil Code which provides:
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.
 Sales Session 9 P a g e | 20

If the possessor of a movable lost or of which the owner has been unlawfully as moral damages, plus P2,000 as attorney's fees. The Court absolves defendant Bulahan and
deprived, has acquired it in good faith at a public sale, the owner cannot obtain its Pahati from the complaint as regards the claim for damages, reserving to Bulahan whatever
return without reimbursing the price paid therefor. action he may deem proper to take against JesusitoBelizo. No costs.

It appears that "one who has lost any movable or has been unlawfully deprived thereof, 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." And supplementing this provision, Article
1505 of the same Code provides that "where goods are sold by a person who is not the owner
thereof, and who does not sell them under authority or with the consent of the owner, the buyer
acquires no better title to the goods than the seller had, unless the owner of the goods is by his
conduct precluded from denying the seller's authority to sell.

Applying the above legal provisions to the facts of this case, one is inevitably led to the
conclusion that plaintiff has a better right to the car in question than defendant Bulahan for it
cannot be disputed that plaintiff had been illegally deprived thereof because of the ingenious
scheme utilized by Belizo to enable him to dispose of it as if he were the owner thereof. Plaintiff
therefore can still recover the possession of the car even if defendant Bulahan had acted in good
faith in purchasing it from Belizo. Nor can it be pretended that the conduct of plaintiff in giving
Belizo a letter to secure the issuance of a new certificate of registration constitutes a sufficient
defense that would preclude recovery because of the undisputed fact that that letter was
falsified and this fact can be clearly seen by a cursory examination of the document. If Bulahan
had been more diligent he could have seen that the pertinent portion of the letter had been
erased which would have placed him on guard to make an inquiry as regards the authority of
Belizo to sell the car. This he failed to do.

The right of the plaintiff to the car in question can also be justified under the doctrine laid down
in U. S. vs. Sotelo, 28 Phil., 147. This is a case of estafa wherein one Sotelo misappropriated a
ring belonging to Alejandra Dormir. In the course of the decision, the Court said that "Whoever
may have been deprived of his property in consequence of a crime is entitled to the recovery
thereof, even if such property is in the possession of a third party who acquired it by legal
means other than those expressly stated in Article 464 of the Civil Code" (p. 147), which refers
to property pledged in the "Monte de Piedad", an establishment organized under the authority of
the Government. The Court further said: It is a fundamental principle of our law of personal
property that no man can be divested of it without his own consent; consequently, even an
honest purchaser, under a defective title, cannot resist the claim of the true owner. The maxim
that 'No man can transfer a better title than he has himself "obtain in the civil as well as in the
common law." (p. 158).

Counsel for appellee places much reliance on the common law principle that "Where one of two
innocent parties 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" (Sager vs.
W. T. Rawleight Co. 153 Va. 514, 150 S. E. 244, 66 A.L.R. 305), and contends that, as between
plaintiff and Bulahan, the former should bear the loss because of the confidence he reposed in
Belizo which enabled the latter to commit the falsification. But this principle cannot be applied to
this case which is coverred by an express provision of our new Civil Code. Between a common
law principle and a statutory provision, the latter must undoubtedly prevail in this jurisdiction.
Moreover we entertain serious doubt if, under the circumstances obtaining, Bulahan may be
considered more innocent than the plaintiff in dealing with the car in question. We prefer not to
elaborate on this matter it being necessary considering the conclusion we have reached.

Wherefore, the decision appealed from is reversed. The Court declares plaintiff to be entitled to
recover the car in question, and orders defendant JesusitoBelizo to pay him the sum of P5,000
 Sales Session 9
No. L-30817. September 29, 1972.
DOMINADOR DIZON, doing business under the firm name "Pawnshop of Dominador
Dizon", petitioner, vs. LOURDES G. SUNTAY, respondent.
Civil Law; Property; Owner unlawfully deprived of movable property may recover possession of
same from third party.—The owner of a diamond ring may recover the possession of the same
from a pawnshop where another person had pledged it without authority to do so. Article 559 of
the Civil Code of the Philippines applies and the defense that the pawnshop acquired possession
of the ring without notice of any defect in the title of the pledgor is unavailing.
Same; Same; Estoppel; Owner of movable unlawfully pledged by another not estopped from
recovering possession.—Where the owner delivered the diamond ring to another solely for sale
on commission but the latter instead pawned the same without authority to do so, the owner is
not estopped from pursuing an action against the pawnshop for the recovery of the possession
of the said ring.
Teehankee, J., concurring:
Civil Law; Property; Words and phrases; "Unlawfully deprived" defined in relation to Article 559
of Civil Code.—Senator Tolentino concedes that there 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 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. 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.
Same; Same; Conviction of embezzler not essential to recovery of movable by owner from third
party.—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 vs. Raymundo, 19 Phil. 47.
PETITION FOR REVIEW by certiorari of a decision of the Court of Appeals.
The facts are stated in the opinion of the Court.
     Andres T. Velarde for petitioner.
     Rafael G. Suntay for respondent. Dizon vs. Suntay, 47 SCRA 160, No. L-30817 September
29, 1972
FERNANDO, J.:p
P a g e | 21
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 DominadorDizon, 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.
 Sales Session 9
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." 13Some 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
P a g e | 22
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.
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
 Sales Session 9
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
P a g e | 23
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 xxxxxx
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.
 Sales Session 9 P a g e | 24

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.