,,

c--~,-y

--p:: . _...,

V'~'\.

.,e -L-

.. .Et<,

18,

Aucmi' 11, 1958'

OFFICIAL GAZETTE

.5143.

,iy,

DECISIONS OF THE COURT OF APPEALS

1e
te

~o
;e
te

[No. 17085-R.

[r
it

,f

SALE; SALES AT MEnCHANTS' STORES; INNOCENT PURCHASERS FOR

VALUE PROTECTED; ARTICLE 1505;- NEW CIVIL' CODE.-Under

~-

paragraph (3) of Arti~e .15"05 of the Civil CodJ, a person

who buys a t-hing'~ at a ):llerc1:rn,nt's store after the same has
been put on display thereat, acquires a -lid title to the thing
although hts predecessors in interest did not have any right
of ownership over it. Thi,s is a ca-ie 'of an imperfect or void
title 'ripening into a valid one, as a result of some intervening
causes.. The policy of the -law has always been that where)
the rights and interesfs-of a vendor come- into clash with that
of an iroiocent buyer for value, the latter must be protected..
The rule embodied in paragraph (3) of Article 1505, protecting
innocent third par.ties wh~ave made purchases at merchants'
stores in good faith and for valut appears to be a wise and
necessary rule not only to ~ilitate commercial sales on movables but to ~ stal5ility to business transactions. This rule
is necessary in a country sucii' as 'ours where free enterprise
prevails, for a buyer cannot be reasonably expected to look
behind the title of every atticle when he buys at a store .
The doctrine of caveat empt~r is now rarely applied, a n d ~
is ever .. mentioned it is
of an -{x~epti@ rather than tli0
general rule.

g
1,

;o
:e
.e
,r

.'{"

l-

.s

e
e
.t
c

January 13, 19'58]

SUN BROTHF..S & COMPANY, plaintiff and appellee, vs.

JOSE VELASCO and Co KANG CHIU, defendants and
appeilants.

~-

,
,''~}

!-

.t

e
s

~m-e

h
d

APPEAL from a judgment of the Court of First Instance

of Manila. Macadaeg, _J.
The facts are stated in the opinion of the Court.
Jose C. de Guzman for defendant and appellant Jose
Velasco.

ToZentino & Garcia for defendant and appellant Co

Kang Chirr.
Domiriador A. Alafriz fo~ plaintiff and appellee.

n
'1
1,

ANGELES, J.:
This a_stion for the r.ecavery of personal property was
commenced h1 the Municipal Court of Manila by the
plaintiff Sun Brothers & Company, a registered s-ene@!.
co.-partnersbip, duly organized and existing under and by
virtue of the laws of the Philippines, against the defendants Francisco Lopez, Jose Velasco and Co Kang Chiu.
After trial, the Court re~ered j u<!_glllent "_2rde.ring the .
plai!!tiff to degver':, the, saf!l~refri~ator .0 defend!nt Q.o ~
Kang,~Chtu g:r~to'-pa]fits val4,~ iri the. sum of 1"985 with
costs againk the plaintiff. The cross-claim filed against
Jose Velas~o as well as the counterclaim of Co Kang
Chiu are hereby dismissed for lack of merit." r
The plaintiff and the defendant Co Kang Chi appealed
/
the judgtiiient of the Municipal Court to the Court of
1

8024~~

........:...

__ .

'r~r./

'~~

~,:,'\.-.,
::J!r.:

. ....,....,"5.~-:;;:.,:

5144

OFFICIAL GAZETTE

+;;;.~;~_:...

VOL. 54, '::'.o. 18

First Instance of Manila where a trial de novo was held.

Failing to file his answer, defendant Francsico Lopez
was declared in default. Before trial, the plaintiff Sun
Brothers & Company and. the defendants Jose Velasco
and Co Kang Chiu, represented by their respective coun(),
sels,. entered into a stipulation of facts.
~

As appears from said stipulation of facts, the plain.} .-- ,...__._,f-2"'k~ hff deliv~:r~d to defendant Francisco L..212.ez, on July 1,
,!) .$'c~ 11 7Tl~54, one ~~:~J,.re!rigerator, Model . 9D-7, ~omplete
i1l
with transformer, Serial No.,. 1508012, the same to be
--- -~
paid under the terms and conditions stipulated between
them in- a "Conditional Sale Agreemt:!nt'' (Annex A of
the complaint. Out of the amount . of Pl,700 which
fj (b
was the stipulated price of the. I'efr,igerator, ~
was paid b_Y Francisco /
Lopez. ~ e r paragr4phs 5 and 6 of the,sa,d Annex A,
tf
/
it was s. ula:. ed that F~ancisco Lopez pall npb.rem~ve
q<t; '-:,
the refr1gera or from hrn address nor part poss.essrnn .
therewith ~it!;).pt ,,,the/express Y[r_ift~p___,_conse:riE of:::i@fu.~ and in the event of violation of the terms of said
agreement then the .J?laintiff may rescind the contract
of sale and recove-r possessi0il bf. the article_ object thereCk._C
of. It was stipulated further that in the event of violation of the terms of the contract PY, defendant, any
amo.unt previously : paid by him shall' be forfeited . as
.~at_aj_ - damag~fl ; a:nd . t . .. the merchandise ob .eS!.t
'{/cthe sale shall remain the a s ute ro ert of ai:nJiff
/
until defendant has aid -'n f
r
i

ft)'
On July 2,
1954,
without
the
knowledge
of
plaintiff,
.
--..,
defendant Francisco Lopez sold the refrigerator to the
J. ~ Trading, a business store at 94 Rosario St.,. Manila,
owned by defendant Jose Velasco, in the sum of P850,
by m~r-ep,rgl'lenting himself as Jose Lim and executing a
-(:locument that he is the absolute owner. The following
day, July 3, 1954,. without kr.iowledge of plaintiff, defendant Jose Velasco, after displaying the refrigerator at his
store,~ the article to Ci:> Rang Chiu, the ot_ller defendant herein, in the sum of P985 which was paid in cash
by Co Kang Chiu. The refrigerator was delivered to the
residence and business address . of. Co Kang Cl).i:u at 505
Sto. Cristo, Manila.
On August 2, 1954, plaintiff filed a complaint 'for.
1
Replevin it;L the Municipal Court of Manila against defendants Frari'cisco Lopez and Co Kang . Chiu, and asked for
a preliminar5,{J;vrit of Replevin ror the recovery of the
possession of 'tie refrigerator, which writ was issued by
the Court. Iniompliance with the Writ of S'eizu"'reissued
by the Court, .fl),e deputy sheriff, accompanie1f by a repres~tative of, th''. plaintiff, went to the residence of Co
' ,'"11;.~.,;1,.
Kang Chiu to serye th~ writ.
the request of Co Kang
Chiu and upon the~ntercession of his lawyer, and having
filed a counter-bond, the refrigerator was Iiot -taken out

(; i)

f'l

~l - ct

far:-4~~

l ~ -~

i/

On

Aue
~~\~-

oft
plai1
as c
cl ail
plai1
Ir
Vefa
Kan
way
as c
fron:
clai:n
Dt
ant I
of d~
rendi
folloi

''*

absolu
Chiu,
immed
Lopez
of 12?
the M

"On

burse <
which
"The
mages

Fro
and C
Jose ~
sense
refr~~
. ancf th

cliru-1

%lase;
. P9Ef5;.__

judgmE
------owner
laritCi
~nd as
be the
as agai
further
moral.
ever ex
The
main, u
Civil Cc
"ART,

are sold'
not sell

-,:-::/x,,........-., ..:!,>

. "i ~~--;..-.;.-

-~

l&W'J"i .., ill

'

J?C . "
. y:

r,

AUGUST 11, 1958

). 18.

OFFICIAL GAZETTE

;'5145

held.
,opez
Sun
[asco
ounlainyl,
)lete
> be
veen
l of
hich
only
!isco
c A,
1ove
sion
.a1nsaid
ract
ereolaany
as
ject
1tiff

of the residence of Co Kang Chiu. Later on, the complaint of plaintiff was amended to include. Jose Velasco .,,.
as one of the defendants. Co Kang Chiu filed a cross- ;,claim against Jose Velasco and a counterclaim against
plaintiff.

In the Court of First Instance the answer filed by Jose

Velasco in the Municipal Court. was reproduced. Co
Kang Chiu likewise reproduced his answer, asking by
way of counterclaim. from plai~tiff . the sum . of P12,500
as damages and r"600 for . attorney's fees, and seeking
from .his co-defendant Jose Velasco, by way of crossclaim, t_he same amounts for damages and attorney's fees.
During the trial in the Coyrt of First lm;.tan.9e, defendant G<L.Ka.ng--Ghiu. adduced evidence to show the extent
of damages he ha/ suffered. After trial, the" lower Court
rendered judgnieri."f~ the ''cUspo.sitive part of which is as
follows:
r
"* * * judg#ient is hereby rendered declaring plaintiff the LC 7'

-t

~50,

505

"fl:

ijV"
J,
CK~

absolute owner of the property in question. DefendanteoKang

Chiu, who is in possession of the refrigerator, shall return same
immediately to the plaintiff; and failure to do, defendant Fran,csico
Lopez shall pay the plaintiff the amount of Pl, 700 plus interest
of 121-'o per annum from the date of the complaint was filed with
the Municipal Court of Manila.
"On t,he cross-claim, cross-defendant Jose Velasco shall :i::eim,..
burse defendant-cross plaintiff Co Kang Chiu the amount of i',fillli.ill)
which the latter paid to the ~ormer for the refrigerator.
"The claim of defendant-\!ross-plaintiff Co Kang Chiu for damages and attorney's fees has not been substantiated. No costs;''

tiff,
the
1ila,
g a
'ing
mdhis
,nd.ash
the

f' \
--;:,

From the foregoing judgment, defenda~t Jose Velasco

and Co Kang Chiu have interposed the present appeal,
Jose Velasco seeking, a reversal of the judgment in the V-sense that he lIB-declared +be lawful owner of be said I
refrig.erat~H--af..ter._th.e...-sale. -a_bjm by Francisco Lopez,
. and- that the transfer made by Jose Velasco to Co Kang
Cmu~_~3.ecfarecC~alid, -~!!;~~:_:f;o~r~ve=:=Tos-e=
Velasco from ~ g Co Kang Chm the . alllgunL.of
- P985 ;_while. Co... E:a1lg(;hius-ee".KS___ ffie reversal of the~
judgment. in@fa:r_ as -IC'<feciares----=-,;iliifiitH ''ihe. a~_Ql!J.ie
ownerof-thE:._:ref.rjg~;~fo.r_lii.J11i~fioii""-ancf"require; a ppel~- ~
-l~nteoKan
to return its-R6ss-ess1~=J~jilfil.n.mt,
and
a.ska- that another one be
decl~ring
him
r
- entered
..................................
,
... --- J.Q
be the absolute owil.ertneFeor-eiititlecrto---rEspossession
. ~ a inst pla iutiifaiicrtnrWliolewo~}cl-:---rro-Xaiig-Ciiiu'
further prays that plaintiff be ordered to pay 'P'5,000.00
moral. damages, P-600 attorney's fees, -costs, and whatever exemplary damages . this Court may fix.
The final resolution of the case at b a r , ~ in the
m:1-i.n, upon a c~rrect. applica~ion of Arti e _1505 of the
Civil Code~a1d article provides: .
~

'for
,ndfor
the
by
ued
>reCo
mg

ing /
out

. "ART. 150 Subject. to the provisions of th1.s Title, where goods

are sold .by
person who is not the owner thereof, and who does
not sell the
under authority or with the consent of the owner, '

.,_.....;.;.:

. ''\

. ,\''

.~

.-"':"-.. . . "\f-- .

"~?

OFFICIAL GAZ:t;TTE

5146

VOL. 54, No. is

br

the buyer acquires. no better title to tlf. goods. than the seller had, . . .
unless the owner of the goods is
his conduct precluded fron\. ... ,;:-) :
denying the seller's authority to sell..
~ ~ \J}1- .
"Nothing in this Title, how . r,
all
ect :

(l) The provisions of any factors'
s, recording law , or any
.
other provision of law . enabr g t
ppal'ent owrier of goods to
dispose of them as if he were
e t e owner thereof;
(2) The validity of any contrac of sale under .statutory power)..
of sale or under the order of a court of competent jurisdiction; J
(3) Purchases made in a merchant's store, or in fairs, or
markets, in accordance with .the Code of Commerce and special
laws."

1s.

\I

""'

As has been stated, plaintiff Sun Brothers & Company\

is seeking to recover,, possession. of a refrigerator with
which it has parted pursuant to a\conditional sale with ,
one Francisco Lopez who violated his contract by selling
the refrigerator to the J. V. Trading & Co. owned by
Jose Velasco who, in turn, sol.d .the property to Co Kang
Chiu. The clash of interests, in this case, is between
the Sun Brothers & Company and appellant Co Kang
Chiu who is now in possession of the refrigerator. The
lower court, relying. on the first .paragraph of Article
1505, adjudged plaintiff to be the absolute. owner of the
refrigerator and ordered Co Kang Chiu to return the
same immediately to plaintiff. It is urged by appellant
Co Kang Chiu that paragraph (3) and not the fir~t
paragraph of Article 1505 should bti applied because he
bought the refrigerator in good faith and for value at:
a merchant's store.
In our opinion, the lower court committed error when
it applied the first paragraph of Article 1505. It is true
that Francisco Lopez, the conditional vendee, never "'iuid
any title to the refrigerator in question, because the
stipulation between him and the conditional vendor, the
Sun Brothers & Company, is that title shall vest in the
vendee upon payment in full of the purchase price, and
Francisco Lopez has not fully paid the contract price.
When Francisco Lopez, who has no -titleto the refrigera-1
tor i? question, so.Id. it to Jose Velasc~_,~atter di.d..@t.. .
acqmre any better right than what Franc-1sco Lapez hadwhicli is practically nothing:...~We-do-~ agree with tJ::ie
court a quo that Jose Velasco was a.._pu~chaser in good
faith and for value for the reason that Francisc(o. Lopez,
being a private person who
not Gngaged in. the business of selling refrigerato.rs, /J"~~e Velasco n.iu~.:t-::be.~f
sonably expected to have mqmred from Francisco Lopez
whether or not the refrigeratcir !:i:t was selling has been Ii'
paid in full. In this, Jose Velasco has been negligent, ;
The conflict of inter~however";"".is between . the Sun
Brothers & Company which is the conditional vendor,
on the one hand, and Co Kang Chlu, an innocent pur~
chaser for value, on the other. ~The:r~_.can be no questieri.
but that the J. V. Tradin0tore from which . C<:>) Kang

--J

"--! .

r\
.

~ JYefDt.fC-1:1,

Auat
-

Chi.u
.as 1n,
/
t/ Co K
ing :
lt fol
applii
dec1ai
q . , altho1
~
r.i g ht
feet <
of SOJ
whicli
that
'/
11
into c
I latter
1'h
protec
~
chasei
I appea
<'
fa<
\I. stabili
in a c
for bl
the ti

"'--1

i20

~~

it iS I
than 1
Upo
ap'pelli
:refrig(
cause
anaTc
.__
Not
owner

j t:';:
I

it nh
'pl~
Franc1
y_~tion
said:

"Yet
iding, a

sessing

\~

of this
suant tc
the pric
saction
Commer,

And, n

\r

*'

.P/P

-~

'

./

No.18

AUGUS'l'

11; 1958

GF~.t\A~ GAZETTE

5147

~~~~~~~~~-'-' ~.~~~~~-

ller had

~t\~
, or any
goods to

y power}
iction;
'airs, or
l special

)mpany \
>r with
le with \
selling
ned by 1
J Kang f
>etween
> Kang
~- The
Article
of the
,rn the

'

f~<A'S .

:~elA::;

A~

alue at\~)~~.'i.
\,.
is true
'
ll
er had
,
1se the
.)
or, the
in the
::e, and
price.
I!
'rigera-~l
:lid .n.qt (1
; had-\
... .!t
ith th~~/
n good

r when

,....

Lopez, .
e busi1e rea-' i
Lopez !\
,s been
~ligent..
1e

sui<-=-

vendor,
1t puruestion
>) Kang

Chiu purchased th~ ref.rigera.tor."!.fits. a m..e~.han!_.store, ~

. .as merchant stor~& . a.re J!efirre'd in tlt, qode of Commerce.
, / Co Kang ~hru' bought t~_e refr1geratof at t~~-'1~ad- I
ing after 'the same has been put ~, d1spiay thereat. '
It follows that paragraph (3) of Arbcl'@'. 1505 should be
applied, under which appellant-Co . Kangt;};iu shoiiJ<lhe \1
dec1ared to haveacquired a valid title to the refrigerator, l
q
r although his .Predecessors in interest .did not'hi:1:v:e any
.
""--1-r.i.g.ht...Q.~e~ship\.oye1: it'. . Tl;!is is a. case. of-an'.1m_per~I ,
, }.'
~ 1,,J!.r
feet or ~ title npemng mto a. v~l1~c on_~1. as a r:~!!ll/ \_ W ;IV' 'f),0- .,,,,,...J
of ~om.g___rn:tervemng c~use_s. , The po~cy o:L,.tb};lsla~, ...fro. . I ) '-" I / - . '.,..,:~ ..vv'
which we. do not ~eeLJustifie~ to dev1a.te, h:as always beew
.J,vc. r-<-. J
that where the rights and mterests of a vendor come
S -.r ,1 .-t 'h 11
into clash with that of an innocent .buyer for value, th . .
~~
latter mqst be protected.
r "'' "
'l'he rule embodied in paragraph (3) of Article 1505 l Sf'OTT/~tt- IJA)f-S
protecting innocent third parties who have made purf:
chases at merchants' stores in. good faith and for value
l
appears to us to be a~s~ and nece'ssaiy rule not"onJyf-(
<" o facilitate commercial sales. on movables but to give~
v{;tabilityto business b-ansactions't This rule is necessary
in a country such 'as ours where free enterprise prevails,
~
for buyers cannot be :::easonably expected to look behind
the title of every article when he buys at a store. Th_.
~octrine _of c:wel:l,t emptor is now rarely applied, and
1
it is ever mentioned it is more of an exception rath~
than the general rule.
, Upon the whole, we are persuaded to believe that}
appellant Co Kang Chiu who is now in possession of the
refrigerator should 'be adjudged the owner thereof, beC'ause
he bought
it at a mercriant's store in good faith ~P'I
. .
=
all_d for va!ue.
/ ~ '' ,,...
Not even the remedy granted by Article ~ to the
owner of a movable to obtain its ];'eturn provided he reimb_urses the one _in possJ, :on L~ _f, is ~vailable to plain-:
~1ff fecausfv:~1th:--;--c d .1. I _. the
fr1gerator n_or .was
:,.,It ynlawfmfy.dep~_'.:~ ;her.e...:_
t qtnnot be. Sald, that
. pl~elivecy I possess10 of ~efr1gera,tor to
Francisco Lopez should be construed as ynlawful deprivation of the owner thereof .. As the Supreme Court has
said:
. ,.

;-.,,~tv:.'
c~rt'l\. -. :

,/

if\\

j /

"Yet the defendant invokes Article 464 of the Civil Code prov. iding, among other things, that 'one who has been unlawfully
!lcc.:.T:..:i.:..ve.::cd::....;o;.:f_D"""~-r~s.onal property may 1:ecover it from an~ person liQ.S- r])
sessing it.' We do not 'believe that the plaintiff has been unlaw- f'
~eprived of the cartons of Gloco Tonic within the scope ~
of this legal provi.sion. {!Lhas y6luntarily parted. with them pur-\
suant to a contract of purch~se and sale. The ,~1rcumstance that
the price was not subsequently paid did not render illegal a transaction which was valid and legal at the J:ieginning.'..'J (Asiatic
Commercial Corp. V8. Ang, et al., 40 Off. Gaz., Supp. No. 11, 102.)

And, moreover., as one noted author has aptly put it:

.t'~---.- . - - ~ J /

'.

,.,

.. \~---

7'{'

-~~;-;{;.-:-::''"

,(

Vor,. 54, No. 18

AUGUS1

"The owner of property Iwst or illegally taken cannot recover it:

"~) If acquired -in mai:;1,:ets;
,

"2) If acquired hi fat~fi; (Art. 1505, Civil Code; Code of _Com~

merce, Art. .86) ;
t '.'
"3) . If acquire<l
'froAf
stbres
of.
.(
.

ROMAN
PA

OFFICIAL,:G.N}ii~fE

5148

,,.,.
-.

fti;.

'-

1'-l

.s
~\

I'

. i) Liig~ll:r regi~tered merchants, or

. .
I
ii)

N:,n~regist~ted
_merchants
whose
stc;,res
are
advertised
II'
'
or open to the public for eight consecutive days
(0:ode of Commerce, Arts. 85, 86)." (Jose B. L.
.
.
'E~\lr.e~, Outline on Philippine. Civil. Law, Book II,
p. ii7.)

.
.

, . ,.ol"

.,

PA

LAND RI
FEJ

Do

LA,:

the

'{ ,.AiDPe!iee's r . e c o ~ c 1 ~ i m for indemnity agains.V

\ : filr-a~tco Lop:9 l \'lvu p..;,,, ~ ' " " ~ -
Appel1aitt;1Jo Kang Chiu has r.aised anothef assign:-
ment of error and, that is, that the lower court has erred
in not awarding him damages'. He contends that the
service of the Writ of Seizure issued by the Municipal
Court. has caused hin:i untold damages in the form of
besmirched business reputation a,nd mental anguish. A
review of the record,- ho:w:ever, reveals. .th.~t appellant's
claim is not well-substantiated, for while it is true that'the Municipal Court issued the said writ, the -refrige:ra~
\
tor was never taken out of his residence becase of..appel'\t lant's request and his counsel's intercession. It results
that the i"5,000 claim for mora_l damages should . be
dismissed for lack of merit. The same n!:.1.y_be sllid ...ahout-~
the claim for attorney's fees of appellant Co Kang Chiu.
Not having been well-supported by evidence, the claim
should not be granted.
WHEREFORE, finding that the lower court has committed
error in declaring plaintiff to be the absolute owner of
the refrigerator object of this suit, the judgment appealed
'from is hereby modified. Appellant Co Kang Chiu is /
hereby declared to be the absolute owner and is entitled
to. the possession of the refrigerator in question. Defendant Francisco Lopez is hereby ordered to pay to the plain- v
: tiff the full purchase price of the refrigerator in the sum
of/-Pl,700, with 6% annual interest thereon from the
date of the filfng of the complaint in the Municipal Court
until fully paid. The claim of Co Kang Chiu for damages
and attorney's fees is hereby dismissed. No special pronouncement as to costs:
IT IS SO ORDERED.

Natividad and Sanchez, JJ., concur.

Judgment modified.

mu

sirr
fea
bel

fro

up,
ste
lan
Dii
Ra

Lu
Ph

APPE..t
of
The
Pedr
Man1

ANGEL]

An a
session
with cl
against
Camari
in favc
At t:
before
lowing
missio11

"1. TJconsists
"2 .. Tl:
parcel o
died in
Nazaria,
surname

"6. TIcovered
name of
"The
evidence

"So O

'.:

..

OFFICIAL GAZETTE

3792

.,,.

VOL. 53 No. 12

,,
[No. 13514-R.

TRINIDAD

February 22, 1957]

c.

TAGAT.A.C, palintiff and appellant, vs. LI~ERATO

C. JIMENEZ, defendant and appellee
.

OCAMPO, J.:
In October, 1951, Trinidad C. Tagatac bought a car
for .$4,500 from Danielson and Kavarno Motors' of 'Sta.
Barbara, California, U.S.A. On May 27, 1952, she brought
the car to the Philippines. .Tagatac counted among her
friends one Joseph Lee and his wife, the latter being her
childhood friend. Sometime in June, 1952, Tagatac, accJ1').panied by her sister, Dolores Corpus, visited the Lee's in
the latter's house. Shortly thereafter Joseph Lee came to
see Trinidad C. Tagatac. With him was one Warner L.
Feist alias Warner L. Levy who was posing as a very
wealthy man. Joseph Lee introduced Feist to Trinidad C.
Tagatac. Possessed of a glib tongue, . Feist easily convinced Tagatac that he was a millionaire. He told her that
he was the manager of a cotporation named China Pacific

l;
"

1. OWNiERSHIP; MOVABLE PROPERTY; Loss OF MOVABLE PROPERTY; RECOVERY FROM PERSON IN POSSESSION OF SAME; CASE AT BAR.-AC
cording to Article 559 of the New Civil Code, although
possession of movable property acquired in good fafth is
equivalent to a title, one who has lost any movable or has
been unlawfully deprived thereof, may nevertheless recover it
from the person in possession of the same. However, in a
oa.se like the present, where there 'is no proof of illegal or
unlawful deprivation, there is no justification in applying the
provisions of Article 559 of the New Civil Code. The failure to pay the price of the car or the issuance of a check for
its price without funds to answer therefor by the original
vendee did not or could not affect the .validity of the transfer
of title of the subsequent vendee who acquired the car in
good faith; at the most it would give the vendor a right to
resolve the cont:ria.ct, but the title to the thing sold would not
revert to the seller until the sale has been set aside by a
competent court. Until this is done, the rights of stranger
in good faith, acquired before the resolution of the contract,
are entitled to protection. (Benjamin vs. Favis, CA-G. R.
No. 4964-R, January 12, 1951.)
2. CONTRACTS; VOIDABLE CONTRACT, E:FFECT.-A voidable contract is
susceptible of either ratification or annulment. If the cont:ria.ct is ratified, the action to annul it is extinguished C"A.rticle
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 situatic;ms before the contract and mutual restitution topows as a
consequence (Article 1398, N. C. C.).
3. EQUITY; INNOCENT PARTIES.-Behveen two innocent parties, the
one whose. acts made possible the injury must shoulder the
consequences thereof.

APPEAL from a judgment of the Court of First Instance

of Manila. Concepcion, J.
The facts are stated in the opinion of the Court.
Ftrdinand E. Marcos for plaintiff and appellant.
Delgado, Flores & Macapagal for defendaRt and appellee.

>S

,:

'Y

\'
.

,i>.

I
;
I,

,:.t?

,,

'

,,

\J;

....
!'

"'

i ,;

4-j.g' ~'
-~:...

-~-

. ' .. , .,,..._,_<:.lbMi-'4:e&ftlll!

..

.JUNE

,.

f
ii~i ,

, ,
..

'

:#-

P,

l
'...s

,,

....

>f

~i
1-

i.i ... ,t

!i

'

71693,,,,,--6

J,
,

.. ,r.

,Jtrtrr+i .

OFFICIAL GAZETTE

Trading Co., Inc. ; that he was the owner .of two cars and
two houses in Baguio; and that he was the consignee of'
billions. of_ pesos of textiles then deposited in the custom. house. Seeing that Tagatac believed every word he said,
he offered to buy her car for P15,000. Tagatac was amenable to the idea. She agreed to sell the car to Feist at
the price quoted by him. On June 18, 1952 between 9 and
10 in the morning, the deed of sale was made. Tagatac
signed said private document of sale. Warner L. Feist
paid the price to Tagatac .by means of a check postdated
June 19, 1952 which check he delivered on the day of the
execution of the deed of sale, June 18, 1952. In turn,
Tagatac delivered the car to Feist on the same day, June 18,
. 1952..
The next day, June 19, 1952, Tagatac tried to cash th~
check with the PhilippiM National Bank. The bank Afused to honor the check and informed her that Watner
L. Feist has no account and no funds in said bank. Without losing any time, Tagatac notified all enforcement agencies such as the Police authorities of Manila, the National
Bureau of Investigation, the Philippine Constabulary and
the Military Intelligence Service, of the estafa committed
on her by Warner L, Feist. The law enforcement agencies
failed to apprehend. Warner L. Feist. The car itself disappeared completely. Meanwhile, Warner L. Feist managed
to have the private deed of sale notarized by Notary
Public Juan N. Sombrito. With the properly notarized
deed of sale, he succeeded in having the registration certificate of the car transferred in his name on June 28, 19~2,
exactly 11 days after the sale thereof. On August 18,
1952 Feist sold the car to .Felix Sanchez of Imus, Cavite.
Sanchez %had the registration certificate of the car trans.
ferred in his name on the same date. Sanchez offered to
sell the car to Liberato C. Jimenez. Jimenez investigated
in the lVIotor Vehicles Office the registration certificate of
Sanchez, After finding out that everything was inorder;
he bought the car from Sanchez for Pl0,000. On August
21, 1952, Jimenez delivered the car to the California Car
Exchange on Taft Avenue in order that it may be displayed
for sale. Ruben lVIasalonga offered to sell the car for
Jimenez so the latter transferred the car to Ruben Masalonga in order to facilitate the sale of the car. Masalonga in turn, unable to sell the car immediately, trans-
ferr'ed it to Eugenio Villanueva, in order that the latter
might sell it for Liberato C. Jimenez. On August 31,
1952 plaintiff discovered the car in the possession of the
California Car Exchange so she demanded from the manager
of said exchange for the delivery of the car to her but
the latter. refus.ed. On September 3, 1952 the certificate
of registration was retransferred to Liberato C. Jimenez.
On October 20, 1952, Tri,d C. Tagatac filed a suit
for the recovery of the possession of the car. The Sheriff.,
pursuant to a warrant of seizure obtained by plaintiff,

;,'!.-.

30, 1957

',.;,...,._

3793

:\

' 3794

- OFFICIAL GAZETTE

VOL. 53 No. 12

ll<:

seized and impounded the car but upon defendant Jimenez

filing a counterbond the car was delivered back to him.

After trial, the lower court rendered a decision dimissing

. plaintiff's complaint and confirming the ownership and
possession of defendant .Liberato C. Jimenez.
Plaintiff appealed. She raises two - questions, one a
question of fact and the other a question of law, to wit:
. (1) whether defendant-appellant Liberato C. Jimenez is
a purchaser in good faith; and (2) whether in view of the
- facts obtaining in this case, she is entitled to the possession
of the car in question.
We shail first resolve the question of fact.
Plaintiff-appellant claims that defendant-appellee is a
purchaser in bad faith of the car in question. Plaintiff:: appellant further submits that in view of the fact that the
estafa was committed by Warner L. Feist on June 19, 1952,
and the car -was transferred to defendant-appellee, on
August 21, 1952 the presumption set forth in section 6_9
- (j), Rule 123, of the Rules of Court, ar-ises. According
-to the aforecited section of Rule 123, there is a disputable
-presumption that a person found in possession of a thing
- taken in the doing of a recent wrongful act is the taker
and the doer of the whole act. This presumption usually
arises in cases of stolen goods. We cannot make this
presumption in the pre'Sent case, because (1) the car was
riot stolen from plaintiff-appellant anJ (2) defendant-appelle came into possession of the car two months after
Warner L. Feist swindled plaintiff-appellant so that even
assuming that the car was stolen, defendant-appellee could
-. not have been presumed to have been the wrongdoer for
-the wrongful act was done two months before the car came
into his possession.
The car was transferred twice to defendant-appellee,
for_ the first time on August 21, 1952 and for the second
-tire on September 3, 1952. Plaintiff-appellant argues
that defendant~appellee is a purchaser in bad faith because on September 1, 1952, that is three days before the
car was transferred to him on September 3, 1952, h_e al. ready knew that the car was subject of a search warrant
in a estafa case against Warner L. Feist, as shown by
his motion for the dissolution of the search warrant (Exhibit 0). Defendant-appellee bought the car for Pl0,000
from Felix Sanchez on August 21, 1952 (Exhibit 0-2).
The car was. duly registered in his name (Exhibit G).
On August 22, 1952 defendant-appellee transferred the
:car. to Ruben Masalonga (Exhibit H). On the same date
Masalonga transferred the car to Eugenio Villanueva (Ex'hibit I). On September 3, 1952, Villanueva transferred
-the car back to defendant-appellee (Exhibit J).
The search warrant (Exhibit M) submitted by plaintiffappellant is dated September 1, 1952. Defendant-appellee,
Ol1 the--sam~ date file-d a petition to dissolve the Search war.:.

!}'

-... .

.-("'

-,

1 ~~

.t '

;d:

/-'

'!<

"

.~

'. I

'
f

----

._i
. : . !, .

r--c~

. ,....,,...:::@<r4:t,~'.., :

'~.~.,

l.

j"!

~..

! I.

r. '

"t

,.,....r; Ii .,_.;
t.
t

l
r

l,
!Z1.,

1 r1

it ~-

I "

'

'
':/-'
,.;..

"
~

ii

' l''

~-

.~:

+.

..+- ~

--,

.,

---...

't \

, 11 :

JUNEL 301 .1957

'OFFICIAL ..GAZETTE

rant (Exhibit O) in.which he stated "that there is:, however,

. a.crimina.l case.pending.in Branch 6 of this court presided
over" by the Honorable Poteneiano Pecson regarding ;an
. a.utomobile of similar description wherein Trinidad. C.
:Tagatac is the offended party and. the accused are Warner
L. Feist and Joseph Lee for estafa". Admittedly, on that
date, September 1, 1952, def endant-appellee was fully-aware
that there were.some questions regarding the car. Plaintiffappellant (!!aims that such knowledge already conlitutes
bad faith when the car was transferred to him for the
second time on September 3. We do not find it so. It
. is .a fact beyond dispute that when defendant-appellee
acquired the. car on August 21, -1952 he had no knowledge
of any flaw in the title of the person from whom he
.acquired it. He, therefore, acted in good faith in buying
the .ca;r. Such .good faith coritin.ued even .though the car
was transferred first to Ruben Masalonga, then .to Eugeniq Villanueva and later back .to defendarit-appellee, for
.the .successive :transfers were made for the purpose mereiy
of facilitating the sale of the car.

Contrary to plaintiff-appellant's claim, defending:.appel:lee Liberato C. Jimenez did not commit perjury when he
swore under oath in Exhibit O that he owns the car and
.that it was registered in his name, because evetl- though
the car oh that date, September 1, 1952, was still registered
in the name of Eugenio Villanueva, defendant-appellee considered himself to be the owner of the car for :as we have
.said the transfer of the car to ,Masalonga and that to
Villanueva were made for the purpose of enabling these
persons to sell it. For all intents and purposes, defendant. appellee had every reason to assert that he was the <Jwner
of the car on September 1, 1952.
Plaintiff-appellant alleges thaf the . lower . court totally
ignored the judgment convicting.Warner L. Feist of estafa
and that the lower court erred in not declaring that
restitution of the property swindled must inevitably follow.
: The record reveals that the co.:urt a;. quo took notice-.of
the judgment of conviction in its order of Julyi15, 1954
.denying plaintiff-appellant's motion for reconsideration of
the decision now under consideration. In said order, it
expressly declared "this court knows that in one criminal
case Feist was convicted of estafa ori the rubber check lie
.is:s:ued against. the Philippine 'Bank of .Commerce without
any fund in 'the said bank so that he was accused of
estafa because of that check and not because-of the delivery
:of the car."
Plaintiff~appellant Trinidad C. .Tagatac rel:fos chiefly
on Articles iOO, 104 and 105 6f the Revised PenaLCode and
Article 559 of the New Civil Code.. True it is that every
,person criminally liable is also civilly liable (Article 100,
Re"\i:ised Pena1 Code) and Ms civil liability includes res:..

:3795

OFFICIAL GAZETTE

3796

Vo~. 53 No. 12

titution of the thing itself even though it be found in

the possession of a third person who acquired it by lawful
means (Articles 104 and 105, Revised Penal Code).
According to Article 559 of the New Civil Code, although
possession of movabJe property acquired in good faith is
equivalent to title, one who has lost any movable or has
been unlawfully deprived thereof, may nevertheless recover
it from the person in possession of the same.
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? Plaintiff-appellant
cites a number of cases to support her stand that the car
should be returned to her in consonance with the provisions
of Article 559 of the New Civil Code. However, the cases
she cites are not on all fours with the case at bar. The
cases of Gacula, et al. v.s. Martinez, et al. ( G. R. No.
L-3038, promulgated January 31, 1951); Valera vs. Finnick (9 Phil. 482); U.S. vs. Sotelo (28 Phil. 147) ; Arenas
vs. Raymundo (19 Phil. 47); and Del Rosario vs. Lucena
(8 Phil. 535) have one factor in common: Persons not
duly authorized to do so. pawne,d or pledged jewelry in
favor of innocent third persons. It should be noted that
in the case 1.mder consideration, Warner L. Feist sold the
car to Felix Sanchez, and the }atter in turn sold it to
defendant-appellee Liberato C. Jimenez. Furthermore, in
the above-mentioned five cases, the jewelry involved were
not sold by the true owners thereof to the persons who
unlawfully pledged or pawned them. The jewelry were
deiivered to persons who had the obligation to either return
them or the price thereof, but who instead of complying
with this obligation, pledged them with innocent third
persons. There was no valid transmission of ownership
from the owners of the jewelry to the persons who illegally
deprived them thereof, whereas in the present ca~e, there
was a valid transmission of ownership from the true
owner, plaintiff-appellant Trinidad C. Tagatac, to the
swindler, Warner L. Feist, . considering that there was
between them a contract of sale by reason of which plaintiffappellant delivered to Feist the car in litigation.
The other two cases upon which plaintiff-appellant relies are likewise not in point. In People vs. Alejano (54
Phil. 987) the owner was clearly unlawfully deprived of
his property, for it wa~ stolen from him; likewise the
owner of the truck in Tuazon & Sampedro, Inc., vs. Gi-

.,.,,..

1
-""
I
i

-- !

I
"

~ff:

(. ':

,'

__.. \ ..

___ .,, ....,... _

+I
.1..1,.

(Ii'_
r:

I
"

'

,:,.

"'
!
.;,- '

. ...--':J_,.,

,.

OFFICIAL GAZETTE

JUNE 30, 1957

3797

menea (CA) 46 Off. Ga~. 1113, was illegally deprived

thereof the Japanese forcibly took it from him during the
Occupation.
The_ facts of this case closely resemble those obtaining
in Benjamin vs. Favis (CA-G. R. No. 4964-R, January
12, 1951), wherei'n this Court declared:
"The tri,al court opined that the plaintiff was unlawfully deprived
of his property through estafa, with the car comitituting the corpus
delicti, and he is entitled to its restitution without compensating
the possessor in good faith, as authorized ~.rticle 464 of the
Civil Code. We believe with the defendant-appellant that the position thus taken by the lower Court is not legally tenable. The
sale of the car. by plaintiff to Serafin Belmonte has all th_e -elements
essential for its validity. There was consent unvitiated by any vice
or defect. The vendor and the vendee freely agreed.,upon the car
to be sold and the price to be paid. The consideration of the
contract was licit. The transa,ction came about openly. Nothing
of material significance was concealed by one party from the
other. Even the fact that the check issued in payment of the
car had no funds in the .bank to bl!_ck it up was not unknown to
the pLaintiff, for he was informed of the same at the time he was
requested by Belmonte to refrain from collecting the check until
9 :00 o'clock on the day following the day of the sale, to which
request, by the way, plaintiff readily assented. This is a circumstance showing clearly that plaintiff was well aware, at least
soon after the issuance of the check in question, of the lfrnancial
position of his vendee; and it would not be entirely correct to say
that he was dec_eived all ra.Iong as regards the latter's ability to
pay. And even if it were so, it would not necessarily imply that
plaintiff was unlawfully deprived of his property when he voluntarily
parted with it in the belief, proved by subsequent events to be
erroneous, that his buyer was solvent. It would be more in conformity with the fact to state that the plaintiff, pI,acing far too
much stock on. the appearances and pretenses of his buyer, who
misrepresented himself to be a Congressman and a man of means
threw discretion to _the winds and allowed himself to be paid i~
5heck instead of oash for the price of car only to regret it later;
,JJUt the misrepresentation of the purchaser did not, in our opinion,
render fraudulent or illegal the sale which, as already stated, bears .
all the earmarks of legality. The fact that the check, ras it turned
out, was without funds may have given rise to a prosecution of
the issuer for estafa under our penal laws, but it did not make the
consummated sale un1a,wful for the reasons above-mentioned; nor was
the automobile the corpus delicti of such estafa, as the lower Court
mistakely assumed. We are not, therefore, satisfied that the plaintiff
was able to prove illegal or unlawful deprivation, ra.nd the trial
Court, consequently, was not ju.stifled in applying the pro-visions
of A:rticle 464; Civil Code (Enage vs. Sotto, CA-G. R. No. 221-R,
May 17, 1947).
.
"The only conclusion left to be drawn from the foregoing circumstances is that the sale of the car by plaintiff to Belmonte was
a good and valid sale (Article 1450, Civil Code) The delivery
of the car by the plaintiff to his buyer Belmonte effectively passed
ownership to the latter (Arts. 1095 and 609, Civil Code). And
the failure to pay the price, or the issuance of a check for the
price without funds to answer therefor, did not and could not
affect the validity of the transfer of title; at the most it would
give to the vendor a right to resolve the contra.ct under Article
1124 of the Civil Code, but the title to the automobile would not
revert to the seller until the sale was set aside by a competent
Court. This has not been done, and it is elementary that the rights

<\<.

/ .,,.-/

379.8:

Vor.;; :5:3 No::12

,,
,,: .

O;F:(l'ICIAL GAZETTE

. .
.
\ :
of a stranger in good faith, ia.cquired befor.e the resolutiqi:l of the
contract, are. entitiea' to .protection."
.
.

Let us turn our attention to the contract of sale between

plaintiff-appellant Trinidad C. Tagatac and Warner L.
Fe~st. Thefraud 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 annual 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 .
ccmtrac::ttng parties are restored to their respective situati<:ms before the contract a.nd iutual r~stitution :foilows as
a :consequence. (Article 1398, N. C. C;).
However, as long as no action is .. taken by the party:
entitled, either that o! annulment or of ratification, the
contract ~f sale remains valid and binding. When plaintiff- ,
app~llant Trinidad C. Tagatac delivered the car to Feist by ,
virtue of said voidable contract of sale, the title to t.he
car passed to Feist. Of course, the title that Feist acquired
was defective and voidable. . Nevertheless, at the time he ..
so.Id the car to Felix ,Sanchez, his title thereto !ftd .not ;
been avoided and he therefore conferred a good title on ..
the latter, provided he . bought the ,car in good faith, for
value and without notice of the defect in Feist's title
(Article 1506, N. C. C.). There being no proof on record
that Felix Sanchez acted in bad faith, it is safe to assume
that he acted, in good faith. But even granting for the .
sake of argument that Feiix Sanchez "-;as a buyer in bad .
faith and he acquired from Warner L. Feist .merely a
voidable. title to the car, considering that defendant-appellee Liberato C. Jimenez bought the car in good faith, for
value and, without notice of any . defect in Sanchez' title, ;.
then he acquired a good title to the car (Article J506, .:
N; C. C;). Good title means an indefeasible titl~ to the
car even as against the original owner of the car, herein
\
.
plaintiff-appellant Trnidad C; Tagata.c.
Even under rules of equity, defendant-appel1e Liberato
c; Jiinen.ez has . a .better right to the car. Both he and .
plaintiff-'appellant Trinidad C.. Tagatac are innocent parties,
but it was the latter's gullibility which made possible the
swindle committed by. Warner L. Fefat.
between them,, :
the_refore, it. is .. plaintiff-appellant who should bear the
consequences of. the swindle for as between two innocent
parties,' the one whose acts made possible the injury must '
shoulder the consequences thereof.
For all th.e -foregoing considerations, we hereby. affirm
th~ appealed decision without making any pronouncement
respecting .costs;

'---. ..

'

..

I
l
l

.!, .

/~.
'I,,.,,.

As

.,

Santiago and San J?se, f J., concur.

;Judgm,etJ1,t affirmed. .

"

,,
........ ~

..,.,