G.R. No.
61584 November 25, 1992 On learning of these transactions, respondents children of the late Pascual Paulmitan filed
PAULMITAN vs. CA
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 "Alicio Paulmitan, et al. v.
Donato Sagario Paulmitan, et al." which affirmed the decision 2 of the then Court of First
Instance (now RTC) of Negros Occidental, 12th Judicial District, Branch IV, Bacolod City, in
Civil Case No. 11770.
The antecedent facts are as follows:
Agatona Sagario Paulmitan, 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 Agatona Sagario, 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 Agatona Sagario Paulmitan 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 Agatona Sagario. 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 Agatona
Sagario 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 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 upon finding merit in petitioners' affirmative defense. This order, which is not the
object of the present petition, has become final after respondents' failure to appeal
therefrom.
Trial proceeded with respect to Lot No. 1091. In a decision dated May 20, 1977, the trial
court decided in favor of respondents as to Lot No. 1091. According to the trial court, the
respondents, as descendants of Agatona Sagario Paulmitan were entitled to one-half (1/2)
of Lot No. 1091, pro indiviso. The sale by petitioner Donato Paulmitan to his daughter,
petitioner 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 ownership over the entire land but only gave her the right to be
reimbursed for the amount paid to redeem the property. The trial court ordered the
partition of the land and directed petitioners Donato Paulmitan and Juliana P. Fanesa to pay
private respondents certain amounts representing the latter's share in the fruits of the
land. On the other hand, respondents were directed to pay P1,479.55 to Juliana P. Fanesa
as their share in the redemption price paid by Fanesa to the Provincial Government of
Negros Occidental. The dispositive portion of the trial court's decision reads:
WHEREFORE, judgment is hereby rendered on the second cause of action pleaded in
the complain as follows:
1. The deed of sale (Exh. "F") dated May 28, 1974 is valid insofar as the one-half
undivided portion of Lot 1091 is concerned as to vest ownership 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;
 2. Lot 1091, Cadastral Survey of Pontevedra, Province of Negros Occidental, now
covered by TCT No. RO-11653 (N.A.), is ordered partitioned. The parties must proceed
to an actual partition by property instrument of 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;
3. Pending the physical partition, the Register of Deeds of Negros 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 portion each, pro-indiviso, as indicated in
paragraph 1 above;
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;
5 Defendants Donato Sagario Paulmitan and Juliana Paulmitan Fanesa are ordered to
account to plaintiffs and to pay them, jointly and severally, the value of the produce
from Lot 1091 representing plaintiffs' share in the amount of P5,000.00 per year from
1966 up to the time of actual partition of the property, and to pay them the sum of
P2,000.00 as attorney's fees as well as the costs of the suit.
xxx xxx xxx
On appeal, the Court of Appeals affirmed the trial court's decision. Hence this petition.
To determine the rights and obligations of the parties to the land in question, it is well to
review, initially, the relatives who survived the decedent Agatona Sagario Paulmitan. When
Agatona died in 1953, she was survived by two (2) sons, Donato and Pascual. A few
months later in the same year, Pascual died, leaving seven children, the private
respondents. On the other had, Donato's sole offspring was petitioner Juliana P. Fanesa.
At the time of the relevant transactions over the properties of decedent Agatona Sagario
Paulmitan, her son Pascual had died, survived by respondents, his children. It is, thus,
tempting to apply the principles pertaining to the right of representation as regards
respondents. It must, however, be borne in mind that Pascual did no predecease his
mother, 8 thus precluding the operation of the provisions in the Civil Code on the right of
representation 9 with respect to his children, the respondents. When Agatona Sagario
Paulmitan died intestate in 1952, her two (2) sons Donato and Pascual were still alive.
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," 10 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." 11 Donato and Pascual excluded their children as to the
right to inherit from Agatona Sagario Paulmitan, their mother.
From the time of the death of Agatona Sagario Paulmitan 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, owned in common by such heirs, subject to the payment of debts of
the deceased." 12 Donato and Pascual Paulmitan were, therefore, co-owners of the estate
left by their mother as no partition was ever made.
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 death, became co-owners with their uncle Donato over the disputed decedent
estate.
Petitioner Juliana P. Fanesa claims ownership over Lot No. 1091 by virtue of two
transactions, 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.
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 of respondents to one half (1/2) undivided share of the land which
they inherited from their father. It did not vest ownership in the entire land with the buyer
but transferred only the seller's pro-indiviso share in the property 14 and consequently
made the buyer a co-owner of the land until it is partitioned. InBailon-Casilao v. Court of
Appeals, 15 the Court, through Justice Irene R. Cortes, outlined the effects of a sale by one
co-owner without the consent of all the co-owners, thus:
The rights of a co-owner of a certain property are clearly specified in Article 493 of the
Civil Code, Thus:
Art. 493. Each co-owner shall have the full ownership of his part and of the 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 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-ownership. [Emphasis supplied.]
 As early as 1923, 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)]. 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 [Ramirez v. Bautista, 14 Phil. 528 (1909)].
Consequently, by virtue of the sales made by Rosalia and Gaudencio Bailon which are
valid with respect to their proportionate shares, and the subsequent transfers which
culminated in the sale to private respondent Celestino Afable, the said Afable thereby
became a co-owner of 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)].
From the foregoing, it may be deduced that 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. However, only the rights of the co-owner-
seller are transferred, thereby making the buyer a co-owner of the property.
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 land but merely transferred to her the one half (1/2) undivided share of her
father, thus making her the co-owner of the land in question with the respondents, her first
cousins.
Petitioner Juliana P. Fanesa also claims ownership of the entire property by virtue of the
fact that when the Provincial Government of Negros Occidental bought the land after it was
forfeited for non-payment of taxes, she redeemed it.
The contention is without merit.
The redemption of the land made by Fanesa did not terminate the co-ownership nor give
her title to the entire land subject of the co-ownership. Speaking on the same issue raised
by petitioners, the Court, in Adille v. Court of Appeals, 16 resolved the same with the
following pronouncements:
The petition raises a purely legal issue: May a co-owner acquire exclusive ownership
over the property held in common?
Essentially, it is the petitioners' contention that the property subject of 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 the vendee a retro the right to demand
redemption of the entire property.
There is no merit in this petition.
The right of repurchase may be exercised by co-owner with respect to his share alone
(CIVIL CODE, art. 1612, CIVIL CODE (1889), art. (1514.). While the records show that
petitioner redeemed the property in its entirety, shouldering the expenses therefor,
that did not make him the owner of all of it. In other words, it did not put to end the
existing state of co-ownership (Supra, Art. 489). There is no doubt that redemption of
property entails a necessary expense. Under the Civil Code:
Art. 488. Each co-owner shall have a right to compel the other co-owners to contribute
to the expenses of preservation of the thing or right owned in common and to the
taxes. Any one of the latter may exempt himself from this obligation by renouncing so
much of his undivided interest as may be equivalent to his share of the expenses and
taxes. No such waiver shall be made if it is prejudicial to the co-ownership.
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-heir or co-owner of the property in its
totality does not vest in him ownership over it. Failure on the part of all the co-owners
to redeem it entitles the vendee a retro to retain the property and consolidate title
thereto in his name (Supra, art. 1607). But the provision does not give to the
redeeming co-owner the right to the entire property. It does not provide for a mode of
terminating a co-ownership.
Although petitioner Fanesa did not acquire ownership over the entire lot by virtue of the
redemption she made, nevertheless, she did acquire the right to reimbursed for half of the
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 her. 17
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 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. 18
WHEREFORE, the petition is DENIED and the decision of the Court of Appeals AFFIRMED.
SO ORDERED
G.R. No. L-17681 February 26, 1965
MINDANAO ACADEMY, INC., vs. ILDEFONSO D. YAP
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,
Restituto Abuton.
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
(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 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 decree of annulment it rendered in the other case (Civil
Case No. 1774), wherein the defendants are not only Ildefonso D. Yap but also Rosenda
Nuqui and her son Sotero. Erlinda D. Diaz could just as well have refrained from joining as
plaintiff in the action for rescission, not being a party 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 Case No. 1907,
because of some cause attributable to the appellant.
The appellant claims reimbursement for the value of the improvements he allegedly
introduced in the schools, consisting of a new building worth P8,000.00 and a toilet costing
P800.00, besides laboratory equipment, furniture, fixtures and books for the libraries. It
should be noted 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.
It is unnecessary to pass upon the question posed in this assignment of error in view of the
total annulment of the sale on grounds concerning which both parties thereto were at fault.
The nullity of the contract precludes enforcement of any of its stipulations.
WHEREFORE, the judgment appealed from is modified by eliminating therefrom the award
of 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 making the award of attorney's fees in the sum of P2,000.00 payable to counsel for
the account of the Mindanao Academy, Inc. instead of the plaintiff stockholders. In all other
respects the judgment appealed from is affirmed. No pronouncement as to costs.
G.R. No. L-36359 January 31, 1974
FELIX BUCTON AND NICANORA GABAR BUCTON, vs. ZOSIMO GABAR,
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
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:
Plaintiff Nicanora Gabar Bucton (wife of her co-plaintiff Felix Bucton) is the sister of
defendant Zosimo Gabar, husband of his co-defendant Josefina Llamoso Gabar.
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 Llamoso
Gabar 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 Nicanora Gabar Bucton, 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
Zosimo Gabar 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 Llamoso Gabar, Exhibit I, to whom was
issued on June 20, 1947 TCT No. II, cancelling OCT No. 6337. Exhibit D.
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.
In the meantime, plaintiffs continued to insist on obtaining their separate 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 Llamoso Gabar
denies agreement to sell to plaintiffs one-half of the land in litigation. She declared that
the amounts she had received from plaintiff Nicanora Gabar Bucton 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:
Cagayan, Mis. Or.
January 19, 1946
Received from Mrs. Nicanora Gabar 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 Roa Villarin.
"(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;
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.
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 disquisition:
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
Llamoso Gabar 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;
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.
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 Nicanora Gabar Bucton 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 Nicanora Gabar Bucton 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.
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 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).
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 (b) Solicitor del Gobiern o adquirir, en la forma permitia por la ley, concessiones madereras
his title in attacked before taking steps to vindicate his right. But the rule that the statute si el negocio asi lo exige;
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)
(To apply from the Government or to acquire in any manner permitted by law, lumber
concessions if the business would so require);
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- (c) Aserrar maderas y comprar trozos de madera, en caso de que el negocio de la
appellee is in possession of the land, the action is imprescriptible. Considering that the corporacion lo exija; y
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 (To saw lumber and to buy logs, in case the business of the corporation would so demand;
are hereby reversed, and the judgment of the Court of First Instance of Misamis Oriental, and)
Branch IV, in its Civil Case No. 3004, is revived. Costs against private respondents.

(d) Hacer toda clase de negocios relacionados directa o indirectamente con los fines para
G.R. No. L-8255 July 11, 1957 los cuales se ha creado esta corporacion (Exhibit "A").

CITY OF MANILA vs. BUGSUK LUMBER CO.

(To make all kinds of business that may be directly or indirectly in line with the purposes
for which this corporation has been created).
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:

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,
(a) Comprar y vender maderas y para dedicarse, en general a toda clase de negocios Co., Basilan Lumber Co., Dy Pac & So, Inc., Central Sawmill, Woodart Inc., Felipe Yupangco
sobre maderas; & Sons, Inc., Jacinto Music Store and P. E. Domingo & Co., Inc. (Exhibits B to B-23).

(T buy and sell lumber and to engage in general, in any kind of business concerning On October 10, 1952, the Office of the Treasurer of the City of Manila sent a demand to the
lumber); 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 authorities were not excessive and, consequently, ordered the defendant Company to pay
securing the required licenses and permits pursuant to City Ordinances Nos. 3420, 3364 the sum of P584.50 plus legal interests and costs.
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 From this decision, therein defendant took the matter to this Court and in this instance
and 4th quarters of 1951 and the 1st, 2nd and 3rd quarters of 1952 different kinds of alleged that the lower Court erred:
lumber for which it should have paid a quarterly license tax of P40.000 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, 1. In holding that appellant is a wholesale dealer and not a producer within the meaning of
defendant Company refused and failed to pay the same and, therefore, prayed that the tax ordinance;
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. 2. In holding that appellant is a retail dealer and not a producer within the meaning of the
tax ordinance; and

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 3. In holding that appellant is liable under the municipal ordinances imposing taxes in
sold were unprocessed logs; neither did it sell at retail because the timbers were delivered wholesale and retail dealers because defendant is not a dealer but a producer.
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 We could see from the foregoing set of facts that the only question at issue in this case is
as such producer, it had paid the taxes required by law such as the ordinary Timber whether or not appellant, maintaining a principal office in Manila, receiving orders for its
License fee, Privilege tax (producer), sales tax, forestry charges, reforestation fees, products and accepting in said office payments thereto, can be considered a dealer in this
residence taxes, and the municipal licenses in Bugsuk, Palawan; that the taxes in the form City and is, therefore, subject to the payment of the license tax and permit fees in
of license and permit fees sought to be collected by the City would constitute double question.
taxation, and prayed for the dismissal of the complaint.

Appellant does not dispute the power of the Municipal Board of the City of Manila to enact
The record shows that the Municipal Court of Manila rendered judgment in favor of plaintiff Ordinance No. 3000 requiring wholesale and retail dealers to secure and pay the mayor's
and defendant Company appealed the case to the Court of First Instance of Manila based permit annually, neither does it contest the validity of Ordinance No. 3364 which contains
practically in the same arguments. On July 18, 1954, the Court of First Instance rendered the following provision:
decision holding that the Company sold logs to various firms in wholesale and retail
transactions and although 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
Group 2. Retail dealers in new (not yet used) merchandise, which dealers are not yet
constitute double taxation and that the municipal taxes sought to be collected by the City
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);
All articles subject to the payment of percentage taxes or graduated fixed taxes, but not
articles 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).

nor of Ordinance No. 3420 which provides:

SEC. 1. Municipal Tax on wholesalers in General Merchandise. There shall be paid by
every person, firm or corporation engaging in business as wholesale dealer in general
merchandise, a 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.)
A dealer has been defined as:
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.
Appellee, however, in asserting that appellant Company is a dealer relied on the case of
Atlantic Refining Co. vs. 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 contention of the City Fiscal that the office at 703 San
Fernando, Binondo, Manila, where appellant received orders and receipted payment for
such orders is actually a store.

A dealer, in the common acceptation and, therefore, in the legal meaning of the word, 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 commodity (In re Hemming, 51 F. 2d 850). 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 produce and accept payments therefor, and not for any purpose connected with the
business of 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? .
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 foresight with which he watches the markets (State vs. J. Watts
Kearny & Sons, 160 So. 77).
Lexicographers defined a store as:

In the light of the above definitions, appellant certainly does not fall within the common
and ordinary acceptation of the word "dealer" for there is no controversy as to the fact that Any place where goods are kept for sale, whether by wholesale or retail; a shop (Webster's
what appellant sold was the produce of its concession in Palawan. Even conceding, New International Dictionary, 2nd ed., p. 2486).
therefore, that the 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:
Any place where goods are deposited and sold by one engaged in buying and selling them therefore, engage in the business of selling sugar. (Central Azucarera de Don Pedro vs. City
(Black's Law Dictionary, 4th ed., p. 1589). of Manila et al., 97 Phil., 627).

It was also said that: 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.

A store is any place where goods are kept for sale or sold, whether by wholesale or retail
(Standard Oil Co. vs. Green, 34 F. Supp. 30). It also applies to a building or room in which
goods of any kind or in which goods, wares and merchandise are kept for sale, or to any
building used for the sale of goods of any kind (Jackson vs. Lane, 59 A. 2d 662; 142 N. J.
Eq. 193). G.R. No. 80298 April 26, 1990

EDCA PUBLISHING & DISTRIBUTING CORP. vs. THE SPS. LEONOR & GERARDO
SANTOS
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 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 The case before us calls for the interpretation of Article 559 of the Civil Code and raises the
selling. These elements are wanting in the case at bar for it needs no further clarification particular question of when a person may be deemed to have been "unlawfully deprived"
that the principal office alluded to as a store only serves to facilitate the transactions of movable property in the hands of another. The article runs in full as follows:
relative to the sale of its produce, but does not act as a dealer or intermediary between its
field office and its customers.

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
We may further add that this matter was already passed upon by this Court when, through recover it from the person in possession of the same.
Mr. Justice Alejo Labrador, it held that:

It may be admitted that the 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. But plaintiff-appellee did not carry on the business of selling
sugar at 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,
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 Pea and his sale of 120 of the books he had ordered from EDCA
to the private respondents. 8
On the night of the same date, EDCA sought the assistance of the police in Precinct 5 at
the UN Avenue, which forced their way into the store of the private respondents and
threatened Leonor Santos with prosecution for buying stolen property. They seized the 120
books without warrant, loading them in a van belonging to EDCA, and thereafter turned
them over to the petitioner. 9
Protesting this high-handed action, the private respondents sued for recovery of the books
after demand for their return was rejected by EDCA. A writ of preliminary attachment was
issued and the petitioner, after initial refusal, finally surrendered the books to the private
respondents. 10 As previously stated, the petitioner was successively rebuffed in the three
courts below and now hopes to secure relief from us.
To begin with, the Court expresses its disapproval of the arbitrary action of the petitioner in
taking the law into its own hands and forcibly recovering the disputed books from the
private respondents. The circumstance that it did so with the assistance of the police,
which should have been the first to uphold legal and peaceful processes, has compounded
the wrong even more deplorably. Questions like the one at bar are decided not by
policemen but by judges and with the use not of brute force but of lawful writs.
Now to the merits
It is the contention of the petitioner that the private respondents have not established their
ownership of the disputed books because they have not even produced a receipt to prove
they had bought the stock. This is unacceptable. Precisely, the first sentence of Article 559
provides that "the possession of movable property acquired in good faith is equivalent to a
title," thus dispensing with further proof.
The argument that the private respondents did not acquire the books in good faith has
been dismissed by the lower courts, and we agree. Leonor Santos first ascertained the
ownership of the books from the EDCA invoice showing that they had been sold to Cruz,
who said he was selling them for a discount because he was in financial need. Private
respondents are in the business of buying and selling books and often deal with hard-up
sellers who urgently have to part with their books at reduced prices. To Leonor Santos,
Cruz must have been only one of the many such sellers she was accustomed to dealing
with. It is hardly bad faith for any one in the business of buying and selling books to buy
them at a discount and resell them for a profit.
But the real issue here is whether the petitioner has been unlawfully deprived of the books
because the check issued by the impostor in payment therefor was dishonored.
In its extended memorandum, EDCA cites numerous cases holding that the owner who has
been unlawfully deprived of personal property is entitled to its recovery except only where
the property was purchased at a public sale, in which event its return is subject to
reimbursement of the purchase price. The petitioner is begging the question. It is putting
the cart before the horse. Unlike in the cases invoked, it has yet to be established in the
case at bar that EDCA has been unlawfully deprived of the books.
The petitioner argues that it was, because the impostor acquired no title to the books that
he could have validly transferred to the private respondents. Its reason is that as the
payment check bounced for lack of funds, there was a failure of consideration that nullified
the contract of sale between it and Cruz.
The contract of sale is consensual and is perfected once agreement is reached between
the parties on the subject matter and the consideration. According to the Civil Code:
Art. 1475. The contract of sale is perfected at the moment there is a meeting of minds
upon the thing which is the object of the contract and upon the price.
From that moment, the parties may reciprocally demand performance, subject to the
provisions of the law governing the form of contracts.
xxx xxx xxx
Art. 1477. The ownership of the thing sold shall be transferred to the vendee upon the
actual or constructive delivery thereof.
Art. 1478. The parties may stipulate that ownership in the thing shall not pass to the
purchaser until he has fully paid the price.
It is clear from the above provisions, particularly the last one quoted, that ownership in the
thing sold shall not pass to the buyer until full payment of the purchase only if there is a
stipulation to that effect. Otherwise, the rule is that such ownership shall pass from the
vendor to the vendee upon the actual or constructive delivery of the thing sold even if the
purchase price has not yet been paid.
Non-payment only creates a right to demand payment or to rescind the contract, or to
criminal prosecution in the case of bouncing checks. But absent the stipulation above
noted, delivery of the thing sold will effectively transfer ownership to the buyer who can in
turn transfer it to another.
In Asiatic Commercial Corporation v. Ang,11 the plaintiff sold some cosmetics to Francisco
Ang, who in turn sold them to Tan Sit Bin. Asiatic not having been paid by Ang, it sued for
the recovery of the articles from Tan, who claimed he had validly bought them from Ang,
paying for the same in cash. Finding that there was no conspiracy between Tan and Ang to
deceive Asiatic the Court of Appeals declared:
Yet the defendant invoked Article 464 12 of the Civil Code providing, among other things
that "one who has been unlawfully deprived of personal property may recover it from any
person possessing it." We do not believe that the plaintiff has been unlawfully deprived of
the cartons of Gloco Tonic within the scope of this legal provision. It has voluntarily parted
with them pursuant to a contract of purchase and sale. The circumstance that the price
was not subsequently paid did not render illegal a transaction which was valid and legal at
the beginning.
In Tagatac v. Jimenez,13 the plaintiff sold her car to Feist, who sold it to Sanchez, who sold
it to Jimenez. When the payment check issued to Tagatac by Feist was dishonored, the
plaintiff sued to recover the vehicle from Jimenez on the ground that she had been
unlawfully deprived of it by reason of Feist's deception. In ruling for Jimenez, the Court of
Appeals held:
The point of inquiry is whether plaintiff-appellant Trinidad C. Tagatac has been unlawfully
deprived of her car. At first blush, it would seem that she was unlawfully deprived thereof,
considering that she was induced to part with it by reason of the chicanery practiced on
her by Warner L. Feist. Certainly, swindling, like robbery, is an illegal method of deprivation
of property. In a manner of speaking, plaintiff-appellant was "illegally deprived" of her car,
for the way by which Warner L. Feist induced her to part with it is illegal and is punished by
law. But does this "unlawful deprivation" come within the scope of Article 559 of the New
Civil Code?
xxx xxx xxx
. . . The fraud and deceit practiced by Warner L. Feist earmarks this sale as a voidable
contract (Article 1390 N.C.C.). Being a voidable contract, it is susceptible of either
ratification or annulment. If the contract is ratified, the action to annul it is extinguished
(Article 1392, N.C.C.) and the contract is cleansed from all its defects (Article 1396, N.C.C.);
if the contract is annulled, the contracting parties are restored to their respective situations
before the contract and mutual restitution follows as a consequence (Article 1398, N.C.C.).
However, as long as no action is taken by the party entitled, either that of annulment or of
ratification, the contract of sale remains valid and binding. When plaintiff-appellant
Trinidad C. Tagatac delivered the car to Feist by virtue of said voidable contract of sale, the
title to the car passed to Feist. Of course, the title that Feist acquired was defective and
voidable. Nevertheless, at the time he sold the car to Felix Sanchez, his title thereto had
not been avoided and he therefore conferred a good title on the latter, provided he bought
the car in good faith, for value and without notice of the defect in Feist's title (Article 1506,
N.C.C.). There being no proof on record that Felix Sanchez acted in bad faith, it is safe to
assume that he acted in good faith.
The above rulings are sound doctrine and reflect our own interpretation of Article 559 as
applied to the case before us.
Actual delivery of the books having been made, Cruz acquired ownership over the books
which he could then validly transfer to the private respondents. The fact that he had not
yet paid for them to EDCA was a matter between him and EDCA and did not impair the title
acquired by the private respondents to the books.
One may well imagine the adverse consequences if the phrase "unlawfully deprived" were
to be interpreted in the manner suggested by the petitioner. A person relying on the
seller's title who buys a movable property from him would have to surrender it to another
person claiming to be the original owner who had not yet been paid the purchase price
therefor. The buyer in the second sale would be left holding the bag, so to speak, and
would be compelled to return the thing bought by him in good faith without even the right
to reimbursement of the amount he had paid for it.
It bears repeating that in the case before us, Leonor Santos took care to ascertain first that
the books belonged to Cruz before she agreed to purchase them. The EDCA invoice Cruz
showed her assured her that the books had been paid for on delivery. By contrast, EDCA
was less than cautious in fact, too trusting in dealing with the impostor. Although it had
never transacted with him before, it readily delivered the books he had ordered (by
telephone) and as readily accepted his personal check in payment. It did not verify his
identity although it was easy enough to do this. It did not wait to clear the check of this
unknown drawer. Worse, it indicated in the sales invoice issued to him, by the printed
terms thereon, that the books had been paid for on delivery, thereby vesting ownership in
the buyer.
Surely, the private respondent did not have to go beyond that invoice to satisfy herself that
the books being offered for sale by Cruz belonged to him; yet she did. Although the title of
Cruz was presumed under Article 559 by his mere possession of the books, these being
movable property, Leonor Santos nevertheless demanded more proof before deciding to
buy them.
It would certainly be unfair now to make the private respondents bear the prejudice
sustained by EDCA as a result of its own negligence.1wphi1 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 Pea, 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.
G.R. No. L-18536 March 31, 1965
JOSE B. AZNAR, vs. RAFAEL YAPDIANGCO
This is an appeal, on purely legal questions, from a decision of the Court of First Instance of
Quezon City, Branch IV, declaring the intervenor-appellee, Teodoro Santos, entitled to the
possession of the car in dispute.
The records before this Court disclose that sometime in May, 1959, Teodoro Santos
advertised in two metropolitan papers the sale of his FORD FAIRLANE 500. In the afternoon
of May 28, 1959, a certain L. De Dios, claiming to be a nephew of Vicente Marella, went to
the Santos residence to answer the ad. However, Teodoro Santos was out during this call
and only the latter's son, Irineo Santos, received and talked with De Dios. The latter told
the young Santos that he had come in behalf of his uncle, Vicente Marella, who was
interested to buy the advertised car.
On being informed of the above, Teodoro Santos instructed his son to see the said Vicente
Marella the following day at his given address: 1642 Crisostomo Street, Sampaloc, Manila.
And so, in the morning of May 29, 1959, Irineo Santos went to the above address. At this
meeting, Marella agreed to buy the car for P14,700.00 on the understanding that the price
would be paid only after the car had been registered in his name.
Irineo Santos then fetched his father who, together with L. De Dios, went to the office of a
certain Atty. Jose Padolina where the deed of the sale for the car was executed in Marella's
favor. The parties to the contract thereafter proceeded to the Motor Vehicles Office in
Quezon City where the registration of the car in Marella's name was effected. Up to this
stage of the transaction, the purchased price had not been paid.
From the Motor Vehicles Office, Teodoro Santos returned to his house. He gave the
registration papers and a copy of the deed of sale to his son, Irineo, and instructed him not
to part with them until Marella shall have given the full payment for the car. Irineo Santos
and L. De Dios then proceeded to 1642 Crisostomo Street, Sampaloc, Manila where the
former demanded the payment from Vicente Marella. Marella said that the amount he had
on hand then was short by some P2,000.00 and begged off to be allowed to secure the
shortage from a sister supposedly living somewhere on Azcarraga Street, also in Manila.
Thereafter, he ordered L. De Dios to go to the said sister and suggested that Irineo Santos
go with him. At the same time, he requested the registration papers and the deed of sale
from Irineo Santos on the pretext that he would like to show them to his lawyer. Trusting
the good faith of Marella, Irineo handed over the same to the latter and thereupon, in the
company of L. De Dios and another unidentified person, proceeded to the alleged house of
Marella's sister.
At a place on Azcarraga, Irineo Santos and L. De Dios alighted from the car and entered a
house while their unidentified companion remained in the car. Once inside, L. De Dios
asked Irineo Santos to wait at the sala while he went inside a room. That was the last that
Irineo saw of him. For, after a considerable length of time waiting in vain for De Dios to
return, Irineo went down to discover that neither the car nor their unidentified companion
was there anymore. Going back to the house, he inquired from a woman he saw for L. De
Dios and he was told that no such name lived or was even known therein. Whereupon,
Irineo Santos rushed to 1642 Crisostomo to see Marella. He found the house closed and
Marella gone. Finally, he reported the matter to his father who promptly advised the police
authorities.
That very same day, or on the afternoon of May 29, 1959 Vicente Marella was able to sell
the car in question to the plaintiff-appellant herein, Jose B. Aznar, for P15,000.00. Insofar
as the above incidents are concerned, we are bound by the factual finding of the trial court
that Jose B. Aznar acquired the said car from Vicente Marella in good faith, for a valuable
consideration and without notice of the defect appertaining to the vendor's title.

While the car in question was thus in the possession of Jose B. Aznar and while he was
attending to its registration in his name, agents of the Philippine Constabulary seized and
confiscated the same in consequence of the report to them by Teodoro Santos that the said
car was unlawfully taken from him.
In due time, Jose B. Aznar filed a complaint for replevin against Captain Rafael Yapdiangco,
the head of the Philippine Constabulary unit which seized the car in question Claiming
ownership of the vehicle, he prayed for its delivery to him. In the course of the litigation,
however, Teodoro Santos moved and was allowed to intervene by the lower court.
At the end of the trial, the lower court rendered a decision awarding the disputed motor
vehicle to the intervenor-appellee, Teodoro Santos. In brief, it ruled that Teodoro Santos
had been unlawfully deprived of his personal property by Vicente Marella, from whom the
plaintiff-appellant traced his right. Consequently, although the plaintiff-appellant acquired
the car in good faith and for a valuable consideration from Vicente Marella, the said
decision concluded, still the intervenor-appellee was entitled to its recovery on the
mandate of Article 559 of the New Civil Code which provides:
ART. 559. The possession of movable property acquired in good faith is equivalent to title.
Nevertheless, one who lost any movable or has been unlawfully deprived thereof, may
recover it from the person in possession of the same.
If the possessor of a movable lost or of which the owner has been unlawfully deprived, has
acquired it in good faith at a public sale, the owner cannot obtain its return without
reimbursing the price paid therefor.
From this decision, Jose B. Aznar appeals.
The issue at bar is one and simple, to wit: Between Teodoro Santos and the plaintiff-
appellant, Jose B. Aznar, who has a better right to the possession of the disputed
automobile?
We find for the intervenor-appellee, Teodoro Santos.
The plaintiff-appellant accepts that the car in question originally belonged to and was
owned by the intervenor-appellee, Teodoro Santos, and that the latter was unlawfully
deprived of the same by Vicente Marella. However, the appellant contends that upon the
facts of this case, the applicable provision of the Civil Code is Article 1506 and not Article
559 as was held by the decision under review. Article 1506 provides:
ART. 1506. Where the seller of goods has a voidable title thereto, but his, title has not been
voided at the time of the sale, the buyer acquires a good title to the goods, provided he
buys them in good faith, for value, and without notice of the seller's defect of title.
The contention is clearly unmeritorious. Under the aforequoted provision, it is essential
that the seller should have a voidable title at least. It is very clearly inapplicable where, as
in this case, the seller had no title at all.
Vicente Marella did not have any title to the property under litigation because the same
was never delivered to him. He sought ownership or acquisition of it by virtue of the
contract. Vicente Marella could have acquired ownership or title to the subject matter
thereof only by the delivery or tradition of the car to him.
Under Article 712 of the Civil Code, "ownership and other real rights over property are
acquired and transmitted by law, by donation, by testate and intestate succession, and in
consequence of certain contracts, by tradition." As interpreted by this Court in a host of
cases, by this provision, ownership is not transferred by contract merely but by tradition or
delivery. Contracts only constitute titles or rights to the transfer or acquisition of
ownership, while delivery or tradition is the mode of accomplishing the same (Gonzales v.
Rojas, 16 Phil. 51; Ocejo, Perez and Co. v. International Bank, 37 Phil. 631, Fidelity and
Deposit Co. v. Wilson, 8 Phil. 51; Kuenzle & Streiff v. Wacke & Chandler, 14 Phil. 610;
Easton v. Diaz Co., 32 Phil. 180).
For the legal acquisition and transfer of ownership and other property rights, the thing
transferred must be delivered, inasmuch as, 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 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.
G.R. No. L-8257 April 13, 1956
JOSE R. CRUZ vs. REYNALDO PAHATI, ET AL.
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 Felixberto Bulahan but, upon
amendment of the complaint, Jesusito Belizo 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 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 Jesusito Belizo 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
Jesusito Belizo 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. Jesusito Belizo 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 Felixberto Bulahan 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.
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.
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 Jesusito Belizo to pay him the
sum of P5,000 as moral damages, plus P2,000 as attorney's fees. The Court absolves
defendant Bulahan and Pahati from the complaint as regards the claim for damages,
reserving to Bulahan whatever action he may deem proper to take against Jesusito Belizo.
No costs.
G.R. No. L-30817 September 29, 1972
DOMINADOR DIZON, doing business under the firm name "Pawnshop of
Dominador Dizon"vs. LOURDES G. SUNTAY
In essence there is nothing novel in this petition for review of a decision of the Court of
Appeals affirming a lower court judgment sustaining the right of an owner of a diamond
ring, respondent Lourdes G. Suntay, as against the claim of petitioner Dominador Dizon,
who owns and operates a pawnshop. The diamond ring was turned over to a certain Clarita
R. Sison, for sale on commission, along with other pieces of jewelry of respondent Suntay.
It was then pledged to petitioner. Since what was done was violative of the terms of the
agency, there was an attempt on her part to recover possession thereof from petitioner,
who refused. She had to file an action then for its recovery. She was successful, as noted
above, both in the lower court and thereafter in the Court of Appeals. She prevailed as she
had in her favor the protection accorded by Article 559 of the Civil
Code. 1 The matter was then elevated to us by petitioner. Ordinarily, our discretion would
have been exercised against giving due course to such petition for review. The vigorous
plea however, grounded on estoppel, by his counsel, Atty. Andres T. Velarde, persuaded us
to act otherwise. After a careful perusal of the respective contentions of the parties, we fail
to perceive any sufficient justification for a departure from the literal language of the
applicable codal provision as uniformly interpreted by this Court in a number of decisions.
The invocation of estoppel is therefore unavailing. We affirm.
The statement of the case as well as the controlling facts may be found in the Court of
Appeals decision penned by Justice Perez. Thus: "Plaintiff is the owner of a three-carat
diamond ring valued at P5,500.00. On June 13, 1962, the plaintiff and Clarita R. Sison
entered into a transaction wherein the plaintiff's ring was delivered to Clarita R. Sison for
sale on commission. Upon receiving the ring, Clarita R. Sison executed and delivered to the
plaintiff the receipt ... . The plaintiff had already previously known Clarita R. Sison as the
latter is a close friend of the plaintiff's cousin and they had frequently met each other at
the place of the plaintiff's said cousin. In fact, about one year before their transaction of
June 13, 1962 took place, Clarita R. Sison received a piece of jewelry from the plaintiff to
be sold for P500.00, and when it was sold, Clarita R. Sison gave the price to the plaintiff.
After the lapse of a considerable time without Clarita R. Sison having returned to the
plaintiff the latter's ring, the plaintiff made demands on Clarita R. Sison for the return of
her ring but the latter could not comply with the demands because, without the knowledge
of the plaintiff, on June 15, 1962 or three days after the ring above-mentioned was
received by Clarita R. Sison from the plaintiff, said ring was pledged by Melia Sison, niece
of the husband of Clarita R. Sison, evidently in connivance with the latter, with the
defendant's pawnshop for P2,600.00 ... ." 2 Then came this portion of the decision under
review: "Since the plaintiff insistently demanded from Clarita R. Sison the return of her ring,
the latter finally delivered to the former the pawnshop ticket ... which is the receipt of the
pledge with the defendant's pawnshop of the plaintiff's ring. When the plaintiff found out
that Clarita R. Sison pledged, she took steps to file a case of estafa against the latter with
the fiscal's office. Subsequently thereafter, the plaintiff, through her lawyer, wrote a
letter ... dated September 22, 1962, to the defendant asking for the delivery to the plaintiff
of her ring pledged with defendant's pawnshop under pawnshop receipt serial-B No. 65606,
dated June 15, 1962 ... . Since the defendant refused to return the ring, the plaintiff filed
the present action with the Court of First Instance of Manila for the recovery of said ring,
with P500.00 as attorney's fees and costs. The plaintiff asked for the provisional remedy of
replevin by the delivery of the ring to her, upon her filing the requisite bond, pending the
final determination of the action. The lower court issued the writ of replevin prayed for by
plaintiff and the latter was able to take possession of the ring during the pendency of the
action upon her filing the requisite bond." 3 It was then noted that the lower court rendered
judgment declaring that plaintiff, now respondent Suntay, had the right to the possession
of the ring in question. Petitioner Dizon, as defendant, sought to have the judgment
reversed by the Court of Appeals. It did him no good. The decision of May 19, 1969, now on
review, affirmed the decision of the lower court.
In the light of the facts as thus found by the Court of Appeals, well-nigh conclusive on use,
with the applicable law being what it is, this petition for review cannot prosper. To repeat,
the decision of the Court of Appeals stands.
1. There is a fairly recent restatement of the force and effect of the governing codal norm
in De Gracia v. Court of Appeals. 4 Thus: "The controlling provision is Article 559 of the Civil
Code. It reads thus: 'The possession of movable property acquired in good faith is
equivalent to a title. Nevertheless, one who has lost any movable or has been unlawfully
deprived thereof may recover it from the person in possession of the same. If the
possessor of a movable lost of which the owner has been unlawfully deprived, has acquired
it in good faith at a public sale, the owner cannot obtain its return without reimbursing the
price paid therefor.' Respondent Angelina D. Guevara, having been unlawfully deprived of
the diamond ring in question, was entitled to recover it from petitioner Consuelo S. de
Garcia who was found in possession of the same. The only exception the law allows is
when there is acquisition in good faith of the possessor at a public sale, in which case the
owner cannot obtain its return without reimbursing the price. As authoritatively interpreted
in Cruz v. Pahati, the right of the owner cannot be defeated even by proof that there was
good faith in the acquisition by the possessor. There is a reiteration of this principle in
Aznar v. Yapdiangco. Thus: 'Suffice it to say in this regard that the right of the owner to
recover personal property acquired in good faith by another, is based on his being
dispossessed without his consent. The common law principle that were one of two innocent
persons must suffer by a fraud perpetrated by another, the law imposes the loss upon the
party who, by his misplaced confidence, has enabled the fraud to be committed, cannot be
applied in a case which is covered by an express provision of the new Civil Code,
specifically Article 559. Between a common law principle and a statutory provision, the
latter must prevail in this jurisdiction." " 5
2. It must have been a recognition of the compulsion exerted by the above authoritative
precedents that must have caused petitioner to invoke the principle of estoppel. There is
clearly a misapprehension. Such a contention is devoid of any persuasive force.
Estoppel as known to the Rules of Court 6 and prior to that to the Court of Civil Procedure, 7
has its roots in equity. Good faith is its basis. 8 It is a response to the demands of moral
right and natural justice. 9 For estoppel to exist though, it is indispensable that there be a
declaration, act or omission by the party who is sought to be bound. Nor is this all. It is
equally a requisite that he, who would claim the benefits of such a principle, must have
altered his position, having been so intentionally and deliberately led to comport himself
thus, by what was declared or what was done or failed to be done. If thereafter a litigation
arises, the former would not be allowed to disown such act, declaration or omission. The
principle comes into full play. It may successfully be relied upon. A court is to see to it then
that there is no turning back on one's word or a repudiation of one's act. So it has been
from our earliest decisions. As Justice Mapa pointed out in the first case, a 1905 decision,
Rodriguez v. Martinez, 10 a party should not be permitted "to go against his own acts to the
prejudice of [another]. Such a holding would be contrary to the most rudimentary
principles of justice and law." 11 He is not, in the language of Justice Torres, in Irlanda v.
Pitargue, 12 promulgated in 1912, "allowed to gainsay [his] own acts or deny rights which
[he had] previously recognized." 13 Some of the later cases are to the effect that an
unqualified and unconditional acceptance of an agreement forecloses a claim for interest
not therein provided. 14 Equally so the circumstance that about a month after the date of
the conveyance, one of the parties informed the other of his being a minor, according to
Chief Justice Paras, "is of no moment, because [the former's] previous misrepresentation
had already estopped him from disavowing the contract. 15 It is easily understandable why,
under the circumstances disclosed, estoppel is a frail reed to hang on to. There was clearly
the absence of an act or omission, as a result of which a position had been assumed by
petitioner, who if such elements were not lacking, could not thereafter in law be prejudiced
by his belief in what had been misrepresented to him. 16 As was put by Justice Labrador, "a
person claimed to be estopped must have knowledge of the fact that his voluntary acts
would deprive him of some rights because said voluntary acts are inconsistent with said
rights." 17 To recapitulate, there is this pronouncement not so long ago, from the pen of
Justice Makalintal, who reaffirmed that estoppel "has its origin in equity and, being based
on moral right and natural justice, finds applicability wherever and whenever the special
circumstances of a case so demand." 18
How then can petitioner in all seriousness assert that his appeal finds support in the
doctrine of estoppel? Neither the promptings of equity nor the mandates of moral right and
natural justice come to his rescue. He is engaged in a business where presumably ordinary
prudence would manifest itself to ascertain whether or not an individual who is offering a
jewelry by way of a pledge is entitled to do so. If no such care be taken, perhaps because
of the difficulty of resisting opportunity for profit, he should be the last to complain if
thereafter the right of the true owner of such jewelry should be recognized. The law for this
sound reason accords the latter protection. So it has always been since Varela v.
Finnick, 19 a 1907 decision. According to Justice Torres: "In the present case not only has
the ownership and the origin of the jewels misappropriated been unquestionably proven
but also that the accused, acting fraudulently and in bad faith, disposed of them and
pledged them contrary to agreement, with no right of ownership, and to the prejudice of
the injured party, who was thereby illegally deprived of said jewels; therefore, in
accordance with the provisions of article 464, the owner has an absolute right to recover
the jewels from the possession of whosoever holds them, ... ." 20 There have been many
other decisions to the same effect since then. At least nine may be cited. 21 Nor could any
other outcome be expected, considering the civil code provisions both in the former
Spanish legislation 22 and in the present Code. 23 Petitioner ought to have been on his
guard before accepting the pledge in question. Evidently there was no such precaution
availed of. He therefore, has only himself to blame for the fix he is now in. It would be to
stretch the concept of estoppel to the breaking point if his contention were to prevail.
Moreover, there should have been a realization on his part that courts are not likely to be
impressed with a cry of distress emanating from one who is in a business authorized to
impose a higher rate of interest precisely due to the greater risk assumed by him. A
predicament of this nature then does not suffice to call for less than undeviating adherence
to the literal terms of a codal provision. Moreover, while the activity he is engaged in is no
doubt legal, it is not to be lost sight of that it thrives on taking advantage of the necessities
precisely of that element of our population whose lives are blighted by extreme poverty.
From whatever angle the question is viewed then, estoppel certainly cannot be justly
invoked.
WHEREFORE, the decision of the Court of Appeals of May 19, 1969 is affirmed, with costs
against petitioner.