Sale by a Person Not the Owner at the Time of Delivery – ARTS. 1462, 1459, 1505

1. AZNAR vs. YAPDIANGCO (13 SCRA 486 | 1965)

FACTS:

Theodoro Santos advertised in the newspapers the sale of his Ford Fairlane 500. After the advertisement, a certain de Dios, claiming to be the nephew of Vicente Marella, went to the

residence of Santos and expressed his uncle’s intent to purchase the car. Since Santos wasn't around, it was Irineo (son of Theodoro) who talked with de Dios. On being informed,

Santos advised his son to see Marella, which the son did. Marella expressed his intention to purchase the car. A deed of sale was prepared and Irineo was instructed by

his father not to part with the deed and the car without receiving the purchase price from Marella. Upon arriving at the house of Vicente Marella, he said that his money was short and that he had to borrow

from his sister. Marella then instructed de Dios and Irineo to go the supposed house of the sister to obtain the money with

an unidentified person. He also asked Irineo to leave the deed to have his lawyer see it. Relying on the good faith of Marella, Irineo

did as requested. Upon arriving at the house of Marella’s supposed to be sister, de Dios and the unidentified person then

disappeared together with the car. Santos reported the incident to the authorities. Thereafter, Marella was able to sell the land to Aznar. While in possession of the car, police authorities

confiscated the same from him. Aznar filed an action for replevin (to recover the car). 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. Lower court ruled in favor of Teodoro Santos saying that he has been unlawfully deprived of his car and he

retains ownership of the same.

ISSUE: Between Teodoro Santos and the plaintiff-appellant, Jose B. Aznar, who has a better right to the possession of the disputed automobile? Teodoro Santos HELD: Article 559 is applicable in this case and not Article 1506 which was cited by petitioner Aznar 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 (Marella) had no title at all. Marella did not have a title over the car because it was never delivered to him Vicente Marella 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. Delivery vs. Tradition 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. 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. Article 559 was applicable in this case (Doctrine of irrevindicability) 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. Aznar shall suffer the consequences 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.

2. NOEL vs. CA (240 SCRA 78 | January 11, 1995)

FACTS: (Quiason, J.) PETITIONS for review on certiorari of a decision of the Court of Appeals. Gregorio Nanaman and Hilaria Tabuclin (Nanaman spouses) were a childless, legally-married couple. Gregorio, however, had a child named Virgilio Nanaman (IC) by another woman. Since he was two years old, Virgi lio was reared by Gregorio and Hilaria. He was sent to school by the couple until he reached third year of the law course. During their marriage, Gregorio and Hilaria acquired certain property

including a34.7-hectare land in Tambo, Iligan City on which they planted sugarcane, corn and bananas. They also lived there with Virgilio and 15 tenants. On October 2, 1945, Gregorio died. Hilaria then administered the property with the help of Virgi lio. Through their tenants, Hilaria and Virgilio enjoyed the produce of the land to the exclusion of Juan Nanaman, the brother of Gregorio, and Esperanza and Caridad Nanaman, Gregorio's daughters by sti ll another woman. In 1953, Virgi lio (IC ) declared the property in his name for taxation purposes. On November 1, 1952, H i l a r i a a n d V i r g i l i o , m o r t g a g e d t h e 3 4 . 7 - h e c t a r e l a n d i n f a v o r o f p r i v a t e respondent, in consideration of the amount of P4, 800.00. On February 16, 1954, Hilaria and Virgilio executed a deed of sale over the same tract of land also in favor of private respondent in consideration of the sum of P16, 000.00. Witnesses to the sale were the wife of Virgi lio, Rosita S. Nanaman, Rufo C. Salas, the driver of private respondent, and Remedios Pilotan. The tax declaration in the name of Virgilio was cancelled and a new tax declaration was issued in the name of private respondent, Jose Deleste. Having discovered that t h e p r o p e r t y w a s i n a r r e a r s i n t h e p a y m e n t o f t a x e s f r o m 1 9 5 2 , p r i v a t e respondent paid the taxes for 1952, 1953 and 1954. From then on, private respondent has paid the taxes on the property. On May 15, 1954, Hilaria died. On October 27, 1954, Esperanza and Caridad Nanaman filed intestate estate proceedings concerning the estate of their father, Gregorio. Included in the list of property of the estate was the 34.7-hectare land. In as much as only Esperanza, Caridad and Virgilio Nanaman were named as heirs of Gregorio in the petition, Juan Nanaman, Gregorio's brother, opposed it. On November 26, 1954, the petition was amended to include the estate of Hilaria with Alejo Tabuclin, Hilaria's brother, and Julio Tabuclin, (nephew) a son of Hilaria's deceased brother, Jose, as additional petitioners. Having been appointed special administrator of the estate of the Nanaman couple, Juan Nanaman included the34.7-hectare land in the list of the assets of the estate. Juan also reported that Virgilio took the amount of P350.00 from the produce of the estate without prior permission and that five tenants delivered sugar and palay to private respondent. Hence Juan prayed that the court cite private respondent and the tenants in contempt of cour t. Accordingly, in its Order of January 30, 1956, the probate court required private respondent and said tenants to appear before it and "show cause why they should not be cited for contempt for illegally interfering in the land" under special administration. On June 16, 1956, when Edilberto Noel took over as regular administrator of the estate, he was not able to take possession of the land in question because it was in the possession of private respondent and some heirs of Hilaria. Later, Private r e s p o n d e n t a n d t h e h e i r s o f t h e N a n a m a n s p o u s e s e x e c u t e d a n a m i c a b l e settlement of the Nanaman estate. In the document, private respondent agreed "to relinquish his rights to one-half (1/2) of the entire parcel of land in Tambo, Iligan City, indicated in item 1 under the Estate, sold to him by Hilaria Tabuclin, in favor of all the heirs of the abovementioned intestate [estate] for the reason that not all of the heirs of Gregorio Nanaman have signed and agreed.” The court approved the amicable settlement but when it was questioned by some heirs, the court set aside its approval and declared it null and void. Noel, as regular administrator, and as ordered by the court filed an action against private respondent for the reversion of title over the 34.7 -hectare land to the Nanaman estate and to order private respondent to pay the rentals and attorney's fees to the estate. RTC: Action for annulment of the deed of sale had prescribed in 1958 inasmuch as the sale was registered in 1954 and that Gregorio's heirs had slept o n their rights by allowing Hilaria to exercise rights of ownership over Gregorio's share of the conjugal property after his death in 1945.

On the issue that Hilaria had no authority to dispose of one-half of the property pertaining to her husband, the trial court ruled: (1) that Hilaria in effect acted as administratrix over the estate of Gregorio; (2) that she sold the 34.7- hectare land in order to pay the debts of the conjugal partnership; and (3) that out of the purchase price of P16,000.00, P4,000.00 was in payment to private respondent (who was a doctor of medicine) for medical services rendered and medicine administered during Gregorio's ai lment and P800.00 was used to pay taxes in arrears. Noel appealed. CA: The transaction between Hilaria and Virg i lio on one hand and private respondent on the other, was indeed a sale. It found that no fraud, mistake or misrepresentation attended in the execution of the deed of sale and that no proof was shown that the contract was merely a mortgage. The appellate court, however, agreed with Noel that Hilaria could not validly sell the 37.7 -hectare land because it was conjugal property, and Hilaria could sell only her one -half share thereof. O n t h e i s s u e o f p r e s c r i p t i o n , t h e a p p e l l a t e c o u r t r u l e d t h a t s i n c e n o f r a u d , m i s t a k e o r misrepresentation attended the execution of the deed of sale, the prescriptive period of ten years had not yet elapsed when the action to recover the property was filed in 1963. Moreover, the appellate court held that in the absence of proof of adverse possession by Hilaria, she should be considered as holding the property pursuant to her usufructuary rights over the same under the provisions of the Spanish Civil Code of 1889, the law in force at the time of the death of Gregorio. Finding that Noel's claim for rentals of P5, 000.00 per annum from 1957 was uncontroverted, the appellate court ruled that one-half thereof belonged to the estate of Gregorio. CA AMENDED DECISION: Affirmed its previous decision regarding the due execution of the Deed of Sale adding that since no fraud attended its execution, there was no basis for the action to annul the sale, and therefore there was no starting point in reckoning the prescriptive period of four years. It reconsidered the Decision of Feb. 18, 1980 insofar as it declared Deleste and the estate of Gregorio as co-owners of the said land. The appellate court tacked "the physical possession of Hilaria and Virgilio to the possession of the defendant for another nine (9) years up to the time the complaint was filed." It considered the "change of conditions or relations" which had transpired in the case such as private respondent's registration of his muniment of title over the property; the cancellation of Virgilio's tax declaration and the issuance of another tax declaration in the name of private respondent; private respondent's payment of taxes from 1952 "up to the present;" the execution of a new tenancy agreement between private respondent and the tenants; and private respondent's purchase of plows, a carabao and insecticides for use in the rice field. Stating that it was "proscribed from taking away property from the alert and the industrious and dumping it into the hands and possession of one has previously slept on his rights," the appellate court affirmed the decision of the lower court in all i ts parts, including the award of damages and the costs of suit. ISSUE: W/N Hilaria and Virgilio could dispose of the entire property sold to private respondent and assuming that they did not have full ownership th ereof, whether the right of action to recover the share of the collateral heirs of Gregorio had prescribed or been lost through laches. HELD: NO. Gregorio died in 1945 long before the effectivity of the Civil Code of the Philippines on August 30, 1950. Under Article 2263 of the said Code, "rights tothe inheritance of a person who died, with or without a will, before the effectivity of this Code, shall be governed by the Civil Code of 1889, by other previous laws, and by the rules of Court." T h u s , s u c c e s s i o n t o t h e e s t a t e o f G r e g o r i o w a s g o v e r n e d p r i m a r i l y b y t h e provisions of the Spanish Civil Code of 1889. Under Article 953 thereof, a spouse like Hilaria, who is survived by brothers or sisters or children of brothers or sisters of the decedent, as is obtaining in this case, was entitled to receive in usufruct the part of the inheritance pertaining to said heirs. Hilaria, however, had full

ownership, not merely usufruct, over the undivided half of the estate (Spanish Civil Code of 1889, Art. 493). It is only this undivided half-interest that she could validly alienate. On the other hand, Virgi lio was not an heir of Gregorio under the Spanish Civi l Code of 1889. Although he was treated as a child by the Nanaman spouses, illegitimate children who were not natural were disqualified to inherit under the said Code (Cid v. Burnaman, 24 SCRA 434 [1968]). Article 998 of the Civil Code of the Philippines, which gave an illegitimate child certain hereditary rights, could not benefit Virgi lio because the right of ownership of the collateral heirs of Gregorio had become vested upon his death (Civil Code of the Philippines, Art.2253; Uson v. Del Rosario, 92 Phil. 530 [1953]). Therefore, Virgilio had no right at all to transfer ownership over which he did not own. In a contract of sale, it is essential that the seller is the owner of the property he is selling. The principal obligation of a seller is "to transfer the ownership of" the property sold (Civil Code of the Philippines, Art. 1458). This law stems from the principle that nobody can dispose of that which does not belong to him (Azcona v. Reyes, 59 Phil. 446 [1934]; Coronel v. Ona, 33 Phil. 456 [1916). NEMO DAT QUADNON HABET. While it cannot be said that fraud attended the sale to private respondent, clearly there was a mistake on the part of Hilaria and Virgi lio in selling an undivided interest in the property which belonged to the collateral heirs of Gregorio. The sale, having been made in 1954, was governed by the Civi l Code of the Philippines. Under Article 1456 of said Code, an implied trust was created on the one-half undivided interest over the 34.7-hectare land in favor of the real owners. Under the law in force in 1945, the surviving spouse was given the management o f t h e c o n j u g a l p r o p e r t y u n t i l t h e a f f a i r s o f t h e c o n j u g a l p a r t n e r s h i p w e r e terminated. The surviving spouse became the owner of one-half interest of the conjugal estate in his own right. He also became a trustee with respect to the other half for the benefit of whoever may be legally entitled to inher it the said portion. "He could therefore no more acquire a title by prescription against those for whom he was administering the conjugal estate than could a guardian his ward or a judicial administrator against the heirs of an estate. . . . The surviving husband as the administrator and liquidator of the conjugal estate occupies the position of a trustee of the highest order and is not permitted by the law to hold that estate or any portion thereof adversely to those for whose benefit the law imposes upon him duty of administration and liquidation" (Pamittan v. Lasam, 60Phil. 908 [1934]). T h e p o s s e s s i o n o f V i r g i l i o , h i s r e g i s t r a t i o n o f t h e l a n d i n h i s n a m e f o r t a x purposes, his hiring of tenants to till the land, and his enjoyment of the produce of the tenants, appear more as acts done to help Hilaria in managing the conjugal property. There is no evidence to prove indubitably that Virgilio asserted a claim of ownership over the property in his own right and adverse to all including Hilaria. Amended judgment reversed and set aside, original judgment reinstated in toto.

3. ASSET PRIVATIZATION TRUST vs. T.J. ENTERPRISES (G.R. No. 167195 | May 8, 2009)

FACTS: Petitioner was a government entity created for the purpose to conserve, to provisionally manage and to dispose assets of government institutions. It had acquired assets consisting of machinery and refrigeration equipment stored at the Golden City compound which was leased to and in the physical possession of Creative Lines, Inc., (Creative Lines). These assets were being sold on an as-is-where-is basis. Petitioner and respondent entered into an absolute deed of sale over certain machinery and refrigeration equipment wherein respondent paid the full amount as evidenced by petitioner’s receipt. After two (2) days, respondent demanded the delivery of the machinery it had purchased. Petitioner issued a Gate Pass to respondent to enable them to pull out from the compound the properties designated ; however, during the hauling of Lot No. 2 consisting of sixteen (16) items, only nine (9) items were pulled out by respondent. Respondent filed a complaint for specific performance and damages against petitioner and Creative Lines. Upon inspection of the remaining items, they found the machinery and equipment damaged and had missing parts.

Petitioner claimed that there was already a constructive delivery of the machinery and equipment upon the execution of the deed of sale it had complied with its obligation to deliver the object of the sale since there was no stipulation to the contrary and it was the duty of respondent to take possession of the property. The RTC ruled that petitioner is liable for breach of contract and should pay for the actual damages suffered by respondent. It found that at the time of the sale, petitioner did not have control over the machinery and equipment and, thus, could not have transferred ownership by constructive delivery. The Court of Appeals affirmed the judgment; hence, this petition.

ISSUE: Whether or not the petitioner had complied with its obligations to make delivery of the properties and failure to make actual delivery of the properties was not attributable was beyond the control of petitioner?

HELD: No. There was no constructive delivery of the machinery and equipment upon the execution of the deed of absolute sale or upon the issuance of the gate pass since it was not the petitioner but Creative Lines which had actual possession of the property. The presumption of constructive delivery is not applicable as it has to yield to the reality that the purchaser was not placed in possession and control of the property.

Petitioner also claims that its failure to make actual delivery was beyond its control. It posits that the refusal of Creative Lines to allow the hauling of the machinery and equipment was unforeseen and constituted a fortuitous event. The matter of fortuitous events is governed by Art. 1174 of the Civil Code which provides that except in cases expressly specified by the law, or when it is otherwise declared by stipulation, or when the nature of the obligation requires assumption of risk, no person shall be responsible for those events which could not be foreseen, or which though foreseen, were inevitable. A fortuitous event may either be an act of God, or natural occurrences such as floods or typhoons, or an act of man such as riots, strikes or wars. However, when the loss is found to be partly the result of a person’s participation whether by active intervention, neglect or failure to act, the whole occurrence is humanized and removed from the rules applicable to a fortuitous event. Thus, the risk of loss or deterioration of property is borne by petitioner. Thus, it should be liable for the damages that may arise from the delay.

EXCEPTIONS: A. ESTOPPEL – ARTS. 1431, 1433, 1434; see also, 1437, 1439 and 1911

4. HERNAEZ vs. HERNAEZ ( 32 PHIL 214 | 1915 ) -cant find digest. HUHU

The spouses, Pedro Hernaez and Juana Espinosa, died, leaving several legitimate descendants. Neither of their estates had been divided up to the date of the institution of this action, but was both under administration. Their son, Domingo Hernaez y Espinosa, sold all his interest in both his father's and mother's estate to his son, Vicente Hernaez y Tuason, on November 6, 1901.Notwithstanding the fact that Domingo Hernaez y Espinosa had thus parted with all his interest in the estates of his two parents, he executed a document of sale in favor of Alejandro Montelibano y Ramos on February 27, 1907, in which he purported to convey all his undivided interest in his mother's estate. On the same date he executed another document of sale in which he purported to convey to Jose Montelibano Uy-Cana four-eighteenths of his interest in his mother's estate. Both of these sales were made with the connivance of his son, Vicente Hernaez y Tuason. Hence, although Vicente Hernaez y Tuason had actually purchased all of his father's interests in the estates of Pedro Hernaez and Juana Espinosa as early as November 6, 1901, and was, on February 27, 1907, the undoubted owner thereof, he is effectually estopped from asserting his title as against either of the vendees mentioned in the documents of sale

dated February 27, 1907, to which we have just referred. (Code Civ. Pro., sec. 333, No. 1.) Bigelow on Estoppel (p. 607) says:. . . it is now a well-established principle that where the true owner of property, for however short a time, holds out another, or, with knowledge of his own right, allows another to appear as the owner of or as having full power of disposition over the property, the same being in the latter's actual possession, and innocent third parties are thus led into dealing with such apparent owner, they will be protected. On August 19, 1912, Jose Montelibano Uy-Cana sold his interest in the estate to Alejandro Montelibano y Ramos. By this transfer, the latter stood owner of all the interest of Domingo Hernaez y Espinosa in the estate of Pedro Hernaez, and five-eighteenths of his interest in the estate of Juana Espinosa as against Vicente Hernaez y Espinosa. It is admitted that Rosendo Hernaez y Espinosa, another son of the deceased spouses administrator of the estates, was notified of Montelibano's purchases on January 8,1913, when he received notice of Montelibano's motion, entered in the administration proceedings, asking that he (Montelibano) be substituted as assignee of the interests of various heirs of the estate which he had acquired by purchase. Notwithstanding this knowledge, Rosendo Hernaez y Espinosa entered into a contract of sale with Vicente Hernaez y Tuason, whereby the latter purported to convey all the interest, which he had acquired from his father, in the estate of the deceased spouses, Pedro Hernaez and Juana Espinosa. It will be remembered that he purchased his father's share of the estate on November 6, 1901; that he is estopped from asserting title to any interest in his grandfather's estate and in five-eighteenths of his grandmother's estate. Rosendo Hernandez y Espinosa purchased with full knowledge of these facts. He, therefore, acquired thirteen-eighteenths of the interest of Domingo Hernaez y Espinosa in the estate of the latter's mother nothing more. That rule is that the holder [Alejandro Montelibano y Ramos] of a prior equitable right has priority over the purchaser [Rosendo Hernandez y Espinosa] of a subsequent estate (whether legal or equitable) without value, or with notice of the equitable right, but not as against a subsequent purchaser for value and without notice. (Ewart on Estoppel, p.199. ) Alejandro Montelibano y Ramos has acquired in his interest in the estate of the deceased spouses for a valuable consideration and in good faith, and there remains to the plaintiff, Rosendo Hernaez y Espinosa, only the right of subrogation allowed him by article1067 of the Civil Code, which reads as follows: If any of the heirs should sell his hereditary rights to a stranger before the division, all or any of the co-heirs may subrogate himself in the place of the purchaser, reimbursing him for the value of the purchase, provided they do so within the period of a month, to be counted from the time they were informed thereof. On January 24, 1913, the plaintiff instituted this action seeking to subrogate himself in the rights acquired by Montelibano in the estate. Unless the plaintiff can be charged with actual notice of the conveyance by which Montelibano acquired these interests, prior to January 8, 1913, it is clear that he has opportunely asserted his right of subrogation. This is purely a question of fact. As to the sales whereby Domingo Hernaez y Espinosa parted withthat portion of his interest in the estate which is now held by Alejandro Montelibano, as well as to those sales made by other heirs to Montelibano, the trial court found that the plaintiff, Rosendo Hernaez y Espinosa, was not chargeable with notice prior to January 8, 1913.After a careful examination of the record we see no reason for disturbing this finding of fact. As a consequence, the plaintiff, Rosendo Hernaez y Espinosa, is entitled to exercise hisright of subrogation in accordance with article 1067, above quoted.

For the foregoing reasons, the judgment of the court is modified by substituting, as the price of subrogation of the interest originally purchased by Jose Montelibano Uy-Cana, thesum of P4,500, as set out in Exhibit 7, for the sum of P10,000, the consideration expressed in Exhibit 10. As modified, the judgment appealed from is affirmed, without costs. So ordered. LEGAL DOCTRINE Where the true owner of property, for however short a time, holds out another, or, with knowledge of his own right, allows another to appear as the owner of or as having full power o f d i s p o s i t i o n o v e r t h e p r o p e r t y , t h e s a m e b e i n g i n t h e l a t t e r ' s actual possession, and innocent third parties are thus led into dealing with such apparent owner, t h e y w i l l b e protected.

5. SIY CONG BIENG vs. HSBC ( 56 PHIL 598 | 1932) NATURE Appeal from decision of CFI of Manila FACTS On June 25, 1926, Otto Ranft called at the office of Siy Cong Bieng & Co, Inc., the herein plaintiff, to purchase hemp. On the same date the quedans (warehouse receipts), together with the covering invoice, were sent to Ranft by the plaintiff. In the evening of the day upon which the quedans in question were delivered to HSBC, the herein defendant, Ranft died. When the plaintiff found that such was the case, it immediately demanded the return of the quedans, or the payment of the value, but was told that the quedans had been sent to the herein defendant as soon as they were received by Ranft. Shortly thereafter the plaintiff filed a claim for the sum of P31,645 in the intestate proceedings of the estate of the deceased Otto Ranft, which on an appeal from the decision of the committee on claims, was allowed by the Court of First Instance in case No. 31372 (City of Manila). In the meantime, demand had been made by the plaintiff on the defendant bank for the return of the quedans, or their value, which demand was refused by the bank on the ground that it was a holder of the quedans in due course. ISSUES 1. WON HSBC acted in good faith in accepting the quedans from Ranft 2. WON Siy Cong Bieng is estopped from denying that the bank had a valid title to the quedans HELD 1. YES Ratio If the owner of the goods permits another to have the possession or custody of negotiable warehouse receipts running to the order of the latter, or to bearer, it is a representation of title upon which bona fide purchasers for value are entitled to rely, despite breaches of trust or violations of agreement on the part of the apparent owner. 2. YES Ratio Applying the familiar rule of equitable estoppel that where one of two innocent persons must suffer a loss, he who by his conduct made the loss possible must bear it, there is now no remedy available to the plaintiff. The negotiable quedans were duly negotiated to the bank and as far as the record shows, there has been no fraud on the part of the defendant. Disposition The appealed judgment is reversed and the appellant is absolved from the plaintiff's complaint. SEPARATE OPINION ROMUALDEZ [dissent] - With due respect for the majority opinion, I dissent and vote for the confirmation of the appealed judgment.

LONG VERSION: FACTS: Siy Cong Bieng & Co., a corporation engaged in business generally, and Hongkong & Shanghai Banking Corporation, a foreign bank authorized to engage in the banking business in the Philippines, are domiciled in the City of Manila. On 25 June 1926, certain negotiable warehouse receipts were pledged by Otto Ranft to the bank to secure the payment of his preexisting debts to the latter (Siy Cong Bieng as depositor: 1707, Public Warehouse Co., 27 bales; 133, W.F. Stevenson Co, 67 bales; 1722, Public Warehouse Co., 60 bales; 1723, W.F. Stevenson Co, 4

bales; 1634, The Philippine Warehouse Company, 99 bales; 1702, The Philippine Warehouse Company, 39 bales. O. Ranft as depositor: 1918, Public Warehouse Co, 166 bales; 2, Siy Cong Bieng & Co. Inc., 2 bales). The baled hemp covered by the warehouse receipts was worth P31,635; receipts numbers 1707, 133, 1722, 1723, 1634, and 1702 being endorsed in blank by Siy Cong Bieng and Otto Ranft, and numbers 1918 and 2, by Otto Ranft alone. On 25 June 1926, Ranft called at the office of Siy Cong Bieng to purchase hemp (abaca), and he was offered the bales of hemp as described in the quedans. The parties agreed to the price (P31,645), and on the same date the quedans, together with the covering invoice, were sent to Ranft, without having been paid for the hemp, but Siy Cong Bieng’s understanding was that the payment would be made against the same quedans, and it appears that in previous transactions of the same kind between the bank and Siy Cong Bieng, quedans were paid one or two days after their delivery to them. In the evening of the day upon which the quedans in question were delivered to the bank, Ranft died suddenly at his home in the city of Manila, and when Siy Cong Bieng found that such was the case, it immediately demanded the return of the quedans, or the payment of the value, but was told that the quedans had been sent to the bank as soon as they were received by Ranft. Siy Cong Bieng filed a claim for the sum of P31,645 (the value of 464 bales of hemp deposited in certain bonded warehouses) in the intestate proceedings of the estate of the deceased Otto Ranft, which on an appeal from the decision of the committee on claims, was allowed by the CFI in case 31372 (City of Manila). In the meantime, demand had been made by Siy Cong Bieng on the bank for the return of the quedans (warehouse receipts), or their value, which demand was refused by the bank on the ground that it was a holder of the quedans in due course. Thereupon Siy Cong Bieng filed its first complaint against the bank, wherein it alleged that it had “sold” the quedans in question to the deceased Ranft for cash, but that the said Ranft had not fulfilled the conditions of the sale. Later on, Siy Cong Bieng filed an amended complaint, wherein they changed the word “sold” referred to in the first complaint to the words “attempted to sell”. Upon trial the judge of the lower court rendered judgment in favor of Siy Cong Bieng. The Supreme Court reversed the appealed judgment and absolved the bank from the complaint; without costs. 1. Circumstances involving the quedans The quedans in question were negotiable in form. They were pledged by Otto Ranft to the bank to secure the payment of his preexisting debts to said bank. Such of the quedans as were issued in the name of Siy Cong Bieng were duly endorsed in blank by Siy Cong Bieng and by Otto Ranft. The two remaining quedans which were issued directly in the name of Otto Ranft were also duly endorsed in blank by him. 2. Quedans were received by the bank to secure the payment of Ranft’s preexisting debts When the quedans were negotiated, Otto Ranft was indebted to the Hongkong & Shanghai Banking Corporation in the sum of P622,753.22, which indebtedness was partly covered by quedans. He was also being pressed to deposit additional payments as a further security to the bank. 3. No evidence that bank is bound to pay back Ranft the amount of the quedans; On the delivery of the quedans, indorser does not own property anymore unless he liquidated his debt with the bank It has been the practice of the bank in its transactions with Ranft that the value of the quedans has been entered in the current accounts between Ranft and the bank, but there is no evidence to the effect that the bank was at any time bound to pay back to Ranft the amount of any of the quedans. There is also nothing in the record to show that the bank has promised to pay the value of the quedans neither to Ranft nor to Siy Cong Bieng. On the contrary, as stated in the stipulation of facts, the “negotiable warehouse receipts — were pledged by Otto Ranft to the Hongkong & Shanghai Banking Corporation to secure the payment of his preexisting debts to the latter”, and taking into consideration that the quedans were negotiable in form and duly endorsed in blank by Siy Cong Bieng and by Otto Ranft, it follows that on the delivery of the quedans to the bank they were no longer the property of the indorser unless he liquidated his debt with the bank.

4. No compelling reason to compel bank to investigate indorser There is nothing in the record which in any manner would have compelled the bank to investigate the indorser, especially as to his authority to negotiate the quedans. The bank had a perfect right to act as it did, and its action is in accordance with sections 47, 38, and 40 of the Warehouse Receipts Act (Act 2137). 5. Section 47 of the Warehouse Receipts Act; When negotiation not impaired by fraud, mistake or duress Section 47 (When negotiation not impaired by fraud, mistake, or duress) provides that “the validity of the negotiation of a receipt is not impaired by the fact that such negotiation was a breach of duty on the part of the person making the negotiation, or by the fact that the owner of the receipt was induced by fraud, mistake, or duress to intrust the possession or custody of the receipt to such person, if the person to whom the receipt was negotiated, or a person to whom the receipt was subsequently negotiated, paid value therefor, without notice of the breach of duty, or fraud, mistake, or duress.” 6. Section 38 of the Warehouse Receipts Act; Negotiation of negotiable receipts by indorsement Section 38 (Negotiation of negotiable receipts by indorsement) provides that “a negotiable receipt may be negotiated by the indorsement of the person to whose order the goods are, by the terms of the receipt, deliverable. Such indorsement may be in blank, to bearer or to a specified person. . . Subsequent negotiation may be made in like manner.” 7. Section 40 of the Warehouse Receipts Act; Who may negotiate a receipt Section 40 (Who may negotiate a receipt) provides that “a negotiable receipt may be negotiated “(a) By the owner thereof, or (b) By any person to whom the possession or custody of the receipt has been entrusted by the owner, if, by the terms of the receipt, the warehouseman undertakes to deliver the goods to the order of the person to whom the possession or custody of the receipt has been entrusted, or if at the time of such entrusting the receipt is in such form that it may be negotiated by delivery.” 8. Rights of bank over the quedans after indorsement; Section 41 of the Warehouse Receipts Act The rights the bank acquired over the quedans after indorsement and delivery to it by Ranft are covered by Section 41 of the Warehouse Receipt Act. Section 41 (Rights of person to whom a receipt has been negotiated) provides that “a person to whom a negotiable receipt has been duly negotiated acquires thereby: (a) Such title to the goods as the person negotiating the receipt to him had or had ability to convey to a purchaser in good faith for value, and also such title to the goods as the depositor of person to whose order the goods were to be delivered by the terms of the receipt had or had ability to convey to a purchaser in good faith for value.” 9. Use of warehouse receipts as documents of title; Intrusting receipts more than delivery, it is to intrust title to the goods; Purchasers for value entitled to rely on representation despite breach of trust and agreement In the case of the Commercial National Bank of New Orleans vs. Canal-Louisiana Bank & Trust Co. (239 U. S., 520), it was observed that “one who takes by trespass or a finder is not included within the description of those who may negotiate.” (Report of Commissioner on Uniform State Laws, January 1, 1910, p. 204.) Aside from this, the intention is plain to facilitate the use of warehouse receipts as documents of title. Under Section 40, the person who may negotiate the receipt is either the “owner thereof”, or a “person to whom the possession or custody of the receipt has been intrusted by the owner” if the receipt is in the form described. The warehouse receipt represents the goods, but the intrusting of the receipt, as stated, is more than the mere delivery of the goods; it is a representation that the one to whom the possession of the receipt has been so intrusted has the title to the goods. By Section 47, the negotiation of the receipt to a purchaser for value without notice is not impaired by the fact that it is a breach of duty, or that the owner of the receipt was induced “by fraud, mistake, or duress” to intrust the receipt to the person who negotiated it. And, under Section 41, one to whom the negotiable receipt has been duly negotiated acquires such title to the goods as the person negotiating the receipt to him, or the depositor or person to whose order the goods were deliverable by the terms of the receipt, either had or “had

ability to convey to a purchaser in good faith for value.” The clear import of these provisions is that if the owner of the goods permits another to have the possession or custody of negotiable warehouse receipts running to the order of the latter, or to bearer, it is a representation of title upon which bona fide purchasers for value are entitled to rely, despite breaches of trust or violations of agreement on the part of the apparent owner. 10. Siy Cong Bieng estopped to deny bank had valid title to the quedans Siy Cong Bieng is estopped to deny that the bank had a valid title to the quedans for the reason that Siy Cong Bieng had voluntarily clothed Ranft with all the attributes of ownership and upon which the bank relied. 11. Equitable estoppel; Where one or two innocent persons must suffer a loss, he who by his conduct made the loss possible must bear it In the National Safe Deposit vs. Hibbs (229 U. S., 391), certain certificates of stock were pledged as collateral by the defendant in error to the bank, which certificates were converted by one of the trusted employees of the bank to his own use and sold by him. The stock certificates were unqualifiedly endorsed in blank by the defendant when delivered to the bank. The Supreme Court of the United States applied the familiar rule of equitable estoppel that where one of two innocent persons must suffer a loss he who by his conduct made the loss possible must bear it. Thus, when the broker obtained the stock certificates, containing all the indicia of ownership and possible of ready transfer, from one who had possession with the bank’s consent, and who brought the certificates to him, apparently clothed with the full ownership thereof by all the tests usually applied by business men to gain knowledge upon the subject before making a purchase of such property. On the other hand, the bank, for a legitimate purpose, with confidence in one of its own employees, instrusted the certificates to him, with every evidence of title and transferability upon them. The bank’s trusted agent, in gross breach of his duty, whether with technical criminality or not is unimportant, took such certificates, thus authenticated with evidence of title, to one who, in the ordinary course of business, sold them to parties who paid full value for them. In such case we think the principles which underlie equitable estoppel place the loss upon him whose misplaced confidence has made the wrong possible. 12. No remedy available to Siy Cong Bieng Siy Cong Bieng has suffered the loss of the quedans, but there is now no remedy available to it. The bank is not responsible for the loss; the negotiable quedans wee duly negotiated to the bank and as far as the record shows, there has been no fraud on the part of the bank.

6. JALBUENA vs. LIZARRAGA ( 33 PHIL 77 | 1915) NATURE Petition for review of the decision of the CFI FACTS Lizarraga, as judgment creditor, caused the sheriff to levy upon an old sugar mill as the property of Doronilla, judgment debtor. The property was sold in a public auction. Subsequently, Jalbuena sought to recover the mill upon the ground that she is the exclusive owner of such. Jalbuena however, knew of that the property had been levied; and that it would be sold as the property of her husband. However, she stood by and permitted the sale to go forward without making the slightest protest until ownership had already passed to another. ISSUE WON the plaintiff can recover the mill

HELD NO - The plaintiff knew that the mill was to be levied as property of her husband. Notwithstanding this knowledge, she stood by and permitted the sale to go forward without making the slightest protest or claim until the property had passed into the hands of Lopez. She is therefore estopped from asserting her claim of ownership against the defendants. ISSUE: WON Jalbuena is estopped from recovering the property. HELD: Yes - Jalbuena had full knowledge of the fact that the property was going to be sold to pay the debts of her husband. She did not communicate her claim to the purchaser, and it is now too late to assert such a claim. “When a person having title to or an interest in property knowingly stands by and suffers it to be sold under judgment or decree, without asserting his title or right or making it known to the bidders, he cannot afterward set up his claim.” The phrase “stood by” does not import an actual presence, but implies knowledge under such circumstances as to render it the duty of the possessor to communicate it. - - - - - - - - - - - - - - “… it is now a well-established principle that where the true owner of property, for however short a time, holds out another, or, with knowledge of his own right, allows another to appear, as the owner of or as having full power of disposition over the property, the same being in the latter’s actual possession, and innocent third parties are thus led into dealing with some [such] apparent owner, they will be protected.” “Whenever a party has, by his own declaration, act, or omission, intentionally and deliberately led another to believe a particular thing true, and to act upon such belief, he can not, in any litigation arising out of such declaration, act, or omission, be permitted to falsify it.” Disposition Decision affirmed

7. BUCTON vs. GABAR ( 55 SCRA 499 | 1974) FACTS: Nicanora Bucton & Josefina Gabar are sisters-in-law. Josefina bought a land from Villarin on installment basis. Josefina then entered into a verbal agreement with Nicanora that the latter would pay one-half of the price and would then own one-half of the land. Nicanora agreed. She paid the initial amount evidenced by a receipt. Sps Bucton then took possession of the land and made thereon improvements. When a deed of sale was executed in favor of Sps Gabar for the land, Sps Bucton sought to obtain a separate title but was refused. Sps Bucton filed a case for specific performance which was granted by the trial court. CA reversed, ruling that the action for specific performance was based on the receipt of the initial payment which was executed 22 years ago, thus had already prescribed (10 years prescription for an action based on a written agreement –Art. 1444). Sps Bucton argues that as owners in actual, continuous and physical possession of the land since its purchase, their right of action did not prescribe. Josefina bought a parcel of land from Villarin. By verbal agreement, Josefina sold a portion thereof to Nicanora for P3,000. Nicanora paid P1,000 then P400—all evidence by receipts—then she loaned Josefina P1,000 and thereafter along with her spouse, took possession of the lot and built their house as well as apartments thereon. Villarin then issued a Deed of Sale to Josefina, but the latter refused to execute the corresponding Deed of Sale to Nicanora. Josefina claimed that the amounts paid by Nicanora were in the concept of loans. Thus, Nicanora filed a case for specific performance.

ISSUE: WON Sps Bucton’s right of action to compel Sps Gabar to execute a formal deed of conveyance in their favor, has prescribed. HELD: No. The real and ultimate basis of petitioners’ action is their ownership of one-half of the lot coupled with their possession thereof (not the receipt), which entitles them to a conveyance of the property. By the delivery of the possession of the land, the sale was consummated and title was transferred to Sps Bucton, that the action is actually not for specific performance, since all it seeks is to quiet title, to remove the cloud cast upon Bucton’s ownership as a result of Gabar’s refusal to recognize the sale made and that as Sps Bucton are in possession of the land, the action is imprescriptible. ISSUE: W/N there was a sale between Josefina and Nicanora HELD: YES. Assuming that at the time when Josefina sold the lot to Nicanora, she was not yet the owner thereof. When Villarin executed the Deed of Sale in her favor, title passed to Nicanora by operation of law. Although the sale between Josefina and Nicanora was verbal, it was as between them. Considering that Nicanora has paid the purchase price, she became owner of the lot. Likewise, although the complaint was titled “specific performance” it was actually one for quieting of title, which is imprescriptible so long as the plaintiff is in possession of the lot. EXCEPTIONS: B. Factors Act, Recording Laws, Torrens System C. Validity of the Sale under Statutory Power or Court Order to Sell D. Sale in Merchant’s Store, Market or Fair – ARTS. 559, 1505 (3)

8. SUN BROS. vs. VELASCO ( 54 OG 5143 | 1958) NATURE: Action for Recovery of Personal Property FACTS: Sun Brothers sold a refrigerator to Francisco Lopez. Lopez just paid down-payment and could not pay in full. In the Conditional Sale Agreement it was stipulated that the Admiral refrigerator would be the absolute property of Sun if the whole payment is not to be given to them and the agreement may be rescinded. Lopez sold the ref to J.V. Trading. Jose Velasco, the owner of J.V. Trading displayed the ref in his store and it was then bought by Co Kang Chiu. Sun filed a complaint for Replevin against Lopez and Chiu and asked for the recovery of the ref. Court granted it and a writ of recovery was given. Sheriff went to Chiu’s residence but Chiu requested for it not to be taken that was granted to him Later, the Complaint was amended to include Velasco. CFI granted the case to the plaintiff ordering Chiu to return the ref to Sun while and Lopez would pay Sun. Velasco would pay Chiu. No damages were granted as petitioned by Chiu. Velasco and Chiu appealed. Velasco asked that he be declared the lawful owner of the ref and that the transfer between Velasco and Chiu be valid and that Velasco be relieved from paying Chiu. Chiu on the other hand asks that he be declared the absolute owner and also asks for damages.

ISSUE: Who is the absolute owner? HELD: Chiu is the owner. Applying Art. 1505 of the Civil Code: Subject to the provisions of this Title, 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. Nothing in this Title, however, shall affect; 1. The provision of any factors’ acts, recording, laws, or any other provisions of law enabling the apparent owner of goods to dispose of them as if he were the true owner thereof; 2. The validity of any contract of sale under statutory power of sale or under the order of a court of competent jurisdiction; 3. Purchase made in a merchant’s store, or in fairs, or markets, in accordance with the Code of Commerce and special laws.” The CFI was wrong when it applied this because following the facts, Velasco has no right because of the non-payment of the ref between Lopez and Sun. It also can’t be said that it was in good faith because he should have asked about the ref being absolutely owned by Lopez, he is negligent on his part. Chiu however has a different case because when he bought the ref from Velasco, it was through the store of Velasco that displayed the ref and had it for sale. It was a place considered to be a merchant’s store. Paragraph three (3) now is applicable. Following the principle that where the rights and interests of a vendor comes into clash with that of an innocent buyer for value, the buyer must be protected. This rule is necessary because of free enterprise wherein buyers cannot be reasonably expected to look behind the title of every article when he buys at a store. What Sun could do is to file a claim for indemnity against Lopez. ISSUE: W/N Sun Brothers may recover the thing HELD: NO. It is true that where a person who is not the owner of a thing sells the same, the buyer acquires no better title than the seller has. In this case. Lopez obviously had no title to the goods for having failed to pay the full price. It only follows that JV Trading had no title thereto as Velasco was not in good faith. He should have inquired if Lopez had good title to it—the same not being engaged in the business of selling appliances. HOWEVER, when the refrigerator passed to Co Kang Chiu, the latter acquired valid title thereto. The exception to the foregoing rule is the purchase in good faith in a merchant store or a fair or a market. This rule fosters stability to commerce and business transactions. Co Kang Chiu purchased the refrigerator in a merchant store—and for value and in good faith. Thus, he is protected by the law. Sun Brothers would not be entitled to recover the refrigerator—not even if they pay its value—since they were not deprived of the same unlawfully. Lopez is the one who should be liable to Sun Brothers for the full purchase price of the ref. Disposition Judgment modified. Chiu is declared to be the absolute owner of the refrigerator. Lopez is ordered to pay P. 1,700 to the plaintiff and 6% annual interest. Claim for damages is dismissed.

9. MASICLAT vs. CENTENO ( 1956 ) NATURE Appeal from CA Decision FACTS Defendant-respondent Centeno owned 15 sacks of rice offered for sale at her store situated on a street near public market. In the morning of Jan. 21, 1951, a person approached defendant and offered her to purchase the rice in question. Defendant agreed to sell 15 sacks of rice in question at P26/ sack, which the buyer promised to pay as soon as he would receive the price of his adobe stones which were being then unloaded from a truck owned Francisco Tan, then parked at the opposite side of the street in front of the Union Grocery facing the defendant’s store. Relying on this promise and upon the request of said purchaser, the defendant ordered the rice in question loaded in the said truck, of which the plaintiff was the caretaker, expecting that as soon as the adobe stones would be paid, said purchaser would pay her the price of the rice. While the rice was being loaded on the truck and even thereafter, defendant kept an eye on it waiting for the purchaser to come to pay her. When the adobe stones were completely unloaded from the truck, the defendant looked for the purchaser, but the latter was no found. So defendant decided to unload the rice from the truck but to her surprise plaintiff-petitioner Masiclat objected on the ground that he has bought it at P26/sack from a person whom he did not know and whom he met only that morning for the first time. Defendant insisted in unloading the rice and the plaintiff objected. Hence, defendant called a policeman to investigate the matter and the latter brought the rice in question to the Municipal building where it was deposited pending investigation. Plaintiff then initiated this action for recovery of possession of the rice in question ISSUES 1. WON the contract of sale was consummated between respondent Centeno and unknown purchaser (alleged

unknown seller to plaintiff) 2. WON petitioners have a better title to the rice in question HELD A. NO Ratio: Although a contract of sale is perfected upon the parties having agreed as to the thing which is the subject matter of the contract and the price, ownership is not considered transmitted until the property is actually delivered and the purchaser has taken possession and paid the price agreed upon. Reasoning: 1) The evidence does not clearly show the identity of the person who tried to buy the rice in question from the

respondent, and neither does it show that the same person was the one who sold the commodity to Ramon Masiclat.

2) The sale between the respondent Centeno and the unknown purchaser was not consummated because although the former allowed the rice in question to be loaded in the truck, she did not intend to transfer its ownership until she was paid the stipulated price; and this is very evident from the fact that respondent continually watched her rice and demanded its unloading as soon as the unknown purchaser was missing. Respondent thus has not lost ownership and legal possession thereof.

B. NO The general principle of law as enunciated in A1505 CC that where one of 2 persons must suffer the fraud of a third, the loss should fall upon him who has enabled the third person to do the wrong, does not apply for the ff. reasons: 1) there was no definite finding that the unknown purchaser was same person who sold the rice to Masiclat, 2) Centeno could not have been so negligent as to allow the unknown purchaser to run away with said rice and

enable him to sell it to Masiclat, it evident that in fact Centeno kept an eye on the rice in question.

Disposition Decision of CA is affirmed.

Facts: Centeno sold sacks of rice at a store on a street near the public market. A person offered to buy 15 sacks of rice, to be paid as soon as he sold his adobe stone, which was being unloaded, from a truck on the opposite side of the street. Centeno then order the sacks of rice to be loaded onto the truck. Masiclat, loaded the rice while Centeno watched. However the buyer did not come back. Upon orders of Centeno to unload the rice, Masiclat objected. Masiclat claimed to have bought the rice. Issue: WON Masiclat had better title to the rice over Centeno (No) Ruling: Centeno did not lose her ownership over the rice as she did not intend to part with her ownership over the rice until the price was paid. This was evident by her watching the sacks being loaded in the truck. As Masiclat did not buy the rice from a merchant’s store or market, he did not acquire a better title than Centeno.

FACTS: Centeno (defendant) was the owner of 15 sacks of rice, which were for sale at her store near the public market of Angeles. A stranger approached her and offered to purchase the rice. Centeno agreed to sell the 15 sacks for P26.00 each, which the stranger promised to pay as soon as he would receive the price of his adobe stones (which were being then unloaded from a truck parked at the opposite side of the street). Relying on this promise, Centeno ordered the rice loaded in the aforementioned truck, of which Masiclat (plaintiff) was the caretaker, on the expectation that as soon as the adobe stones would be paid, the stranger would pay her the price of the rice. While the rice was being loaded, Centeno was keeping an eye on it, waiting for the stranger to come and pay her. When the stones were completely unloaded, the stranger could nowhere be found. Thereupon, Centeno decided to unload the rice from the truck, but Masiclat objected on the ground that he has bought it at P26.00 per sack from a person whom he did not know. 4. Sale by a Person Having a Voidable Title – Arts. 1506, 559

10. TAGATAC vs. JIMENEZ ( 53 OG 3792 No.12 | June 1957 ) FACTS: Tagatac bought a car abroad and brought it to the Philippines. Warner Feist deceived her into believing that he was very rich and purchased her car. She delivered possession thereof. Levy (another name of Feist) issued her a postdated check, which was dishonored. Feist then disappeared with the car. Feist was able to register the car in his name and eventually sold the car to Sanchez, who then sold the same to Jimenez. Jimenez even labored to verify the car’s records with Motor Vehicle Office. Jimenez then delivered the car to California Car Exchange for display. Tagatac, upon finding out, sought to recover the car, but Jimenez refused. Trinidad owns a car which she bought in the US for $4500. A guy named Warner Feist, whom she met when her friend Joseph Lee came to visit, what giving the appearance that he was a wealthy man. Warner offered to buy her car for 15,000 pesos, which she agreed to. Subsequent to the offer, a deed of sale was executed in favor of Feist. He paid Trinidad by means of a postdated check. When Tagatac tried to encash the check, PNB refused because Feist had no account in the bank. Tagatac informed the law enforcement of the alleged estafa done to her by Feist, but the latter was nowhere to be found and the car has also disappeared. It was proven that Feist has managed to notarize that private deed of sale and was able to procure the car’s registration certificate to be in his

name. He thereafter sold the car to a person named Sanchez. Then sold to Jimenez. Masalonga -> Villanueva (Car Exchanges). Tagatac filed for recovery. ISSUE: WON Tagatac can recover the car? (No) RATIO: 559 does not apply because Tagatac was not unlawfully deprived. There was a valid transmission of ownership from Tagatac to Fiest. The failure to pay price does not validly affect the transfer. The fraud employed made the contract merely voidable. Not being voided at the time Fiest sold it to Sanchez, there was a valid transmission of ownership under Art 1506. As the car was again sold to Jimenez, the title acquired by him was an indefeasible one, even as against the original owner. ISSUE: W/N Jimenez may refuse to give the car back?

HELD: YES. Jimenez was a buyer in good faith of the car—he had no knowledge of any defect in the title of the seller. It is true that one who has lost any movable or has been unlawfully deprived thereof may recover the same from the possessor. However, in this case Tagatac was NOT unlawfully deprived within the context of the Civil Code. The sale between Feist and Tagatac was merely voidable—valid until annulled. There was a valid transmission of ownership. The fact that Feist did not pay only gives rise to an action to resolve the contract or demand payment. When Feist sold the car to Sanchez, the sale between him and Tagatac was still valid; therefore, good title passed to Sanchez. As between 2 innocent parties, the one who made possible the injury must bear the loss.

HELD: The disputable presumption that a person found in possession of a thing taken in the doing of a recent wrongful act is the taker and the doer of the whole act does NOT apply in this case because the car was not stolen from Tagatac, and Jimenez came into possession of the car two months after Feist swindled Tagatac. Jimenez did not know of any flaw in the title of the person whom he acquired the car. As long as the entitled party takes no action, the contract of sale remains valid and binding. Feist acquired defective and voidable title, but when he sold it to Sanchez, he conferred a good title on the latter. Jimenez bought the car from Sanchez in good faith, for value, and without notice of any defect in Sanchez’ title, so he acquired a good title to the car. Good title means an indefeasible title to the car, even as against original owner Tagatac. As between two innocent parties, the one whose acts made possible the injury must shoulder the consequences thereof (Tagatac being gullible). ‘The point of inquiry is whether plaintiff-appellant Trinidad C. Tagatac has been unlawfully deprived of her car. At first blush, it would seem that she was unlawfully deprived thereof, considering that she was induced to part with it by reason of the chicanery practiced on her by Warner L. Feist. Certainly, swindling, like robbery, is an illegal method of deprivation of property. In a manner of speaking, plaintiff appellant was “illegally deprived’’ of her car, for the way by which Warner L. Feist induced her to part with it is illegal and is punished by law. But does this unlawful deprivation come within the scope of Article 559 of the New Civil Code? x x x 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 on the latter, provided he brought 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.’ ’’

11. DE GARCIA vs. CA (Spouses Guevara) ( 37 SCRA 129 | 1971 ) NATURE Petition for review on certiorari of a decision of the Court of Appeals. FACTS Presented in the lower court: "Plaintiff Angelina D. Guevara, assisted by her spouse, Juan B. Guevara, seeks recovery of `one (1) lady's diamond ring 18 cts. white gold mounting, with one (1) 2.05 cts. diamond-solitaire, and four (4) brills 0.10 cts. Total weight' which she bought on October 27, 1947 from R. Rebullida, Inc." Plaintiff's evidence tends to show that around October 11, 1953 plaintiff while talking to Consuelo S. de Garcia, recognized her ring in the finger of Mrs. Garcia and inquired where she bought it, which the defendant answered from her comadre. Plaintiff explained that that ring was stolen from her house in February 1952. Defendant handed the ring to plaintiff and it fitted her finger. 2-3 days later, at the request of plaintiff, plaintiff, her husband Lt. Col. Juan Guevara, Lt. Cementina of Pasay PD, defendant and her attorney proceeded to the store of Mr. Rebullida to whom they showed the ring in question. Mr. Rebullida examined the ring with the aid of high power lens and after consulting the stock card thereon, concluded that it was the very ring that plaintiff bought from him in 1947. The ring was returned to defendant who despite a written request therefor failed to deliver the ring to plaintiff. Later on when the sheriff tried to serve the writ of seizure (replevin), defendant refused to deliver the ring which had been examined by Mr. Rebullida, claiming it was lost. On the other hand, defendant denied having made any admission before plaintiff or Mr. Rebullida or the sheriff. Her evidence tends to show that the ring was purchased by her from Mrs. Miranda who got it from Miss Angelita Hinahon who in turn got it from the owner, Aling Petring, who was boarding in her house; that the ring she bought could be similar to, but not the same ring plaintiff purchased from Mr. Rebullida which was stolen; that according to a pawn-shop owner the big diamond was before the trial never dismantled. When dismantled, defendant's diamond was found to weigh 2.57 cts. Plaintiff lost in the lower court. She elevated the matter to respondent Court of Appeals with the judgment of the lower court being reversed. It is this decision now under review. These are the facts as found by respondent Court of Appeals: " Before plaintiff lost the ring, she had been wearing it for six years and became familiar with it. Thus, when she saw the missing ring in the finger of defendant, she readily and definitely identified it. Her identification was confirmed by Mr. Rafael Rebullida, whose candid testimony is entitled to great weight, with his 30 years experience behind him in the jewelry business and being a disinterested witness since both parties are his customers. Indeed, defendant made no comment when in her presence Rebullida after examining the ring and stock card told plaintiff that that was her ring, nor did she answer plaintiff's letter of demand, ... asserting ownership. Further confirmation may be found in the extra-judicial admissions, contained in defendant's original and first amended answers. It is noteworthy that defendant gave a rather dubious source of her ring. Aling Petring from whom the ring supposedly came turned out to be a mysterious and ephemeral figure. Miss Hinahon did not even know her true and full name, nor her forwarding address. She appeared from nowhere, boarded three months in the house of Miss Hinahon long enough to sell her diamond ring, disappearing from the scene a week thereafter. Moreover, Mrs. Baldomera Miranda, third-party defendant, who tried to corroborate defendant on the latter's alleged attempt to exchange the ring defendant bought through her, is [belied] by her judicial admission in her Answer

that appellee `suggested that she would make alterations to the mounting and structural design of the ring to hide the true identity and appearance of the original one'. Finally, defendant is refuted by her own extrajudicial admissions ... although made by defendant's counsel. Her proffered explanation that her counsel misunderstood her is puerile because the liability to error as to the identity of the vendor and the exchange of the ring with another ring of the same value, was rather remote." ISSUE WON respondent court is correct in granting the ring to Guevara

HELD: YES Ratio The title established by the first clause of Art. 559 is only a presumptive title sufficient to serve as a basis for acquisitive prescription, that the clause immediately following provides that `one who has lost any movable or has been unlawfully deprived thereof, may recover it from the person in possession of the same. Reasoning The article 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." Suffice it to say in this regard that the right of the owner to recover personal property acquired in good faith by another is based on his being dispossessed without his consent. The common law principle that where one of two innocent persons must suffer by a fraud perpetrated by the another, the law imposes the loss upon the party who, by his misplaced confidence, has enabled the fraud to be committed, cannot be applied in a case which is covered by an express provision of the new Civil Code, specifically Article 559. Actually, even under the first clause, possession in good faith does not really amount to title, for the reason that Art. 1132 of the Code provides for a period of acquisitive prescription for movables through `uninterrupted possession for four years in good faith, so that many Spanish writers, including Manresa, Sanchez Roman, Scaevola, De Buen, and Ramos, assert that under Art. 464 of the Spanish Code (Art. 559 of the New Civil Code), the title of the possessor is not that of ownership, but is merely a presumptive title sufficient to serve as a basis of acquisitive prescription. AS TO OTHER ASSIGNED ERRORS: > Questions of fact, the court will not disturb (identity of ring and substitution) As to the attorney's fees and exemplary damages, this is what respondent Court said in the decision under review: "Likewise, plaintiff is entitled to recover reasonable attorney's fees in the sum of P1,000, it being just and equitable under the circumstances, and another P1,000 as exemplary damages for the public good to discourage litigants from resorting to fraudulent devices to frustrate the ends of justice, as defendant herein tried to substitute the ring for plaintiff's ring." Considering the circumstances, the cursory discussion of the sixth assigned error on the matter by petitioner fails to demonstrate that respondent Court's actuation is blemished by legal defects. Disposition the decision of respondent Court of Appeals of August 6, 1962 is hereby affirmed.

12. EDCA PUBLISHING & DISTRIBUTING CORP. vs. CA (SPOUSES LEONOR AND GERARDO SANTOS, DOING BUSINESS UNDER THE NAME AND STYLE OF “SANTOS BOOKSTORE”) (184 SCRA 614 | 1990)

NATURE Petition to reverse the decision of the Court of Appeals FACTS Art. 559. The possession of movable property acquired in good faith is equivalent to a title. Nevertheless, one

who has lost any movable or has been unlawfully deprived thereof, may recover it from the person in possession of the same. If the possessor of a movable lost or of which the owner has been unlawfully deprived has acquired it in good faith at a public sale, the owner cannot obtain its return without reimbursing the price paid therefor. The movable property here consists of books. A person identifying himself as Professor Jose Cruz placed an order by telephone with the petitioner company

for 406 books, payable on delivery EDCA delivered the books as ordered, for which Cruz issued a personal check covering the purchase price of

P8,995.65. 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. 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. Also, Cruz had no more account or deposit with the Philippine Amanah Bank, against which he had drawn the payment check EDCA then went to the police, which set a trap and arrested Cruz on October 7, 1981. Investigation disclosed

his real name as Tomas de la Peña and his sale of 120 of the books he had ordered from EDCA to the private respondents. On the night of the same date, EDCA sought the assistance of the police, 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 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. The petitioner was successively rebuffed in the three courts below and now hopes to secure relief from us.

Petitioner claims > 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 argues that it was unlawfully deprived 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. ISSUE: WON the petitioner has been unlawfully deprived of the books because the check issued by the impostor in payment therefor was dishonored. HELD: NO

Ratio: The petitioner was not unlawfully deprived of the books because the sale between the petitioner and the imposter Tomas de la Pena “Professor Cruz” had already been perfected. Having acquired ownership, he could already validly transfer ownership to the private respondents. The contract of sale is consensual and is perfected once agreement is reached between the parties on the subject matter and the consideration. Reasoning 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. 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. Disposition While we sympathize with the petitioner for its plight, it is clear that its remedy is not against the private respondents but against Tomas de la Peña, who has apparently caused all this trouble. The private respondents have themselves been unduly inconvenienced, and for merely transacting a customary deal not really unusual in their kind of business. It is they and not EDCA who have a right to complain. WHEREFORE, the challenged decision is AFFIRMED and the petition is DENIED. The Supreme Court affirmed the challenged decision and denied the petition, with costs against EDCA Publishing. 1. Article 559 of the Civil Code Article 559 provides that “The possession of movable property acquired in good faith is equivalent to a title. Nevertheless, one who has lost any movable or has been unlawfully deprived thereof, may recover it from the person in possession of the same. If the possessor of a movable lost or of which the owner has been unlawfully deprived has acquired it in good faith at a public sale, the owner cannot obtain its return without reimbursing the price paid therefor. 2. Arbitrary action, act of taking the law on own hands, condemned The Court expresses its disapproval of the arbitrary action of EDCA Publishing in taking the law into its own hands and forcibly recovering the disputed books from the Santos spouses. 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, such as the ownership of the books, are decided not by policemen but by judges and with the use not of brute force but of lawful writs. 3. Possession of movable property acquired in good faith equivalent to title 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. It cannot be said that the spouses cannot establish their ownership of the disputed books because they have not even produced a receipt to prove they had bought the stock. 4. Santos a purchaser in good faith, even if books were bought at discount 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. The Santos spouses 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 anyone in the business of buying and selling books to buy them at a discount and resell them for a profit. 5. Contract of sale consensual and is perfected upon agreement 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 Article 1475 of the Civil Code, “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.” Article 1477, on the other hand, provides that “The ownership of the thing sold shall be transferred to the vendee upon the actual or constructive delivery thereof.” Article 1478 provides that “The parties may stipulate that ownership in the thing shall not pass to the purchaser until he has fully paid the price.” 6. Rule in the transfer of ownership Ownership in the thing sold shall not pass to the buyer until full payment of the purchase price only if there is a stipulation to that effect. Otherwise, the rule is that such ownership shall pass from the vendor to the vendee upon the actual or constructive delivery of the thing sold even if the purchase price has not yet been paid. Absent the stipulation, delivery of the thing sold will effectively transfer ownership to the buyer who can in turn transfer it to another. 7. Effect of non-payment; Relief Non-payment only creates a right to demand payment or to rescind the contract, or to criminal prosecution in the case of bouncing checks. 8. Asiatic Commercial Corporation vs. Ang; Company not unlawfully deprived of property, sale valid In Asiatic Commercial Corporation v. Ang, the company 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 that the company was not 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. 9. Tagatac vs. Jimenez; Sale voidable due to fraud but subsists as valid until annulled In Tagatac v. Jimenez, Trinidad C. Tagatac sold her car to Warner Feist, who sold it to Sanchez, who sold it to Jimenez. When the payment check issued to Tagatac by Feist was dishonored, Tagatac 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 that “the fraud and deceit practiced by Feist earmarks this sale as a

voidable contract (Article 1390). 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) and the contract is cleansed from all its defects (Article 1396); 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). 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 Tagatac delivered the car to Feist by virtue of said voidable contract of sale, the title to the car passed to Feist (the title 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). There being no proof on record that Felix Sanchez acted in bad faith, it is safe to assume that he acted in good faith. 10. Ownership validly transferred to the Santos spouses Actual delivery of the books having been made, Cruz acquired ownership over the books which he could then validly transfer to the Santos spouses. 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 spouses to the books. 11. Injustice will arise if “unlawfully deprived” would be interpreted in a different manner One may well imagine the adverse consequences if the phrase “unlawfully deprived” were to be interpreted in the manner premised on the argument that the impostor acquired no title to the books that he could have validly transferred to the spouses. 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.

12. Diligence exercised by Santos, but not by EDCA 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. Santos 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. 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.

13. Santos spouses cannot be made to suffer It would certainly be unfair to make the spouses bear the prejudice sustained by EDCA as a result of its own negligence. There is no 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 the Court sympathized with EDCA for its plight, it is clear that its remedy is not against the spouses but against Tomas de la Peña, who has apparently caused all this trouble. 14. Santos have the right to complain The spouses 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.