Sales Part VIII Page |1
G.R. No. 61584.November 25, 1992.*
DONATO S. PAULMITAN, JULIANA P. FANESA and RODOLFO
FANESA, petitioners, vs. COURT OF APPEALS, ALICIO PAULMITAN,
ELENA PAULMITAN, ABELINO PAULMITAN, ANITA PAULMITAN,
BAKING PAULMITAN, ADELINA PAULMITAN and ANITO
PAULMITAN, respondents.
Civil Law; Succession; In every inheritance the relative nearest in degree
excludes the more distant ones.—Since it is well-settled by virtue of Article
777 of the Civil Code that “[t]he rights to the succession are transmitted
from the moment of the death of the decedent,” the right of ownership, not
only of Donato but also of Pascual, over their respective shares in the
inheritance was automatically and by operation of law vested in them in
1953 when their mother died intestate. At that stage, the children of Donato
and Pascual did not yet have any right over the inheritance since “[i]n every
inheritance the relative nearest in degree excludes the more distant ones.”
Donato and Pascual excluded their children as to the right to inherit from
Agatona Sagario Paulmitan, their mother.
Same; Property; Co-ownership; Even if a co-owner sells the whole property
as his, the sale will affect only his own share but not those of the other co-
owners who did not consent to the sale.—This Court has ruled that even if a
co-owner sells the whole property as his, the sale will affect only his own
share but not those of the other co-owners who did not consent to the sale
[Punsalan v. Boon Liat, 44 Phil. 320 (1923)].
Same; Same; Same; Same; Since a co-owner is entitled to sell his undivided
share, a sale of the entire property by one co-owner without the consent of
the other co-owners is not null and void.—This is because under the
aforementioned codal provision, the sale or other disposition affects only his
undivided share and the transferee gets only what would correspond to his
grantor in the partition of the thing owned in common.
Remedial Law; Appeal; The settled rule is that only questions of law may be
raised in a petition for review; Generally, findings of fact made by the trial
court and the Court of Appeals are final and conclusive and cannot be
reviewed on appeal.—Petitioners dispute the order of the trial court, which
the Court of Appeals affirmed, for them to pay private respondents
P5,000.00 per year from 1966 until the partition of the estate which
represents the share of private respondents in the fruits of the land.
According to petitioners, the land is being leased for P2,000.00 per year only.
This assigned error, however, raises a factual question. The settled rule is
that only questions of law may be raised in a petition for review. As a
general rule, findings of fact made by the trial court and the Court of Appeals
are final and conclusive and cannot be reviewed on appeal.
PETITION for review on certiorari, from the decision of the Court of Appeals.
The facts are stated in the opinion of the Court. Paulmitan vs. Court of
Appeals, 215 SCRA 866, G.R. No. 61584 November 25, 1992
ROMERO, J.:
This is a petition for review on certiorari seeking the reversal of the
decision 1 of the Court of Appeals, dated July 14, 1982 in CA-G.R. No. 62255-
R entitled "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 learning of these transactions, respondents children of the late Pascual
Paulmitan filed on January 18, 1975 with the Court of First Instance of
Negros Occidental a Complaint against petitioners to partition the properties
plus damages.
Petitioners set up the defense of prescription with respect to Lot No. 757 as
an affirmative defense, contending that the Complaint was filed more than
eleven years after the issuance of a transfer certificate of title to Donato
Paulmitan over the land as consequence of the registration with the Register
of Deeds, of Donato's affidavit extrajudicially adjudicating unto himself Lot
No. 757. As regards Lot No. 1091, petitioner Juliana P. Fanesa claimed in her
Answer to the Complaint that she acquired exclusive ownership thereof not
only by means of a deed of sale executed in her favor by her father,
petitioner Donato Paulmitan, but also by way of redemption from the
Provincial Government of Negros Occidental.
Acting on the petitioners' affirmative defense of prescription with respect to
Lot No. 757, the trial court issued an order dated April 22, 1976 dismissing
the complaint as to the said property 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
Sales Part VIII Page |2
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.
x x x           x x x          x x x
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
Sales Part VIII Page |3
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.
In Bailon-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
Sales Part VIII Page |4
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
 Sales Part VIII Page |5

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.

No. L-17681. February 26, 1965.
MINDANAO ACADEMY, INC., MAURICIO O. BAS, ERLINDA D. DIAZ,
accompanied by her husband ANTOLIN DIAZ, ESTER AIBA D. BAS,
accompanied by her husband MAURICIO O. BAS, ROSALINDA D.
BELLEZA, accompanied by her husband APOLINARIO BELLEZA, LUZ
MINDA D. DAJAO, accompanied by her husband ELIGIO C. DAJAO,
ADELAIDA D. NUESA, accompanied by her husband WILSON
NUESA,PEDRO N. ABUTON, SY PAOCO, JOSEFA DIGNUM, and
PERFECTO VELASQUEZ, plaintiffs-appellees, vs. ILDEFONSO D. YAP,
ROSENDA A. DE NUQUI, and SOTERO A. DIONISIO, JR., defendants,
ILDEFONSO D. YAP, defendant-appellant.
No. L-17682. February 26, 1965.
ROSENDA A. DE NUQUI,SOTERO DIONISIO,JR., ERLINDA
DIONISIO-DIAZ and ANTOLIN DIAZ, plaintiffs-appellees, vs.
ILDEFONSO D. YAP, defendant-appellant.
Sale; Void entirely where vendors ceded also interest belonging to persons
not parties and prestation is indivisible.—A contract of sale is entirely null
and void where it purports to sell properties of which the sellers were not the
only owners and the prestation involved was indivisible, and therefore
incapable of partial annulment.
Same; Legal fiction of good faith ceases after complaint is filed in court.—
Although the bad faith of one party neutralizes that of the other and hence
as between themselves their rights would be as if both of them had acted in
good faith at the time of the transaction, this legal fiction of the buyer’s good
faith ceased when the complaint against him was filed.
Same; Same; Possessor in good faith not entitled to fruits after legal
interruption of possession.—A possessor in good faith is entitled to the fruits
Sales Part VIII Page |6
only so long as his possession is not legally interrupted, and such
interruption takes place upon service of judicial summons.
Same; Same; Possessor in good faith not entitled to reimbursement of
improvements constructed after filing of action for annulment.—A possessor
in good faith cannot recover the value of a new building constructed after
the filing of an action for annulment of the sale of land on which it is
constructed, thus rendering him a builder in bad faith who is denied by law
any right of reimbursement.
Damages; Nominal and exemplary damages not awarded to stockholders
already represented by the corporation.—Where the interests of the
stockholders were already represented by the corporation itself, which was
the proper party plaintiff, and no cause of action accruing to them separately
from the corporation is alleged in the complaint, the trial court’s ruling out
the claim for moral damages to the corporation also rule’s out any award for
such nominal and exemplary damages to the stockholders.
APPEAL from a judgment of the Court of First Instance of Misamis
Occidental.
The facts are stated in the opinion of the Court.
     Mauricio O. Bas for and in his own behalf as plaintiff-appellee.
     Eligio C. Dayao for and in his own behalf as plaintiff-appellee.
     Roque Desquitado for other plaintiffs-appellees.
     Ambrosio Padilla Law Offices for defendant-appellant.
MAKALINTAL, J.:
By deed entitled "Mutual Agreement," executed on May 10, 1964, Rosenda
A. de Nuqui (widow of deceased Sotero Dionisio) and her son Sotero
Dionisio, Jr. sold three parcels of residential land in Oroquieta, Misamis
Occidental, and another parcel in Ozamis City in favor of Ildefonso D. Yap.
Included in the sale were certain buildings situated on said lands as well as
laboratory equipment, books, furniture and fixtures used by two schools
established in the respective properties, the Mindanao Academy in Oroquieta
and the Misamis Academy in Ozamis City. The aggregate price stated in the
deed was P100,700.00, to be paid according to the terms and conditions
specified in the contract.

Besides Rosenda and her son Sotero, Jr., both of whom signed the
instrument, Adelaida Dionisio-Nuesa (a daughter of Rosenda) is also named
therein as co-vendor, but actually did not take part either personally or
through her uncle and supposed attorney-in-fact, 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.
Sales Part VIII Page |7
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:
Sales Part VIII Page |8
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.
Sales Part VIII Page |9
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.

No. L-36359. January 31, 1974.*
FELIX BUCTON AND NICANORA GABAR BUCTON, petitioners, vs.
ZOSIMO GABAR,JOSEFINA LLAMOSO GABAR AND THE HONORABLE
COURT OF APPEALS, respondents.
Land registration; Sale of land in private instrument is binding upon the
parties.—There is no question that petitioner Nicanora Gabar Bucton paid
P1,500 to respondent Josefina Gabar as purchase price of one-half of the lot
now covered by TCT No. II, for respondent Court of Appeals found as a fact
“that plaintiffs really paid for a portion of the lot in question pursuant to their
agreement with the defendants that they would own one-half of the land.”
That sale, although not consigned in a public instrument or formal writing, is
nevertheless valid and binding between petitioners and private respondents,
for the time-honored rule is that even a verbal contract of sale of real estate
produces legal effects between the parties.
Obligations and contracts; One who sells something he does not as yet own
is bound by the sale when he acquires the thing later.—Although at the time
said petitioner paid P1,000 as part payment of the purchase price on January
19, 1946, private respondents were not yet the owners of the lot, they
became such owners on January 24, 1947, when a deed of sale was
executed in their favor by the Villarin spouses. In the premises, Article 1434
of the Civil Code, which provides that “when a person who is not the owner
of a thing sells or alienates title thereto, such title passes by operation of law
to the buyer or grantee,” is applicable.
Prescription; Action to quiet title does not prescribe.— The real and ultimate
basis of petitioners’ action is their ownership of one-half of the lot coupled
S a l e s P a r t V I I I P a g e | 10
with their possession thereof, which entitles them to a conveyance of the
property. In Sapto, et al. vs. Fabiana, 103 Phil. 683, 686-87, this Court
explained that under the circumstances no enforcement of the contract is
needed, since the delivery of possession of the land sold had consummated
the sale and transferred title to the purchases, and that, actually, the action
for conveyance is one to quiet title, i.e., to remove the cloud upon the
appellee’s ownership by the refusal of the appellants to recognize the sale
made by their predecessors. We held therein that it is an established rule of
American jurisprudence that actions to quiet title to property in the
possession of the plaintiff are imprescriptible.
APPEAL from a decision of the Court of Appeals.
The facts are stated in the opinion of the Court.
     Rizalindo V. Diaz for petitioners.
     Alfredo Ber. Pallarca for respondents. Bucton vs. Gabar, 55 SCRA 499,
No. L-36359 January 31, 1974
ANTONIO, J.
Appeal from the decision of the Court of Appeals in CA-G.R. No. 49091-R,
dated January 10, 1973, reversing the judgment of the trial court and
dismissing the complaint filed by herein 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
S a l e s P a r t V I I I P a g e | 11
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:
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.
S a l e s P a r t V I I I P a g e | 12
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
S a l e s P a r t V I I I P a g e | 13
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 his title in attacked
before taking steps to vindicate his right. But the rule that
the statute of limitations is not available as a defense to an
action to remove a cloud from title can only be invoked by a
complainant when he is in possession. One who claims
property which is in the possession of another must, it
seems, invoke remedy within the statutory period. (44 Am.
Jur., p. 47)
The doctrine was reiterated recently in Gallar v. Husain, et al.,4 where We
ruled that by the delivery of the possession of the land, the sale was
consummated and title was transferred to the appellee, that the action is
actually not for specific performance, since all it seeks is to quiet title, to
remove the cloud cast upon appellee's ownership as a result of appellant's
refusal to recognize the sale made by his predecessor, and that as plaintiff-
appellee is in possession of the land, the action is imprescriptible.
Considering that the foregoing circumstances obtain in the present case, We
hold that petitioners' action has not prescribed.

WHEREFORE, the decision and resolution of respondent Court of Appeals
appealed from are hereby reversed, and the judgment of the Court of First
Instance of Misamis Oriental, Branch IV, in its Civil Case No. 3004, is revived.
Costs against private respondents.
[No. L-8255. July 11, 1957]
CITY OF MANILA, plaintiff and appellee, vs. BUGSUK LUMBER Co.,
defendant and appellant.
1.PRODUCER; DIRECT SALES FROM LUMBER CONCESSION TO DEALERS,
EXEMPT FROM LlCENSE TAX AND PERMIT FEES.—Inasmuch as appellant
lumber company sells the produce of its timber concession direct to the
lumber dealers, it can not be considered a dealer in the common and
ordinary acceptation of the word, because "a dealer is not one who buys to
keep or makes to sell, but one who buys to sell again; the middleman
between the producer and the consumer of the community (In re Hemming,
51 F. 2d 850)." Appellant, therefore, is not liable under Ordinances Nos.
3420, 3364 and 3000 of the City of Manila, imposing taxes in wholesale and
retail dealers because it is not a dealer but a producer selling its own
produce.
2.ID. ; ID. ; PRODUCER DOES NOT BECOME DEALER BY MAINTAINING
OFFICE, WHERE ORDERS AND PAYMENTS THEREFOR ARE RECEIVED.—It is
contended that a manufacturer becomes a dealer if he carries on the
business of selling goods or the products manufactured by him at a store or
warehouse apart from his own shop or manufactory. (Central Azucarera de
Don Pedro vs. City of Manila et al., 97 Phil., 627), and that the office in
Manila where appellant received orders and receipted payment for such
orders is actually a store. The placing of an order for goods and the making
of payment thereto at a principal office does not transform said office into a
store, for it is a necessary element that there must also be goods or wares
S a l e s P a r t V I I I P a g e | 14
stored therein or on display, and provided also that the firm or person
maintaining that office is actually engaged in the business of buying and
selling. These elements are wanting in the case at bar for the principal office
of appellant alluded to as a store only serves to faciliate the transactions
relative to the purchase of its produce, but does not act as a dealer or
intermediary between its field office and its customers.
APPEAL from a judgment of the Court of First Instance of Manila.
Concepcion, J.
The facts are stated in the opinion of the Court.
City Fiscal Eugenio Angeles and Assistant Fiscal Artemio H. Cusi for appellee.
M. Almario and /. L. Misa for appellant.
DECISION
FELIX, J.:
Bugsuk Lumber Company, Inc., a domestic corporation with field. office at
Balabak, Palawan, and principal office at 703 San Fernando, Binondo, Manila,
was organized to:chanrob1es virtual 1aw library
(a) Comprar y vender maderas y para dedicarse, en general a toda clase de
negocios sobre maderas;
(To buy and sell lumber and to engage in general, in any kind of business
concerning lumber);
(b) Solicitor del Gobierno o adquirir, en la forma permitia por la ley,
concessiones madereras si el negoclo asi lo exige;
(To apply from the Government or to acquire in any manner permitted by
law, lumber concessions if the business would so require);
(c) Aserrar maderas y comprar trozos de madera, en caso de que el negocio
de la corporacion lo exija; y
(To saw lumber and to buy logs, in case the business of the corporation
would so demand; and)
(d) Hacer toda clase de negocios relacionados directa o indirectamente con

los fines para los cuales se ha creado esta corporacion (Exhibit "A").  and that its products (logs) were sold directly from the lumber concession to
(To make all kinds of business that may be directly or indirectly in line with
the purposes for which this corporation has been created).  sales tax, forestry charges, reforestation fees, residence taxes, and the
In 1951 and during the 1st, 2nd and 3rd quarters of 1952, the Bugsuk
Lumber Company made sales of lumber to several firms including Pio Barreto
& Sons, Inc., Gotamco & Sons, Co., Basilan Lumber Co., Dy Pac & So, Inc.,
Central Sawmill, Woodart Inc., Felipe Yupangco & Sons, Inc., Jacinto Music
Store and P. E. Domingo & Co., Inc. (Exhibits B to B-23).  favor of plaintiff and defendant Company appealed the case to the Court of
On October 10, 1952, the Office of the Treasurer of the City of Manila sent a
demand to the Company for the payment of the amount of P544.50 for
license fees corresponding to the years 1951 and 1952, and P40.00 for the
necessary mayor’s permit, on the ground that said business firm was found
to be engaged in the sales of timber products without first securing the
required licenses and permits pursuant to City Ordinances Nos. 3420, 3364
and 3000. (Exhibit C). The Company must have refused or failed to pay said
imposts because on June 11, 1953, the City Fiscal of Manila filed a complaint
against the Bugsuk Lumber Co., Inc., with the Municipal Court of Manila
alleging, among others, that defendant Company sold at wholesale to
different lumber dealers in Manila during the 1st, 2nd, 3rd and 4th quarters
of 1951 and the 1st, 2nd and 3rd quarters of 1952 different kinds of lumber
for which it should have paid a quarterly license tax of P40.00 or a total of
P280.00 as provided by Ordinance No. 3000, as amended; that during the
2nd, 3rd and 4th quarters of 1951 and the 1st, 2nd, 3rd and 4th quarters of
1952, defendant Company sold at retail to different firms lumber for which it
should have paid a total amount of P215.00 for license fees and the mayor’s
permit of P20.00; that despite repeated demands, defendant Company
refused and failed to pay the same and, therefore, prayed that judgment be
rendered ordering the defendant Company to pay the City of Manila the
amount of P584.50 representing license fees and mayor’s permit fees, with
legal interests thereon and surcharges and for such other relief as may be
deemed just and equitable in the premises. 
Defendant Bugsuk Lumber Co., Inc., filed an answer on October 12, 1953,
contesting plaintiff’s allegation that it sold lumber at wholesale transactions
because what it actually sold were unprocessed logs; neither did it sell at
retail because the timbers were delivered directly from the vessel to the
lumber dealers, and set up the affirmative defenses that the Bugsuk Lumber
Company was essentially a producer, having no lumber yard of any kind in
Manila or elsewhere, nor kept a store where lumber or logs could be sold,
S a l e s P a r t V I I I P a g e | 15
the dealers in Manila; that as such producer, it had paid the taxes required
by law such as the ordinary Timber License fee, Privilege tax (producer),
municipal licenses in Bugsuk, Palawan; that the taxes in the form of license
and permit fees sought to be collected by the City would constitute double
taxation, and prayed for the dismissal of the complaint. 
The record shows that the Municipal Court of Manila rendered judgment in
First Instance of Manila based practically in the same arguments. On July 18,
1954, the Court of First Instance rendered decision holding that the
Company sold logs to various firms in wholesale and retail transactions and
although defendant had no store or lumber yard in the City, this fact alone
cannot destroy the findings of the inspector of the City Treasurer’s Office
that it sold logs to different buyers in Manila; that the imposition of the taxes
in question did not constitute double taxation and that the municipal taxes
sought to be collected by the City authorities were not excessive and,
consequently, ordered the defendant Company to pay the sum of P584.50
plus legal interests and costs. 
From this decision, therein defendant took the matter to this Court and in
this instance alleged that the lower Court erred:
1. In holding that appellant is a wholesale dealer and not a producer within
the meaning of the tax ordinance;
2. In holding that appellant is a retail dealer and not a producer within the
meaning of the tax ordinance; and
3. In holding that appellant is liable under the municipal ordinances imposing
taxes in wholesale and retail dealers because defendant is not a dealer but a
producer. 
We could see from the foregoing set of facts that the only question at issue
in this case is whether or not appellant, maintaining a principal office in
Manila, receiving orders for its products and accepting in said office
payments thereto, can be considered a dealer in this City and is, therefore,
subject to the payment of the license tax and permit fees in question. 
Appellant does not dispute the power of the Municipal Board of the City of
Manila to enact Ordinance No. 3000 requiring wholesale and retail dealers to

secure and pay the mayor’s permit annually, neither does it contest the
validity of Ordinance No. 3364 which contains the following provision:
"Group 2. Retail dealers in new (not yet used) merchandise, which dealers
are not yet subject to the payment of any municipal tax, such as; (1) Retail
dealers in General Merchandise and (2) retail dealers exclusively engaged in
the sale of electrical supplies; sporting goods; office equipment and
materials; rice; textile including knitted wares; hardwares, including
glasswares; cooking utensils and construction materials; papers; books
including stationery:" (Ordinance No. 3364);
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.)  used merely to facilitate the payment of the tax obligations of said Company,
A dealer has been defined as:
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). 
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 v. J. Watts Kearny & Sons, 160 So. 77).  and selling them (Black’s Law Dictionary, 4th ed., p. 1589).
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 what appellant sold was the produce of its
concession in Palawan. Even conceding, 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:
"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
S a l e s P a r t V I I I P a g e | 16
provisions of the Internal Revenue Code. It shall also include poultry,
livestock, fish and other allied products" (Ordinance No. 3420). 
We see no reason why a producer or manufacturer selling its own produce or
manufactured goods would be considered a dealer just to make it liable for
the corresponding dealer’s tax, as is the case in the instant appeal. 
Appellee, however, in asserting that appellant Company is a dealer relied on
the case of Atlantic Refining Co. v. Van Valkenburg, 265 Pa. 456; 109 A. 208,
wherein it was held that the term dealer includes "one who carries on the
business of selling goods, wares and merchandise manufactured by him at a
store or warehouse apart from his own manufactory", and it was the
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. 
Appellant admittedly maintained said principal office but averred that it was
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?
Lexicographers defined a store as:
Any place where goods are kept for sale, whether by wholesale or retail; a
shop (Webster’s New International Dictionary, 2nd ed., p. 2486). 
Any place where goods are deposited and sold by one engaged in buying
 
It was also said that:
A store is any place where goods are kept for sale or sold, whether by
wholesale or retail (Standard Oil Co. v. Green, 34 F. Supp. 30). It also
applies to a building or room in which goods 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 V. Lane, 59 A. 2d 662; 142 N. J. Eq. 193). 
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
 S a l e s P a r t V I I I P a g e | 17

stored therein or on display, and provided also that the firm or person
maintaining that office is actually engaged in the business of buying and
selling. These elements are wanting in the case at bar for it needs no further
clarification that the principal office alluded to as a store only serves to
facilitate the transactions relative to the sale of its produce, but does not act
as a dealer or intermediary between its field office and its customers. 

We may further add that this matter was already passed upon by this Court
when, through 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, therefore, engage in the business of
selling sugar." (Central Azucarera de Don Pedro v. City of Manila Et. Al., 97
Phil., 627). 

Wherefore, the decision appealed from is hereby reversed and appellant

declared exempt from the liabilities sought to be charged against it under the
provisions of the aforementioned ordinances, without pronouncement as to
costs. It is so ordered.

G.R. No. 80298. April 26, 1990.*
EDCA PUBLISHING & DISTRIBUTING CORP., petitioner, vs. THE
SPOUSES LEONOR and GERARDO SANTOS, doing business under
the name and style of “SANTOS BOOKSTORE,” and THE COURT OF
APPEALS, respondents.
Civil Law; Property; Sales; Possession of movable property acquired in good
faith is equivalent to a title.—It is the contention of the petitioner that the
private respondents have not established their ownership of the disputed
books because they have not even produced a receipt to prove they had
bought the stock. This is unacceptable. Precisely, the first sentence of Article
559 provides that “the possession of movable property acquired in good faith
is equivalent to a title,” thus dispensing with further proof.
Same; Same; Contract of sale is consensual; Ownership shall pass from the
vendor to the vendee upon the actual or constructive delivery of the thing
sold.—The contract of sale is consensual and is perfected once agreement is
reached between the parties on the subject matter and the consideration. x x
x It is clear from the above provisions, particularly the last quoted, that
ownership in the thing sold shall not pass to the buyer until full payment of
the purchase price only if there is a stipulation to that effect. Otherwise, the
rule is that such ownership shall pass from the vendor to the vendee upon
the actual or constructive delivery of the thing sold even if the purchase price
has not yet been paid.
S a l e s P a r t V I I I P a g e | 18
Same; Same; Same; Non-payment creates a right to demand payment or to
rescind the contract, or to criminal prosecution.—Non-payment only creates
a right to demand payment or to rescind the contract, or to criminal
prosecution in the case of bouncing checks. But absent the stipulation above
noted, delivery of the thing sold will effectively transfer ownership to the
buyer who can in turn transfer it to another.
Same; Same; Same; Same; It would be unfair to make the respondents who
acted in good faith, bear the prejudice sustained by EDCA as a result of its
own negligence.—It would certainly be unfair now to make the private
respondents bear the prejudice sustained by EDCA as a result of its own
negligence. We cannot see the justice in transferring EDCA’s loss to the
Santoses who had acted in good faith, and with proper care, when they
bought the books from Cruz.
PETITION to review the decision of the Court of Appeals. Buena, J.
The facts are stated in the opinion of the Court.
     Emiliano S. Samson, R. Balderrama-Samson, Mary Anne B. Samson for
petitioner.
     Cendaña, Santos, Delmundo & Cendaña for private respondents. EDCA
Publishing & Distributing Corp. vs. Santos, 184 SCRA 614, G.R. No. 80298
April 26, 1990
CRUZ, J.:
The case before us calls for the interpretation of Article 559 of the Civil Code
and raises the particular question of when a person may be deemed to have
been "unlawfully deprived" of movable property in the hands of another. The
article runs in full as follows:
Art. 559. The possession of movable property acquired in good faith
is equivalent to a title. Nevertheless, one who has lost any movable
or has been unlawfully deprived thereof, may recover it from the
person in possession of the same.
If the possessor of a movable lost or of which the owner has been
unlawfully deprived has acquired it in good faith at a public sale, the

owner cannot obtain its return without reimbursing the price paid
therefor.
The movable property in this case consists of books, which were bought
from the petitioner by an impostor who sold it to the private respondents.
Ownership of the books was recognized in the private respondents by the
Municipal Trial Court, 1 which was sustained by the Regional Trial
Court, 2 which was in turn sustained by the Court of Appeals. 3 The petitioner
asks us to declare that all these courts have erred and should be reversed.
This case arose when on October 5, 1981, a person identifying himself as
Professor Jose Cruz placed an order by telephone with the petitioner
company for 406 books, payable on delivery. 4 EDCA prepared the
corresponding invoice and delivered the books as ordered, for which Cruz
issued a personal check covering the purchase price of P8,995.65. 5 On
October 7, 1981, Cruz sold 120 of the books to private respondent Leonor
Santos who, after verifying the seller's ownership from the invoice he
showed her, paid him P1,700.00. 6
Meanwhile, EDCA having become suspicious over a second order placed by
Cruz even before clearing of his first check, made inquiries with the De la
Salle College where he had claimed to be a dean and was informed that
there was no such person in its employ. Further verification revealed that
Cruz had no more account or deposit with the Philippine Amanah Bank,
against which he had drawn the payment check. 7 EDCA then went to the
police, which set a trap and arrested Cruz on October 7, 1981. Investigation
disclosed his real name as Tomas de la Peña and his sale of 120 of the books
he had ordered from EDCA to the private respondents. 8
On the night of the same date, EDCA sought the assistance of the police in
Precinct 5 at the UN Avenue, which forced their way into the store of the
private respondents and threatened Leonor Santos with prosecution for
buying stolen property. They seized the 120 books without warrant, loading
them in a van belonging to EDCA, and thereafter turned them over to the
petitioner. 9
Protesting this high-handed action, the private respondents sued for recovery
of the books after demand for their return was rejected by EDCA. A writ of
preliminary attachment was issued and the petitioner, after initial refusal,
finally surrendered the books to the private respondents. 10 As previously
S a l e s P a r t V I I I P a g e | 19
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.
x x x           x x x          x x x
Art. 1477. The ownership of the thing sold shall be transferred to the
vendee upon the actual or constructive delivery thereof.
Art. 1478. The parties may stipulate that ownership in the thing shall
not pass to the purchaser until he has fully paid the price.
It is clear from the above provisions, particularly the last one quoted, that
ownership in the thing sold shall not pass to the buyer until full payment of
the purchase 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.
S a l e s P a r t V I I I P a g e | 20
In Asiatic Commercial Corporation v. Ang, 11 the plaintiff sold some cosmetics
to Francisco Ang, who in turn sold them to Tan Sit Bin. Asiatic not having
been paid by Ang, it sued for the recovery of the articles from Tan, who
claimed he had validly bought them from Ang, paying for the same in cash.
Finding that there was no conspiracy between Tan and Ang to deceive
Asiatic the Court of Appeals declared:
Yet the defendant invoked Article 464 12 of the Civil Code providing,
among other things that "one who has been unlawfully deprived of
personal property may recover it from any person possessing it." We
do not believe that the plaintiff has been unlawfully deprived of the
cartons of Gloco Tonic within the scope of this legal provision. It has
voluntarily parted with them pursuant to a contract of purchase and
sale. The circumstance that the price was not subsequently paid did
not render illegal a transaction which was valid and legal at the
beginning.
In Tagatac v. Jimenez,13 the plaintiff sold her car to Feist, who sold it to
Sanchez, who sold it to Jimenez. When the payment check issued to Tagatac
by Feist was dishonored, the plaintiff sued to recover the vehicle from
Jimenez on the ground that she had been unlawfully deprived of it by reason
of Feist's deception. In ruling for Jimenez, the Court of Appeals held:
The point of inquiry is whether plaintiff-appellant Trinidad C. Tagatac
has been unlawfully deprived  of her car. At first blush, it would seem
that she was unlawfully deprived thereof, considering that she was
induced to part with it by reason of the chicanery practiced on her
by Warner L. Feist. Certainly, swindling, like robbery, is an illegal
method of deprivation of property. In a manner of speaking,
plaintiff-appellant was "illegally deprived" of her car, for the way by
which Warner L. Feist induced her to part with it is illegal and is
punished by law. But does this "unlawful deprivation" come within
the scope of Article 559 of the New Civil Code?
x x x           x x x          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
 S a l e s P a r t V I I I P a g e | 21

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.
ordered (by telephone) and as readily accepted his personal check in
payment. It did not verify his identity although it was easy enough to do this.
It did not wait to clear the check of this unknown drawer. Worse, it indicated
in the sales invoice issued to him, by the printed terms thereon, that the
books had been paid for on delivery, thereby vesting ownership in the buyer.
Surely, the private respondent did not have to go beyond that invoice to
satisfy herself that the books being offered for sale by Cruz belonged to him;
yet she did. Although the title of Cruz was presumed under Article 559 by his
mere possession of the books, these being movable property, Leonor Santos
nevertheless demanded more proof before deciding to buy them.
It would certainly be unfair now to make the private respondents bear the
prejudice sustained by EDCA as a result of its own negligence. 1âwphi1 We
cannot see the justice in transferring EDCA's loss to the Santoses who had
acted in good faith, and with proper care, when they bought the books from
Cruz.
While we sympathize with the petitioner for its plight, it is clear that its
remedy is not against the private respondents but against Tomas de la Peña,
who has apparently caused all this trouble. The private respondents have
themselves been unduly inconvenienced, and for merely transacting a
customary deal not really unusual in their kind of business. It is they and not
EDCA who have a right to complain.
WHEREFORE, the challenged decision is AFFIRMED and the petition is
DENIED, with costs against the petitioner.

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

No. L-18536. March 31, 1965.
JOSE B. AZNAR, plaintiff-appellant, vs. RAFAEL YAPDIANGCO,
defendant-appellee; TEODORO SANTOS, intervenor-appellee.
Motor Vehicles; True owner has better right than buyer in good faith to
possession of stolen car.—A person unlawfully deprived of the possession of
his personal property has a better right to the possession thereof as against
a buyer in good faith for value from a seller who had no title thereto.
Same; Same; Article 1506 of the Civil Code not applicable whale seller had
no title.—Under Article 1506 of the Civil Code, it is essential that the seller
should have a voidable title at least. It is clearly inapplicable where the seller
had no title at all.
Property; Ownership transferred not merely by contract but by tradition and
delivery.—Ownership is not transferred by contract merely but by tradition or
delivery. Contracts only constitute titles or rights to the transfer or
S a l e s P a r t V I I I P a g e | 22
acquisition of ownership, while delivery or tradition is the mode of
accomplishing the same.
Same; Same; Ownership of car sold not transferred merely by contract of
sale where there was no delivery.—A contract of sale of personal property
does not serve to transfer ownership where the vendee took possession of
the subject matter thereof by stealing the same while it was in the custody
of the vendor’s agent.
Same; Rule under Art. 559, Civil Code; When owner may recover lost
property from third persons.—Under Article 559, Civil Code, the rule is to the
effect that if the owner has lost a thing, or if he has been unlawfully deprived
of it, he has a right to recover it, not only from the finder, thief or robber,
but also from third persons who may have acquired it in good faith from
such finder, thief or robber. The said article establishestwo exceptions to the
general rule of irrevindicability, to wit: when the owner (1) has lost the thing,
or (2) has been unlawfully deprived thereof. In these cases, the possessor
cannot retain the thing as against the owner, who may recover it without
paying any indemnity, except when the possessor acquired it in a public sale.
Statutory Construction; Statutory provisions prevail over common law
principle.—The common law principle that where one of two innocent
persons must suffer by a fraud perpetrated by another, the law imposes the
loss upon the party who, by his misplaced confidence, has enabled the fraud
to be committed,cannot be applied in a case which is covered by an express
provision of the new Civil Code, specifically Article 559. Between a common
law principle and a statutory provision,the latter must prevail in this
jurisdiction.
APPEAL from a decision of the Court of First Instance of Quezon City, Branch
TV. Caluag, J.
The facts are stated in the opinion of the Court.
     Florentino M. Guanlao for plaintiff-appellant.
     Rafael Yapdiangco in his own behalf as defendant-appellee.
     Lorenzo Sumulong, R. B. Hilao & B. S. Felipe for intervenor-appellee.
Aznar vs. Yapdiangco, 13 SCRA 486, No. L-18536 March 31, 1965.
REGALA, J.:

This is an appeal, on purely legal questions, from a decision of the Court of
First Instance of Quezon City, Branch IV, declaring the intervenor-appellee,
Teodoro Santos, entitled to the possession of the car in dispute.
The records before this Court disclose that sometime in May, 1959, Teodoro
Santos advertised in two metropolitan papers the sale of his FORD FAIRLANE
500. In the afternoon of May 28, 1959, a certain L. De Dios, claiming to be a
nephew of Vicente Marella, went to the Santos residence to answer the ad.
However, Teodoro Santos was out during this call and only the latter's son,
Irineo Santos, received and talked with De Dios. The latter told the young
Santos that he had come in behalf of his uncle, Vicente Marella, who was
interested to buy the advertised car.
On being informed of the above, Teodoro Santos instructed his son to see
the said Vicente Marella the following day at his given address: 1642
Crisostomo Street, Sampaloc, Manila. And so, in the morning of May 29,
1959, Irineo Santos went to the above address. At this meeting, Marella
agreed to buy the car for P14,700.00 on the understanding that the price
would be paid only after the car had been registered in his name.
Irineo Santos then fetched his father who, together with L. De Dios, went to
the office of a certain Atty. Jose Padolina where the deed of the sale for the
car was executed in Marella's favor. The parties to the contract thereafter
proceeded to the Motor Vehicles Office in Quezon City where the registration
of the car in Marella's name was effected. Up to this stage of the transaction,
the purchased price had not been paid.
From the Motor Vehicles Office, Teodoro Santos returned to his house. He
gave the registration papers and a copy of the deed of sale to his son,
Irineo, and instructed him not to part with them until Marella shall have
given the full payment for the car. Irineo Santos and L. De Dios then
proceeded to 1642 Crisostomo Street, Sampaloc, Manila where the former
demanded the payment from Vicente Marella. Marella said that the amount
he had on hand then was short by some P2,000.00 and begged off to be
allowed to secure the shortage from a sister supposedly living somewhere on
Azcarraga Street, also in Manila. Thereafter, he ordered L. De Dios to go to
the said sister and suggested that Irineo Santos go with him. At the same
time, he requested the registration papers and the deed of sale from Irineo
Santos on the pretext that he would like to show them to his lawyer.
Trusting the good faith of Marella, Irineo handed over the same to the latter
and thereupon, in the company of L. De Dios and another unidentified
person, proceeded to the alleged house of Marella's sister.
S a l e s P a r t V I I I P a g e | 23
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.
S a l e s P a r t V I I I P a g e | 24
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)
 S a l e s P a r t V I I I P a g e | 25

The lower court was correct in applying Article 559 of the Civil Code to the Code, specifically Article 559. Between a common law principle and a
case at bar, for under it, the rule is to the effect that if the owner has lost a statutory provision, the latter must prevail in this jurisdiction. (Cruz v.
thing, or if he has been unlawfully deprived of it, he has a right to recover it, Pahati, supra)
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 UPON ALL THE FOREGOING, the instant appeal is hereby dismissed and the
article establishes two exceptions to the general rule of irrevindicability, to decision of the lower court affirmed in full. Costs against the appellant.
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

[No. L-8257. April 13, 1956]
JOSE R. CRUZ, plaintiff and appellant, vs. REYNALDO PAHATI, ET
AL., defendants and appellees.
1.POSSESION; MOVABLES; OWNER ILLEGALLY DEPRIVED THEREOF MAY
RECOVER THE SAME; LAW APPLICABLE.—Under Article 559 of the new Civil
Code, a person illegally deprived of any movable may recover it from the
person in possession of the same and the only defense the latter may have is
if he has acquired it in good faith at a public sale, in which case, the owner
cannot obtain its return without reimbursing the price paid therefor. In the
present case, plaintiff has been illegally deprived of his car through the
ingenious scheme of defendant B to enable the latter to dispose of it as if he
were the owner thereof. Plaintiff therefore can still recover possession of the
car even if it is in the possession of a third party who had acquired it in good
faith from defendant B. The maxim that “No man can transfer to another a
better title than he has himself” obtains in the civil as well as in the common
law.” (U. S. vs. Sotelo, 28 Phil., 147.)
2.ID. ; ID. ; ID. ; PARTY TO BEAR LOSS UNDER COMMON LAW PRINCIPLE;
STATUTORY PRINCIPLE PREVAILS OVER COMMON LAW PRINCIPLE.—The
S a l e s P a r t V I I I P a g e | 26
common law principle that “Where one of two innocent parties must suffer
by a fraud perpetrated by another, the law imposes the loss upon the party
who, by his misplaced confidence, has enabled the fraud to be committed”
cannot be applied in a case which is covered by an express provision of the
new Civil Code. Between a common law principle and a statutory principle,
the latter must prevail in this jurisdiction.
APPEAL from a judgment of the Court of First Instance of Manila.
Concepcion, J.
The facts are stated in the opinion of the Court.
Panganiban Law Offices and Arsenio Roldan for appellant.
Carlos, Laurea, Fernando & Padilla for appellees. Cruz vs. Pahati, et al., 98
Phil. 788, No. L-8257 April 13, 1956
BAUTISTA ANGELO, J.:
This is an action of replevin instituted by plaintiff in the Court of Firts
Instance of Manila to recover the possession of an automobile and certain
amount as damages and attorney's fees resulting from his illegal deprivation
thereof.
The original defendants were Reynaldo Pahati and 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.
S a l e s P a r t V I I I P a g e | 27
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
 S a l e s P a r t V I I I P a g e | 28

was falsified and this fact can be clearly seen by a cursory examination of whatever action he may deem proper to take against Jesusito Belizo. No
the document. If Bulahan had been more diligent he could have seen that costs.
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

No. L-30817. September 29, 1972.
DOMINADOR DIZON, doing business under the firm name
"Pawnshop of Dominador Dizon", petitioner, vs. LOURDES G.
SUNTAY, respondent.
Civil Law; Property; Owner unlawfully deprived of movable property may
recover possession of same from third party.—The owner of a diamond ring
may recover the possession of the same from a pawnshop where another
person had pledged it without authority to do so. Article 559 of the Civil Code
of the Philippines applies and the defense that the pawnshop acquired
possession of the ring without notice of any defect in the title of the pledgor
is unavailing.
Same; Same; Estoppel; Owner of movable unlawfully pledged by another not
estopped from recovering possession.—Where the owner delivered the
diamond ring to another solely for sale on commission but the latter instead
pawned the same without authority to do so, the owner is not estopped from
S a l e s P a r t V I I I P a g e | 29
pursuing an action against the pawnshop for the recovery of the possession
of the said ring.
Teehankee, J., concurring:
Civil Law; Property; Words and phrases; "Unlawfully deprived" defined in
relation to Article 559 of Civil Code.—Senator Tolentino concedes that there
are writers who believe that the phrase "unlawfully deprived" in our Code
does not have the same meaning as stolen in the French Code; that it is
used in the general sense; and is not used in the specific sense of
deprivation by robbery or theft. Under this view, it extends to all cases where
there has been no valid transmission of ownership, including depositary, or
lessee who has sold the same. It is believed that the owner in such case is
undoubtedly unlawfully deprived of his property, and may recover the same
from a possessor in good faith. Indeed, if our legislature had intended to
narrow the scope of the term "unlawfully deprived" to "stolen" as advocated
by Tolentino, it certainly would have adopted and used such a narrower term
rather than the broad language of article 464 of the old Spanish Civil Code
with its long-established and accepted meaning in accordance with our
jurisprudence.
Same; Same; Conviction of embezzler not essential to recovery of movable
by owner from third party.—The contention that the owner may recover the
lost article of which he has been unlawfully deprived without reimbursement
of the sum received by the embezzler from the pawnshop only after a
criminal conviction of the embezzler, is to add a requirement that is not in
the codal article and to unduly prejudice the victim of embezzlement, as
pointed out by the Court in Arenas vs. Raymundo, 19 Phil. 47.
PETITION FOR REVIEW by certiorari of a decision of the Court of Appeals.
The facts are stated in the opinion of the Court.
     Andres T. Velarde for petitioner.
     Rafael G. Suntay for respondent. Dizon vs. Suntay, 47 SCRA 160, No. L-
30817 September 29, 1972
FERNANDO, J.:p
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  fees and costs. The plaintiff asked for the provisional remedy of replevin by
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
S a l e s P a r t V I I I P a g e | 30
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
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 Court6 and prior to that to the Court of
Civil Procedure,7 has its roots in equity. Good faith is its basis.8 It is a
response to the demands of moral right and natural justice. 9 For estoppel to
exist though, it is indispensable that there be a declaration, act or omission
by the party who is sought to be bound. Nor is this all. It is equally a
requisite that he, who would claim the benefits of such a principle, must
have altered his position, having been so intentionally and deliberately led to
comport himself thus, by what was declared or what was done or failed to be
done. If thereafter a litigation arises, the former would not be allowed to
disown such act, declaration or omission. The principle comes into full play.
It may successfully be relied upon. A court is to see to it then that there is
no turning back on one's word or a repudiation of one's act. So it has been
from our earliest decisions. As Justice Mapa pointed out in the first case, a
1905 decision, Rodriguez v. Martinez, 10 a party should not be permitted "to
go against his own acts to the prejudice of [another]. Such a holding would
be contrary to the most rudimentary principles of justice and law." 11 He is
not, in the language of Justice Torres, in Irlanda v. Pitargue, 12 promulgated
in 1912, "allowed to gainsay [his] own acts or deny rights which [he had]
previously recognized." 13Some of the later cases are to the effect that an
unqualified and unconditional acceptance of an agreement forecloses a claim
for interest not therein provided. 14 Equally so the circumstance that about a
month after the date of the conveyance, one of the parties informed the
other of his being a minor, according to Chief Justice Paras, "is of no
moment, because [the former's] previous misrepresentation had already
estopped him from disavowing the contract. 15 It is easily understandable
why, under the circumstances disclosed, estoppel is a frail reed to hang on
to. There was clearly the absence of an act or omission, as a result of which
S a l e s P a r t V I I I P a g e | 31
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.
Separate Opinions
TEEHANKEE, J.,  concurring:
I concur in the main opinion of Mr. Justice Fernando, tracing and confirming
the long settled and uniform jurisprudence since 1905 based on the express
statutory provision of article 559 of our Civil Code (formerly article 464 of the
old Civil Code) that the owner "who has lost any movable or has
been unlawfully deprived thereof may recover it from the person in
possession of the same," the only exception expressly provided in the codal
article being that "if the possessor of a movable lost of which the owner has
been unlawfully deprived, has acquired it in good faith at a public sale , the
owner cannot obtain its return without reimbursing the price paid therefor ."1
Senator Tolentino's submittal in his commentaries on the Civil Code "that the
better view is to consider 'unlawfully deprived' as limited to unlawful taking,
such as theft or robbery, and should not include disposition through abuse of
confidence. Thus, if the owner has entrusted personal property to a bailee,
such as for transportation, pledge, loan or deposit, without transmitting
ownership, and the latter alienates it to a third person who acquires it in
good faith, the owner cannot recover it from such third person, "is, as he
himself admits, based on the express provision of the French Code which
allows the true owner of personal property to recover it from the possessor
in good faith without reimbursement only "if it has been stolen from him." He
concedes likewise that "our Code, following the Spanish code, uses broader
language than that used in the French code" — since our Code provides that
the owner who has been "unlawfully deprived" of personal property may
recover it from the possessor without reimbursement, with the sole
exception where the possessor acquired the article in good faith at a public
sale.2
S a l e s P a r t V I I I P a g e | 32
He thus concedes finally that "(T)here are writers who believe that the
phrase 'unlawfully deprived' in our Code does not have the same meaning as
stolen in the French code; that it is used in the general sense, and is not
used in the specific sense of deprivation by robbery or theft. Under this view,
it extends to all cases where there has been no valid transmission of
ownership, including the case where the proprietor has entrusted the thing
to a borrower, depositary, or lessee who has sold the same. It is believed
that the owner in such case is undoubtedly unlawfully deprived of his
property, and may recover the same from a possessor in good faith" (citing
De Buen: 2-II Colin & Capitant 1008; 1 Bonet 
234)3 and cites the long unbroken line of decisions of the Court of Appeals
and of this Court upholding the import of the broader language of the codal
article in question.
Indeed, if our legislature had intended to narrow the scope of the term
"unlawfully deprived" to "stolen" as advocated by Tolentino, it certainly
would have adopted and used such a narrower term rather than the broad
language of article 464 of the old Spanish Civil Code with its long-established
and accepted meaning in accordance with our jurisprudence.
Petitioner's contentions at bar had long been disposed of in the Court's 1911
decision of Arenas vs. Raymundo,4 per Mr. Justice Florentino Torres,
reiterating the doctrine of the earlier cases and holding that
Even supposing that the defendant Raymundo had acted in
good faith in accepting the pledge of the jewelry in litigation,
even then he would not be entitled to retain it until the
owner thereof reimburse him for the amount loaned to the
embezzler, since the said owner of the jewelry, the plaintiff,
did not make any contract with the pledgee, that would
obligate him to pay the amount loaned to Perello, and the
trial record does not disclose any evidence, even
circumstantial, that the plaintiff Arenas consented to or had
knowledge of the pledging of her jewelry in the pawnshop of
the defendant.
For this reason, and because Concepcion Perello was not the
legitimate owner of the jewelry which she pledged to the
defendant Raymundo, for a certain sum that she received
from the latter as a loan, the contract of pledge entered into
by both, is of course, null and void, and, consequently the
jewelry so pawned can not serve as security for the payment

of the sum loaned, nor can the latter be collected out of the
value of the said jewelry.
Article 1857 of the Civil Code prescribes as one of the
essential requisites of the contracts of pledge and of
mortgage, that the thing pledged or mortgaged must belong
to the person who pledges or mortgages it. This essential
requisite for the contract of pledge between Perello and the
defendant being absent as the former was not the owner of
the jewelry given in pledge, the contract is as devoid of
value and force as if it had not been made, and as it was
executed with marked violation of an express provision of
the law, it can not confer upon the defendant any rights in
the pledged jewelry, nor impose any obligation toward him
on the part of the owner thereof, since the latter was
deprived of her possession by means of the illegal pledging
of the said jewelry, a criminal act.
Between the supposed good faith of the defendant
Raymundo and the undisputed good faith of the plaintiff
Arenas, the owner of the jewelry, neither law nor justice
permit that the latter, after being the victim of
embezzlement, should have to choose one of the two
extremes of a dilemma, both of which, without legal ground
or reason, are injurious and prejudicial to her interests and
rights, that is, she must either lose her jewelry or pay a
large sum received by the embezzler as a loan from the
defendant, when the plaintiff Arenas is not related to the
latter by any legal or contractual bond out of which legal
obligations arise.
xxx xxx xxx
The business of pawnshops, in exchange for the high and
onerous interest which constitutes its enormous profits, is
always exposed to the contingency of receiving in pledge or
security for the loans, jewels and other articles that have
been robbed, stolen, or embezzled from their legitimate
owners; and as the owner of the pawnshop accepts the
pledging of jewelry from the first bearer who offers the
same and asks for money on it, without assuring himself
whether such bearer is or is not the owner thereof, he can
S a l e s P a r t V I I I P a g e | 33
not, by such procedure, expect from the law better and
more preferential protection than the owner of the jewels or
other articles, who was deprived thereof by means of a
crime and is entitled to be excused by the courts.
Antonio Matute, the owner of another pawnshop, being
convinced that he was wrong, refrained from appealing from
the judgment wherein he was sentenced to return, without
redemption, to the plaintiffs, another jewel of great value
which had been pledged to him by the same Perello. He
undoubtedly had in mind some of the previous decisions of
this court, one of which was against himself.
By the same token, the contention that the owner may recover the lost
article of which he has been unlawfully deprived without reimbursement of
the sum received by the embezzler from the pawnshop only after a criminal
conviction of the embezzler, is to add a requirement that is not in the codal
article and to unduly prejudice the victim of embezzlement, as pointed out by
the Court in Arenas, supra.
The civil action that the owner must resort to for the recovery of his personal
property of which he has been unlawfully deprived as against the possessor
(where the latter refuses to honor the claim, presumably on same valid
doubts as to the genuineness of the claim) gives the possessor every
adequate protection and opportunity to contest the owner's claim of
recovery. The owner must therein establish by competent evidence his lawful
claim, and show to the court's satisfaction his lawful ownership of the article
claimed and that he had been unlawfully deprived thereof.
I therefore find no reason to set aside the long settled interpretation given
by our jurisprudence to article 559 (formerly article 464) of our Civil Code in
accordance with its clear and unambiguous language, as reaffirmed in the
case at bar.