JAIME LEDESMA, PETITIONER, VS. THE HONORABLE COURT OF APPEALS AND CITIWIDE MOTORS INC., RESPONDENTS.

Petitioner impugns the Decision of 22 September 1988 of respondent
Court Of Appeals ^[1]
in C.A.-G.R. CV No. 05955^[2]
reversing the decision of then Branch XVIII-B (Quezon City) of the then Court
of First Instance (now Regional Trial Court) of Rizal in a replevin case, Civil
Case No. Q-24200, the dispositive portion of which reads:

“Accordingly, the Court orders the plaintiff to return the
repossessed Isuzu Gemini, 1977 Model vehicle, subject of this case to the
defendant Ledesma. The incidental claim
(sic) for damages professed by the plaintiff are dismissed for lack of
merit. On defendant’s counterclaim,
Court (sic) makes no pronouncement as to any form of damages, particularly,
moral, exemplary and nominal in view of the fact that Citiwide has a perfect
right to litigate its claim, albeit by this pronouncement, it did not
succeed.”^[3]

which was supplemented by a Final Order
dated 26 June 1980, the dispositive portion of which reads:

“IN VIEW OF THE FOREGOING, the Court grants defendant Ledesma
the sum of P35,000.00 by way of actual damages recoverable upon plaintiff’s
replevin bond. Plaintiff and its
surety, the Rizal Surety and Insurance Co., are hereby ordered jointly and
severally to pay defendant Jaime Ledesma the sum of P10,000.00 as damages for
the wrongful issue of the writ of seizure, in line with Rule 57, Sec. 20,
incorporated in Rule 60, Sec. 10.

In conformity with the rules adverted to, this final order shall
form part of the judgment of this Court on September 5, 1979.

The motion for reconsideration of the judgment filed by the
plaintiff is hereby DENIED for lack of merit. No costs at this instance.” ^[4]

The decision of the trial court is anchored on its findings that
(a) the proof on record is not persuasive enough to show that defendant,
petitioner herein, knew that the vehicle in question was the object of a fraud
and a swindle^[5]
and (b) that plaintiff, private respondent herein, did not rebut or contradict
Ledesma’s evidence that valuable consideration was paid for it.

The antecedent facts as summarized by the respondent Court of
Appeals are as follows:

“On September 27, 1977, a person representing himself to be
Jojo Consunji, purchased purportedly for his father, a certain Rustico T.
Consunji, two (2) brand new motor vehicles from plaintiff-appellant Citiwide
Motors, Inc., more particularly described as follows:

a) One (1) 1977 Isuzu Gemini, 2-door
Model PF 50ZIK, with Engine No. 751214 valued at P42,200.00; and

b) One (1) 1977 Holden Premier Model
8V41X with Engine No. 198­-1251493, valued at P58,800.00.

Said purchases are evidenced by Invoices Nos. 3054 and 3055,
respectively. (See Annexes A and B).

On September 28, 1977, plaintiff-appellant delivered the two-above
described motor vehicles to the person who represented himself as Jojo
Consunji, allegedly the son of the purported buyer, Rustico T. Consunji, and
said person in turn issued to plaintiff-appellant Manager’s Check No.
066-110-0638 of the Philippine Commercial and Industrial Bank dated September
28, 1977 for the amount of P101,000.00 as full payment of the value of the two
(2) motor vehicles.

However, when plaintiff-appellant deposited the said check, it was
dishonored by the bank on the ground that it was tampered with, the correct
amount of P101.00 having been raised to P101,000.00 per the bank’s notice of
dishonor. (Annexes F and G).

On September 30, 1977, plaintiff?appellant reported to the
Philippine Constabulary the criminal act perpetrated by the person who
misrepresented himself as Jojo Consunji and in the course of the investigation,
plaintiff appellant learned that the real identity of the wrongdoer/impostor is
Armando Suarez who has a long line of criminal cases against him for estafa
using this similar modus operandi.

On October 17, 1977, plaintiff-appellant was able to recover the
Holden Premier vehicle which was found abandoned somewhere in Quezon City.

On the other hand, plaintiff-appellant learned that the 1977 Isuzu
Gemini was transferred by Armando Suarez to third persons and was in the
possession of one Jaime Ledesma at the time plaintiff-appellant instituted this
action for replevin on November 16, 1977.

In his defense, Jaime Ledesma claims that he purchases (sic) and
paid for the subject vehicle in good faith from its registered owner, one Pedro
Neyra, as evidenced by the Land Transportation Commission Registration
Certificate No. RC01427249.

After posting the necessary bond in the amount double the value of
the subject motor vehicle, plaintiff-appellant was able to recover possession
of the 1977 Isuzu Gemini as evidenced by Atilt Sheriff’s Return dated January
23, 1978.”^[6]

After trial on the merits, the lower court rendered the decision
and subsequently issued the Final Order both earlier adverted to, which
plaintiff (private respondent herein) appealed to the respondent Court of
Appeals; it submitted the following assignment of errors:

“The trial court erred:

I

IN HOLDING THAT THE DEFENDANT IS ENTITLED TO THE POSSESSION OF THE
CAR;

II

IN HOLDING THAT THE DEFENDANT IS AN INNOCENT PURCHASER IN GOOD
FAITH AND FOR VALUE;

III

IN RULING THAT THE PLAINTIFF SHOULD RETURN THE CAR TO DEFENDANT,
DISMISSING ITS CLAIM FOR DAMAGES, AND GRANTING DEFENDANT P35,000.00 DAMAGES
RECOVERABLE AGAINST THE REPLEVIN BOND AND P10,000.00 DAMAGES FOR ALLEGED
WRONGFUL SEIZURE;

IV

IN RENDERING THE DECISION DATED SEPTEMBER 3, 1979 AND THE FINAL
ORDER DATED JUNE 26, 1980.”^[7]

In support of its first and second assigned errors, private
respondent cites Article 559 of the Civil Code which provides:

“ARTICLE 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.”

Without in any way reversing the findings
of the trial court that herein petitioner was a buyer in good faith and for
valuable consideration, the respondent Court ruled that:

“’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 establishes two (2)
exceptions to the general rule of irrevendicability (sic), to wit: when the owner (1) has lost the thing, or
(2) has been unlawfully deprived thereof. In these cases, the possessor cannot retain the thing as against the
owner who may recover it without paying any indemnity, except when the
possessor acquired it in a public sale.’ (Aznar vs. Yapdiangco, 13 SCRA 486).

Put differently, where the owner has lost the thing or has been
unlawfully deprived thereof, the good faith of the possessor is not a bar to
recovery of the movable unless the possessor acquired it in a public sale of
which there is no pretense in this case. Contrary to the court’s assumption, the issue is not primarily the good
faith of Ledesma for even if this were true, this may not be invoked as a valid
defense, if it be shown that Citiwide was unlawfully deprived of the vehicle.

In the case of Dizon vs. Suntay, 47 SCRA 160, the Supreme Court had
occasion to define the phrase ‘unlawfully deprived’, to wit:

‘x x x 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 a case is undoubtedly unlawfully deprived of his property and may recover
the same from a possessor in good faith.’

x         x            x

In the case at bar, the
person who misrepresented himself to be the son of the purported buyer, Rustico
T. Consunji, paid for the two (2) vehicles using a check whose amount has been
altered from P101.00 to P101,000.00. There is here a case of estafa. Plaintiff was unlawfully deprived of the vehicle by false pretenses
executed simultaneously with the commission of fraud (Art. 315 2(a)
R.P.C.). Clearly, Citiwide would not
have parted with the two (2) vehicles were it not for the false representation
that the check issued in payment thereupon (sic) is in the amount of
P101,000.00, the actual value of the two (2) vehicles.”^[8]

In short, said buyer
never acquired title to the property; hence, the Court rejected the claim of
herein petitioner that at least, Armando Suarez had a voidable title to the
property.

His motion for reconsideration having been denied in the
resolution of the respondent Court of 12 December 1988,^[9]
petitioner filed this petition
alleging therein that:

“A

THE HONORABLE COURT OF APPEALS ERRED IN APPLYING ARTICLE 559 OF THE
NEW CIVIL CODE TO THE INSTANT CASE DESPITE THE FACT THAT PRIVATE RESPONDENT
CITIWIDE MOTORS, INC. WAS NOT UNLAWFULLY DEPRIVED OF THE SUBJECT CAR, AS IN
FACT CITIWIDE VOLUNTARILY PARTED WITH THE TITLE AND POSSESSION OR (sic) THE
SAME IN FAVOR OF ITS IMMEDIATE TRANSFEREE.

B

THE FACTUAL MILIEU OF THE INSTANT CASE FALLS WITHIN THE OPERATIVE
EFFECTS OF ARTICLES 1505 AND 1506 OF THE NEW CIVIL CODE CONSIDERING THAT THE
IMMEDIATE TRANSFEREE OF THE PRIVATE RESPONDENT CITIWIDE MOTORS, INC., ACQUIRED
A VOIDABLE TITLE OVER THE CAR IN QUESTION WHICH TITLE WAS NOT DECLARED VOID BY
A COMPETENT COURT PRIOR TO THE ACQUISITION BY THE PETITIONER OF THE SUBJECT CAR
AND ALSO BECAUSE PRIVATE RESPONDENT, BY ITS OWN CONDUCT, IS NOW PRECLUDED FROM
ASSAILING THE TITLE AND POSSESSION BY THE PETITIONER OF THE SAID CAR.”^[10]

There is merit in the petition. The assailed decision must be reversed.

The petitioner successfully proved that he acquired the car in
question from his vendor in good faith and for valuable consideration. According to the trial court, the private
respondent’s evidence was not persuasive enough to establish that petitioner
had knowledge that the car was the object of a fraud and a swindle and that it
did not rebut or contradict petitioner’s evidence of acquisition for valuable
consideration. The respondent Court
concedes to such findings but postulates that the issue here is not whether
petitioner acquired the vehicle in that concept but rather, whether private
respondent was unlawfully deprived of it so as to make Article 559 of the Civil
Code apply.

It is quite clear that a party who (a) has lost any movable or
(b) has been unlawfully deprived thereof can recover the same from the present
possessor even if the latter acquired it in
good faith and has, therefore, title thereto for under the first
sentence of Article 559, such manner of acquisition is equivalent to a title. There are three (3) requisites to make possession of movable property
equivalent to title, namely: (a) the
possession should be in good faith; (b) the owner voluntarily parted with the
possession of the thing; and (c) the possession is in the concept of owner.^[11]

Undoubtedly, one who has lost a movable or who has been unlawfully deprived of it
cannot be said to have voluntarily parted with the possession thereof. This is the justification for the exceptions
found under the second sentence of Article 559 of the Civil Code.

The basic issue then in this case is whether private respondent
was unlawfully deprived of the cars when it sold the same to Rustico
Consunji, through a person who claimed to be Jojo Consunji, allegedly the
latter’s son, but who nevertheless turned out to be Armando Suarez, on the
faith of a Manager’s Check with a face value of P101,000.00, dishonored for
being altered, the correct amount being only P101.00.

Under this factual milieu, the respondent Court was of the
opinion, and thus held, that private respondent was unlawfully deprived of the
car by false pretenses.

We disagree. There was a
perfected unconditional contract of sale between private respondent and the
original vendee. The former voluntarily
caused the transfer of the certificate of registration of the vehicle in the
name of the first vendee — even if the said vendee was represented by someone
who used a fictitious name — and likewise voluntarily delivered the cars and
the certificate of registration to the vendee’s alleged representative. Title thereto was forthwith transferred to
the vendee. The subsequent dishonor of
the check because of the alteration merely amounted to a failure of
consideration which does not render the contract of sale void, but merely
allows the prejudiced party to sue for specific performance or rescission of
the contract, and to prosecute the impostor for estafa under Article 315 of the
Revised Penal Code. This is the rule
enunciated in EDCA Publishing and Distributing Corp. vs. Santos,^[12]
the facts of which do not materially and substantially differ from those
obtaining in the instant case. In said
case, a person identifying himself as Professor Jose Cruz, dean of the De la
Salle College, placed an order by telephone with petitioner for 406 books,
payable upon delivery. Petitioner
agreed, prepared the corresponding invoice and delivered the books as ordered,
for which Cruz issued a personal check covering the purchase price. Two (2) days later, Cruz sold 120 books to
private respondent Leonor Santos who, after verifying the seller’s ownership
from the invoice the former had shown her, paid the purchase price of
P1,700.00. Petitioner became suspicious
over a second order placed by Cruz even before his first check had cleared;
hence, it made inquiries with the De la Salle College. The latter informed the petitioner that Cruz
was not in its employ. Further
verification revealed that Cruz had no more account or deposit with the bank
against which he drew the check. Petitioner sought the assistance of the police which then set a trap and
arrested Cruz. Investigation disclosed
his real name, Tomas de la Peña, and his sale of 120 of the books to Leonor
Santos. On the night of the arrest, the
policemen whose assistance the petitioner sought, forced their way into the
store of Leonor and her husband, threatened her with prosecution for the buying
of stolen property, seized the 120 books without a warrant and thereafter
turned said books over to the petitioner. The Santoses then sued for recovery of the books in the Municipal Trial
Court which decided in their favor; this decision was subsequently affirmed by
the Regional Trial Court and sustained by the Court of Appeals. Hence, the petitioner came to this Court by
way of a petition for review wherein it insists that it was unlawfully deprived
of the books because as the check bounced for lack of funds, there was failure
of consideration that nullified the contract of sale between it arid the
impostor who then acquired no title over the books. We rejected said claim in this wise:

“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

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 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.

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.”^[13]

In the early case of Chua Hai vs. Hon. Kapunan,^[14]
one Roberto Soto purchased from the Youngstown Hardware, owned by private
respondent, corrugated galvanized iron sheets and round iron bars for P6,137.70;
in payment thereof, he issued a check drawn against the Security Bank and Trust
Co. without informing Ong Shu that he (Soto) had no sufficient funds in said
bank to answer for the same. In the
meantime, however, Soto sold the sheets to, among others, petitioner Chua
Hai. In the criminal case filed against
Soto, upon motion of the offended party, the respondent Judge ordered
petitioner to return the sheets which were purchased from Soto. Petitioner’s motion for reconsideration
having been denied, he came to this Court alleging grave abuse of discretion
and excess of jurisdiction. In answer
to the petition, it is claimed that inter
alia, even if the
property was acquired in good faith, the owner who has been unlawfully deprived
thereof may recover it from the person in possession of the same unless the
property was acquired in good faith at a public sale.^[15]
Resolving this specific issue, this Court ruled that Ong Shu was not illegally
deprived of the possession of the property:

“x x x It is not denied that Ong Shu delivered the sheets to
Soto upon a perfected contract of sale, and such delivery transferred title or
ownership to the purchaser. Says Art.
1496:

‘Art. 1496. The ownership
of the thing sold is acquired by the vendee from the moment it is delivered to
him in any of the ways specified in articles 1497 to 1501, or in any other
manner signifying an agreement that the possession is transferred from the
vendor to the vendee.’ (C.C.)

The failure of the buyer to make good the price does not, in law,
cause the ownership to revest in the seller until and unless the bilateral
contract of sale is first rescinded or resolved pursuant to Article 1191 of the
new Civil Code.

And, assuming that the consent of Ong Shu to the sale in favor of
Soto was obtained by the latter through fraud or deceit, the contract was not
thereby rendered void ab initio, but only voidable by reason of the
fraud, and Article 1390 expressly provides that:

‘ART. 1390. The following
contracts are voidable or annullable, even though there may have been no damage
to the contracting parties:

(1) Those where one of the parties is incapable of giving consent to a contract;

(2) Those where the consent is vitiated by mistake, violence,
intimidation, undue influence or fraud.

These contracts are binding, unless they are annulled by a proper
action in court. They are susceptible
of ratification.’

Agreeably to this provision, Article 1506 prescribes:

‘ARTICLE 1506. Where the
seller of goods has a voidable title thereto, but his title has not been
avoided 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.’ (C.C.)

Hence, until the contract of Ong Shu with Soto is set aside by a
competent court assuming that the fraud is established to its satisfaction),
the validity of appellant’s claim to the property in question can not be
disputed, and his right to the possession thereof should be respected.”^[16]

It was therefore erroneous for the respondent Court to declare
that the private respondent was illegally deprived of the car simply because
the check in payment therefor was subsequently dishonored; said Court also
erred when it divested the petitioner, a buyer in good faith who paid valuable
consideration therefor, of his possession thereof.

WHEREFORE, the challenged decision of the respondent Court
of Appeals of 22 September 1988 and its Resolution of 12 December 1988 in
C.A.-G.R. CV No. 05955 are hereby SET ASIDE and the Decision of the trial court
of 3 September 1979 and its Final Order of 26 June 1980 in Civil Case No.
Q-24200 are hereby REINSTATED, with costs against private respondent Citiwide
Motors, Inc.

SO ORDERED.

Gutierrez, Jr., (Chairman), Bidin, and Romero, JJ., concur.

Feliciano, J., on official
leave.

^[1]
Per Associate Justice Oscar M. Herrera, concurred in by Associate Justices
Jorge S. Imperial and Fernando A. Santiago.

^[2]
Entitled Citiwide Motors, Inc., Plaintiff-Appellant, vs. Jaime Ledesma, et
al., Defendants-Appellees.

^[3]
Annex “A” of Petition; Rollo, 23-28, at p. 28.

^[4]
Id., 33; 40.

^[5]
Id., 27.

^[6]
Rollo, 42-43.

^[7]
Rollo, 41-42.

^[8]
Rollo, 45-46.

^[9]
Annex “E” of Petition; Rollo, 59-60.

^[10]
Id., 7-8.

^[11]
TOLENTINO, A.M., Civil Code
of the Philippines, Vol. II, 1983 ed., 275-276,
citing 2-II Colin and Capitant 942; De Buen; Ibid., 1009,
2 Salvat 165; 4 Manresa, 339.

^[12]
184 SCRA 614 [1990].

^[13]
184 SCRA 618 [1990].

^[14]
104 Phil. 110 [1958].

^[15]
Article 559, Civil Code.

^[16]
104 Phil. 116-117 [1958].