SALES – RISK OF LOSS – IN GENERAL – LOSS BY FORTUITOUS EVENTS
G.R. No. L-55684 December 19, 1984
CHRYSLER PHILIPPINES CORPORATION, petitioner,
vs.
THE HONORABLE COURT OF APPEALS and SAMBOK MOTORS CO. (BACOLOD), respondents,
MELENCIO-HERRERA, J:
Subject of this Petition for Review is the Decision of the then Court of Appeals in CA-G.R. No.
65328-R reversing the judgment of the then Court of First Instance of Rizal, Branch XX, in Civil
Case No. 16624, and dismissing petitioner Chrysler Philippines Corporation's suit for Damages
against private respondent Sambok Motors Company (Bacolod) arising from breach of
contract.
Petitioner is a domestic corporation engaged in the assembling and sale of motor vehicles and
other automotive products. Respondent Sambok Motors Co., a general partnership, during the
period relevant to these proceedings, was its dealer for automotive products with offices at
Bacolod (Sambok, Bacolod) and Iloilo (Sambok, Iloilo). The two offices were run by relatives.
Miguel Ng was Assistant Manager for Sambok, Bacolod, while an elder brother, Pepito Ng, was
the President. 1
On September 7, 1972, petitioner filed with the Court of First Instance of Rizal, Branch XX,
Pasig, Rizal, a Complaint for Damages against Allied Brokerage Corporation, Negros Navigation
Company and Sambok, Bacolod, alleging that on October 2, 1970, Sambok, Bacolod, ordered
from petitioner various automotive products worth P30,909.61, payable in 45 days; that on
November 25, 1970, petitioner delivered said products to its forwarding agent, Allied
Brokerage Corporation, for shipment; that Allied Brokerage loaded the goods on board the
M/S Doña Florentina, a vessel owned and operated by Negros Navigation Company, for
delivery to Sambok, Bacolod; that when petitioner tried to collect from the latter the amount
of P31,037.56, representing the price of the spare parts plus handling charges, Sambok,
Bacolod, refused to pay claiming that it had not received the merchandise; that petitioner also
demanded the return of the merchandise or their value from Allied Brokerage and Negros
Navigation, but both denied any liability.
In its Answer, Sambok, Bacolod, denied having received from petitioner or from any of its co-
defendants, the automotive products referred to in the Complaint, and professed no
knowledge of having ordered from petitioner said articles.
Upon a Joint Motion to Dismiss filed by petitioner and Allied Brokerage, the Trial Court. on
October 23, 1975, dismissed the case with prejudice against Allied Brokerage for lack of cause
of action, and also dismissed the latter's counterclaim against petitioner.
On July 31, 1978, the Trial Court rendered its Decision dismissing the Complaint against Negros
Navigation for lack of cause of action, but finding Sambok, Bacolod, liable for the claim of
petitioner, thus:
PREMISES CONSIDERED, the Court renders judgment as follows:
(1) The complaint against defendant Negros Navigation is dismissed for lack of cause of
action.
(2) Defendant Sambok Motors Co. (Bacolod) is ordered to pay plaintiff Chrysler Philippines
Corporation:
(a) The sum of Thirty-One Thousand Thirty Seven Pesos and Fifty Six Centavos
(P31,037.56) with interest at the rate of twelve percent (12) per annum from January 1,
1971 until fully paid;
(b) The sum of Five Thousand Pesos as and for attorney's fees and expenses of litigation;
(c) The costs of the suit.
(3) The counterclaim of defendant Negros Navigation and Sambok Motors Co. (Bacolod) are
dismissed for lack of merit.
The case against Negros Navigation was dismissed for failure of petitioner and Sambok,
Bacolod, to file the necessary notices and claims as conditions precedent for a judicial action.
2
On the other hand, the Trial Court found that the act of Sambok, Bacolod, "in refusing to take
delivery of the shipment for no justifiable reason from Negros Navigation despite having
received the Bill of Lading constituted wrongful neglect or refusal to accept and pay for the
subject shipment, by reason of which defendant Sambok Motors may be held liable for
damages."
Sambok, Bacolod, appealed. On November 26, 1980, respondent Appellate Court set aside the
appealed judgment and dismissed petitioner's Complaint, after finding that the latter had not
performed its part of the obligation under the contract by not delivering the goods at Sambok,
Iloilo, the place designated in the Parts Order Form (Exhibits "A", "A-1" to "A-6"), and must,
therefore, suffer the loss. In other words, respondent Appellate Court found. that there was
misdelivery.
Hence, this Petition for Review on Certiorari, with the following errors assigned to respondent
Court:
I
The Respondent Court of Appeals erred in finding that the issue of misshipment or
misdelivery of the automotive spare parts involved in the litigation was raised by the private
respondent Sambok Motors Co. (Bacolod) in the Trial Court.
II
 The Respondent Court of Appeals erred in refusing to apply the provisions of Section 18,
Rule 46 of the Revised Rules of Court quoted below, that since the question of misshipment
or misdelivery was not raised by the private respondent in the Trial Court, this issue cannot
for the first time be raised on appeal.
Section 18. Questions that may be raised on appeal. Whether or not the appellant has
filed a motion for new trial in the court below, he may include in his assignment of errors
any question of law or fact that has been raised in the court below and which is within the
issues framed by the parties.
the time Sambok, Bacolod, was ready to take delivery. Where the seller delivers to the buyer
a quantity of goods less than he contracted to sell, the buyer may reject them. 6
From the evidentiary record, Negros Navigation was the party negligent in failing to deliver the
complete shipment either to Sambok, Bacolod, or to Sambok, Iloilo, but as the Trial Court
found, petitioner failed to comply with the conditions precedent to the filing of a judicial
action. Thus, in the last analysis, it is petitioner that must shoulder the resulting loss. The
general rule that before, delivery, the risk of loss is home by the seller who is still the owner,
under the principle of "res petit domino", 7 is applicable in petitioner's case.

III
The Respondent Court of Appeals erred in finding that the private respondent gave the
alleged instruction to the petitioner to ship the automotive spare parts to Iloilo City and not
to Bacolod City.
IV
The Respondent Court of Appeals erred in finding that the defendant Negros Navigation
notified the private respondent of the arrival of the shipment at Bacolod City.
In sum, the judgment of respondent Appellate Court, will have to be sustained not on the basis
of misdelivery but on non-delivery since the merchandise was never placed in the control and
possession of Sambok, Bacolod, the vendee. 8
WHEREFORE, we hereby affirm the Decision of the then Court of Appeals in CA-G.R. No. 65328-
R, without pronouncement as to costs.
SO ORDERED.

The Respondent Court of Appeals erred in reversing the decision of the Trial Court that the
act of the private respondent in refusing to take delivery of the automotive spare parts that
it purchased from the petitioner after having been notified of the shipment constitutes
wrongful neglect resulting in the loss of the cargo for which it should be liable in damages
to the petitioner.

To our minds, the matter of misdelivery is not the decisive factor for relieving Sambok,
Bacolod, of liability herein. While it may be that the Parts Order Form (E exhibits "A", "A-1" to
"A-6") specifically indicated Iloilo as the destination, as testified to by Ernesto Ordonez, Parts
Sales Representative of petitioner, 3 Sambok, Bacolod, and Sambok, Iloilo, are actually one. In
fact, admittedly, the order for spare parts was made by the President of Sambok, Pepito Ng,
through its marketing consultant. Notwithstanding, upon receipt of the Bill of Lading, Sambok,
Bacolod, initiated, but did not pursue, steps to take delivery as they were advised by Negros
Navigation that because some parts were missing. they would just be informed as soon as the
missing parts were located. 4

It was only four years later, however, or in 1974, when a warehouseman of Negros Navigation,
Severino Aguarte, found in their off-shore bodega, parts of the shipment.- in question, but
already deteriorated and valueless. 5

Under the circumstances, Sambok, Bacolod, cannot be faulted for not accepting or refusing to
accept the shipment from Negros Navigation four years after shipment. The evidence is clear
that Negros Navigation could not produce the merchandise nor ascertain its whereabouts at
SALES – RISK OF LOSS – IN GENERAL – FRUITS OR IMPROVEMENTS
G.R. No. 91029 February 7, 1991
NORKIS DISTRIBUTORS, INC., petitioner,
vs.
THE COURT OF APPEALS & ALBERTO NEPALES, respondents.
GRIÑO-AQUINO, J.:
Subject of this petition for review is the decision of the Court of Appeals (Seventeenth Division)
in CA-G.R. No. 09149, affirming with modification the judgment of the Regional Trial Court,
Sixth (6th) Judicial Region, Branch LVI. Himamaylan, Negros Occidental, in Civil Case No. 1272,
which was private respondent Alberto Nepales' action for specific performance of a contract
of sale with damages against petitioner Norkis Distributors, Inc.
The facts borne out by the record are as follows:
Petitioner Norkis Distributors, Inc. (Norkis for brevity), is the distributor of Yamaha motorcycles
in Negros Occidental with office in Bacolod City with Avelino Labajo as its Branch Manager. On
September 20, 1979, private respondent Alberto Nepales bought from the Norkis-Bacolod
branch a brand new Yamaha Wonderbike motorcycle Model YL2DX with Engine No. L2-
329401K Frame No. NL2-0329401, Color Maroon, then displayed in the Norkis showroom. The
price of P7,500.00 was payable by means of a Letter of Guaranty from the Development Bank
of the Philippines (DBP), Kabankalan Branch, which Norkis' Branch Manager Labajo agreed to
accept. Hence, credit was extended to Nepales for the price of the motorcycle payable by DBP
upon release of his motorcycle loan. As security for the loan, Nepales would execute a chattel
mortgage on the motorcycle in favor of DBP. Branch Manager Labajo issued Norkis Sales
Invoice No. 0120 (Exh.1) showing that the contract of sale of the motorcycle had been
perfected. Nepales signed the sales invoice to signify his conformity with the terms of the sale.
In the meantime, however, the motorcycle remained in Norkis' possession.
On November 6, 1979, the motorcycle was registered in the Land Transportation Commission
in the name of Alberto Nepales. A registration certificate (Exh. 2) in his name was issued by
the Land Transportation Commission on November 6, 1979 (Exh. 2-b). The registration fees
were paid by him, evidenced by an official receipt, Exhibit 3.
On January 22, 1980, the motorcycle was delivered to a certain Julian Nepales who was
allegedly the agent of Alberto Nepales but the latter denies it (p. 15, t.s.n., August 2, 1984).
The record shows that Alberto and Julian Nepales presented the unit to DBP's Appraiser-
Investigator Ernesto Arriesta at the DBP offices in Kabankalan, Negros Occidental Branch (p.
12, Rollo). The motorcycle met an accident on February 3, 1980 at Binalbagan, Negros
Occidental. An investigation conducted by the DBP revealed that the unit was being driven by
a certain Zacarias Payba at the time of the accident (p. 33, Rollo). The unit was a total wreck
(p. 36, t.s.n., August 2,1984; p. 13, Rollo), was returned, and stored inside Norkis' warehouse.
On March 20, 1980, DBP released the proceeds of private respondent's motorcycle loan to
Norkis in the total sum of P7,500. As the price of the motorcycle later increased to P7,828 in
March, 1980, Nepales paid the difference of P328 (p. 13, Rollo) and demanded the delivery of
the motorcycle. When Norkis could not deliver, he filed an action for specific performance with
damages against Norkis in the Regional Trial Court of Himamaylan, Negros Occidental, Sixth
(6th) Judicial Region, Branch LVI, where it was docketed as Civil Case No. 1272. He alleged that
Norkis failed to deliver the motorcycle which he purchased, thereby causing him damages.
Norkis answered that the motorcycle had already been delivered to private respondent before
the accident, hence, the risk of loss or damage had to be borne by him as owner of the unit.
After trial on the merits, the lower court rendered a decision dated August 27, 1985 ruling in
favor of private respondent (p. 28, Rollo.) thus:
WHEREFORE, judgment is rendered in favor of the plaintiff and against the defendants. The
defendants are ordered to pay solidarity to the plaintiff the present value of the motorcycle
which was totally destroyed, plus interest equivalent to what the Kabankalan Sub-Branch of
the Development Bank of the Philippines will have to charge the plaintiff on fits account,
plus P50.00 per day from February 3, 1980 until full payment of the said present value of
the motorcycle, plus P1,000.00 as exemplary damages, and costs of the litigation. In lieu of
paying the present value of the motorcycle, the defendants can deliver to the plaintiff a
brand-new motorcycle of the same brand, kind, and quality as the one which was totally
destroyed in their possession last February 3, 1980. (pp. 28-29, Rollo.)
On appeal, the Court of appeals affirmed the appealed judgment on August 21, 1989, but
deleted the award of damages "in the amount of Fifty (P50.00) Pesos a day from February 3,
1980 until payment of the present value of the damaged vehicle" (p35, Rollo). The Court of
Appeals denied Norkis' motion for reconsideration. Hence, this Petition for Review.
The principal issue in this case is who should bear the loss of the motorcycle. The answer to
this question would depend on whether there had already been a transfer of ownership of the
motorcycle to private respondent at the time it was destroyed.
Norkis' theory is that:
. . . After the contract of sale has been perfected (Art. 1475) and even before delivery, that
is, even before the ownership is transferred to the vendee, the risk of loss is shifted from
the vendor to the vendee. Under Art. 1262, the obligation of the vendor to deliver a
determinate thing becomes extinguished if the thing is lost by fortuitous event (Art. 1174),
that is, without the fault or fraud of the vendor and before he has incurred in delay (Art. 11
65, par. 3). If the thing sold is generic, the loss or destruction does not extinguish the
obligation (Art. 1263). A thing is determinate when it is particularly designated or physically
segregated from all others of the same class (Art. 1460). Thus, the vendor becomes released
from his obligation to deliver the determinate thing sold while the vendee's obligation to
pay the price subsists. If the vendee had paid the price in advance the vendor may retain the
same. The legal effect, therefore, is that the vendee assumes the risk of loss by fortuitous
 event (Art. 1262) after the perfection of the contract to the time of delivery. (Civil Code of interposition of another will, then fiction yields to reality-the delivery has riot been effects
the Philippines, Ambrosio Padilla, Vol. 5,1987 Ed., p. 87.) .(Emphasis supplied.)

Norkis concedes that there was no "actual" delivery of the vehicle. However, it insists that
there was constructive delivery of the unit upon: (1) the issuance of the Sales Invoice No. 0120
(Exh. 1) in the name of the private respondent and the affixing of his signature thereon; (2) the
registration of the vehicle on November 6, 1979 with the Land Transportation Commission in
private respondent's name (Exh. 2); and (3) the issuance of official receipt (Exh. 3) for payment
of registration fees (p. 33, Rollo).
That argument is not well taken. As pointed out by the private respondent, the issuance of a
sales invoice does not prove transfer of ownership of the thing sold to the buyer. An invoice is
nothing more than a detailed statement of the nature, quantity and cost of the thing sold and
has been considered not a bill of sale (Am. Jur. 2nd Ed., Vol. 67, p. 378).
In all forms of delivery, it is necessary that the act of delivery whether constructive or actual,
be coupled with the intention of delivering the thing. The act, without the intention, is
insufficient (De Leon, Comments and Cases on Sales, 1978 Ed., citing Manresa, p. 94).
When the motorcycle was registered by Norkis in the name of private respondent, Norkis did
not intend yet to transfer the title or ownership to Nepales, but only to facilitate the execution
of a chattel mortgage in favor of the DBP for the release of the buyer's motorcycle loan. The
Letter of Guarantee (Exh. 5) issued by the DBP, reveals that the execution in its favor of a
chattel mortgage over the purchased vehicle is a pre-requisite for the approval of the buyer's
loan. If Norkis would not accede to that arrangement, DBP would not approve private
respondent's loan application and, consequently, there would be no sale.
The Court of Appeals correctly ruled that the purpose of the execution of the sales invoice
dated September 20, 1979 (Exh. B) and the registration of the vehicle in the name of plaintiff-
appellee (private respondent) with the Land Registration Commission (Exhibit C) was not to
transfer to Nepales the ownership and dominion over the motorcycle, but only to comply with
the requirements of the Development Bank of the Philippines for processing private
respondent's motorcycle loan. On March 20, 1980, before private respondent's loan was
released and before he even paid Norkis, the motorcycle had already figured in an accident
while driven by one Zacarias Payba. Payba was not shown by Norkis to be a representative or
relative of private respondent. The latter's supposed relative, who allegedly took possession
of the vehicle from Norkis did not explain how Payba got hold of the vehicle on February 3,
1980. Norkis' claim that Julian Nepales was acting as Alberto's agent when he allegedly took
delivery of the motorcycle (p. 20, Appellants' Brief), is controverted by the latter. Alberto
denied having authorized Julian Nepales to get the motorcycle from Norkis Distributors or to
enter into any transaction with Norkis relative to said motorcycle. (p. 5, t.s.n., February 6,
1985). This circumstances more than amply rebut the disputable presumption of delivery upon
which Norkis anchors its defense to Nepales' action (pp. 33-34, Rollo).
Article 1496 of the Civil Code which provides that "in the absence of an express assumption of
risk by the buyer, the things sold remain at seller's risk until the ownership thereof is
transferred to the buyer," is applicable to this case, for there was neither an actual nor
constructive delivery of the thing sold, hence, the risk of loss should be borne by the seller,
Norkis, which was still the owner and possessor of the motorcycle when it was wrecked. This
is in accordance with the well-known doctrine of res perit domino.

WHEREFORE, finding no reversible error in the decision of the Court of Appeals in CA-G.R. No.
In other words, the critical factor in the different modes of effecting delivery, which gives legal
09149, we deny the petition for review and hereby affirm the appealed decision, with costs
effect to the act, is the actual intention of the vendor to deliver, and its acceptance by the
against the petitioner.
vendee. Without that intention, there is no tradition (Abuan vs. Garcia, 14 SCRA 759).

SO ORDERED.
In the case of Addison vs. Felix and Tioco (38 Phil. 404, 408), this Court held:

The Code imposes upon the vendor the obligation to deliver the thing sold. The thing is
considered to be delivered when it is "placed in the hands and possession of the vendee."
(Civil Code, Art. 1462). It is true that the same article declares that the execution of a public
instrument is equivalent to the delivery of the thing which is the object of the contract, but,
in order that this symbolic delivery may produce the effect of tradition, it is necessary that
the vendor shall have had such control over the thing sold that, at the moment of the sale, its
material delivery could have been made. It is not enough to confer upon the purchaser the
ownership and the right of possession. The thing sold must be placed in his control. When
there is no impediment whatever to prevent the thing sold passing into the tenancy of the
purchaser by the sole will of the vendor, symbolic delivery through the execution of a public
instrument is sufficient. But if notwithstanding the execution of the instrument, the purchaser
cannot have the enjoyment and material tenancy of the thing and make use of it himself or
through another in his name, because such tenancy and enjoyment are opposed by the
SALES – RISK OF LOSS – IN GENERAL – FRUITS OR IMPROVEMENTS
G.R. No. L-2412 April 11, 1906
PEDRO ROMAN, plaintiff-appellant,
vs.
ANDRES GRIMALT, defendant-appellee.
TORRES, J.:
On July 2, 1904, counsel for Pedro Roman filed a complaint in the Court of First Instance of this
city against Andres Grimalt, praying that judgment be entered in his favor and against the
defendant (1) for the purchase price of the schooner Santa Marina, to wit, 1,500 pesos or its
equivalent in Philippine currency, payable by installments in the manner stipulated; (2) for
legal interest on the installments due on the dates set forth in the complaint; (3) for costs of
proceedings; and (4) for such other and further remedy as might be considered just and
equitable.
On October 24 of the same year the court made an order sustaining the demurer filed by
defendant to the complaint and allowing plaintiff ten days within which to amend his
complaint. To this order the plaintiff duly excepted.
Counsel for plaintiff on November 5 amended his complaint and alleged that between the 13th
and the 23rd day of June, 1904, both parties, through one Fernando Agustin Pastor, verbally
agreed upon the sale of the said schooner; that the defendant in a letter dated June 23 had
agreed to purchase the said schooner and of offered to pay therefor in three installment of
500 pesos each, to wit, on July 15, September 15, and November 15, adding in his letter that
if the plaintiff accepted the plan of payment suggested by him the sale would become effective
on the following day; that plaintiff on or about the 24th of the same month had notified the
defendant through Agustin Pastor that he accepted the plan of payment suggested by him and
that from that date the vessel was at his disposal, and offered to deliver the same at once to
defendant if he so desired; that the contract having been closed and the vessel being ready for
delivery to the purchaser, it was sunk about 3 o'clock p. m., June 25, in the harbor of Manila
and is a total loss, as a result of a severe storm; and that on the 30th of the same month
demand was made upon the defendant for the payment of the purchase price of the vessel in
the manner stipulated and defendant failed to pay. Plaintiff finally prayed that judgment be
rendered in accordance with the prayer of his previous complaint.
Defendant in his answer asked that the complaint be dismissed with costs to the plaintiff,
alleging that on or about June 13 both parties met in a public establishment of this city and the
plaintiff personally proposed to the defendant the sale of the said vessel, the plaintiff stating
that the vessel belonged to him and that it was then in a sea worthy condition; that defendant
accepted the offer of sale on condition that the title papers were found to be satisfactory, also
that the vessel was in a seaworthy condition; that both parties then called on Calixto Reyes, a
notary public, who, after examining the documents, informed them that they were insufficient
to show the ownership of the vessel and to transfer title thereto; that plaintiff then promised
to perfect his title and about June 23 called on defendant to close the sale, and the defendant
believing that plaintiff had perfected his title, wrote to him on the 23d of June and set the
following day for the execution of the contract, but, upon being informed that plaintiff had
done nothing to perfect his title, he insisted that he would buy the vessel only when the title
papers were perfected and the vessel duly inspected.
Defendant also denied the other allegations of the complaint inconsistent with his own
allegations and further denied the statement contained in paragraph 4 of the complaint to the
effect that the contract was completed as to the vessel; that the purchase price and method
of payment had been agreed upon; that the vessel was ready for delivery to the purchaser and
that an attempt had been made to deliver the same, but admitted, however, the allegations
contained in the last part of the said paragraph.
The court below found that the parties had not arrived at a definite understanding. We think
that this finding is supported by the evidence introduced at the trial.
A sale shall be considered perfected and binding as between vendor and vendee when they
have agreed as to the thing which is the object of the contract and as to the price, even though
neither has been actually delivered. (Art. 1450 of the Civil Code.)
Ownership is not considered transmitted until the property is actually delivered and the
purchaser has taken possession of the value and paid the price agreed upon, in which case the
sale is considered perfected.
When the sale is made by means of a public instrument the execution thereof shall be
equivalent to the delivery of the thing which is the object of the contract. (Art. 1462 of the Civil
Code.)
Pedro Roman, the owner, and Andres Grimalt, the purchaser, had been for several days
negotiating for the purchase of the schooner Santa Marina — from the 13th to the 23d of
June, 1904. They agreed upon the sale of the vessel for the sum of 1,500 pesos, payable in
three installments, provided the title papers to the vessel were in proper form. It is so stated
in the letter written by the purchaser to the owner on the 23rd of June.
The sale of the schooner was not perfected and the purchaser did not consent to the execution
of the deed of transfer for the reason that the title of the vessel was in the name of one Paulina
Giron and not in the name of Pedro Roman, the alleged owner. Roman promised, however, to
perfect his title to the vessel, but he failed to do so. The papers presented by him did not show
that he was the owner of the vessel.
If no contract of sale was actually executed by the parties the loss of the vessel must be borne
by its owner and not by a party who only intended to purchase it and who was unable to do
so on account of failure on the part of the owner to show proper title to the vessel and thus
enable them to draw up the contract of sale.
The vessel was sunk in the bay on the afternoon of the 25th of June, 1904, during a severe
storm and before the owner had complied with the condition exacted by the proposed
purchaser, to wit, the production of the proper papers showing that the plaintiff was in fact
the owner of the vessel in question.

The defendant was under no obligation to pay the price of the vessel, the purchase of which
had not been concluded. The conversations had between the parties and the letter written by
defendant to plaintiff did not establish a contract sufficient in itself to create reciprocal rights
between the parties.

It follows, therefore, that article 1452 of the Civil Code relative to the injury or benefit of the
thing sold after a contract has been perfected and articles 1096 and 1182 of the same code
relative to the obligation to deliver a specified thing and the extinction of such obligation when
the thing is either lost or destroyed, are not applicable to the case at bar.

The first paragraph of article 1460 of the Civil Code and section 335 of the Code of Civil
Procedure are not applicable. These provisions contemplate the existence of a perfected
contract which can not, however, be enforced on account of the entire loss of the thing or
made the basis of an action in court through failure to conform to the requisites provided by
law.

The judgment of the court below is affirmed and the complaint is dismissed with costs against
the plaintiff. After the expiration of twenty days from the date hereof let judgment be entered
in accordance herewith and ten days thereafter let the case be remanded to the Court of First
Instance for proper action. So ordered.
SALES – RISK OF LOSS – EFFECT OF LOSS OF THING SOLD
G.R. No. L-17527 April 30, 1963
SUN BROTHERS APPLIANCES, INC., plaintiff-appellee,
vs.
DAMASO P. PEREZ, defendant-appellant.
LABRADOR, J.:
This is an action brought by the plaintiff to recover from defendant the sum of P1,404.00, the
price of one Admiral Air Conditioner, Slim Style, Model 100-23-1 H.P., Serial No. 2978828,
delivered to the defendant by the plaintiff under a conditional sale agreement entered into by
and between them on December 6, 1958, in the City of Manila, plus stipulated interest of 12%
from January 6, 1959 until the same is fully paid, together with P200 as attorney's fees, and
costs. Defendant answered that the air-conditioner in question was delivered to him installed
in the office of the defendant located at Gardiner street, Lucena, Quezon on December 14,
1959 but that said air-conditioner was totally destroyed by fire which occured in the morning
of December 28, 1958 at 2 o'clock. Defendant further claimed that the machine was destroyed
by force majeure, not by the defendant's fault and/or negligence and, therefore, he is not liable
under the conditional sale, Annex "A", which the parties, plaintiff and defendant, had
executed.
At the trial of the case the parties entered into a stipulation of facts, the most important
provision of which are as follows:
1. That defendant admits that on December 6, 1958, he entered into a Conditional Sale
Agreement with the plaintiff, copy of which contract is attached to the complaint as Annex
"A";
2. That pursuant to the terms and conditions provided in the said Conditional Sale
Agreement the plaintiff delivered to the defendant (1) Admiral Air Conditioner Slim Style
Model 100-23-1 HP, Serial No. 2978828 with the contract price of P1,678.00 and that said
Air Conditioner was received by the defendant;
3. That defendant made a down payment of P274.00 on December 6, 1958, pursuant to the
terms and conditions of the Conditional Sales Agreement; and Air Conditioner was installed
by the plaintiff, thru its representative, at Lucena, Quezon;
4. That said Air Conditioner was burned on December 27,1958, on or about 2:00 o'clock in
the morning, however, defendant will present evidence to show that the Air Conditioner
subject of the complaint herein was burned where it was installed by the plaintiff;
5. That defendant, after making down payment of P274.00 to the plaintiff, did not pay any
of the monthly installments of P78.00 thereafter, leaving a balance of P1,404.00 in favor of
the plaintiff;
6. That after defendant presents evidence to prove that the Air Conditioner was burned
where it was installed by the plaintiff to the satisfaction of this Honorable Court, the parties
agree to leave to this Honorable Court the resolution of the issue whether loss by fire
extinguishes the obligation of the defendant to pay to the plaintiff the subsequent
installments of the initial payment;"
The Court of First Instance before which the action was brought rendered judgment
condemning the defendant to pay the plaintiff the amount demanded in the complaint,
including interest and attorney's fees. The defendant has appealed the case directly to us as
involving only a question of law.
The conditional sale executed by the plaintiff and defendant contained the following
stipulation:
"2. Title to said property shall vest in the Buyer only upon full payment of the entire account
as herein provided, and only upon complete performance of all the other conditions herein
specified:
"3. The Buyer shall keep said property in good condition and properly protected against the
elements, at his/its address above-stated, and undertakes that if said property or any part
thereof be lost, damaged, or destroyed for any causes, he shall suffer such loss, or repair
such damage, it being distinctly understood and agreed that said property remains at
Buyer's risk after delivery;"
The Court below declared that as the buyer would be liable in case of loss for any cause, such
buyer assumed liability even in case of loss by fortuitous event; so it rendered judgment
declaring defendant liable for the sun demanded together with interest and attorney's fees.
Wherefore, the parties respectfully pray that the foregoing stipulation of facts be admitted
and approved by this Honorable Court, without prejudice to the parties adducing other
evidence to prove their case not covered by this stipulation of facts. 1äwphï1.ñët
In this Court on appeal defendant-appellant argues that inasmuch as the title to the property
sold shall vest in the buyer only upon full payment of the price, the loss of the vendor; that the
phrase "for any cause" used in paragraph 2 of the agreement may not be interpreted to include
a fortuitous event absolutely beyond the control of the appellant; and that although Article
1174 of the new Civil Code recognizes the exception on fortuitous event when the parties to a
contract expressly so stipulate, the phrase "for any cause" used in the contract did not indicate
any intention of the parties that the loss of the unit due to fortuitous event is to be included
within the responsibility of the vendor.
In answer to the arguments above set forth the appellee argues that the stipulation in the
contract of sale whereby the buyer shall be liable for any loss, damage or destruction for any
cause, is not contrary to law, morals or public policy and is specifically authorized to be
stipulated upon between the parties by Article 1174 of the Civil Code; that the risk of loss was
expressly stipulated to be undertaken by the buyer, even if the title to the property sold
remained, also by stipulation, in the vendor; that the terms "any cause" used in the agreement
includes a fortuitous event, and an express stipulation making the vendee responsible in such
case is valid.

We believe that the agreement making the buyer responsible for any loss whatsoever,
fortuitous or otherwise, even if the title to the property remains in the vendor, is neither
contrary to law, nor to morals or public policy. We have held such stipulation to be legal in the
case of Government vs. Amechazurra, 10 Phil. 637 (Tolentino, Commentaries on the Civil Code,
Vol. IV, p. 120)and declare it to be based on a sound public policy in conditional sales according
to American decisions.

"The weight of authority support the rule that where goods are sold and delivered to the
vendor under an agreement that the title is to remain in the vendor until payment, the loss or
destruction of the property while in the possession of the vendor before payment, without his
fault, does not relieve him from the obligation to pay the price, and he, therefore, suffers the
loss. In accord with this rule are the provisions of the Uniform Sales Act and the Uniform
Conditional Sales Act. There are several basis for this rule. First is the absolute and
unconditional nature of the vendee's promise to pay for the goods. The promise is nowise
dependent upon the transfer of the absolute title. Second is the fact that the vendor has fully
performed his contract and has nothing further to do except receive payment, and the vendee
received what he bargained for when he obtained the right of possession and use of the goods
and the right to acquire title upon making full payment of the price. A third basis advanced for
the rule is the policy of providing an incentive to care properly for the goods, they being
exclusively under the control and dominion of the vendee." (47 Am. Jur., pp. 81-82).

We, therefore, agree with the trial court that the loss by fire or fortuitous event was expressly
agreed in the contract to be borne by the buyer and this express agreement is not contrary to
law but sanctioned by it as well as by the demands of sound, public policy. The judgment of
the court below is affirmed, with costs against defendant-appellant.
SALES – RIGHTS AND OBLIGATIONS OF THE VENDOR – TRANSFER OF OWNERSHIP AND TITLE
– SALE BY ONE PERSON NOT THE OWNER
G.R. No. L-18536 March 31, 1965
JOSE B. AZNAR, plaintiff-appellant,
vs.
RAFAEL YAPDIANGCO, defendant-appellee;
TEODORO SANTOS, intervenor-appellee.
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.
At a place on Azcarraga, Irineo Santos and L. De Dios alighted from the car and entered a house
while their unidentified companion remained in the car. Once inside, L. De Dios asked Irineo
Santos to wait at the sala while he went inside a room. That was the last that Irineo saw of
him. For, after a considerable length of time waiting in vain for De Dios to return, Irineo went
down to discover that neither the car nor their unidentified companion was there anymore.
Going back to the house, he inquired from a woman he saw for L. De Dios and he was told that
no such name lived or was even known therein. Whereupon, Irineo Santos rushed to 1642
Crisostomo to see Marella. He found the house closed and Marella gone. Finally, he reported
the matter to his father who promptly advised the police authorities.
That very same day, or on the afternoon of May 29, 1959 Vicente Marella was able to sell the
car in question to the plaintiff-appellant herein, Jose B. Aznar, for P15,000.00. Insofar as the
above incidents are concerned, we are bound by the factual finding of the trial court that Jose
B. Aznar acquired the said car from Vicente Marella in good faith, for a valuable consideration
and without notice of the defect appertaining to the vendor's title.
While the car in question was thus in the possession of Jose B. Aznar and while he was
attending to its registration in his name, agents of the Philippine Constabulary seized and
confiscated the same in consequence of the report to them by Teodoro Santos that the said
car was unlawfully taken from him.
In due time, Jose B. Aznar filed a complaint for replevin against Captain Rafael Yapdiangco, the
head of the Philippine Constabulary unit which seized the car in question Claiming ownership
of the vehicle, he prayed for its delivery to him. In the course of the litigation, however,
Teodoro Santos moved and was allowed to intervene by the lower court.
At the end of the trial, the lower court rendered a decision awarding the disputed motor
vehicle to the intervenor-appellee, Teodoro Santos. In brief, it ruled that Teodoro Santos had
been unlawfully deprived of his personal property by Vicente Marella, from whom the plaintiff-
appellant traced his right. Consequently, although the plaintiff-appellant acquired the car in
good faith and for a valuable consideration from Vicente Marella, the said decision concluded,
still the intervenor-appellee was entitled to its recovery on the mandate of Article 559 of the
New Civil Code which provides:
ART. 559. The possession of movable property acquired in good faith is equivalent to title.
Nevertheless, one who lost any movable or has been unlawfully deprived thereof, may
recover it from the person in possession of the same.
If the possessor of a movable lost or of which the owner has been unlawfully deprived, has
acquired it in good faith at a public sale, the owner cannot obtain its return without
reimbursing the price paid therefor.
From this decision, Jose B. Aznar appeals.
The issue at bar is one and simple, to wit: Between Teodoro Santos and the plaintiff-appellant,
Jose B. Aznar, who has a better right to the possession of the disputed automobile?
We find for the intervenor-appellee, Teodoro Santos.
The plaintiff-appellant accepts that the car in question originally belonged to and was owned
by the intervenor-appellee, Teodoro Santos, and that the latter was unlawfully deprived of the
same by Vicente Marella. However, the appellant contends that upon the facts of this case,
the applicable provision of the Civil Code is Article 1506 and not Article 559 as was held by the
decision under review. Article 1506 provides:
ART. 1506. Where the seller of goods has a voidable title thereto, but his, title has not been
voided at the time of the sale, the buyer acquires a good title to the goods, provided he buys
them in good faith, for value, and without notice of the seller's defect of title.
The contention is clearly unmeritorious. Under the aforequoted provision, it is essential that
the seller should have a voidable title at least. It is very clearly inapplicable where, as in this
case, the seller had no title at all.
Vicente Marella did not have any title to the property under litigation because the same was
never delivered to him. He sought ownership or acquisition of it by virtue of the contract.
Vicente Marella could have acquired ownership or title to the subject matter thereof only by
the delivery or tradition of the car to him.
Under Article 712 of the Civil Code, "ownership and other real rights over property are
acquired and transmitted by law, by donation, by testate and intestate succession, and in
consequence of certain contracts, by tradition." As interpreted by this Court in a host of cases,
by this provision, ownership is not transferred by contract merely but by tradition or delivery.
Contracts only constitute titles or rights to the transfer or acquisition of ownership, while
delivery or tradition is the mode of accomplishing the same (Gonzales v. Rojas, 16 Phil. 51;
Ocejo, Perez and Co. v. International Bank, 37 Phil. 631, Fidelity and Deposit Co. v. Wilson, 8
Phil. 51; Kuenzle & Streiff v. Wacke & Chandler, 14 Phil. 610; Easton v. Diaz Co., 32 Phil. 180).
For the legal acquisition and transfer of ownership and other property rights, the thing
transferred must be delivered, inasmuch as, according to settled jurisprudence, the tradition
of the thing is a necessary and indispensable requisite in the acquisition of said ownership by
virtue of contract. (Walter Laston v. E. Diaz & Co. & the Provincial Sheriff of Albay, supra.)
So long as property is not delivered, the ownership over it is not transferred by contract
merely but by delivery. Contracts only constitute titles or rights to the transfer or acquisition
of ownership, while delivery or tradition is the method of accomplishing the same, the title
and the method of acquiring it being different in our law. (Gonzales v. Roxas, 16 Phil. 51)
In the case on hand, the car in question was never delivered to the vendee by the vendor as
to complete or consummate the transfer of ownership by virtue of the contract. It should be
recalled that while there was indeed a contract of sale between Vicente Marella and Teodoro
Santos, the former, as vendee, took possession of the subject matter thereof by stealing the
same while it was in the custody of the latter's son.
The lower court was correct in applying Article 559 of the Civil Code to the case at bar, for
under it, the rule is to the effect that if the owner has lost a thing, or if he has been unlawfully
deprived of it, he has a right to recover it, not only from the finder, thief or robber, but also
from third persons who may have acquired it in good faith from such finder, thief or robber.
The said article establishes two exceptions to the general rule of irrevindicability, to wit, when
the owner (1) has lost the thing, or (2) has been unlawfully deprived thereof. In these cases,
the possessor cannot retain the thing as against the owner, who may recover it without paying
any indemnity, except when the possessor acquired it in a public sale. (Del Rosario v. Lucena,
8 Phil. 535; Varela v. Finnick, 9 Phil. 482; Varela v. Matute, 9 Phil. 479; Arenas v. Raymundo, 19
Phil. 46. Tolentino, id., Vol. II, p. 261.)
In the case of Cruz v. Pahati, et al., 52 O.G. 3053 this Court has already ruled
that —
Under Article 559 of the new Civil Code, a person illegally deprived of any movable may
recover it from the person in possession of the same and the only defense the latter may
have is if he has acquired it in good faith at a public sale, in which case, the owner cannot
obtain its return without reimbursing the price paid therefor. In the present case, plaintiff
has been illegally deprived of his car through the ingenious scheme of defendant B to enable
the latter to dispose of it as if he were the owner thereof. Plaintiff, therefore, can still recover
possession of the car even if it is in the possession of a third party who had acquired it in
good faith from defendant B. The maxim that "no man can transfer to another a better title
than he had himself" obtains in the civil as well as in the common law. (U.S. v. Sotelo, 28
Phil. 147)
Finally, the plaintiff-appellant here contends that inasmuch as it was the intervenor-appellee
who had caused the fraud to be perpetrated by his misplaced confidence on Vicente Marella,
he, the intervenor-appellee, should be made to suffer the consequences arising therefrom,
following the equitable principle to that effect. Suffice it to say in this regard that the right of
the owner to recover personal property acquired in good faith by another, is based on his being
dispossessed without his consent. The common law principle that where one of two innocent
persons must suffer by a fraud perpetrated by another, the law imposes the loss upon the
party who, by his misplaced confidence, has enabled the fraud to be committed, cannot be
applied in a case which is covered by an express provision of the new Civil Code, specifically
Article 559. Between a common law principle and a statutory provision, the latter must prevail
in this jurisdiction. (Cruz v. Pahati, supra)
UPON ALL THE FOREGOING, the instant appeal is hereby dismissed and the decision of the
lower court affirmed in full. Costs against the appellant.

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)
SALES – RIGHTS AND OBLIGATIONS OF THE VENDOR – TRANSFER OF OWNERSHIP AND TITLE pawn-shop owner the big diamond on Exhibit 1 was before the trial never dismantled. When
– SALE BY ONE HAVING VOIDABLE TITLE dismantled, defendant's diamond was found to weigh 2.57 cts."3

G.R. No. L-20264 January 30, 1971
CONSUELO S. DE GARCIA and ANASTACIO GARCIA, petitioners,
vs.
HON. COURT OF APPEALS, ANGELINA D. GUEVARA and JUAN B. GUEVARA, respondents.
FERNANDO, J.:
This petition for certiorari to review a decision of respondent Court of Appeals was given due
course because it was therein vigorously asserted that legal questions of gravity and of
moment, there being allegations of an unwarranted departure from and a patent misreading
of applicable and controlling decisions, called for determination by this Tribunal. The brief for
petitioners-spouses, however, failed to substantiate such imputed failings of respondent
Court. The performance did not live up to the promise. On the basis of the facts as duly found
by respondent Court, which we are not at liberty to disregard, and the governing legal
provisions, there is no basis for reversal. We affirm.
Plaintiff lost in the lower court. She elevated the matter to respondent Court of Appeals with
the judgment of the lower court being reversed. It is this decision now under review.
These are the facts as found by respondent Court of Appeals: "That the ring brought by the
parties for examination by Rafael Rebullida on December 14, 1953 was the same ring
purchased by plaintiff from R. Rebullida, Inc. on October 27, 1947 and stolen in February, 1952
has been abundantly established by plaintiff's evidence. Before plaintiff lost the ring, she had
been wearing it for six years and became familiar with it. Thus, when she saw the missing ring
in the finger of defendant, she readily and definitely identified it. Her identification was
confirmed by Mr. Rafael Rebullida, whose candid testimony is entitled to great weight, with
his 30 years experience behind him in the jewelry business and being a disinterested witness
since both parties are his customers. Indeed, defendant made no comment when in her
presence Rebullida after examining the ring and stock card told plaintiff that that was her ring,
nor did she answer plaintiff's letter of demand, ... asserting ownership. Further confirmation
may be found in the extra-judicial admissions, contained in defendant's original and first
amended answers ..."4

These further facts likewise appeal therein: "The foregoing proof is not counter-balanced by
The nature of the case presented before the lower court by private respondent Angelina D.
the denial on the part of defendant or the presentation of the ring, Exhibit I, which has a
Guevara, assisted by her spouse, Juan B. Guevara, as plaintiffs, was noted in the decision of
diamond-solitaire 2.57 cts., or much heavier than the lost diamond weighing 2.05 cts. only. It
respondent Court of Appeals thus: "Plaintiff seeks recovery of `one (1) lady's diamond ring 18
is noteworthy that defendant gave a rather dubious source of her ring. Aling Petring from
cts. white gold mounting, with one (1) 2.05 cts. diamond-solitaire, and four (4) brills 0.10 cts.
whom the ring supposedly came turned out to be a mysterious and ephemeral figure. Miss
total weight' which she bought on October 27, 1947 from R. Rebullida, Inc." 1 Then came a
Hinahon did not even know her true and full name, nor her forwarding address. She appeared
summary of now respondent Guevara of her evidence: "Plaintiff's evidence tends to show that
from nowhere, boarded three months in the house of Miss Hinahon long enough to sell her
around October 11, 1953 plaintiff while talking to Consuelo S. de Garcia, owner of La Bulakeña
diamond ring, disappearing from the scene a week thereafter. Indeed, the case was terminated
restaurant recognized her ring in the finger of Mrs. Garcia and inquired where she bought it,
without any hearing on the third-party and fourth-party complaints, which would have shown
which the defendant answered from her comadre. Plaintiff explained that that ring was stolen
up the falsity of defendant's theory. Moreover, Mrs. Baldomera Miranda, third-party
from her house in February, 1952. Defendant handed the ring to plaintiff and it fitted her
defendant, who tried to corroborate defendant on the latter's alleged attempt to exchange
finger. Two or three days later, at the request of plaintiff, plaintiff, her husband Lt. Col. Juan
the ring defendant bought through her, is [belied] by her judicial admission in her Answer that
Guevara, Lt. Cementina of Pasay PD, defendant and her attorney proceeded to the store of
appellee `suggested that she would make alterations to the mounting and structural design of
Mr. Rebullida to whom they showed the ring in question. Mr. Rebullida a examined the ring
the ring to hide the true identity and appearance of the original one' (Cunanan vs. Amparo, 45
with the aid of high power lens and after consulting the stock card thereon, concluded that it
O.G. 3796). Finally, defendant is refuted by her own extra-judicial admissions ... although made
was the very ring that plaintiff bought from him in 1947. The ring was returned to defendant
by defendant's counsel. For an attorney who acts as counsel of record and is permitted to act
who despite a written request therefor failed to deliver the ring to plaintiff. Hence, this case.
such, has the authority to manage the cause, and this includes the authority to make admission
Later on when the sheriff tried to serve the writ of seizure (replevin), defendant refused to
for the purpose of the litigation... Her proffered explanation that her counsel misunderstood
deliver the ring which had been examined by Mr. Rebullida, claiming it was lost."2
her is puerile because the liability to error as to the identity of the vendor and the exchange of
the ring with another ring of the same value, was rather remote." 5
How the defendant, Consuelo S. de Garcia, the present petitioner before us, along with her
husband Anastacio Garcia, sought to meet plaintiff's claim was narrated thus: "On the other
It is in the light of the above facts as well as the finding that the discrepancy as to the weight
hand, defendant denied having made any admission before plaintiff or Mr. Rebullida or the
between the diamond-solitaire in Exhibit I and the lost diamond was due to defendant having
sheriff. Her evidence tends to show that the ring (Exhibit 1) was purchased by her from Mrs.
"substituted a diamond-solitaire of plaintiff with a heavier stone" that the decision was
Miranda who got it from Miss Angelita Hinahon who in turn got it from the owner, Aling
rendered, respondent Court reversing the lower court and ordering defendant, now petitioner
Petring, who was boarding in her house; that the ring she bought could be similar to, but not
Consuelo S. de Garcia, to return plaintiff's ring or fact value of P1,000.00 and costs, as well as
the same ring plaintiff purchased from Mr. Rebullida which was stolen; that according to a
to pay plaintiff P1,000.00 as attorney's fee and P1,000.00 as exemplary damages. Hence this
appeal.
To repeat, there is no occasion to reverse respondent Court. It correctly applied the law to the
facts as found.
1. 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 authoritative
interpreted in Cruz v. Pahati,6 the right of the owner cannot be defeated even by proof that
there was good faith by the acquisition by the possessor. There is a reiteration of this principle
in Aznar v. Yapdiangco.7 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 where one of two innocent
persons must suffer by a fraud perpetrated by the another, the law imposes the loss upon the
party who, by his misplaced confidence, has enabled the fraud to be committed, cannot be
applied in a case which is covered by an express provision of the new Civil Code, specifically
Article 559. Between a common law principle and statutory provision, the latter must prevail
in this jurisdiction."8
2. It is thus immediately apparent that there is no merit to the contention raised in the first
assigned error that her possession in good faith, equivalent to title, sufficed to defeat
respondent Guevara's claim. As the above cases demonstrate, even on that assumption the
owner can recover the same once she can show illegal deprivation. Respondent Court of
Appeals was so convinced from the evidence submitted that the owner of the ring in litigation
is such respondent. That is a factual determination to which we must pay heed. Instead of
proving any alleged departure from legal norms by respondent Court, petitioner would stress
Article 541 of the Civil Code, which provides: 'A possessor in the concept of owner has in his
favor the legal presumption that he possesses with a just title and he cannot be obliged to
show or prove it." She would accord to it a greater legal significance than that to which under
the controlling doctrines it is entitled.lâwphî1.ñèt The brief for respondents did clearly point
out why petitioner's assertion is lacking in support not only from the cases but even from
commentators. Thus: "Actually, even under the first clause, possession in good faith does not
really amount to title, for the reason that Art. 1132 of the Code provides for a period of
acquisitive prescription for movables through `uninterrupted possession for four years in good
faith' (Art. 1955 of the old Spanish Code, which provided a period of three years), so that many
Spanish writers, including Manresa, Sanchez Roman, Scaevola, De Buen, and Ramos, assert
that under Art. 464 of the Spanish Code (Art. 559 of the New Civil Code), the title of the
possessor is not that of ownership, but is merely a presumptive title sufficient to serve as a basis
of acquisitive prescription (II Tolentino, Civil Code of the Phil. p. 258: IV Manresa, Derecho Civil
Español, 6th Ed., p. 380). And it is for the very reason that the title established by the first
clause of Art. 559 is only a presumptive title sufficient to serve as a basis for acquisitive
prescription, that the clause immediately following provides that `one who has lost any
movable or has been unlawfully deprived thereof, may recover it from the person in
possession of the same.' As stated by the Honorable Justice Jose B. L. Reyes of this Court in
Sotto vs. Enage (C.A.), 43 Off. Gaz. 5075, Dec. 1947: `Article 559 in fact assumes that possessor
is as yet not the owner; for it is obvious that where the possessor has come to acquire
indefeasible title by, let us say, adverse possession for the necessary period, no proof of loss
or illegal deprivation could avail the former owner of the chattel. He would no longer be
entitled to recover it under any condition.' "9
The second assigned error is centered on the alleged failure to prove the identity of the
diamond ring. Clearly the question raised is one of the fact. What the Court of Appeals found
is conclusive. Again, petitioner could not demonstrate that in reaching such a conclusion the
Court of Appeals acted in an arbitrary manner. As made mention of in the brief for respondents
two disinterested witnesses, Mr. Rafael Rebullida as well as Lt. Col. Reynaldo Cementina of the
Pasay City Police Department, both of whom could not be accused of being biased in favor of
respondent Angelina D. Guevara, did testify as to the identity of the ring.
The third assigned error of petitioners would find fault with respondent Court relying "on the
weakness of the title or evidence" of petitioner Consuelo S. de Garcia. It is true, in the decision
under review, mention was made of petitioner Consuelo S. de Garcia making no comment
when in her presence Rebullida, after examining the ring the stock card, told respondent
Angelina L. Guevara that that was her ring, nor did petitioner answer a letter of the latter
asserting ownership. It was likewise stated in such decision that there were extra-judicial
admissions in the original and first amended answers of petitioner. In the appraisal of her
testimony, respondent Court likewise spoke of her giving a rather dubious source of her ring,
the person from whom she allegedly bought it turning out "to be a mysterious and ephemeral
figure." As a matter of fact, as set forth a few pages back, respondent Court did enumerate the
flaws in the version given by petitioner. From the weakness of the testimony offered which, as
thus made clear, petitioner, did not even seek to refute, she would raise the legal question
that respondent Court relied on the "weakness of [her] title or evidence" rather than on the
proof justifying respondent Angelina D. Guevara's claim of ownership. Petitioner here would
ignore the finding of fact of respondent Court that such ownership on her part "has been
abundantly established" by her evidence. Again here, in essence, the question raised is one of
fact, and there is no justification for us to reverse respondent Court.
The legal question raised in the fourth assignment of error is that the matter of the substitution
of the diamond on the ring was a question raised for the first time on appeal as it was never
put in issue by the pleadings nor the subject of reception of evidence by both parties and not
touched upon in the decision of the lower court. Why no such question could be raised in the
pleadings of respondent Angelina D. Guevara was clarified by the fact that the substitution
came after it was brought for examination to Mr. Rebullida. After the knowledge of such
substitution was gained, however, the issue was raised at the trial according to the said
respondent resulting in that portion of the decision where the lower court reached a negative
conclusion. As a result, in the motion for reconsideration, one of the points raised as to such
decision being contrary to the evidence is the finding that there was no substitution. It is not
necessary to state that respondent Court, exercising its appellate power reversed the lower
court. What was held by it is controlling. What is clear is that there is no factual basis for the
legal arguments on which the fourth assigned error is predicated.
What is said takes care of the fifth assigned error that respondent Court was mistaken in its
finding that there was such a substitution. Again petitioner would have us pass on a question
of credibility which is left to respondent Court of Appeals. The sixth assigned error would
complain against the reversal of the lower court judgment as well as petitioner Consuelo S. de
Garcia being made to pay respondent Angelina D. Guevara exemplary damages, attorney's fees
and costs. The reversal is called for in the light of the appraisal of the evidence of record as
meticulously weighed by respondent Court. As to the attorney's fees and exemplary damages,
this is what respondent Court said in the decision under review: "Likewise, plaintiff is entitled
to recover reasonable attorney's fees in the sum of P1,000, it being just and equitable under
the circumstances, and another P1,000 as exemplary damages for the public good to
discourage litigants from resorting to fraudulent devices to frustrate the ends of justice, as
defendant herein tried to substitute the ring, Exhibit 1, for plaintiff's ring." 10 Considering the
circumstances, the cursory discussion of the sixth assigned error on the matter by petitioner
fails to demonstrate that respondent Court's actuation is blemished by legal defects.
SALES – RIGHTS AND OBLIGATIONS OF THE VENDOR – TRANSFER OF OWNERSHIP AND TITLE On the night of the same date, EDCA sought the assistance of the police in Precinct 5 at the UN
– SALE BY ONE HAVING VOIDABLE TITLE 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
G.R. No. 80298 April 26, 1990 warrant, loading them in a van belonging to EDCA, and thereafter turned them over to the
petitioner. 9
EDCA PUBLISHING & DISTRIBUTING CORP., petitioner,
vs. Protesting this high-handed action, the private respondents sued for recovery of the books
THE SPOUSES LEONOR and GERARDO SANTOS, doing business under the name and style of after demand for their return was rejected by EDCA. A writ of preliminary attachment was
"SANTOS BOOKSTORE," and THE COURT OF APPEALS, respondents. issued and the petitioner, after initial refusal, finally surrendered the books to the private
respondents. 10 As previously stated, the petitioner was successively rebuffed in the three
courts below and now hopes to secure relief from us.
CRUZ, J.:

To begin with, the Court expresses its disapproval of the arbitrary action of the petitioner in
The case before us calls for the interpretation of Article 559 of the Civil Code and raises the
taking the law into its own hands and forcibly recovering the disputed books from the private
particular question of when a person may be deemed to have been "unlawfully deprived" of
respondents. The circumstance that it did so with the assistance of the police, which should
movable property in the hands of another. The article runs in full as follows:
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
Art. 559. The possession of movable property acquired in good faith is equivalent to a title. and with the use not of brute force but of lawful writs.
Nevertheless, one who has lost any movable or has been unlawfully deprived thereof, may
recover it from the person in possession of the same.
Now to the merits
If the possessor of a movable lost or of which the owner has been unlawfully deprived has
It is the contention of the petitioner that the private respondents have not established their
acquired it in good faith at a public sale, the owner cannot obtain its return without
ownership of the disputed books because they have not even produced a receipt to prove they
reimbursing the price paid therefor.
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
The movable property in this case consists of books, which were bought from the petitioner dispensing with further proof.
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
The argument that the private respondents did not acquire the books in good faith has been
Trial Court, 2 which was in turn sustained by the Court of Appeals. 3 The petitioner asks us to
dismissed by the lower courts, and we agree. Leonor Santos first ascertained the ownership of
declare that all these courts have erred and should be reversed.
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
This case arose when on October 5, 1981, a person identifying himself as Professor Jose Cruz business of buying and selling books and often deal with hard-up sellers who urgently have to
placed an order by telephone with the petitioner company for 406 books, payable on delivery. part with their books at reduced prices. To Leonor Santos, Cruz must have been only one of
4 EDCA prepared the corresponding invoice and delivered the books as ordered, for which Cruz
the many such sellers she was accustomed to dealing with. It is hardly bad faith for any one in
issued a personal check covering the purchase price of P8,995.65. 5 On October 7, 1981, Cruz the business of buying and selling books to buy them at a discount and resell them for a profit.
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
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.
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
In its extended memorandum, EDCA cites numerous cases holding that the owner who has
be a dean and was informed that there was no such person in its employ. Further verification
been unlawfully deprived of personal property is entitled to its recovery except only where the
revealed that Cruz had no more account or deposit with the Philippine Amanah Bank, against
property was purchased at a public sale, in which event its return is subject to reimbursement
which he had drawn the payment check. 7 EDCA then went to the police, which set a trap and
of the purchase price. The petitioner is begging the question. It is putting the cart before the
arrested Cruz on October 7, 1981. Investigation disclosed his real name as Tomas de la Peña
horse. Unlike in the cases invoked, it has yet to be established in the case at bar that EDCA has
and his sale of 120 of the books he had ordered from EDCA to the private respondents. 8
been unlawfully deprived of the books.
The petitioner argues that it was, because the impostor acquired no title to the books that he
could have validly transferred to the private respondents. Its reason is that as the payment
check bounced for lack of funds, there was a failure of consideration that nullified the contract
of sale between it and Cruz.
The contract of sale is consensual and is perfected once agreement is reached between the
parties on the subject matter and the consideration. According to the Civil Code:
Art. 1475. The contract of sale is perfected at the moment there is a meeting of minds upon
the thing which is the object of the contract and upon the price.
From that moment, the parties may reciprocally demand performance, subject to the
provisions of the law governing the form of contracts.
xxx xxx xxx
Art. 1477. The ownership of the thing sold shall be transferred to the vendee upon the actual
or constructive delivery thereof.
Art. 1478. The parties may stipulate that ownership in the thing shall not pass to the
purchaser until he has fully paid the price.
It is clear from the above provisions, particularly the last one quoted, that ownership in the
thing sold shall not pass to the buyer until full payment of the purchase only if there is a
stipulation to that effect. Otherwise, the rule is that such ownership shall pass from the vendor
to the vendee upon the actual or constructive delivery of the thing sold even if the purchase
price has not yet been paid.
Non-payment only creates a right to demand payment or to rescind the contract, or to criminal
prosecution in the case of bouncing checks. But absent the stipulation above noted, delivery
of the thing sold will effectively transfer ownership to the buyer who can in turn transfer it to
another.
In Asiatic Commercial Corporation v. Ang,11 the plaintiff sold some cosmetics to Francisco Ang,
who in turn sold them to Tan Sit Bin. Asiatic not having been paid by Ang, it sued for the
recovery of the articles from Tan, who claimed he had validly bought them from Ang, paying
for the same in cash. Finding that there was no conspiracy between Tan and Ang to deceive
Asiatic the Court of Appeals declared:
Yet the defendant invoked Article 464 12 of the Civil Code providing, among other things that
"one who has been unlawfully deprived of personal property may recover it from any person
possessing it." We do not believe that the plaintiff has been unlawfully deprived of the
cartons of Gloco Tonic within the scope of this legal provision. It has voluntarily parted with
them pursuant to a contract of purchase and sale. The circumstance that the price was not
subsequently paid did not render illegal a transaction which was valid and legal at the
beginning.
In Tagatac v. Jimenez,13 the plaintiff sold her car to Feist, who sold it to Sanchez, who sold it to
Jimenez. When the payment check issued to Tagatac by Feist was dishonored, the plaintiff
sued to recover the vehicle from Jimenez on the ground that she had been unlawfully deprived
of it by reason of Feist's deception. In ruling for Jimenez, the Court of Appeals held:
The point of inquiry is whether plaintiff-appellant Trinidad C. Tagatac has been unlawfully
deprived of her car. At first blush, it would seem that she was unlawfully deprived thereof,
considering that she was induced to part with it by reason of the chicanery practiced on her
by Warner L. Feist. Certainly, swindling, like robbery, is an illegal method of deprivation of
property. In a manner of speaking, plaintiff-appellant was "illegally deprived" of her car, for
the way by which Warner L. Feist induced her to part with it is illegal and is punished by law.
But does this "unlawful deprivation" come within the scope of Article 559 of the New Civil
Code?
xxx xxx xxx
. . . The fraud and deceit practiced by Warner L. Feist earmarks this sale as a voidable
contract (Article 1390 N.C.C.). Being a voidable contract, it is susceptible of either ratification
or annulment. If the contract is ratified, the action to annul it is extinguished (Article 1392,
N.C.C.) and the contract is cleansed from all its defects (Article 1396, N.C.C.); if the contract
is annulled, the contracting parties are restored to their respective situations before the
contract and mutual restitution follows as a consequence (Article 1398, N.C.C.).
However, as long as no action is taken by the party entitled, either that of annulment or of
ratification, the contract of sale remains valid and binding. When plaintiff-appellant Trinidad
C. Tagatac delivered the car to Feist by virtue of said voidable contract of sale, the title to
the car passed to Feist. Of course, the title that Feist acquired was defective and voidable.
Nevertheless, at the time he sold the car to Felix Sanchez, his title thereto had not been
avoided and he therefore conferred a good title on the latter, provided he bought the car in
good faith, for value and without notice of the defect in Feist's title (Article 1506, N.C.C.).
There being no proof on record that Felix Sanchez acted in bad faith, it is safe to assume that
he acted in good faith.
The above rulings are sound doctrine and reflect our own interpretation of Article 559 as
applied to the case before us.
Actual delivery of the books having been made, Cruz acquired ownership over the books which
he could then validly transfer to the private respondents. The fact that he had not yet paid for
them to EDCA was a matter between him and EDCA and did not impair the title acquired by
the private respondents to the books.
One may well imagine the adverse consequences if the phrase "unlawfully deprived" were to
be interpreted in the manner suggested by the petitioner. A person relying on the seller's title
who buys a movable property from him would have to surrender it to another person claiming
to be the original owner who had not yet been paid the purchase price therefor. The buyer in
the second sale would be left holding the bag, so to speak, and would be compelled to return
the thing bought by him in good faith without even the right to reimbursement of the amount
he had paid for it.

It bears repeating that in the case before us, Leonor Santos took care to ascertain first that the
books belonged to Cruz before she agreed to purchase them. The EDCA invoice Cruz showed
her assured her that the books had been paid for on delivery. By contrast, EDCA was less than
cautious — in fact, too trusting in dealing with the impostor. Although it had never transacted
with him before, it readily delivered the books he had ordered (by telephone) and as readily
accepted his personal check in payment. It did not verify his identity although it was easy
enough to do this. It did not wait to clear the check of this unknown drawer. Worse, it indicated
in the sales invoice issued to him, by the printed terms thereon, that the books had been paid
for on delivery, thereby vesting ownership in the buyer.

Surely, the private respondent did not have to go beyond that invoice to satisfy herself that
the books being offered for sale by Cruz belonged to him; yet she did. Although the title of
Cruz was presumed under Article 559 by his mere possession of the books, these being
movable property, Leonor Santos nevertheless demanded more proof before deciding to buy
them.

It would certainly be unfair now to make the private respondents bear the prejudice sustained
by EDCA as a result of its own negligence.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.
SALES – RIGHTS AND OBLIGATIONS OF THE VENDOR – TRANSFER OF OWNERSHIP AND TITLE 2 Siy Cong Bieng & Co., Inc do 2
– SALE BY ONE HAVING VOIDABLE TITLE 1702 The Philippine Warehouse Company Siy Cong Bieng & Co., Inc. 39

G.R. No. L-34655 March 5, 1932
SIY CONG BIENG & CO., INC., plaintiff-appellee,
vs.
HONGKONG & SHANGHAI BANKING CORPORATION, defendant-appellant.
OSTRAND, J.:
This action was brought in the Court of First Instance of Manila to recover the sum of P31,645,
the value of 464 bales of hemp deposited in certain bonded warehouses as evidenced by the
quedans (warehouse receipts) described in the complaint, said quedans having been delivered
as pledge by one Otto Ranft to the herein defendant, the Hongkong and Shanghai Banking
Corporation, for the guarantee of a preexisting debt of the former to the latter. The record
shows that both parties, through their respective counsel, subscriber and submitted to the
court below the following agreement of facts:
STIPULATION OF FACTS
(Translated into English)
Come now the parties, both the plaintiff and the defendant Hongkong & Shanghai Banking
Corporation, through their respective counsel in the above entitled case, and respectfully
submit to the court the following agreed statements of facts:
1. That both the plaintiff and the defendant Hongkong & Shanghai Banking Corporation are
corporations domicile in the City of Manila and duly authorized to transact business in
accordance with the laws of the Philippine Islands.
2. That the plaintiff is a corporation engaged in business generally, and that the defendant
Hongkong & Shanghai Banking Corporation is a foreign bank authorized to engage in the
banking business in the Philippines.
3. That on June 25, 1926, certain negotiable warehouse receipts described below were
pledge by Otto Ranft to the defendant Hongkong & Shanghai Banking Corporation to secure
the payment of his preexisting debts to the latter:
And that the baled hemp covered by these warehouse receipts was worth P31,635; receipts
number 1707,133,1722, 1723, 1634, and 1702 being endorsed in blank by the plaintiff and
Otto Ranft, and numbers 1918 and 2, by Otto Ranft alone.
4. That in the night of June 25, 1926, said Otto Ranft died suddenly at his house in the City
of Manila.
5. That both parties submit this agreed statement of facts, but reserve their right to have
in evidence upon other points not included herein, and upon which they cannot come to
an agreement.
Manila, August 7, 1929.
The evidence shows that on June 25, 1926, Ranft called at the office of the herein plaintiff to
purchase hemp (abaca), and he was offered the bales of hemp as described in the quedans
above mentioned. The parties agreed to the aforesaid price, and on the same date the
quedans, together with the covering invoice, were sent to Ranft by the plaintiff, without having
been paid for the hemp, but the plaintiff's understanding was that the payment would be made
against the same quedans, and it appear that in previous transaction of the same kind between
the bank and the plaintiff, quedans were paid one or two days after their delivery to them.
In the evening of the day upon which the quedans in question were delivered to the herein
defendant, Ranft died, and when the plaintiff found that such was the case, it immediately
demanded the return of the quedans, or the payment of the value, but was told that the
quedans had been sent to the herein defendant as soon as they were received by Ranft.
Shortly thereafter the plaintiff filed a claim for the aforesaid sum of P31,645 in the intestate
proceedings of the estate of the deceased Otto Ranft, which on an appeal form the decision of
the committee on claims, was allowed by the Court of First Instance in case No. 31372 (City of
Manila). In the meantime, demand had been made by the plaintiff on the defendant bank for
the return of the quedans, or their value, which demand was refused by the bank on the
ground that it was a holder of the quedans in due course. Thereupon the plaintiff filed its first
complaint against the defendant, wherein it alleged that it has "sold" the quedans in question
to the deceased O. Ranft for cash, but that the said O. Ranft had not fulfilled the conditions of
the sale. Later on, plaintiff filed an amended complaint, wherein they changed the word "sold"
referred to in the first complaint to the words "attempted to sell".

No. Warehouseman Depositor Bales Upon trial the judge of the court below rendered judgment in favor of the plaintiff principally
1707 Public Warehouse Co Siy Cong Bieng & Co., Inc. 27 on the ground that in the opinion of the court the defendant bank "could not have acted in
133 W.F. Stevenson Co do 67 good faith for the reason that according to the statements of its own witness, Thiele, the
1722 Public Warehouse Co do 60 quedans were delivered to the bank in order to secure the debts of Ranft for the payment of
1723 do do 4 their value and from which it might be deduced that the said bank knew that the value of the
1634 The Philippine Warehouse Company do 99 said quedans was not as yet paid when the same were endorsed to it, and its alleged belief
1918 Public Warehouse Co O. Ranft 166 that Ranft was the owner of the said quedans was not in accordance with the facts proved at
the time"; and that, moreover, the circumstances were such that "the bank knew, or should
have known, that Ranft had not yet acquired the ownership of the said quedans and that it
therefore could not invoke the presumption that it was acting in good faith and without
negligence on its part".
In our opinion the judgment of the court below is not tenable. It may be noted, first, that the
quedans in question were negotiable in form; second, that they were pledge by Otto Ranft to
the defendant bank to secure the payment of his preexisting debts to said bank (paragraph 3
of the Stipulation of Facts); third, that such of the quedans as were issued in the name of the
plaintiff were duly endorsed in blank by the plaintiff and by Otto Ranft; and fourth, that the
two remaining quedans which were duly endorsed in blank by him.
When these quedans were thus negotiated, Otto Ranft was indebted to the Hongkong &
Shanghai Banking Corporation in the sum of P622,753.22, which indebtedness was partly
covered by quedans. He was also being pressed to deposit additional payments as a further
security to the bank, and there is no doubt that the quedans here in question were received
by the bank to secure the payment of Ranft's preexisting debts; it is so stated in paragraph 3
of the stipulation of the facts agreed on by the parties and hereinbefore quoted.
It further appears that it has been the practice of the bank in its transactions with Ranft that
the value of the quedans has been entered in the current accounts between Ranft and the
bank, but there is no evidence to the effect that the bank was at any time bound to pay back
to Ranft the amount of any of the quedans, and there is nothing in the record to show that the
bank has promised to pay the values of the quedans neither to Ranft nor to the herein plaintiff;
on the contrary, as stated in the stipulation of facts, the "negotiable warehouse receipts —
were pledged by Otto Ranft to the defendant Hongkong & Shanghai Banking Corporation
secure the payment of his preexisting debts to the latter", and taking into consideration that
the quedans were negotiable in form and duly endorsed in blank by the plaintiff and by Otto
Ranft, it follows that on the delivery of the qeudans to the bank they were no longer the
property of the indorser unless he liquidated his debt with the bank.
In his brief the plaintiff insists that the defendant, before the delivery of the quedans, should
have ascertained whether Ranft had any authority to negotiate the quedans.
We are unable to find anything in the record which in any manner would have compelled the
bank to investigate the indorser. The bank had a perfect right to act as it did, and its action is
in accordance with sections 47, 38, and 40 of the Warehouse Receipts Act (Act No. 2137),
which read as follows:
SEC. 47. When negotiation not impaired by fraud, mistake, or duress. — The validity of the
negotiation of a receipt is not impaired by the fact that such negotiation was a breach of
duty on the part of the person making the negotiation, or by the fact that the owner of the
receipt was induced by fraud, mistake, or duress to intrust the possession or custody of the
receipt was negotiated, or a person to whom the receipt was subsequent negotiated, paid
value therefor, without notice of the breach of duty, or fraud, mistake, or duress.
SEC. 38. Negotiation of negotiable receipts by indorsement. — A negotiable receipt may be
negotiated by the indorsement of the person to whose order the goods are, by the terms of
the receipt, deliverable. Such indorsement may be in blank, to bearer or to a specified
person. . . . Subsequent negotiation may be made in like manner.
SEC. 40. Who may negotiate a receipt. — A negotiable receipt may be negotiated:
(a) By the owner thereof, or
(b) By any person to whom the possession or custody of the receipt has been entrusted by
the owner, if, by the terms of the receipt, the warehouseman undertakes to deliver the
goods to the order of the person to whom the possession or custody of the receipt has been
entrusted, or if at the time of such entrusting the receipt is in such form that it may be
negotiated by delivery.
The question as to the rights the defendant bank acquired over the aforesaid quedans after
indorsement and delivery to it by Ranft, we find in section 41 of the Warehouse Receipts Act
(Act No. 2137):
SEC. 41. Rights of person to whom a receipt has been negotiated. — A person to whom a
negotiable receipt has been duly negotiated acquires thereby:
(a) Such title to the goods as the person negotiating the receipt to him had or had ability to
convey to a purchaser in good faith for value, and also such title to the goods as the depositor
of person to whose order the goods were to be delivered by the terms of the receipt had or
had ability to convey to a purchaser in good faith for value, and. . . .
In the case of the Commercial National Bank of New Orleans vs. Canal-Louisiana Bank & Trust
Co. (239 U.S., 520), Chief Justice Hughes said in regard to negotiation of receipts:
It will be observed that "one who takes by trespass or a finder is not included within the
description of those who may negotiate." (Report of Commissioner on Uniform States Laws,
January 1, 1910, p. 204.) Aside from this, the intention is plain to facilitate the use of
warehouse receipts as documents of title. Under sec. 40, the person who may negotiate the
receipt is either the "owner thereof", or a "person to whom the possession or custody of the
receipt has been intrusted by the owner" if the receipt is in the form described. The
warehouse receipt represents the goods, but the intrustion of the receipt, as stated, is more
than the mere delivery of the goods; it is a representation that the one to whom the
possession of the receipt has been so intrusted has the title to the goods. By sec. 47, the
negotiation of the receipt to a purchaser for value without notice is not impaired by the fact
that it is a breach of duty, or that the owner of the receipt was induced "by fraud, mistake,
or duree" to intrust the receipt to the person who negotiated it. And, under sec. 41, one to
whom the negotiable receipt has been duly negotiated acquires such title to the goods as
the person negotiating the receipt to him, or the depositor or person whose order the goods
were delivered by the terms of the receipt, either had or "had ability to convey to a
purchaser in good faith for value." The clear import of these provisions is that if the owner
of the goods permit another to have the possession or custody of negotiable warehouse
 receipts running to the order of the latter, or to bearer, it is a representation of title upon
which bona fide purchasers for value are entitled to rely, despite breaches of trust or
violations of agreement on the part of the apparent owner.

In its second assignment of error, the defendant-appellant maintains that the plaintiff-appellee
is estopped to deny that the bank had a valid title to the quedans for the reason that the
plaintiff had voluntarily clothed Ranft with all the attributes of ownership and upon which the
defendant bank relied. In our opinion, the appellant's view is correct. In the National Safe
Deposit vs. Hibbs (229 U.S., 391), certain certificates of stock were pledged as collateral by the
defendant in error to the plaintiff bank, which certificates were converted by one of the trusted
employees of the bank to his own use and sold by him. The stock certificates were unqualified
endorsed in blank by the defendant when delivered to the bank. The Supreme Court of the
United States through Justice Day applied the familiar rule of equitable estoppel that where
one of two innocent persons must suffer a loss he who by his conduct made the loss possible
must bear it, using the following language:

We think this case correctly states the principle, and, applied to the case in hand, is decisive
of it. Here one of two innocent person must suffer and the question at last is, Where shall
the loss fall? It is undeniable that the broker obtained the stock certificates, containing all
the indicia of ownership and possible of ready transfer, from one who had possession with
the bank's consent, and who brought the certificates to him, apparently clothed with the
full ownership thereof by all the tests usually applied by business men to gain knowledge
upon the subject before making a purchase of such property. On the other hand, the bank,
for a legitimate purpose, with confidence in one of its own employees, instrusted the
certificates to him, with every evidence of title and transferability upon them. The bank's
trusted agent, in gross breach of his duty, whether with technical criminality or not is
unimportant, took such certificates, thus authenticated with evidence of title, to one who,
in the ordinary course of business, sold them to parties who paid full value for them. In such
case we think the principles which underlie equitable estoppel place the loss upon him
whose misplaced confidence has made the wrong possible. . . .

We regret that the plaintiff in this case has suffered the loss of the quedans, but as far as we
can see, there is now no remedy available to the plaintiff. The bank is not responsible for the
loss; the negotiable quedans were duly negotiated to the bank and as far as the record shows,
there has been no fraud on the part of the defendant.

The appealed judgment is reversed and the appellant is absolved from the plaintiff's complaint.
Without costs. So ordered.
SALES – RIGHTS AND OBLIGATIONS OF THE VENDOR – TRANSFER OF OWNERSHIP AND TITLE –
ESTOPPEL
G.R. No. L-10027 November 13, 1915
ROSENDO HERNAEZ y ESPINOSA, plaintiff-appellant,
vs.
MATEO HERNAEZ y ESPINOSA, ET AL., defendants-appellants.
TRENT, J.:
The spouses, Pedro Hernaez and Juana Espinosa, died, leaving several legitimate descendants.
Neither of their estates had been divided up to the date of the institution of this action, but were
both under administration. Their son, Domingo Hernaez y Espinosa, sold all his interest in both his
father's and mother's estate to his son, Vicente Hernaez y Tuason, on November 6, 1901.
Notwithstanding the fact that Domingo Hernaez y Espinosa had thus parted with all his interest in
the estates of his two parents, he executed a document of sale in favor of Alejandro Montelibano y
Ramos on February 27, 1907, in which he purported to convey all his undivided interest in his
mother's estate. On the same date he executed another document of sale in which he purported to
convey to Jose Montelibano Uy-Cana four-eighteenths of his interest in his mother's estate. Both of
these sales were made with the connivance of his son, Vicente Hernaez y Tuason. Hence, although
Vicente Hernaez y Tuason had actually purchased all of his father's interests in the estates of Pedro
Hernaez and Juana Espinosa as early as November 6, 1901, and was, on February 27, 1907, the
undoubted owner thereof, he is effectually estopped from asserting his title as against either of the
vendees mentioned in the documents of sale dated February 27, 1907, to which we have just
referred. (Code Civ. Pro., sec. 333, No. 1.) Bigelow on Estoppel (p. 607) says:
. . . it is now a well-established principle that where the true owner of property, for however short
a time, holds out another, or, with knowledge of his own right, allows another to appear as the
owner of or as having full power of disposition over the property, the same being in the latter's
actual possession, and innocent third parties are thus led into dealing with such apparent owner,
they will be protected.
On August 19, 1912, Jose Montelibano Uy-Cana sold his interest in the estate to Alejandro
Montelibano y Ramos. By this transfer, the latter stood owner of all the interest of Domingo Hernaez
y Espinosa in the estate of Pedro Hernaez, and five-eighteenths of his interest in the estate of Juana
Espinosa as against Vicente Hernaez y Espinosa.
It is admitted that Rosendo Hernaez y Espinosa, another son of the deceased spouses administrator
of the estates, was notified of Montelibano's purchases on January 8, 1913, when he received notice
of Montelibano's motion, entered in the administration proceedings, asking that he (Montelibano)
be substituted as assignee of the interests of various heirs of the estate which he had acquired by
purchase. Notwithstanding this knowledge, Rosendo Hernaez y Espinosa entered into a contract of
sale with Vicente Hernaez y Tuason, whereby the latter purported to convey all the interest, which
he had acquired from his father, in the estate of the deceased spouses, Pedro Hernaez and Juana
Espinosa. It will be remembered that he purchased his father's share of the estate on November 6,
1901; that he is estopped from asserting title to any interest in his grandfather's estate and in five-
eighteenths of his grandmother's estate. Rosendo Hernandez y Espinosa purchased with full
knowledge of these facts. He, therefore, acquired thirteen-eighteenths of the interest of Domingo
Hernaez y Espinosa in the estate of the latter's mother nothing more. lawph!l.net
That rule is that the holder [Alejandro Montelibano y Ramos] of a prior equitable right has priority
over the purchaser [Rosendo Hernandez y Espinosa] of a subsequent estate (whether legal or
equitable) without value, or with notice of the equitable right, but not as against a subsequent
purchaser for value and without notice. (Ewart on Estoppel, p. 199.)
Alejandro Montelibano y Ramos has acquired in his interest in the estate of the deceased spouses
for a valuable consideration and in good faith, and there remains to the plaintiff, Rosendo Hernaez
y Espinosa, only the right of subrogation allowed him by article 1067 of the Civil Code, which reads
as follows:
If any of the heirs should sell his hereditary rights to a stranger before the division, all or any of
the co-heirs may subrogate himself in the place of the purchaser, reimbursing him for the value
of the purchase, provided they do so within the period of a month, to be counted from the time
they were informed thereof.
On January 24, 1913, the plaintiff instituted this action seeking to subrogate himself in the rights
acquired by Montelibano in the estate. Unless the plaintiff can be charged with actual notice of the
conveyance by which Montelibano acquired these interests, prior to January 8, 1913, it is clear that
he has opportunely asserted his right of subrogation. This is purely a question of fact. As to the sales
whereby Domingo Hernaez y Espinosa parted with that portion of his interest in the estate which is
now held by Alejandro Montelibano, as well as to those sales made by other heirs to Montelibano,
the trial court found that the plaintiff, Rosendo Hernaez y Espinosa, was not chargeable with notice
prior to January 8, 1913. After a careful examination of the record we see no reason for disturbing
this finding of fact. As a consequence, the plaintiff, Rosendo Hernaez y Espinosa, is entitled to
exercise his right of subrogation in accordance with article 1067, above quoted. lawph!1.net
The interest which Jose Montelibano Uy-Cana purchased from Domingo Hernaez y Espinosa on
February 27, 1907, for the sum of P4,500, he afterwards transferred to Alejandro Montelibano y
Ramos for the sum of P10,000. In rendering judgment, the trial court decreed that the plaintiff,
Rosendo Hernaez y Espinosa, should pay the latter sum for the privilege of exercising the right of
subrogation. This was error. Article 1067 of the Civil Code provides that the co-heir may exercise
this right of subrogation upon the payment to the purchaser of another heir's interest, "el precio de
la compra" (the purchase price). Obviously, if the interest had not been resold, the plaintiff, Rosendo
Hernaez y Espinosa, would have had to pay only the price for which Uy-Cana acquired it. The
purpose of the article cannot be evaded by a reconveyance of the interest to a third person at a
higher price. Subsequent purchasers of the interest acquire it burdened with the right of
subrogation of co-heirs at the price for which the heir who sold it parted with it.
It is urged that the prices in some of the deeds of sale by which Alejandro Montelibano y Ramos
purchased the interest of various heirs in the estates are fictitious. This is a question of fact upon
which both parties adduced evidence, and we concur in the opinion of the trial court that there is
no basis to the charge. For the foregoing reasons, the judgment of the court is modified by
substituting, as the price of subrogation of the interest originally purchased by Jose Montelibano
Uy-Cana, the sum of P4,500, as set out in Exhibit 7, for the sum of P10,000, the consideration
expressed in Exhibit 10. As modified, the judgment appealed from is affirmed, without costs. So
ordered.
SALES – RIGHTS AND OBLIGATIONS OF THE VENDOR – TRANSFER OF OWNERSHIP AND TITLE sue in trespass for damages or for the recovery of the property, provided he has not lost his
– JUDICIAL SALES right to do so by his own conduct. Upon this point, the rule is stated in 16 Cyc., 764, thus:
"When a person having title to or an interest in property knowingly stands by and suffers it to
G.R. No. L-10599 December 24, 1915 be sold under judgment or decree, without asserting his title or right or making it known to
the bidders, he cannot afterward set up his claim." (Citing a long array of cases from Florida,
Georgia, Illinois, Kentucky, South Carolina, New York, North Carolina, Pennsylvania, and
VICENTA JALBUENA, plaintiff-appellant,
Conklin vs. Wehrman, 38 Fed., 874.)"
vs.
SALVADOR LIZARRAGA, et al., defendants-appellees.
Bigelow on Estoppel says: "... it is now a well-established principle that where the true owner
of property, for however short a time, holds out another, or, with knowledge of his own right,
TRENT, J.:
allows another to appear, as the owner of or as having full power of disposition over the
property, the same being in the latter's actual possession, and innocent third parties are thus
On May 22, 1903, Salvador Lizarraga, as judgment creditor, caused the sheriff of the Province led into dealing with some [such] apparent owner, they will be protected." (Quoted with
of Iloilo to levy upon an old sugar-mill as the property of Ildefonso Doronila, the judgment approval in the case of Hernaez vs. Hernaez, 32 Phil. Rep., 214.)
debtor and husband of the plaintiff. At the time of the levy Doronila stated to the sheriff that
the mill belonged to him. The sale took place about the last of July, 1913. The purchaser at this
The foregoing quotations from Cyc. and Bigelow are in harmony with No. 1 of section 333 of
public sale sold the mill to Lopez. The present action was instituted on November 26, 1913, by
the Code of Civil Procedure, wherein it is provided that — "Whenever a party has, by his own
the plaintiff for the purpose of recovering the mill of its value upon the ground that the same
declaration, act, or omission, intentionally and deliberately led another to believe a particular
was her exclusive property and that her husband had no interest therein. From a judgment
thing true, and to act upon such belief, he can not, in any litigation arising out of such
dismissing the cause after a hearing on the merits, the plaintiff appealed.
declaration, act, or omission, be permitted to falsify it."
The plaintiff knew that the old sugar-mill had been levied upon at the time the levy was made
The phrase "stood by" does not import an actual presence, but implies knowledge under such
and also knew that it would be sold as the property of her husband. Notwithstanding these
circumstances as to render it the duty of the possessor to communicate it. The herein plaintiff
facts, she stood by and permitted the sale to go forward without making the slightest protest
had, as we have indicated, full knowledge of the fact that the property was going to be sold to
or claim until the property had passed into the hands of Lopez. Upon these facts the trial court
pay the debts of her husband. She did not communicate her claim to the purchaser, and it is
held that the plaintiff was estopped from asserting her claim of ownership against the
now too late to assert such a claim.itc-a1f
defendants, or either of them. This holding is assigned as an error, and in support of this alleged
error the plaintiff cites and relies upon the doctrine enunciated by this court in the case of
Waite vs. Peterson (8 Phil. Rep., 449); Lopez vs. Alvarez (9 Phil. Rep., 28); Uy Piaoco vs. Osmeña For the foregoing reason, the judgment appealed from is affirmed, with costs against the
(9 Phil. Rep., 299); Ariston vs. Cea (13 Phil. Rep., 109); and Bonzon vs. Standard Oil Co. and appellant. So ordered.
Osorio (27 Phil. Rep., 141).lawphil.net

An examination of the above cited cases will show that they do not support the plaintiff's
contention. In the first case the interested party made a demand upon the sheriff for the return
of the property levied upon. The second case had to do with the question of preferred
creditors. In the third case there was also a claim made upon the sheriff for the return of the
property soon after it was attached. In the fourth case there was likewise a claim made upon
the sheriff for the release of the property before it was sold under execution. In the last case
the court used the following language: "In this jurisdiction, under the general principle that
one person may not enrich himself at the expense of another, a judgment creditor would not
be permitted to retain the purchase price of land sold as the property of a judgment debtor
after it has been made to appear that the judgment debtor had no title to the land and that
the purchaser had failed to secure title thereto, and we find no difficulty, therefore, in
accepting a liberal construction of the statute which arrives at the same equitable result." This
is a correct statement of the law; but it has nothing to do with the question of estopped.

An execution is an order to the sheriff to attach and sell the property of the judgment debtor.
If he sells the property of another person, he exceeds his authority and the true owner may
SALES – RIGHTS AND OBLIGATIONS OF THE VENDOR –DELIVERY OF THING SOLD – KINDS OF
DELIVERY – REAL OR PHYSICAL
G.R. No. L-4175 March 26, 1908
A.W. BEAN, administrator of the estate of George Case, deceased, plaintiff-appellee, Exhibit B is as follows:
vs.
THE B.W. CADWALLADER COMPANY, defendant-appellant.
JOHNSON, J.:
On the 4th day of June, 1906, the plaintiff brought an action in the Court of First Instance of
the city of Manila to recover of the defendant the following sums:
(a) The sum of P7,356.80, with interest thereon at the rate of 6 per cent per annum, from the
6th day of December, 1905, being the balance due for timber sold and delivered by the plaintiff
to the defendant, under and pursuant to the contract set out in Exhibit A of the complaint.
(b) The sum of P2,782.75, the balance due for timber sold and delivered by the plaintiff to the
defendant, under and pursuant to the agreement set out in Exhibit B of the complaint.
(c) The sum of P810, the actual damage suffered by the plaintiff by reason of the violation of
said agreements (a) and (b), and for such other damages as the proof at the trial may show the
plaintiff had suffered, etc.
Said Exhibit A is as follows:
MANILA, September 6, 1905.
Mr. GEORGE CASE, Manila, P.I.
DEAR SIR: We wish to confirm our acceptance of your verbal offer to furnish us a cargo of
ipil and molave (the molave to consist of 10 logs, more or less), said cargo to comprise from
eight thousand to ten thousand cubic feet, English measurement, and the same to be
delivered alongside our vessel at Basilan, for the sum of sixty cents (60 cents), Philippine
currency, per English cubic foot. It is understood that we are to pay the forestry dues at
Manila, the same to be charged against you, and it is also understood that delivery is to be
made within three months from date of this letter, you notify us by telegraph when delivery
can be made.
Very respectfully,
THE B.W. CADWALLADER CO.,
By B.W. CADWALLADER, President.
It is understood that the timber is to be round and that allowance will be made in
measurement of same for the bark, which is to be removed.
B.W.C.
MANILA. P.I., January 3, 1905.
THE B.W. CADWALLADER CO., Manila, P.I.
DEAR SIRS: I propose to furnish you the following native timber at the prices and under the
conditions herein expressed, viz:
Calantas, at twenty-five (25) cents per English cubic foot, all forestry charges to be paid by
me.
Calantas, short and crooked, at ten (10) cents per English cubic foot, all forestry charges to
be paid by you.
Ipil, at sixty (60) cents per English cubic foot, all forestry charges to be paid by me.
Ipil, short pieces, at fifteen (15) cents per English cubic foot, all forestry charges to be paid
by you.
Mangachupay, No. 1, at twenty-five (25) cents per English cubic foot, all forestry charges to
be paid by me.
These prices are in the Philippine currency and include delivery alongside ship or barge at
Basilan, I to furnish the necessary men to load same, and you to furnish steam gear to assist
in loading; the cargo to be mixed and consisting of approximately fifteen thousand cubic
feet. Delivery to be made within three months from this date.
Very respectfully,
GEORGE CASE.
MANILA, P.I., January 3, 1905.
MR. GEORGE CASE, Manila, P.I.
DEAR SIR: We beg to acknowledge receipt of your favor of even date proposing to furnish
us calantas, ipil, and mangachupay, and state that we hereby accept the prices and
conditions therein mentioned.
 Very respectfully,
THE B.W. CADWALLADER CO.,
By B.W. CADWALLADER, President.
On February 6, 1906, the defendant and appellant wrote the following letter to George Case:
MANILA, February 6, 1906.
MR. GEO. CASE, Manila.
DEAR SIR: Conforming our conversation of this morning, we will make you a further advance
of P1,000 for the logs at your cuttings on Basilan islands, Approximating 30,000 English cubic
feet, more or less. It is understood that this timber is not otherwise encumbered, and that
this payment of P2,500 on December 29, 1905, shall draw interest at the rate of 10 per cent
per annum, each from date of payment, until sufficient timber has been delivered to us
under our contract to cover the amount.
It is further understood that these two payment are part payments on the entire 30,000
English cubic feet, more or less, and that the timber shall be held subject to our order.
If this is satisfactory to you, please confirm the same.
Yours, faithfully,
THE B.W. CADWALLADER CO.,
By B.W. CADWALLADER, President.
MANILA, P.I., February 6, 1906.
I hereby confirm acceptance of the above.
GEO. CASE.
The plaintiff alleged and undertook to prove that, in accordance with the said agreement as
represented by Exhibit A, he did, within three months from said 6th day of September, 1905,
deliver at the port of Basilan, P.I., a cargo of native logs, consisting of 16,428 English cubic feet
of ipil, and duly notified the defendant by telegram of such delivery; that the value of said logs
so delivered at the price stipulated was P9,856.50; that on the 29th day of December, 1905,
the defendant paid to the plaintiff the sum of P2,500 to apply on the said account, and that
there was still due from the defendant to the plaintiff, upon said contract as represented by
Exhibit A, the sum of P7,356.80, with interest at the rate of 6 per cent from the 6th day of
December, 1905.
The plaintiff also alleged and attempted to prove that he did, in pursuance of the terms of the
contract represented by Exhibit B, within three months from the said 3d day of January, 1906,
deliver at the port of Basilan, P.I., 15,131 English cubic feet of mangachupay and calantas, and
did notify the defendant of such delivery; that the value of said timber so delivered at the price
agreed upon in said contract as represented by Exhibit B was P3,782.75; that on the 6th day of
February, 1906, the defendant paid to the plaintiff, to apply on said account, the sum of
P1,000, and that there is still due and owing to the plaintiff by the defendant the sum of
P2,782.75, with interest at the rate of 6 per cent from the 3d day of April, 1906.
The plaintiff further alleges that, by reason of the violation on the part of the defendant of said
contracts as represented by Exhibits A and B, he, the said plaintiff, was obliged to borrow
money from third persons and incur expenses in travelling, amounting to the sum of P810, and
that, by reason of the violation of the said contracts on the part of the defendant, this sum was
due and payable as damages by the defendant to the plaintiff.
On the 16th day of July, 1906, the defendant answered the complaint of the plaintiff and
admitted the execution and delivery of the said contracts, but alleged that the plaintiff had
make certain misrepresentations concerning the character of the costs of the Island of Basilan;
that the plaintiff had represented that the harbor of said Island of Basilan, where said logs
were to be delivered, was a safe harbor, and that it was easily practicable for a vessel to come
alongside the land, whereas, in fact, said harbor was unsafe, and that it was impossible for the
defendant to enter said harbor with the boats and to load said logs.
The defendant further alleged that the plaintiff had not, as a matter of fact, delivered to it the
logs or timber, nor any part of the same, as represented by said contracts, and asked for a
judgment against the plaintiff for the sum of P3,500, the money paid by the defendant to the
plaintiff, and interest on the sum of P2,500 from the 29th of December, 1905, and interest on
P1,000 from the 6th of February, 1906, at the rate of 10 per cent.
The cause was duly tried in the Court of First Instance of the city of Manila, and on the 27th
day of June, 1907, the court rendered a judgment in favor of the plaintiff and against the
defendant for the sum of P10,033.39, with interest at 6 per cent from the 3rd day of April,
1906, and costs.
After hearing the evidence adduced during the trial of the cause, the lower court made the
following findings of fact:
First. That on September 6, 1906 [1905], the plaintiff and the defendants erred into a written
contract (Exhibit A), by virtue of which the former bound himself to furnish and sell to the
latter a cargo of pieces of native wood, about eight to ten thousand (8,000 to 10,000) cubic
feet, for the sum of sixty (60) cents, Philippine currency, per English cubic foot, and also
bound himself to deliver said pieces of wood to the defendants alongside the latter's ship at
Basilan, which delivery was to be effected within three months from the date of the
contract, and the same plaintiff was to wire the defendants regarding the date on which the
above delivery could be made.
Second. That on January 3 of the following year, 1906, the plaintiff and the defendant
entered into another contract, by which the former bound to himself to deliver and sell to
the defendants another cargo of native lumber consisting of calantas, ipil, and
mangachupay, at the various prices mentioned in the same contract (Exhibit B), for a cubic
foot, and agreeing also to deliver it to the defendants alongside the latter's vessel at Basilan,
within the period of three months from the said date.
Third. That, for the fulfillment of the first contract, the plaintiff cut a great quantity of
lumber, sufficient for the purpose, and placed the same on the near the beach at Punta
Matanal, Island of Basilan, where his cuttings were established, and had the lumber ready
for delivery to the defendants within the period fixed in the above-mentioned Exhibit A; that
on November 17 of the same year, 1905 — that is, two months and eleven days after the
date of the contract, and therefore within the fixed term of three months — he informed
the defendants by a telegram (Exhibit 2), that the said cargo of lumber could be shipped on
about December 6, a date within the period agreed to, and added that good and strong
halyards were required; that some pieces weighed eight tons; and he asked the said
defendants to wire him immediately the probable date on which their steamer would leave
Manila for his port and the probable date her arrival in Basilan. To this communication the
defendants replied by telegrams also, on the same date, stating that they could not fix the
probable date of the departure of the steamer until after the 24th, and asked the plaintiff
whether he was able to make contracts for transportation at Basilan, and at what rate. The
plaintiff replied to this cable on the following day, the 18th, stating that he was unable to
obtain the transportation there, and again requested the defendants to wire the probable
date on which their steamer would arrive at Basilan.
Fourth. That the defendants advised the plaintiff in Basilan, by telegram on December 8,
that the ship Lilly-bonne was dismasted, that they had no means of transportation, and that
they wished him to telegraph them the quantity of lumber ready for shipment, and to inform
them if he could obtain transportation from there. The said plaintiff, after giving in his reply
the particulars relating to the quantity and prices of lumber referred to by the defendants
in their previous telegram, reported on the 18th of the same month that, as stated by the
captain of the S.S. Robert K, the defendants might contract for transportation with the
Atlantic, Gulf and Pacific Co., that they might leave the lighter Quince (Jan) at the starting
point with a motor engine, which was very necessary, and pointed out, moreover, in the
same telegram, that the defendants were very late in furnishing the transportation. The
defendants, on the 20th of the same month of December, wired to the plaintiff again, stating
that the Atlantic, Gulf and Pacific Co. could not supply them with transportation, and that
there was at the time no others available way to secure it. (Exhibit B 1.)
Fifth. That the plaintiff, having come to Manila on or about Christmas day of the same year,
interviewed Mr. B.W. Cadwallader, the agent of the defendant company, for the purpose of
getting a boat for Basilan in order to take away the lumber there ready for shipment, and,
after an inquiry made by him at the office of the Atlantic, Gulf and Pacific Company, it was
agreed by the defendants and the said Atlantic, Gulf and Pacific Company, that the lighter
Primera, towed by the S.S. Robert K., would be sent there for the transportation of the
lumber.
Sixth. That the lighter Primera, towed by the S.S. Robert K, having arrived, on January 22,
1906, at the point of the eastern shore of Basilan where the cargo of lumber prepared by
the plaintiff was to be shipped, it happened that, after the said lighter had been placed in
the proper position for loading, and when a portion of the lumber was put on rafts (balsas)
in order to be delivered alongside the said lighter Primera, the latter grounded on the beach
on account of the breaking of the anchor chain, the said lighter thereby becoming useless
for the shipment of the lumber.
Seventh. That new steps were taken by the plaintiff, together with the defendants, about
the beginning of February, 1906, in order to make arrangements with the Atlantic, Gulf and
Pacific Company of this city for the transportation of said lumber from Basilan to Manila,
when the logs covered by the second contract were cut and ready at Basilan, and the Atlantic
Gulf furnished the lighter Juanita, towed also by the same S.S. Robert K. That the lighter,
after having appeared first on March 23 at the place for the shipment of the lumber, without
making any attempt at loading, on account of the unsettled condition of the sea, did attempt
to effect the shipment during the early part of the following month of April, by anchoring
near the place where the logs were placed on rafts ready for delivery; but on placing the
gang planks necessary for loading, the anchor chain was broken at the moment when
operations began, which resulted in the suspension of the shipment, and the return of the
lumber to its original place on shore. The lighter Juanita, towed by the S.S. Robert K. left the
place, and since that date no action has been taken or efforts made by the defendants for
the purpose of taking away the two cargoes of lumber, purchased from the plaintiff, who
had already received from the defendants P2,500 on December 29, 1905, and a further
P1,000 on February 6, 1906, as an advance payment on the mentioned cargoes, and had
bound himself to pay the same defendants interest at the rate of 10 per cent per annum of
the above amounts.
From this judgment the defendant appealed and made a number of assignments of error,
which are more specifically included within the following:
First. The defendant has never received or accepted the timber which is the object of the
contracts.
Second. If the defendant has defaulted in receiving the property, the law has provided
remedies and the plaintiff must pursue those remedies or fail.
Third. There has been no default upon the part of the defendant.
Fourth. The plaintiff has never had said timber ready for delivery at ship's side.
Fifth. The conditions at Punta Matanal are such that the plaintiff can not make delivery at ship's
side, and the default is therefore on the part of the plaintiff and not on the part of the
defendant.
Under the first above-noted assignment of error the defendant and appellant argues that the
contract between the parties was a contract de compraventa under the Civil Code, or an
executory contract under the common law, and cites various provisions of the Civil Code as
well as of the Commercial Code for the purpose of showing that, under a contract of this kind,
an absolute and manual delivery of the property sold is necessary before the contract becomes
an executed one upon which an action can be based. It will be remembered that, under the
terms of the contract, the logs in question were only to be delivered by the plaintiff "alongside
our (defendant's) vessel at Basilan, within three months from the date of this letter"
(September 6, 1905). There is nothing in the contract which in any way required the plaintiff
to do more than to place said logs alongside a vessel to be sent to the point of delivery by the
defendant. To the above contention of the defendant and appellant the plaintiff and appellee
contends that the following propositions are clearly established by the testimony:
(a) That the plaintiff cut the logs required by the contract.
(b) That plaintiff transported said logs to the beach.
(c) That plaintiff had said logs measured by the representative of the Forestry Bureau of
Government of the Philippine Islands.
(d) That plaintiff placed said logs in rafts to be floated alongside a vessel to be sent to the point
of delivery by the defendant.
(e) That plaintiff did actually place the said logs along-side the vessel known as the Juanita in
the month of April, 1906.
(f) That the crew of the Juanita did in fact actually proceed to place said logs on board said
vessel, but failed because the anchor chain was not strong enough to sustain a 1 ½ ton skid,
which the crew were trying to pull in place.
The plaintiff and appellee insists that he had done all that was required of him by the contract.
The evidence shows that at least on one occasion, if not more, the plaintiff had about eighty
men at the point of delivery of said logs, for the purpose of assisting the defendant and
appellant in loading said logs.
The evidence shows beyond peradventure of doubt that at the time the said Juanita, the vessel
of the defendant, was at Basilan, some of the logs were placed alongside of the vessel, in
accordance with the terms of the contract. It is denied that all of the logs to be furnished by
the plaintiff under the terms of the contract were placed in rafts in the water at or near the
point of delivery. Certainty the plaintiff can not be required to show that he placed each log
alongside the vessel, after he has shown that he had all the logs rafted in the water at the point
of delivery and had placed some of them alongside the vessel in accordance with the terms of
the contract. He could not be required to place others alongside the vessel until after the first
had been loaded. (Whitcomb vs. Whitney, 24 Mich., 485.) The fact is not disputed that the
plaintiff duly notified the defendant, within the period prescribed in the contract, that the said
logs were ready for delivery.
Actual manual delivery of an article sold is not essential to the passing of the title thereto (art
1450, Civil Code) unless made so by the terms of the contract or by an understanding of the
parties. The parties to the contract may agree when and on what conditions the property in
the subject of the contract was passed to the prospective owner. (Andrews vs. Durant, 11 N.Y.,
42.) In the present case the parties agreed that the delivery of the logs should be made
alongside a vessel of the defendant. That was done by the plaintiff. The vessel of the defendant
was sent to the point of delivery and the said defendant attempted to load on said vessel the
logs delivered along its side by the plaintiff. It is a rule well established that a mere contract
for the sale of goods, where nothing remains to be done by the seller before making delivery,
transfers the right of property, although the price has not been paid, nor the thing sold actually
delivered to the purchaser. (Olyphant vs. Baker, 5 Denio, N.Y., 379; art. 1450, Civil Code.)
Suppose, for example, that after the vessel of the defendant had arrived at the point where
the logs were delivered along its side, and the logs had actually been delivered at the side, as
is claimed by the plaintiff in the present case, the plaintiff had thereafter sold the said logs to
third persons. Could the defendant have maintained replevin for the same? If the title had not
passed, he could not. If it had, he could. If the title had not passed at that moment the plaintiff
might have sold said logs to a third person in the very presence of the defendant, even after
defendant's vessel had arrived to take the logs away. If the title had not passed, the plaintiff
would thus have subjected himself to an action for damages upon his contract upon a failure
to perform it. We are of the opinion, however, that, if the plaintiff had sold said logs to a third
person after the arrival of the vessel of the defendant, the defendant, the defendant, the
defendant might have claimed and recovered said logs upon the theory that have properly said
to another purchaser of said logs: "These logs are mine; they have been delivered to me under
a contract; everything has been done under said contract which the circumstances will permit
of for the passing of the title of the same to me, and whoever buys said logs buys something
which has not only been previously bought by me but which has been set apart for me ands
placed at my disposal by the most unequivocal acts, and I am, therefore, vested with the title
to the same which I have a right to maintain and enforce." And we believe that the law would
have sustained the defendant in this contention. (Whitcomb vs. Whitney, 24 Mich., 485; Hatch
vs. Oil Company, 100 U.S., 124 art. 339, Code of Commerce; Noyes vs. Marlott, 156 Fed. Rep.,
753.)
The evidence shows that, when the Juanita arrived at the point of delivery, the parties in
charge of said boat placed or attempted to place skids on said boat for the purpose of loading
the logs. Certainly they believed that the logs had been delivered, or else why would they have
actually made preparation for the loading of the same? The logs were fully at the disposal of
the defendant, and the latter thereby became liable for the price of the same under the
contract. (Art. 339, Code of Commerce; Noyes vs. Marlott, 156 Fed. Rep., 753.
It was held in the case of Nicholas vs. Morse (100 Mass., 523) that in an action for goods sold
and delivered, if the plaintiff proves delivery at the place agreed and that there remained
nothing further for him to do, he need not show actual acceptance by the defendant. The mere
fact that the defendant, by reason of the improper equipment of the vessel, was unable to
take said logs aboard such vessel, can not relieve the latter from responsibility under the
contract. No burden rested upon the plaintiff to furnish proper equipment for the vessel of the
defendant with which to put on board said logs. That was the responsibility of the defendant.
The responsibility of the plaintiff ceased when he placed the logs alongside the vessel of the P10,033.39, with interest at the rate of 6 per cent per annum from the 3rd day of April, 1906,
defendant. and costs. So ordered.

Under the second above assignment of error the defendant and appellant claims that the
plaintiff, in bringing the form of action which was brought in this case, did not pursue the
proper remedy afforded him by the law, and cites articles 325, 332, and 339 of the Commercial
Code in support of this view. To this contention of the defendant and appellant the plaintiff
replies that he is entitled to recover under the contract price by virtue of article 1451 of the
Civil Code, insisting that the delivery of the logs in question had actually been made, and cites
a letter of the defendant and appellant directed to the plaintiff, dated the 6th day of February,
1906, in which the defendant after referring to the advancements which he had made, said
that "it was further understood ... that the logs should be held subject to our (defendant's)
order." This letter of the defendant would seem to clearly indicate that the latter, at least,
believed that the title to said logs had passed.

With reference to the third and fourth above-noted assignments of error, it would seem that
we have said all that is necessary upon that question under the first above-noted assignment
of error.

With reference to the fifth above-noted assignment of error, there is considerable conflict
among the witnesses with reference to the conditions at the point where the logs were to be
delivered. The witnesses for the defendant state that it was impossible to load logs at said
point, while witnesses for the plaintiff assert that during several months of the year, at least it
was perfectly possible and feasible to load logs on boats such as were furnished by the
defendant at the place designated for the delivery of the said logs. It will be noted, from
reading the testimony of the witnesses for the defendant, that many of them had no
experience whatever concerning the general conditions of the sea in and about the point
where the said logs were to be delivered, except on the particular occasions when they were
there with boats of the defendant to receive the delivery of said logs; whereas, upon the
contrary, the plaintiff presented some four or five witnesses, the experience of whom had
covered several years, and who all testified that during several months of the year especially
during the months of December, January, and February, it was perfectly feasible and
practicable by means of proper apparatus, to take on board cargo at the point where the logs
were to be delivered. And it must not be forgotten that, under the terms of the contract, the
defendant undertook to receive and put on board its vessel the logs in question at a time
beyond the time provided for by the terms of the contract. Our conclusion is that a large
preponderance of the evidence shows that it was perfectly feasible of the defendant, with
proper apparatus, to take on board the logs in question at the point of delivery. We presume
that at almost every point upon the coast of the Philippine Archipelago there are days when
conditions are such as to prevent the loading of cargo upon vessels. This is true even in the Bay
of Manila. However, it would not be just to conclude that, because on certain days it is
impossible to load and unload ships might be loaded and unloaded in said bay had made
misrepresentations, because of the fact that on a particular day ships could not be loaded or
unloaded by reason of the conditions of the sea resulting from wind or storm.

We are of the opinion, and so hold, under all of the facts, that the plaintiff is entitled to a
confirmation of the judgment of the lower court. It is therefore, hereby ordered that a
judgment be entered in favor of the plaintiff and against the defendant for the sum of
SALES – RIGHTS AND OBLIGATIONS OF THE VENDOR –DELIVERY OF THING SOLD – KINDS OF
DELIVERY – REAL OR PHYSICAL
G.R. No. L-10658 February 14, 1918
OCEJO, PEREZ & CO., plaintiffs-appellees,
vs.
THE INTERNATIONAL BANKING CORPORATION, defendant-appellant.
FRANCISCO CHUA SECO, as assignee, intervener-appellant.
FISHER, J.:
On the 7th day of March, 1914, Chua Teng Chong of Manila, executed and delivered to the
International Banking Corporation, hereinafter referred to as "the bank," a promissory note,
payable one month after date, for the sum of P20,000. Attached to this note was another
private document, signed by Chua Teng Chong, in which it was stated that he had deposited
with the bank, as security for the said note, 5,000 piculs of sugar, which in said document were
said to be stored in a warehouse situated at No 1008, Calle Toneleros, Binondo, Manila. It
appears from the evidence, assuming that the sugar was in the warehouse on that date, that
the bank did not take possession of it when the document was executed and delivered, and
that Chua Teng Chong continued to retain the sugar in his possession and control. The bank
made no effort to exercise any active ownership over said merchandise until the 16th of April,
when it discovered that the amount of sugar stored in the said warehouse was much less than
the 5,000 piculs mentioned in the contract. The agreement between the bank and Chua Teng
Chong with respect to the alleged pledge of the sugar was never recorded in a public
instrument. It does not appear from the evidence that the promissory note represents money
delivered by the bank on the date of its execution, although it is stated therein that it was
executed for value received.
On the 24th day of March, 1914, the plaintiff partnership Ocejo, Perez and Co., entered into
contract with Chua Teng Chong for the sale to him of a lot of sugar. It was agreed that delivery
should be made in the month of April, the sugar to be weighed in the buyer's warehouse. It
appears that this sugar was brought to Manila by a steamer in the month of April, and 5,000
piculs were delivered by plaintiff to Chua Teng Chong. The delivery was completed April 16,
1914, and the sugar was stored in the buyer's warehouse situated at No. 119, Muelle de la
Industria. On April 17, 1914, plaintiff partnership presented, for collection, its account for the
purchase price of the sugar, but the buyer refused to make payment, and put up to the present
time the sellers have been unable to collect the purchase price of the merchandise in question.
On the same date as that on which the 5,000 piculs of sugar were delivered into the warehouse
on Muelle de la Industria, the bank sent an employee to inspect the sugar described in the
pledge agreement, and which, as therein stated, should have been stored in the Calle
Toneleros warehouse. The bank's representative then discovered that the amount of sugar in
that warehouse did not exceed 1,800 piculs, whereas the amount which should have been
there, according to the contract, was 5,000 piculs. Upon making this discovery, the bank's
representative, accompanied by a lawyer, went immediately to see Chua Teng Chong, and the
latter informed him that the rest of the sugar covered by the pledge agreement was stored in
the warehouse at No. 119, Muelle de la Industria. The bank's representative immediately went
to this warehouse and upon arrival there found some 3,200 piculs of sugar, of which he took
immediate possession, closing the warehouse with the bank's padlocks. It is admitted that the
sugar seized by the bank in the Muelle de la Industria warehouse is the same sugar which the
plaintiff firm delivered to Chua Teng Chong. On the date on which the bank took possession of
the sugar the promissory note executed March 17, 1914, had fallen due and was unpaid.
In the written contract by which the plaintiff firm undertook to sell the sugar in question to
Chua Teng Chong nothing was said concerning the time and place for payment. The court
below found that the delivery of the sugar by plaintiff to Chua Teng Chong was made upon the
mutual understanding that the price was to be paid in cash "upon the completion of delivery."
The plaintiff firm proved that in sales of this kind it is the custom among merchants in Manila
for the seller to deliver the merchandise into the warehouse of the buyer, for inspection and
verification of weights, and that as soon as this operation is completed, the price is payable on
demand. After Chua Teng Chong had refused to pay the bill for the price of the sugar which
the plaintiff firm presented to him, the day after its delivery, an attempt was made by the
plaintiff to recover possession of the sugar, and to that end, on April 24, 1914, the plaintiff
made a demand on the bank for the delivery of the sugar, to which demand the bank refused
to accede. On April 24, 1914, the buyer Chua Teng Chong was judicially declared to be
insolvent, and Francisco Chua Seco was appointed as assignee of the insolvency. On the same
date, and a few minutes after the insolvency proceedings were commenced, the plaintiff
partnership filed a complaint, upon which this action was commenced, naming the bank as
defendant, alleging that said defendant was unlawfully holding some 4,711 piloness of sugar,
the property of the plaintiff firm, which the bank had received from Chua Teng Chong, and
prayed for the judgment for the possession of said sugar. A few days after, the plaintiff firm
took advantage of those provisions of the procedural law which permit a plaintiff to replevin
personal property. Subsequently, by agreement of the parties, the sugar was sold and the
proceeds of the sale deposited in the bank, subject to the order of the court upon the final
disposition of the case. After the answer of the defendant bank was filed, a complaint in
intervention was filed by Chua Seco, in which he asserts a preferential right to the sugar, or to
the proceeds of its sale, upon the ground that the delivery of the sugar by plaintiff, by virtue
of which it passed into the possession and control of Chua Teng Chong, had the effect of
transmitting the title of the pledge asserted by the bank was null and void. Upon these
allegations the interveners contends that the sugar is the property of the insolvent estate
represented by him. The lower court rendered judgment in favor of the plaintiff and from this
decision appeals have been taken by the bank and by the intervener.
Upon these facts the following questions arise:
(a) Did title to the sugar pass to the buyer upon its delivery to him?
(b) Assuming to pay that the title passed to the buyer, did his failure to pay the purchase price
authorize the seller to rescind the sale?
(c) Was the commencement of a replevin suit by the seller equivalent to the rescission of the
sale?
(d) Can the pledge of the sugar to the bank be sustained upon the evidence as to the
circumstances under which it obtained physical possession thereof?
Clearly, there can be no doubt that from March 24, 1914, on which date the parties agreed in
regard to the quantity of the sugar which the seller was to deliver and the price which the
buyer was to pay, the contract was perfected. (Civil Code, art. 1450.) It is also clear that the
obligation of the seller to make delivery of the thing sold was not subject to the condition that
the buyer was to pay the price before delivery. The witness Pomar, called on behalf of the
seller, testified that the price was to be paid after the completion of delivery. (Stenographic
notes, p. 4.)
The sugar was delivered to the buyer March 16, 1914. The seller delivered it into the buyer's
warehouse, leaving it entirely subject to his control. Article 1462 of the Civil Code provides that
the thing sold is deemed to be delivered "when it passes into the possession and control of the
buyer." It is difficult to see how the seller could have divested himself more completely of the
possession of the sugar, or how he could have placed it more completely under the control of
the buyer.
On the day following the delivery of the sugar the seller presented his bill to the buyer, but the
latter failed and refused to make payment. We agree with the seller's contention that he was
entitled to demand payment of the sugar at any time after the delivery. No term having been
stipulated within which the payment should be made, payment was demandable at the time
and place of the delivery of the thing sold. (Civil Code, art. 1500.) The seller did not avail himself
of his right to demand payment as soon as the right to such payment arose, but as no term for
payment was stipulated, he was entitled, to require payment to be made at any time after
delivery, and it was the duty of the buyer to pay the price immediately upon demand. But the
seller not only argues that he was entitled to demand payment at any time after delivery, but
contends further that until such payment was in fact made, title to the sugar did not pass to
the buyer. We cannot agree with this contention.
As Manresa says (vol. 10 p. 120), tradition is a true mode of acquiring ownership "which effects
the passage of title and the birth of the right in rem. Therefore, the delivery of the thing . . .
signifies that title has passed from the seller to the buyer."
If we were to sustain the seller's contention, the consequences to the business community
would, in our judgment, be most deplorable. If the seller may make delivery of the thing sold
and clothe the buyer with all the appearances of ownership but without the passage of title
until the purchase price is actually paid, it occurs to us to inquire how long this anomalous
state of affairs may be permitted to continue? It is the buyer's duty, upon the assumed facts
to pay the price on demand, but the seller is not bound to present his account immediately. In
the present case the buyer was not called upon to make payment until the following day. If
the seller had allowed three, four, or five days to go by before presenting his account for
payment, would it be permitted him still to contend that title had passed? If the title did not
pass, any sale which might in the meantime be made by the buyer, would be void, ass it is
evident that no one can transfer a greater interest than that which he possesses. With even
greater reason, the destruction of the thing in the possession of the buyer, before demand
upon him for payment, would relieve him from the obligation to pay — the thing perishes for
its owner. (Tan Leonco vs. Go Inqui, 8 Phil. Rep., 531.)
The seller calls this transaction a cash sale, but, strictly speaking, it is not cash sale. It is not like
a sale made in a retail store, in which delivery and payment are to be made simultaneously. Of
course, when no term for payment is stipulated the seller is not bound to deliver the thing sold
until the buyer has paid him the price; but if, notwithstanding this right, delivery is
consummated without requiring payment to be made in advance or simultaneously, in fact he
grants a term of credit to the buyer, however short and indeterminate it my be, and waives his
right to insist upon payment in advance or simultaneously with delivery, but in lieu thereof he
becomes entitled to payment upon demand therefor made upon the buyer. As is correctly
stated in Williston on Sales:
Confusion especially may be caused by use of the words 'cash sale' or 'terms cash' by
business men. In business dealings these words are frequently used when in reality a short
period of credit is contemplated. In such a case it is clear there is no cash sale in the legal
sense; for, under the circumstances suggested, it is not contemplated that the buyer shall
refrain from dealing with the goods or even from reselling them, and if such is the
contemplation of the parties, it is impossible to say that the property was not to pass until
the price was paid. (Williston, Sales par. 343.)
It is contended that there was an express agreement in this case that the passage of the title
should be subject to the payment of the price, as a condition precedent. As was stated by
Justice Mapa, the author of the decision in the case of De la Rama vs. Sanchez, (10 Phil. Rep.,
432):
The fact that the price of the property has not yet been paid in full is not, nor can it be, an
obstacle to the acquisition of the ownership thereof by the plaintiff, because as such a
condition was not stipulated in the contract, the latter immediately produced its natural
effects in law, the principal and most important of which being the conveyance of the
ownership by means of the delivery of the thing old to the purchaser, without prejudice, of
the course, to the right of the vendor to claim payment of any sum still due.
The same fundamental doctrine was stated by Chief Justice Arellano in the case of Gonzalez
vs. Rojas (16 Phil. Rep., 51):
. . . ownership of things 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."
In the case of Kuenzle and Sheriff vs. Watson and Co. (13 Phil. Rep., 26), the court sustained
the validity of a sale of personal property subject to the stipulation that title should not pass
until the payment of the purchase price. On the other hand, when there has been no such
express agreement and the thing sold has been delivered, title passes from the moment the
thing sold is placed in the "possession and control of the buyer."
Having concluded that the effect of the delivery was to transmit the title of the sugar to the
buyer, we will now consider the legal effect of the failure on the part of the buyer to pay the
price on demand.
Article 1506 of the Civil Code provides that the contract of sale may be rescinded for the same
causes as all other obligations, in addition to the special causes enumerated in the preceding
articles. It is also observed that the article does not distinguish the consummated sale from the
merely perfected sale, and we do not believe that there is any reason for making this
distinction. Article 1124 of the Civil Code establishes the principle that all reciprocal obligations
are rescindible in the event that one of the parties bound should fail to perform that which is
incumbent upon him. In the contract of the sale the obligation to pay the price is correlative
to the obligation to deliver the thing sold. Nonperformance by one of the parties authorizes
the other to exercise the right, conferred upon him by the law, to elect to demand the
performance of the obligation or its rescission (Mateos vs. Lopez, 6 Phil. Rep., 206), together
with damages in either event. But the right to rescind the sale for nonperformance on the part
of the buyer is not absolute. The law subordinates it to the rights of third persons to whom
bad faith is not imputable (Civil Code, arts. 1124 and 1295), and the defendant bank seeks to
invoke in its defense this principle, alleging that the sugar in question was pledge to it, after its
delivery to the buyer and before the latter was placed in default with respect to the payment
of the price.
We believe that this connection of the defendant bank cannot be sustained. In the first place,
even giving all possible effect to the contract evidenced by the private document exhibited by
the bank (Exhibit No. 1), it is evident that the sugar therein mentioned is not the same as that
here in dispute. By this document, which bears date March 4, 1919, an attempt was made to
pledge the lot of sugar deposited in warehouse No. 1008, Calle Toneleros, Manila. The sugar
in dispute has never been in that warehouse, as the seller delivered it into the bodega at No.
119, Muelle de la Industria. The sugar here in question could not be possibly have been the
subject matter of the contract of pledge which the parties undertook to create by the private
document dated March 7, 1914, inasmuch as it was not at the time the property of the
defendant, and this constitutes an indispensable requisite for the creation of a pledge. (Civil
Code, art. 1857.) It does not appear from the record that any effort was made to pledge the
sugar which is the subject matter of this case. It is true that it appears that in the afternoon of
the day the sugar was delivered, the buyer gave the bank's representative the keys of the
warehouse on the Muelle de la Industria in which the sugar was stored, but it also appears
from the testimony of the bank's witness, Grey, to whom the keys of the warehouse were
delivered, that this was not done because of an agreement concerning the pledge of the sugar
now in dispute. Grey testified that on the afternoon of April 16, 1914, he ascertained, after an
inspection of the warehouse on Calle Toneleros, that the sugar therein stored was not stated
in the document of pledge; that upon observing this storage he asked the debtor to account
for it, whereupon at No. 119, Muelle de la Industria;" that upon receiving this reply the witness
went to the warehouse at No. 119, Muelle de la Industria, demanded the keys from the person
in charge, and then closed the warehouse with the bank's own padlocks. From these
statements it appears that no attempt was made to enter into any agreement for the pledge
of the sugar here in question. The bank took possession of that sugar under the erroneous
belief, based upon the false statement of Chua Teng Chong, that it was a part of the lot
mentioned in the private document dated March 7, 1914. But even if it were assumed that on
the afternoon of April 16, 1914, an attempt was made to pledge the sugar and that delivery
was made in accordance with the agreement, the pledge so established would be void as
against third persons. Article 1865 of the Civil Code provides that a pledge is without effect as
against third persons "if the certainty of the date does not appear by public instrument." In the
case of Tec Bi and Co. vs. Chartered Bank of India, Australia and China, 16 Off. Gaz., 908 decided
February 5, 1916, this court held that when the contract of pledge is not recorded in a public
instrument, it is void as against third persons; that the seller of the thing pledged, seeking to
recover the purchase price thereof, is a third person within the meaning of the article cited;
and that the fact that the person claiming as pledgee has taken actual physical possession of
the thing sold will not prevent the pledge form being declared void as against the seller. The
court held that the principle established by article 1865 of the Civil Code is not adjective in its
character, but that "It prescribes a condition without which the contract of pledge cannot
adversely affect third persons." Applying the doctrine of the decision cited, it is evident that
the pledge aserted by the International Bank is inefficacious.
In the brief filed on behalf of the bank it is argued that in no case may a revindicatory action
be maintained when the plaintiff attempts to exercise the right to rescind the sale for
nonpayment of the purchase price and that therefore a replevin suit will not lie. But as it is
held that the bank has no interest in this matter, as its alleged contract of pledge is utterly
unavailing, it is evident that the question of procedure does not affect it. It appears that by
reason of the insolvency of the buyer Chua Teng Chong an insolvency proceeding was
commenced in a court of competent jurisdiction and in that proceeding Francisco Chua Seco
was appointed assignee of the property of the insolvent. As such assignee Chua Seco filed a
complaint in intervention in this suit, in which he contends that by reason of its sale and
delivery by plaintiff to the insolvent, title to the sugar passed to the latter and that the pledge
set up by the bank is void as to third persons. Standing in the place of the insolvent buyer, the
assignee asks that he be recognized in his representative capacity as the owner of the sugar in
question. The voluntary intervention of the assignee of the insolvent buyer cures the defect of
nonjoiner of the latter as a party defendant, and all parties in interest have been heard in this
proceeding.
The judgment of the court below awards the plaintiff the product of the sale of the sugar, it
having been so disposed of by agreement by the parties during the pendency of the suit. The
intervener excepted to the decision and joined in the bank's appeal. In his brief in this court
the intervener raises a question as to the sufficiency of the complaint to support the decision
of the court below, adopting the argument of the bank upon this point. That is, assuming that
by reason of the nonpayment of the purchase price, the seller is entitled to elect to rescind the
sale, is the rescission effected ipso facto by such election, or is it necessary for him to bring an
action of rescission? The action of replevin, the intervener contends, is based (Code of Civil
Procedure, sec. 263) upon the assumption that the plaintiff at the time of bringing the action
is either the owner of the thing which is the subject matter of the suit or entitled to its
possession. But the question presented is whether, in cases in which title has passed by
delivery and in which the buyer has failed to pay the purchased price on demand, title is
revested in the seller by the mere fact that he has mentally determined to elect to rescind? In
its brief the plaintiff partnership contends for the affirmative, saying that the acts of the seller
— the filing of its complaint — imply that it has made the election. But the intervener, adopting
the argument of the bank, contends that the party to whom article 1124 of the Civil Code
grants the right to rescind "must apply to the court for a decree for the rescission of the
contract. . . ." (Scaevola, vol. 19, p. 673); and this conclusion is supported by the last paragraph
of the article cited. Of course, if the action of the court is necessary in order to effectuate the
rescission of the sale, such rescission does not follow ipso jure by reason of nonpayment and
the determination of the seller to elect to rescind. Consequently, the action of replevin cannot
be maintained. The right to rescind a sale, established by article 1506, in no wise differs from
that which is established, in general terms, with respect to reciprocal obligations, by article
1124 in "true event that one of the obligors fails to perform the obligation incumbent upon
him." But the right so conferred is not an absolute one. The same article provides that "the
court shall decree the rescission demanded, unless there are causes which justify him in
allowing a term."

Therefore, it is the judgment of the court and not the mere will of the plaintiff which produces
the rescission of the sale. This being so, the action of replevin will no lie upon the theory that
the rescission has already taken place and that the seller has recovered title to the thing sold.

If the buyer himself had intervened, instead of the assignee in the bankruptcy suit, we might
perhaps have said that all the parties in interest having been heard, we would overlook the
matter of procedure and proceed to adjudicate the rights of the parties upon the evidence
submitted. But as the buyer has been declared insolvent, it is clear that his creditors have an
interest in this question, and that if this interest is discussed in the bankruptcy proceedings,
they will have an opportunity to be heard. In the present condition of the case, the only thing
we can do is to decide that the title to the sugar having been commenced against him before
the declaration of insolvency, the assignee, standing in the shoes of the buyer, has a better
right to its possession or to the product of its sale during the pendency of this action. We
cannot apply section 126 of the Civil Code Procedure, because one of the material averments
of the complaint is that Chua Teng Chong unlawfully took possession of the sugar. The
evidence shows, on the contrary, that it was delivered to him by plaintiff. Strictly speaking the
mission of the court ends at this point, but following the practice adopted in other cases, for
the purposes of avoiding an unnecessary multiplicity of suits, and bearing in mind the fact that
the assignee of the bankruptcy is a party to this proceedings, we deem it advisable to indicate
that we are of the opinion that the rights of the seller are protected by section 48 of Act No.
1956, inasmuch as the sugar in question had not passed by an "irrevocable title" when the
buyer was declared insolvent. Attention is also invited to the decision of the court overruling
the motion for a rehearing in the case of Tec Bi & Co. vs. Chartered Bank of India, Australia &
China, cited above.1

The decision of the court below is therefore reversed, and it is decided that the assignee of the
bankruptcy of Chua Teng Chong is entitled to the product of the sale of the sugar here in
question, to wit, P10,826.76, together with the interest accruing thereon, reserving
proceedings. So ordered.
SALES – RIGHTS AND OBLIGATIONS OF THE VENDOR –DELIVERY OF THING SOLD – KINDS OF
DELIVERY – CONSTRUCTIVE DELIVERY – SYMBOLIC
G.R. No. 18341 September 18, 1922
GENEROSA AVILES and her husband RUFINO VILLAFUERTE, plaintiffs-appellants,
vs.
SEGUNDA ARCEGA and FORTUNATO DE LEON, defendants-appellees.
ROMUALDEZ, J.:
The plaintiffs bring this action to recover title to a house of mixed materials erected on a
leasehold land of the Nagtahan estate, more particularly described in the complaint. While
the plaintiffs claim the ownership of said house, the defendants assert title in themselves.
At the trial of the case, the parties entered into the following stipulation of facts:
1. That the house in dispute in this case was on October 10, 1917, sold by the spouses
Venancio Alcantara and Vicenta Capulong to the plaintiff Generosa Aviles, as evidenced by
the document marked with the letter A, and acknowledged on the 8th day of November of
the same year, 1917, before the notary public Jose Galang Serano, for the sum of P497, it
having been stipulated that during four months from the 10th of October, 1917, the vendors
would continue in possession of the house, the expenses for repairs, land and other tax to
be for their account, as well as the payment of the rent for the lot on which it is erected.
2. That in a document dated March 13, 1918, and acknowledged on the following day before
Ariston Rivera, notary public, the same property was sold by the same spouses Venancio
Alcantara and Vicente Capulong for P500 to the spouses Fortunato de Leon and Segunda
Arcega, who took possession of the property, as the stated in the third paragraph of the
complaint, the plaintiff Generosa Aviles never having taken possession thereof.
Under the foregoing facts the case is submitted to the consideration of the court for the
determination of the question law as to which of the two purchasers acquired title to the
property.
In view of these stipulated facts the trial court rendered judgement declaring the defendants
to be the owner of the house and absolving them from the complaint with costs. From this
judgement the plaintiffs appeal, alleging that the trial court erred (a) in not rendering
judgement in their favor; (b) in not giving preference to the sale made to them of the house in
question; (c) in not declaring them owners of said house; (d) in not sentencing the defendants
to deliver the same plaintiffs; (e) in not sentencing the defendants to pay damages; ( f ) in
declaring the latter owners of the house when they did not make a prayer to that effect; (g) in
drawing from the facts stipulated a conclusion inconsistent therewith; and (h) in not granting
a new trial.
These assignments of error raise but two questions: First, in which of the two sales was title to
the house in dispute transferred? And second, whether or not it was an error to declare the
defendants owners of said house, the latter not having expressly prayed in their answer for
such declaration. The other errors assigned are but a consequence of these two points.
As to the first question, we have, by virtue of the stipulation and the documents presented,
the following facts, which must be considered proven:
The house in question belonged originally to the spouses Venancio Alcantara and Vicenta
Capulong. On the 10th of October, 1917, these spouses sold this house in a public document
to Generosa Aviles, the herein plaintiff, it having been stipulated, in the document executed
for the purpose, that "during four months from the 10th of October, 1917, the vendors would
continue in possession of the house" (to use the language of the stipulation of facts). We
italicize the words would continue, which show that the vendors were in possession of the
house before, and that at time of, its conveyance, and continued thereafter in said possession.
It is, further, to be noted that the plaintiff never had possession of the house, as stated at the
end of the second paragraph of the stipulation of facts, which says "the plaintiff Generosa
Aviles never having taken possession thereof." From this it appears that the purchaser never
took possession of the house either at the execution of the deed of sale, or at any other time.
It thus being admitted by the appellants that the purchaser Generosa Aviles, one of the
plaintiff, never had possession of this house, it cannot be presumed that she took possession
thereof at the expiration of the four months following the sale, as stipulated by the parties.
Such positive fact having been expressly admitted, there can be no presumption to the
contrary.
On the 13th of March, 1918, the same spouses Venancio Alcantara and Vicenta Capulong (who
are presumed to have been in possession of the house until then, inasmuch as it is positively
know that they were uninterruptedly prior to the first sale, during the time the sale was in
force and until at least four months thereafter, and it is a fact that the purchaser Aviles never
had possession of the house), in a public document sold the same house to the spouses
Fortunato de Leon and Segunda Arcega, the herein defendants, who then and there took
possession of said house.
None of the two sales appears to have been registered; therefore the question at issue is,
which of these purchasers was the first to take possession (art. 1473, Civil Code).
We have already seen that the first purchaser, the plaintiff, never took possession of the
house, while the second purchasers, the defendant spouses, did. Under the Civil Code, the
conclusion is inevitable that the titles to the house was transmitted not to the plaintiff but to
the defendants.
We are of the opinion that the plaintiff cannot invoked symbolic delivery by the execution of
the public document of sale, inasmuch as there was not, nor could there have been, such
delivery, the same being prevented by the express stipulation contained in the deed of sale,
to the effect that the vendors did not part with the possession of the house but would continue
therein for four months. Article 1462 of the Civil Code says:
 If the sale should be made by means of a public instrument, the execution thereof shall be
equivalent to the delivery of the thing which is the subject-matter of the contract unless the
contrary appears or may be clearly inferred from such instrument.
At the time, therefore, of the execution of the deed in favor of the plaintiff, the first purchaser,
there was no symbolic delivery because there was an express stipulation to the contrary. It
cannot be said that after the lapse of the four months following, during which the vendors
were to continue in possession of the house, according to the stipulation, any symbolic delivery
subsisted. Nothing can subsist that did not exist before.
It cannot be said that symbolic delivery spontaneously took place after the lapse of the four
months stipulated, for there is no law providing that it should take place after the execution
of the document where there is a stipulation to the contrary.
The law does not say that such a symbolic delivery is suspended when at the execution of the
document a stipulation to the contrary is made. What the law simply says is that no such
symbolic tradition can take place, — can exist — when there is a stipulation to the contrary.
As we understand the law, there is symbolic delivery when the sale is made in a public
document, and nothing appears therein to the contrary either expressly or impliedly; and no
such symbolic delivery can be held to take place when, as in the instant case, there is in the
document a stipulation to the contrary.
We do not hesitate to term symbolic such delivery of the thing as is supposed to be made
by the execution of the document, as provided in article 1462, although in that case it must
be considered to take place partly by operation of law. This kind of tradition finds its
precedent in law 8, title and Partida aforecited, which provides that "when one grants
another any property or thing, the latter acquires possession thereof, if the grantor delivers
to him the letters whereby the same is made, or makes a new one and hands it to him,
although he is not given physical possession of the thing."
It must be noted that this manner of delivering the thing through the execution of a public
document is common to personal as well as real property, for the Code does not distinguish,
and besides, taking this rule in connection with the following article, 1463, a conclusion to
this effect seems to be clearly justifiable.
This kind of tradition, however, is, as to its efficaciousness, subject to the terms of the
document, for if it appears therein, or can be inferred therefrom, that it was not the
intention of the parties to make delivery, no tradition can be deemed to have taken place.
Such would be the case, for instance, where a certain date is fixed when the purchaser
should take possession of the thing, or where in the case of a sale by installments, it is
stipulated that until payment of the last installment is made, the title to the property should
not be deemed to have been transmitted, or where the vendor reserves the right to use and
enjoy the property until the gathering of the pending crops. (10 Manresa, Codigo Civil, p.
129.)
The instant case is one of those above mentioned by the eminent commentator Mr. Manresa.
To use the phraseology of the above quoted passage, a certain date was fixed (namely, at the
end of four months, because id certum est quod certum reddi potest), when the purchaser
should take possession of the thing.
Neither can it be said that the house must be presumed to have been delivered to the first
purchaser after the lapse of the four months aforesaid, for such a presumption is overthrown
by the fact stipulated by the parties that this first purchaser never took possession of the
house.
We entertain no doubt, either under the facts or under the law of the case, as to the right of
the defendants to the house in question, with absolute exclusion of the plaintiffs.
Turning to the second point which is of a procedural nature, we hold that the trial court did
not commit any error in declaring the defendants owners of the house in question. It is true
that the answer does not expressly pray for such as affirmative relief. But both parties
expressly and solemnly stipulated that they submitted the case to the trial court for the
determination of the question as to which of the two purchasers acquired title to the house,
when in the stipulation of facts, they said the following to the court:
Under the foregoing facts, the case is submitted to the consideration of the court for the
determination of the question of law as to which of the two purchasers acquired title to the
property.
This statement made to the court below by both parties is tantamount to an amendment of
the prayer of the answer, and to a waiver by the party plaintiff of the right to question such a
defect, if it is at all, of the prayer of the answer.
The question having thus been raised, and both parties having requested the lower court to
determine which of the two litigating parties acquired the house in question, the lower court
did but fulfill its duty in determining the question presented and declaring upon the facts and
the law of the case, that the defendants, and not the plaintiffs, are the owners of the house in
dispute.
As above stated, the other assignments of error are but a corollary of the two points already
decided.
The judgment appealed from is affirmed, with the costs against the appellants. So ordered.
Separate Opinions
ARAULLO, C.J., dissenting:
Under the facts stated in the majority opinion, this case presents a double sale of a house of
mixed materials. The first was made to the plaintiffs on October 10, 1917, with a stipulation
that during the four months following said date the vendors should continue in possession of
the house for the reasons therein stated. The second was made on March 13, 1918, to the
defendants who took possession of the property, which is one month after the expiration of
the term stipulated in the first one. Both sales appear in a public document. None of the
documents was registered in the registry of property.
To which of the two purchasers was the title to the property in question transferred?
Article 1473 of the Civil Code provides:
If the same thing should have been sold to different vendees, the ownership shall be
transferred to the person who may have first taken possession thereof in good faith if it
should be personal property.
Should it be real property, it shall belong to the purchaser who first recorded it in the registry
of deeds.
Should it not be recorded, the property shall belong to the person who first took possession
of it in good faith, or, in default of possession, to the person who present the oldest title,
provided there is good faith.
Applying this provision to the instant case, there is no doubt that the ownership was
transferred to the purchaser who first gained possession in good faith. But who was the first
to gain possession? The defendants, according to the opinion of the majority. But with all the
respect due to the authoritative opinion of the majority, the undersigned think that it was the
plaintiffs.
Article 1462 of the Civil Code provides:
The thing sold shall be deemed delivered when the vendee is placed in the control and
possession thereof.
obligation effective, whereas that of the resolutory resolves the obligation — makes it entirely
ineffective.
The symbolic tradition, which is effected by the execution of the public document, was
suspended for four months by virtue of the stipulation. It cannot be said that it did not exist
because suspension presupposes the existence of that which is suspended. The four months
elapsed, the condition was fulfilled. It seems clear to us that symbolic tradition, which was
temporarily suspended, recovered its efficaciousness, as a necessary consequence of the
execution of the public document. To hold otherwise is to give the stipulation a meaning
contrary to the evident intention of the contracting parties.
The doctrine we maintain finds support in the very opinion of the authoritative commentator
of the Civil Code, Mr. Manresa.
This kind of tradition, however, is, as to its efficaciousness, subject to the terms of the
document, for if it appears therein, or can be inferred therefrom that it was not the intention
of the parties to make delivery, no tradition can be deemed to have taken place. Such would
be the case, for instance, where a certain date is fixed when the purchaser should take
possession of the thing, or where in the case of a sale by installments, it is stipulated that
until payment of the last installment is made, the title to the property should not be deemed
to have been transmitted, or where the vendor reserves the right to use and enjoy the
property until the gathering of the pending crops. (10 Manresa, Codigo Civil, p. 129.)
Manresa does not say that, at the expiration of the term fixed, or upon the payment of the last
installment, in the examples given by him, the public document ceases to produce legal effect
— the symbolic tradition. Neither can it be said in the case at bar that the lapse of the term
stipulated renders the document ineffective in so far as the effecting of tradition by its
execution is concerned, because this would amount to annulling an obligation by the
fulfillment of a suspensive condition.
For the foregoing the undersigned dissent from the opinion of the majority.

If the sale should be made by means of a public instrument, the execution thereof shall be
equivalent to the delivery of the thing which is the subject-matter of the contract unless the
contrary appears or may be clearly inferred from such instrument.

The majority opinion says: "At the time, therefore, of the execution of the deed in favor of the
plaintiff, the first purchaser, there was no symbolic delivery because there was an express
stipulation to the contrary. It cannot be said that after the lapse of the four months following,
during which the vendors were to continue in possession of the house, according to the
stipulation, any symbolic delivery subsisted. Nothing can subsist that did not exist before."

This reasoning, in our opinion, is applicable only where the stipulation inserted in the public
documents involves a resolutory condition. But to our mind the stipulation under
consideration constitutes a suspensive condition. The essential difference in law between
these two kinds of condition is that the fulfillment of the suspensive condition makes the
SALES – RIGHTS AND OBLIGATIONS OF THE VENDOR –DELIVERY OF THING SOLD – KINDS OF The RTC ruled that the execution of the deed of absolute sale did not result in constructive
DELIVERY – CONSTRUCTIVE DELIVERY – SYMBOLIC delivery of the machinery and equipment. It found that at the time of the sale, petitioner did
not have control over the machinery and equipment and, thus, could not have transferred
G.R. No. 167195 May 8, 2009 ownership by constructive delivery. The RTC ruled that petitioner is liable for breach of
contract and should pay for the actual damages suffered by respondent.
ASSET PRIVATIZATION TRUST, Petitioner, On petitioner’s appeal, the Court of Appeals affirmed in toto the decision of the RTC.
vs.
T.J. ENTERPRISES, Respondent. Hence this petition.

DECISION Before this Court, petitioner raises issues by attributing the following errors to the Court of
Appeals, to wit:
TINGA, J.:
I.
This is a Rule 45 petition1 which seeks the reversal of the Court of Appeals’ decision 2 and
resolution3 affirming the RTC’s decision4 holding petitioner liable for actual damages for breach The Court of Appeals erred in not finding that petitioner had complied with its obligation to
of contract. make delivery of the properties subject of the contract of sale.

Petitioner Asset Privatization Trust5 (petitioner) was a government entity created for the II.
purpose to conserve, to provisionally manage and to dispose assets of government
The Court of Appeals erred in not considering that the sale was on an "as-is-where-is" basis
institutions.6 Petitioner had acquired from the Development Bank of the Philippines (DBP)
wherein the properties were sold in the condition and in the place where they were located.
assets consisting of machinery and refrigeration equipment which were then stored at Golden
City compound, Pasay City. The compound was then leased to and in the physical possession III.
of Creative Lines, Inc., (Creative Lines). These assets were being sold on an as-is-where-is basis.
The Court of Appeals erred in not considering that respondent’s acceptance of petitioner’s
On 7 November 1990, petitioner and respondent entered into an absolute deed of sale over disclaimer of warranty forecloses respondent’s legal basis to enforce any right arising from the
certain machinery and refrigeration equipment identified as Lots Nos. 2, 3 and 5. Respondent contract.
paid the full amount of ₱84,000.00 as evidenced by petitioner’s Receipt No. 12844. After two
(2) days, respondent demanded the delivery of the machinery it had purchased. Sometime in IV.
March 1991, petitioner issued Gate Pass No. 4955. Respondent was able to pull out from the
compound the properties designated as Lots Nos. 3 and 5. However, during the hauling of Lot The reason for the failure to make actual delivery of the properties was not attributable to the
No. 2 consisting of sixteen (16) items, only nine (9) items were pulled out by respondent. The fault and was beyond the control of petitioner. The claim for damages against petitioner is
seven (7) items that were left behind consisted of the following: (1) one (1) Reefer Unit 1; (2) therefore bereft of legal basis.8
one (1) Reefer Unit 2; (3) one (1) Reefer Unit 3; (4) one (1) unit blast freezer with all accessories;
The first issue hinges on the determination of whether there was a constructive delivery of the
(5) one (1) unit chest freezer; (6) one (1) unit room air-conditioner; and (7) one (1) unit air
machinery and equipment upon the execution of the deed of absolute sale between petitioner
compressor. Creative Lines’ employees prevented respondent from hauling the remaining
and respondent.
machinery and equipment.
The ownership of a thing sold shall be transferred to the vendee upon the actual or
Respondent filed a complaint for specific performance and damages against petitioner and
constructive delivery thereof.9 The thing sold shall be understood as delivered when it is placed
Creative Lines.7 During the pendency of the case, respondent was able to pull out the
in the control and possession of the vendee.10
remaining machinery and equipment. However, upon inspection it was discovered that the
machinery and equipment were damaged and had missing parts. As a general rule, when the sale is made through a public instrument, the execution thereof
shall be equivalent to the delivery of the thing which is the object of the contract, if from the
Petitioner argued that upon the execution of the deed of sale it had complied with its
deed the contrary does not appear or cannot clearly be inferred. And with regard to movable
obligation to deliver the object of the sale since there was no stipulation to the contrary. It
property, its delivery may also be made by the delivery of the keys of the place or depository
further argued that being a sale on an as-is-where-is basis, it was the duty of respondent to
where it is stored or kept.11 In order for the execution of a public instrument to effect tradition,
take possession of the property. Petitioner claimed that there was already a constructive
the purchaser must be placed in control of the thing sold.12
delivery of the machinery and equipment.
However, the execution of a public instrument only gives rise to a prima facie presumption of
delivery. Such presumption is destroyed when the delivery is not effected because of a legal
impediment.13 It is necessary that the vendor shall have control over the thing sold that, at the
moment of sale, its material delivery could have been made.14 Thus, a person who does not
have actual possession of the thing sold cannot transfer constructive possession by the
execution and delivery of a public instrument.15
In this case, there was no constructive delivery of the machinery and equipment upon the
execution of the deed of absolute sale or upon the issuance of the gate pass since it was not
petitioner but Creative Lines which had actual possession of the property. The presumption of
constructive delivery is not applicable as it has to yield to the reality that the purchaser was
not placed in possession and control of the property.
On the second issue, petitioner posits that the sale being in an as-is-where-is basis, respondent
agreed to take possession of the things sold in the condition where they are found and from
the place
where they are located. The phrase as-is where-is basis pertains solely to the physical condition
of the thing sold, not to its legal situation.16 It is merely descriptive of the state of the thing
sold. Thus, the as-is where-is basis merely describes the actual state and location of the
machinery and equipment sold by petitioner to respondent. The depiction does not alter
petitioner’s responsibility to deliver the property to respondent.1awphi1.zw+
Anent the third issue, petitioner maintains that the presence of the disclaimer of warranty in
the deed of absolute sale absolves it from all warranties, implied or otherwise. The position is
untenable.
The vendor is bound to transfer the ownership of and deliver, as well as warrant the thing
which is the object of the sale.17 Ownership of the thing sold is acquired by the vendee from
the moment it its 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.18 A perusal of the deed of absolute sale shows that both the vendor and the
vendee represented and warranted to each other that each had all the requisite power and
authority to enter into the deed of absolute sale and that they shall perform each of their
respective obligations under the deed of absolute in accordance with the terms thereof. 19 As
previously shown, there was no actual or constructive delivery of the things sold. Thus,
petitioner has not performed its obligation to transfer ownership and possession of the things
sold to respondent.
As to the last issue, petitioner claims that its failure to make actual delivery was beyond its
control. It posits that the refusal of Creative Lines to allow the hauling of the machinery and
equipment was unforeseen and constituted a fortuitous event.
The matter of fortuitous events is governed by Art. 1174 of the Civil Code which provides that
except in cases expressly specified by the law, or when it is otherwise declared by stipulation,
or when the nature of the obligation requires assumption of risk, no person shall be
responsible for those events which could not be foreseen, or which though foreseen, were
inevitable. The elements of a fortuitous event are: (a) the cause of the unforeseen and
unexpected occurrence, must have been independent of human will; (b) the event that
constituted the caso fortuito must have been impossible to foresee or, if foreseeable,
impossible to avoid; (c) the occurrence must have been such as to render it impossible for the
debtors to fulfill their obligation in a normal manner, and; (d) the obligor must have been free
from any participation in the aggravation of the resulting injury to the creditor. 20
A fortuitous event may either be an act of God, or natural occurrences such as floods or
typhoons, or an act of man such as riots, strikes or wars.21 However, when the loss is found to
be partly the result of a person’s participation–whether by active intervention, neglect or
failure to act—the whole occurrence is humanized and removed from the rules applicable to
a fortuitous event.22
We quote with approval the following findings of the Court of Appeals, to wit:
We find that Creative Lines’ refusal to surrender the property to the vendee does not
constitute force majeure which exculpates APT from the payment of damages. This event
cannot be considered unavoidable or unforeseen. APT knew for a fact that the properties to
be sold were housed in the premises leased by Creative Lines. It should have made
arrangements with Creative Lines beforehand for the smooth and orderly removal of the
equipment. The principle embodied in the act of God doctrine strictly requires that the act
must be one occasioned exclusively by the violence of nature and all human agencies are to
be excluded from creating or entering into the cause of the mischief. When the effect, the
cause of which is to be considered, is found to be in part the result of the participation of man,
whether it be from active intervention or neglect, or failure to act, the whole occurrence is
thereby humanized, as it were, and removed from the rules applicable to the acts of God. 23
Moreover, Art. 1504 of the Civil Code provides that where actual delivery has been delayed
through the fault of either the buyer or seller the goods are at the risk of the party in fault. The
risk of loss or deterioration of the goods sold does not pass to the buyer until there is actual
or constructive delivery thereof. As previously discussed, there was no actual or constructive
delivery of the machinery and equipment. Thus, the risk of loss or deterioration of property is
borne by petitioner. Thus, it should be liable for the damages that may arise from the
delay.1avvphi1
Assuming arguendo that Creative Lines’ refusal to allow the hauling of the machinery and
equipment is a fortuitous event, petitioner will still be liable for damages. This Court agrees
with the appellate court’s findings on the matter of damages, thus:
Article 1170 of the Civil Code states: "Those who in the performance of their obligations are
guilty of fraud, negligence, or delay and those who in any manner contravene the tenor thereof
are liable for damages." In contracts and quasi-contracts, the damages for which the obligor
who acted in good faith is liable shall be those that are the natural and probable consequences
of the breach of the obligation, and which the parties have foreseen or could have reasonably
foreseen at the time the obligation was constituted.24 The trial court correctly awarded actual
damages as pleaded and proven during trial.25
WHEREFORE, the Court AFFIRMS in toto the Decision of the Court of Appeals dated 31 August
2004. Cost against petitioner.
SO ORDERED.
SALES – RIGHTS AND OBLIGATIONS OF THE VENDOR –DELIVERY OF THING SOLD – KINDS OF
DELIVERY – CONSTRUCTIVE DELIVERY – TRADITIO LONGA MANU
G.R. No. L-15155 December 29, 1960
BOARD OF LIQUIDATORS, petitioner-appellant,
vs.
EXEQUIEL FLORO, ET AL., oppositors-appellees.
REYES, J.B.L., J.:
From the order of the Court of First Instance of Manila, dated August 10, 1955, denying its
petition to exclude certain pieces of steel matting from the assets of the insolvent M. P.
Malabanan, the Board of Liquidators appealed to the Court of Appeals. The latter certified the
case to this Court on the ground that only questions of law are involved.
The Board of Liquidators (hereinafter referred to as the Board) is an agency of the Government
created under Executive Order No. 372 (November 24, 1950), and, pursuant to Executive Order
No. 377 (December 1, 1950), took over the functions of the defunct Surplus Property
Liquidating Committee.
On June 14, 1952 Melecio Malabanan entered into an agreement with the Board for the
salvage of surplus properties sunk in territorial waters off the provinces of Mindoro, La Union,
and Batangas (Exhibit "A"). By its terms, Malabanan was to commence operations within 30
days from execution of said contract, which was to be effective for a period of one (1) year
from the start of operations, extendible for a total period of not more than six (6) months. On
June 10, 1953, Malabanan requested for an extension of one (1) year for the salvage in waters
of Mindoro and Batangas; and the Board extended the contract up to November 30, 1953. On
November 18, 1953, Malabanan requested a second extension of one more year for the waters
of Occidental Mindoro, and Board again extended the contract up to August 31, 1954.
Malabanan submitted a recovery report dated July 26, 1954, wherein it is stated that he had
recovered a total of 13,107 pieces of steel mattings, as follows:
1. December, 1953-April 30, 1954 2,5552
2. May 1, 1954-June 30, 1954 10,552
13,107 (pieces)
Four months previously, Malabanan had entered into an agreement with Exequiel Floro, dated
March 31, 1954 (Exhibit 1, Floro), in which, among other things, it was agreed that Floro would
advance to Malabanan certain sums of money, not to exceed P25,000.00, repayment, thereof
being secured by quantities of steel mattings which Malabanan would consign to Floro; that
said advances were to paid within a certain period, and upon default at the expiration thereof,
Floro was, authorized to sell whatever steel mattings were in his possession under said
contract, in amount sufficient to satisfy the advances. Pursuant thereto, Floro claims to have
made total advances to the sum of P24,224.50.
It appears that as Malabanan was not able to repay Floro's advances, the latter, by a document
dated August 4, 1954, sold 11,047 pieces of steel mattings to Eulalio Legaspi for the sum of
P24,803.40.
Seventeen days later, on August 21, 1954, Malabanan filed in the Court of First Instance of
Manila a petition for voluntary insolvency, attaching thereto a Schedule of Accounts, in which
the Board was listed as one of the creditors for P10,874.46, and Exequiel Floro for P24,220.50,
the origin of the obligations being described as "Manila Royalty" and "Salvaging Operations",
respectively. Also attached was an Inventory of Properties, listing certain items of personal
property allegedly aggregating P33,707.00 in value. In this list were included 11,167 pieces of
steel mattings with an alleged estimated value of P33,501.00.
Soon after, the Board, claiming to be the owner of the listed steel matting, filed a petition to
exclude them from the inventory; and to make the insolvent account for a further 1,940 pieces
of steel matting, the difference between the number stated in the insolvent's recovery report
of July 26, 1954 and that stated in the inventory. Exequiel Floro opposed the Board's petition
and claimed that the steel matting listed had become the property of Eulalio Legaspi by virtue
of a deed of sale in his favor, executed by Floro pursuant to the latter's contract with
Malabanan on March 31, 1954. The court below, after reception of evidence as to the
genuineness and due execution of the deed of sale to Legaspi, as well as of the contract
between Malabanan and Floro, denied the Board's petition, declaring that Malabanan had
acquired ownership over the steel mattings under his contract with the Board; that Exequiel
Floro was properly authorized to dispose of the steel mattings under Floro's contract with
Malabanan; and that the sale to Eulalio Legaspi was valid and not contrary to the Insolvency
Law.
In this appeal, the Board contends that Malabanan did not acquire ownership over the steel
mattings due to his failure to comply with the terms of the contract, allegedly constituting
conditions precedent for the transfer of title, namely: payment of the price; audit and check
as to the nature, quantity and value of properties salvaged; weighing of the salvaged
properties to be conducted jointly by representatives of the Board and of Malabanan;
determination of the site for storage; audit and verification of the recovery reports by
government auditors; and firing of performance bond.
We are of the opinion, and so hold, that the contract (Exhibit "A") between Malabanan and
the Board had effect of vesting Malabanan with title to, or ownership of the steel mattings in
question as soon as they were brought up from the bottom of the sea. This is shown by
pertinent provisions of the contract as follows:
10. For and in consideration of the assignment by the BOARD OF LIQUIDATORS to the
CONTRACTOR (Malabanan) of all right, title and interest in and to all surplus properties
salvaged by the CONTRACTOR under this contract, the CONTRACTOR shall pay to the
Government Ninety Pesos (P90.00) per long ton(2,240 lbs.) of surplus properties recovered.
11. Payment of the agreed price shall be made monthly during the first ten (10) days of every
month on the basis of recovery reports of sunken surplus properties salvaged during the
 preceding month, duly verified and audited by the authorized representative of the BOARD
OF LIQUIDATORS.
That Malabanan was required under the contract to post a bond of P10,000.00 to guarantee
compliance with the terms and conditions of the contract; that the operation for salvage were
entirely at Malabanan's expense and risks; that gold, silver, copper, coins, currency, jewelry,
precious stones, etc. were excepted from the contract, and were instead required to be turned
over to the Board for disposition; that the expenses for storage, including guard service, were
for Malabanan's account — all these circumstances indicated that ownership of the goods
passed to Malabanan as soon as they were recovered or salvaged (i.e., as soon as the salvor
had gained effective possession of the goods), and not only after payment of the stipulated
price. .
While there can be reservation of title in the seller until full payment of the price (Article 1478,
N.C.C.), or, until fulfillment of a condition (Article 1505, N.C.C.); and while execution of a public
instrument amounts to delivery only when from the deed the contrary does not appear or
cannot clearly be inferred (Article 1498, supra), there is nothing in the said contract which may
be deemed a reservation of title, or from which it may clearly be inferred that delivery was not
intended.
The contention that there was no delivery is incorrect. While there was no physical tradition,
there was one by agreement (traditio longa manu) in conformity with Article 1499 of the Civil
Code.lawphil.net
Art. 1499 — The delivery of movable property may likewise be made by the mere consent
or agreement of the contracting parties, if the thing sold cannot be transferred to the
possession of the vendee at the time of the sale. . . .
As observed earlier, there is nothing in the terms of the public instrument in question from
which an intent to withhold delivery or transfer of title may be inferred.
The Board also contends that as no renewal of the bond required was filed for the extension
of the contract, it ceased to have any force and effect; and, as the steel mattings were
recovered during the extended period of the contract, Malabanan did not acquire any rights
thereto. The pertinent portion of the contract provides:
12. Jointly with the execution of this contract, the CONTRACTOR shall file a bond in the
amount of TEN THOUSAND (P10,000.00) PESOS to guarantee his faithful compliance with
the terms and conditions herein; Provided, that this contract shall not be considered to have
been executed notwithstanding the signing hereof by the parties until said bond shall have
been properly filed.
Malabanan filed a bond dated June 10, 1952, effective for one (1) year, or up to June 10, 1953.
The principal contract, executed on June 14, 1952, was first extended to November 30, 1953,
and finally, to August 31, 1954. As can be seen, there was no longer any bond from June 11,
1953 to August 31, 1954.
The lapse of the bond did not extinguish the contract between Malabanan and the Board. The
requirement that a bond be posted was already complied with when Malabanan filed the bond
dated June 10, 1952. A bond merely stands as guaranty for a principal obligation which exist
independently of said bond, the latter being an accessory contract (Valencia vs. RFC & C.A.,
103 Phil., 444). Significantly, its purpose, as per the terms of the contract, was "to guarantee
his (Malabanan's) faithful compliance with the terms and conditions herein" and, for violation
of the contract, the Board may declare "the bond forfeited" (par. 13). Being for its benefit, the
Board could legally waive the bond requirement (Valencia vs. RFC, et al., supra.), and it did so
when, the bond already having expired, it extended the contract not only once, but twice. In
none of the resolutions extending contract (Annexes "C" & "E", pp. 108-112, Record on Appeal)
was there a requirement that the bond be renewed, in the face of the first indorsement by the
Executive Officer recommending that Malabanan's request for a second extension be granted
"provided the bond be originally posted should continue."
There is no merit to the suggestion that there being a novation, Article 1299 of the Civil Code
should govern. Novation is never presumed, it being required that the intent to novate be
expressed clearly and unequivocally, or that the terms of the new agreement be incompatible
with the old contract (Article 1292, N.C.C.; Martinez vs. Cavives, 25 Phil. 581; Tiu Siuce vs.
Habaña, 45 Phil. 707; Pablo vs. Sapungan, 71 Phil. 145; Young vs. Villa, 93 Phil., 21; 49 Off. Gaz.,
[5] 1818.) Here there was neither express novation nor incompatibility from which it could be
implied. Moreover, a mere extension of the term (period) for payment or performance is not
novation (Inchausti vs. Yulo, 34 Phil. 978; Zapanta vs. De Rotaeche, 21 Phil. 154; Pablo vs.
Sapungan, Supra); and, while the extension covered only some of the areas originally agreed
upon, this change did not alter the essence of the contract (cf. Ramos vs. Gibbon, 67 Phil., 371;
Bank of P.I. vs. Herridge, 47 Phil., 57).
It is next contended that the sale by Floro to Legaspi on August 4, 1954 (within 30 days prior
to petition for insolvency) was void as a fraudulent transfer under Section 70 of the Insolvency
Law. The court below held that the sale to Legaspi was valid and not violative of Section 70;
but there having been no proceedings to determine whether the sale was fraudulent, we think
it was premature for the court below to decide this point, especially because under section 36,
No. 8. of the Insolvency Act, all proceedings to set aside fraudulent transfers should be brought
and prosecuted by the assignee, who can legally represent all the creditors of the insolvent
(Maceda, et al., vs. Hernandez, et al., 70 Phil., 261). To allow a single creditor to bring such a
proceeding would invite a multiplicity of suits, since the resolution of his case would not bind
the other creditors, who may refile the same claim independently, with diverse proofs, and
possibly give rise to contradictory rulings by the courts.
The order appealed from is hereby affirmed in so far as it declares the disputed goods to be
the property of the insolvent; but without prejudice to the right of the assignee in insolvency
to take whatever action may be proper to attack the alleged fraudulent transfer of the steel
matting to Eulalio Legaspi, and to make the proper parties account for the difference between
the number of pieces of steel matting stated in the insolvent's recovery report, Annex "B"
(13,107), and that stated in his inventory (11,167). Costs against appellant.
SALES – RIGHTS AND OBLIGATIONS OF THE VENDOR –DELIVERY OF THING SOLD – KINDS OF
DELIVERY – CONSTRUCTIVE DELIVERY – TRADITIO CONSTITUTOM POSSESSORIUM
G.R. No. L-13125 February 11, 1919
ROSALIO BAUTISTA, plaintiff-appellee,
vs.
FRANCISCO SIOSON, ET AL., defendants.
RAYMUNDO DE LA CRUZ, appellant.
TORRES, J.:
This appeal through bill of exceptions was filed by counsel for the defendant Raymundo de la
Cruz from the judgment of December 29, 1916, whereby the judge of the Court of First
Instance of Rizal held (1) that Rosalio Bautista, the plaintiff, was by merger the owner of the
properties described in subparagraphs (a) and (b) of paragraph 2 of the complaint; (2) ordered
Raymundo de la Cruz to deliver to the plaintiff Bautista the camarin or warehouse, built of
strong materials, described in the subparagraph (a) above mentioned; (3) ordered Francisco
Sioson to pay to said plaintiff Bautista the sum of P200, the amount of the rent due; (4)
absolved Francisco Santos Paulino from the compliant, as the evidence did not show that he
had taken possession of the house described in said subparagraph (b); and, finally (5) ordered
each of the defendants Francisco Sioson and Raymundo de la Cruz to pay one-half of the costs.
The appellant moved for a new trial, which motion being denied, he entered an exception,
and, upon filing the proper bill of exceptions, the same was approved and forwarded, together
with a transcript of all the evidence to the office of the clerk of this court.
On June 30, 1916, counsel for the plaintiff filed complaint in the Court of First Instance of Rizal,
in which he alleged that on September 4, 1912, by virtue of a contract of sale executed on
September 4, 1912, between the plaintiff Rosalio Bautista and the spouses Francisco Sioson
and Lorenza de la Cruz, for the sale of a camarin or warehouse of strong materials with an iron
roof and a house of mixed materials with a nipa roof — both buildings constructed on lots
situated in the town of Malabon, Rizal, and belonging to the chaplaincy known by the name of
Concepcion — said buildings were delivered to him on the date of the contract, which was
drawn up before a notary, under the condition that the vendors might repurchase them within
the term of two years, counted from the date of the contract; that immediately after the sale
of the plaintiff leased the purchased buildings to said vendor spouses, who had not paid the
price of the lease, nor repurchased said buildings, notwithstanding that the term of the
contract had elapsed with the result that the other defendant Raymundo de la Cruz was then
(at the time of the filing of the complaint) in material possession of said camarin under title of
owner, and Francisco Santos Paulino was in possession of the house, also under a like title.
Therefore he prayed the court to hold that the plaintiff's ownership in said buildings was
consolidated, to order the defendants to deliver them to the plaintiff, and to order Francisco
Sioson to pay to the plaintiff the price of the lease and to pay the costs.
The defendants Francisco Sioson and Francisco Santos Paulino did not put in an appearance to
answer the complaint, notwithstanding that they were duly summoned. They were therefore
declared in default.
Counsel for the defendant Raymundo de la Cruz admitted paragraphs 1 and 6 of the complaint,
and denied generally and specifically the other paragraphs thereof. In special defense he
alleged that the camarin described in subparagraph (a) , paragraph 2 of the complaint, was of
the exclusive ownership of the defendant Raymundo de la Cruz. He therefore asked that his
client be absolved from the complaint, with the costs against the plaintiff.
Upon the hearing of the case and the introduction of the evidence by the parties, the court
decided the suit in the manner aforesaid.
It now behooves us to determine who is the owner of the camarin of strong materials with an
iron roof, to which reference is made in subparagraph (a) of paragraph 2 of the complaint:
Whether it belongs to Rosalio Bautista, in whose favor its ownership became consolidated by
the lapse of the term of two years without its having been repurchased by the vendors; or to
Raymundo de la Cruz, to whom Francisco Sioson likewise sold the said camarin on August 5,
1914, one year and eleven months after the sale of this building to the plaintiff Bautista,
effected on September 4, 1912.
In order that the issue raised in this suit may be properly decided we shall herein make a
statement of the contracts executed by and between the litigants.
On September 4, 1912, the defendant Francisco Sioson and his wife Lorenza de la Cruz, through
a notarial instrument, sold to the plaintiff Rosalio Bautista the camarin in question, besides
some other property, under the right of repurchase. It was stipulated that if within two years
from the date of the contract the vendors or their successors in interest should not repurchase
said properties for the sum of P400, the price of the sale, such sale should become absolute
and thenceforth the ownership in the properties sold should be consolidated, the execution
of another instrument being unnecessary. (Exhibit A, p. 10.)
On the same date, September 4, 1912, Rosalio Bautista, through a notarial instrument, leased
the properties sold to him to the vendors Francisco Sioson and Lorenza de la Cruz, for the price
of P100 per annum, for the period of two years counted from the date of the instrument.
(Exhibit D, p. 15.)
On June 12, 1913, Lorenza de la Cruz died (Sten. notes, p. 29) and on August 5, 1914, Francisco
Sioson executed before a notary a document by which he sold under right of repurchase to the
defendant Raymundo de la Cruz, the camarin in question. It was stipulated in this instrument
that if within six months, counted from the 1st of August, 1914, the vendor Francisco Sioson
should return to the purchase Raymundo de la Cruz the sum of P422, the price of the purchase,
then the purchaser Raymundo de la Cruz would be obliged to execute in favor of said vendor
Francisco Sioson an instrument of resale, but that if within the period mentioned he should
not make the redemption stipulated, said sale should become absolute, the execution of
another instrument being unnecessary. (Exhibit 1, p. 17.)
From the instrument referred to in the preceding paragraphs it is concluded that the original
owner of the buildings in dispute, Francisco Sioson, and his wife, Lorenza de la Cruz, sold, on
September 4, 1912, the house and the camarin to the plaintiff Rosalio Bautista for P400, under
agreement of their resale within the term of two years counted from said date; and that, on
the same date, by means of a constitutum possessorium agreement, and in another new of the two purchasers first took possession of the camarin sold, and also whether the material
notarial instrument, the purchaser Bautista leased the properties sold to the vendors Francisco possession of the tenant is of a precarious nature, enjoyed in the same and representation of
Sioson and Lorenza de la Cruz at an annual rent of P100, for a period of two years counted the owner Bautista.
from the date above mentioned.
Article 1462 of the Civil Code reads:
After the lessee, Francisco Sioson, had been in possession of the properties leased for one year
and eleven months, he sold the camarin, one of them, by virtue of a notarial instrument to A thing sold shall be considered as delivered, when it is placed in the hands and possession
Raymundo de la Cruz, under the agreement that if he did not redeem the camarin so sold of the vendee.
within six months from the 1st of August, 1914, and return the sum of P422, such sale under
right of repurchase should become absolute, the execution of another instrument being
When the sale should be made by means of a public instrument, the execution thereof shall
unnecessary.
be equivalent to the delivery of the thing which is the object of the contract, if in said
instrument the contrary does not appear or may be clearly inferred.
As a result of the two said alienation, both set forth in notarial instruments though not
recorded in the registry of property the issue raised and to be decided is, which of the two
From the contest of this article it is deduced that the delivery or tradition of the thing sold may
purchasers, the plaintiff Bautista and the defendant Cruz, is the lawful owner of the camarin
be real or actual, and feigned. The execution of a public instrument constitutes one of the kinds
successively sold to the former and to the latter by the other defendant Francisco Sioson, its
of symbolic tradition, but, in all the different manners by which the thing sold may be
original owner, in accordance with the provisions contained in article 1473 of the Civil Code,
delivered, it is necessary that the record bear proof and that it may be held that such delivery
the last paragraph of which, among other things, prescribed:
or tradition was determined by the will of the parties to deliver and receive, respectively, the
thing that is the subject of the contract.
Should there be no entry, the property shall belong to the person who first took possession
of its in good faith . . .
In the contract of lease (Exhibit D, record, p. 15) the lessor, Rosalio Bautista, states that in his
capacity as owner he leased to the spouses Francisco Sioson and Lorenza de la Cruz, among
In view of the fact that the deed of sale executed by Francisco Sioson, the owner of the other properties, a camarin of strong material with an iron roof, at an annual rent of P100, the
camarin, and his wife, Lorenza de la Cruz, on September 4, 1912, in favor of Rosalio Bautista, lessees binding themselves to report to the lessor any act of disturbance committed by any
was not entered in the registry of property, and of the further fact that, upon the execution of other person, and all defects that might be occasioned to the building. The execution of this
the second sale of the same camarin by the said Sioson, which sale was made after the death instrument of lease shows that the camarin would be continued to be occupied by its previous
of his wife Lorenza by virtue of an instrument dated August 5, 1914, in favor of Raymundo de owner and vendor after it had been delivered, symbolically, by means of the instrument
la Cruz, under agreement of repurchase for the price of P422 the term of two years fixed for executed for the purpose in favor of the purchaser, in order that he might hold it in the capacity
the redemption of the camarin so sold had not yet expired, it may be presumed, in the absence of lessee, it being supposed, by a legal fiction, that the purchaser entered into possession of
of proof to the contrary, that the second purchaser Raymundo de la Cruz, on acquiring the the camarin sold, a form of possession utilized by the purchaser by virtue of the clause known
camarin of its original owner Francisco Sioson, who, according to the written contract, became in law as constitutum possessorium, stipulated between the contracting parties.
a tenant or lessee of the camarin, was not aware of said first sale to Bautista, and believed that
Sioson, who was in possession of the camarin, was still the owner thereof. Therefore, Cruz
So that by the execution of the deed of sale of September 4, 1912, Rosalio Bautista entered
acted in good faith in acquiring it, inasmuch as, through failure to enter the property in the
into the material possession under title of owner, of the camarin sold to him by Francisco
registry, there was no reason why the previous alienation of the camarin should have been
Sioson, and, by virtue of another instrument of lease, of the same date, the purchaser and
known. But be all this as it may, nevertheless, the actual and material possession of the
owner of the camarin conveyed and delivered this building to the lessee in view of said
camarin by Cruz does not constitute a sufficient legal reason for holding the he has a better
contract. Under these perfectly legal suppositions it is unquestionable that the purchaser
right to the building than the first purchaser Rosalio Bautista, although the latter was not in
Rosalio Bautista was the first person who entered into the possession of the camarin as soon
actual, physical, and material of the camarin that he had purchased. This conclusion is derived
as soon as he acquired it by virtue of said sale.
from a strict application of the provisions of said article 1473 of the Civil Code.
The material possession which the other defendant, Raymundo de la Cruz, now enjoys, not
Both alienations, effected successively by Francisco Sioson in favor of Bautista and Cruz, are
only was subsequent by one year and eleven months, but also, on the other hand, is an
recorded in notarial instruments, though they were not entered in the registry of property. To
unlawful possession which was transmitted to him by Francisco Sioson, who held the camarin
determine who is the lawful owner of the camarin sold, if the provisions of said article of the
precariously and in the capacity of tenant, and, consequently, without any right whatever to
Code are to be observed, we have first to determine the contention in regard to which of the
convey to Raymundo de la Cruz the possession under title of owner referred to in article 1473,
two purchasers is in possession thereof, and if, on the execution of the contract of lease by the
aforementioned of the Civil Code.
first purchaser in favor of the vendor himself, the constitutum possessorium agreement is to
be considered to have been stipulated, the conclusion must necessarily be reached as to which
This article says: "If the same thing should have been sold to different vendees. . .;" but it must
be understood that said sale was made by its original owner. In the instant case Francisco
Sioson, on affecting the second sale in favor of Raymundo de la Cruz, was in possession of the
camarin and occupied it, not in the capacity of owner, but in that of lessee or tenant, and
therefore absolutely had no right to dispose of the building in the capacity of owner thereof;
consequently Sioson could not convey to the second purchaser the lawful possession of the
disputed camarin.

After the foregoing elucidation of the main issue submitted to this court for decision, we deem
it unnecessary to pass upon the other issues relative to whether Francisco Sioson could have
sold, only after the death of his wife, the said camarin to Raymundo de la Cruz, and whether
the price of the second sale was part of a larger sum that pertained to the second purchaser,
as proceeds derived from the game of jueteng, inasmuch as, for the reasons above stated, it
has been shown that Raymundo de la Cruz could not have acquired any right in the camarin
involved in this suit; for Francisco Sioson, who sold to Cruz, occupied it as a mere tenant and
not as owner, and, consequently, was unable to transmit to the purchaser any property right
whatever or lawful possession under title of owner.

For all the foregoing reasons, whereby the errors assigned to the judgment appealed from
have been duly refuted, said judgment, being in conformity with the evidence of record, should
be, as it hereby is, affirmed, with the costs against the appellant Raymundo de la Cruz. So
ordered.

Separate Opinions

CARSON, J., dissenting:

I dissent. Manresa, in his commentaries, on article 1473 of the Civil Code, clearly indicates that
the possession referred to in that article is the real, the physical possession of the property;
and certain it is that to hold that the possession contemplated in this article may be secured
without the performance of some act which will give notice to innocent subsequent
purchasers, or of which subsequent purchasers may inform themselves by due diligence tends
to defeats the just and equitable provisions of the law.
SALES – RIGHTS AND OBLIGATIONS OF THE VENDOR –DELIVERY OF THING SOLD – KINDS OF order. Defendant also refused the optional offer of the plaintiff, of waiting for the remainder
DELIVERY – CONSTRUCTIVE DELIVERY – DELIVERY TO A COMMON CARRIER of the shipment until its arrival, or of accepting the substitution of seventy-one drums of
caustic soda of similar grade from plaintiff's stock. The plaintiff thereupon sold, for the account
G.R. No. 13203 September 18, 1918 of the defendant, eighty drums of caustic soda from which there was realized the sum of
P6,352.89. Deducting this sum from the selling price of P10,063.86, we have the amount
claimed as damages for alleged breach of the contract.
BEHN, MEYER & CO. (LTD.), plaintiff-appellant,
vs.
TEODORO R. YANCO, defendant-appellee. Law. — It is sufficient to note that the specific merchandise was never tendered. The soda
which the plaintiff offered to defendant was not of the "Carabao" brand, and the offer of
drums of soda of another kind was not made within the time that a March shipment, according
MALCOLM, J.:
to another provision the contract, would normally have been available.
The first inquiry to be determined is what was the contract between the parties.
2. PLACE OF DELIVERY.
The memorandum agreement executed by the duly authorized representatives of the parties
Facts. — The contract provided for "c.i.f. Manila, pagadero against delivery of documents."
to this action reads:

Law. — Determination of the place of delivery always resolves itself into a question of act. If
Contract No. 37.
the contract be silent as to the person or mode by which the goods are to be sent, delivery by
the vendor to a common carrier, in the usual and ordinary course of business, transfers the
MANILA, 7 de marzo, de 1916. property to the vendee. A specification in a contact relative to the payment of freight can be
taken to indicate the intention of the parties in regard to the place of delivery. If the buyer is
to pay the freight, it is reasonable to suppose that he does so because the goods become his
Confirmanos haber vendido a Bazar Siglo XX, 80 drums Caustic Soda 76 per cent "Carabao" at the point of shipment. On the other hand, if the seller is to pay the freight, the inference is
brand al precio de Dollar Gold Nine and 75/100 per 100-lbs., c.i.f. Manila, pagadero against equally so strong that the duty of the seller is to have the goods transported to their ultimate
delivery of documents. Embarque March, 1916. destination and that title to property does not pass until the goods have reached their
destination. (See Williston on Sales, PP. 406-408.)

Comprador Bazar Siglo XX

The letters "c.i.f." found in British contracts stand for cost, insurance, and freight. They signify
de Teodoro R. Yangco
that the price fixed covers not only the cost of the goods, but the expense of freight and
J. Siquia
insurance to be paid by the seller. (Ireland vs. Livingston, L. R., 5 H. L., 395.) Our instant
contract, in addition to the letters "c.i.f.," has the word following, "Manila." Under such a
Vendores
contract, an Australian case is authority for the proposition that no inference is permissible
BEHN, MEYER & CO. (Ltd.)
that a seller was bound to deliver at the point of destination. (Bowden vs. Little, 4 Comm.
O. LOMBECK.
[Australia], 1364.)

This contract of sale can be analyzed into three component parts.
1. SUBJECT MATTER AND CONSIDERATION.
Facts. — The contract provided for "80 drums Caustic Soda 76 per cent "Carabao" brand al
precio de Dollar Gold Nine and 75/100 1-lbs."
Resorting to the circumstances surrounding the agreement are we are permitted to do, in
pursuance of this provision, the merchandise was shipped from New York on the steamship
Chinese Prince. The steamship was detained by the British authorities at Penang, and part of
the cargo, including seventy-one drums of caustic soda, was removed. Defendant refused to
accept delivery of the remaining nine drums of soda on the ground that the goods were in bad
In mercantile contracts of American origin the letters "F.O.B." standing for the words "Free on
Board," are frequently used. The meaning is that the seller shall bear all expenses until the
goods are delivered where they are to be "F.O.B." According as to whether the goods are to
be delivered "F.O.B." at the point of shipment or at the point of destination determines the
time when property passes.
Both the terms "c.i.f." and "F.O.B." merely make rules of presumption which yield to proof of
contrary intention. As Benjamin, in his work on Sales, well says: "The question, at last, is one
of intent, to be ascertained by a consideration of all the circumstances." For instance, in a case
of Philippine origin, appealed to the United States Supreme Court, it was held that the sale was
complete on shipment, though the contract was for goods, "F.O.B. Manila," the place of
destination the other terms of the contract showing the intention to transfer the property. contemplated by article 1451 of the Civil Code, the vendee can demand fulfillment of the
(United States vs. R. P. Andrews & Co. [1907], 207 U.S., 229.) contract, and this being shown to be impossible, is relieved of his obligation. There thus being
sufficient ground for rescission, the defendant is not liable.
With all due deference to the decision of the High Court of Australia, we believe that the word
Manila in conjunction with the letters "c.i.f." must mean that the contract price, covering costs, The judgment of the trial court ordering that the plaintiff take nothing by its action, without
insurance, and freight, signifies that delivery was to made at Manila. If the plaintiff company special finding as to costs, is affirmed, with the costs of this instance. Against the appellant. So
has seriously thought that the place of delivery was New York and Not Manila, it would not ordered.
have gone to the trouble of making fruitless attempts to substitute goods for the merchandise
named in the contract, but would have permitted the entire loss of the shipment to fall upon
the defendant. Under plaintiffs hypothesis, the defendant would have been the absolute
owner of the specific soda confiscated at Penang and would have been indebted for the
contract price of the same.

This view is corroborated by the facts. The goods were not shipped nor consigned from New
York to plaintiff. The bill of lading was for goods received from Neuss Hesslein & Co. the
documents evidencing said shipment and symbolizing the property were sent by Neuss
Hesslein & Co. to the Bank of the Philippine Islands with a draft upon Behn, Meyer & Co. and
with instructions to deliver the same, and thus transfer the property to Behn, Meyer & Co.
when and if Behn, Meyer & Co. should pay the draft.

The place of delivery was Manila and plaintiff has not legally excused default in delivery of the
specified merchandise at that place.

3. TIME OF DELIVERY.

Facts. — The contract provided for: "Embarque: March 1916," the merchandise was in fact
shipped from New York on the Steamship Chinese Prince on April 12, 1916.

Law. — The previous discussion makes a resolution of this point unprofitable, although the
decision of the United States Supreme Court in Norrington vs. Wright (([1885], 115 U.S., 188)
can be read with profit. Appellant's second and third assignments of error could, if necessary,
be admitted, and still could not recover.

THE CONTRACT.

To answer the inquiry with which we begun this decision, the contract between the parties
was for 80 drums of caustic soda, 76 per cent "Carabao" brand, at the price of $9.75 per one
hundred pounds, cost, insurance, and freight included, to be shipped during March, 1916, to
be delivered to Manila and paid for on delivery of the documents.

PERFORMANCE.

In resume, we find that the plaintiff has not proved the performance on its part of the
conditions precedent in the contract. The warranty — the material promise — of the seller to
the buyer has not been complied with. The buyer may therefore rescind the contract of sale
because of a breach in substantial particulars going to the essence of the contract. As
SALES – RIGHTS AND OBLIGATIONS OF THE VENDOR –DELIVERY OF THING SOLD – KINDS OF
DELIVERY – CONSTRUCTIVE DELIVERY – DELIVERY TO A COMMON CARRIER
[G.R. No. L-8717. November 20, 1956.]
GENERAL FOODS CORPORATION, Plaintiff-Appellant, vs. NATIONAL COCONUT
CORPORATION, Defendant-Appellee.
DECISION
REYES, J. B. L., J.:
Appellant General Foods Corporation is a foreign corporation organized under the laws of the
State of Delaware, U. S. A., and licensed to do business in the Philippines; while Appellee
National Coconut Corporation (otherwise called NACOCO), was, on the date of the transaction
in question, a corporation created by Commonwealth Act No. 518, but later abolished and
place in liquidation by Executive Order No. 3727 dated November 24, 1950.
On September 23, 1947, Appellee sold to Appellant 1,500 (later reduced to 1,000) long tons of
copra, at $164 (later reduced to $163) per ton of 2,000 pounds, under the following terms and
conditions:
“CONTRACT NO. RH-3551
FRANKLIN BAKER DIVISION OF GENERAL FOODS CORPORATION
15th & Bloomfield Streets
Hoboken, New Jersey
WE CONFIRM HAVING PURCHASED FOR YOU TODAY from Messrs. National Coconut
Corporation, Manila, Philippine Islands, through Mercantile, Inc., Manila, P. I.
COMMODITY: COPRA — Fair Merchantable Quality, Basis
6% F. F. A.
QUALITY: As per rule 100 of National Institute of
Oilseeds Products.
QUANTITY: Fifteen Hundred (1500) tons of 2,240 pounds each. Seller has the option of
delivering 5 per cent more or less of the contracted quantity, such surplus or deficiency to
be settled as follows: On the basis of the delivered weight up to 3 per cent at the contract
price and any excess or deficiency beyond this 3 per cent at the market price of the day of
arrival at port of discharge, this market price to be fixed by the Executive Committee of the
National Institute of Oilseeds Products. Each shipment to be treated as a separate contract.
PACKING: In bulk. SHIPMENT: November, 1947, earlier if possible, from Philippine Islands.
PRICE: One hundred and sixty-four dollars ($164) per ton of 2,000 pounds, CIF New York.
PAYMENT: Buyers to open immediately by cable in favor of Sellers Irrevocable Letter of
Credit through the Philippine National Bank for 95 per cent of invoice value based on
shipping weight in exchange for the following documents:
1. Provisional Invoice.
2. Full set of negotiable ocean bills of lading, freight charges fully prepaid and showing the
material on board.
3. Weight Certificate confirming quantity shown on invoice and bill of lading.
4. Consular invoice or certificate of origin in duplicate.
5. Loading survey report and weight certificate of Superintendence Corporation.
6. Consular form No. 197 (Pure Food & Drug Certificate).
Balance due to be paid promptly upon ascertainment and based upon outturn weights and
quality at port of discharge.
WEIGHTS: Net landed weights.
SAMPLING: As per Rule 101 of National Institute of Oilseeds Products.
INSURANCE: Buyer to provide valid insurance for Marine and War risks for 110 per cent of
CIF contract value. Seller to allow buyer from the CIF price an amount equivalent to the
current rate of insurance prevailing on the date of shipment, in lieu of sellers covering usual
marine insurance themselves.
CLAUSE PARAMOUNT: This contract is subject to published rules of the National Institute
of Oilseeds Products adopted and now in force, which are hereby made a part hereof. Any
dispute arising under this contract shall be settled by a Board of Arbitrators selected by
the Chairman of the Foreign Commerce Association of the San Francisco Chamber of
Commerce and to be judged according to the rules of the National Institute of
Oilseeds Products and the findings of said Board will be final and binding upon all the
signatories hereto, providing such rules are not in conflict with existing Government
regulations.
The above shipment to be made under Franklin Baker’s license No. 26429. This contract covers
the sale made by the Nacoco thru the Mercantile, Inc. dated September 9, 1947 in the
Philippines.” (Exhibit “A”).
From November 14 to December 3, 1947, Appellee shipped 1054.6278 short tons of copra to
Appellant on board the S. S. “Mindoro”. The weighing of the cargo was done by the Luzon
Brokerage Co., in its capacity as agent of the General Superintendence Co., Ltd., of Geneva,
Switzerland, by taking the individual weight of each bag of copra and summing up the total
gross weight of the shipment, then weighing a certain number of empty bags to determine the
average tare of the empty bags, which was subtracted from the gross weight of the shipment
to determine the net weight of the cargo. On the strength of the net weigh thus found,
Appellee prepared and remitted to Appellant the corresponding bills of lading and other
documents, and withdrew from the latter’s letter of credit 95 per cent of the invoice value of
the shipment, or a total of $136,686.95.
Upon arrival in New York, the net cargo was reweighed by Appellant and was found to weigh
only 898.792 short tons. Deducting from the value of the shortage the sum of $8,092.02
received by Appellant from the insurer for 58.25 long tons lost or destroyed even before the
copra was loaded on board the vessel, Appellant demanded from Appellee the refund of the
amount of $24,154.59. Sometime after the receipt of Appellant’s demand, the Appellee,
through its officers-in-charge Jose Nieva, Sr., acknowledged in a letter liability for the
deficiency in the outturn weights of the copra and promised payment thereof as soon as funds
were available (Exhibit “B”). Then Appellee was, as already stated, abolished and went into
liquidation. Appellant submitted its claim to the Board of Liquidators, which refused to pay the
same; wherefore, it filed the present action in the Court of First Instance of Manila to recover
from Defendant-Appellee the amount of $24,154.49 and the 17 per cent exchange tax thereon
which, under the provisions of Republic Act 529, had to be paid in order to remit said amount
to the United States, plus attorney’s fees and costs. The Court a quo found for the Defendant
and dismissed the complaint; hence, this appeal by Plaintiff.
Plaintiff-Appellant’s theory is that although the sale between the parties quoted a CIF New
York price, the agreement contemplated the payment of the price according to the weight and
quality of the cargo upon arrival in New York, the port of destination, and that therefore, the
risk of the shipment was upon the seller. Defendant-Appellee, on the other hand, insists that
the contract in question was an ordinary C. I. F. agreement wherein delivery to the carrier is
delivery to the buyer, and that the shipment having been delivered to the buyer and the latter
having paid its price, the sale was consummated.
There is no question that under an ordinary C.I.F. agreement, delivery to the buyer is complete
upon delivery of the goods to the carrier and tender of the shipping and other documents
required by the contract and the insurance policy taken in the buyer’s behalf (77 C.J. S. 983;
46 Am. Jur. 313; II Williston on Sales, 103 — 107). There is equally no question that the parties
may, by express stipulation or impliedly (by making the buyer’s obligation depend on arrival
and inspection of the goods), modify a CIF contract and throw the risk upon the seller until
arrival in the port of destination (77 CJS 983- 984; Williston, supra, 116; also Willits vs.
Abekobei, 189 NYS 525; National Wholesale Grocery Co. vs. Mann. 146 NE 791, Klipstein vs.
Dilsizian, 273 F 473).
In the transaction now in question, despite the quoted price of CIF New York, and the right of
the seller to withdraw 95 per cent of the invoice price from the buyer’s letter of credit upon
tender of the shipping and other documents required by the contract, the express agreement
that the “Net Landed Weights” were to govern, and the provision that the balance of the price
was to be ascertained on the basis of outturn weights and quality of the cargo at the port of
discharge, indicate an intention that the precise amount to be paid by the buyer depended
upon the ascertainment of the exact net weight of the cargo at the port of destination. That is
furthermore shown by the provision that the seller could deliver 5 per cent more or less than
the contracted quantity, such surplus or deficiency to be paid “on the basis of the delivered
weight”.
In our opinion, the governing rule may be found in the decision of the Supreme Court of New
York in the case of Warner, Barnes & Co. vs. Warner Sugar R. Co., 192 NYS 151, cited in
Appellee’s brief (pp. 16-19.) In said case, the parties had expressly agreed that the payment of
the price was to be according to “landed weights”, and that delivery of the goods shipped from
the Philippine Islands to New York was to be in New York ex vessel at wharf; but it was also
agreed that the seller had the right, upon presentation of full shipping documents, including
full insurance, to draw upon the Defendants for 90 per cent of the invoice price, evidencing an
intent to give the buyers dominion over the goods and to place the risk of loss upon them. The
reasonable construction given by the Court to this contract was that:
“though the seller was required to deliver the goods at a customary wharf in New York, and
the price could not be finally determined until the goods were landed, yet the property in the
goods and the risk of loss was intended to pass when the full shipping documents were
presented, including an insurance policy. If the goods were totally lost, then by the express
terms of the contract the buyers were to pay the full amount of invoice and if the goods were
partially lost, then it is fairly inferable that, while payment was to be made according to landed
weights, the seller should not be deprived of the right to show that these landed weights were
diminished by loss or damage due to the risk of the voyage. Any other construction of the
contract would require the seller to provide insurance for the buyer for a loss which falls not
on the buyer, but on the seller.” (Emphasis supplied.)
The same could be said in the instant case. While the risk of loss was apparently placed on the
Appellant after delivery of the cargo to the carrier, it was nevertheless agreed that the
payment of the price was to be according to the “net landed weight”. The net landed or
outturn weight of the cargo, upon arrival in New York, was 898.692 short tons. Although the
evidence shows that the estimated weight of the shipment when it left Manila was 1,054.6278
tons, the Appellee had the burden of proof to show that the shortage in weight upon arrival in
New York was due to risks of the voyage and not the natural drying up of the copra while in
transit, or to reasonable allowances for errors in the weighing of the gross cargo and the empty
bags in Manila. In the absence of such proof on the part of the shipper-Appellee, we are
constrained to hold that the net landed weight of the shipment in New York should control, as
stipulated in the agreement, and that therefore, the Appellee should be held liable for the
amount of $24,154.59 which it had overdrawn from Appellant’s letter of credit.
Appellee contends that as it was only the “balance due to be paid” that was to be ascertained
and based “upon outturn weights and quality at port of discharge”, as provided in the contract,
there was no more balance due to be ascertained at the port of discharge because it had
already received full payment of the copra it sent to the Appellant when it withdrew
$136,686.95 from the latter’s letter of credit. The argument is untenable. The provision
regarding the ascertainment of the balance due based upon outturn weight and quality of the
shipment at the port of discharge, should not be construed separately from the stipulation
that the “net landed weight” was to control. The manifest intention of the parties was for the
total price to be finally ascertained only upon determining the net weight and quality of the
goods upon arrival in New York, most likely because the cargo in question, being copra, by
nature dries up and diminishes in weight during the voyage; that no bulk weigher was available
in Manila so that the best that could be done was to get the gross weight of the shipment and
deduct the average tare of the empty bags; and that the buyer in New York had no agent in
Manila to represent it and protect its interest during the weighing of the cargo. The intention
of the parties to be bound by the outturn or net landed weight in New York is clearly shown in
the letter of Appellee’s then officer-in-charge Jose Nieva, Sr., acknowledging liability for the
deficiency in the outturn weight of the copra (Exhibit “B”). Although this letter may not be
considered an admission of liability on the part of Appellee in the absence of a showing that
Nieva was authorized to admit liability for the corporation, it is nevertheless competent
evidence of the intention of the parties, particularly the NACOCO, to be bound by the net
landed weight or outturn weight of the copra at the port of discharge.

With respect to Appellant’s claim for damages equivalent to the 17 per cent excise tax which
it has to pay in order to remit the sum of $24,154.59 to the United States, such excise tax is no
longer imposed in view of the trade (Laurel-Langley) agreement, so that it need not be taken
into account.

Wherefore, the judgment appealed from is reversed and the Appellee National Coconut
Corporation is ordered to pay the Appellant General Foods Corporation the equivalent in
Philippine currency of the amount of $24,154.59, with legal interest from the time of the filing
of the complaint. No pronouncement as to costs. SO ORDERED.