Republic of the Philippines Belizo for resale and to facilitate it he gave the latter a letter of authority to
SUPREME COURT secure a new certificate of registration in his name (plaintiff's) and that by
Manila
EN BANC
G.R. No. L-8257 April 13, 1956
JOSE R. CRUZ, plaintiff-appellant,
vs.
REYNALDO PAHATI, ET AL., defendants-appellees.
Panganiban Law Offices and Arsenio Roldan for appellant.
Carlos, Laurea, Fernando and Padilla for appellees.
BAUTISTA ANGELO, J.:
This is an action of replevin instituted by plaintiff in the Court of Firts
Instance of Manila to recover the possession of an automobile and certain
amount as damages and attorney's fees resulting from his illegal
deprivation thereof.
The original defendants were Reynaldo Pahati and Felixberto Bulahan but,
upon amendment of the complaint, Jesusito Belizo was included as party
defendant who was summoned by publication because his whereabouts
were not known. Belizo failed to appear or answer the complaint and so he
was declared default.
Pahati admitted having bought the automobile from Bulahan, for the sum of
P4,900 which he paid in check. When the Manila Police Department
impounded the automobile, he cancelled the sale and stopped the
payment of the check and as a result he returned the automobile to
Bulahan who in turned surrended the check for cancellation. He set up a
counterclaim for the sum of P2,000 as attorney's fees.
Bulahan on his part claims that he acquired the automobile from Jesusito
Belizo for value and without having any knowledge of any defect in the title
of the latter; that plaintiff had previously acquired title to said automobile by
purchase from Belizo as evidenced by a deed of sale executed to that
effect; that later plaintiff delivered the possession of the automobile to
having clothed Belizo with an apparent ownership or authority to sell the
automobile, plaintiff is now estopped to deny such ownership or authority.
Bulahan claims that between two innocent parties, he who gave occasion,
through his conduct, to the falsification committed by Belizo, should be the
one to suffer the loss and this one is the plaintiff. Bulahan also set up a
counterclaim for P17,000 as damages and attorney's fees.
After the presentation of the evidence, the court rendered judgment
declaring defendant Bulahan entitled to the automobile in question and
consequently ordered the plaintiff to return it to said defendant and, upon
his failure to do so, to pay him the sum of P4,900, with legal interest from
the date of the decision. The claim for damages and attorney's fees of
Bulahan was denied. Defendant Belizo was however ordered to indemnify
the plaintiff in the amount of P4,900 and pay the sum of P5,000 as moral
damages. The counterclaim of defendant Pahati was denied for lack of
evidence. The case was taken directly to this Court by the plaintiff.
The lower court found that the automobile in question was originally owned
by the Nothern Motors, Inc. which later sold it to Chinaman Lu Dag. This
Chinaman sold it afterwards to Jesusito Belizo and the latter in turn sold it
to plaintiff. Belizo was then a dealer in second hand cars. One year
thereafter, Belizo offered the plaintiff to sell the automobile for him claiming
to have a buyer for it. Plaintiff agreed. At that time, plaintiff's certificate of
registration was missing and, upon the suggestion of Belizo, plaintiff wrote
a letter addressed to the Motor Section of the Bureau of Public Works for
the issuance of a new registration certificate alleging as reason the loss of
the one previously issued to him and stating that he was intending to sell
his car. This letter was delivered to Belizo on March 3, 1952. He also
turned over Belizo the automobile on the latter's pretext that he was going
to show it to a prospective buyer. On March 7, 1952, the letter was falsified
and converted into an authorized deed of sale in favor of Belizo by erasing
a portion thereof and adding in its place the words "sold the above car to
Mr. Jesusito Belizo of 25 Valencia, San Francisco del Monte, for Five
Thousand Pesos (P5,000)." Armed with this deed of sale, Belizo
succeeded in ontaining a certificate of registration in his name on the same
date, March 7, 1952, and also on the same date, Belizo sold the car to
Felixberto Bulahan who in turn sold it to Reynaldo Pahati, a second hand
car dealer. These facts show that the letter was falsified by Belizo to enable
him to sell the car to Bulahan for a valuable consideration.
This is a case which involves a conflict of rights of two persons who claim to be the
owners of the same property; plaintiff and defendant Bulahan. Both were found by
the lower court to be innocent and to have acted in good faith. They were found to
be the victims of Belizo who falsified the letter given him by plaintiff to enable him to
sell the car of Bulahan for profit. Who has, therefore, a better right of the two over
the car?.
The law applicable to the case is Article 559 of the new Civil Code which provides:
ART. 559. The possession of movable property acquired in good faith is equivalent
to a title. Nevertheless, one who has lost any movable or has been unlawfully
deprived thereof, may recover it from the person in possession of the same.
If the possessor of a movable lost or of which the owner has been unlawfully
deprived, has acquired it in good faith at a public sale, the owner cannot obtain its
return without reimbursing the price paid therefor.
It appears that "one who has lost any movable or has been unlawfully deprived
thereof, may recover it from the person in possession of the same" and the only
defense the latter may have is if he "has acquired it in good faith at a public sale" in
which case "the owner cannot obtain its return without reimbursing the price paid
therefor." And supplementing this provision, Article 1505 of the same Code
provides that "where goods are sold by a person who is not the owner thereof, and
who does not sell them under authority or with the consent of the owner, the buyer
acquires no better title to the goods than the seller had, unless the owner of the
goods is by his conduct precluded from denying the seller's authority to sell.
Applying the above legal provisions to the facts of this case, one is inevitably led to
the conclusion that plaintiff has a better right to the car in question than defendant
Bulahan for it cannot be disputed that plaintiff had been illegally deprived thereof
because of the ingenious scheme utilized by Belizo to enable him to dispose of it as
if he were the owner thereof. Plaintiff therefore can still recover the possession of
the car even if defendant Bulahan had acted in good faith in purchasing it from
Belizo. Nor can it be pretended that the conduct of plaintiff in giving Belizo a letter to
secure the issuance of a new certificate of registration constitutes a sufficient
defense that would preclude recovery because of the undisputed fact that that letter
was falsified and this fact can be clearly seen by a cursory examination of the
document. If Bulahan had been more diligent he could have seen that the pertinent
portion of the letter had been erased which would have placed him on guard to
make an inquiry as regards the authority of Belizo to sell the car. This he failed to
do.
The right of the plaintiff to the car in question can also be justified under the doctrine
laid down in U. S. vs. Sotelo, 28 Phil., 147. This is a case of estafa wherein one
Sotelo misappropriated a ring belonging to Alejandra Dormir. In the course of the
decision, the Court said that "Whoever may have been deprived of his property in
consequence of a crime is entitled to the recovery thereof, even if such property is
in the possession of a third party who acquired it by legal means other than those
expressly stated in Article 464 of the Civil Code" (p. 147), which refers to property
pledged in the "Monte de Piedad", an establishment organized under the authority
of the Government. The Court further said: It is a fundamental principle of our law of
personal property that no man can be divested of it without his own consent;
consequently, even an honest purchaser, under a defective title, cannot resist the
claim of the true owner. The maxim that 'No man can transfer a better title than he
has himself "obtain in the civil as well as in the common law." (p. 158).
Counsel for appellee places much reliance on the common law principle that
"Where one of two innocent parties must suffer by a fraud perpetrated by another,
the law imposes the loss upon the party who, by his misplaced confidence, has
enabled the fraud to be committed" (Sager vs. W. T. Rawleight Co. 153 Va. 514,
150 S. E. 244, 66 A.L.R. 305), and contends that, as between plaintiff and Bulahan,
the former should bear the loss because of the confidence he reposed in Belizo
which enabled the latter to commit the falsification. But this principle cannot be
applied to this case which is coverred by an express provision of our new Civil
Code. Between a common law principle and a statutory provision, the latter must
undoubtedly prevail in this jurisdiction. Moreover we entertain serious doubt if,
under the circumstances obtaining, Bulahan may be considered more innocent
than the plaintiff in dealing with the car in question. We prefer not to elaborate on
this matter it being necessary considering the conclusion we have reached.
Wherefore, the decision appealed from is reversed. The Court declares plaintiff to
be entitled to recover the car in question, and orders defendant Jesusito Belizo to
pay him the sum of P5,000 as moral damages, plus P2,000 as attorney's fees. The
Court absolves defendant Bulahan and Pahati from the complaint as regards the
claim for damages, reserving to Bulahan whatever action he may deem proper to
take against Jesusito Belizo. No costs.
Paras, C. J., Bengzon, Padilla, Montemayor, Jugo, Labrador, Concepcion, Reyes,
J. B. L., and Endencia, JJ.,concur.
CRUZ v. PAHATI
The common law principle that the one who has made the happening of
fraud possible through misplaced confidence must suffer the consequence
cannot be applied since there is an express provision covering the case.
Article 559, a statutory provision, prevails over a common law principle.
FACTS:
Jesusito Belizo is a second hand car dealer who sold an automobile (not
indicated what type) to plaintiff Jose Cruz. After a year, Belizo offered to
sell the sell the same car to a certain buyer. Plaintiff agreed and since the
certificate of registration was missing, Cruz made a letter addressed to the
Motor Section of the Bureau of Public Works for the issuance of a new
certificate.
and was made without authority, the buyer acquires no better right than
that of the seller unless the owner is estopped.
Moreover, if Bulahan had been more diligent, he could have seen that the
letter had an erased portion which couldve aroused his suspicion and
made him conscious on making inquiries which he failed to do.
The contention of Bulahanan re common law principle that the one who
has made the happening of fraud possible through misplaced confidence
must suffer the consequence cannot be applied since there is an express
provision covering the case.

Cruz gave the letter to Belizo to be submitted to the said office and he gave
the car as well on the latters pretext that he was going to show it to a
prospective buyer. The letter was falsified, making it appear that a deed of
sale was executed in favor of Belizo, who then got a certificate of
registration on his name.

Belizo was able to sell the car to respondent Bulahan who later sold it to
Pahati, but the sale was cancelled so the car went back to Bulahan.

ISSUE:
Between two innocent and parties in good faith, who has a better right over
the property?

HELD:
Cruz, the original owner has the better right for it cannot be disputed that
plaintiff had been illegally deprived through ingenious schemes by Belizo
and that Art 559 and 1505 are applicable in this situation.

1. Art 559 clearly indicates that the one who has lost any movable or has
been lawfully deprived thereof, may recover it from the person in
possession of the same and the only defense is if the other party has
acquired it in good faith and at a public sale.

2. Art 1505 clearly says that in cases where a sale is made not by owner
 Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-30817 September 29, 1972
DOMINADOR DIZON, doing business under the firm name
"Pawnshop of Dominador Dizon", petitioner,
vs.
LOURDES G. SUNTAY, respondent.
Andres T. Velarde for petitioner.
Rafael G. Suntay for respondent.
FERNANDO, J.:
In essence there is nothing novel in this petition for review of a decision of
the Court of Appeals affirming a lower court judgment sustaining the right
of an owner of a diamond ring, respondent Lourdes G. Suntay, as against
the claim of petitioner Dominador Dizon, who owns and operates a
pawnshop. The diamond ring was turned over to a certain Clarita R. Sison,
for sale on commission, along with other pieces of jewelry of respondent
Suntay. It was then pledged to petitioner. Since what was done was
violative of the terms of the agency, there was an attempt on her part to
recover possession thereof from petitioner, who refused. She had to file an
action then for its recovery. She was successful, as noted above, both in
the lower court and thereafter in the Court of Appeals. She prevailed as she
had in her favor the protection accorded by Article 559 of the Civil
Code.1 The matter was then elevated to us by petitioner. Ordinarily, our
discretion would have been exercised against giving due course to such
petition for review. The vigorous plea however, grounded on estoppel, by
his counsel, Atty. Andres T. Velarde, persuaded us to act otherwise. After a
careful perusal of the respective contentions of the parties, we fail to
perceive any sufficient justification for a departure from the literal language
of the applicable codal provision as uniformly interpreted by this Court in a
number of decisions. The invocation of estoppel is therefore unavailing.
We affirm.
The statement of the case as well as the controlling facts may be found in
the Court of Appeals decision penned by Justice Perez. Thus: "Plaintiff is
the owner of a three-carat diamond ring valued at P5,500.00. On June 13,
1962, the plaintiff and Clarita R. Sison entered into a transaction wherein
the plaintiff's ring was delivered to Clarita R. Sison for sale on commission.
Upon receiving the ring, Clarita R. Sison executed and delivered to the
plaintiff the receipt ... . The plaintiff had already previously known Clarita R.
Sison as the latter is a close friend of the plaintiff's cousin and they had
frequently met each other at the place of the plaintiff's said cousin. In fact,
about one year before their transaction of June 13, 1962 took place, Clarita
R. Sison received a piece of jewelry from the plaintiff to be sold for
P500.00, and when it was sold, Clarita R. Sison gave the price to the
plaintiff. After the lapse of a considerable time without Clarita R. Sison
having returned to the plaintiff the latter's ring, the plaintiff made demands
on Clarita R. Sison for the return of her ring but the latter could not comply
with the demands because, without the knowledge of the plaintiff, on June
15, 1962 or three days after the ring above-mentioned was received by
Clarita R. Sison from the plaintiff, said ring was pledged by Melia Sison,
niece of the husband of Clarita R. Sison, evidently in connivance with the
latter, with the defendant's pawnshop for P2,600.00 ... ."2 Then came this
portion of the decision under review: "Since the plaintiff insistently
demanded from Clarita R. Sison the return of her ring, the latter finally
delivered to the former the pawnshop ticket ... which is the receipt of the
pledge with the defendant's pawnshop of the plaintiff's ring. When the
plaintiff found out that Clarita R. Sison pledged, she took steps to file a
case of estafa against the latter with the fiscal's office. Subsequently
thereafter, the plaintiff, through her lawyer, wrote a letter ... dated
September 22, 1962, to the defendant asking for the delivery to the plaintiff
of her ring pledged with defendant's pawnshop under pawnshop receipt
serial-B No. 65606, dated June 15, 1962 ... . Since the defendant refused
to return the ring, the plaintiff filed the present action with the Court of First
Instance of Manila for the recovery of said ring, with P500.00 as attorney's
fees and costs. The plaintiff asked for the provisional remedy of replevin by
the delivery of the ring to her, upon her filing the requisite bond, pending
the final determination of the action. The lower court issued the writ of
replevin prayed for by plaintiff and the latter was able to take possession of
the ring during the pendency of the action upon her filing the requisite
bond."3 It was then noted that the lower court rendered judgment declaring
that plaintiff, now respondent Suntay, had the right to the possession of the
ring in question. Petitioner Dizon, as defendant, sought to have the
judgment reversed by the Court of Appeals. It did him no good. The
decision of May 19, 1969, now on review, affirmed the decision of the lower
court.
In the light of the facts as thus found by the Court of Appeals, well-nigh
conclusive on use, with the applicable law being what it is, this petition for
review cannot prosper. To repeat, the decision of the Court of Appeals
stands.
1. There is a fairly recent restatement of the force and effect of the
governing codal norm in De Gracia v. Court of Appeals.4 Thus: "The
controlling provision is Article 559 of the Civil Code. It reads thus: 'The
possession of movable property acquired in good faith is equivalent to a
title. Nevertheless, one who has lost any movable or has been unlawfully
deprived thereof may recover it from the person in possession of the same.
If the possessor of a movable lost of which the owner has been unlawfully
deprived, has acquired it in good faith at a public sale, the owner cannot
obtain its return without reimbursing the price paid therefor.' Respondent
Angelina D. Guevara, having been unlawfully deprived of the diamond ring
in question, was entitled to recover it from petitioner Consuelo S. de Garcia
who was found in possession of the same. The only exception the law
allows is when there is acquisition in good faith of the possessor at a public
sale, in which case the owner cannot obtain its return without reimbursing
the price. As authoritatively interpreted in Cruz v. Pahati, the right of the
owner cannot be defeated even by proof that there was good faith in the
acquisition by the possessor. There is a reiteration of this principle in Aznar
v. Yapdiangco. Thus: 'Suffice it to say in this regard that the right of the
owner to recover personal property acquired in good faith by another, is
based on his being dispossessed without his consent. The common law
principle that were one of two innocent persons must suffer by a fraud
perpetrated by another, the law imposes the loss upon the party who, by
his misplaced confidence, has enabled the fraud to be committed, cannot
be applied in a case which is covered by an express provision of the new
Civil Code, specifically Article 559. Between a common law principle and a
statutory provision, the latter must prevail in this jurisdiction." "5
2. It must have been a recognition of the compulsion exerted by the above
authoritative precedents that must have caused petitioner to invoke the
principle of estoppel. There is clearly a misapprehension. Such a
contention is devoid of any persuasive force.
Estoppel as known to the Rules of Court6 and prior to that to the Court of
Civil Procedure,7 has its roots in equity. Good faith is its basis.8 It is a
response to the demands of moral right and natural justice.9 For estoppel
to exist though, it is indispensable that there be a declaration, act or
omission by the party who is sought to be bound. Nor is this all. It is equally
a requisite that he, who would claim the benefits of such a principle, must
have altered his position, having been so intentionally and deliberately led
to comport himself thus, by what was declared or what was done or failed
to be done. If thereafter a litigation arises, the former would not be allowed
to disown such act, declaration or omission. The principle comes into full
play. It may successfully be relied upon. A court is to see to it then that
there is no turning back on one's word or a repudiation of one's act. So it
has been from our earliest decisions. As Justice Mapa pointed out in the
first case, a 1905 decision, Rodriguez v. Martinez, 10 a party should not be
permitted "to go against his own acts to the prejudice of [another]. Such a
holding would be contrary to the most rudimentary principles of justice and
law." 11 He is not, in the language of Justice Torres, in Irlanda v.
Pitargue, 12 promulgated in 1912, "allowed to gainsay [his] own acts or
deny rights which [he had] previously recognized." 13Some of the later
cases are to the effect that an unqualified and unconditional acceptance of
an agreement forecloses a claim for interest not therein
provided. 14 Equally so the circumstance that about a month after the date
of the conveyance, one of the parties informed the other of his being a
minor, according to Chief Justice Paras, "is of no moment, because [the
former's] previous misrepresentation had already estopped him from
disavowing the contract. 15 It is easily understandable why, under the
circumstances disclosed, estoppel is a frail reed to hang on to. There was
clearly the absence of an act or omission, as a result of which a position
had been assumed by petitioner, who if such elements were not lacking,
could not thereafter in law be prejudiced by his belief in what had been
misrepresented to him. 16 As was put by Justice Labrador, "a person
claimed to be estopped must have knowledge of the fact that his voluntary
acts would deprive him of some rights because said voluntary acts are
inconsistent with said rights." 17 To recapitulate, there is this
pronouncement not so long ago, from the pen of Justice Makalintal, who
reaffirmed that estoppel "has its origin in equity and, being based on moral
right and natural justice, finds applicability wherever and whenever the
special circumstances of a case so demand." 18
How then can petitioner in all seriousness assert that his appeal finds
support in the doctrine of estoppel? Neither the promptings of equity nor
the mandates of moral right and natural justice come to his rescue. He is
engaged in a business where presumably ordinary prudence would
manifest itself to ascertain whether or not an individual who is offering a
jewelry by way of a pledge is entitled to do so. If no such care be taken,
perhaps because of the difficulty of resisting opportunity for profit, he
should be the last to complain if thereafter the right of the true owner of
such jewelry should be recognized. The law for this sound reason accords
the latter protection. So it has always been since Varela v. Finnick, 19 a
1907 decision. According to Justice Torres: "In the present case not only
has the ownership and the origin of the jewels misappropriated been
unquestionably proven but also that the accused, acting fraudulently and in
bad faith, disposed of them and pledged them contrary to agreement, with
no right of ownership, and to the prejudice of the injured party, who was
thereby illegally deprived of said jewels; therefore, in accordance with the
provisions of article 464, the owner has an absolute right to recover the
jewels from the possession of whosoever holds them, ... ." 20 There have
been many other decisions to the same effect since then. At least nine may
be cited. 21 Nor could any other outcome be expected, considering the civil
code provisions both in the former Spanish legislation 22 and in the present
Code. 23 Petitioner ought to have been on his guard before accepting the
pledge in question. Evidently there was no such precaution availed of. He
therefore, has only himself to blame for the fix he is now in. It would be to
stretch the concept of estoppel to the breaking point if his contention were
to prevail. Moreover, there should have been a realization on his part that
courts are not likely to be impressed with a cry of distress emanating from
one who is in a business authorized to impose a higher rate of interest
precisely due to the greater risk assumed by him. A predicament of this
nature then does not suffice to call for less than undeviating adherence to
the literal terms of a codal provision. Moreover, while the activity he is
engaged in is no doubt legal, it is not to be lost sight of that it thrives on
taking advantage of the necessities precisely of that element of our
population whose lives are blighted by extreme poverty. From whatever
angle the question is viewed then, estoppel certainly cannot be justly
invoked.

WHEREFORE, the decision of the Court of Appeals of May 19, 1969 is

affirmed, with costs against petitioner.

Concepcion, C.J., Zaldivar, Makasiar, Antonio and Esguerra, JJ., concur.