614

SUPREME COURT REPORTS ANNOTATED

EDCA Publishing & Distributing Corp. vs. Santos

G.R. No. 80298. April 26, 1990.*

EDCA PUBLISHING & DISTRIBUTING CORP., petitioner, vs. THE SPOUSES

LEONOR and GERARDO SANTOS, doing business under the name and style of
“SANTOS BOOKSTORE,” and THE COURT OF APPEALS, respondents.
Civil Law; Property; Sales; Possession of movable property acquired in good faith is
equivalent to a title.—It is the contention of the petitioner that the private respondents
have not established their ownership of the disputed books because they have not even
produced a receipt to prove they had bought the stock. This is unacceptable. Precisely,
the first sentence of Article 559 provides that “the possession of movable property
acquired in good faith is equivalent to a title,” thus dispensing with further proof.

Same; Same; Contract of sale is consensual; Ownership shall pass from the vendor to
the vendee upon the actual or constructive delivery of the thing sold.—The contract of
sale is consensual and is perfected once agreement is reached between the parties on
the subject matter and the consideration. x x x It is clear from the above provisions,
particularly the last quoted, that ownership in the thing sold shall not pass to the buyer
until full payment of the purchase price only if there is a stipulation to that effect.
Otherwise, the rule is that such ownership shall pass from the vendor to the vendee
upon the actual or constructive delivery of the thing sold even if the purchase price has
not yet been paid.

Same; Same; Same; Non-payment creates a right to demand payment or to rescind the
contract, or to criminal prosecution.—Non-payment only creates a right to demand
payment or to rescind the contract, or to criminal prosecution in the case of bouncing
checks. But absent the stipulation above noted, delivery of the thing sold will effectively
transfer ownership to the buyer who can in turn transfer it to another.

Same; Same; Same; Same; It would be unfair to make the respondents who acted in
good faith, bear the prejudice sustained by EDCA as a result of its own negligence.—It
would certainly be unfair now to make the private respondents bear the prejudice
sustained by EDCA as a result of its own negligence. We cannot see the justice in
transfer-

_______________

* FIRST DIVISION.

615
VOL. 184, APRIL 26, 1990

615

EDCA Publishing & Distributing Corp. vs. Santos

ring EDCA’s loss to the Santoses who had acted in good faith, and with proper care,
when they bought the books from Cruz.

PETITION to review the decision of the Court of Appeals. Buena, J.

The facts are stated in the opinion of the Court.

     Emiliano S. Samson, R. Balderrama-Samson, Mary Anne B. Samson for petitioner.

     Cendaña, Santos, Delmundo & Cendaña for private respondents.

CRUZ, J.:

The case before us calls for the interpretation of Article 559 of the Civil Code and raises
the particular question of when a person may be deemed to have been “unlawfully
deprived” of movable property in the hands of another. The article runs in full as follows:

ART. 559. The possession of movable property acquired in good faith is equivalent to a
title. Nevertheless, one who has lost any movable or has been unlawfully deprived
thereof, may recover it from the person in possession of the same.

If the possessor of a movable lost or of which the owner has been unlawfully deprived
has acquired it in good faith at a public sale, the owner cannot obtain its return without
reimbursing the price paid therefor.

The movable property in this case consists of books, which were bought from the
petitioner by an impostor who sold it to the private respondents. Ownership of the books
was recognized in the private respondents by the Municipal Trial Court,1 which was
sustained by the Regional Trial Court,2 which was in turn sustained by the Court of
Appeals.3 The petitioner asks us to declare that all these courts have erred and should
be reversed.

This case arose when on October 5, 1981, a person identifying himself as Professor
Jose Cruz placed an order by telephone with the petitioner company for 406 books,
payable on delivery.4 EDCA prepared the corresponding invoice and delivered the
books as ordered, for which Cruz issued a personal check covering the purchase price
of P8,995.65.5 On October 7, 1981, Cruz sold 120 of the books to private respondent
Leonor Santos who, after verifying the seller’s ownership from the invoice he showed
her, paid him P1,700.00.6

Meanwhile, EDCA having become suspicious over a second order placed by Cruz even
before clearing of his first check, made inquiries with the De la Salle College where he
had claimed to be a dean and was informed that there was no such person in its
employ. Further verification revealed that Cruz had no more account or deposit with the
Philippine Amanah Bank, against which he had drawn the payment check.7 EDCA then
went to the police, which set a trap and arrested Cruz on October 7, 1981. Investigation
disclosed his real name as Tomas de la Peña and his sale of 120 of the books he had
ordered from EDCA to the private respondents.8

On the night of the same date, EDCA sought the assistance of the police in Precinct 5
at the UN Avenue, which forced their way into the store of the private respondents and
threatened Leonor Santos with prosecution for buying stolen property. They seized the
120 books without warrant, loading them in a van belonging to EDCA, and thereafter
turned them over to the petitioner.9

Protesting this high-handed action, the private respondents sued for recovery of the
books after demand for their return was rejected by EDCA. A writ of preliminary
attachment was issued and the petitioner, after initial refusal, finally surrendered the
books to the private respondents.10 As previously stated, the petitioner was
successively rebuffed in the three courts below and now hopes to secure relief from us.

To begin with, the Court expresses its disapproval of the arbitrary action of the petitioner
in taking the law into its own hands and forcibly recovering the disputed books from the
private respondents. The circumstance that it did so with the assistance of the police,
which should have been the first to uphold legal and peaceful processes, has
compounded the wrong even more deplorably. Questions like the one at bar are
decided not by policemen but by judges and with the use not of brute force but of lawful
writs.

Now to the merits.

It is the contention of the petitioner that the private respondents have not established
their ownership of the disputed books because they have not even produced a
receipt to prove they had bought the stock. This is unacceptable. Precisely, the first
sentence of Article 559 provides that “the possession of movable property acquired in
good faith is equivalent to a title,” thus dispensing with further proof.

The argument that the private respondents did not acquire the books in good faith has
been dismissed by the lower courts, and we agree. Leonor Santos first ascertained the
ownership of the books from the EDCA invoice showing that they had been sold to
Cruz, who said he was selling them for a discount because he was in financial need.
Private respondents are in the business of buying and selling books and often deal with
hard-up sellers who urgently have to part with their books at reduced prices.
 To Leonor Santos, Cruz must have been only one of the many such sellers she was
accustomed to dealing with. It is hardly bad faith for any one in the business of buying
and selling books to buy them at a discount and resell them for a profit.

But the real issue here is whether the petitioner has been unlawfully deprived of the
books because the check issued by the impostor in payment therefor was dishonored.

In its extended memorandum, EDCA cites numerous cases holding that the owner who
has been unlawfully deprived of personal property is entitled to its recovery except only
where the property was purchased at a public sale, in which event its return is subject to
reimbursement of the purchase price. The petitioner is begging the question. It is putting
the cart before the horse. Unlike in the cases invoked, it has yet to be established in the
case at bar that EDCA has been unlawfully deprived of the books.

The petitioner argues that it was, because the impostor acquired no title to the books
that he could have validly transferred to the private respondents. Its reason is that as
the payment check bounced for lack of funds, there was a failure of consideration that
nullified the contract of sale between it and Cruz.

The contract of sale is consensual and is perfected once agreement is reached between
the parties on the subject matter and the consideration. According to the Civil Code:

ART. 1475. The contract of sale is perfected at the moment there is a meeting of minds
upon the thing which is the object of the contract and upon the price.

From that moment, the parties may reciprocally demand performance, subject to the
provisions of the law governing the form of contracts.

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 price only if
there is a stipulation to that effect. Otherwise, the rule is that such ownership shall pass
from the vendor to the vendee upon the actual or constructive delivery of the thing sold
even if the purchase price has not yet been paid.

Non-payment only creates a right to demand payment or to rescind the contract, or to

criminal prosecution in the case of bouncing checks. But absent the stipulation above
noted, delivery of the thing sold will effectively transfer ownership to the buyer who can
in turn transfer it to another.

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 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

x x x The fraud and deceit practiced by Warner L. Feist earmarks this sale as a voidable
contract (Article 1390 N.C.C.). Being a voidable contract, it is susceptible of either
ratification or annulment. If the contract is ratified, the action to annul it is extinguished
(Article 1392, N.C.C.) and the contract is cleansed from all its defects (Article 1396,
N.C.C.); if the contract is annulled, the contracting parties are restored to their
respective situations before the contract and mutual restitution follows as a
consequence (Article 1398, N.C.C.).

However, as long as no action is taken by the party entitled, either that of annulment or
of ratification, the contract of sale remains valid and binding. When plaintiff-appellant
Trinidad C. Tagatac delivered the car to Feist by virtue of said voidable contract of sale,
the title to the car passed to Feist. Of course, the title that Feist acquired was defective
and voidable. Nevertheless, at the time he sold the car to Felix Sanchez, his title 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. 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.

     Narvasa (Chairman), Gancayco, Griño-Aquino and Medialdea, JJ., concur.

Decision affirmed. Petition denied.

Note.—Conveyance of property which is manifestly fraudulent, to defeat a judgment in

favor of the judgment creditors, is null and void. (Tanchoco vs. Aquino, 154 SCRA 1.)

——o0o——

622 EDCA Publishing & Distributing Corp. vs. Santos, 184 SCRA 614, G.R. No. 80298
April 26, 1990