THIRD DIVISION

[G.R. No. 86051. September 1, 1992.]

JAIME LEDESMA, petitioner, vs. THE HONORABLE COURT OF

APPEALS and CITIWIDE MOTORS, INC., respondents.

Ledesma, Saludo & Associates for petitioner.

Magtanggol C. Gunigundo for private respondent.

SYLLABUS

1. CIVIL LAW; POSSESSION; REQUISITES TO MAKE POSSESSION OF

MOVABLE PROPERTY EQUIVALENT TO TITLE. — It is quite clear that a party who
(a) has lost any movable or (b) has been unlawfully deprived thereof can recover the
same from the present possessor even if the latter acquired it in good faith and has,
therefore, title thereto for under the first sentence of Article 559, such manner of
acquisition is equivalent to a title. There are three (3) requisites to make possession of
movable property equivalent to title, namely: (a) the possession should be in good faith;
(b) the owner voluntarily parted with the possession of the thing; and (c) the possession
is in the concept of owner. (TOLENTINO, A.M., Civ il Code of the Philippines, Vol. II,
1983 ed., 275-276, citing 2-II Colin and Capitant 942; De Buen: Ibid., 1009, 2 Salvat
165; 4 Manresa 339). Undoubtedly, one who has lost a movable or who has been
unlawfully deprived of it cannot be said to have voluntarily parted with the possession
thereof. This is the justification for the exceptions found under the second sentence of
Article 559 of the Civil Code.
2. CIVIL LAW; SPECIAL CONTRACTS; CONTRACT OF SALE; ABSENCE
OF CONSIDERATION; EFFECT THEREOF. — There was a perfected unconditional
contract of sale between private respondent and the original vendee. The former
voluntarily caused the transfer of the certificate of registration of the vehicle in the name
of the first vendee — even if the said vendee was represented by someone who used a
fictitious name — and likewise voluntarily delivered the cars and the certificate of
registration to the vendee's alleged representative. Title thereto was forthwith
transferred to the vendee. The subsequent dishonor of the check because of the
alteration merely amounted to a failure of consideration which does not render the
contract of sale void, but merely allows the prejudiced party to sue for specific
performance or rescission of the contract, and to prosecute the impostor for estafa
under Article 315 of the Revised Penal Code.

DECISION

DAVIDE, JR., J : p

Petitioner impugns the Decision of 22 September 1988 of respondent Court of

Appeals 1 in C.A.-G.R. CV No. 05955 2 reversing the decision of then Branch XVIII-B
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 (Quezon City) of the then Court of First Instance (now Regional Trial Court) of Rizal in a
replevin case, Civil Case No. Q-24200, the dispositive portion of which reads: cdll

"Accordingly, the Court orders the plaintiff to return the repossessed

Isuzu Gemini, 1977 Model vehicle, subject of this case to the defendant
Ledesma. The incidental claim (sic) for damages professed by the plaintiff are
dismissed for lack of merit. On defendant's counterclaim, Court (sic) makes no
pronouncement as to any form of damages, particularly, moral, exemplary and
nominal in view of the fact that Citiwide has a perfect right to litigate its claim,
albeit by this pronouncement, it did not succeed." 3
which was supplemented by a Final Order dated 26 June 1980, the dispositive portion
of which reads:
"IN VIEW OF THE FOREGOING, the Court grants defendant Ledesma
the sum of P35,000.00 by way of actual damages recoverable upon plaintiff's
replevin bond. Plaintiff and its surety, the Rizal Surety and Insurance Co., are
hereby ordered jointly and severally to pay defendant Jaime Ledesma the sum
of P10,000.00 as damages for the wrongful issue of the writ of seizure, in line
with Rule 57, Sec. 20, incorporated in Rule 60, Sec. 10.
In conformity with the rules adverted to, this final order shall form part of
the judgment of this Court on September 5, 1979.
The motion for reconsideration of the judgment filed by the plaintiff is
hereby DENIED for lack of merit. No costs at this instance." 4
The decision of the trial court is anchored on its findings that (a) the proof on
record is not persuasive enough to show that defendant, petitioner herein, knew that the
vehicle in question was the object of a fraud and a swindle 5 and (b) that plaintiff, private
respondent herein, did not rebut or contradict Ledesma's evidence that valuable
consideration was paid for it.
The antecedent facts as summarized by the respondent Court of Appeals are as
follows:
"On September 27, 1977, a person representing himself to be Jojo
Consunji, purchased purportedly for his father, a certain Rustico T. Consunji,
two (2) brand new motor vehicles from plaintiff-appellant Citiwide Motors, Inc.,
more particularly described as follows: llcd

a) One (1) 1977 Isuzu Gemini, 2-door Model PF 50ZIK, with

Engine No. 751214 valued at P42,200.00; and

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

Said purchases are evidenced by Invoices Nos. 3054 and 3055,

respectively. (See Annexes A and B).
On September 28, 1977, plaintiff-appellant delivered the two-above
described motor vehicles to the person who represented himself as Jojo
Consunji, allegedly the son of the purported buyers Rustico T. Consunji, and
said person in turn issued to plaintiff-appellant Manager's Check No. 066-110-
0638 of the Philippine Commercial and Industrial Bank dated September 28,
1977 for the amount of P101,000.00 as full payment of the value of the two (2)
motor vehicles.
However, when plaintiff-appellant deposited the said check, it was
dishonored by the bank on the ground that it was tampered with, the correct
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 amount of P101.00 having been raised to P101,000.00 per the bank's notice of
dishonor (Annexes F and G).
On September 30, 1977, plaintiff-appellant reported to the Philippine
Constabulary the criminal act perpetrated by the person who misrepresented
himself as Jojo Consunji and in the course of the investigation, plaintiff-
appellant learned that the real identity of the wrongdoer/impostor is Armando
Suarez who has a long line of criminal cases against him for estafa using this
similar modus operandi.
On October 17, 1977, plaintiff-appellant was able to recover the Holden
Premier vehicle which was found abandoned somewhere in Quezon City.
On the other hand, plaintiff-appellant learned that the 1977 Isuzu Gemini
was transferred by Armando Suarez to third persons and was in the possession
of one Jaime Ledesma at the time plaintiff-appellant instituted this action for
replevin on November 16, 1977.
In his defense, Jaime Ledesma claims that he purchases (sic) and paid
for the subject vehicle in good faith from its registered owner, one Pedro Neyra,
as evidenced by the Land Transportation Commission Registration Certificate
No. RCO1427249. prLL

After posting the necessary bond in the amount double the value of the
subject motor vehicle, plaintiff-appellant was able to recover possession of the
1977 Isuzu Gemini as evidenced by the Sheriff's Return dated January 23,
1978." 6
After trial on the merits, the lower court rendered the decision and subsequently
issued the Final Order both earlier adverted to, which plaintiff (private respondent
herein) appealed to the respondent Court of Appeals; it submitted the following
assignment of errors:
"The trial court erred.
I
IN HOLDING THAT THE DEFENDANT IS ENTITLED TO THE POSSESSION
OF THE CAR;
II
IN HOLDING THAT THE DEFENDANT IS AN INNOCENT PURCHASER IN
GOOD FAITH AND FOR VALUE;
III
IN RULING THAT THE PLAINTIFF SHOULD RETURN THE CAR TO
DEFENDANT, DISMISSING ITS CLAIM FOR DAMAGES, AND GRANTING
DEFENDANT P35,000.00 DAMAGES RECOVERABLE AGAINST THE
REPLEVIN BOND AND P101,000.00 DAMAGES FOR ALLEGED WRONGFUL
SEIZURE;
IV
IN RENDERING THE DECISION DATED SEPTEMBER 3, 1979 AND THE
FINAL ORDER DATED JUNE 26, 1980." 7
In support of its first and second assigned errors, private respondent cites Article
559 of the Civil Code which provides:
"ARTICLE 559. The possession of movable property acquired in
good faith is equivalent to a title. Nevertheless, one who has lost any movable
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 or has been unlawfully deprived thereof, may recover it from the person in
possession of the same.
If the possessor of a movable lost or of which the owner has been
unlawfully deprived, has acquired it in good faith at a public sale, the owner
cannot obtain its return without reimbursing the price paid therefor."
Without in any way reversing the findings of the trial court that herein petitioner was a
buyer in good faith and for valuable consideration, the respondent Court ruled that: cdll

"'Under Article 559, Civil Code, the rule is to the effect that if the owner
has lost a thing, or if he has been unlawfully deprived of it, he has a right to
recover it not only from the finder, thief or robber, but also from third persons
who may have acquired it in good faith from such finder, thief or robber. The
said article establishes two (2) exceptions to the general rule of irrevendicability
(sic), to wit: when the owner (1) has lost the thing, or (2) has been unlawfully
deprived thereof. In these cases, the possessor cannot retain the thing as
against the owner who may recover it without paying any indemnity, except
when the possessor acquired it in a public sale.' (Aznar vs. Yapdiangco, 13
SCRA 486).
Put differently, where the owner has lost the thing or has been unlawfully
deprived thereof, the good faith of the possessor is not a bar to recovery of the
movable unless the possessor acquired it in a public sale of which there is no
pretense in this case. Contrary to the court's assumption, the issue is not
primarily the good faith of Ledesma for even if this were true, this may not be
invoked as a valid defense, if it be shown that Citiwide was unlawfully deprived
of the vehicle.
In the case of Dizon vs. Suntay, 47 SCRA 160, the Supreme Court had
occasion to define the phrase unlawfully deprived, to wit:
'. . . it extends to all cases where there has been no valid
transmission of ownership including depositary or lessee who has sold the
same. It is believed that the owner in such a case is undoubtedly
unlawfully deprived of his property and may recover the same from a
possessor in good faith.'

xxx xxx xxx

In the case at bar, the person who misrepresented himself to be the son
of the purported buyer, Rustico T. Consunji, paid for the two (2) vehicles using
a check whose amount has been altered from P101.00 to P101,000.00. There
is here a case of estafa. Plaintiff was unlawfully deprived of the vehicle by false
pretenses executed simultaneously with the commission of fraud (Art. 315 2(a)
R.P.C.). Clearly, Citiwide would not have parted with the two (2) vehicles were it
not for the false representation that the check issued in payment thereupon
(sic) is in the amount of P101,000.00, the actual value of the two (2) vehicles." 8
In short, said buyer never acquired title to the property; hence, the Court rejected
the claim of herein petitioner that at least, Armando Suarez had a voidable title to the
property.
His motion for reconsideration having been denied in the resolution of the
respondent Court of 12 December 1988, 9 petitioner filed this petition alleging therein
that: LLjur

"A
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 THE HONORABLE COURT OF APPEALS ERRED IN APPLYING ARTICLE 559
OF THE NEW CIVIL CODE TO THE INSTANT CASE DESPITE THE FACT
THAT PRIVATE RESPONDENT CITIWIDE MOTORS, INC. WAS NOT
UNLAWFULLY DEPRIVED OF THE SUBJECT CAR, AS IN FACT CITIWIDE
VOLUNTARILY PARTED WITH THE TITLE AND POSSESSION OR (sic) THE
SAME IN FAVOR OF ITS IMMEDIATE TRANSFEREE.
B
THE FACTUAL MILIEU OF THE INSTANT CASE FALLS WITHIN THE
OPERATIVE EFFECTS OF ARTICLES 1505 AND 1506 OF THE NEW CIVIL
CODE CONSIDERING THAT THE IMMEDIATE TRANSFEREE OF THE
PRIVATE RESPONDENT CITIWIDE MOTORS, INC., ACQUIRED A VOIDABLE
TITLE OVER THE CAR IN QUESTION WHICH TITLE WAS NOT DECLARED
VOID BY A COMPETENT COURT PRIOR TO THE ACQUISITION BY THE
PETITIONER OF THE SUBJECT CAR AND ALSO BECAUSE PRIVATE
RESPONDENT, BY ITS OWN CONDUCT, IS NOW PRECLUDED FROM
ASSAILING THE TITLE AND POSSESSION BY THE PETITIONER OF THE
SAID CAR." 10
There is merit in the petition. The assailed decision must be reversed.
The petitioner successfully proved that he acquired the car in question from his
vendor in good faith and for valuable consideration. According to the trial court, the
private respondent's evidence was not persuasive enough to establish that petitioner
had knowledge that the car was the object of a fraud and a swindle and that it did not
rebut or contradict petitioner's evidence of acquisition for valuable consideration. The
respondent Court concedes to such findings but postulates that the issue here is not
whether petitioner acquired the vehicle in that concept but rather, whether private
respondent was unlawfully deprived of it so as to make Article 559 of the Civil Code
apply.
It is quite clear that a party who (a) has lost any movable or (b) has been
unlawfully deprived thereof can recover the same from the present possessor even if
the latter acquired it in good faith and has, therefore, title thereto for under the first
sentence of Article 559, such manner of acquisition is equivalent to a title. There are
three (3) requisites to make possession of movable property equivalent to title, namely:
(a) the possession should be in good faith; (b) the owner voluntarily parted with the
possession of the thing; and (c) the possession is in the concept of owner. 11
Undoubtedly, one who has lost a movable or who has been unlawfully deprived
of it cannot be said to have voluntarily parted with the possession thereof. This is the
justification for the exceptions found under the second sentence of Article 559 of the
Civil Code.
The basic issue then in this case is whether private respondent was unlawfully
deprived of the cars when it sold the same to Rustico Consunji, through a person who
claimed to be Jojo Consunji, allegedly the latter's son, but who nevertheless turned out
to be Armando Suarez, on the faith of a Manager's Check with a face value of
P101,000.00, dishonored for being altered, the correct amount being only P101.00. Cdpr

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

ART. 1475. The contract of sale is perfected at the moment

there is a meeting of minds upon the thing which is the object of the
contract and upon the price.
From that moment, the parties may reciprocally demand
performance, subject to the provisions of the law governing the form of
contracts.
prcd

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.

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 It is clear from the above provisions, particularly the last one quoted, that
ownership in the thing sold shall not pass to the buyer until full payment of the
purchase price only if there is a stipulation to that effect. Otherwise, the rule is
that such ownership shall pass from the vendor to the vendee upon the actual
or constructive delivery of the thing sold even if the purchase price has not yet
been paid.
Non-payment only creates a right to demand payment or to rescind the
contract, or to criminal prosecution in the case of bouncing checks. But absent
the stipulation above noted, delivery of the thing sold will effectively transfer
ownership to the buyer who can in turn transfer it to another." 13
In the early case of Chua Hai vs. Hon. Kapunan, 14 one Roberto Soto purchased
from the Youngstown Hardware, owned by private respondent, corrugated galvanized
iron sheets and round iron bars for P6,137.70, in payment thereof, he issued a check
drawn against the Security Bank and Trust Co. without informing Ong Shu that he
(Soto) had no sufficient funds in said bank to answer for the same. In the meantime,
however, Soto sold the sheets to, among others, petitioner Chua Hai. In the criminal
case filed against Soto, upon motion of the offended party, the respondent Judge
ordered petitioner to return the sheets which were purchased from Soto. Petitioner's
motion for reconsideration having been denied, he came to this Court alleging grave
abuse of discretion and excess of jurisdiction. In answer to the petition, it is claimed that
inter alia, even if the property was acquired in good faith, the owner who has been
unlawfully deprived thereof may recover it from the person in possession of the same
unless the property was acquired in good faith at a public sale. 15 Resolving this specific
issue, this Court ruled that Ong Shu was not illegally deprived of the possession of the
property:
". . . It is not denied that Ong Shu delivered the sheets to Soto upon a
perfected contract of sale, and such delivery transferred title or ownership to
the purchaser. Says Art. 1496:
'Art. 1496. The ownership of the thing sold is acquired by the
vendee from the moment it is delivered to him in any of the ways specified
in articles 1497 to 1501, or in any other manner signifying an agreement
that the possession is transferred from the vendor to the vendee.' (C.C.)
The failure of the buyer to make good the price does not, in law, cause
the ownership to revest in the seller until and unless the bilateral contract of
sale is first rescinded or resolved pursuant to Article 1191 of the new Civil
Code. llcd

And, assuming that the consent of Ong Shu to the sale in favor of Soto
was obtained by the latter through fraud or deceit, the contract was not thereby
rendered void ab initio, but only voidable by reason of the fraud, and Article
1390 expressly provides that:
'ART. 1390. The following contracts are voidable or annullable,
even though there may have been no damage to the contracting parties:
(1) Those where one of the parties is incapable of giving
consent to a contract;
(2) Those where the consent is vitiated by mistake, violence,
intimidation, undue influence or fraud.

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 These contracts are binding, unless they are annulled by a proper
action in court. They are susceptible of ratification.'
Agreeably to this provision, Article 1506 prescribes:
'ARTICLE 1506. Where the seller of goods has a voidable title
thereto, but his title has not been avoided at the time of the sale, the buyer
acquires a good title to the goods, provided he buys them in good faith, for
value, and without notice of the seller's defect of title.' (C.C.)

Hence, until the contract of Ong Shu with Soto is set aside by a
competent court (assuming that the fraud is established to its satisfaction), the
validity of appellant's claim to the property in question can not be disputed, and
his right to the possession thereof should be respected." 16
It was therefore erroneous for the respondent Court to declare that the private
respondent was illegally deprived of the car simply because the check in payment
therefor was subsequently dishonored; said Court also erred when it divested the
petitioner, a buyer in good faith who paid valuable consideration therefor, of his
possession thereof. LLjur

WHEREFORE, the challenged decision of the respondent Court of Appeals of 22

September 1988 and its Resolution of 12 December 1988 in C.A.-G.R. CV No. 05955
are hereby SET ASIDE and the Decision of the trial court of 3 September 1979 and its
Final Order of 26 June 1980 in Civil Case No. Q-24200 are hereby REINSTATED, with
costs against private respondent Citiwide Motors, Inc.
SO ORDERED.
Gutierrez, Jr., Bidin and Romero, JJ ., concur.
Feliciano, J ., is on leave.

Footnotes
1. Per Associate Justice Oscar M. Herrera, concurred in by Associate Justices Jorge S.
Imperial and Fernando A. Santiago.
2. Entitled Citiwide Motors, Inc., Plaintiff-Appellant, vs. Jaime Ledesma, et al., Defendants-
Appellees.
3. Annex "A" of Petition; Rollo, 23-38, at p. 28.
4. Id., 33; 40.
5. Id., 27.
6. Rollo, 42-43.

7. Rollo, 41-42.
8. Rollo, 45-46.
9. Annex "E" of Petition; Rollo, 59-60.
10. Id., 7-8.

11. TOLENTINO, A.M., Civil Code of the Philippines, Vol. II, 1983 ed., 275-276, citing 2-II
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 Colin and Capitant 942; De Buen; Ibid., 1009, 2 Salvat 165; 4 Manresa, 339.
12. 184 SCRA 614 [1990].
13. 184 SCRA 618 [1990].

14. 104 Phil. 110 [1958].

15. Article 559, Civil Code.
16. 104 Phil. 116-117 [1958].

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