SUN BROTHERS & COMPANY, plaintiff-appellee v.
JOSE VELASCO and CO KANG CHIU,
defendants and appellants.
GR. No. 17085-R 1958, Aug 11 ANGELES, J.
Sobere
SUBJECT MATTER:
Obligation of the Seller to Transfer Ownership – Sale in Merchant’s Store, Market, or Fair
DOCTRINE:
Article 1505 (3) protects innocent third parties who have made purchases at merchants’ stores in good faith and for
value appears to us to be a wise and necessary rule not only to facilitate commercial sales on movables but to give
stability to business transactions. This rule is necessary in a country such as ours where free enterprise prevails, for
buyers cannot be reasonably expected to look behind the title of every article when he buys at a store. The doctrine of
caveat emptor is now rarely applied, and if it is ever mentioned, it is more of an exception rather than the general
rule.
LEGAL PROVISION/S:
Art 1505. Subject to the provisions of this Title, 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 if the goods is by his conduct precluded
from denying the seller’s authority to sell.
Nothing in this Title, however, shall affect: … (3) Purchases made in a merchant’s store, or in
fairs, or markets, …”
ACTION BEFORE THE SUPREME COURT:
Appeal from a judgment of the Court of First Instance of Manila.
SUMMARY [C2024]:
Sun Brothers & Co delivered to Lopez an Admiral refrigerator under a “Conditional Sale
Agreement”. Out of the P1,700 purchase price, only P500 was paid as downpayment. They stipulated that
Lopez shall not remove the refrigerator from his address nor part possession therewith without the
express written consent of Sun brothers. In violation thereof, Sun Brothers may rescind the sale, recover
possession and the amounts paid shall be forfeited. The refrigerator shall remain the absolute property of
Sun Brothers until Lopez has fully paid the purchase price. Lopez later sold the refrigerator to JV Trading
(owned by Jose Velasco) without knowledge of Sun brothers for P850.Thereafter, Velasco displayed the
refrigerator in his store and Co Kang Chui bought it for P985.
The issue is whether Co Kang Chiu, an innocent buyer from a store, has a better right as owner
than Sun Brothers, the conditional vendor. Court ruled in favor of Chiu. Article 1505(3) of the Civil Code
provides an exception to the general rule that a buyer who acquires goods from a vendor without a title
to it likewise cannot acquire any title to it, that is, purchases made in a merchant’s store. The sale to
Velasco by Lopez was invalid. Velasco was not a purchaser in good faith since Lopez was a private
individual, meaning Velasco should have inquired into legitimacy of ownership and his failure to do so
constituting negligence. However, the sale between Velasco and Chiu, the latter having purchased the
refrigerator from Velasco’s store, is valid. This is a case of an imperfect or void title ripening into a valid
one, as a result of some intervening causes. Plaintiff’s recourse is a claim for indemnity against Lopez.
ANTECEDENT FACTS:
Plaintiff Sun Brothers & Co. delivered to defendant Francisco Lopez one Admiral refrigerator,
complete with transformer, the same to be paid under the terms and conditions stipulated
between them in a Conditional Sale Agreement. Out of P1,700 (stipulated price of the refrigerator),
only the downpayment of P500 was paid by Lopez. In the agreement:
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o Lopez shall not remove the refrigerator from his address nor part possession therewith
without the express written consent of plaintiff.
o Title shall vest in Lopez upon full payment.
o In the event of violation:
Plaintiff may rescind the contract of sale and recover possession
Any amount previously paid shall be forfeited as liquidated damages, and the
object shall remain the absolute property of plaintiff until payment of full
purchase price.
Without the knowledge of Sun Bros, Lopez sold the refrigerator to the business store J.V. Trading,
owned by defendant Jose Velasco, in the sum of P850—by misrepresenting himself as Jose Lim
and executing a document that he is the absolute owner.
Without the knowledge of Sun Bros, Velasco sold the refrigerator to defendant Co Kang Chiu, after
displaying it at hjs store, in the sum of P985 which was paid in cash.
o The refrigerator was delivered to the residence and business address of Co Kang Chiu.
Case Trail:
o Sun Bros filed a complaint for Replevin in the Municipal Court of Manila against
defendants Lopez and Co Kang Chiu, and asked for a preliminary Writ of Replevin for
the recovery of the possession of the refrigerator.
o Deputy sheriff went to Chiu’s residence to serve the writ, but Chiu filed a counter-bond
and kept the refrigerator in his residence.
o CFI rendered judgment declaring Sun Bros the absolute owner of the property in
question; that Chiu shall return the same immediately to Sun Bros and that Velasco shall
reimburse Chiu the amount of P985 which the latter paid to the former for the
refrigerator.
o Velasco and Chiu appealed.
Whether petitioner Sun Bros. is the owner of the refrigerator – NO
Defendant Co Kang Chiu, as the current possessor, is the owner—after buying it at a merchant’s store
in good faith and for value. Following Art 1505(3), Chiu who is now in possession of the refrigerator
should be adjudged the owner thereof because he bought it at a merchant’s store in good faith and
for value.
The lower court erred when it applied 1505(1); it is true that Lopez, the conditional vendee,
never had any title to the refrigerator as he was not able to pay the full purchase price which
would vest in him the ownership of the item. Thus, when Lopez sold it to Jose Velasco, the
latter did not acquire any better right than what Lopez had—which is practically nothing.
Velasco was not a purchaser in good faith and for value. Since Lopez is a private person who is
not engaged in the business of selling refrigerators, Velasco must be reasonably expected to
have inquired from Lopez w/n the refrigerator he was selling has been paid in full. In this,
Velasco has been negligent.
Apply 1505(3) instead. Co Kang Chiu bought the refrigerator at J.V. Trading after the same has
been put on display. 1505(3) would make Chiu acquire a valid title to it, although his
predecessors in interest did not have any right of ownership over it—this is a case of an
imperfect or void title ripening into a valid one, as a result of some intervening causes.
Where the rights and interests of a vendor comes into clash with that of an innocent buyer for value, the
latter must be protected.
Policy of Art 1505(3)
To protect the rights of an innocent buyer for value (against a vendor in bad faith);
To facilitate commercial sales on movables, while giving stability to business transactions;
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Buyers cannot be reasonably expected to look behind the title of every article he buys at a store.
The doctrine of caveat emptor (the principle that the buyer is responsible for checking the
quality and suitability of goods before purchasing) is more of an exception rather than the
general rule.
Remedy for Sun Bros
Plaintiff was not unlawfully deprived of the item. It has voluntarily parted with them pursuant
to a contract of purchase and sale.
Recourse should be a claim for indemnity against Francisco Lopez.
DISPOSITIVE: WHEREFORE, the judgment appealed from is hereby MODIFIED. Appellant Co Kang
Chiu is hereby declared to be the absolute owner and is entitled to the possession of the refrigerator in
question. Defendant Francisco Lopez is hereby ordered to pay to the plaintiff the full purchase price of
the refrigerator in the sum of 1,700 PHP with 6% annual interest thereon from the date of the filing of the
complaint in the Municipal Court until fully paid. The claim of Co Kang Chiu for damages and attorney’s
fees is hereby dismissed. No special pronouncement as to costs. It is so ordered.
OTHER NOTES: N/A
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