Sun Brothers vs. Velasco (54 O.G. 5143)

Sun Brothers vs. Jose Velasco (54 OG 5143)

L-17085-R, January 13, 1958

Angeles, J.:

Facts:

Sun Brothers & company delivered to Lopez an Admiral refrigerator under a “Conditional Sale Agreement”. Out of the P1,700 purchase price, only P500 was paid as downpayment.

Inter alia, 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 sold the refrigerator to JV Trading (owned by Jose Velasco) without knowledge of Sun brothers for P850, misrepresented himself as Jose Lim and executed a document stating that he is the absolute owner. Thereafter, Velasco displayed the refrigerator in his store abd Co Kang Chui bought it for P985.

Issue:

Whether Co Kang Chiu, an innocent buyer from a store, has a better right as owner than Sun Brothers, a conditional vendor

Held:

Co Kang Chiu has a better right than Sun Brothers.

Article 1505 of the Civil Code provides:

“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:

(1)   The provisions of any factors’ acts, recording laws, or any other provision of law enabling the apparent owner of goods to dispose of them as if he were  the true owner thereof;

…

(3) Purchases made in a merchant’s store, or in fairs, or markets, …”

The lower court committed error when it applied the 1^st paragraph of Article 1505. It is true that Francisco Lopez, the conditional vendee, never had any title to the refrigerator in question, because the stipulation between him and the conditional vendor, Sun Brothers, is that title shall vest in the vendee upon payment in full of the purchase price, and Lopez has not fully paid such price. When Lopez, who has not tile to the refrigerator, sold it to Jose Velasco, the latter did not acquire any better right than what Lopez had --- which is practically nothing. We do not agree with the court a quo that Velasco was a purchaser in good faith and for value for the reason that Lopez, being a private person who is not engaged in the business of selling refrigerators, Velasco must be reasonably expected to have inquired from Lopez whether or not the refrigerator he was selling has been paid in full. In this, Velasco has been negligent.

            Also, since Co Kang Chui purchased the refrigerator from JV Trading, a merchant store and displayed thereat, the 3^rd paragraph of Art. 1505 applies, from which Co Kang Chui should be declared as having acquired a valid title to the refrigerator, although his predecessors in interest did not have any right of ownership over it. This is a case of imperfect or void title ripening into a valid one, as a result of some intervening causes. The policy of the law which we do not feel justified to deviate, has always been that where the rights and interests of a vendor comes into clash with that of an innocent buyer for value, the latter must be protected.

The rule embodied in Article 1505 (3) protecting 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 [the buyer alone is responsible for checking the quality and suitability of goods before a purchase is made] is now rarely applied, and if it is ever mentioned, it is more of an exception rather than the general rule.

Upon the whole, we are persuaded to believe that Co Kang Chui who is now is 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.