G.R. No. L-36902 January 30, 1982 LUIS PICHEL, petitioner, vs. PRUDENCIO ALONZO, respondent. GUERRERO, J.

: This is a petition to review on certiorari the decision of the Court of First Instance of Basilan City dated January 5, 1973 in Civil Case No. 820 entitled "Prudencio Alonzo, plaintiff, vs. Luis Pichel, defendant." This case originated in the lower Court as an action for the annulment of a "Deed of Sale" dated August 14, 1968 and executed by Prudencio Alonzo, as vendor, in favor of Luis Pichel, as vendee, involving property awarded to the former by the Philippine Government under Republic Act No. 477. Pertinent portions of the document sued upon read as follows: That the VENDOR for and in consideration of the sum of FOUR THOUSAND TWO HUNDRED PESOS (P4,200.00), Philippine Currency, in hand paid by the VENDEE to the entire satisfaction of the VENDOR, the VENDOR hereby sells transfers, and conveys, by way of absolute sale, all the coconut fruits of his coconut land, designated as Lot No. 21 - Subdivision Plan No. Psd- 32465, situated at Balactasan Plantation, Lamitan, Basilan City, Philippines; That for the herein sale of the coconut fruits are for all the fruits on the aforementioned parcel of land presently found therein as well as for future fruits to be produced on the said parcel of land during the years period; which shall commence to run as of SEPTEMBER 15,1968; up to JANUARY 1, 1976 (sic); After the pre-trial conference, the Court a quo issued an Order dated November 9, 1972 which in part read thus: The following facts are admitted by the parties: Plaintiff Prudencio Alonzo was awarded by the Government that parcel of land designated as Lot No. 21 of Subdivision Plan Psd 32465 of Balactasan, Lamitan, Basilan City in accordance with Republic Act No. 477. The award was cancelled by the Board of Liquidators on January 27, 1965 on the ground that, previous thereto, plaintiff was proved to have alienated the land to another, in violation of law. In 197 2, plaintiff's rights to the land were reinstated. <see above> In July 1972, defendant for the first time since the execution of the deed of sale in his favor, caused the harvest of the fruit of the coconut trees in the land. xxx xxx xxx The lower court rendered its decision now under review, holding that although the agreement in question is denominated by the parties as a deed of sale of fruits of the coconut trees found in the vendor's land, it actually is, for all legal intents and purposes, a contract of lease of the land itself. According to the Court: ... the sale aforestated has given defendant complete control and enjoyment of the improvements of the land. That the contract is consensual; that its purpose is to allow the enjoyment or use of a thing; that it is onerous because rent or price certain is stipulated; and that the enjoyment or use of the thing certain is stipulated to be for a certain and definite period of time, are characteristics which admit of no other

conclusion. ... The provisions of the contract itself and its characteristics govern its nature. 4 The Court, therefore, concluded that the deed of sale in question is an encumbrance prohibited by Republic Act No. 477 which provides thus: Sec. 8. Except in favor of the Government or any of its branches, units, or institutions, land acquired under the provisions of this Act or any permanent improvements thereon shall not be thereon and for a term of ten years from and after the date of issuance of the certificate of title, nor shall they become liable to the satisfaction of any debt contracted prior to the expiration of such period. Any occupant or applicant of lands under this Act who transfers whatever rights he has acquired on said lands and/or on the improvements thereon before the date of the award or signature of the contract of sale, shall not be entitled to apply for another piece of agricultural land or urban, homesite or residential lot, as the case may be, from the National Abaca and Other Fibers Corporation; and such transfer shall be considered null and void.5 Before going into the issues raised by the instant Petition, the matter of whether, under the admitted facts of this case, the respondent had the right or authority to execute the "Deed of Sale" in 1968, his award over Lot No. 21 having been cancelled previously by the Board of Liquidators on January 27, 1965, must be clarified. The case in point is Ras vs. Sua 7 wherein it was categorically stated by this Court that a cancellation of an award granted pursuant to the provisions of Republic Act No. 477 does not automatically divest the awardee of his rights to the land. Such cancellation does not result in the immediate reversion of the property subject of the award, to the State. Speaking through Mr. Justice J.B.L. Reyes, this Court ruled that "until and unless an appropriate proceeding for reversion is instituted by the State, and its reacquisition of the ownership and possession of the land decreed by a competent court, the grantee cannot be said to have been divested of whatever right that he may have over the same property." 8 There is nothing in the record to show that at any time after the supposed cancellation of herein respondent's award on January 27, 1965, reversion proceedings against Lot No. 21 were instituted by the State. Instead, the admitted fact is that the award was reinstated in 1972. Applying the doctrine announced in the above-cited Ras case, therefore, herein respondent is not deemed to have lost any of his rights as grantee of Lot No. 21 under Republic Act No. 477 during the period material to the case at bar, i.e., from the cancellation of the award in 1965 to its reinstatement in 1972. Within said period, respondent could exercise all the rights pertaining to a grantee with respect to Lot No. 21. We agree with petitioner that construction or interpretation of the document in question is not called for. A perusal of the deed fails to disclose any ambiguity or obscurity in its provisions, nor is there doubt as to the real intention of the contracting parties. The terms of the agreement are clear and unequivocal, hence the literal and plain meaning thereof should be observed. Such is the mandate of the Civil Code of the Philippines which provides that: Art. 1370. If the terms of a contract are clear and leave no doubt upon the intention of the contracting parties, the literal meaning of its stipulation shall control ... . Pursuant to the afore-quoted legal provision, the first and fundamental duty of the courts is the application of the contract according to its express terms, interpretation being resorted to only when such literal application is impossible. 9 Simply and directly stated, the "Deed of Sale dated August 14, 1968 is precisely what it purports to be. It is a document evidencing the agreement of herein parties for the sale of coconut fruits of Lot No. 21, and not for thelease of the land itself as found by the lower Court. In clear and express terms, the document defines the object of the contract thus: "the herein sale of the coconut fruits are for an the fruits on the aforementioned parcel of land during the years ...(from) SEPTEMBER 15, 1968; up to JANUARY 1, 1976." Moreover, as petitioner correctly asserts, the document in question expresses a

valid contract of sale. It has the essential elements of a contract of sale as defined under Article 1458 of the New Civil Code which provides thus: Art. 1458. By the contract of sale one of the contracting parties obligates himself to transfer the ownership of and to deliver a determinate thing, and the other to pay therefor a price certain in money or its equivalent. A contract of sale may be absolute or conditional. The subject matter of the contract of sale in question are the fruits of the coconut trees on the land during the years from September 15, 1968 up to January 1, 1976, which subject matter is a determinate thing. Under Article 1461 of the New Civil Code, things having a potential existence may be the object of the contract of sale. And inSibal vs. Valdez, 50 Phil. 512, pending crops which have potential existence may be the subject matter of the sale. Here, the Supreme Court, citing Mechem on Sales and American cases said which have potential existence may be the subject matter of sale. Here, the Supreme Court, citing Mechem on Sales and American cases said: Mr. Mechem says that a valid sale may be made of a thing, which though not yet actually in existence, is reasonably certain to come into existence as the natural increment or usual incident of something already in existence, and then belonging to the vendor, and the title will vest in the buyer the moment the thing comes into existence. (Emerson vs. European Railway Co., 67 Me., 387; Cutting vs. Packers Exchange, 21 Am. St. Rep. 63) Things of this nature are said to have a potential existence. A man may sell property of which he is potentially and not actually possess. He may make a valid sale of the wine that a vineyard is expected to produce; or the grain a field may grow in a given time; or the milk a cow may yield during the coming year; or the wool that shall thereafter grow upon sheep; or what may be taken at the next case of a fisherman's net; or fruits to grow; or young animals not yet in existence; or the goodwill of a trade and the like. The thing sold, however, must be specific and Identified. They must be also owned at the time by the vendor. (Hull vs. Hull 48 Conn. 250 (40 Am. Rep., 165) (pp. 522-523). We do not agree with the trial court that the contract executed by and between the parties is "actually a contract of lease of the land and the coconut trees there." (CFI Decision, p. 62, Records). The Court's holding that the contract in question fits the definition of a lease of things wherein one of the parties binds himself to give to another the enjoyment or use of a thing for a price certain and for a period which may be definite or indefinite (Art. 1643, Civil Code of the Philippines) is erroneous. The essential difference between a contract of sale and a lease of things is that the delivery of the thing sold transfers ownership, while in lease no such transfer of ownership results as the rights of the lessee are limited to the use and enjoyment of the thing leased. In concluding that the possession and enjoyment of the coconut trees can therefore be said to be the possession and enjoyment of the land itself because the defendant-lessee in order to enjoy his right under the contract, he actually takes possession of the land, at least during harvest time, gather all of the fruits of the coconut trees in the land, and gain exclusive use thereof without the interference or intervention of the plaintiff-lessor such that said plaintiff-lessor is excluded in fact from the land during the period aforesaid, the trial court erred. The contract was clearly a "sale of the coconut fruits." The vendor sold, transferred and conveyed "by way of absolute sale, all the coconut fruits of his land," thereby divesting himself of all ownership or dominion over the fruits during the seven-year period. The possession and enjoyment of the coconut trees cannot be said to be the possession and enjoyment of the land itself because these rights are distinct and separate from each other, the first pertaining to the accessory or improvements (coconut trees) while the second, to the principal (the land). A transfer of the accessory or improvement is not a transfer of the principal. It is the other way around, the accessory follows the principal. Hence, the sale of the nuts cannot be interpreted nor construed to be a lease of the trees, much less extended further to include the lease of the land itself. The real and pivotal issue of this case which is taken up in petitioner's sixth assignment of error and as already stated above, refers to the validity of the "Deed of Sale", as such contract of sale, vis-a-vis the

provisions of Sec. 8, R.A. No. 477. The lower Court did not rule on this question, having reached the conclusion that the contract at bar was one of lease. It was from the context of a lease contract that the Court below determined the applicability of Sec. 8, R.A. No. 477, to the instant case. Resolving now this principal issue, We find after a close and careful examination of the terms of the first paragraph of Section 8 hereinabove quoted, that the grantee of a parcel of land under R.A. No. 477 is not prohibited from alienating or disposing of the natural and/or industrial fruits of the land awarded to him. What the law expressly disallows is the encumbrance or alienation of the land itself or any of the permanent improvements thereon. Permanent improvements on a parcel of land are things incorporated or attached to the property in a fixed manner, naturally or artificially. They include whatever is built, planted or sown on the land which is characterized by fixity, immutability or immovability. Houses, buildings, machinery, animal houses, trees and plants would fall under the category of permanent improvements, the alienation or encumbrance of which is prohibited by R.A. No. 477. While coconut trees are permanent improvements of a land, their nuts are natural or industrial fruits which are meant to be gathered or severed from the trees, to be used, enjoyed, sold or otherwise disposed of by the owner of the land. Herein respondents, as the grantee of Lot No. 21 from the Government, had the right and prerogative to sell the coconut fruits of the trees growing on the property. The purpose of the law is not violated when a grantee sells the produce or fruits of his land. On the contrary, the aim of the law is thereby achieved, for the grantee is encouraged and induced to be more industrious and productive, thus making it possible for him and his family to be economically self-sufficient and to lead a respectable life. At the same time, the Government is assured of payment on the annual installments on the land. We agree with herein petitioner that it could not have been the intention of the legislature to prohibit the grantee from selling the natural and industrial fruits of his land, for otherwise, it would lead to an absurd situation wherein the grantee would not be able to receive and enjoy the fruits of the property in the real and complete sense. Respondent through counsel, in his Answer to the Petition contends that even granting arguendo that he executed a deed of sale of the coconut fruits, he has the "privilege to change his mind and claim it as (an) implied lease," and he has the "legitimate right" to file an action for annulment "which no law can stop." He claims it is his "sole construction of the meaning of the transaction that should prevail and not petitioner. (sic). 10 Respondent's counsel either misapplies the law or is trying too hard and going too far to defend his client's hopeless cause. Suffice it to say that respondent-grantee, after having received the consideration for the sale of his coconut fruits, cannot be allowed to impugn the validity of the contracts he entered into, to the prejudice of petitioner who contracted in good faith and for a consideration. IN VIEW OF THE FOREGOING, the judgment of the lower Court is hereby set aside and another one is entered dismissing the Complaint. Without costs. SO ORDERED. Teehankee (Chairman), Makasiar, Fernandez, Melencio-Herrera and Plana, JJ., concur. LEGAL DOCTRINES 1) A valid sale may be made of a thing, which though not yet actually in existence, is reasonably certain to come into existence. 2) The essential difference between a contract of sale and a lease of things is that the delivery of the thing sold transfers ownership, while in lease no such transfer of ownership results as the rights of the lessee are limited to the use and enjoyment of the thing leased. 3) The possession and enjoyment of the coconut trees cannot be said to be the possession and enjoyment of the land itself because these rights are distinct and separate from each other, the first pertaining to the accessory or improvements (coconut trees) while the

second, to the principal (the land). A transfer of the accessory or improvement is not a transfer of the principal. It is the other way around, the accessory follows the principal. Hence, the sale of the nuts cannot be interpreted nor construed to be a lease of the trees, much less extended further to include the lease of the land itself. G.R. No. L-9935 February 1, 1915

YU TEK and CO., plaintiff-appellant, vs. BASILIO GONZALES, defendant-appellant. TRENT, J.: The basis of this action is a written contract, the pertinent paragraphs of which follow: 1. That Mr. Basilio Gonzalez hereby acknowledges receipt of the sum of P3,000 Philippine currency from Messrs. Yu Tek and Co., and that in consideration of said sum be obligates himself to deliver to the said Yu Tek and Co., 600 piculs of sugar of the first and second grade, according to the result of the polarization, within the period of three months, beginning on the 1st day of January, 1912, and ending on the 31st day of March of the same year, 1912. xxx Plaintiff proved that no sugar had been delivered to it under this contract nor had it been able to recover the P3,000. Plaintiff prayed for judgment for the P3,000 and, in addition, for P1,200 under paragraph 4, supra. Judgment was rendered for P3,000 only, and from this judgment both parties appealed. In the case at bar, it is sought to show that the sugar was to be obtained exclusively from the crop raised by the defendant. There is no clause in the written contract which even remotely suggests such a condition. The defendant undertook to deliver a specified quantity of sugar within a specified time. The contract placed no restriction upon the defendant in the matter of obtaining the sugar. He was equally at liberty to purchase it on the market or raise it himself. It may be true that defendant owned a plantation and expected to raise the sugar himself, but he did not limit his obligation to his own crop of sugar. Our conclusion is that the condition which the defendant seeks to add to the contract by parol evidence cannot be considered. The rights of the parties must be determined by the writing itself. The second contention of the defendant arises from the first. He assumes that the contract was limited to the sugar he might raise upon his own plantation; that the contract represented a perfected sale; and that by failure of his crop he was relieved from complying with his undertaking by loss of the thing due. (Arts. 1452, 1096, and 1182, Civil Code.) This argument is faulty in assuming that there was a perfected sale. Article 1450 defines a perfected sale as follows: The sale shall be perfected between vendor and vendee and shall be binding on both of them, if they have agreed upon the thing which is the object of the contract and upon the price, even when neither has been delivered. Article 1452 reads: "The injury to or the profit of the thing sold shall, after the contract has been perfected, be governed by the provisions of articles 1096 and 1182." This court has consistently held that there is a perfected sale with regard to the "thing" whenever the article of sale has been physically segregated from all other articles. Thus, a particular tobacco factory with its contents was held sold under a contract which did not provide for either delivery of the price or of the thing until a future time. McCullough vs. Aenlle and Co. (3 Phil. Rep., 295). Quite similar was the recent case of Barretto vs. Santa Marina(26 Phil. Rep., 200) where specified shares of stock in a tobacco factory were held sold by a contract which deferred delivery of

both the price and the stock until the latter had been appraised by an inventory of the entire assets of the company. In Borromeo vs. Franco (5 Phil. Rep., 49) a sale of a specific house was held perfected between the vendor and vendee, although the delivery of the price was withheld until the necessary documents of ownership were prepared by the vendee. In Tan Leonco vs. Go Inqui (8 Phil. Rep., 531) the plaintiff had delivered a quantity of hemp into the warehouse of the defendant. The defendant drew a bill of exchange in the sum of P800, representing the price which had been agreed upon for the hemp thus delivered. Prior to the presentation of the bill for payment, the hemp was destroyed. Whereupon, the defendant suspended payment of the bill. It was held that the hemp having been already delivered, the title had passed and the loss was the vendee's. It is our purpose to distinguish the case at bar from all these cases. How different is this from the contracts discussed in the cases referred to above? In the McCullough case, for instance, the tobacco factory which the parties dealt with was specifically pointed out and distinguished from all other tobacco factories. So, in the Barretto case, the particular shares of stock which the parties desired to transfer were capable of designation. In the Tan Leonco case, where a quantity of hemp was the subject of the contract, it was shown that that quantity had been deposited in a specific warehouse, and thus set apart and distinguished from all other hemp. A number of cases have been decided in the State of Louisiana, where the civil law prevails, which confirm our position. Perhaps the latest is Witt Shoe Co. vs. Seegars and Co. (122 La., 145; 47 Sou., 444). In this case a contract was entered into by a traveling salesman for a quantity of shoes, the sales having been made by sample. The court said of this contract: But it is wholly immaterial, for the purpose of the main question, whether Mitchell was authorized to make a definite contract of sale or not, since the only contract that he was in a position to make was an agreement to sell or an executory contract of sale. He says that plaintiff sends out 375 samples of shoes, and as he was offering to sell by sample shoes, part of which had not been manufactured and the rest of which were incorporated in plaintiff's stock in Lynchburg, Va., it was impossible that he and Seegars and Co. should at that time have agreed upon the specific objects, the title to which was to pass, and hence there could have been no sale. He and Seegars and Co. might have agreed, and did (in effect ) agree, that the identification of the objects and their appropriation to the contract necessary to make a sale should thereafter be made by the plaintiff, acting for itself and for Seegars and Co., and the legend printed in red ink on plaintiff's billheads ("Our responsibility ceases when we take transportation Co's. receipt `In good order'" indicates plaintiff's idea of the moment at which such identification and appropriation would become effective. The question presented was carefully considered in the case of State vs. Shields, et al. (110 La., 547, 34 Sou., 673) (in which it was absolutely necessary that it should be decided), and it was there held that in receiving an order for a quantity of goods, of a kind and at a price agreed on, to be supplied from a general stock, warehoused at another place, the agent receiving the order merely enters into an executory contract for the sale of the goods, which does not divest or transfer the title of any determinate object, and which becomes effective for that purpose only when specific goods are thereafter appropriated to the contract; and, in the absence of a more specific agreement on the subject, that such appropriated takes place only when the goods as ordered are delivered to the public carriers at the place from which they are to be shipped, consigned to the person by whom the order is given, at which time and place, therefore, the sale is perfected and the title passes. This case and State vs. Shields, referred to in the above quotation are amply illustrative of the position taken by the Louisiana court on the question before us. But we cannot refrain from referring to the case of Larue and Prevost vs. Rugely, Blair and Co. (10 La. Ann., 242) which is summarized by the court itself in the Shields case as follows: . . . It appears that the defendants had made a contract for the sale, by weight, of a lot of cotton, had received $3,000 on account of the price, and had given an order for its delivery, which had been presented to the purchaser, and recognized by the press in which the cotton was stored, but that the cotton had been destroyed by fire before it was weighed. It was held that it was still at the risk of the seller, and that the buyer was entitled to recover the $3,000 paid on account of the price.

We conclude that the contract in the case at bar was merely an executory agreement; a promise of sale and not a sale. At there was no perfected sale, it is clear that articles 1452, 1096, and 1182 are not applicable. The defendant having defaulted in his engagement, the plaintiff is entitled to recover the P3,000 which it advanced to the defendant, and this portion of the judgment appealed from must therefore be affirmed. Arellano, C.J., Torres, Carson and Araullo, JJ., concur. Johnson, J., dissents. LEGAL DOCTRINE A contract involving alleged sale of generic things, or things not particularly designated or physically segregated, is not a contract of sale, but merely an executory agreement; a promise of sale and not a sale. As there was no perfected sale, the articles on sales are not applicable.

G.R. No. L-10027

November 13, 1915

ROSENDO HERNAEZ y ESPINOSA, plaintiff-appellant, vs. MATEO HERNAEZ y ESPINOSA, ET AL., defendants-appellants. TRENT, J.: The spouses, Pedro Hernaez and Juana Espinosa, died, leaving several legitimate descendants. Neither of their estates had been divided up to the date of the institution of this action, but were both under administration. Their son, Domingo Hernaez y Espinosa, sold all his interest in both his father's and mother's estate to his son, Vicente Hernaez y Tuason, on November 6, 1901. Notwithstanding the fact that Domingo Hernaez y Espinosa had thus parted with all his interest in the estates of his two parents, he executed a document of sale in favor of Alejandro Montelibano y Ramos on February 27, 1907, in which he purported to convey all his undivided interest in his mother's estate. On the same date he executed another document of sale in which he purported to convey to Jose Montelibano Uy-Cana foureighteenths of his interest in his mother's estate. Both of these sales were made with the connivance of his son, Vicente Hernaez y Tuason. Hence, although Vicente Hernaez y Tuason had actually purchased all of his father's interests in the estates of Pedro Hernaez and Juana Espinosa as early as November 6, 1901, and was, on February 27, 1907, the undoubted owner thereof, he is effectually estopped from asserting his title as against either of the vendees mentioned in the documents of sale dated February 27, 1907, to which we have just referred. (Code Civ. Pro., sec. 333, No. 1.) Bigelow on Estoppel (p. 607) says: . . . it is now a well-established principle that where the true owner of property, for however short a time, holds out another, or, with knowledge of his own right, allows another to appear as the owner of or as having full power of disposition over the property, the same being in the latter's actual possession, and innocent third parties are thus led into dealing with such apparent owner, they will be protected.

On August 19, 1912, Jose Montelibano Uy-Cana sold his interest in the estate to Alejandro Montelibano y Ramos. By this transfer, the latter stood owner of all the interest of Domingo Hernaez y Espinosa in the estate of Pedro Hernaez, and five-eighteenths of his interest in the estate of Juana Espinosa as against Vicente Hernaez y Espinosa. It is admitted that Rosendo Hernaez y Espinosa, another son of the deceased spouses administrator of the estates, was notified of Montelibano's purchases on January 8, 1913, when he received notice of Montelibano's motion, entered in the administration proceedings, asking that he (Montelibano) be substituted as assignee of the interests of various heirs of the estate which he had acquired by purchase. Notwithstanding this knowledge, Rosendo Hernaez y Espinosa entered into a contract of sale with Vicente Hernaez y Tuason, whereby the latter purported to convey all the interest, which he had acquired from his father, in the estate of the deceased spouses, Pedro Hernaez and Juana Espinosa. It will be remembered that he purchased his father's share of the estate on November 6, 1901; that he is estopped from asserting title to any interest in his grandfather's estate and in five-eighteenths of his grandmother's estate. Rosendo Hernandez y Espinosa purchased with full knowledge of these facts. He, therefore, acquired thirteen-eighteenths of the interest of Domingo Hernaez y Espinosa in the estate of the latter's mother nothing more. That rule is that the holder [Alejandro Montelibano y Ramos] of a prior equitable right has priority over the purchaser [Rosendo Hernandez y Espinosa] of a subsequent estate (whether legal or equitable) without value, or with notice of the equitable right, but not as against a subsequent purchaser for value and without notice. (Ewart on Estoppel, p. 199.) Alejandro Montelibano y Ramos has acquired in his interest in the estate of the deceased spouses for a valuable consideration and in good faith, and there remains to the plaintiff, Rosendo Hernaez y Espinosa, only the right of subrogation allowed him by article 1067 of the Civil Code, which reads as follows: If any of the heirs should sell his hereditary rights to a stranger before the division, all or any of the co-heirs may subrogate himself in the place of the purchaser, reimbursing him for the value of the purchase, provided they do so within the period of a month, to be counted from the time they were informed thereof. On January 24, 1913, the plaintiff instituted this action seeking to subrogate himself in the rights acquired by Montelibano in the estate. Unless the plaintiff can be charged with actual notice of the conveyance by which Montelibano acquired these interests, prior to January 8, 1913, it is clear that he has opportunely asserted his right of subrogation. This is purely a question of fact. As to the sales whereby Domingo Hernaez y Espinosa parted with that portion of his interest in the estate which is now held by Alejandro Montelibano, as well as to those sales made by other heirs to Montelibano, the trial court found that the plaintiff, Rosendo Hernaez y Espinosa, was not chargeable with notice prior to January 8, 1913. After a careful examination of the record we see no reason for disturbing this finding of fact. As a consequence, the plaintiff, Rosendo Hernaez y Espinosa, is entitled to exercise his right of subrogation in accordance with article 1067, above quoted.

For the foregoing reasons, the judgment of the court is modified by substituting, as the price of subrogation of the interest originally purchased by Jose Montelibano Uy-Cana, the sum of P4,500, as set out in Exhibit 7, for the sum of P10,000, the consideration expressed in Exhibit 10. As modified, the judgment appealed from is affirmed, without costs. So ordered. Arellano, C.J., Torres, and Carson, JJ., concur. Johnson, J., concurs in the result. LEGAL DOCTRINE Where the true owner of property, for however short a time, holds out another, or, with knowledge of his own right, allows another to appear as the owner of or as having full power of disposition over the property, the same being in the latter's actual possession, and innocent third parties are thus led into dealing with such apparent owner, they will be protected.
Siy Cong Bien vs. Hongkong Shanghai Bank

Facts Otto Ranft called at the office of the herein plaintiff to purchase hemp (abaca), and he was offered the bales of hemp as described in the quedans above mentioned. The parties agreed to the aforesaid price, and on the same date the quedans, together with the covering invoice, were sent to Ranft by the plaintiff, without having been paid for the hemp, but the plaintiff's understanding was that the payment would be made against the same quedans, and it appear that in previous transaction of the same kind between the bank and the plaintiff, quedans were paid one or two days after their delivery to them. However, on the day the Quedan was supposed to be delivered, Ranft died. Thereupon, Siy discovered that Ranft delivered such quedans to the Hongkong Shanghai Bank to whom Ranft was indebted to. Siy then filed before the estate proceedings to collect the debt of Ranft and filed an action against HSBC to demand for the recovery of possession of the quedans. Siy further argued that there was negligence in the part of HSBC, because Ranft had not yet acquired ownership over the quedans at the time of its indorsment to HSBC. Issue Whether or not HSBC acquired the quedans in good faith Held The Supreme Court held that the quedans is now owned by HSBC, and not by Ranft nor by Siy so as he claims. Ranft delivered to HSBC the quedans for a valuable consideration, which is valid, and that as it appears as well, those quedans were negotiable in form and endorsed in blank. So, upon delivery, it no longer becomes property of the indorser but the indorsee as it appears in this case, unless he pays for his indebtedness. For a warehouse receipt to be negotiated, it should be properly indorsed and delivered which is evident in this case. Since it was a blank warehouse receipt, it may be delivered to any person, and the bearer thereon becomes the owner of the receipt.

As to the question of ownership, Siy voluntarily clothed Ranft with all the attributes of ownership, thus he is estopped to question the valid title of the quedans. There is now no remedy for the plaintiff, and the bank is not responsible if the quedans be negotiated to the bank as there is no proof of fraud on the part of the defendant. December 24, 1915 G.R. No. L-10599 VICENTA JALBUENA, plaintiff-appellant, vs. SALVADOR LIZARRAGA, et al., defendants-appellees. TRENT, J.: On May 22, 1903, Salvador Lizarraga, as judgment creditor, caused the sheriff of the Province of Iloilo to levy upon an old sugar-mill as the property of Ildefonso Doronila, the judgment debtor and husband of the plaintiff. The sale took place about the last of July, 1913. The purchaser at this public sale sold the mill to Lopez. The present action was instituted on November 26, 1913, by the plaintiff for the purpose of recovering the mill of its value upon the ground that the same was her exclusive property and that her husband had no interest therein. From a judgment dismissing the cause after a hearing on the merits, the plaintiff appealed. The plaintiff knew that the old sugar-mill had been levied upon at the time the levy was made and also knew that it would be sold as the property of her husband. Notwithstanding these facts, she stood by and permitted the sale to go forward without making the slightest protest or claim until the property had passed into the hands of Lopez. Upon these facts the trial court held that the plaintiff was estopped from asserting her claim of ownership against the defendants, or either of them. This holding is assigned as an error, and in support of this alleged error the plaintiff cites and relies upon the doctrine enunciated by this court in the case of Waite vs. Peterson (8 Phil. Rep., 449); Lopez vs. Alvarez (9 Phil. Rep., 28); Uy Piaoco vs. Osmea (9 Phil. Rep., 299); Ariston vs. Cea (13 Phil. Rep., 109); and Bonzon vs. Standard Oil Co. and Osorio (27 Phil. Rep., 141). An examination of the above cited cases will show that they do not support the plaintiff's contention. An execution is an order to the sheriff to attach and sell the property of the judgment debtor. If he sells the property of another person, he exceeds his authority and the true owner may sue in trespass for damages or for the recovery of the property, provided he has not lost his right to do so by his own conduct. Upon this point, the rule is stated in 16 Cyc., 764, thus: "When a person having title to or an interest in property knowingly stands by and suffers it to be sold under judgment or decree, without asserting his title or right or making it known to the bidders, he cannot afterward set up his claim." (Citing a long array of cases from Florida, Georgia, Illinois, Kentucky, South Carolina, New York, North Carolina, Pennsylvania, and Conklin vs. Wehrman, 38 Fed., 874.)" Bigelow on Estoppel says: "... it is now a well-established principle that where the true owner of property, for however short a time, holds out another, or, with knowledge of his own right, allows another to appear, as the owner of or as having full power of disposition over the property, the same being in the latter's actual possession, and innocent third parties are thus led into dealing with some [such] apparent owner, they will be protected." (Quoted with approval in the case of Hernaez vs. Hernaez, 32 Phil. Rep., 214.) The foregoing quotations from Cyc. and Bigelow are in harmony with No. 1 of section 333 of the Code of Civil Procedure, wherein it is provided that "Whenever a party has, by his own declaration, act, or omission, intentionally and deliberately led another to believe a particular thing true, and to act upon such belief, he cannot, in any litigation arising out of such declaration, act, or omission, be permitted to falsify

it." The herein plaintiff had, as we have indicated, full knowledge of the fact that the property was going to be sold to pay the debts of her husband. She did not communicate her claim to the purchaser, and it is now too late to assert such a claim. For the foregoing reason, the judgment appealed from is affirmed, with costs against the appellant. So ordered. Arellano, C.J., Torres, Johnson, Carson and Araullo, JJ., concur.

Sun Bros. & Co. v. Jose Velasco & Co Kang Chiu Court of Appeals, 08/11/1958 Appeal from a judgment of CFI Manila. ANGELES, J. Facts The case involves one Admiral refrigerator Model 9D-7, which was originally owned by plaintiff herein. Plaintiff Francisco Lopez, P1700 full price, P500 DP Jose Velasco (owner of JV Trading), P850 Co Kang Chiu, P985. It was stipulated that Francisco Lopez shall not remove the refrigerator from his address xxx without the express written consent of plaintiff, and in the event of violation of the terms of said agreement then the plaintiff may rescind the contract of sale and recover possession of the article object thereof. It was stipulated further that xxx the merchandise object of the sale shall remain the absolute property of the plaintiff until defendant has paid in full the purchase price. 08/02/1954 plaintiff filed a complaint for replevin in the municipal court of Manila against Lopez and Co Kang Chiu. Issue W/n the refrigerator is still owned by the plaintiff. Held No. Ratio 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 of the goods is by his conduct precluded from denying the sellers authority to sell. Nothing in this Title, however, shall affect: xxx 3) Purchases made in a merchants store, or in fairs, or markets, in accordance with the Code of Commerce, and special laws.

Reasoning The JV Trading store from which Co Kang Chiu purchased the refrigerator was a merchant store, as merchant store defined in the Code of Commerce. Co Kang Chiu bought the refrigerator at the JV Trading after the same has been put on display thereat. This is a case of an imperfect or void title ripening into a valid one, as a result of some intervening causes. The rule embodied in par. 3 of Art. 1505 protecting innocent 3rd 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 reasonably be 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.