Sun Brothers & Co. v. Velasco

SUN BROTHERS & CO. [SBC] v. JOSE VELASCO & CO KANG CHIU

1958 / Angeles / Appeal from CFI judgment [Note that this is a CA, not SC, decision.]

FACTS

SBC delivered to Francisco Lopez an Admiral refrigerator. The stipulated price was P1,700, but only the downpayment of P500 was paid. Their contract stipulated the following:

• Lopez shall not remove the ref nor part possession without the express written consent of SBC.
• In the event of a violation of the agreement, SBC may rescind the contract of sale and recover possession of the ref. In addition, any amount previously paid shall be forfeited as liquidated damages, and the ref remains as SBC’s absolute property until Lopez is able to pay the full purchase price.

Without SBC’s knowledge, Lopez (who misrepresented himself as Jose Lim) sold it to JV Trading (owned by Jose Velasco) for P850, and Lopez executed a document that stated that he is the absolute owner of the ref. Without SBC’s knowledge, after displaying the ref at his store, JV Trading sold the ref to Co Kang Chiu for P985, and it was delivered to the latter’s house.

SBC filed a complaint for replevin against Lopez and Co Kang Chiu (later, JV Trading / Jose Velasco was included), and asked for a preliminary writ of replevin for the recovery of the possession of the ref, and it was issued. However, on Co Kang Chiu’s request and having filed a counter-bond, the ref was not taken out of his residence.

CFI decided in favor of SBC, declaring it as the absolute owner. Co Kang Chiu should return ref, or else, Lopez shall pay full amount of P1,700 to SBC, and JV Trading should reimburse Co Kang Chiu the amount of P985.

CFI ERRED; CO KANG CHIU IS THE ABSOLUTE OWNER; LOPEZ MUST PAY SBC P1,700

ALSO, NCC 1505 PARAGRAPH 3 (ON MERCHANT STORE) SHOULD BE APPLIED

The lower court erred in applying the first paragraph of NCC 1505. It is true that Lopez never had title since it would only be vested on him upon full payment of the purchase price. As regards JV Trading, it did not acquire any better right than what Lopez had. The Court also found that he was not a purchaser in good faith. Since he was purchasing a ref from a private person who is not engaged in such business, he should have inquired WON Lopez has paid for the ref in full.

Paragraph 3 should be applied since Co Kang Chiu purchased the ref from JV Trading, which is a merchant store. Co Kang Chiu should be declared to have acquired a valid title, although his predecessors-in-interest did not have any right of ownership thereto. Here is a case where an imperfect or void title ripens into a valid one, because of some intervening causes.

            The rights and interests of an innocent buyer for value should be protected when it comes into clash with the rights and interests of a vendor. This is embodied in NCC 1505 (3) to facilitate commercial sales of movables and to give stability to business transactions.

            SBC’s recourse should be a claim for indemnity against Lopez, and not recovery upon reimbursement, since SBC did not lose ref nor was the company unlawfully deprived of it.