G.R. No. 26337 - Ledesma vs. Municipality of Iloilo

Jaime Ledesma (petitioner) challenged the decision of the Court of Appeals (CA) dated September 22, 1988, which reversed the judgment of the Court of First Instance (now Regional Trial Court) of Rizal.
The case involves a replevin suit (Civil Case No. Q-24200) over a 1977 Isuzu Gemini vehicle. Citiwide Motors, Inc. (private respondent) was the plaintiff-appellant in the CA, and Jaime Ledesma was the defendant-appellee.

On September 27, 1977, a person representing himself as Jojo Consunji purchased two vehicles from Citiwide Motors:

The said person issued a Manager’s Check dated September 28, 1977, amounting to P101,000.00 as full payment for both vehicles.
The check was dishonored for alteration, the amount being raised from P101.00 to P101,000.00. The true identity of the impostor was discovered to be Armando Suarez, a known estafa (fraud) offender.
Citiwide Motors recovered the Holden Premier but found the Isuzu Gemini transferred to third parties, ultimately in the possession of Jaime Ledesma by the time of the replevin suit.
Jaime Ledesma claimed to have bought the Isuzu Gemini in good faith for value from Pedro Neyra, the registered owner.
The trial court ordered Citiwide Motors to return the vehicle to Ledesma and granted damages in favor of Ledesma against Citiwide Motors and its surety on the replevin bond for wrongful issuance of writ of seizure.

Citiwide Motors filed an appeal before the CA, arguing errors in the trial court decision that:

Ledesma was entitled to possession;
Ledesma was an innocent purchaser in good faith and for value;
The trial court erred in ordering the return of the car and awarding damages against Citiwide;
The final orders of the trial court dated September 3, 1979, and June 26, 1980, were erroneous.

The CA reversed the trial court, applying Article 559 of the Civil Code, holding that Citiwide Motors was unlawfully deprived of the vehicle and thus could recover it despite Ledesma’s good faith purchase.

The CA erred in applying Article 559 because Citiwide Motors voluntarily parted with the vehicle and title;
The contract of sale was perfected and not void ab initio even if obtained through fraud by Suarez;
Articles 1505 and 1506 of the Civil Code must apply, recognizing a voidable title that had not been annulled before petitioner’s purchase;
Citiwide Motors’ conduct precluded it from assailing Ledesma’s title and possession.

Trial court found petitioner Ledesma bought the car in good faith, paying valuable consideration, and that Citiwide Motors failed to prove that petitioner had knowledge of the fraud.
CA held that Citiwide Motors was unlawfully deprived of the vehicle by false pretenses and hence could recover the car notwithstanding petitioner’s good faith acquisition.

Whether the Court of Appeals erred in ruling that Citiwide Motors was unlawfully deprived of the vehicle notwithstanding the subsequent dishonor of the check and thus had the right to recover the vehicle despite petitioner’s good faith purchase.

Whether petitioner Jaime Ledesma, as a buyer in good faith and for value with no notice of fraud, acquired a valid title over the vehicle.

Whether the contract of sale between Citiwide Motors and the purported buyer (through the impostor) was void from the beginning or only voidable for fraud.

Whether Article 559 of the Civil Code on unlawful deprivation of movable property applies under the particular facts of the case.

The effect of Articles 1505 and 1506 of the Civil Code on the transfer of ownership and voidable title acquired by a buyer in good faith before annulment.