G.R. No. 86051 - Ledesma vs. Court of Appeals

Case Summary (G.R. No. 86051)

Petitioner

Jaime Ledesma claimed to have purchased the 1977 Isuzu Gemini in good faith for valuable consideration and was in possession of the vehicle when Citiwide Motors instituted replevin.

Respondent

Citiwide Motors, Inc. sought recovery of the vehicle by replevin after discovering the instrument of payment had been fraudulently altered and the purchaser was an impostor; Citiwide also pursued damages against the replevin bond and for wrongful seizure.

Key Dates

Relevant transactions and litigation events included: the alleged sale and delivery of two motor vehicles on September 27–28, 1977; discovery of the dishonored manager’s check and police investigation thereafter; institution of replevin by Citiwide on November 16, 1977; sheriff’s recovery of the Isuzu on January 23, 1978; trial court judgment dated September 3, 1979 and Final Order June 26, 1980; Court of Appeals decision reversing the trial court on September 22, 1988 with denial of reconsideration December 12, 1988; and the Supreme Court decision on review rendered September 1, 1992.

Applicable Law

Governing law applied by the Supreme Court (decision rendered in 1992) includes the 1987 Constitution as the constitutional framework, and substantive and procedural provisions cited in the decision: Civil Code provisions (notably Article 559 and provisions on formation and effect of sale—Arts. 1475, 1477, 1478, 1390, 1496, 1506, 1191), Revised Penal Code Article 315 (estafa by false pretenses), and procedural rules referenced in the trial court’s Final Order (Rule 57 Sec. 20 and Rule 60 Sec. 10).

Facts

Citiwide sold two new motor vehicles to a person representing himself as Jojo Consunji. Delivery occurred on September 28, 1977 and the impostor issued Manager’s Check No. 066-110-0638 for P101,000.00. The check was dishonored because the amount had been altered from P101.00 to P101,000.00. Investigation revealed the impostor’s real identity to be Armando Suarez, a known perpetrator of estafa by similar means. Citiwide recovered one vehicle (the Holden) but the Isuzu Gemini ended up in the possession of Jaime Ledesma, who asserted he bought it in good faith from Pedro Neyra. Citiwide filed replevin and, after posting bond, recovered the vehicle by sheriff’s return. At trial the court found Ledesma to be an innocent purchaser for value in good faith and awarded him compensatory damages against the replevin bond and damages for wrongful seizure; the Court of Appeals reversed, holding Citiwide was unlawfully deprived and therefore could recover the vehicle under Article 559.

Procedural History

The trial court (Court of First Instance, later RTC) ruled for defendant Ledesma, ordered return of the vehicle to him, and awarded damages against plaintiff’s replevin bond and for wrongful issuance of the writ. The Court of Appeals reversed, applying Article 559 and finding Citiwide was unlawfully deprived by the impostor’s fraud, thereby stripping Ledesma of the protection of good-faith acquisition. The Court of Appeals denied reconsideration. Ledesma petitioned to the Supreme Court, which reviewed whether Citiwide had been unlawfully deprived so as to make Article 559 applicable and whether title had passed to subsequent purchasers in good faith.

Issues Presented

(1) Whether Article 559 of the Civil Code applied so as to permit Citiwide to recover the vehicle notwithstanding Ledesma’s good-faith purchase for value; and (2) whether the sale to the impostor produced a void or a voidable title such that subsequent purchasers in good faith could obtain valid title absent a prior judicial annulment.

Supreme Court Holding

The Supreme Court set aside the Court of Appeals decision and reinstated the trial court judgment and Final Order. It held that the sale between Citiwide and the impostor resulted in a perfected, unconditional contract of sale and that Citiwide voluntarily transferred possession and the certificate of registration to the vendee (albeit through an impostor). Consequently, title passed on delivery; the subsequent dishonor of the check constituted failure of consideration but did not render the contract void ab initio. The impostor’s title, at most, was voidable for fraud and remained effective until annulled by competent court action. Therefore, Ledesma, who purchased in good faith for value and without notice of defect, acquired title; Article 559 did not operate to divest him because Citiwide was not “unlawfully deprived” in the legal sense required for that exception to apply.

Reasoning and Legal Analysis

The Court reiterated the three requisites for possession of movables to be equivalent to title: good-faith possession, voluntary transfer by the owner, and possession in the concept of owner. The case turned on whether Citiwide had been unlawfully deprived of the vehicle.
The Court of Appeals characterized the facts as estafa by false pretenses, concluding unlawful deprivation, and applied Article 559’s exception that the owner who has been unlawfully deprived may recover the thing even from a good-faith possessor. The Supreme Court rejected this application.
The Court relied on Civil Code provisions governing perfection of sale (Arts. 1475, 1477, 1478). A consensual contract of sale is perfected upon meeting of the minds as to the th

Case Syllabus (G.R. No. 86051)

Citation and Panel

Reported at 288 Phil. 52, Third Division, G.R. No. 86051, decided September 1, 1992.
Decision authored by Justice Davide, Jr.
Per Associate Justice Oscar M. Herrera, concurred in by Associate Justices Jorge S. Imperial and Fernando A. Santiago at the Court of Appeals level (as to the assailed CA decision).
Supreme Court judgment concurred in by Justices Gutierrez, Jr. (Chairman), Bidin, and Romero; Justice Feliciano was on official leave.

Procedural History

Civil Case No. Q-24200 (replevin) filed by Citiwide Motors, Inc. in the then Court of First Instance (Branch XVIII-B, Quezon City; now Regional Trial Court, Rizal) for recovery of a 1977 Isuzu Gemini and a 1977 Holden Premier.
Trial court rendered a decision dated September 3, 1979 ordering return of the repossessed Isuzu Gemini to defendant Ledesma, dismissed plaintiff's incidental claim for damages, and made no pronouncement on certain items of damages. (Dispositive portion quoted in source.)
Trial court supplemented its judgment with a Final Order dated June 26, 1980 awarding defendant Ledesma P35,000.00 as actual damages recoverable upon plaintiff’s replevin bond and P10,000.00 as damages for wrongful issuance of writ of seizure, jointly and severally against plaintiff and its surety, Rizal Surety and Insurance Co.; motion for reconsideration denied. (Dispositive portion quoted in source.)
Citiwide Motors, Inc. appealed to the Court of Appeals (C.A.-G.R. CV No. 05955). The Court of Appeals reversed the trial court in a Decision of September 22, 1988 and denied reconsideration in a Resolution of December 12, 1988.
Petitioner Jaime Ledesma filed a petition for review before the Supreme Court, attacking the Court of Appeals’ application of Article 559, Civil Code, among other points.

Facts (as summarized by the Court of Appeals and trial record)

On September 27, 1977, a person purporting to be "Jojo Consunji" purchased two brand new motor vehicles from Citiwide Motors, Inc.: (a) a 1977 Isuzu Gemini (2-door model PF 50ZIK, Engine No. 751214), valued at P42,200.00 (Invoice No. 3054); and (b) a 1977 Holden Premier (Model 8V41X, Engine No. 198-1251493), valued at P58,800.00 (Invoice No. 3055).
On September 28, 1977, Citiwide delivered both vehicles to the person claiming to be Jojo Consunji, who issued Manager’s Check No. 066-110-0638 of the Philippine Commercial and Industrial Bank, dated September 28, 1977, for P101,000.00 as full payment for both vehicles.
Upon deposit, the check was dishonored because it had been tampered with—the correct amount on the check was P101.00, altered to read P101,000.00.
Citiwide reported the matter to the Philippine Constabulary on September 30, 1977; investigation revealed the impostor’s real identity as Armando Suarez, who had prior estafa cases using a similar modus operandi.
On October 17, 1977, Citiwide recovered the Holden Premier which had been abandoned. The Isuzu Gemini had been transferred by Armando Suarez to third persons and was in the possession of Jaime Ledesma at the time Citiwide instituted replevin on November 16, 1977.
Jaime Ledesma claimed to have purchased and paid for the Isuzu Gemini in good faith from its registered owner, Pedro Neyra, evidenced by Registration Certificate No. RC01427249.
After plaintiff posted a bond double the value of the vehicle, the vehicle was recovered by plaintiff via an Atilt Sheriff’s Return dated January 23, 1978.

Trial Court Findings and Orders

Trial court found (a) petitioner Ledesma’s proof did not persuade that he knew the vehicle was the object of fraud or swindle; and (b) Citiwide did not rebut or contradict Ledesma’s evidence that valuable consideration was paid for the car.
Trial court ordered Citiwide to return the repossessed Isuzu Gemini to Ledesma (decision dated September 3, 1979).
Final Order dated June 26, 1980: awarded Ledesma P35,000.00 as actual damages recoverable upon plaintiff’s replevin bond; ordered plaintiff and its surety to pay Ledesma P10,000.00 as damages for wrongful issuance of the writ of seizure; denied plaintiff’s motion for reconsideration.

Court of Appeals Decision and Reasoning (assailed)

Court of Appeals reversed the trial court, applying Article 559 of the Civil Code.
The Court of Appeals reasoned that when an owner has lost a thing or has been unlawfully deprived thereof, the owner may recover it from a possessor even if that possessor acquired in good faith, except when acquisition was at public sale.
Court of Appeals concluded Citiwide was unlawfully deprived of the vehicles by false pretenses because the impostor paid by a check alte