Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. L-!"# $eb%ua%& "' (#
LEUNG )EE' plaintiff-appellant'
*s.
$RAN+ L. STRONG MAC,-NER) COMPAN) an. /. G. 0-LL-AMSON' .efen.ants-
appellees.
Boo%a1 an. Mahone& fo% appellant.
0illia1s' $e%%ie% an. S&Cip fo% appellees.
CARSON' /.2
The 3Co1pa4ia A5%icola $ilipina3 bou5ht a consi.e%able 6uantit& of %ice-cleanin5
1achine%& co1pan& f%o1 the .efen.ant 1achine%& co1pan&' an. e7ecute. a chattel
1o%t5a5e the%eon to secu%e pa&1ent of the pu%chase p%ice. -t inclu.e. in the 1o%t5a5e
.ee. the buil.in5 of st%on5 1ate%ials in 8hich the 1achine%& 8as installe.' 8ithout an&
%efe%ence to the lan. on 8hich it stoo.. The in.ebte.ness secu%e. b& this inst%u1ent not
ha*in5 been pai. 8hen it fell .ue' the 1o%t5a5e. p%ope%t& 8as sol. b& the she%iff' in
pu%suance of the te%1s of the 1o%t5a5e inst%u1ent' an. 8as bou5ht in b& the 1achine%&
co1pan&. The 1o%t5a5e 8as %e5iste%e. in the chattel 1o%t5a5e %e5ist%&' an. the sale of
the p%ope%t& to the 1achine%& co1pan& in satisfaction of the 1o%t5a5e 8as annotate. in
the sa1e %e5ist%& on 9ece1be% :(' (;.
A fe8 8ee<s the%eafte%' on o% about the =th of /anua%&' (=' the 3Co1pa4ia A5%icola
$ilipina3 e7ecute. a .ee. of sale of the lan. upon 8hich the buil.in5 stoo. to the
1achine%& co1pan&' but this .ee. of sale' althou5h e7ecute. in a public .ocu1ent' 8as
not %e5iste%e.. This .ee. 1a<es no %efe%ence to the buil.in5 e%ecte. on the lan. an.
8oul. appea% to ha*e been e7ecute. fo% the pu%pose of cu%in5 an& .efects 8hich 1i5ht be
foun. to e7ist in the 1achine%& co1pan&>s title to the buil.in5 un.e% the she%iff>s
ce%tificate of sale. The 1achine%& co1pan& 8ent into possession of the buil.in5 at o%
about the ti1e 8hen this sale too< place' that is to sa&' the 1onth of 9ece1be%' (;' an.
it has continue. in possession e*e% since.
At o% about the ti1e 8hen the chattel 1o%t5a5e 8as e7ecute. in fa*o% of the 1achine%&
co1pan&' the 1o%t5a5o%' the 3Co1pa4ia A5%icola $ilipina3 e7ecute. anothe% 1o%t5a5e to
the plaintiff upon the buil.in5' sepa%ate an. apa%t f%o1 the lan. on 8hich it stoo.' to
secu%e pa&1ent of the balance of its in.ebte.ness to the plaintiff un.e% a cont%act fo% the
const%uction of the buil.in5. Upon the failu%e of the 1o%t5a5o% to pa& the a1ount of the
in.ebte.ness secu%e. b& the 1o%t5a5e' the plaintiff secu%e. ?u.51ent fo% that a1ount'
le*ie. e7ecution upon the buil.in5' bou5ht it in at the she%iff>s sale on o% about the #th
of 9ece1be%' (=' an. ha. the she%iff>s ce%tificate of the sale .ul& %e5iste%e. in the lan.
%e5ist%& of the P%o*ince of Ca*ite.
At the ti1e 8hen the e7ecution 8as le*ie. upon the buil.in5' the .efen.ant 1achine%&
co1pan&' 8hich 8as in possession' file. 8ith the she%iff a s8o%n state1ent settin5 up its
clai1 of title an. .e1an.in5 the %elease of the p%ope%t& f%o1 the le*&. The%eafte%' upon
.e1an. of the she%iff' the plaintiff e7ecute. an in.e1nit& bon. in fa*o% of the she%iff in
the su1 of P:'@@@' in %eliance upon 8hich the she%iff sol. the p%ope%t& at public auction
to the plaintiff' 8ho 8as the hi5hest bi..e% at the she%iff>s sale.
This action 8as institute. b& the plaintiff to %eco*e% possession of the buil.in5 f%o1 the
1achine%& co1pan&.
The t%ial ?u.5e' %el&in5 upon the te%1s of a%ticle =A; of the Ci*il Co.e' 5a*e ?u.51ent
in fa*o% of the 1achine%& co1pan&' on the 5%oun. that the co1pan& ha. its title to the
buil.in5 %e5iste%e. p%io% to the .ate of %e5ist%& of the plaintiff>s ce%tificate.
A%ticle =A; of the Ci*il Co.e is as follo8s2
-f the sa1e thin5 shoul. ha*e been sol. to .iffe%ent *en.ees' the o8ne%ship shall be
t%ansfe% to the pe%son 8ho 1a& ha*e the fi%st ta<en possession the%eof in 5oo. faith' if it
shoul. be pe%sonal p%ope%t&.
Shoul. it be %eal p%ope%t&' it shall belon5 to the pe%son ac6ui%in5 it 8ho fi%st %eco%.e. it in
the %e5ist%&.
Shoul. the%e be no ent%&' the p%ope%t& shall belon5 to the pe%son 8ho fi%st too<
possession of it in 5oo. faith' an.' in the absence the%eof' to the pe%son 8ho p%esents the
ol.est title' p%o*i.e. the%e is 5oo. faith.
The %e5ist%& he% %efe%%e. to is of cou%se the %e5ist%& of %eal p%ope%t&' an. it 1ust be
appa%ent that the annotation o% insc%iption of a .ee. of sale of %eal p%ope%t& in a chattel
1o%t5a5e %e5ist%& cannot be 5i*en the le5al effect of an insc%iption in the %e5ist%& of %eal
p%ope%t&. B& its e7p%ess te%1s' the Chattel Mo%t5a5e La8 conte1plates an. 1a<es
p%o*ision fo% 1o%t5a5es of pe%sonal p%ope%t&B an. the sole pu%pose an. ob?ect of the
chattel 1o%t5a5e %e5ist%& is to p%o*i.e fo% the %e5ist%& of 3Chattel 1o%t5a5es'3 that is to
sa&' 1o%t5a5es of pe%sonal p%ope%t& e7ecute. in the 1anne% an. fo%1 p%esc%ibe. in the
statute. The buil.in5 of st%on5 1ate%ials in 8hich the %ice-cleanin5 1achine%& 8as
installe. b& the 3Co1pa4ia A5%icola $ilipina3 8as %eal p%ope%t&' an. the 1e%e fact that
the pa%ties see1 to ha*e .ealt 8ith it sepa%ate an. apa%t f%o1 the lan. on 8hich it stoo. in
no 8ise chan5e. its cha%acte% as %eal p%ope%t&. -t follo8s that neithe% the o%i5inal %e5ist%&
in the chattel 1o%t5a5e of the buil.in5 an. the 1achine%& installe. the%ein' not the
annotation in that %e5ist%& of the sale of the 1o%t5a5e. p%ope%t&' ha. an& effect 8hate*e%
so fa% as the buil.in5 8as conce%ne..
0e conclu.e that the %ulin5 in fa*o% of the 1achine%& co1pan& cannot be sustaine. on
the 5%oun. assi5ne. b& the t%ial ?u.5e. 0e a%e of opinion' ho8e*e%' that the ?u.51ent
1ust be sustaine. on the 5%oun. that the a5%ee. state1ent of facts in the cou%t belo8
.iscloses that neithe% the pu%chase of the buil.in5 b& the plaintiff no% his insc%iption of
the she%iff>s ce%tificate of sale in his fa*o% 8as 1a.e in 5oo. faith' an. that the 1achine%&
co1pan& 1ust be hel. to be the o8ne% of the p%ope%t& un.e% the thi%. pa%a5%aph of the
abo*e cite. a%ticle of the co.e' it appea%in5 that the co1pan& fi%st too< possession of the
p%ope%t&B an. fu%the%' that the buil.in5 an. the lan. 8e%e sol. to the 1achine%& co1pan&
lon5 p%io% to the .ate of the she%iff>s sale to the plaintiff.
-t has been su55este. that since the p%o*isions of a%ticle =A; of the Ci*il Co.e %e6ui%e
35oo. faith'3 in e7p%ess te%1s' in %elation to 3possession3 an. 3title'3 but contain no
e7p%ess %e6ui%e1ent as to 35oo. faith3 in %elation to the 3insc%iption3 of the p%ope%t& on
the %e5ist%&' it 1ust be p%esu1e. that 5oo. faith is not an essential %e6uisite of
%e5ist%ation in o%.e% that it 1a& ha*e the effect conte1plate. in this a%ticle. 0e cannot
a5%ee 8ith this contention. -t coul. not ha*e been the intention of the le5islato% to base
the p%efe%ential %i5ht secu%e. un.e% this a%ticle of the co.e upon an insc%iption of title in
ba. faith. Such an inte%p%etation place. upon the lan5ua5e of this section 8oul. open
8i.e the .oo% to f%au. an. collusion. The public %eco%.s cannot be con*e%te. into
inst%u1ents of f%au. an. opp%ession b& one 8ho secu%es an insc%iption the%ein in ba.
faith. The fo%ce an. effect 5i*en b& la8 to an insc%iption in a public %eco%. p%esupposes
the 5oo. faith of hi1 8ho ente%s such insc%iptionB an. %i5hts c%eate. b& statute' 8hich a%e
p%e.icate. upon an insc%iption in a public %e5ist%&' .o not an. cannot acc%ue un.e% an
insc%iption 3in ba. faith'3 to the benefit of the pe%son 8ho thus 1a<es the insc%iption.
Const%uin5 the secon. pa%a5%aph of this a%ticle of the co.e' the sup%e1e cou%t of Spain
hel. in its sentencia of the ;th of Ma&' (@#' that2
This %ule is al8a&s to be un.e%stoo. on the basis of the 5oo. faith 1entione. in the fi%st
pa%a5%aphB the%efo%e' it ha*in5 been foun. that the secon. pu%chase%s 8ho %eco%. thei%
pu%chase ha. <no8le.5e of the p%e*ious sale' the 6uestion is to be .eci.e. in acco%.ance
8ith the follo8in5 pa%a5%aph. CNote :' a%t. =A;' Ci*. Co.e' Me.ina an. Ma%anon D(E
e.ition.F
Althou5h a%ticle =A;' in its secon. pa%a5%aph' p%o*i.es that the title of con*e&ance of
o8ne%ship of the %eal p%ope%t& that is fi%st %eco%.e. in the %e5ist%& shall ha*e p%efe%ence'
this p%o*ision 1ust al8a&s be un.e%stoo. on the basis of the 5oo. faith 1entione. in the
fi%st pa%a5%aphB the le5islato% coul. not ha*e 8ishe. to st%i<e it out an. to sanction ba.
faith' ?ust to co1pl& 8ith a 1e%e fo%1alit& 8hich' in 5i*en cases' .oes not obtain e*en in
%eal .isputes bet8een thi%. pe%sons. CNote :' a%t. =A;' Ci*. Co.e' issue. b& the
publishe%s of the La Re*ista .e los T%ibunales' ;th e.ition.F
The a5%ee. state1ent of facts clea%l& .iscloses that the plaintiff' 8hen he bou5ht the
buil.in5 at the she%iff>s sale an. insc%ibe. his title in the lan. %e5ist%&' 8as .ul& notifie.
that the 1achine%& co1pan& ha. bou5ht the buil.in5 f%o1 plaintiff>s ?u.51ent .ebto%B
that it ha. 5one into possession lon5 p%io% to the she%iff>s saleB an. that it 8as in
possession at the ti1e 8hen the she%iff e7ecute. his le*&. The e7ecution of an in.e1nit&
bon. b& the plaintiff in fa*o% of the she%iff' afte% the 1achine%& co1pan& ha. file. its
s8o%n clai1 of o8ne%ship' lea*es no %oo1 fo% .oubt in this %e5a%.. ,a*in5 bou5ht in the
buil.in5 at the she%iff>s sale 8ith full <no8le.5e that at the ti1e of the le*& an. sale the
buil.in5 ha. al%ea.& been sol. to the 1achine%& co1pan& b& the ?u.51ent .ebto%' the
plaintiff cannot be sai. to ha*e been a pu%chase% in 5oo. faithB an. of cou%se' the
subse6uent insc%iption of the she%iff>s ce%tificate of title 1ust be hel. to ha*e been tainte.
8ith the sa1e .efect.
Pe%haps 8e shoul. 1a<e it clea% that in hol.in5 that the insc%iption of the she%iff>s
ce%tificate of sale to the plaintiff 8as not 1a.e in 5oo. faith' 8e shoul. not be un.e%stoo.
as 6uestionin5' in an& 8a&' the 5oo. faith an. 5enuineness of the plaintiff>s clai1 a5ainst
the 3Co1pa4ia A5%icola $ilipina.3 The t%uth is that both the plaintiff an. the .efen.ant
co1pan& appea% to ha*e ha. ?ust an. %i5hteous clai1s a5ainst thei% co11on .ebto%. No
c%iticis1 can p%ope%l& be 1a.e of the e7e%cise of the ut1ost .ili5ence b& the plaintiff in
asse%tin5 an. e7e%cisin5 his %i5ht to %eco*e% the a1ount of his clai1 f%o1 the estate of the
co11on .ebto%. 0e a%e st%on5l& incline. to belie*e that in p%ocu%in5 the le*& of
e7ecution upon the facto%& buil.in5 an. in bu&in5 it at the she%iff>s sale' he consi.e%e.
that he 8as .oin5 no 1o%e than he ha. a %i5ht to .o un.e% all the ci%cu1stances' an. it is
hi5hl& possible an. e*en p%obable that he thou5ht at that ti1e that he 8oul. be able to
1aintain his position in a contest 8ith the 1achine%& co1pan&. The%e 8as no collusion
on his pa%t 8ith the co11on .ebto%' an. no thou5ht of the pe%pet%ation of a f%au. upon
the %i5hts of anothe%' in the o%.ina%& sense of the 8o%.. ,e 1a& ha*e hope.' an.
.oubtless he .i. hope' that the title of the 1achine%& co1pan& 8oul. not stan. the test of
an action in a cou%t of la8B an. if late% .e*elop1ents ha. confi%1e. his unfoun.e. hopes'
no one coul. 6uestion the le5alit& of the p%op%iet& of the cou%se he a.opte..
But it appea%in5 that he ha. full <no8le.5e of the 1achine%& co1pan&>s clai1 of
o8ne%ship 8hen he e7ecute. the in.e1nit& bon. an. bou5ht in the p%ope%t& at the
she%iff>s sale' an. it appea%in5 fu%the% that the 1achine%& co1pan&>s clai1 of o8ne%ship
8as 8ell foun.e.' he cannot be sai. to ha*e been an innocent pu%chase% fo% *alue. ,e
too< the %is< an. 1ust stan. b& the conse6uencesB an. it is in this sense that 8e fin. that
he 8as not a pu%chase% in 5oo. faith.
One 8ho pu%chases %eal estate 8ith <no8le.5e of a .efect o% lac< of title in his *en.o%
cannot clai1 that he has ac6ui%e. title the%eto in 5oo. faith as a5ainst the t%ue o8ne% of
the lan. o% of an inte%est the%einB an. the sa1e %ule 1ust be applie. to one 8ho has
<no8le.5e of facts 8hich shoul. ha*e put hi1 upon such in6ui%& an. in*esti5ation as
1i5ht be necessa%& to ac6uaint hi1 8ith the .efects in the title of his *en.o%. A pu%chase%
cannot close his e&es to facts 8hich shoul. put a %easonable 1an upon his 5ua%.' an. then
clai1 that he acte. in 5oo. faith un.e% the belief that the%e 8as no .efect in the title of the
*en.o%. ,is 1e%e %efusal to belie*e that such .efect e7ists' o% his 8illful closin5 of his
e&es to the possibilit& of the e7istence of a .efect in his *en.o%>s title' 8ill not 1a<e hi1
an innocent pu%chase% fo% *alue' if afte%8a%.s .e*elops that the title 8as in fact .efecti*e'
an. it appea%s that he ha. such notice of the .efects as 8oul. ha*e le. to its .isco*e%&
ha. he acte. 8ith that 1easu%e of p%ecaution 8hich 1a& %easonabl& be ac6ui%e. of a
p%u.ent 1an in a li<e situation. Goo. faith' o% lac< of it' is in its anal&sis a 6uestion of
intentionB but in asce%tainin5 the intention b& 8hich one is actuate. on a 5i*en occasion'
8e a%e necessa%il& cont%olle. b& the e*i.ence as to the con.uct an. out8a%. acts b&
8hich alone the in8a%. 1oti*e 1a&' 8ith safet&' be .ete%1ine.. So it is that 3the honest&
of intention'3 3the honest la8ful intent'3 8hich constitutes 5oo. faith i1plies a 3f%ee.o1
f%o1 <no8le.5e an. ci%cu1stances 8hich ou5ht to put a pe%son on in6ui%&'3 an. so it is
that p%oof of such <no8le.5e o*e%co1es the p%esu1ption of 5oo. faith in 8hich the
cou%ts al8a&s in.ul5e in the absence of p%oof to the cont%a%&. 3Goo. faith' o% the 8ant of
it' is not a *isible' tan5ible fact that can be seen o% touche.' but %athe% a state o% con.ition
of 1in. 8hich can onl& be ?u.5e. of b& actual o% fancie. to<ens o% si5ns.3 C0il.e% *s.
Gil1an' "" Gt.' "@=' "@"B Cf. Ca%.enas Lu1be% Co. *s. Sha.el' ": La. Ann.' :@(=-:@(#B
Pin<e%ton B%os. Co. *s. B%o1le&' ( Mich.' #' @' A.F
0e conclu.e that upon the 5%oun.s he%ein set fo%th the .isposin5 pa%t of the .ecision an.
?u.51ent ente%e. in the cou%t belo8 shoul. be affi%1e. 8ith costs of this instance a5ainst
the appellant. So o%.e%e..
A%ellano' C./.' /ohnson' A%aullo' St%eet an. Malcol1' //.' concu%.
To%%es' A*ance4a an. $ishe%' //.' too< no pa%t.