Obaña vs. Court of Appeals

Ownership of goods sold passes to the vendee upon actual or constructive delivery, even if the vendee procured the goods through fraud; however, a vendee who has been repaid the purchase price by his own seller cannot retain the goods, as the voluntary rescission of their sale divests him of any claim, and allowing him to do so would constitute unjust enrichment.

Aniceto Sandoval was the owner and manager of "Sandoval and Sons Rice Mill" in Rosales, Pangasinan, engaged in the buying and selling of palay. Petitioner Aniano Obaña operated a store in San Fernando, La Union. Sandoval knew Obaña and had previously transacted with him. The dispute arose from a triangular transaction involving Sandoval, Obaña, and one Chan Lin, an intermediary who contracted with Sandoval for the purchase of rice and separately arranged a sale of the same rice to Obaña.

Aniceto Sandoval owned and managed the "Sandoval and Sons Rice Mill" in Rosales, Pangasinan, and was engaged in the buying and selling of palay. He knew petitioner Aniano Obaña, who operated a store in San Fernando, La Union, and had previously transacted with him. On November 21, 1964, a certain Chan Lin approached Sandoval and offered to purchase 170 cavans of clean rice (wagwag variety) at ₱37.25 per cavan, with delivery to be made the following day at Obaña's store in San Fernando, La Union, and payment to be made there by Chan Lin to Sandoval's representative. Sandoval accepted the offer.

The following day, the 170 cavans of rice were transported on Sandoval's truck to Obaña's store, with Chan Lin accompanying the shipment. Upon arrival, the goods were unloaded, but when the truck driver attempted to collect the purchase price from Chan Lin, the latter was nowhere to be found. The driver then tried to collect from Obaña, who refused, stating that he had purchased the goods from Chan Lin at ₱33.00 per cavan and that the price had already been paid to Chan Lin.

Further demands having been met with refusal, Sandoval filed a replevin suit against Obaña before the Municipal Court of San Fernando, La Union, which ordered Obaña to pay half the cost of the rice. On appeal to the Court of First Instance of La Union, the parties agreed to adopt Sandoval's Municipal Court testimony, and after trial de novo, the complaint was dismissed. The Court of Appeals reversed, ordering Obaña to return the rice or pay its value. Obaña then elevated the case to the Supreme Court.

During the proceedings, Obaña testified that three days after the delivery, on or about November 26, Chan Lin returned to his store accompanied by Sandoval's driver, repaid him ₱5,600.00, and requested the return of the rice. Obaña claimed he delivered the rice back to them. On rebuttal, however, the driver denied that the rice had ever been returned. The driver's version was found more credible, as Sandoval's counsel had manifested in open court that had the rice been returned, they would have withdrawn the complaint.

• Perfected Sale and Transfer of Ownership: Petitioner argued that there was a perfected sale between Sandoval and Chan Lin, and that ownership of the rice had transferred to Chan Lin upon delivery, thereby vesting Chan Lin with authority to sell the same rice to him.
• Error of the Court of Appeals: Petitioner took issue with the Appellate Court's finding that Chan Lin was not the owner of the goods at the time of the sale to petitioner and that petitioner acquired no greater right than his predecessor-in-interest, contending that this reasoning was erroneous.

• Validity of the Sale to Chan Lin: Whether a perfected sale existed between Sandoval and Chan Lin such that ownership of the rice transferred to Chan Lin upon delivery.
• Title of Petitioner: Whether petitioner acquired valid title to the rice through his purchase from Chan Lin.
• Right to Recovery: Whether Sandoval is entitled to recover the rice or its value from petitioner.

• Validity of the Sale to Chan Lin: Yes. A perfected sale existed between Sandoval and Chan Lin, and ownership of the rice transferred to Chan Lin upon its delivery at the stipulated place, pursuant to Articles 1475, 1477, and 1496 of the Civil Code.
• Title of Petitioner: Yes, initially. Petitioner acquired title from Chan Lin, who had at least a rescissible title to the goods for non-payment of the purchase price, which had not been rescinded at the time of the sale to petitioner.
• Right to Recovery: Yes. Sandoval is entitled to recover the rice or its value, because petitioner's own admission that Chan Lin repaid him the purchase price constituted a voluntary rescission of their sale, divesting petitioner of any claim to the rice and rendering his continued retention of it unjust enrichment.

• Validity of the Sale to Chan Lin: The Court agreed with petitioner that there was a perfected sale. Under Article 1475 of the Civil Code, a contract of sale is perfected at the moment there is a meeting of minds upon the thing which is the object of the contract and upon the price. Sandoval and Chan Lin had agreed on the subject matter (170 cavans of clean rice) and the price (₱37.25 per cavan). Ownership of the rice was transferred to Chan Lin upon its delivery to him at San Fernando, La Union, the stipulated place, pursuant to Articles 1477 and 1496 of the Civil Code, which provide that ownership of the thing sold is transferred to the vendee upon actual or constructive delivery. The Court thus rejected the Court of Appeals' reasoning that Chan Lin never became owner.

• Title of Petitioner: Because Chan Lin had acquired ownership of the rice upon delivery, he had at least a rescissible title to the goods by reason of non-payment of the purchase price. That title, however, had not been rescinded at the time Chan Lin sold the rice to petitioner. Petitioner therefore initially acquired title through his purchase from Chan Lin, and the Court of Appeals' conclusion that petitioner acquired no greater right than a non-owner predecessor was incorrect.

• Right to Recovery: The decisive fact was petitioner's own testimony before the Court of First Instance, in which he admitted that three days after delivery, Chan Lin and Sandoval's driver came to him, repaid him ₱5,600.00, and requested the return of the rice. That repayment constituted a voluntary rescission of the sale between Chan Lin and petitioner, thereby divesting petitioner of any claim to the rice. The driver's rebuttal testimony that the rice was never returned was found more credible, as Sandoval's counsel had manifested that had the rice been returned, the complaint would have been withdrawn. Since even Chan Lin was ready to return the rice to Sandoval, and petitioner could not establish that he had returned it, allowing petitioner to hold on to the property would constitute unjust enrichment under Article 22 of the Civil Code. In law and equity, Sandoval was entitled to recover the rice or its value, as he had never been paid the purchase price.

• Perfection of Contract of Sale — Under Article 1475 of the Civil Code, a contract of sale is perfected at the moment there is a meeting of minds upon the thing which is the object of the contract and upon the price, even if neither has been delivered. The Court applied this to find that the agreement between Sandoval and Chan Lin on the 170 cavans of rice at ₱37.25 per cavan constituted a perfected sale.
• Transfer of Ownership Upon Delivery — Under Articles 1477 and 1496 of the Civil Code, ownership of the thing sold is transferred to the vendee upon actual or constructive delivery. The Court held that ownership of the rice passed to Chan Lin upon delivery at the stipulated place in San Fernando, La Union, notwithstanding his fraudulent intent.
• Rescissible Title — A vendee who has not paid the purchase price holds at least a rescissible title to the goods, which remains valid and transferable until judicially or voluntarily rescinded. The Court found that Chan Lin's title, though rescissible for non-payment, had not been rescinded at the time he sold the rice to petitioner.
• Voluntary Rescission — Repayment of the purchase price by the vendee to his own seller, coupled with a request for return of the goods, constitutes a voluntary rescission of the sale, divesting the vendee of any claim to the property. The Court applied this to petitioner's admitted receipt of ₱5,600.00 from Chan Lin.
• Unjust Enrichment (Article 22, Civil Code) — Every person who through an act or performance by another, or any other means, acquires or comes into possession of something at the expense of the latter without just or legal ground, must return it. The Court invoked this principle to bar petitioner from retaining the rice after the voluntary rescission of his sale with Chan Lin.

• "We agree with petitioner-defendant that there was a perfected sale. Article 1475 of the Civil Code lays down the general rule that there is perfection when there is consent upon the subject matter and price, even if neither is delivered." — This passage marks the Court's departure from the Court of Appeals' reasoning, establishing that the sale between Sandoval and Chan Lin was validly perfected despite Chan Lin's fraudulent intent.

• "At the very least, Chan Lin had a rescissible title to the goods for the non-payment of the purchase price, but which had not been rescinded at the time of the sale to petitioner." — This defines the nature of Chan Lin's ownership and explains why petitioner initially acquired valid title, distinguishing a rescissible title from a void one.

• "Having been repaid the purchases price by Chan Lin, the sale, as between them, had been voluntarily rescinded, and petitioner-defendant was thereby divested of any claim to the rice." — This is the ratio decidendi: the repayment constituted rescission, which is the actual ground for affirming the judgment rather than the Court of Appeals' theory of non-ownership.

• Article 1475, Civil Code — Provides that the contract of sale is perfected at the moment there is a meeting of minds upon the thing which is the object of the contract and upon the price. Applied to find a perfected sale between Sandoval and Chan Lin.
• Article 1477, Civil Code — Provides that ownership of the thing sold shall be transferred to the vendee upon actual or constructive delivery thereof. Applied to find that ownership of the rice passed to Chan Lin upon delivery at the stipulated place.
• Article 1496, Civil Code — Provides that ownership of the thing sold is acquired by the vendee from the moment it is delivered in any of the ways specified in Articles 1497 to 1501, or in any manner signifying an agreement that possession is transferred from vendor to vendee. Applied in conjunction with Article 1477.
• Article 22, Civil Code — Provides that every person who through an act or performance by another acquires or comes into possession of something at the expense of the latter without just or legal ground must return it. Applied to bar petitioner from unjustly enriching himself by retaining the rice after voluntary rescission of his sale with Chan Lin.

Plana, Relova, Gutierrez, Jr., De la Fuente, and Alampay, JJ., concurred.