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PHILIPPINE SUPREME COURT DECISIONS

EN BANC

[G.R. No. 13026. July 12, 1919. ]

CAYETANO CHINCHILLA, Plaintiff-Appellee, v. JULIO RAFEL and JOAQUIN VERDAGUER, Defendants. JOAQUIN VERDAGUER, Appellant.

Recaredo Ma. Calvo for Appellant.

Sanz & Luzuriaqa for Appellee.

SYLLABUS


1. CONTRACTS; INTERPRETATION OF DEED OF SALE WITH RIGHT OF REPURCHASE. — When the terms of a contract of sale with right of repurchase are clear and leave no doubt as to the intention of the parties who have employed in the making of the said contract express words evidently showing their intention, it is not possible to infer from the contents of the document containing the said contract that there has been another stipulation consistent with a loan upon a security of personal property and chattels which appear therein to have been sold, and, for its true and real interpretation, the literal sense of the stipulations of the contract above all other things should be followed in the absence of proofs which show that the contracting parties had an intention distinct from that appearing in the contract. (Article 1281, Civil Code.)

2. ID.; ID. — There not appearing in the document containing the contract of sale with right of repurchase any general terms or ambiguous phrases from which it may be inferred that the parties entered into a contract of loan instead of a contract of sale with right of repurchase, it behooves that the clear and express precept of the law should be observed, that is, there should not be understood as comprised in a written contract things and cases distinct and different from those which the interested parties intended. In other words, it should not be understood that a contract of loan was entered into when what really and truly appears to have been stipulated by the parties is that of sale.

3. DEEDS; PUBLIC DOCUMENT; EFFECT. — The validity and efficacy of a private document can not prevail over that of a public document, which, as such, is a proof against a third party who did not take part in the contract.

4. RECORDS; REGISTRY OF TRANSFER OF AUTOMOBILE; NATURE. — The registry of the transfer of automobiles and of the certificates of license for their use in the Bureau of Public Works merely constitutes an administrative proceeding which does not bear any essential relation to the contract of sale entered into between the parties.

5. BAILMENT; RIGHT OF LESSEE TO ALIENATE. — Inasmuch as the lessee does not possess the character of owner of the thing leased, he has no right whatever to alienate or transfer any right of ownership to the purchaser who contracts with him, nor can he impose any burden upon the thing leased without the consent of the true owner.


D E C I S I O N


TORRES, J.:


On March 29, 1915, Cayetano Chinchilla filed a complaint in the Court of First Instance of Manila against Julio Rafel and Joaquin Verdaguer, alleging that on November 23, 1914, the defendant Julio Rafel executed a mortgage contract covering five automobiles belonging to him in favor of Rosa Sanz as a security for the payment of a promissory note for two thousand six hundred twenty- five pesos (P2,625) which note was subscribed by said Julio Rafel in favor of the creditor Sanz; that the said mortgage was inscribed in the registry of mortgage on November 27, 1914, and because the debt was not paid in spite of several demands made to this end by the creditor, the latter proceeded to the foreclosure of the said mortgage; that the sheriff announced the sale at public auction of the mortgaged automobiles for February 10, 1915; that for the purpose of attending to several obligations that were then due and demandable, among which was that contracted in favor of the mortgagee Rosa Sanz, the defendant Julio Rafel, on February 5, 1915, sold to the plaintiff all his business known by the name of "Rafel’s Garage," situated in the city of Manila, for the sum of eleven thousand five hundred pesos (P11,500), executing therefor the corresponding document which was signed by both parties, but by reason of causes independent of the will of the plaintiff, said document was not ratified before a notary public; that on February 9, 1915, the defendant Julio Rafel demanded of the plaintiff to pay him seven thousand pesos (P7,000) on account of the eleven thousand five hundred pesos (P11,500), the purchase price, because he had to comply with certain obligations such as a mortgage previously mentioned, and the plaintiff, believing in the good faith of the defendant Julio Rafel and trusting, moreover, in the assurance given him that the deed of sale which was then in the hands of Attorney Alfredo Chicote was already signed, delivered to the defendant three thousand pesos (P3,000), in order that with this sum he might pay to the latter as representative of the said mortgagee the obligation contracted in favor of the latter, promising to deliver the other four thousand pesos upon showing him the receipt of Attorney Chicote; that in compliance with said promise the plaintiff then delivered to the defendant Julio Rafel the sum of four thousand pesos (P4,000), with the understanding that said document be ratified after the office hours of Chicote, and that the next day the business sold should be delivered to the plaintiff, but that the delivery was not effected because the defendant Julio Rafel delayed through excuses the ratification of the document until he was informed that the other defendant Joaquin Verdaguer was presenting a claim to Attorney Jose Valera Calderon, representative of the defendant Julio Rafel, to the effect that said Julio Rafel had executed in his (Verdaguer’s) favor a document by virtue of which Julio Rafel sold to him his business, and for this reason the chattels of the same were attached without any objection on the part of the said representative of Rafel; that for this reason, the plaintiff went to Attorney Chicote to ask him that he be subrogated in the rights of the mortgagee, and in view of the fact that the attorney told him that the amount of four hundred forty-five pesos and seventy-five centavos (P445.75) was not yet paid, the plaintiff paid the amount to the said attorney who drew up the corresponding deed of subrogation; that the sale alleged by the defendant Verdaguer does not give him any right, because the property sold was in the legal possession of the mortgagee whose rights the plaintiff represents by virtue of the subrogation, and, moreover, because said defendant Verdaguer was never in the possession of the license of the automobiles, but only on February 4, 1915, when he illegally took possession of all the automobiles and accessories connected with the business of Julio Rafel, and for this reason the plaintiff prayed that he be subrogated in the rights of the creditor Rosa Sanz and that it be declared that said Sanz’s right as mortgagee of the automobiles so mortgaged has preference over that of the defendant Joaquin Verdaguer.

Case No. 12886 of the Court of First Instance of Manila having been instituted by virtue of this complaint, on April 16, 1915, the plaintiff brought another action registered in the same court with the No. 12926, alleging therein the same facts as alleged in the former complaint, but stating that he had paid the total sum of seven thousand four hundred forty-five pesos and seventy-five centavos (P7,445.75) on account of the price of the said sale into which he had entered with the defendant Julio Rafel; that of this sum three thousand pesos (P3,000) should be reimbursed to the plaintiff by virtue of his right of subrogation, and the remaining sum of four thousand four hundred forty-five pesos and seventy-five centavos (P4,445.75) should be paid to him from the property which makes up the business of "Rafel’s said business; wherefore, the plaintiff prayed that the court Garage," and that the defendant Joaquin Verdaguer has no right whatsoever to take possession of the declare null and void the claim asserted by the defendant Joaquin Verdaguer to the possession of the business of "Rafel’s Garage," and that the court declare that the plaintiff is entitled to be reimbursed in the amount of four thousand four hundred forty-five pesos and seventy-five centavos (P4,445.75) from the property which makes up the business of "Rafel’s Garage."cralaw virtua1aw library

The defendant Joaquin Verdaguer answered the first complaint, denying generally the allegations thereof and alleging as first special defense that by virtue of a written contract of sale with right of repurchase entered into between him and the defendant Julio Rafel before a notary on April 17, 1914, he (the defendant) acquired the eight automobiles, the vulcanizing plant and all the accessories, tools, and utensils of an automobile repair shop under the name of "Rafel’s Garage" for the sum of five thousand pesos (P5,000); that they (Verdaguer and Rafel) have agreed that during the term of six months extendible for another six months allowed for the redemption, Rafel should have all the said property under a lease by paying a monthly rent of one hundred pesos (P100), under the stipulation that in the event of a failure to pay the rent corresponding to two months, the right to repurchase should immediately lapse, and the purchaser Verdaguer should then become the owner; that after the said document had been executed, the defendant Julio Rafel delivered the certificates of registry of the automobiles issued in his favor by the Bureau of Public Works, signing in blank the printed indorsements which appear inserted on the back of each of the certificates of registry; that Julio Rafel had been paying the rent for the automobiles and other property leased from the date of the execution of the document up to December 16, 1914, when he stopped to do so until this date; that on February 17, 1915, the ownership of the automobiles and the other property sold under right of repurchase was merged in the defendant Joaquin Verdaguer for failure on Rafel’s part to pay the rent agreed upon, and the defendant Verdaguer then asked Julio Rafel’s representative to deliver to him the property sold, and the delivery was accordingly made; that the mortgage executed by Julio Rafel in favor of Rosa Sanz on November 23, 1914, as well as the sale made to the plaintiff were made without the consent and knowledge of Joaquin Verdaguer, and that the defendant Julio Rafel could neither then mortgage nor sell anything except his right to repurchase. As second special defense, said defendant Verdaguer alleged: that when the defendant Joaquin Verdaguer had knowledge of the announced sale at public auction of the automobiles in order to satisfy the mortgage credit of Rosa Sanz, the said Verdaguer required the defendant Julio Rafel to cancel the mortgage and withdraw the notice of sale within twenty-four (24) hours, to which the defendant Julio Rafel answered that the mortgage debt of two thousand five hundred pesos (P2,500) had already been paid; that the money with which he paid the mortgage debt did not come from the plaintiff but was Julio Rafel’s own money, and the remainder of one hundred twenty-five pesos (P125) which the plaintiff alleges to have paid to the mortgagee Rosa Sanz was reimbursed if the plaintiff had so paid it, knowing that the properties mortgaged were sold to the defendant Joaquin Verdaguer and that Julio Rafel had no right, interest, or participation whatsoever in the properties so mortgaged to Rosa Sanz except that of repurchase. And as third special defense he alleged: that the contract of sale which is alleged to have been entered into between the plaintiff and the defendant Julio Rafel is simulated and fictitious, because the true intention of the parties who executed it was to pay to Julio Rafel not the sum of eleven thousand five hundred pesos (P11,500) but the sum of seven thousand pesos (P7,000) which the plaintiff admits to have delivered to Julio Rafel, in order that Julio Rafel could, with such sum, purchase opium abroad and import it into the Philippine Islands, and in order to assure herself of Julio Rafel’s return to the Islands a fictitious sale of the property was made; that inasmuch as the said contract contains an illegal consideration, the importation of opium, it is null and void; wherefore, the said defendant Joaquin Verdaguer prayed that he be absolved from the complaint, that he be declared to have a better right to the property in question, and that the plaintiff be sentenced to indemnify the said defendant in the amount of one thousand five hundred pesos (P1,500), the amount of the bond required by the court from Joaquin Verdaguer upon his being appointed depositary of the property in dispute, for the reason that the said appointment of depositary was solicited by the plaintiff without any justifiable cause.

In answer to the second complaint, the defendant made substantially the same allegations as those of the foregoing answer.

In this case, Henry W. Peabody & Co., Castelltort and De Leon, and Kuenzle & Streiff intervened, claiming credits against the business of "Rafel’s Garage." The defendant Joaquin Verdaguer answered each of said claims.

By virtue of an agreement entered into by the parties, the two cases were heard jointly, and after the evidence on both sides had been adduced, the lower court rendered judgment sentencing Joaquin Verdaguer to deliver to the plaintiff Chinchilla all the automobiles he had under his control in his capacity as depositary, and ordering the sale at public auction of the automobiles Nos. 44340, 43487, 6795, 6747, and 103016, in order that the proceeds therefrom be applied in the discharge of Chinchilla’s preferred credit to the amount of three thousands pesos (P3,000), and to apply the balance together with the value of the other automobiles in the payment, without preference, of Chinchilla’s own credit of four thousand pesos (P4,000), Kuenzle & Streiff’s credit of one thousand six hundred fifty nine pesos and eighty centavos, (P1,659.80), Henry W. Peabody & Co.’s credit for one thousand two hundred pesos (P1,200), with interest at the rate of 8 per cent per annum on the last mentioned credit from March 14, 1914, in proportion to the amount of the credits mentioned.

From this judgment, only the defendant Joaquin Verdaguer excepted and moved for a new trial. His motion for a new trial having been denied, he excepted to the order of the court denying said motion and presented the corresponding bill of exceptions which was approved, certified, and transmitted to the clerk of this court.

Counsel for Henry W. Peabody & Co. also moved for a new trial, but did not except to the order denying his motion nor did he present an appeal. Hence, the controversy in this appeal is only between the plaintiff Chinchilla and the defendant Joaquin Verdaguer.

The following are positive and proven facts: that on April 17, 1914. Julio Rafel executed in favor of Joaquin Verdaguer before a notary public a document by virtue of which Julio Rafel sold with right of repurchase to Joaquin Verdaguer the following for five thousand pesos (P5,000):jgc:chanrobles.com.ph

"One automobile marked Reo, with the factory number 42400 of 33 horse-power, Registry No. 1598.

"Another automobile marked Reo, with the factory number 29136 of 30 horse-power, Registry No. 172.

"Another automobile marked Everett, with the factory number B-6747 and motor number 7958, of 36 horse-power, Registry No. 1827.

"Another automobile marked Reo, with the factory number 47487 of 30 horse-power, Registry No. 2016.

"Another automobile marked Studebaker, with the factory number 103016, of 35 horse-power, Registry No. 2061.

"Another automobile Reo, with the factory No. 44340, motor number 44340, of 35 horse-power, Registry No. 2460.

"Another automobile marked Winen, with factory No. H-96, motor No. H-96, of 12 horse-power, Registry No. 2883

"Another automobile marked Everett, with factory number 6795, motor No. 8057, of 36 horse-power, Registry No. 1826.

"Besides, one electric machine for vulcanizing rubber, two screw-stocks for making lock-nuts, and all the instruments and utensils pertaining to the shop of ’Rafel’s Garage,’ valued at P5,000."cralaw virtua1aw library

In said document, it appears to have been stipulated that if the vendor should return to the purchaser the price of five thousand pesos (P5,000) within the period of six months counted from the date of the document and extendible to another six months according to the will of the parties, the purchaser might redeem the said automobiles, machinery, and utensils, the sale remaining absolute in a contrary case. It was also stipulated that during the period of repurchase, the vendor should have under lease the automobiles, machinery, and utensils above described, through the payment of a monthly rental of one hundred pesos (P100) payable in advance within the first five days of each month, provided that if the lessee should fail to pay the rent for two consecutive months, this sale should by this fact alone be considered absolute, irrevocable, and definite, and the purchaser Joaquin Verdaguer would become the owner of the said property. (Exhibit 1, pp. 30-32, first part of record.)

On November 23, 1914, Julio Rafel mortgaged to Rosa Sanz Vda. de Bastida the following:jgc:chanrobles.com.ph

"A passenger automobile, marked Reo, with factory number 44340, motor No. 44340, of four wheels, gasoline power, and of 35 horse-power, registered with the No. 2460 in the Bureau of Public Works. "A passenger automobile, marked Reo, with factory number 43487, of four wheels, gasoline power, and of 30 horse- power, registered with No. 2016 in the Bureau of Public Works.

"A passenger automobile, marked Everett, with factory number B-6795, motor No. 8057, of four wheels, gasoline power, and of 36 horse-power registered with the number 1826 in the Bureau of Public Works.

"A passenger automobile, marked Everett, with factory number B-6747, motor number 7958, of four wheels, gasoline power, and of 36 horse-power, registered with the No. 1827 in the Bureau of Public Works.

"A passenger automobile, marked Everett, with the factory number 103016, of four wheels, gasoline power, and of 35 horse-power, registered with the number 2061 in the Bureau of Public Works."cralaw virtua1aw library

It appears that the mortgage document has been executed by the debtor Rafel in order to guarantee the payment of a promissory note of two thousand six hundred twenty-five pesos (P2,625) subscribed by said Rafel and payable on December 23, 1914. It was stipulated in said-note that if it should not be paid on the day it was due, said Julio Rafel bound himself to pay an interest of 5 per cent per month by way of penalty, plus one hundred pesos (P100) by way also of penalty should it be necessary to resort to the courts for the collection of its amount. The mortgage document was inscribed in the registry of mortgage on November 27, 1914. (Exhibit B, pp. 26-28, first part of record.)

On January 28, 1915, the mortgage deed was delivered to the sheriff of Manila, together with a petition for the execution of the said mortgage, by selling at public auction the property mortgaged. (Exhibit C, p. 170, first part of record.) On the 29th of the same month, the sale at public auction was announced to take place on February 10th, and the sheriff notified Julio Rafel that in accordance with the notice of sale he would proceed to sell at public auction, on February 10, 1915, the property described in the said notice and which was mortgaged in favor of Rosa Sanz Vda. de Bastida.

On the first days of February, 1915, Julio Rafel proposed to the plaintiff the sale of his automobiles, showing as proof of his ownership thereof the documents Exhibits E, E-l, E-2, E-3, E-4, E-5, E-6, E-7, E-8, and E-9. The plaintiff received information from Picornell and afterwards interviewed Attorney Chicote who told him that the automobiles were mortgaged to his client, Rosa Sanz de Bastida and on February 5, 1915, Julio Rafel and Cayetano Chinchilla executed a document (Exhibit A) whereby Rafel sold to Chinchilla for eleven thousand five hundred pesos (P11,500) nine automobiles, a machine for vulcanizing rubber with its accessories, a complete automobile repair shop, the right to lease lot No. 520 on Salcedo Street, Manila, all the things which constituted. the business denominated as "Rafel’s Garage," including its name and good will as well as the credits that were still unpaid.

The automobiles thus sold are described in the referred document in the following manner:

———————————————————————————————

Class Mark Kind Horse Reg. No. Factory

power or Motor

No.

———————————————————————————————

Passengers Reo Gasoline 35 2460 44340

Do do do 30 2016 43487

Do do do

Do Studebaker do 35 2061 103016

Do Buick do 30 170 3934

Do Everett do 36 1826 B6795

Do do do 36 1827 8057

Truck Wine do

It was stipulated in the contract that if, within the period of thirty days extendible to another thirty days, Julio Rafel should pay to the vendee Chinchilla the amount of eleven thousand five hundred pesos (P11,500), the latter bound himself and promised to resell to the vendor the things sold. (Exhibit A, first part of record, pp. 165-167.) This document is signed by the parties in the presence of two witnesses and in the same paper wherein appear their signatures appears a ratification in blank.

The documents exhibited by Julio Rafel to Cayetano Chinchilla (Exhibits E to E-5, record, pp. 175-180) are certificates issued by the Director of Public Works to Julio Rafel in 1912 and 1913 wherein it appears that said Julio Rafel had duly registered certain automobiles belonging to him, but said documents except E-2 are all marked with the words "copy" and "reissue of No."cralaw virtua1aw library

Exhibits E-6 and E-7 (first part of record, pp. 181-182), which were also presented by Julio Rafel to Cayetano Chinchilla in order to prove his ownership of the automobiles, are copies of receipts signed on February 4, 1915, by C. Alkan, purporting to show that Julio Rafel paid to said Alkan the price of an automobile marked Reo No. 2016 and of another automobile of the same mark with the No. 1598.

Exhibits E-8 and E-9 (first part of record, pp. 183-186), which Rafel also showed to Chinchilla in connection with the automobiles the former sold, are: The first, a mortgage deed executed by Julio Rafel in favor of C. Alkan, covering an automobile marked Reo, No. 44340, and the second, a document cancelling the same mortgage signed by C. Alkan, who declared therein that the said automobile was under the free disposal of Julio Rafel since March 18, 1914.

It is to be noted that on February 4, 1915, that is, one day before the date of the execution of the document Exhibit A by Julio Rafel in favor of Cayetano Chinchilla, the following automobiles were already registered in the name of Joaquin Verdaguer in the Bureau of Public Works:jgc:chanrobles.com.ph

"Auto Reo, Registry No. 172, Factory No. — Motor No. 29136.

"Auto Reo, Registry No. 1598, Factory No. 42400, Motor No. —

"Auto Reo, Registry No. 2016, Factory No. 43487, Motor No. —

"Auto Reo, Registry No. 2460, Factory No. 44340, Motor No. 44340.

"Auto Winy, Registry No. 2883, Factory No. H-96, Motor No. H-96.

"Auto Everett, Registry No. 1827, Factory No. B-6747, Motor No. 7958.

"Auto Studebaker, Registry No. 2061, Factory No. 103016, Motor No. — .

(See Exhibit H, first part of record p. 60, and Exhibits 3 to 10, first part of record, pp. 260-267.)

In the same month of February, 1915, Attorney Chicote issued a receipt in favor of Julio Rafel, acknowledging that he received from the latter, on account of the chattel mortgage in favor of Rosa Sanz, the sum of two thousand five hundred pesos (P2,500). (Exhibit 11, record, p. 268.) This receipt bears the date of February 6, 1915, but the plaintiff insists and Chicote testifies likewise that the truth of the matter is that the said receipt was issued on February 9, 1916, but was dated back on the 6th, to avoid the necessity of paying interest for an additional month.

On February 9, 1915, Attorney Chicote who represented the creditor Rosa Sanz moved for the dismissal of the proceeding regarding the execution of the mortgage on the ground that the parties were about to enter into a compromise (Exhibit L, second part of record, p. 278).

On February 14, 1915, Julio Rafel left the Philippine Islands on board the steamer Shinyo Maru enroute to Hongkong, under the name of J. R. Monroset which is his maternal surname.

On February 17, 1915, the defendant Joaquin Verdaguer attached the business of "Rafel’s Garage" (Exhibit 2, first part of record, pp. 55-57), taking possession of the same as owner, and on April 27, 1915, as depositary named by the court of the four automobiles marked Reo Nos. 2460, 1598, 2016, and 172, of two automobiles marked Everett Nos. 1826 and 2883; of one marked Studebaker No. 2061; of another marked Waming No. 1827, and. of a machinery for vulcanizing rubber and of various utensils pertaining to the automobile repair shop, as may be seen from the inventory (record, p. 95) of the first bill of exceptions.

The principal question submitted for the decision of this court by virtue of the appeal interposed by the defendant consists in determining the nature of the contract Exhibit 1, executed by Julio Rafel in favor of the defendant Joaquin Verdaguer.

This contract appears in a manner which is clear, evident, and unequivocal in the said document Exhibit 1, whereby Julio Rafel sold to the defendant Verdaguer with right of repurchase the eight automobiles and other chattels specified therein. It also appears to have been stipulated in the same contract that the vendor Rafel might redeem them within six months to be counted from April 17, 1914, the date of the contract, which period would be extendible according to the will of the parties for another six months. It was, moreover, agreed that during the period allowed for redemption the vendor would remain in the possession of the automobiles and chattels sold by him, in the capacity of lessee through the payment of a monthly rental of one hundred pesos, subject to the condition that if the lessee Rafel should fail to pay two consecutive monthly rental by virtue of the stipulated lease, the right of repurchase would ipso facto be considered as waived and the sale would become absolute, irrevocable, and definite. Notwithstanding the fact that the terms of the contract are definite and clear, oral evidence was presented for the purpose of showing that the agreement entered into between the parties is distinct from that stated in the said document Exhibit 1, and that the latter does not express the true intention of the contracting parties.

Section 285 of the Code of Civil Procedure, treating of the presumption that an agreement in writing contains all the conditions stipulated in the contract, prescribes as follows:jgc:chanrobles.com.ph

"When the terms of an agreement have been reduced to writing by the parties, it is to be considered as containing all those terms, and therefore there can be, between the parties and their representatives or successors in interest, no evidence of the terms of agreement other than the contents of the writing, except in the following cases: . . ."cralaw virtua1aw library

"It was not alleged that this case was comprised within the two exceptions mentioned in the above-cited section in order that the presumption established therein may be considered rebutted, and that it was necessary to adduce evidence tending to prove that the agreement between the contracting parties and stated in the said document Exhibit 1 does not express what has been agreed upon by the parties nor the true intention of the same, in view of the fact that it was neither alleged nor justified at the trial that the terms of the contract Exhibit 1 were ambiguous, and that the contract of sale with right of repurchase was executed through fraud and deceitful or false statements of one of the contracting parties."cralaw virtua1aw library

It is true that the plaintiff in his complaint, which is the beginning of the proceeding No. 12886, asked that the court declare null and void the title alleged by the defendant Verdaguer to the possession of the business "Rafel’s Garage," and the plaintiff thereby referred undoubtedly to the contract of sale with right of repurchase, Exhibit 1, without making any attempt to ostensibly impugn this contract; but it is no less true that the said contract of sale with right of repurchase was never impugned as false and illegal, civilly or criminally, inasmuch as the plaintiff has not adduced any evidence of its illegality or falsity, nor has he adduced any evidence tending to show that the contract was one of loan secured with the automobiles and accessories pertaining to the said business of "Rafel’s Garage" — that which has been really and truly entered into between Julio Rafel and Joaquin Verdaguer.

Article 1281 of the Civil Code provides:jgc:chanrobles.com.ph

"If the terms of a contract are clear and leave no doubt as to the intention of the contracting parties, the literal sense of its stipulations shall be followed.

"If the words appear to be contrary to the evident intention of the contracting parties, the intention shall prevail."cralaw virtua1aw library

That the terms employed in the contract Exhibit 1 are clear and leave no doubt as to the true genuine intention of the contracting parties, it is sufficient, in the opinion of this court, to demonstrate it by a simple reading of the document Exhibit 1 from the wording of which it is not possible to find any meaning contrary or opposed to the evident intention of the contracting parties, Rafel and Verdaguer. Upon a conscientious and careful examination of the meaning of each and every word and phrase contained in the said document Exhibit 1, it will be seen that it is not possible to deduce from all of them that there was executed a mere contract of loan with guaranty of the automobiles and accessories specified in detail in the said document. On the other hand, it will be inferred therefrom that it was a sale with right of repurchase according to the terms of the contract expressed therein, and the same conveys the real and genuine intention and will of the contracting parties. From the literal wording of the document in question, it is not possible under any circumstance whatsoever to infer a contract distinct from that which really and truly appears to have been specified in the said document.

Article 1283 of the Civil Code provides:jgc:chanrobles.com.ph

"However the general terms of a contract may be, it shall not be construed as including things and cases different from those with respect to which the persons interested intended to contract."cralaw virtua1aw library

The record does not furnish any proof that Julio Rafel and Joaquin Verdaguer proposed to enter into a contract of loan with the guaranty of the eight automobiles belonging to the borrower. The only proof that appears of record of the contract entered into between the parties is the document Exhibit 1 which is a conclusive and indisputable proof of the fact that the contract entered into between them is that of sale with right of repurchase. If the document Exhibit 1 expresses, in any manner, by any of its words or phrases, that there was between the parties any stipulation expressive of a loan of money, as asserted by the plaintiff and in the decision appealed from, there not being in the contract any generalization of terms or of expression which may, in any manner, imply a stipulation of loan, it behooves that the clear precept of the law should be observed, that is, there should not be understood in said agreement any contract of loan but a sale with right of repurchase, because to do so would be considering as included in the document Exhibit 1 things and cases distinct and different from those which the contracting parties proposed to agree, that is, that Verdaguer would give money in loan to Rafel with a guaranty of certain chattels when what they have in fact proposed to contract was that Rafel sell to Verdaguer the automobiles and property mentioned in the said document Exhibit 1.

Article 1218 of the Civil Code provides:jgc:chanrobles.com.ph

"Public instruments are evidence, even against a third person, of the fact which gave rise to their execution and of the date of the latter."cralaw virtua1aw library

The document Exhibit 1 executed by Julio Rafel in favor of Joaquin Verdaguer appears to have been duly ratified before a notary public, and hence is clothed with the character of a public document, and as such, is a proof against third persons, as the plaintiff Chinchilla in this case, who on his behalf, has not presented at the trial any proof of his alleged preferred right, except the private document Exhibit A whose validity and efficacy can not prevail over that of a public document such as the notarial document Exhibit 1. (Article 1227, Civil Code.)

The fact that the purchaser failed to register opportunely the transfer of the automobiles in his name in the Bureau of Public Works, which he did only after ten months and some days, that is, on February 4, 1915, when the sale with right of repurchase of the same took place on April 17, 1914, such a circumstance does not constitute a proof that said sale was not real and true and that it was a simulated or fictitious sale; inasmuch as it appears proven without any evidence to the contrary that after the document Exhibit 1 was signed, the vendor Rafel delivered to the vendee Verdaguer the certificates issued by the Bureau of Public Works in his name, signing them in blank without noting down any date in order that the latter, by means of the signed indorsement, might obtain the corresponding annotation of the automobiles in his name in the said office — the natural and consequent proceeding following the alienation made by the owner of the automobiles in favor of the defendant Verdaguer. The fact that the registration was effected by the purchaser with more than ten months’ delay can not in any manner affect essentially the validity and efficacy of the contract contained in the document Exhibit 1, because the annotation or the registry of the certificates of license for the use of the automobiles merely constitutes an administrative proceeding which does not bear any essential relation to the contract of sale entered into between the parties.

The fact that the vendor continued in the possession of the automobiles and property sold is no obstacle to the perfection and consummation of the contract of sale stipulated in the document Exhibit 1, inasmuch as by the express will of the contracting parties immediately after the execution of the notarial document of sale the vendee shall be considered legally in possession of the chattels which he has acquired by virtue of the delivery or symbolical tradition with all the effects that arise from a title transferring ownership, and by means of an agreement of constitutum possessorium the vendor, the original owner of the chattels sold, became a mere lessee and continued in the material possession of the objects leased in the name and in representation of the purchaser Verdaguer, the legitimate owner thereof, by virtue of a separate agreement entered into between them.

If Julio Rafel was not then owner but a mere lessee of the automobiles which he had under his control on February 5, 1915, it is evident that he could not have sold them on that date to Cayetano Chinchilla nor could he have mortgaged five of the automobiles to Rosa Sanz, the widow of Bastida, on November 23, 1914, in view of the fact that the supposed vendor Julio Rafel was not the owner of the automobiles which had been mortgaged and sold to the damage and prejudice of their legitimate owner, and in view of the further fact that this supposed vendor was a mere lessee, who was neither authorized. nor empowered by Verdaguer, owner of the objects sold. Neither could he legally impose any burden nor could he transfer any right therein to his creditor Rosa Sanz, nor could he transfer the ownership of the automobiles to the supposed purchaser, Cayetano Chinchilla.

The possession enjoyed by Julio Rafel of the automobiles and chattels sold by virtue of the document Exhibit 1 was exercised materially by the vendor Rafel in the name and representation of the vendee Verdaguer from April 17, 1914, the date of the alienation (Article 431, Civil Code), because, by the express will of the contracting parties as evidenced by the contract of lease, the vendee became the legal possessor of the things sold by delivery or symbolical tradition, with all the consequent effects of a title transferring ownership, which was evidently confirmed by the execution of the notarial document of sale which produced the effect of the delivery of the automobiles and the other things sold, in accordance with the provision of Article 1462 of the Civil Code.

As a logical consequence of the facts above set forth, the plaintiff Chinchilla could not acquire ownership of the automobiles and chattels which he, as a second purchaser, had acquired from Julio Rafel who sold the same to him long after the alienation of the same in favor of Verdaguer, inasmuch as the plaintiff Chinchilla acquired them not from the legitimate owner but from said Rafel who is a mere lessee and consequently had no right whatsoever to dispose of them, as precarious possession can not prevail over that enjoyed by the legitimate owner.

It is undeniable that the defendant Verdaguer through his lessee was the first who took possession in good faith of the automobiles and chattels sold, and consequently his right should be respected in accordance with the provision of Article 1473 of the Civil Code. For this reason, neither the rights of the plaintiff Chinchilla nor those of the creditor Sanz can be considered superior and more preferred than those of the defendant Verdaguer, the legitimate owner of the automobiles and chattels some of which have been sold a second time to Chinchilla and some mortgaged to Rosa Sanz by Julio Rafel who not being then the owner had no right whatsoever to dispose of them or burden them as security for a loan.

The reversal of the judgment appealed from is therefore proper.

With respect to the claims presented by persons and entities as intervening parties, this court, after having carefully examined these respective claims, proceeds to decide them separately. With regard to the claim by Castelltort and De Leon, relative to the repairs of some automobiles which amounted to six hundred and seventy-one pesos and fifty centavos (P671.50), it is held that, in view of the fact that it does not appear what automobiles had been repaired and in view of the further fact that on April 17, 1914, Julio Rafel was no longer the owner of the automobile No. 172 which is alleged to have been indicated as guaranty for the payment of the expenses of said repairs, which guaranty does not appear to have been set forth in any document, the said Castelltort and De Leon have no right to the automobiles in litigation and are entitled only to a personal action against the debtor Julio Rafel for the recovery of their credit.

The creditors Kuenzle & Streiff alleged that the business of Rafel’s Garage was, from March 11, 1913, till the present date, the property of Julio Rafel and Edward J. Beardsley who formed a partnership, each having an equal participation in the same; that on March 26, 1914, said Edward Beardsley mortgaged in favor of Kuenzle & Streiff his interest and participation in the said business, the said mortgage having been recorded on April 18, 1914; that when the principal obligation fell due, the said Kuenzle & Streiff presented a complaint on September 17, 1914, praying for the foreclosure of the said mortgage; that on April 13, 1915, a judgment was rendered in favor of the said Kuenzle and Streiff and against the defendant Edward J. Beardsley for the payment of the sum of one thousand six hundred fifty-nine pesos and eighty centavos (P1,659.80), the said judgment being ordered to be satisfied from the share of the debtor Edward J. Beardsley in the business of "Rafel’s Garage," sentencing Julio Rafel to deliver half of the said business to the creditors, Kuenzle & Streiff, for the payment of the said Judgment; and that, notwithstanding the fact that in that litigation Cayetano Chinchilla and Joaquin Verdaguer intervened, the said judgment in favor of Kuenzle & Streiff remained to be final, for which reason it was held that Beardsley was the owner of one-half of the business of Rafel’s Garage.

However, when Verdaguer purchased the automobiles in question, said automobiles appeared in the registry in the name only of Julio Rafel, and that the automobile Reo No. 174 which figures with others as the property of the business mortgaged in favor of Kuenzle & Streiff, does not appear to be among those purchased by Joaquin Verdaguer, and notwithstanding that the mortgage appears to have been registered only on April 18, 1914, a day after the sale made by Julio Rafel on the 17th day of the same month and year, it is certain that the firm of Kuenzle & Streiff received the judgment in its favor on April 13, 1915, which became final, and the said document was presented in the registry office on April 4th, although it was transcribed in the registry only on the 18th of the same month, of the year 1914. So that now, we have as against the notarial document of sale of eight automobiles, one electric machine, and other implements valued in all at five thousand pesos (P5 000), executed by Julio Rafel in favor of Verdaguer on April 17, 1914, and the said judgment of April 13, 1915, in favor of Kuenzle & Streiff together with the said mortgage document presented in the registry office on April 4, very much prior to the date of the said sale.

With the above facts in view, we find to be indisputable that the creditors Kuenzle & Streiff have the right to enforce their credit of one thousand six hundred fifty-nine pesos and eighty centavos (P1,659.80) against the share of the debtor Edward J. Beardsley in the business of Rafel’s Garage, by virtue of the finding in the said judgment of April 13, 1915, rendered. in the proceeding instituted by the said creditors. Consequently, after a liquidation of the property making up the said business is had, the share pertaining to the debtor Edward J. Beardsley shall be sold and the proceeds therefrom applied to the payment of the amount claimed by the said creditors, with the costs against the debtor.

Lastly, the commercial firm of Henry W. Peabody & Co. also claims the payment of a mortgage credit which amounts to four thousand eight hundred pesos (P4,800) in favor of the Commercial Vehicle Co. against Julio Rafel, which credit was ceded by the latter company to Henry W. Peabody & Co., with a mortgage of two automobiles marked Everett, Nos. B-6795 and B-6747, signing for this purpose twelve promissory notes in favor of the said company, three of which notes, each for four hundred pesos (P400), were endorsed to Henry W. Peabody & Co.

On May 12, 1914, the said firm filed a complaint against Julio Rafel for the recovery of the value of the three notes. A judgment was rendered against said Rafel for the sum of one thousand two hundred pesos (P1,200) together with interests thereon at the rate of eight per cent per annum from March 13, 1913, and although this case was appealed by the debtor to this court, it was later sent back to the Court of First Instance for failure of the appellant to prosecute his appeal.

This court does not deem reasonable or founded the claim of the defendant Verdaguer to the effect that, because Henry W. Peabody & Co., has brought an action against Julio Rafel, the said company has impliedly renounced its mortgage rights, for the reason that the mortgagee can bring a personal action against the debtor for the recovery of his credit or can proceed directly against the property mortgaged. It is true that a chattel mortgage is a conditional sale, but the sale is resolved only when the amount of the debt guaranteed by the mortgage which is the price of the sale is refunded to the mortgagee considered as purchaser, and the mere fact of the filing of a personal action does not in fact dissolve the conditional sale or the mortgage of the chattels.

In view of the fact that the mortgage of the said two Everett automobiles of March 3, 1913, appears to have been inscribed in the said month and year, it is indisputable that when Joaquin Verdaguer acquired the said automobiles, Factory Numbers B-6747 and 6795, the said automobiles already had the encumbrance stated above, and consequently the creditor firm, Henry W. Peabody & Co. has the right to recover its credit from the proceeds of the sale of the said two automobiles.

It should therefore be held that the said firm has an in- disputable right to recover its credit of one thousand two hundred pesos (P1,200), with interests thereon at the rate of eight per cent per annum from March 13, 1913, from the proceeds of the sale of the two automobiles which have been mortgaged and sold to Joaquin Verdaguer.

In view of all the foregoing considerations it should be held, as we hereby hold, that the document Exhibit 1 of April 17, 1914, is valid and subsisting, and should be upheld in all its parts in so far as it expresses the contract of sale of the automobiles and chattels therein stated as well as the contract of lease of the same contracts entered into between the vendor Julio Rafel and the vendee Joaquin Verdaguer. This ruling is without prejudice to the right recognized in favor of Kuenzle & Streiff as creditors of Edward J. Beardsley for the payment of one thousand six hundred fifty-nine pesos and eighty centavos (P1,659.80) from the share of the debtor Edward J. Beardsley in the business of "Rafel’s Garage," as well as the right equally recognized in favor of the firm Henry W. Peabody & Co. for the recovery of one thousand two hundred pesos (P1,200) with interests thereon at the rate of eight per cent per annum from March 13, 1913, from the proceeds of the sale of the automobiles marked Everett Nos. B-6795 and B-6747 acquired by Verdaguer, and consequently, the defendant Joaquin Verdaguer should be, as he is hereby absolved, from the complaint interposed by the plaintiff Cayetano Chinchilla, without prejudice to any right Chinchilla may have to bring an action against Julio Rafel for the recovery of the amounts he has paid. There shall be considered as reproduced in this decision the conclusions above mentioned with respect to Castelltort and De Leon, with respect to Kuenzle & Streiff and to Henry W. Peabody & Co., and the costs incurred in these last two cases should be charged against the debtors. The judgment appealed from should therefore be affirmed in all its parts that agree with this decision and reversed in all that is contrary to the same. There is no special finding of costs with respect to said Castelltort and De Leon and the said Chinchilla and Verdaguer. So ordered.

Arellano, C.J., Araullo, Street and Malcolm, JJ., concur.

Moir, J., dissents.

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