G.R. No. 50025, August 21, 1980
Alfonso Yu and Soledad Yu, petitioners, vs. Hon. Judge Reynaldo P. Honrado, Presiding Judge of the Court of First Instance of Rizal, Branch XXV-Pasig, Marcelo Steel Corporation, Detective Carlos C. Nuestro and People of the Philippines, respondents.

FACTS

Marcelo Steel Corporation sold scrap engine blocks to Carlito Refuerzo, who paid with a dishonored check. Refuerzo subsequently sold the scrap to the spouses Alfonso and Soledad Yu, proprietors of the Soledad Junk Shop, for P44,000. Acting on Marcelo Steel’s complaint, Detective Carlos Nuestro applied for and obtained a search warrant from respondent Judge Reynaldo Honrado on June 27, 1978, alleging the scrap was embezzled property. The warrant was executed the next day, resulting in the seizure of 42.8 metric tons of the scrap from the Yu spouses’ premises. The seized property was placed in the custody of Marcelo Steel Corporation.
The Yu spouses moved to quash the warrant and for the return of the property, but the motion was denied. Parallel to this, a criminal complaint for estafa was filed against Refuerzo and his associates. The investigating fiscal, in a resolution, found the Yu spouses to be innocent purchasers for value and excluded them from the criminal information. The estafa case was later archived due to the accused remaining at large, leaving the conflicting claims over the scrap unresolved.

ISSUE

Whether the Yu spouses, as innocent purchasers for value, are entitled to retain possession of the scrap engine blocks seized via a search warrant, pending the final resolution of the criminal case for estafa against the alleged swindler.

RULING

The Supreme Court ruled in favor of the Yu spouses, ordering the return of the scrap engine blocks. The Court held that a search warrant, validly issued to seize property alleged to be the subject of estafa, does not automatically entitle the original owner to retain possession against a third-party purchaser in good faith. The validity of the warrant was upheld based on Detective Nuestro’s personal knowledge derived from his investigation, which justified the finding of probable cause that the property was embezzled.
However, the pivotal legal principle applied is that a possessor in good faith of movable property is entitled to protection in that possession as if he were the true owner until a competent court rules otherwise, pursuant to Articles 539 and 559 of the Civil Code. Citing the precedent in Chua Hai vs. Kapunan, the Court emphasized that the mere filing of an estafa information does not warrant disturbing the possession of a bona fide purchaser. Since the criminal case was archived and there was no final judgment ordering restitution under Article 105 of the Revised Penal Code, Marcelo Steel Corporation had no present legal right to withhold the property. The Court further applied the equitable principle that, as between two innocent parties (Marcelo Steel, which extended credit to the swindler, and the Yus, who purchased in good faith), the loss should fall on the party whose act of confidence made the fraud possible.