G.R. No. L-5741, March 13, 1911
ESTANISLAUA ARENAS, ET AL., plaintiffs-appellees, vs. FAUSTO O. RAYMUNDO, defendant-appellant.

FACTS

Estanislaua Arenas owned several pieces of jewelry. In April or May 1908, she delivered them to Elena de Vega to sell on commission. De Vega, in turn, delivered the jewelry to Concepcion Perello, also to sell on commission. Instead of selling them, Perello pledged the jewelry in the pawnshop of Fausto O. Raymundo and appropriated the loan proceeds for herself. Perello was subsequently prosecuted and convicted of estafa (swindling). The jewelry remained in Raymundo’s possession as pledgee. Arenas demanded the return of the jewelry, but Raymundo refused unless the loan was redeemed. Arenas then filed a replevin action to recover the jewelry. The trial court ordered Raymundo to restore the jewelry to Arenas, reserving Raymundo’s right to pursue an action against the proper party (presumably Perello). Raymundo appealed.

ISSUE

Whether the pawnshop proprietor (Raymundo), who acquired the jewelry in good faith as a pledge from a person (Perello) who had possession but not ownership (having received it on commission), is obligated to restore the jewelry to the true owner (Arenas) without redemption.

RULING

Yes. The Supreme Court affirmed the trial court’s judgment, ordering Raymundo to restore the jewelry to Arenas without requiring redemption.

The Court applied Article 120 of the Penal Code, which provides that restitution of the thing itself must be made even if it is in the possession of a third person who acquired it legally, reserving that third person’s action against the proper person (the perpetrator of the crime). This provision is based on the principle that a person injured by a crime has a preferential right to be indemnified or to have the property restored.

The Court found that Raymundo, as a pawnshop operator, engaged in a business inherently exposed to the risk of receiving stolen or embezzled property. While he may have acted in good faith in accepting the pledge, his right as a possessor in good faith under Article 464 of the Civil Code (which states that possession of movable property acquired in good faith is equivalent to a title) must yield to the right of the owner who was deprived of the property by a crime. The owner’s right to recover property lost or unlawfully taken is superior.

The Court noted that there was no evidence that Arenas or her agent consented to the pledge. Therefore, Raymundo must return the jewelry to its rightful owner. His remedy is to institute a separate action to recover the loan amount from the proper party, Concepcion Perello, the person who criminally misappropriated the jewelry and obtained the loan.