EN BANC

G.R. No. L-11658 February 15, 1918

LEUNG YEE, plaintiff-appellant,
vs.
FRANK L. STRONG MAC!NERY COM"ANY a#$ %. G. &!LL!AMSON, defendants-appellees.
CARSON, J.'
The "Compaia Agricola Filipina" boght a considerable !antit" of rice-cleaning machiner"
compan" from the defendant machiner" compan", and e#ected a chattel mortgage thereon to
secre pa"ment of the prchase price. $t inclded in the mortgage deed the bilding of strong
materials in %hich the machiner" %as installed, %ithot an" reference to the land on %hich it
stood. The indebtedness secred b" this instrment not having been paid %hen it fell de, the
mortgaged propert" %as sold b" the sheriff, in prsance of the terms of the mortgage
instrment, and %as boght in b" the machiner" compan". The mortgage %as registered in the
chattel mortgage registr", and the sale of the propert" to the machiner" compan" in satisfaction
of the mortgage %as annotated in the same registr" on &ecember '(, )()*.
A fe% %ee+s thereafter, on or abot the ),th of -anar", )(),, the "Compaia Agricola Filipina"
e#ected a deed of sale of the land pon %hich the bilding stood to the machiner" compan",
bt this deed of sale, althogh e#ected in a pblic docment, %as not registered. This deed
ma+es no reference to the bilding erected on the land and %old appear to have been e#ected
for the prpose of cring an" defects %hich might be fond to e#ist in the machiner" compan".s
title to the bilding nder the sheriff.s certificate of sale. The machiner" compan" %ent into
possession of the bilding at or abot the time %hen this sale too+ place, that is to sa", the
month of &ecember, )()*, and it has contined in possession ever since.
At or abot the time %hen the chattel mortgage %as e#ected in favor of the machiner"
compan", the mortgagor, the "Compaia Agricola Filipina" e#ected another mortgage to the
plaintiff pon the bilding, separate and apart from the land on %hich it stood, to secre
pa"ment of the balance of its indebtedness to the plaintiff nder a contract for the constrction
of the bilding. /pon the failre of the mortgagor to pa" the amont of the indebtedness
secred b" the mortgage, the plaintiff secred 0dgment for that amont, levied e#ection pon
the bilding, boght it in at the sheriff.s sale on or abot the )1th of &ecember, )(),, and had
the sheriff.s certificate of the sale dl" registered in the land registr" of the 2rovince of Cavite.
At the time %hen the e#ection %as levied pon the bilding, the defendant machiner" compan",
%hich %as in possession, filed %ith the sheriff a s%orn statement setting p its claim of title and
demanding the release of the propert" from the lev". Thereafter, pon demand of the sheriff, the
plaintiff e#ected an indemnit" bond in favor of the sheriff in the sm of 2)',333, in reliance
pon %hich the sheriff sold the propert" at pblic action to the plaintiff, %ho %as the highest
bidder at the sheriff.s sale.
This action %as institted b" the plaintiff to recover possession of the bilding from the
machiner" compan".
The trial 0dge, rel"ing pon the terms of article ),4* of the Civil Code, gave 0dgment in favor
of the machiner" compan", on the grond that the compan" had its title to the bilding
registered prior to the date of registr" of the plaintiff.s certificate.
Article ),4* of the Civil Code is as follo%s5
$f the same thing shold have been sold to different vendees, the o%nership shall be
transfer to the person %ho ma" have the first ta+en possession thereof in good faith, if it
shold be personal propert".
6hold it be real propert", it shall belong to the person ac!iring it %ho first recorded it in
the registr".
6hold there be no entr", the propert" shall belong to the person %ho first too+
possession of it in good faith, and, in the absence thereof, to the person %ho presents the
oldest title, provided there is good faith.
The registr" her referred to is of corse the registr" of real propert", and it mst be apparent
that the annotation or inscription of a deed of sale of real propert" in a chattel mortgage registr"
cannot be given the legal effect of an inscription in the registr" of real propert". B" its e#press
terms, the Chattel 7ortgage 8a% contemplates and ma+es provision for mortgages of personal
propert"9 and the sole prpose and ob0ect of the chattel mortgage registr" is to provide for the
registr" of "Chattel mortgages," that is to sa", mortgages of personal propert" e#ected in the
manner and form prescribed in the statte. The bilding of strong materials in %hich the rice-
cleaning machiner" %as installed b" the "Compaia Agricola Filipina" %as real propert", and the
mere fact that the parties seem to have dealt %ith it separate and apart from the land on %hich
it stood in no %ise changed its character as real propert". $t follo%s that neither the original
registr" in the chattel mortgage of the bilding and the machiner" installed therein, not the
annotation in that registr" of the sale of the mortgaged propert", had an" effect %hatever so far
as the bilding %as concerned.
:e conclde that the rling in favor of the machiner" compan" cannot be sstained on the
grond assigned b" the trial 0dge. :e are of opinion, ho%ever, that the 0dgment mst be
sstained on the grond that the agreed statement of facts in the cort belo% discloses that
neither the prchase of the bilding b" the plaintiff nor his inscription of the sheriff.s certificate
of sale in his favor %as made in good faith, and that the machiner" compan" mst be held to be
the o%ner of the propert" nder the third paragraph of the above cited article of the code, it
appearing that the compan" first too+ possession of the propert"9 and frther, that the bilding
and the land %ere sold to the machiner" compan" long prior to the date of the sheriff.s sale to
the plaintiff.
$t has been sggested that since the provisions of article ),4* of the Civil Code re!ire "good
faith," in e#press terms, in relation to "possession" and "title," bt contain no e#press
re!irement as to "good faith" in relation to the "inscription" of the propert" on the registr", it
mst be presmed that good faith is not an essential re!isite of registration in order that it ma"
have the effect contemplated in this article. :e cannot agree %ith this contention. $t cold not
have been the intention of the legislator to base the preferential right secred nder this article
of the code pon an inscription of title in bad faith. 6ch an interpretation placed pon the
langage of this section %old open %ide the door to frad and collsion. The pblic records
cannot be converted into instrments of frad and oppression b" one %ho secres an inscription
therein in bad faith. The force and effect given b" la% to an inscription in a pblic record
prespposes the good faith of him %ho enters sch inscription9 and rights created b" statte,
%hich are predicated pon an inscription in a pblic registr", do not and cannot accre nder an
inscription "in bad faith," to the benefit of the person %ho ths ma+es the inscription.
Constring the second paragraph of this article of the code, the spreme cort of 6pain held in
its sentencia of the )*th of 7a", )(31, that5
This rle is al%a"s to be nderstood on the basis of the good faith mentioned in the first
paragraph9 therefore, it having been fond that the second prchasers %ho record their
prchase had +no%ledge of the previos sale, the !estion is to be decided in accordance
%ith the follo%ing paragraph. ;Note ', art. ),4*, Civ. Code, 7edina and 7aranon <)())=
edition.>
Althogh article ),4*, in its second paragraph, provides that the title of conve"ance of
o%nership of the real propert" that is first recorded in the registr" shall have preference,
this provision mst al%a"s be nderstood on the basis of the good faith mentioned in the
first paragraph9 the legislator cold not have %ished to stri+e it ot and to sanction bad
faith, 0st to compl" %ith a mere formalit" %hich, in given cases, does not obtain even in
real disptes bet%een third persons.
The agreed statement of facts clearl" discloses that the plaintiff, %hen he boght the bilding at
the sheriff.s sale and inscribed his title in the land registr", %as dl" notified that the machiner"
compan" had boght the bilding from plaintiff.s 0dgment debtor9 that it had gone into
possession long prior to the sheriff.s sale9 and that it %as in possession at the time %hen the
sheriff e#ected his lev". The e#ection of an indemnit" bond b" the plaintiff in favor of the
sheriff, after the machiner" compan" had filed its s%orn claim of o%nership, leaves no room for
dobt in this regard. ?aving boght in the bilding at the sheriff.s sale %ith fll +no%ledge that
at the time of the lev" and sale the bilding had alread" been sold to the machiner" compan" b"
the 0dgment debtor, the plaintiff cannot be said to have been a prchaser in good faith9 and of
corse, the sbse!ent inscription of the sheriff.s certificate of title mst be held to have been
tainted %ith the same defect.
2erhaps %e shold ma+e it clear that in holding that the inscription of the sheriff.s certificate of
sale to the plaintiff %as not made in good faith, %e shold not be nderstood as !estioning, in
an" %a", the good faith and genineness of the plaintiff.s claim against the "Compaia Agricola
Filipina." The trth is that both the plaintiff and the defendant compan" appear to have had 0st
and righteos claims against their common debtor. No criticism can properl" be made of the
e#ercise of the tmost diligence b" the plaintiff in asserting and e#ercising his right to recover
the amont of his claim from the estate of the common debtor. :e are strongl" inclined to
believe that in procring the lev" of e#ection pon the factor" bilding and in b"ing it at the
sheriff.s sale, he considered that he %as doing no more than he had a right to do nder all the
circmstances, and it is highl" possible and even probable that he thoght at that time that he
%old be able to maintain his position in a contest %ith the machiner" compan". There %as no
collsion on his part %ith the common debtor, and no thoght of the perpetration of a frad pon
the rights of another, in the ordinar" sense of the %ord. ?e ma" have hoped, and dobtless he
did hope, that the title of the machiner" compan" %old not stand the test of an action in a
cort of la%9 and if later developments had confirmed his nfonded hopes, no one cold
!estion the legalit" of the propriet" of the corse he adopted.
Bt it appearing that he had fll +no%ledge of the machiner" compan".s claim of o%nership
%hen he e#ected the indemnit" bond and boght in the propert" at the sheriff.s sale, and it
appearing frther that the machiner" compan".s claim of o%nership %as %ell fonded, he cannot
be said to have been an innocent prchaser for vale. ?e too+ the ris+ and mst stand b" the
conse!ences9 and it is in this sense that %e find that he %as not a prchaser in good faith.
@ne %ho prchases real estate %ith +no%ledge of a defect or lac+ of title in his vendor cannot
claim that he has ac!ired title thereto in good faith as against the tre o%ner of the land or of
an interest therein9 and the same rle mst be applied to one %ho has +no%ledge of facts %hich
shold have pt him pon sch in!ir" and investigation as might be necessar" to ac!aint him
%ith the defects in the title of his vendor. A prchaser cannot close his e"es to facts %hich shold
pt a reasonable man pon his gard, and then claim that he acted in good faith nder the belief
that there %as no defect in the title of the vendor. ?is mere refsal to believe that sch defect
e#ists, or his %illfl closing of his e"es to the possibilit" of the e#istence of a defect in his
vendor.s title, %ill not ma+e him an innocent prchaser for vale, if after%ards develops that the
title %as in fact defective, and it appears that he had sch notice of the defects as %old have
led to its discover" had he acted %ith that measre of precation %hich ma" reasonabl" be
ac!ired of a prdent man in a li+e sitation. Aood faith, or lac+ of it, is in its anal"sis a !estion
of intention9 bt in ascertaining the intention b" %hich one is actated on a given occasion, %e
are necessaril" controlled b" the evidence as to the condct and ot%ard acts b" %hich alone
the in%ard motive ma", %ith safet", be determined. 6o it is that "the honest" of intention," "the
honest la%fl intent," %hich constittes good faith implies a "freedom from +no%ledge and
circmstances %hich oght to pt a person on in!ir"," and so it is that proof of sch +no%ledge
overcomes the presmption of good faith in %hich the corts al%a"s indlge in the absence of
proof to the contrar". "Aood faith, or the %ant of it, is not a visible, tangible fact that can be
seen or toched, bt rather a state or condition of mind %hich can onl" be 0dged of b" actal or
fancied to+ens or signs." ;:ilder vs. Ailman, BB Ct., B3,, B3B9 Cf. Cardenas 8mber Co. vs.
6hadel, B' 8a. Ann., '3(,-'3(19 2in+erton Bros. Co. vs. Bromle", ))( 7ich., 1, )3, )4.>
:e conclde that pon the gronds herein set forth the disposing part of the decision and
0dgment entered in the cort belo% shold be affirmed %ith costs of this instance against the
appellant. 6o ordered.
EN BANC
G.R. No(. L-1)81*-18 February +8, 1958
ENR!,UE LO"E-, petitioner,
vs.
.!CENTE OROSA, %R., a#$ "LA-A TEATRE, !NC., respondents.
FEL!/, J.'
Enri!e 8opeD is a resident of Bala"an, Batangas, doing bsiness nder the trade name of
8opeD-Castelo 6a%mill. 6ometime in 7a", )(,E, Cicente @rosa, -r., also a resident of the same
province, dropped at 8opeD. hose and invited him to ma+e an investment in the theatre
bsiness. $t %as intimated that @rosa, his famil" and close friends %ere organiDing a corporation
to be +no%n as 2laDa Theatre, $nc., that %old engage in sch ventre. Althogh 8opeD
e#pressed his n%illingness to invest of the same, he agreed to sppl" the lmber necessar" for
the constrction of the proposed theatre, and at @rosa.s behest and assrance that the latter
%old be personall" liable for an" accont that the said constrction might incr, 8opeD frther
agreed that pa"ment therefor %old be on demand and not cash on deliver" basis. 2rsant to
said verbal agreement, 8opeD delivered the lmber %hich %as sed for the constrction of the
2laDa Theatre on 7a" )4, )(,E, p to &ecember , of the same "ear. Bt of the total cost of the
materials amonting to 2E','BB.1B, 8opeD %as paid onl" 2'3,1,1.B3, ths leaving a balance of
2,),44).*B.
:e ma" state at this 0nctre that the 2laDa Theatre %as erected on a piece of land %ith an area
of E4(.)4 s!are meters formerl" o%ned b" Cicente @rosa, -r., and %as ac!ired b" the
corporation on 6eptember 'B, )(,E, for 2E,333. As 8opeD %as pressing @rosa for pa"ment of the
remaining npaid obligation, the latter and Belarmino Fstia, the president of the corporation,
promised to obtain a ban+ loan b" mortgaging the properties of the 2laDa Theatre., ot of %hich
said amont of 2,),44).*B %old be satisfied, to %hich assrance 8opeD had to accede.
/n+no%n to him, ho%ever, as earl" as November, )(,E, the corporation alread" got a loan for
2*3,333 from the 2hilippine National Ban+ %ith the 8Don 6ret" Compan" as sret", and the
corporation in trn e#ected a mortgage on the land and bilding in favor of said compan" as
conter-secrit". As the land at that time %as not "et broght nder the operation of the Torrens
6"stem, the mortgage on the same %as registered on November )E, )(,E, nder Act No. **,,.
6bse!entl", %hen the corporation applied for the registration of the land nder Act ,(E, sch
mortgage %as not revealed and ths @riginal Certificate of Title No. @-*() %as correspondingl"
issed on @ctober 'B, )(,4, %ithot an" encmbrance appearing thereon.
2ersistent demand from 8opeD for the pa"ment of the amont de him cased Cicente @rosa, -r.
to e#ecte on 7arch )4, )(,4, an alleged "deed of assignment" of his ,'3 shares of stoc+ of the
2laDa Theater, $nc., at 2)33 per share or %ith a total vale of 2,',333 in favor of the creditor,
and as the obligation still remained nsettled, 8opeD filed on November )', )(,4, a complaint
%ith the Cort of First $nstance of Batangas ;Civil Case No. ,B3) %hich later became F-B4>
against Cicente @rosa, -r. and 2laDa Theater, $nc., pra"ing that defendants be sentenced to pa"
him 0ointl" and severall" the sm of 2,),44).*B, %ith legal interest from the firing of the action9
that in case defendants fail to pa" the same, that the bilding and the land covered b" @CT No.
@-*() o%ned b" the corporation be sold at pblic action and the proceeds thereof be applied to
said indebtedness9 or that the ,'3 shares of the capital stoc+ of the 2laDa Theatre, $nc.,
assigned b" Cicente @rosa, -r., to said plaintiff be sold at pblic action for the same prpose9
and for sch other remedies as ma" be %arranted b" the circmstances. 2laintiff also cased the
annotation of a notice of lis pendens on said properties %ith the Fegister of &eeds.
&efendants Cicente @rosa, -r. and 2laDa Theatre, $nc., filed separate ans%ers, the first den"ing
that the materials %ere delivered to him as a promoter and later treasrer of the corporation,
becase he had prchased and received the same on his personal accont9 that the land on
%hich the movie hose %as constrcted %as not charged %ith a lien to secre the pa"ment of
the aforementioned npaid obligation9 and that the ,'3 shares of stoc+ of the 2laDa Theatre,
$nc., %as not assigned to plaintiff as collaterals bt as direct secrit" for the pa"ment of his
indebtedness. As special defense, this defendant contended that as the ,'3 shares of stoc+
assigned and conve"ed b" the assignor and accepted b" 8opeD as direct secrit" for the pa"ment
of the amont of 2,),44).*B %ere personal properties, plaintiff %as barred from recovering an"
deficienc" if the proceeds of the sale thereof at pblic action %old not be sfficient to cover
and satisf" the obligation. $t %as ths pra"ed that he be declared e#empted from the pa"ment of
an" deficienc" in case the proceeds from the sale of said personal properties %old not be
enogh to cover the amont soght to be collected.
&efendant 2laDa Theatre, $nc., on the other hand, practicall" set p the same line of defense b"
alleging that the bilding materials delivered to @rosa %ere on the latter.s personal accont9 and
that there %as no nderstanding that said materials %old be paid 0ointl" and severall" b" @rosa
and the corporation, nor %as a lien charged on the properties of the latter to secre pa"ment of
the same obligation. As special defense, defendant corporation averred that %hile it %as tre
that the materials prchased b" @rosa %ere sold b" the latter to the corporation, sch
transactions %ere in good faith and for valable consideration ths %hen plaintiff failed to claim
said materials %ithin *3 da"s from the time of removal thereof from @rosa, lmber became a
different and distinct specie and plaintiff lost %hatever rights he might have in the same and
conse!entl" had no recorse against the 2laDa Theatre, $nc., that the claim cold not have been
refectionar" credit, for sch +ind of obligation referred to an indebtedness incrred in the repair
or reconstrction of something alread" e#isting and this concept did not inclde an entirel" ne%
%or+9 and that the 2laDa Theatre, $nc., having been incorporated on @ctober ),, )(,E, it cold
not have contracted an" obligation prior to said date. $t %as, therefore, pra"ed that the
complaint be dismissed9 that said defendant be a%arded the sm 2 B,333 for damages, and sch
other relief as ma" be 0st and proper in the premises.
The sret" compan", in the meantime, pon discover" that the land %as alread" registered
nder the Torrens 6"stem and that there %as a notice of lis pendens thereon, filed on Agst )4,
)(,1, or %ithin the )-"ear period after the issance of the certificate of title, a petition for
revie% of the decree of the land registration cort dated @ctober )1, )(,4, %hich %as made the
basis of @CT No. @-*)(, in order to annotate the rights and interests of the sret" compan" over
said properties ;8and Fegistration Case No. )4 A8F@ Fec. No. '(E>. @pposition thereto %as
offered b" Enri!e 8opeD, asserting that the amont demanded b" him constitted a preferred
lien over the properties of the obligors9 that the sret" compan" %as gilt" of negligence %hen it
failed to present an opposition to the application for registration of the propert"9 and that if an"
violation of the rights and interest of said sret" %old ever be made, same mst be sb0ect to
the lien in his favor.
The t%o cases %ere heard 0ointl" and in a decision dated @ctober *3, )(B', the lo%er Cort,
after ma+ing an e#hastive and detailed anal"sis of the respective stands of the parties and the
evidence addced at the trial, held that defendants Cicente @rosa, -r., and the 2laDa Theatre,
$nc., %ere jointly liable for the npaid balance of the cost of lmber sed in the constrction of
the building and the plaintiff ths ac!ired the materialman.s lien over the same. $n ma+ing the
prononcement that the lien %as merel" confined to the bilding and did not e#tend to the land
on %hich the constrction %as made, the trial 0dge too+ into consideration the fact that %hen
plaintiff started the deliver" of lmber in 7a", )(,E, the land %as not "et o%ned b" the
corporation9 that the mortgage in favor of 8Don 6ret" Compan" %as previosl" registered
nder Act No. **,,9 that the codal provision ;Art. )('* of the old 6panish Civil Code> specif"ing
that refection credits are preferred cold refer onl" to bildings %hich are also classified as real
properties, pon %hich said refection %as made. $t %as, ho%ever, declared that plaintiff.s lien on
the bilding %as sperior to the right of the sret" compan". And finding that the 2laDa Theatre,
$nc., had no ob0ection to the revie% of the decree issed in its favor b" the land registration
cort and the inclsion in the title of the encmbrance in favor of the sret" compan", the cort
a quo granted the petition filed b" the latter compan". &efendants @rosa and the 2laDa Theatre,
$nc., %ere ths re!ired to pa" jointly the amont of 2,),44).*B %ith legal interest and costs
%ithin (3 da"s from notice of said decision9 that in case of defalt, the ,'3 shares of stoc+
assigned b" @rosa to plaintiff be sold at pblic action and the proceeds thereof be applied to
the pa"ment of the amont de the plaintiff, pls interest and costs9 and that the encmbrance
in favor of the sret" compan" be endorsed at the bac+ of @CT No. @-*(), %ith notation $ that
%ith respect to the bilding, said mortgage %as sb0ect to the materialman.s lien in favor of
Enri!e 8opeD.
2laintiff tried to secre a modification of the decision in so far as it declared that the obligation of
therein defendants %as 0oint instead of solidar", and that the lien did not e#tend to the land, bt
same %as denied b" order the cort of &ecember '*, )(B'. The matter %as ths appealed to
the Cort of appeals, %hich affirmed the lo%er cort.s rling, and then to this Tribnal. $n this
instance, plaintiff-appellant raises ' isses5 ;)> %hether a materialman.s lien for the vale of the
materials sed in the constrction of a bilding attaches to said strctre alone and does not
e#tend to the land on %hich the bilding is adhered to9 and ;'> %hether the lo%er cort and the
Cort of Appeals erred in not providing that the material mans liens is sperior to the mortgage
e#ected in favor sret" compan" not onl" on the bilding bt also on the land.
$t is to be noted in this appeal that Enri!e 8opeD has not raised an" !estion against the part of
the decision sentencing defendants @rosa and 2laDa Theatre, $nc., to pa" jointly the sm of
2,),44).*B, so :e %ill not ta+e p or consider an"thing on that point. Appellant, ho%ever,
contends that the lien created in favor of the frnisher of the materials sed for the constrction,
repair or refection of a bilding, is also e#tended to the land %hich the constrction %as made,
and in spport thereof he relies on Article )('* of the 6panish Civil Code, pertinent la% on the
matter, %hich reads as follo%s5
AFT. )('*. :ith respect to determinate real propert" and real rights of the debtor, the
follo%ing are preferred5
# # # # # # # # #
B. Credits for refection, not entered or recorded, with respect to the estate upon which
the refection was made, and onl" %ith respect to other credits different from those
mentioned in for preceding paragraphs.
$t is arged that in vie% of the emplo"ment of the phrase real estate, or immovable propert",
and inasmch as said provision does not contain an" specification delimiting the lien to the
bilding, said article mst be constred as to embrace both the land and the bilding or
strctre adhering thereto. :e cannot sbscribe to this vie%, for %hile it is tre that generall",
real estate connotes the land and the bilding constrcted thereon, it is obvios that the
inclsion of the bilding, separate and distinct from the land, in the enmeration of %hat ma"
constitte real properties cold mean onl" one thing G that a bilding is b" itself an immovable
propert", a doctrine alread" prononced b" this Cort in the case of Leung Yee vs. Strong
Machinery Co., *4 2hil., E,,. 7oreover, and in vie% of the absence of an" specific provision of
la% to the contrar", a bilding is an immovable propert", irrespective of %hether or not said
strctre and the land on %hich it is adhered to belong to the same o%ner.
A close e#amination of the provision of the Civil Code invo+ed b" appellant reveals that the la%
gives preference to nregistered refectionar" credits onl" %ith respect to the real estate pon
%hich the refection or %or+ %as made. This being so, the inevitable conclsion mst be that the
lien so created attaches merel" to the immovable propert" for the constrction or repair of %hich
the obligation %as incrred. Evidentl", therefore, the lien in favor of appellant for the npaid
vale of the lmber sed in the constrction of the bilding attaches onl" to said strctre and
to no other propert" of the obligors.
Considering the conclsion ths arrived at, i.e., that the materialman.s lien cold be charged
onl" to the bilding for %hich the credit %as made or %hich received the benefit of refection, the
lo%er cort %as right in, holding at the interest of the mortgagee over the land is sperior and
cannot be made sb0ect to the said materialman.s lien.
:herefore, and on the strength of the foregoing considerations, the decision appealed from is
hereb" affirmed, %ith costs against appellant. $t is so ordered.
F$F6T &$C$6$@N
G.R. No. L-5)))8 Au0u(1 21, 198*
"RU3ENT!AL 4ANK, petitioner,
vs.
ONORA4LE 3OM!NGO 3. "AN!S, "re(5$5#0 %u$0e o6 4ra#78 !!!, Cour1 o6 F5r(1
!#(1a#7e o6 -a9ba:e( a#$ O:o#0a;o C51y< FERNAN3O MAGCALE = TEO3ULA 4ALUYUT-
MAGCALE, respondents.
"ARAS, J.:
This is a petition for revie% on certiorari of the November )*, )(41 &ecision of the then Cort of
First $nstance of Hambales and @longapo Cit" in Civil Case No. ',,*-3 entitled "6poses
Fernando A. 7agcale and Teodla Bal"t-7agcale vs. ?on. Famon I. 2ardo and 2rdential
Ban+" declaring that the deeds of real estate mortgage e#ected b" respondent sposes in favor
of petitioner ban+ are nll and void.
The ndispted facts of this case b" stiplation of the parties are as follo%s5
... on November )(, )(4), plaintiffs-sposes Fernando A. 7agcale and Teodla
Bal"t 7agcale secred a loan in the sm of 243,333.33 from the defendant
2rdential Ban+. To secre pa"ment of this loan, plaintiffs e#ected in favor of
defendant on the aforesaid date a deed of Feal Estate 7ortgage over the follo%ing
described properties5
l. A '-6T@FEI, 6E7$-C@NCFETE, residential bilding %ith %arehose spaces
containing a total floor area of 'E* s!. meters, more or less, generall" constrcted
of mi#ed hard %ood and concrete materials, nder a roofing of cor. g. i. sheets9
declared and assessed in the name of FEFNAN&@ 7AACA8E nder Ta# &eclaration
No. '))3(, issed b" the Assessor of @longapo Cit" %ith an assessed vale of
2*B,'(3.33. This bilding is the onl" improvement of the lot.
'. T?E 2F@2EFTI hereb" conve"ed b" %a" of 7@FTAAAE incldes the right of
occpanc" on the lot %here the above propert" is erected, and more particlarl"
described and bonded, as follo%s5
A first class residential land $dentffied as 8ot No. 4'3, ;Ts-*31,
@longapo To%nsite 6bdivision> Ardoin 6treet, East Ba0ac-Ba0ac,
@longapo Cit", containing an area of ,EB s!. m. more or less, declared
and assessed in the name of FEFNAN&@ 7AACA8E nder Ta# &ration
No. )(B(B issed b" the Assessor of @longapo Cit" %ith an assessed
vale of 2),1E3.339 bonded on the
N@FT?5 B" No. E, Ardoin 6treet
6@/T?5 B" No. ', Ardoin 6treet
EA6T5 B" *4 Canda 6treet, and
:E6T5 B" Ardoin 6treet.
All corners of the lot mar+ed b" conc. c"lindrical
monments of the Brea of 8ands as visible limits.
; E#hibit "A, " also E#hibit ")" for defendant>.
Apart from the stiplations in the printed portion of the aforestated
deed of mortgage, there appears a rider t"ped at the bottom of the
reverse side of the docment nder the lists of the properties
mortgaged %hich reads, as follo%s5
AN& $T $6 F/FT?EF AAFEE& that in the event the 6ales
2atent on the lot applied for b" the 7ortgagors as herein
stated is released or issed b" the Brea of 8ands, the
7ortgagors hereb" athoriDe the Fegister of &eeds to
hold the Fegistration of same ntil this 7ortgage is
cancelled, or to annotate this encmbrance on the Title
pon athorit" from the 6ecretar" of Agricltre and
Natral Fesorces, %hich title %ith annotation, shall be
released in favor of the herein 7ortgage.
From the afore!oted stiplation, it is obvios that the mortgagee
;defendant 2rdential Ban+> %as at the otset a%are of the fact that
the mortgagors ;plaintiffs> have alread" filed a 7iscellaneos 6ales
Application over the lot, possessor" rights over %hich, %ere mortgaged
to it.
E#hibit "A" ;Feal Estate 7ortgage> %as registered nder the 2rovisions
of Act **,, %ith the Fegistr" of &eeds of Hambales on November '*,
)(4).
@n 7a" ', )(4*, plaintiffs secred an additional loan from defendant
2rdential Ban+ in the sm of 2'3,333.33. To secre pa"ment of this
additional loan, plaintiffs e#ected in favor of the said defendant
another deed of Feal Estate 7ortgage over the same properties
previosl" mortgaged in E#hibit "A." ;E#hibit "B9" also E#hibit "'" for
defendant>. This second deed of Feal Estate 7ortgage %as li+e%ise
registered %ith the Fegistr" of &eeds, this time in @longapo Cit", on
7a" ', )(4*.
@n April ',, )(4*, the 6ecretar" of Agricltre issed 7iscellaneos 6ales 2atent
No. ,44E over the parcel of land, possessor" rights over %hich %ere mortgaged to
defendant 2rdential Ban+, in favor of plaintiffs. @n the basis of the aforesaid
2atent, and pon its transcription in the Fegistration Boo+ of the 2rovince of
Hambales, @riginal Certificate of Title No. 2-'BB, %as issed in the name of 2laintiff
Fernando 7agcale, b" the E#-@ficio Fegister of &eeds of Hambales, on 7a" )B,
)(4'.
For failre of plaintiffs to pa" their obligation to defendant Ban+ after it became
de, and pon application of said defendant, the deeds of Feal Estate 7ortgage
;E#hibits "A" and "B"> %ere e#tra0diciall" foreclosed. Conse!ent to the foreclosre
%as the sale of the properties therein mortgaged to defendant as the highest bidder
in a pblic action sale condcted b" the defendant Cit" 6heriff on April )', )(41
;E#hibit "E">. The action sale aforesaid %as held despite %ritten re!est from
plaintiffs throgh consel dated 7arch '(, )(41, for the defendant Cit" 6heriff to
desist from going %ith the schedled pblic action sale ;E#hibit "&">."
Fespondent Cort, in a &ecision dated November *, )(41 declared the deeds of Feal Estate
7ortgage as nll and void,
@n &ecember ),, )(41, petitioner filed a 7otion for Feconsideration, opposed b" private
respondents on -anar" B, )(4(, and in an @rder dated -anar" )3, )(4(, the 7otion for
Feconsideration %as denied for lac+ of merit. ?ence, the instant petition.
The first &ivision of this Cort, in a Fesoltion dated 7arch (, )(4(, resolved to re!ire the
respondents to comment, %hich order %as complied %ith the Fesoltion dated 7a" )1, )(4(,
petitioner filed its Fepl" on -ne ', )(4(.
Thereafter, in the Fesoltion dated -ne )*, )(4(, the petition %as given de corse and the
parties %ere re!ired to sbmit simltaneosl" their respective memoranda.
@n -l" )1, )(4(, petitioner filed its 7emorandm, %hile private respondents filed their
7emorandm on Agst ), )(4(.
$n a Fesoltion dated Agst )3, )(4(, this case %as considered sbmitted for decision.
$n its 7emorandm, petitioner raised the follo%ing isses5
). :?ET?EF @F N@T T?E &EE&6 @F FEA8 E6TATE 7@FTAAAE AFE CA8$&9 AN&
'. :?ET?EF @F N@T T?E 6/2EFCEN$NA $66/ANCE $N FAC@F @F 2F$CATE FE62@N&ENT6 @F
7$6CE88ANE@/6 6A8E6 2ATENT N@. ,44E @N A2F$8 ',, )(4' /N&EF ACT N@. 4*3 AN& T?E
C@CEF$NA @F$A$NA8 CEFT$F$CATE @F T$T8E N@. 2-'BB, @N 7AI )B,)(4' ?ACE T?E EFFECT @F
$NCA8$&AT$NA T?E &EE&6 @F FEA8 E6TATE 7@FTAAAE. ;7emorandm for 2etitioner, Follo, p.
)''>.
This petition is impressed %ith merit.
The pivotal isse in this case is %hether or not a valid real estate mortgage can be constitted
on the bilding erected on the land belonging to another.
The ans%er is in the affirmative.
$n the enmeration of properties nder Article ,)B of the Civil Code of the 2hilippines, this Cort
rled that, "it is obvios that the inclsion of "bilding" separate and distinct from the land, in
said provision of la% can onl" mean that a bilding is b" itself an immovable propert"." ;8opeD
vs. @rosa, -r., et al., 8-)31)4-)1, Feb. '1, )(B19 Associated $nc. and 6ret" Co., $nc. vs. $"a, et
al., 8-)31*4-*1, 7a" *3,)(B1>.
Ths, %hile it is tre that a mortgage of land necessaril" incldes, in the absence of stiplation
of the improvements thereon, bildings, still a bilding b" itself ma" be mortgaged apart from
the land on %hich it has been bilt. 6ch a mortgage %old be still a real estate mortgage for
the bilding %old still be considered immovable propert" even if dealt %ith separatel" and apart
from the land ;8eng Iee vs. 6trong 7achiner" Co., *4 2hil. E,,>. $n the same manner, this
Cort has also established that possessor" rights over said properties before title is vested on
the grantee, ma" be validl" transferred or conve"ed as in a deed of mortgage ;Cda. de Batista
vs. 7arcos, * 6CFA ,*1 <)(E)=>.
Coming bac+ to the case at bar, the records sho%, as aforestated that the original mortgage
deed on the '-store" semi-concrete residential bilding %ith %arehose and on the right of
occpanc" on the lot %here the bilding %as erected, %as e#ected on November )(, )(4) and
registered nder the provisions of Act **,, %ith the Fegister of &eeds of Hambales on
November '*, )(4). 7iscellaneos 6ales 2atent No. ,44E on the land %as issed on April ',,
)(4', on the basis of %hich @CT No. 'BB, %as issed in the name of private respondent
Fernando 7agcale on 7a" )B, )(4'. $t is therefore %ithot !estion that the original mortgage
%as e#ected before the issance of the final patent and before the government %as divested of
its title to the land, an event %hich ta+es effect onl" on the issance of the sales patent and its
sbse!ent registration in the @ffice of the Fegister of &eeds ;Cisa"an Fealt" $nc. vs. 7eer, (E
2hil. B)B9 &irector of 8ands vs. &e 8eon, ))3 2hil. '19 &irector of 8ands vs. -rado, 8-),43',
7a" '*, )(E)9 2ena "8a% on Natral Fesorces", p. ,(>. /nder the foregoing considerations, it is
evident that the mortgage e#ected b" private respondent on his o%n bilding %hich %as
erected on the land belonging to the government is to all intents and prposes a valid mortgage.
As to restrictions e#pressl" mentioned on the face of respondents. @CT No. 2-'BB,, it %ill be
noted that 6ections )'), )'' and )', of the 2blic 8and Act, refer to land alread" ac!ired
nder the 2blic 8and Act, or an" improvement thereon and therefore have no application to the
assailed mortgage in the case at bar %hich %as e#ected before sch eventalit". 8i+e%ise,
6ection ' of Fepblic Act No. 4*3, also a restriction appearing on the face of private
respondent.s title has li+e%ise no application in the instant case, despite its reference to
encmbrance or alienation before the patent is issed becase it refers specificall" to
encmbrance or alienation on the land itself and does not mention an"thing regarding the
improvements e#isting thereon.
Bt it is a different matter, as regards the second mortgage e#ected over the same properties
on 7a" ', )(4* for an additional loan of 2'3,333.33 %hich %as registered %ith the Fegistr" of
&eeds of @longapo Cit" on the same date. Felative thereto, it is evident that sch mortgage
e#ected after the issance of the sales patent and of the @riginal Certificate of Title, falls
s!arel" nder the prohibitions stated in 6ections )'), )'' and )', of the 2blic 8and Act and
6ection ' of Fepblic Act 4*3, and is therefore nll and void.
2etitioner points ot that private respondents, after ph"sicall" possessing the title for five "ears,
volntaril" srrendered the same to the ban+ in )(44 in order that the mortgaged ma" be
annotated, %ithot re!iring the ban+ to get the prior approval of the 7inistr" of Natral
Fesorces beforehand, thereb" implicitl" athoriDing 2rdential Ban+ to case the annotation of
said mortgage on their title.
?o%ever, the Cort, in recentl" rling on violations of 6ection )', %hich refers to 6ections ))1,
)'3, )'' and )'* of Common%ealth Act ),), has held5
... Nonetheless, %e appl" or earlier rlings becase %e believe that as in pari
delicto ma" not be invo+ed to defeat the polic" of the 6tate neither ma" the
doctrine of estoppel give a validating effect to a void contract. $ndeed, it is
generall" considered that as bet%een parties to a contract, validit" cannot be given
to it b" estoppel if it is prohibited b" la% or is against pblic polic" ;)( Am. -r.
13'>. $t is not %ithin the competence of an" citiDen to barter a%a" %hat pblic
polic" b" la% %as to preserve ;AonDalo 2"at J 6ons, $nc. vs. &e los Amas and
Alino supra>. ... ;Arsenal vs. $AC, ),* 6CFA B, <)(1E=>.
This prononcement covers onl" the previos transaction alread" allded to and does not pass
pon an" ne% contract bet%een the parties ;Ibid>, as in the case at bar. $t shold not preclde
ne% contracts that ma" be entered into bet%een petitioner ban+ and private respondents that
are in accordance %ith the re!irements of the la%. After all, private respondents themselves
declare that the" are not den"ing the legitimac" of their debts and appear to be open to ne%
negotiations nder the la% ;Comment9 Follo, pp. (B-(E>. An" ne% transaction, ho%ever, %old
be sb0ect to %hatever steps the Aovernment ma" ta+e for the reversion of the land in its favor.
2FE7$6E6 C@N6$&EFE&, the decision of the Cort of First $nstance of Hambales J @longapo Cit"
is hereb" 7@&$F$E&, declaring that the &eed of Feal Estate 7ortgage for 243,333.33 is valid bt
rling that the &eed of Feal Estate 7ortgage for an additional loan of 2'3,333.33 is nll and
void, %ithot pre0dice to an" appropriate action the Aovernment ma" ta+e against private
respondents.
6@ @F&EFE&.
EN BANC
G.R. No. L-18>56 No?e9ber 2), 1962
CONRA3O ". NA.ARRO, plaintiff-appellee,
vs.
RUF!NO G. "!NE3A, RAMONA REYES, ET AL., defendants-appellants.
"ARE3ES, J.:
@n &ecember ),, )(B(, defendants Ffino A. 2ineda and his mother -ana AonDales ;married to
Aregorio 2ineda>, borro%ed from plaintiff Conrado 2. Navarro, the sm of 2',B33.33, pa"able E
months after said date or on -ne ),, )(B(. To secre the indebtedness, Ffino e#ected a
docment captioned "&EE& @F FEA8 E6TATE and C?ATTE8 7@FTAAAE6", %hereb" -ana
AonDales, b" %a" of eal !state Mortgage h"pothecated a parcel of land, belonging to her,
registered %ith the Fegister of &eeds of Tarlac, nder Transfer Certificate of Title No. 'B44E, and
Ffino A. 2ineda, by way of Chattel Mortgage, mortgaged his t%o-stor" residential hose, having
a floor area of ()' s!are meters, erected on a lot belonging to Att". Cicente Castro, located at
Bo. 6an Fo!e, Tarlac, Tarlac9 and one motor trc+, registered in his name, nder 7otor Cehicle
Fegistration Certificate No. A-)4)13E. Both mortgages %ere contained in one instrment, %hich
%as registered in both the @ffice of the Fegister of &eeds and the 7otor Cehicles @ffice of Tarlac.
:hen the mortgage debt became de and pa"able, the defendants, after demands made on
them, failed to pa". The", ho%ever, as+ed and %ere granted e#tension p to -ne *3, )(E3,
%ithin %hich to pa". Came -ne *3, defendants again failed to pa" and, for the second time,
as+ed for another e#tension, %hich %as given, p to -l" *3, )(E3. $n the second e#tension,
defendant 2ineda in a docment entitled "2romise", categoricall" stated that in the remote event
he shold fail to ma+e good the obligation on sch date ;-l" *3, )(E3>, the defendant %old no
longer as+ for frther e#tension and there %old be no need for an" formal demand, and plaintiff
cold proceed to ta+e %hatever action he might desire to enforce his rights, nder the said
mortgage contract. $n spite of said promise, defendants, failed and refsed to pa" the obligation.
@n Agst )3, )(E3, plaintiff filed a complaint for foreclosre of the mortgage and for damages,
%hich consisted of li!idated damages in the sm of 2B33.33 and )'K per annm interest on
the principal, effective on the date of matrit", ntil fll" paid.
&efendants, ans%ering the complaint, among others, stated G
&efendants admit that the loan is overde bt den" that portion of paragraph , of the
First Case of Action %hich states that the defendants nreasonabl" failed and refse to
pa" their obligation to the plaintiff the trth being the defendants are hard p these da"s
and pleaded to the plaintiff to grant them more time %ithin %hich to pa" their obligation
and the plaintiff refsed9
:?EFEF@FE, in vie% of the foregoing it is most respectfll" pra"ed that this ?onorable
Cort render 0dgment granting the defendants ntil -anar" *), )(E), %ithin %hich to
pa" their obligation to the plaintiff.
@n 6eptember *3, )(E3, plaintiff presented a 7otion for smmar" -dgment, claiming that the
Ans%er failed to tender an" genine and material isse. The motion %as set for hearing, bt the
record is not clear %hat rling the lo%er cort made on the said motion. @n November )), )(E3,
ho%ever, the parties sbmitted a 6tiplation of Facts, %herein the defendants admitted the
indebtedness, the athenticit" and de e#ection of the Feal Estate and Chattel 7ortgages9 that
the indebtedness has been de and npaid since -ne ),, )(E39 that a liabilit" of )'K per
annm as interest %as agreed, pon failre to pa" the principal %hen de and 2B33.33 as
li!idated damages9 that the instrment had been registered in the Fegistr" of 2ropert" and
7otor Cehicles @ffice, both of the province of Tarlac9 that the onl" isse in the case is %hether or
not the residential hose, sb0ect of the mortgage therein, can be considered a Chattel and the
propriet" of the attorne".s fees.
@n Febrar" ',, )(E), the lo%er cort held G
... :?EFEF@FE, this Cort renders decision in this Case5
;a> &ismissing the complaint %ith regard to defendant Aregorio 2ineda9
;b> @rdering defendants -ana AonDales and the sposes Ffino 2ineda and Famon
Fe"es, to pa" 0ointl" and severall" and %ithin ninet" ;(3> da"s from the receipt of the
cop" of this decision to the plaintiff Conrado 2. Navarro the principal sm of 2',BB3.33
%ith )'K componded interest per annm from -ne ),, )(E3, ntil said principal sm
and interests are fll" paid, pls 2B33.33 as li!idated damages and the costs of this sit,
%ith the %arning that in defalt of said pa"ment of the properties mentioned in the deed
of real estate mortgage and chattel mortgage ;Anne# "A" to the complaint> be sold to
realiDe said mortgage debt, interests, li!idated damages and costs, in accordance %ith
the pertinent provisions of Act *)*B, as amended b" Act ,))1, and Art. ), of the Chattel
7ortgage 8a%, Act )B319 and
;c> @rdering the defendants Ffino 2ineda and Famona Fe"es, to deliver immediatel" to
the 2rovincial 6heriff of Tarlac the personal properties mentioned in said Anne# "A",
immediatel" after the lapse of the ninet" ;(3> da"s above-mentioned, in defalt of sch
pa"ment.
The above 0dgment %as directl" appealed to this Cort, the defendants therein assigning onl" a
single error, allegedl" committed b" the lo%er cort, to %it G
$n holding that the deed of real estate and chattel mortgages appended to the complaint
is valid, not%ithstanding the fact that the hose of the defendant Ffino A. 2ineda %as
made the sb0ect of the chattel mortgage, for the reason that it is erected on a land that
belongs to a third person.
Appellants contend that article ,)B of the Ne% Civil Code, in classif"ing a hose as immovable
propert", ma+es no distinction %hether the o%ner of the land is or not the o%ner of the bilding9
the fact that the land belongs to another is immaterial, it is enogh that the hose adheres to
the land9 that in case of immovables b" incorporation, sch as hoses, trees, plants, etc9 the
Code does not re!ire that the attachment or incorporation be made b" the o%ner of the land,
the onl" criterion being the nion or incorporation %ith the soil. $n other %ords, it is claimed that
"a bilding is an immovable propert", irrespective of %hether or not said strctre and the land
on %hich it is adhered to, belong to the same o%ner" ;8opeD v. @rosa, A.F. Nos. 8-)31)4-1, Feb.
'1, )(B1>. ;6ee also the case of 8eng Iee v. 6trong 7achiner" Co., *4 2hil. E,,>. Appellants
arge that since onl" movables can be the sb0ect of a chattel mortgage ;sec. ), Act No. *(B'>
then the mortgage in !estion %hich is the basis of the present action, cannot give rise to an
action for foreclosre, becase it is nllit". ;Citing Associated $ns. Co., et al. v. $sabel $"a v.
Adriano Calino, et al., 8-)31*1, 7a" *3, )(B1.>
The trial cort did not predicate its decision declaring the deed of chattel mortgage valid solel"
on the grond that the hose mortgaged %as erected on the land %hich belonged to a third
person, bt also and principall" on the doctrine of estoppel, in that "the parties have so
e"pressly agreed" in the mortgage to consider the hose as chattel "for its smallness and mi#ed
materials of sawali and %ood". $n constring arts. **, and **B of the 6panish Civil Code
;corresponding to arts. ,)B and ,)E, N.C.C.>, for prposes of the application of the Chattel
7ortgage 8a%, it %as held that nder certain conditions, "a propert" ma" have a character
different from that impted to it in said articles. $t is ndeniable that the parties to a contract
ma" by agreement# treat as personal property that which b" natre %old be real propert""
;6tandard @il Co. of N.I. v. -aranillo, ,, 2hil. E*'-E**>."There can not be an" !estion that a
bilding of mi#ed materials ma" be the sb0ect of a chattel mortgage, in %hich case, it is
considered as bet%een the parties as personal propert". ... The matter depends on the
circmstances and the intention of the parties". "2ersonal propert" ma" retain its character as
sch %here it is so agreed b" the parties interested even thogh anne#ed to the realt" ...". ;,'
Am. -r. '3(-')3, cited in 7anarang, et al. v. @filada, et al., A.F. No. 8-1)**, 7a" )1, )(BE9 B'
@.A. No. 1, p. *(B,.> The vie% that parties to a deed of chattel mortgagee ma" agree to
consider a hose as personal propert" for the prposes of said contract, "is good onl" insofar as
the contracting parties are concerned. $t is based partl", pon the principles of estoppel ..."
;Evangelista v. Alto 6ret", No. 8-)))*(, Apr. '*, )(B1>. $n a case, a mortgage hose bilt on a
rented land, %as held to be a personal propert", not onl" becase the deed of mortgage
considered it as sch, bt also becase it did not form part of the land ;Evangelista v. Abad
<CA=9*E @.A. '()*>, for it is no% %ell settled that an ob0ect placed on land b" one %ho has onl"
a temporar" right to the same, sch as a lessee or sfrctar", does not become immobiliDed
b" attachment ;CaldeD v. Central Altagracia, ''' /.6. B1, cited in &avao 6a%mill Co., $nc. v.
Castillo, et al., E) 2hil. 43(>. ?ence, if a hose belonging to a person stands on a rented land
belonging to another person, it ma" be mortgaged as a personal propert" is so stiplated in the
docment of mortgage. ;Evangelista v. Abad, supra.> $t shold be noted, ho%ever, that the
principle is predicated on statements b" the o%ner declaring his hose to be a chattel, a condct
that ma" conceivabl" estop him from sbse!entl" claiming other%ise ;8adera, et al.. v. C. N.
?odges, et al., <CA=9 ,1 @.A. B*4,>. The doctrine, therefore, gathered from these cases is that
althogh in some instances, a hose of mi#ed materials has been considered as a chattel
bet%een them, has been recogniDed, it has been a constant criterion nevertheless that, %ith
respect to third persons, %ho are not parties to the contract, and speciall" in e#ection
proceedings, the hose is considered as an immovable propert" ;Art. ),*), Ne% Civil Code>.
$n the case at bar, the hose in !estion %as treated as personal or movable propert", b" the
parties to the contract themselves. $n the deed of chattel mortgage, appellant Ffino A. 2ineda
conve"ed b" %a" of "Chattel 7ortgage" "m" personal properties", a residential hose and a
trc+. The mortgagor himself groped the hose %ith the trc+, %hich is, inherentl" a movable
propert". The hose %hich %as not even declared for ta#ation prposes %as small and made of
light constrction materials5 A.$. sheets roofing, sawali and %ooden %alls and %ooden posts9
bilt on land belonging to another.
The cases cited b" appellants are not applicable to the present case. The $"a cases ;8-)31*4-*1,
supra>, refer to a bilding or a hose of strong materials, permanentl" adhered to the land,
belonging to the o%ner of the hose himself. $n the case of Lope$ v. %rosa, ;8-)31)4-)1>, the
sb0ect bilding %as a theatre, bilt of materials %orth more than 2E',333, attached
permanentl" to the soil. $n these cases and in the 8eng Iee case, supra, third persons assailed
the validit" of the deed of chattel mortgages9 in the present case, it %as one of the parties to
the contract of mortgages %ho assailed its validit".
C@NF@F7AB8I :$T? A88 T?E F@FEA@$NA, the decision appealed from, shold be, as it is
hereb" affirmed, %ith costs against appellants.
EN BANC
G.R. No. L-+)2+9 Mar78 16, 19+2
TE STAN3AR3 O!L COM"ANY OF NE& YORK, petitioner,
vs.
%OA,U!N %ARAM!LLO, a( re05(1er o6 $ee$( o6 18e C51y o6 Ma#5:a, respondent.
STREET, J.:
This case is before s pon demrrer interposed b" the respondent, -oa!in -aramillo, register
of deeds of the Cit" of 7anila, to an original petition of the 6tandard @il Compan" of Ne% Ior+,
see+ing a peremptor" mandamus to compel the respondent to record in the proper register a
docment prporting to be a chattel mortgage e#ected in the Cit" of 7anila b" Aervasia de la
Fosa, Cda. de Cera, in favor of the 6tandard @il Compan" of Ne% Ior+.
$t appears from the petition that on November '4, )('', Aervasia de la Fosa, Cda. de Cera, %as
the lessee of a parcel of land sitated in the Cit" of 7anila and o%ner of the hose of strong
materials bilt thereon, pon %hich date she e#ected a docment in the form of a chattel
mortgage, prporting to conve" to the petitioner b" %a" of mortgage both the leasehold interest
in said lot and the bilding %hich stands thereon.
The clases in said docment describing the propert" intended to be ths mortgage are
e#pressed in the follo%ing %ords5
No%, therefore, the mortgagor hereb" conve"s and transfer to the mortgage, b" %a" of
mortgage, the follo%ing described personal propert", sitated in the Cit" of 7anila, and
no% in possession of the mortgagor, to %it5
;)> All of the right, title, and interest of the mortgagor in and to the contract of lease
hereinabove referred to, and in and to the premises the sb0ect of the said lease9
;'> The bilding, propert" of the mortgagor, sitated on the aforesaid leased premises.
After said docment had been dl" ac+no%ledge and delivered, the petitioner cased the same
to be presented to the respondent, -oa!in -aramillo, as register of deeds of the Cit" of 7anila,
for the prpose of having the same recorded in the boo+ of record of chattel mortgages. /pon
e#amination of the instrment, the respondent %as of the opinion that it %as not a chattel
mortgage, for the reason that the interest therein mortgaged did not appear to be personal
propert", %ithin the meaning of the Chattel 7ortgage 8a%, and registration %as refsed on this
grond onl".
:e are of the opinion that the position ta+en b" the respondent is ntenable9 and it is his dt"
to accept the proper fee and place the instrment on record. The dties of a register of deeds in
respect to the registration of chattel mortgage are of a prel" ministerial character9 and no
provision of la% can be cited %hich confers pon him an" 0dicial or !asi-0dicial po%er to
determine the natre of an" docment of %hich registration is soght as a chattel mortgage.
The original provisions toching this matter are contained in section )B of the Chattel 7ortgage
8a% ;Act No. )B31>, as amended b" Act No. ',(E9 bt these have been transferred to section
)(1 of the Administrative Code, %here the" are no% fond. There is nothing in an" of these
provisions conferring pon the register of deeds an" athorit" %hatever in respect to the
"!alification," as the term is sed in 6panish la%, of chattel mortgage. ?is dties in respect to
sch instrments are ministerial onl". The efficac" of the act of recording a chattel mortgage
consists in the fact that it operates as constrctive notice of the e#istence of the contract, and
the legal effects of the contract mst be discovered in the instrment itself in relation %ith the
fact of notice. Fegistration adds nothing to the instrment, considered as a sorce of title, and
affects nobod".s rights e#cept as a specifies of notice.
Articles **, and **B of the Civil Code sppl" no absolte criterion for discriminating bet%een
real propert" and personal propert" for prpose of the application of the Chattel 7ortgage 8a%.
Those articles state rles %hich, considered as a general doctrine, are la% in this 0risdiction9 bt
it mst not be forgotten that nder given conditions propert" ma" have character different from
that impted to it in said articles. $t is ndeniable that the parties to a contract ma" b"
agreement treat as personal propert" that %hich b" natre %old be real propert"9 and it is a
familiar phenomenon to see things classed as real propert" for prposes of ta#ation %hich on
general principle might be considered personal propert". @ther sitations are constantl" arising,
and from time to time are presented to this cort, in %hich the proper classification of one thing
or another as real or personal propert" ma" be said to be dobtfl.
The point sbmitted to s in this case %as determined on 6eptember 1, )(),, in an
administrative rling promlgated b" the ?onorable -ames A. @strand, no% a -stice of this
Cort, bt acting at that time in the capacit" of -dge of the forth branch of the Cort of First
$nstance of the Ninth -dicial &istrict, in the Cit" of 7anila9 and little of vale can be here added
to the observations contained in said rling. :e accordingl" !ote therefrom as follo%s5
$t is nnecessar" here to determine %hether or not the propert" described in the
docment in !estion is real or personal9 the discssion ma" be confined to the point as
to %hether a register of deeds has athorit" to den" the registration of a docment
prporting to be a chattel mortgage and e#ected in the manner and form prescribed b"
the Chattel 7ortgage 8a%.
Then, after !oting section B of the Chattel 7ortgage 8a% ;Act No. )B31>, his ?onor contined5
Based principall" pon the provisions of section !oted the Attorne"-Aeneral of the
2hilippine $slands, in an opinion dated Agst )), )(3(, held that a register of deeds has
no athorit" to pass pon the capacit" of the parties to a chattel mortgage %hich is
presented to him for record. & fortiori a register of deeds can have no athorit" to pass
pon the character of the propert" soght to be encmbered b" a chattel mortgage. @f
corse, if the mortgaged propert" is real instead of personal the chattel mortgage %old
no dobt be held ineffective as against third parties, bt this is a !estion to be
determined b" the corts of 0stice and not b" the register of deeds.
$n Leung Yee vs. 'ran( L. Strong Machinery Co. and )illiamson ;*4 2hil., E,,>, this cort held
that %here the interest conve"ed is of the natre of real, propert", the placing of the docment
on record in the chattel mortgage register is a ftile act9 bt that decision is not decisive of the
!estion no% before s, %hich has reference to the fnction of the register of deeds in placing
the docment on record.
$n the light of %hat has been said it becomes nnecessar" for s to pass pon the point %hether
the interests conve"ed in the instrment no% in !estion are real or personal9 and %e declare it
to be the dt" of the register of deeds to accept the estimate placed pon the docment b" the
petitioner and to register it, pon pa"ment of the proper fee.
The demrrer is overrled9 and nless %ithin the period of five da"s from the date of the
notification hereof, the respondent shall interpose a sfficient ans%er to the petition, the %rit of
mandamus %ill be issed, as pra"ed, bt %ithot costs. 6o ordered.
EN BANC
G.R. No. L-16+18 No?e9ber +9, 196+
ANTON!A 4!CERRA, 3OM!NGO 4!CERRA, 4ERNAR3O 4!CERRA, CAYETANO 4!CERRA,
L!N3A 4!CERRA, "!O 4!CERRA a#$ EUFR!C!NA 4!CERRA, plaintiffs-appellants,
vs.
TOMASA TENE-A a#$ 4EN%AM!N 4AR4OSA, defendants-appellees.
MAKAL!NTAL, J.:
This case is before s on appeal from the order of the Cort of First $nstance of Abra dismissing
the complaint filed b" appellants, pon motion of defendants-appellate on the grond that the
action %as %ithin the e#clde ;original> 0risdiction of the -stice of the 2eace Cort of
8agangilang, of the same province.
The complaint alleges in sbstance that appellants %ere the o%ners of the hose, %orth
2'33.33, bilt on and o%ned b" them and sitated in the said mnicipalit" 8agangilang9 that
sometime in -anar" )(B4 appealed forcibl" demolished the hose, claiming to be the o%ners
thereof9 that the materials of the hose, after it %as dismantled, %ere placed in the cstod" of
the barrio lietenant of the place9 and that as a reslt of appellate.s refsal to restore the hose
or to deliver the material appellants the latter have sffered actal damages the amont of
2'33.33, pls moral and conse!ential damages in the amont of 2E33.33. The relief pra"ed for
is that "the plaintiffs be declared the o%ners of the hose in !estion andLor the materials that
reslted in ;sic> its dismantling9 ;and> that the defendants be orders pa" the sm of 2'33.33,
pls 2E33.33 as damages, the costs."
The isse posed b" the parties in this appeal is %hether the action involves title to real propert",
as appellants contend, and therefore is cogniDable b" the Cort of First $nstance ;6ec. ,,, par.
<b=, F.A. '(E, as amended>, %hether it pertains to the 0risdiction of the -stice of the 2eace
Cort, as stated in the order appealed from, since there is no real propert" litigated, the hose
having ceased to e#ist, and the amont of the demand does e#ceed 2',333.33 ;6ec. 11, id.>
)
The dismissal of the complaint %as proper. A hose is classified as immovable propert" b"
reason of its adherence to the soil on %hich it is bilt ;Art. ,)B, par. ), Civil Code>. This
classification holds tre regardless of the fact that the hose ma" be sitated on land belonging
to a different o%ner. Bt once the hose is demolished, as in this case, it ceases to e#ist as sch
and hence its character as an immovable li+e%ise ceases. $t shold be noted that the complaint
here is for recover" of damages. This is the onl" positive relief pra"ed for b" appellants. To be
sre, the" also as+ed that the" be declared o%ners of the dismantled hose andLor of the
materials. ?o%ever, sch declaration in no %ise constittes the relief itself %hich if granted b"
final 0dgment cold be enforceable b" e#ection, bt is onl" incidental to the real case of
action to recover damages.
The order appealed from is affirmed. The appeal having been admitted in forma pauperis, no
costs are ad0dged.
EN BANC
G.R. No. L-1522> %a#uary 21, 196>
4OAR3 OF ASSESSMENT A""EALS, C!TY ASSESSOR a#$ C!TY TREASURER OF ,UE-ON
C!TY, petitioners,
vs.
MAN!LA ELECTR!C COM"ANY, respondent.
"ARE3ES, J.:
From the stiplation of facts and evidence addced dring the hearing, the follo%ing appear5
@n @ctober '3, )(3', the 2hilippine Commission enacted Act No. ,1, %hich athoriDed the
7nicipal Board of 7anila to grant a franchise to constrct, maintain and operate an electric
street rail%a" and electric light, heat and po%er s"stem in the Cit" of 7anila and its sbrbs to
the person or persons ma+ing the most favorable bid. Charles 7. 6%ift %as a%arded the said
franchise on 7arch )(3*, the terms and conditions of %hich %ere embodied in @rdinance No. ,,
approved on 7arch ',, )(3*. Fespondent 7anila Electric Co. ;7eralco for short>, became the
transferee and o%ner of the franchise.
7eralco.s electric po%er is generated b" its h"dro-electric plant located at Botocan Falls, 8agna
and is transmitted to the Cit" of 7anila b" means of electric transmission %ires, rnning from
the province of 8agna to the said Cit". These electric transmission %ires %hich carr" high
voltage crrent, are fastened to inslators attached on steel to%ers constrcted b" respondent
at intervals, from its h"dro-electric plant in the province of 8agna to the Cit" of 7anila. The
respondent 7eralco has constrcted ,3 of these steel to%ers %ithin MeDon Cit", on land
belonging to it. A photograph of one of these steel to%ers is attached to the petition for revie%,
mar+ed Anne# A. Three steel to%ers %ere inspected b" the lo%er cort and parties and the
follo%ing %ere the descriptions given there of b" said cort5
The first steel to%er is located in 6oth Tatalon, Espaa E#tension, MeDon Cit". The
findings %ere as follo%s5 the grond arond one of the for posts %as e#cavated to a
depth of abot eight ;1> feet, %ith an opening of abot one ;)> meter in diameter,
decreased to abot a !arter of a meter as it %e deeper ntil it reached the bottom of the
post9 at the bottom of the post %ere t%o parallel steel bars attached to the leg means of
bolts9 the to%er proper %as attached to the leg three bolts9 %ith t%o cross metals to
prevent mobilit"9 there %as no concrete fondation bt there %as adobe stone
nderneath9 as the bottom of the e#cavation %as covered %ith %ater abot three inches
high, it cold not be determined %ith certaint" to %hether said adobe stone %as placed
prposel" or not, as the place abonds %ith this +ind of stone9 and the to%er carried five
high voltage %ires %ithot cover or an" inslating materials.
The second to%er inspected %as located in Namning Foad, N-F, MeDon Cit", on land
o%ned b" the petitioner appro#imate more than one +ilometer from the first to%er. As in
the first to%er, the grond arond one of the for legs %as e#cavate from seven to eight
;1> feet deep and one and a half ;)-O> meters %ide. There being ver" little %ater at the
bottom, it %as seen that there %as no concrete fondation, bt there soft adobe beneath.
The leg %as li+e%ise provided %ith t%o parallel steel bars bolted to a s!are metal frame
also bolted to each corner. 8i+e the first one, the second to%er is made p of metal rods
0oined together b" means of bolts, so that b" nscre%ing the bolts, the to%er cold be
dismantled and reassembled.
The third to%er e#amined is located along Namias Foad, MeDon Cit". As in the first t%o
to%ers given above, the grond arond the t%o legs of the third to%er %as e#cavated to a
depth abot t%o or three inches be"ond the otside level of the steel bar fondation. $t
%as fond that there %as no concrete fondation. 8i+e the t%o previos ones, the bottom
arrangement of the legs thereof %ere fond to be resting on soft adobe, %hich, probabl"
de to high hmidit", loo+s li+e md or cla". $t %as also fond that the s!are metal
frame spporting the legs %ere not attached to an" material or fondation.
@n November )B, )(BB, petitioner Cit" Assessor of MeDon Cit" declared the aforesaid steel
to%ers for real propert" ta# nder Ta# declaration Nos. *)((' and )BB,(. After den"ing
respondent.s petition to cancel these declarations, an appeal %as ta+en b" respondent to the
Board of Assessment Appeals of MeDon Cit", %hich re!ired respondent to pa" the amont of
2)),EB).1E as real propert" ta# on the said steel to%ers for the "ears )(B' to )(BE. Fespondent
paid the amont nder protest, and filed a petition for revie% in the Cort of Ta# Appeals ;CTA
for short> %hich rendered a decision on &ecember '(, )(B1, ordering the cancellation of the said
ta# declarations and the petitioner Cit" Treasrer of MeDon Cit" to refnd to the respondent the
sm of 2)),EB).1E. The motion for reconsideration having been denied, on April '', )(B(, the
instant petition for revie% %as filed.
$n pholding the case of respondents, the CTA held that5 ;)> the steel to%ers come %ithin the
term "poles" %hich are declared e#empt from ta#es nder part $$ paragraph ( of respondent.s
franchise9 ;'> the steel to%ers are personal properties and are not sb0ect to real propert" ta#9
and ;*> the Cit" Treasrer of MeDon Cit" is held responsible for the refnd of the amont paid.
These are assigned as errors b" the petitioner in the brief.
The ta# e#emption privilege of the petitioner is !oted herender5
2AF (. The grantee shall be liable to pa" the same ta#es pon its real estate, bildings,
plant ;not inclding poles, %ires, transformers, and inslators>, machiner" and personal
propert" as other persons are or ma" be hereafter re!ired b" la% to pa" ... 6aid
percentage shall be de and pa"able at the time stated in paragraph nineteen of 2art @ne
hereof, ... and shall be in lieu of all ta"es and assessments of whatsoever nature and by
whatsoever authority upon the privileges# earnings# income# franchise# and poles, %ires,
transformers, and inslators of the grantee from %hich ta#es and assessments the
grantee is hereby e"pressly e"empted. ;2ar. (, 2art T%o, Act No. ,1, Fespondent.s
Franchise9 emphasis spplied.>
The %ord "pole" means "a long, comparativel" slender sall" c"lindrical piece of %ood or
timber, as t"picall" the stem of a small tree stripped of its branches9 also b" e#tension, a similar
t"picall" c"lindrical piece or ob0ect of metal or the li+e". The term also refers to "an upright
standard to the top of which something is affi"ed or by which something is supported9 as a
dovecote set on a pole9 telegraph poles9 a tent pole9 sometimes, specificall" a vessel.s master
;:ebster.s Ne% $nternational &ictionar" 'nd Ed., p. )(34.> Along the streets, in the Cit" of
7anila, ma" be seen c"lindrical metal poles, cbical concrete poles, and poles of the 28&T Co.
%hich are made of t%o steel bars 0oined together b" an interlacing metal rod. The" are called
"poles" not%ithstanding the fact that the" are no made of %ood. $t mst be noted from
paragraph (, above !oted, that the concept of the "poles" for %hich e#emption is granted, is
not determined b" their place or location, nor b" the character of the electric crrent it carries,
nor the material or form of %hich it is made, bt the se to %hich the" are dedicated. $n
accordance %ith the definitions, pole is not restricted to a long c"lindrical piece of %ood or metal,
bt incldes "pright standards to the top of %hich something is affi#ed or b" %hich something is
spported. As heretofore described, respondent.s steel spports consists of a frame%or+ of for
steel bars or strips %hich are bond b" steel cross-arms atop of %hich are cross-arms spporting
five high voltage transmission %ires ;6ee Anne# A> and their sole fnction is to spport or carr"
sch %ires.
The conclsion of the CTA that the steel spports in !estion are embraced in the term "poles" is
not a novelt". 6everal corts of last resort in the /nited 6tates have called these steel spports
"steel to%ers", and the" denominated these spports or to%ers, as electric poles. $n their
decisions the %ords "to%ers" and "poles" %ere sed interchangeabl", and it is %ell nderstood in
that 0risdiction that a transmission to%er or pole means the same thing.
$n a proceeding to condemn land for the se of electric po%er %ires, in %hich the la% provided
that %ires shall be constrcted pon sitable poles, this term %as constred to mean either
%ood or metal poles and in vie% of the land being sb0ect to overflo%, and the necessar"
carr"ing of nmeros %ires and the distance bet%een poles, the statte %as interpreted to
inclde towers or poles.
The term "poles" %as also sed to denominate the steel spports or to%ers sed b" an
association sed to conve" its electric po%er frnished to sbscribers and members, constrcted
for the prpose of fastening high voltage and dangeros electric %ires alongside pblic
high%a"s. The steel spports or to%ers %ere made of iron or other metals consisting of t%o
pieces rnning from the grond p some thirt" feet high, being %ider at the bottom than at the
top, the said t%o metal pieces being connected %ith criss-cross iron rnning from the bottom to
the top, constrcted li+e ladders and loaded %ith high voltage electricit". $n form and strctre,
the" are li+e the steel to%ers in !estion.
The term "poles" %as sed to denote the steel to%ers of an electric compan" engaged in the
generation of h"dro-electric po%er generated from its plant to the To%er of @#ford and Cit" of
:aterbr". These steel to%ers are abot )B feet s!are at the base and e#tended to a height of
abot *B feet to a point, and are embedded in the cement fondations sn+ in the earth, the top
of %hich e#tends above the srface of the soil in the to%er of @#ford, and to the to%ers are
attached inslators, arms, and other e!ipment capable of carr"ing %ires for the transmission of
electric po%er ;Connectict 8ight and 2o%er Co. v. @#ford, )3) Conn. *1*, )'E Atl. p. )>.
$n a case, the defendant admitted that the strctre on %hich a certain person met his death
%as bilt for the prpose of spporting a transmission %ire sed for carr"ing high-tension
electric po%er, bt claimed that the steel to%ers on %hich it is carried %ere so large that their
%ire too+ their strctre ot of the definition of a pole line. $t %as held that in defining the %ord
pole, one shold not be governed b" the %ire or material of the spport sed, bt %as
considering the danger from an" elevated %ire carr"ing electric crrent, and that regardless of
the siDe or material %ire of its individal members, an" continos series of strctres intended
and sed solel" or primaril" for the prpose of spporting %ires carr"ing electric crrents is a
pole line ;$nspiration Consolidation Cooper Co. v. Br"an 'B' 2. )3)E>.
$t is evident, therefore, that the %ord "poles", as sed in Act No. ,1, and incorporated in the
petitioner.s franchise, shold not be given a restrictive and narro% interpretation, as to defeat
the ver" ob0ect for %hich the franchise %as granted. The poles as contemplated thereon, shold
be nderstood and ta+en as a part of the electric po%er s"stem of the respondent 7eralco, for
the conve"ance of electric crrent from the sorce thereof to its consmers. $f the respondent
%old be re!ired to emplo" "%ooden poles", or "ronded poles" as it sed to do fift" "ears
bac+, then one shold admit that the 2hilippines is one centr" behind the age of space. $t
shold also be conceded b" no% that steel to%ers, li+e the ones in !estion, for obvios reasons,
can better effectate the prpose for %hich the respondent.s franchise %as granted.
Aranting for the prpose of argment that the steel spports or to%ers in !estion are not
embraced %ithin the term poles, the logical !estion posited is %hether the" constitte real
properties, so that the" can be sb0ect to a real propert" ta#. The ta# la% does not provide for a
definition of real propert"9 bt Article ,)B of the Civil Code does, b" stating the follo%ing are
immovable propert"5
;)> 8and, bildings, roads, and constrctions of all +inds adhered to the soil9
# # # # # # # # #
;*> Ever"thing attached to an immovable in a fi"ed manner, in sch a %a" that it cannot
be separated therefrom %ithot brea+ing the material or deterioration of the ob0ect9
# # # # # # # # #
;B> 7achiner", receptacles, instrments or implements intended b" the o%ner of the
tenement for an indstr" or %or+s %hich ma" be carried in a bilding or on a piece of
land, and %hich tends directl" to meet the needs of the said indstr" or %or+s9
# # # # # # # # #
The steel to%ers or spports in !estion, do not come %ithin the ob0ects mentioned in paragraph
), becase the" do not constitte bildings or constrctions adhered to the soil. The" are not
constrction analogos to bildings nor adhering to the soil. As per description, given b" the
lo%er cort, the" are removable and merel" attached to a s!are metal frame b" means of
bolts, %hich %hen nscre%ed cold easil" be dismantled and moved from place to place. The"
can not be inclded nder paragraph *, as the" are not attached to an immovable in a fi#ed
manner, and the" can be separated %ithot brea+ing the material or casing deterioration pon
the ob0ect to %hich the" are attached. Each of these steel to%ers or spports consists of steel
bars or metal strips, 0oined together b" means of bolts, %hich can be disassembled b"
nscre%ing the bolts and reassembled b" scre%ing the same. These steel to%ers or spports do
not also fall nder paragraph B, for the" are not machineries, receptacles, instrments or
implements, and even if the" %ere, the" are not intended for indstr" or %or+s on the land.
2etitioner is not engaged in an indstr" or %or+s in the land in %hich the steel spports or
to%ers are constrcted.
$t is finall" contended that the CTA erred in ordering the Cit" Treasrer of MeDon Cit" to refnd
the sm of 2)),EB).1E, despite the fact that MeDon Cit" is not a part" to the case. $t is arged
that as the Cit" Treasrer is not the real part" in interest, bt MeDon Cit", %hich %as not a
part" to the sit, not%ithstanding its capacit" to se and be sed, he shold not be ordered to
effect the refnd. This !estion has not been raised in the cort belo%, and, therefore, it cannot
be properl" raised for the first time on appeal. The herein petitioner is indlging in legal
technicalities and niceties %hich do not help him an"9 for factall", it %as he ;Cit" Treasrer>
%hom had insisted that respondent herein pa" the real estate ta#es, %hich respondent paid
nder protest. ?aving acted in his official capacit" as Cit" Treasrer of MeDon Cit", he %old
srel" +no% %hat to do, nder the circmstances.
$N C$E: ?EFE@F, the decision appealed from is hereb" affirmed, %ith costs against the
petitioners.
6EC@N& &$C$6$@N
G.R. No. L->*9>2 May 21, 198+
MAN!LA ELECTR!C COM"ANY, petitioner,
vs.
CENTRAL 4OAR3 OF ASSESSMENT A""EALS, 4OAR3 OF ASSESSMENT A""EALS OF
4ATANGAS a#$ "RO.!NC!AL ASSESSOR OF 4ATANGAS, respondents.
A,U!NO, J.:
This case is abot the imposition of the realt" ta# on t%o oil storage tan+s installed in )(E( b"
7anila Electric Compan" on a lot in 6an 2ascal, Batangas %hich it leased in )(E1 from Calte#
;2hil.>, $nc. The tan+s are %ithin the Calte# refiner" compond. The" have a total capacit" of
BEE,333 barrels. The" are sed for storing fel oil for 7eralco.s po%er plants.
According to 7eralco, the storage tan+s are made of steel plates %elded and assembled on the
spot. Their bottoms rest on a fondation consisting of compacted earth as the otermost la"er, a
sand pad as the intermediate la"er and a t%o-inch thic+ bitminos asphalt stratm as the top
la"er. The bottom of each tan+ is in contact %ith the asphalt la"er.
The steel sides of the tan+ are directl" spported nderneath b" a circlar %all made of
concrete, eighteen inches thic+, to prevent the tan+ from sliding. ?ence, according to 7eralco,
the tan+ is not attached to its fondation. $t is not anchored or %elded to the concrete circlar
%all. $ts bottom plate is not attached to an" part of the fondation b" bolts, scre%s or similar
devices. The tan+ merel" sits on its fondation. Each empt" tan+ can be floated b" flooding its
di+e-inclosed location %ith %ater for feet deep. ;pp. '(-*3, Follo.>
@n the other hand, according to the hearing commissioners of the Central Board of Assessment
Appeals, the area %here the t%o tan+s are located is enclosed %ith earthen di+es %ith electric
steel poles on top thereof and is divided into t%o parts as the site of each tan+. The fondation
of the tan+s is elevated from the remaining area. @n both sides of the earthen di+es are t%o
separate concrete steps leading to the fondation of each tan+.
Tan+ No. ' is spported b" a concrete fondation %ith an asphalt lining abot an inch thic+.
2ipelines %ere installed on the sides of each tan+ and are connected to the pipelines of the
7anila Enterprises $ndstrial Corporation %hose bildings and pmping station are near Tan+ No.
'.
The Board concldes that %hile the tan+s rest or sit on their fondation, the fondation itself and
the %alls, di+es and steps, %hich are integral parts of the tan+s, are affi#ed to the land %hile the
pipelines are attached to the tan+s. ;pp. E3-E), Follo.> $n )(43, the mnicipal treasrer of
Baan, Batangas, on the basis of an assessment made b" the provincial assessor, re!ired
7eralco to pa" realt" ta#es on the t%o tan+s. For the five-"ear period from )(43 to )(4,, the
ta# and penalties amonted to 2,*),43*.(E ;p. '4, Follo>. The Board re!ired 7eralco to pa"
the ta# and penalties as a condition for entertaining its appeal from the adverse decision of the
Batangas board of assessment appeals.
The Central Board of Assessment Appeals ;composed of Acting 6ecretar" of Finance 2edro 7.
AlmanDor as chairman and 6ecretar" of -stice Cicente Abad 6antos and 6ecretar" of 8ocal
Aovernment and Commnit" &evelopment -ose Foo as members> in its decision dated
November B, )(4E rled that the tan+s together %ith the fondation, %alls, di+es, steps,
pipelines and other apprtenances constitte ta#able improvements.
7eralco received a cop" of that decision on Febrar" '1, )(44. @n the fifteenth da", it filed a
motion for reconsideration %hich the Board denied in its resoltion of November 'B, )(44, a
cop" of %hich %as received b" 7eralco on Febrar" '1, )(41.
@n 7arch )B, )(41, 7eralco filed this special civil action of certiorari to annl the Board.s
decision and resoltion. $t contends that the Board acted %ithot 0risdiction and committed a
grave error of la% in holding that its storage tan+s are ta#able real propert".
7eralco contends that the said oil storage tan+s do not fall %ithin an" of the +inds of real
propert" enmerated in article ,)B of the Civil Code and, therefore, the" cannot be categoriDed
as realt" b" natre, b" incorporation, b" destination nor b" analog". 6tress is laid on the fact
that the tan+s are not attached to the land and that the" %ere placed on leased land, not on the
land o%ned b" 7eralco.
This is one of those highl" controversial, borderline or penmbral cases on the classification of
propert" %here strong divergent opinions are inevitable. The isse raised b" 7eralco has to be
resolved in the light of the provisions of the Assessment 8a%, Common%ealth Act No. ,43, and
the Feal 2ropert" Ta# Code, 2residential &ecree No. ,E, %hich too+ effect on -ne ), )(4,.
6ection ' of the Assessment 8a% provides that the realt" ta# is de "on real propert", inclding
land, bildings, machiner", and other improvements" not specificall" e#empted in section *
thereof. This provision is reprodced %ith some modification in the Feal 2ropert" Ta# Code %hich
provides5
6ec. *1. Incidence of eal *roperty +a". G The" shall be levied, assessed and
collected in all provinces, cities and mnicipalities an annal ad valorem ta" on real
propert", sch as land, bildings, machiner" and other improvements affi#ed or
attached to real propert" not hereinafter specificall" e#empted.
The Code contains the follo%ing definition in its section *5
+> Improvements G is a valable addition made to propert" or an amelioration in
its condition, amonting to more than mere repairs or replacement of %aste,
costing labor or capital and intended to enhance its vale, beat" or tilit" or to
adapt it for ne% or frther prposes.
:e hold that %hile the t%o storage tan+s are not embedded in the land, the" ma", nevertheless,
be considered as improvements on the land, enhancing its tilit" and rendering it sefl to the
oil indstr". $t is ndeniable that the t%o tan+s have been installed %ith some degree of
permanence as receptacles for the considerable !antities of oil needed b" 7eralco for its
operations.
@il storage tan+s %ere held to be ta#able realt" in 6tandard @il Co. of Ne% -erse" vs. Atlantic
Cit", )B Atl. 'nd '4).
For prposes of ta#ation, the term "real propert"" ma" inclde things %hich shold generall" be
regarded as personal propert";1, C.-.6. )4), Note 1>. $t is a familiar phenomenon to see things
classed as real propert" for prposes of ta#ation %hich on general principle might be considered
personal propert" ;6tandard @il Co. of Ne% Ior+ vs. -aramillo, ,, 2hil. E*3, E**>.
The case of Board of Assessment Appeals vs. 7anila Electric Compan", ))( 2hil. *'1, %herein
7eralco.s steel to%ers %ere held not to be sb0ect to realt" ta#, is not in point becase in that
case the steel to%ers %ere regarded as poles and nder its franchise 7eralco.s poles are e#empt
from ta#ation. 7oreover, the steel to%ers %ere not attached to an" land or bilding. The" %ere
removable from their metal frames.
Nor is there an" parallelism bet%een this case and 7indanao Bs Co. vs. Cit" Assessor, ))E 2hil.
B3), %here the tools and e!ipment in the repair, carpentr" and blac+smith shops of a
transportation compan" %ere held not sb0ect to realt" ta# becase the" %ere personal propert".
:?EFEF@FE, the petition is dismissed. The Board.s !estioned decision and resoltion are
affirmed. No costs.
6@ @F&EFE&.
EN BANC
G.R. No. L-+6+*8 Au0u(1 >, 19+*
LEON S!4AL , plaintiff-appellant,
vs.
EM!L!ANO %. .AL3E- ET AL., defendants.
EM!L!ANO %. .AL3E-, appellee.
%ONSON, J.:
The action %as commenced in the Cort of First $nstance of the 2rovince of Tarlac on the ),th
da" of &ecember )(',. The facts are abot as conflicting as it is possible for facts to be, in the
trial cases.
As a first case of action the plaintiff alleged that the defendant Citaliano 7ama%al, dept"
sheriff of the 2rovince of Tarlac, b" virte of a %rit of e#ection issed b" the Cort of First
$nstance of 2ampanga, attached and sold to the defendant Emiliano -. CaldeD the sgar cane
planted b" the plaintiff and his tenants on seven parcels of land described in the complaint in the
third paragraph of the first case of action9 that %ithin one "ear from the date of the attachment
and sale the plaintiff offered to redeem said sgar cane and tendered to the defendant CaldeD
the amont sfficient to cover the price paid b" the latter, the interest thereon and an"
assessments or ta#es %hich he ma" have paid thereon after the prchase, and the interest
corresponding thereto and that CaldeD refsed to accept the mone" and to retrn the sgar cane
to the plaintiff.
As a second case of action, the plaintiff alleged that the defendant Emiliano -. CaldeD %as
attempting to harvest the pala" planted in for of the seven parcels mentioned in the first case
of action9 that he had harvested and ta+en possession of the pala" in one of said seven parcels
and in another parcel described in the second case of action, amonting to *33 cavans9 and
that all of said pala" belonged to the plaintiff.
2laintiff pra"ed that a %rit of preliminar" in0nction be issed against the defendant Emiliano -.
CaldeD his attorne"s and agents, restraining them ;)> from distribting him in the possession of
the parcels of land described in the complaint9 ;'> from ta+ing possession of, or harvesting the
sgar cane in !estion9 and ;*> from ta+ing possession, or harvesting the pala" in said parcels
of land. 2laintiff also pra"ed that a 0dgment be rendered in his favor and against the defendants
ordering them to consent to the redemption of the sgar cane in !estion, and that the
defendant CaldeD be condemned to pa" to the plaintiff the sm of 2),3BE the vale of pala"
harvested b" him in the t%o parcels above-mentioned ,%ith interest and costs.
@n &ecember '4, )(',, the cort, after hearing both parties and pon approval of the bond for
2E,333 filed b" the plaintiff, issed the %rit of preliminar" in0nction pra"ed for in the complaint.
The defendant Emiliano -. CaldeD, in his amended ans%er, denied generall" and specificall" each
and ever" allegation of the complaint and step p the follo%ing defenses5
;a> That the sgar cane in !estion had the natre of personal propert" and %as not,
therefore, sb0ect to redemption9
;b> That he %as the o%ner of parcels ), ' and 4 described in the first case of action of
the complaint9
;c> That he %as the o%ner of the pala" in parcels ), ' and 49 and
;d> That he never attempted to harvest the pala" in parcels , and B.
The defendant Emiliano -. CaldeD b" %a" of conterclaim, alleged that b" reason of the
preliminar" in0nction he %as nable to gather the sgar cane, sgar-cane shoots ;puntas de
cana dulce> pala" in said parcels of land, representing a loss to him of 21,*4B.'3 and that, in
addition thereto, he sffered damages amonting to 2*,,B1.BE. ?e pra"ed, for a 0dgment ;)>
absolving him from all liabilit" nder the complaint9 ;'> declaring him to be the absolte o%ner
of the sgar cane in !estion and of the pala" in parcels ), ' and 49 and ;*> ordering the
plaintiff to pa" to him the sm of 2)),1**.4E, representing the vale of the sgar cane and
pala" in !estion, inclding damages.
/pon the isses ths presented b" the pleadings the case %as broght on for trial. After
hearing the evidence, and on April '1, )('E, the ?onorable Ca"etano 8+ban, 0dge, rendered a
0dgment against the plaintiff and in favor of the defendants G
;)> ?olding that the sgar cane in !estion %as personal propert" and, as sch, %as not
sb0ect to redemption9
;'> Absolving the defendants from all liabilit" nder the complaint9 and
;*> Condemning the plaintiff and his sreties Cenon de la CrD, -an 6angalang and
7arcos 6ibal to 0ointl" and severall" pa" to the defendant Emiliano -. CaldeD the sm of
2(,,*(.31 as follo%s5
;a> 2E,4B4.,3, the vale of the sgar cane9
;b> ),,*B.E1, the vale of the sgar-cane shoots9
;c> E,E.33, the vale of pala" harvested b" plaintiff9
;d> E33.33, the vale of )B3 cavans of pala" %hich the defendant %as not able to
raise b" reason of the in0nction, at 2, cavan. (,,*(.31 From that 0dgment the
plaintiff appealed and in his assignments of error contends that the lo%er cort
erred5 ;)> $n holding that the sgar cane in !estion %as personal propert" and,
therefore, not sb0ect to redemption9
;'> $n holding that parcels ) and ' of the complaint belonged to CaldeD, as %ell as parcels
4 and 1, and that the pala" therein %as planted b" CaldeD9
;*> $n holding that CaldeD, b" reason of the preliminar" in0nction failed to realiDed
2E,4B4.,3 from the sgar cane and 2),,*B.E1 from sgar-cane shoots ;pntas de cana
dlce>9
;,> $n holding that, for failre of plaintiff to gather the sgar cane on time, the defendant
%as nable to raise pala" on the land, %hich %old have netted him the sm of 2E339
and.
;B> $n condemning the plaintiff and his sreties to pa" to the defendant the sm of
2(,,*(.31.
$t appears from the record5
;)> That on 7a" )), )('*, the dept" sheriff of the 2rovince of Tarlac, b" virte of %rit of
e#ection in civil case No. '3'3* of the Cort of First $nstance of 7anila ;7acondra" J
Co., $nc. vs. 8eon 6ibal>,levied an attachment on eight parcels of land belonging to said
8eon 6ibal, sitated in the 2rovince of Tarlac, designated in the second of attachment as
parcels ), ', *, ,, B, E, 4 and 1 ;E#hibit B, E#hibit '-A>.
;'> That on -l" *3, )('*, 7acondra" J Co., $nc., boght said eight parcels of land, at the
action held b" the sheriff of the 2rovince of Tarlac, for the sm to 2,,'4*.(*, having paid
for the said parcels separatel" as follo%s ;E#hibit C, and '-A>5
2arcel
) ..................................................................... 2).33
' ..................................................................... ',333.33
* ..................................................................... )'3.(*
, ..................................................................... ),333.33
B ..................................................................... ).33
E ..................................................................... ).33
4 %ith the hose thereon .......................... )B3.33
1 ..................................................................... ),333.33
PPPPPPPPPP
,,'4*.(*
;*> That %ithin one "ear from the sale of said parcel of land, and on the ',th da" of
6eptember, )('*, the 0dgment debtor, 8eon 6ibal, paid 2',333 to 7acondra" J Co., $nc.,
for the accont of the redemption price of said parcels of land, %ithot specif"ing the
particlar parcels to %hich said amont %as to applied. The redemption price said eight
parcels %as redced, b" virte of said transaction, to 2',B4(.(4 inclding interest ;E#hibit
C and '>.
The record frther sho%s5
;)> That on April '(, )(',, the defendant Citaliano 7ama%al, dept" sheriff of the
2rovince of Tarlac, b" virte of a %rit of e#ection in civil case No. )*3) of the 2rovince of
2ampanga ;Emiliano -. CaldeD vs. 8eon 6ibal ).Q G the same parties in the present case>,
attached the personal propert" of said 8eon 6ibal located in Tarlac, among %hich %as
inclded the sgar cane no% in !estion in the seven parcels of land described in the
complaint ;E#hibit A>.
;'> That on 7a" ( and )3, )(',, said dept" sheriff sold at pblic action said personal
properties of 8eon 6ibal, inclding the sgar cane in !estion to Emilio -. CaldeD, %ho paid
therefor the sm of 2),BB3, of %hich 2E33 %as for the sgar cane ;E#hibit A>.
;*> That on April '(,)(',, said dept" sheriff, b" virte of said %rit of e#ection, also
attached the real propert" of said 8eon 6ibal in Tarlac, inclding all of his rights, interest
and participation therein, %hich real propert" consisted of eleven parcels of land and a
hose and camarin sitated in one of said parcels ;E#hibit A>.
;,> That on -ne 'B, )(',, eight of said eleven parcels, inclding the hose and the
camarin, %ere boght b" Emilio -. CaldeD at the action held b" the sheriff for the sm of
2)','33. 6aid eight parcels %ere designated in the certificate of sale as parcels ), *, ,, B,
E, 4, )3 and )). The hose and camarin %ere sitated on parcel 4 ;E#hibit A>.
;B> That the remaining three parcels, indicated in the certificate of the sheriff as parcels ',
)', and )*, %ere released from the attachment b" virte of claims presented b" Agstin
C"gan and &omiciano TiDon ;E#hibit A>.
;E> That on the same date, -ne 'B, )(',, 7acondra" J Co. sold and conve"ed to Emilio
-. CaldeD for 2',B4(.(4 all of its rights and interest in the eight parcels of land ac!ired b"
it at pblic action held b" the dept" sheriff of Tarlac in connection %ith civil case No.
'3'3* of the Cort of First $nstance of 7anila, as stated above. 6aid amont represented
the npaid balance of the redemption price of said eight parcels, after pa"ment b" 8eon
6ibal of 2',333 on 6eptember ',, )('*, from the accont of the redemption price, as
stated above. ;E#hibit C and '>.
The foregoing statement of facts sho%s5
;)> The Emilio -. CaldeD boght the sgar cane in !estion, located in the seven parcels of
land described in the first case of action of the complaint at pblic action on 7a" ( and
)3, )(',, for 2E33.
;'> That on -l" *3, )('*, 7acondra" J Co. became the o%ner of eight parcels of land
sitated in the 2rovince of Tarlac belonging to 8eon 6ibal and that on 6eptember ',,
)('*, 8eon 6ibal paid to 7acondra" J Co. 2',333 for the accont of the redemption price
of said parcels.
;*> That on -ne 'B, )(',, Emilio -. CaldeD ac!ired from 7acondra" J Co. all of its rights
and interest in the said eight parcels of land.
;,> That on -ne 'B, )(',, Emilio -. CaldeD also ac!ired all of the rights and interest
%hich 8eon 6ibal had or might have had on said eight parcels b" virte of the 2',333 paid
b" the latter to 7acondra".
;B> That Emilio -. CaldeD became the absolte o%ner of said eight parcels of land.
The first !estion raised b" the appeal is, %hether the sgar cane in !estion is personal or real
propert". $t is contended that sgar cane comes nder the classification of real propert" as
"ngathered prodcts" in paragraph ' of article **, of the Civil Code. 6aid paragraph ' of article
**, enmerates as real propert" the follo%ing5 Trees, plants, and ngathered prodcts, %hile
the" are anne#ed to the land or form an integral part of an" immovable propert"." That article,
ho%ever, has received in recent "ears an interpretation b" the +ribunal Supremo de !spa,a,
%hich holds that, nder certain conditions, gro%ing crops ma" be considered as personal
propert". ;&ecision of 7arch )1, )(3,, vol. (4, Civil -risprdence of 6pain.>
7anresa, the eminent commentator of the 6panish Civil Code, in discssing section **, of the
Civil Code, in vie% of the recent decisions of the spreme Cort of 6pain, admits that gro%ing
crops are sometimes considered and treated as personal propert".
From the foregoing it appears ;)> that, nder 6panish athorities, pending frits and ngathered
prodcts ma" be sold and transferred as personal propert"9 ;'> that the 6preme Cort of
6pain, in a case of e0ectment of a lessee of an agricltral land, held that the lessee %as entitled
to gather the prodcts corresponding to the agricltral "ear, becase said frits did not go %ith
the land bt belonged separatel" to the lessee9 and ;*> that nder the 6panish 7ortgage 8a% of
)(3(, as amended, the mortgage of a piece of land does not inclde the frits and prodcts
e#isting thereon, nless the contract e#pressl" provides other%ise.
An e#amination of the decisions of the 6preme Cort of 8oisiana ma" give s some light on
the !estion %hich %e are discssing. Article ,EB of the Civil Code of 8oisiana, %hich
corresponds to paragraph ' of article **, of or Civil Code, provides5 "6tanding crops and the
frits of trees not gathered, and trees before the" are ct do%n, are li+e%ise immovable, and
are considered as part of the land to %hich the" are attached."
The 6preme Cort of 8oisiana having occasion to interpret that provision, held that in some
cases "standing crops" ma" be considered and dealt %ith as personal propert". $n the case of
Lumber Co. vs. Sheriff and +a" Collector ;)3E 8a., ,)1> the 6preme Cort said5 "Tre, b"
article ,EB of the Civil Code it is provided that .standing crops and the frits of trees not
gathered and trees before the" are ct do%n . . . are considered as part of the land to %hich
the" are attached, bt the immovabilit" provided for is onl" one in abstracto and %ithot
reference to rights on or to the crop ac!ired b" others than the o%ners of the propert" to %hich
the crop is attached. . . . The e#istence of a right on the gro%ing crop is a mobiliDation b"
anticipation, a gathering as it %ere in advance, rendering the crop movable !oad the right
ac!ired therein. @r 0risprdence recogniDes the possible mobiliDation of the gro%ing crop."
;CitiDens. Ban+ vs. :iltD, *) 8a. Ann., ',,9 2orche vs. Bodin, '1 8a., Ann., 4E)9 6andel vs.
&oglass, '4 8a. Ann., E'(9 8e%is vs. NlotD, *( 8a. Ann., 'E4.>
"$t is tre," as the 6preme Cort of 8oisiana said in the case of *orche vs. -odin ;'1 8a. An.,
4E)> that "article ,EB of the Fevised Code sa"s that standing crops are considered as immovable
and as part of the land to %hich the" are attached, and article ,EE declares that the frits of an
immovable gathered or prodced %hile it is nder seiDre are considered as ma+ing part thereof,
and incrred to the benefit of the person ma+ing the seiDre. Bt the evident meaning of these
articles, is %here the crops belong to the o%ner of the plantation the" form part of the
immovable, and %here it is seiDed, the frits gathered or prodced inre to the benefit of the
seiDing creditor.
A crop raised on leased premises in no sense forms part of the immovable. $t belongs to
the lessee, and ma" be sold b" him, %hether it be gathered or not, and it ma" be sold b"
his 0dgment creditors. $f it necessaril" forms part of the leased premises the reslt %old
be that it cold not be sold nder e#ection separate and apart from the land. $f a lessee
obtain spplies to ma+e his crop, the factor.s lien %old not attach to the crop as a
separate thing belonging to his debtor, bt the land belonging to the lessor %old be
affected %ith the recorded privilege. The la% cannot be constred so as to reslt in sch
absrd conse!ences.
$n the case of Citi$en.s -an( vs. )ilt$ ;*) 8a. Ann., ',,>the cort said5
$f the crop quoad the pledge thereof nder the act of )14, %as an immovable, it %old be
destrctive of the ver" ob0ects of the act, it %old render the pledge of the crop ob0ects of
the act, it %old render the pledge of the crop impossible, for if the crop %as an
inseparable part of the realt" possession of the latter %old be necessar" to that of the
former9 bt sch is not the case. Tre, b" article ,EB C. C. it is provided that "standing
crops and the frits of trees not gathered and trees before the" are ct do%n are li+e%ise
immovable and are considered as part of the land to %hich the" are attached9" bt the
immovabilit" provided for is onl" one in abstracto and %ithot reference to rights on or to
the crop ac!ired b" other than the o%ners of the propert" to %hich the crop %as
attached. The immovabilit" of a gro%ing crop is in the order of things temporar", for the
crop passes from the state of a gro%ing to that of a gathered one, from an immovable to
a movable. The e#istence of a right on the gro%ing crop is a mobiliDation b" anticipation, a
gathering as it %ere in advance, rendering the crop movable quoad the right ac!ired
thereon. The provision of or Code is identical %ith the Napoleon Code B'3, and %e ma"
therefore obtain light b" an e#amination of the 0risprdence of France.
The rle above annonced, not onl" b" the +ribunal Supremo de !spa,a bt b" the 6preme
Cort of 8oisiana, is follo%ed in practicall" ever" state of the /nion.
From an e#amination of the reports and codes of the 6tate of California and other states %e find
that the settle doctrine follo%ed in said states in connection %ith the attachment of propert" and
e#ection of 0dgment is, that gro%ing crops raised b" "earl" labor and cltivation are
considered personal propert". ;E CorpD -ris, p. )(49 )4 Corps -ris, p. *4(9 '* Corps -ris,
p. *'(5 Faventas vs. Areen, B4 Cal., 'B,9 Norris vs. :atson, BB Am. &ec., )E)9 :hipple vs.
Foot, * Am. &ec., ,,'9 ) Ben0amin on 6ales, sec. )'E9 7cNenDie vs. 8ample", *) Ala., B'E9
Crine vs. Tifts and Co., EB Aa., E,,9 Aillitt vs. Tra#, '4 7inn., B'19 2reston vs. F"an, ,B 7ich.,
)4,9 Freeman on E#ection, vol. ), p. ,*19 &ra+e on Attachment, sec. ',(9 7echem on 6ales,
sec. '33 and 4E*.>
7r. 7echem sa"s that a valid sale ma" be made of a thing, %hich thogh not "et actall" in
e#istence, is reasonabl" certain to come into e#istence as the natral increment or sal incident
of something alread" in e#istence, and then belonging to the vendor, and then title %ill vest in
the b"er the moment the thing comes into e#istence. ;Emerson vs. Eropean Fail%a" Co., E4
7e., *149 Ctting vs. 2ac+ers E#change, ') Am. 6t. Fep., E*.> Things of this natre are said to
have a potential e#istence. A man ma" sell propert" of %hich he is potentiall" and not actall"
possessed. ?e ma" ma+e a valid sale of the %ine that a vine"ard is e#pected to prodce9 or the
gain a field ma" gro% in a given time9 or the mil+ a co% ma" "ield dring the coming "ear9 or
the %ool that shall thereafter gro% pon sheep9 or %hat ma" be ta+en at the ne#t cast of a
fisherman.s net9 or frits to gro%9 or "ong animals not "et in e#istence9 or the good %ill of a
trade and the li+e. The thing sold, ho%ever, mst be specific and identified. The" mst be also
o%ned at the time b" the vendor. ;?ll vs. ?ll, ,1 Conn., 'B3 <,3 Am. Fep., )EB=.>
$t is contended on the part of the appellee that paragraph ' of article **, of the Civil Code has
been modified b" section ,B3 of the Code of Civil 2rocedre as %ell as b" Act No. )B31, the
Chattel 7ortgage 8a%. 6aid section ,B3 enmerates the propert" of a 0dgment debtor %hich
ma" be sb0ected to e#ection. The pertinent portion of said section reads as follo%s5 "All goods,
chattels, mone"s, and other propert", both real and personal, R R R shall be liable to e#ection.
6aid section ,B3 and most of the other sections of the Code of Civil 2rocedre relating to the
e#ection of 0dgment %ere ta+en from the Code of Civil 2rocedre of California. The 6preme
Cort of California, nder section E11 of the Code of Civil 2rocedre of that state ;2omero", p.
,',> has held, %ithot variation, that gro%ing crops %ere personal propert" and sb0ect to
e#ection.
Act No. )B31, the Chattel 7ortgage 8a%, fll" recogniDed that gro%ing crops are personal
propert". 6ection ' of said Act provides5 "All personal propert" shall be sb0ect to mortgage,
agreeabl" to the provisions of this Act, and a mortgage e#ected in prsance thereof shall be
termed a chattel mortgage." 6ection 4 in part provides5 "$f gro%ing crops be mortgaged the
mortgage ma" contain an agreement stiplating that the mortgagor binds himself properl" to
tend, care for and protect the crop %hile gro%ing.
$t is clear from the foregoing provisions that Act No. )B31 %as enacted on the assmption that
"gro%ing crops" are personal propert". This consideration tends to spport the conclsion
hereinbefore stated, that paragraph ' of article **, of the Civil Code has been modified b"
section ,B3 of Act No. )(3 and b" Act No. )B31 in the sense that "ngathered prodcts" as
mentioned in said article of the Civil Code have the natre of personal propert". $n other %ords,
the phrase "personal propert"" shold be nderstood to inclde "ngathered prodcts."
At common la%, and generall" in the /nited 6tates, all annal crops %hich are raised b"
"earl" manrance and labor, and essentiall" o%e their annal e#istence to cltivation b"
man, . ma" be levied on as personal propert"." ;'* C. -., p. *'(.> @n this !estion
Freeman, in his treatise on the 8a% of E#ections, sa"s5 "Crops, %hether gro%ing or
standing in the field read" to be harvested, are, %hen prodced b" annal cltivation, no
part of the realt". The" are, therefore, liable to volntar" transfer as chattels. $t is e!all"
%ell settled that the" ma" be seiDed and sold nder e#ection. ;Freeman on E#ections,
vol. p. ,*1.>
:e ma", therefore, conclde that paragraph ' of article **, of the Civil Code has been modified
b" section ,B3 of the Code of Civil 2rocedre and b" Act No. )B31, in the sense that, for the
prpose of attachment and e#ection, and for the prposes of the Chattel 7ortgage 8a%,
"ngathered prodcts" have the natre of personal propert". The lo%er cort, therefore,
committed no error in holding that the sgar cane in !estion %as personal propert" and, as
sch, %as not sb0ect to redemption.
All the other assignments of error made b" the appellant, as above stated, relate to !estions of
fact onl". Before entering pon a discssion of said assignments of error, %e deem it opportne
to ta+e special notice of the failre of the plaintiff to appear at the trial dring the presentation
of evidence b" the defendant. ?is absence from the trial and his failre to cross-e#amine the
defendant have lent considerable %eight to the evidence then presented for the defense.
Coming not to the o%nership of parcels ) and ' described in the first case of action of the
complaint, the plaintiff made a ftile attempt to sho% that said t%o parcels belonged to Agstin
C"gan and %ere the identical parcel ' %hich %as e#clded from the attachment and sale of
real propert" of 6ibal to CaldeD on -ne 'B, )(',, as stated above. A comparison of the
description of parcel ' in the certificate of sale b" the sheriff ;E#hibit A> and the description of
parcels ) and ' of the complaint %ill readil" sho% that the" are not the same.
@n the other hand the evidence for the defendant prported to sho% that parcels ) and ' of the
complaint %ere inclded among the parcels boght b" CaldeD from 7acondra" on -ne 'B, )(',,
and corresponded to parcel , in the deed of sale ;E#hibit B and '>, and %ere also inclded
among the parcels boght b" CaldeD at the action of the real propert" of 8eon 6ibal on -ne 'B,
)(',, and corresponded to parcel * in the certificate of sale made b" the sheriff ;E#hibit A>. The
description of parcel , ;E#hibit '> and parcel * ;E#hibit A> is as follo%s5
As %ill be noticed, there is hardl" an" relation bet%een parcels ) and ' of the complaint and
parcel , ;E#hibit ' and B> and parcel * ;E#hibit A>. Bt, inasmch as the plaintiff did not care to
appear at the trial %hen the defendant offered his evidence, %e are inclined to give more %eight
to the evidence addced b" him that to the evidence addced b" the plaintiff, %ith respect to the
o%nership of parcels ) and ' of the compliant. :e, therefore, conclde that parcels ) and ' of
the complaint belong to the defendant, having ac!ired the same from 7acondra" J Co. on -ne
'B, )(',, and from the plaintiff 8eon 6ibal on the same date.
$t appears, ho%ever, that the plaintiff planted the pala" in said parcels and harvested therefrom
)(3 cavans. There being no evidence of bad faith on his part, he is therefore entitled to one-half
of the crop, or (B cavans. ?e shold therefore be condemned to pa" to the defendant for (B
cavans onl", at 2*.,3 a cavan, or the sm of 2*'*, and not for the total of )(3 cavans as held
b" the lo%er cort.
As to the o%nership of parcel 4 of the complaint, the evidence sho%s that said parcel
corresponds to parcel ) of the deed of sale of 7acondra" J Co, to CaldeD ;E#hibit B and '>, and
to parcel , in the certificate of sale to CaldeD of real propert" belonging to 6ibal, e#ected b" the
sheriff as above stated ;E#hibit A>. CaldeD is therefore the absolte o%ner of said parcel, having
ac!ired the interest of both 7acondra" and 6ibal in said parcel.
:ith reference to the parcel of land in 2acalcal, Tarlac, described in paragraph * of the second
case of action, it appears from the testimon" of the plaintiff himself that said parcel
corresponds to parcel 1 of the deed of sale of 7acondra" to CaldeD ;E#hibit B and '> and to
parcel )3 in the deed of sale e#ected b" the sheriff in favor of CaldeD ;E#hibit A>. CaldeD is
therefore the absolte o%ner of said parcel, having ac!ired the interest of both 7acondra" and
6ibal therein.
$n this connection the follo%ing facts are %orth" of mention5
E#ection in favor of 7acondra" J Co., 7a" )), )('*. Eight parcels of land %ere attached nder
said e#ection. 6aid parcels of land %ere sold to 7acondra" J Co. on the *3th da" of -l", )('*.
Fice paid 2,,'4*.(*. @n 6eptember ',, )('*, 8eon 6ibal paid to 7acondra" J Co. 2',333 on the
redemption of said parcels of land. ;6ee E#hibits B and C >.
Attachment, April '(, )(',, in favor of CaldeD. 2ersonal propert" of 6ibal %as attached, inclding
the sgar cane in !estion. ;E#hibit A> The said personal propert" so attached, sold at pblic
action 7a" ( and )3, )(',. April '(, )(',, the real propert" %as attached nder the e#ection
in favor of CaldeD ;E#hibit A>. -ne 'B, )(',, said real propert" %as sold and prchased b"
CaldeD ;E#hibit A>.
-ne 'B, )(',, 7acondra" J Co. sold all of the land %hich the" had prchased at pblic action
on the *3th da" of -l", )('*, to CaldeD.
As to the loss of the defendant in sgar cane b" reason of the in0nction, the evidence sho%s
that the sgar cane in !estion covered an area of '' hectares and E3 ares ;E#hibits 1, 1-b and
1-c>9 that said area %old have "ielded an average crop of )3*( picos and E3 cates9 that one-
half of the !antit", or B)( picos and 13 cates %old have corresponded to the defendant, as
o%ner9 that dring the season the sgar %as selling at 2)* a pico ;E#hibit B and B-A>. Therefore,
the defendant, as o%ner, %old have netted 2 E,4B4.,3 from the sgar cane in !estion. The
evidence also sho%s that the defendant cold have ta+en from the sgar cane ),3)4,333 sgar-
cane shoots ;pntas de cana> and not ),)43,333 as compted b" the lo%er cort. &ring the
season the shoots %ere selling at 2).'3 a thosand ;E#hibits E and 4>. The defendant therefore
%old have netted 2),''3.,3 from sgar-cane shoots and not 2),,*B.E1 as allo%ed b" the lo%er
cort.
As to the pala" harvested b" the plaintiff in parcels ) and ' of the complaint, amonting to )(3
cavans, one-half of said !antit" shold belong to the plaintiff, as stated above, and the other
half to the defendant. The cort erred in a%arding the %hole crop to the defendant. The plaintiff
shold therefore pa" the defendant for (B cavans onl", at 2*.,3 a cavan, or 2*'* instead of
2E,E as allo%ed b" the lo%er cort.
The evidence also sho%s that the defendant %as prevented b" the acts of the plaintiff from
cltivating abot )3 hectares of the land involved in the litigation. ?e e#pected to have raised
abot E33 cavans of pala", *33 cavans of %hich %old have corresponded to him as o%ner. The
lo%er cort has %isel" redced his share to )B3 cavans onl". At 2, a cavan, the pala" %old
have netted him 2E33.
$n vie% of the foregoing, the 0dgment appealed from is hereb" modified. The plaintiff and his
sreties Cenon de la CrD, -an 6angalang and 7arcos 6ibal are hereb" ordered to pa" to the
defendant 0ointl" and severall" the sm of 21,(33.13, instead of 2(,,*(.31 allo%ed b" the lo%er
cort, as follo%s5
2E,4B4.,3 for the sgar cane9
),''3.,3 for the sgar cane shoots9
*'*.33 for the pala" harvested b" plaintiff in parcels ) and '9
E33.33 for the pala" %hich defendant cold have raised.
1,(33.13
PPPPPPPPPPPP
$n all other respects, the 0dgment appealed from is hereb" affirmed, %ith costs. 6o ordered.
F$F6T &$C$6$@N
G.R. No. 1+))98 O71ober +, +))1
RU4Y L. TSA!, petitioner,
vs.
ON. COURT OF A""EALS, E.ER TE/T!LE M!LLS, !NC. a#$ MAMERTO R .!LLALU-,
respondents.
G.R. No. 1+)1)9 O71ober +, +))1
"!L!""!NE 4ANK OF COMMUN!CAT!ONS, petitioner,
vs.
ON. COURT OF A""EALS, E.ER TE/T!LE M!LLS a#$ MAMERTO R .!LLALU-,
respondents.
,U!SUM4!NG, J.'
These consolidated cases assail the decision of the Cort of Appeals in CA-A.F. CC No. *'(1E,
affirming the decision of the Fegional Trial Cort of 7anila, Branch 4, in Civil Case No. 1(-,1'EB.
Also assailed is respondent cort.s resoltion den"ing petitioners. motion for reconsideration.
@n November 'E, )(4B, respondent Ever Te#tile 7ills, $nc. ;ECEFTES> obtained a three million
peso ;2*,333,333.33> loan from petitioner 2hilippine Ban+ of Commnications ;2BCom>. As
secrit" for the loan, ECEFTES e#ected in favor of 2BCom, a deed of Feal and Chattel 7ortgage
over the lot nder TCT No. *4'3(4, %here its factor" stands, and the chattels located therein as
enmerated in a schedle attached to the mortgage contract. The pertinent portions of the Feal
and Chattel 7ortgage are !oted belo%5
7@FTAAAE
;FEA8 AN& C?ATTE8>
### ### ###
The 7@FTAAA@F;6> hereb" transfer;s> and conve";s>, b" %a" of First 7ortgage, to the
7@FTAAAEE, . . . certain parcel;s> of land, together %ith all the bildings and
improvements no% e#isting or %hich ma" hereafter e#ist thereon, sitated in . . .
"Anne# A"
;Feal and Chattel 7ortgage e#ected b" Ever Te#tile 7ills in favor of 2BCommnications G
contined>
8$6T @F 7AC?$NEF$E6 J EM/$27ENT
A. Fort" Eight ;,1> nits of Ca"ro% Nnitting 7achines-Tomp+ins made in ?ong+ong5
6erial Nmbers 6iDe of 7achines
### ### ###
B. 6i#teen ;)E> sets of Ca"ro% Nnitting 7achines made in Tai%an.
### ### ###
C. T%o ;'> Circlar Nnitting 7achines made in :est Aerman".
### ### ###
&. For ;,> :inding 7achines.
### ### ###
6C?E&/8E "A"
$. TCT T *4'3(4 - F$HA8
### ### ###
$$. An" and all bildings and improvements no% e#isting or hereafter to e#ist on the
above-mentioned lot.
$$$. 7AC?$NEF$E6 J EM/$27ENT sitated, located andLor installed on the above-
mentioned lot located at . . .
;a> Fort" eight sets ;,1> Ca"ro% Nnitting 7achines . . .
;b> 6i#teen sets ;)E> Ca"ro% Nnitting 7achines . . .
;c> T%o ;'> Circlar Nnitting 7achines . . .
;d> T%o ;'> :inding 7achines . . .
;e> T%o ;'> :inding 7achines . . .
$C. An" and all replacements, sbstittions, additions, increases and accretions to above
properties.
### ### ###
@n April '*, )(4(, 2BCom granted a second loan of 2*,*BE,333.33 to ECEFTES. The loan %as
secred b" a Chattel 7ortgage over personal properties enmerated in a list attached thereto.
These listed properties %ere similar to those listed in Anne# A of the first mortgage deed.
After April '*, )(4(, the date of the e#ection of the second mortgage mentioned above,
ECEFTES prchased varios machines and e!ipments.
@n November )(, )(1', de to bsiness reverses, ECEFTES filed insolvenc" proceedings
doc+eted as 62 2roc. No. 82-*3()-2 before the defnct Cort of First $nstance of 2asa" Cit",
Branch SSC$$$. The CF$ issed an order on November ',, )(1' declaring the corporation
insolvent. All its assets %ere ta+en into the cstod" of the $nsolvenc" Cort, inclding the
collateral, real and personal, secring the t%o mortgages as abovementioned.
$n the meantime, pon ECEFTES.s failre to meet its obligation to 2BCom, the latter commenced
e#tra0dicial foreclosre proceedings against ECEFTES nder Act *)*B, other%ise +no%n as "An
Act to Feglate the 6ale of 2ropert" nder 6pecial 2o%ers $nserted in or Anne#ed to Feal Estate
7ortgages" and Act )B3E or "The Chattel 7ortgage 8a%". A Notice of 6heriff.s 6ale %as issed
on &ecember ), )(1'.
@n &ecember )B, )(1', the first pblic action %as held %here petitioner 2BCom emerged as
the highest bidder and a Certificate of 6ale %as issed in its favor on the same date. @n
&ecember '*, )(1', another pblic action %as held and again, 2BCom %as the highest bidder.
The sheriff issed a Certificate of 6ale on the same da".
@n 7arch 4, )(1,, 2BCom consolidated its o%nership over the lot and all the properties in it. $n
November )(1E, it leased the entire factor" premises to petitioner Fb" 8. Tsai for 2B3,333.33 a
month. @n 7a" *, )(11, 2BCom sold the factor", loc+, stoc+ and barrel to Tsai for
2(,333,333.33, inclding the contested machineries.
@n 7arch )E, )(1(, ECEFTES filed a complaint for annlment of sale, reconve"ance, and
damages %ith the Fegional Trial Cort against 2BCom, alleging inter alia that the e#tra0dicial
foreclosre of sb0ect mortgage %as in violation of the $nsolvenc" 8a%. ECEFTES claimed that no
rights having been transmitted to 2BCom over the assets of insolvent ECEFTES, therefore Tsai
ac!ired no rights over sch assets sold to her, and shold reconve" the assets.
Frther, ECEFTES averred that 2BCom, %ithot an" legal or factal basis, appropriated the
contested properties, %hich %ere not inclded in the Feal and Chattel 7ortgage of November 'E,
)(4B nor in the Chattel 7ortgage of April '*, )(4(, and neither %ere those properties inclded
in the Notice of 6heriff.s 6ale dated &ecember ), )(1' and Certificate of 6ale . . . dated
&ecember )B, )(1'.
The dispted properties, %hich %ere valed at 2,,333,333.33, are5 ), $nterloc+ Circlar Nnitting
7achines, ) -et &r"ing E!ipment, ) &r"er E!ipment, ) Faisin E!ipment and ) ?eatset
E!ipment.
The FTC fond that the lease and sale of said personal properties %ere irreglar and illegal
becase the" %ere not dl" foreclosed nor sold at the &ecember )B, )(1' action sale since
these %ere not inclded in the schedles attached to the mortgage contracts. The trial cort
decreed5
:?EFEF@FE, 0dgment is hereb" rendered in favor of plaintiff corporation and against the
defendants5
). @rdering the annlment of the sale e#ected b" defendant 2hilippine Ban+ of
Commnications in favor of defendant Fb" 8. Tsai on 7a" *, )(11 insofar as it affects the
personal properties listed in par. ( of the complaint, and their retrn to the plaintiff
corporation throgh its assignee, plaintiff 7amerto F. CillalD, for disposition b" the
$nsolvenc" Cort, to be done %ithin ten ;)3> da"s from finalit" of this decision9
'. @rdering the defendants to pa" 0ointl" and severall" the plaintiff corporation the sm of
2B,'33,333.33 as compensation for the se and possession of the properties in !estion
from November )(1E to Febrar" )(() and 2)33,333.33 ever" month thereafter, %ith
interest thereon at the legal rate per annm ntil fll pa"ment9
*. @rdering the defendants to pa" 0ointl" and severall" the plaintiff corporation the sm of
2B3,333.33 as and for attorne".s fees and e#penses of litigation9
,. @rdering the defendants to pa" 0ointl" and severall" the plaintiff corporation the sm of
2'33,333.33 b" %a" of e#emplar" damages9
B. @rdering the dismissal of the conterclaim of the defendants9 and
E. @rdering the defendants to proportionatel" pa" the costs of sit.
6@ @F&EFE&.
&issatisfied, both 2BCom and Tsai appealed to the Cort of Appeals, %hich issed its decision
dated Agst *), )((,, the dispositive portion of %hich reads5
:?EFEF@FE, e#cept for the deletion therefrom of the a%ard9 for e#emplar" damages, and
redction of the actal damages, from 2)33,333.33 to 2'3,333.33 per month, from November
)(1E ntil sb0ect personal properties are restored to appellees, the 0dgment appealed from is
hereb" AFF$F7E&, in all other respects. No prononcement as to costs.
7otion for reconsideration of the above decision having been denied in the resoltion of April '1,
)((B, 2BCom and Tsai filed their separate petitions for revie% %ith this Cort.
$n A.F No. )'33(1, petitioner Tsai ascribed the follo%ing errors to the respondent cort5
$
T?E ?@N@FAB8E C@/FT @F A22EA86 ;6EC@N& &$C$6$@N> EFFE& $N EFFECT 7AN$NA A
C@NTFACT F@F T?E 2AFT$E6 BI TFEAT$NA T?E )(1) ACM/$FE& 7AC?$NEF$E6 A6
C?ATTE86 $N6TEA& @F FEA8 2F@2EFT$E6 :$T?$N T?E$F EAF8$EF )(4B &EE& @F FEA8
AN& C?ATTE8 7@FTAAAE @F )(4( &EE& @F C?ATTE8 7@FTAAAE.
$$
T?E ?@N@FAB8E C@/FT @F A22EA86 ;6EC@N& &$C$6$@N> EFFE& $N ?@8&$NA T?AT T?E
&$62/TE& )(1) 7AC?$NEF$E6 AFE N@T FEA8 2F@2EFT$E6 &EE7E& 2AFT @F T?E
7@FTAAAE G &E62$TE T?E C8EAF $72@FT @F T?E EC$&ENCE AN& A228$CAB8E F/8$NA6
@F T?E 6/2FE7E C@/FT.
$$$
T?E ?@N@FAB8E C@/FT @F A22EA86 ;6EC@N& &$C$6$@N> EFFE& $N &EE7$NA
2ET$T$@NEF A 2/FC?A6EF $N BA& FA$T?.
$C
T?E ?@N@FAB8E C@/FT @F A22EA86 ;6EC@N& &$C$6$@N> EFFE& $N A66E66$NA
2ET$T$@NEF ACT/A8 &A7AAE6, ATT@FNEI.6 FEE6 AN& ES2EN6E6 @F 8$T$AAT$@N G F@F
:ANT @F CA8$& FACT/A8 AN& 8EAA8 BA6$6.
C
T?E ?@N@FAB8E C@/FT @F A22EA86 ;6EC@N& &$C$6$@N> EFFE& $N ?@8&$NA AAA$N6T
2ET$T$@NEF.6 AFA/7ENT6 @N 2FE6CF$2T$@N AN& 8AC?E6.
$n A.F. No. )'33(1, 2BCom raised the follo%ing isses5
$.
&$& T?E C@/FT @F A22EA86 CA8$&8I &ECFEE T?E 7AC?$NEF$E6 8$6TE& /N&EF 2AFAAFA2? (
@F T?E C@728A$NT BE8@: A6 2EF6@NA8 2F@2EFTI @/T6$&E @F T?E )(4B &EE& @F FEA8
E6TATE 7@FTAAAE AN& ESC8/&E& T?E7 FF@7 T?E FEA8 2F@2EFTI ESTFA-/&$C$A88I
F@FEC8@6E& BI 2BC@7 &E62$TE T?E 2F@C$6$@N $N T?E )(4B &EE& T?AT A88 AFTEF-
ACM/$FE& 2F@2EFT$E6 &/F$NA T?E 8$FET$7E @F T?E 7@FTAAAE 6?A88 F@F7 2AFT
T?EFE@F, AN& &E62$TE T?E /N&$62/TE& FACT T?AT 6A$& 7AC?$NEF$E6 AFE B$A AN& ?EACI,
B@8TE& @F CE7ENTE& @N T?E FEA8 2F@2EFTI 7@FTAAAE& BI ECEF TEST$8E 7$886 T@
2BC@7, AN& :EFE A66E66E& F@F FEA8 E6TATE TAS 2/F2@6E6U
$$
CAN 2BC@7, :?@ T@@N 2@66E66$@N @F T?E 7AC?$NEF$E6 $N M/E6T$@N $N A@@& FA$T?,
ESTEN&E& CFE&$T FAC$8$T$E6 T@ ECEF TEST$8E 7$886 :?$C? A6 @F )(1' T@TA88E&
2(,B,4,3(B.'1, :?@ ?A& 62ENT F@F 7A$NTENANCE AN& 6EC/F$TI @N T?E &$62/TE&
7AC?$NEF$E6 AN& ?A& T@ 2AI A88 T?E BACN TASE6 @F ECEF TEST$8E 7$886 BE 8EAA88I
C@72E88E& T@ FET/FN T@ ECEF T?E 6A$& 7AC?$NEF$E6 @F $N 8$E/ T?EFE@F BE A66E66E&
&A7AAE6. $6 T?AT 6$T/AT$@N TANTA7@/NT T@ A CA6E @F /N-/6T ENF$C?7ENTU
The principal isse, in or vie%, is %hether or not the inclsion of the !estioned properties in
the foreclosed properties is proper. The secondar" isse is %hether or not the sale of these
properties to petitioner Fb" Tsai is valid.
For her part, Tsai avers that the Cort of Appeals in effect made a contract for the parties b"
treating the )(1) ac!ired nits of machiner" as chattels instead of real properties %ithin their
earlier )(4B deed of Feal and Chattel 7ortgage or )(4( deed of Chattel 7ortgage. Additionall",
Tsai arges that respondent cort erred in holding that the dispted )(1) machineries are not
real properties. Finall", she contends that the Cort of Appeals erred in holding against
petitioner.s argments on prescription and laches and in assessing petitioner actal damages,
attorne".s fees and e#penses of litigation, for %ant of valid factal and legal basis.
Essentiall", 2BCom contends that respondent cort erred in affirming the lo%er cort.s 0dgment
decreeing that the pieces of machiner" in dispte %ere not dl" foreclosed and cold not be
legall" leased nor sold to Fb" Tsai. $t frther arged that the Cort of Appeals. prononcement
that the pieces of machiner" in !estion %ere personal properties have no factal and legal
basis. Finall", it asserts that the Cort of Appeals erred in assessing damages and attorne".s fees
against 2BCom.
$n opposition, private respondents arge that the controverted nits of machiner" are not "real
properties" bt chattels, and, therefore, the" %ere not part of the foreclosed real properties,
rendering the lease and the sbse!ent sale thereof to Tsai a nllit".
Considering the assigned errors and the argments of the parties, %e find the petitions devoid of
merit and oght to be denied.
:ell settled is the rle that the 0risdiction of the 6preme Cort in a petition for revie% on
certiorari nder Fle ,B of the Fevised Fles of Cort is limited to revie%ing onl" errors of la%,
not of fact, nless the factal findings complained of are devoid of spport b" the evidence on
record or the assailed 0dgment is based on misapprehension of facts. This rle is applied more
stringentl" %hen the findings of fact of the FTC is affirmed b" the Cort of Appeals.
The follo%ing are the facts as fond b" the FTC and affirmed b" the Cort of Appeals that are
decisive of the isses5 ;)> the "controverted machineries" are not covered b", or inclded in,
either of the t%o mortgages, the Feal Estate and Chattel 7ortgage, and the pre Chattel
7ortgage9 ;'> the said machineries %ere not inclded in the list of properties appended to the
Notice of 6ale, and neither %ere the" inclded in the 6heriff.s Notice of 6ale of the foreclosed
properties.
2etitioners contend that the natre of the dispted machineries, i.e., that the" %ere heav",
bolted or cemented on the real propert" mortgaged b" ECEFTES to 2BCom, ma+e them ipso
facto immovable nder Article ,)B ;*> and ;B> of the Ne% Civil Code. This assertion, ho%ever,
does not settle the isse. 7ere nts and bolts do not foreclose the controvers". :e have to loo+
at the parties. intent.
:hile it is tre that the controverted properties appear to be immobile, a persal of the contract
of Feal and Chattel 7ortgage e#ected b" the parties herein gives s a contrar" indication. $n
the case at bar, both the trial and the appellate corts reached the same finding that the tre
intention of 2BC@7 and the o%ner, ECEFTES, is to treat machiner" and e!ipment as chattels.
The pertinent portion of respondent appellate cort.s rling is !oted belo%5
As stressed pon b" appellees, appellant ban+ treated the machineries as chattels9 never
as real properties. $ndeed, the )(4B mortgage contract, %hich %as actall" real and
chattel mortgage, militates against appellants. postre. It should be noted that the
printed form used by appellant ban( was mainly for real estate mortgages. -ut reflective
of the true intention of appellant *-C%M and appellee !/!+!0 was the typing in capital
letters# immediately following the printed caption of mortgage# of the phrase 1real and
chattel." 6o also, the "machineries and e!ipment" in the printed form of the ban+ had to
be inserted in the blan+ space of the printed contract and connected %ith the %ord
"bilding" b" t"pe%ritten slash mar+s. No%, then, if the machineries in !estion %ere
contemplated to be inclded in the real estate mortgage, there %old have been no
necessit" to in+ a chattel mortgage specificall" mentioning as part $$$ of 6chedle A a
listing of the machineries covered thereb". $t %old have sfficed to list them as
immovables in the &eed of Feal Estate 7ortgage of the land and bilding involved.
As regards the )(4( contract, the intention of the parties is clear and be"ond !estion. $t
refers solel" to chattels. The inventor" list of the mortgaged properties is an itemiDation of
si#t"-three ;E*> individall" described machineries %hile the schedle listed onl" machines
and ',((E,113.B3 %orth of finished cotton fabrics and natral cotton fabrics.
$n the absence of an" sho%ing that this conclsion is baseless, erroneos or ncorroborated b"
the evidence on record, %e find no compelling reason to depart therefrom.
Too, assming arguendo that the properties in !estion are immovable b" natre, nothing
detracts the parties from treating it as chattels to secre an obligation nder the principle of
estoppel. As far bac+ as 2avarro v. *ineda, ( 6CFA E*) ;)(E*>, an immovable ma" be
considered a personal propert" if there is a stiplation as %hen it is sed as secrit" in the
pa"ment of an obligation %here a chattel mortgage is e#ected over it, as in the case at bar.
$n the instant case, the parties herein5 ;)> e#ected a contract st"led as "Feal Estate 7ortgage
and Chattel 7ortgage," instead of 0st "Feal Estate 7ortgage" if indeed their intention is to treat
all properties inclded therein as immovable, and ;'> attached to the said contract a separate
"8$6T @F 7AC?$NEF$E6 J EM/$27ENT". These facts, ta+en together, evince the conclsion that
the parties. intention is to treat these nits of machiner" as chattels. A fortiori, the contested
after-ac!ired properties, %hich are of the same description as the nits enmerated nder the
title "8$6T @F 7AC?$NEF$E6 J EM/$27ENT," mst also be treated as chattels.
Accordingl", %e find no reversible error in the respondent appellate cort.s rling that inasmch
as the sb0ect mortgages %ere intended b" the parties to involve chattels, insofar as e!ipment
and machiner" %ere concerned, the Chattel 7ortgage 8a% applies, %hich provides in 6ection 4
thereof that5 "a chattel mortgage shall be deemed to cover only the property described therein
and not li(e or substituted property thereafter acquired by the mortgagor and placed in the
same depository as the property originally mortgaged, an"thing in the mortgage to the contrar"
not%ithstanding."
And, since the dispted machineries %ere ac!ired in )(1) and cold not have been involved in
the )(4B or )(4( chattel mortgages, it %as conse!entl" an error on the part of the 6heriff to
inclde sb0ect machineries %ith the properties enmerated in said chattel mortgages.
As the action sale of the sb0ect properties to 2BCom is void, no valid title passed in its favor.
Conse!entl", the sale thereof to Tsai is also a nllit" nder the elementar" principle of nemo
dat quod non habet, one cannot give %hat one does not have.
2etitioner Tsai also arged that assming that 2BCom.s title over the contested properties is a
nllit", she is nevertheless a prchaser in good faith and for vale %ho no% has a better right
than ECEFTES.
To the contrar", ho%ever, are the factal findings and conclsions of the trial cort that she is
not a prchaser in good faith. :ell-settled is the rle that the person %ho asserts the stats of a
prchaser in good faith and for vale has the brden of proving sch assertion.
)1
2etitioner Tsai
failed to discharge this brden persasivel".
7oreover, a prchaser in good faith and for vale is one %ho b"s the propert" of another
without notice that some other person has a right to or interest in such property and pa"s a fll
and fair price for the same, at the time of prchase, or before he has notice of the claims or
interest of some other person in the propert". Fecords reveal, ho%ever, that %hen Tsai
prchased the controverted properties, she +ne% of respondent.s claim thereon. As borne ot b"
the records, she received the letter of respondent.s consel, apprising her of respondent.s claim,
dated Febrar" '4, )(14. 6he replied thereto on 7arch (, )(14. &espite her +no%ledge of
respondent.s claim, she proceeded to b" the contested nits of machiner" on 7a" *, )(11.
Ths, the FTC did not err in finding that she %as not a prchaser in good faith.
2etitioner Tsai.s defense of indefeasibilit" of Torrens Title of the lot %here the dispted properties
are located is e!all" navailing. This defense refers to sale of lands and not to sale of properties
sitated therein. 8i+e%ise, the mere fact that the lot %here the factor" and the dispted
properties stand is in 2BCom.s name does not atomaticall" ma+e 2BCom the o%ner of
ever"thing fond therein, especiall" in vie% of ECEFTES.s letter to Tsai ennciating its claim.
Finall", petitioners. defense of prescription and laches is less than convincing. :e find no cogent
reason to distrb the consistent findings of both corts belo% that the case for the reconve"ance
of the dispted properties %as filed %ithin the reglementar" period. ?ere, in or vie%, the
doctrine of laches does not appl". Note that pon petitioners. adamant refsal to heed
ECEFTES.s claim, respondent compan" immediatel" filed an action to recover possession and
o%nership of the dispted properties. There is no evidence sho%ing an" failre or neglect on its
part, for an nreasonable and ne#plained length of time, to do that %hich, b" e#ercising de
diligence, cold or shold have been done earlier. The doctrine of stale demands %old appl"
onl" %here b" reason of the lapse of time, it %old be ine!itable to allo% a part" to enforce his
legal rights. 7oreover, e#cept for ver" strong reasons, this Cort is not disposed to appl" the
doctrine of laches to pre0dice or defeat the rights of an o%ner.
As to the a%ard of damages, the contested damages are the actal compensation, representing
rentals for the contested nits of machiner", the e#emplar" damages, and attorne".s fees.
As regards said actal compensation, the FTC a%arded 2)33,333.33 corresponding to the npaid
rentals of the contested properties based on the testimon" of -ohn Cha, %ho testified that the
2)33,333.33 %as based on the accepted practice in ban+ing and finance, bsiness and
investments that the rental price mst ta+e into accont the cost of mone" sed to b" them.
The Cort of Appeals did not give fll credence to Cha.s pro0ection and redced the a%ard to
2'3,333.33.
Basic is the rle that to recover actal damages, the amont of loss mst not onl" be capable of
proof bt mst actall" be proven %ith reasonable degree of certaint", premised pon
competent proof or best evidence obtainable of the actal amont thereof. ?o%ever, the
allegations of respondent compan" as to the amont of nrealiDed rentals de them as actal
damages remain mere assertions nspported b" docments and other competent evidence. $n
determining actal damages, the cort cannot rel" on mere assertions, speclations, con0ectres
or gess%or+ bt mst depend on competent proof and on the best evidence obtainable
regarding the actal amont of loss. ?o%ever, %e are not prepared to disregard the follo%ing
dispositions of the respondent appellate cort5
. . . $n the a%ard of actal damages nder scrtin", there is nothing on record %arranting
the said a%ard of 2B,'33,333.33, representing monthl" rental income of 2)33,333.33
from November )(1E to Febrar" )((), and the additional a%ard of 2)33,333.33 per
month thereafter.
As pointed ot b" appellants, the testimonial evidence, consisting of the testimonies of
-onh ;sic> Cha and 7amerto CillalD, is sh" of %hat is necessar" to sbstantiate the
actal damages allegedl" sstained b" appellees, b" %a" of nrealiDed rental income of
sb0ect machineries and e!ipments.
The testimon" of -ohn Ca ;sic> is nothing bt an opinion or pro0ection based on %hat is
claimed to be a practice in bsiness and indstr". Bt sch a testimon" cannot serve as
the sole basis for assessing the actal damages complained of. :hat is more, there is no
sho%ing that had appellant Tsai not ta+en possession of the machineries and e!ipments
in !estion, somebod" %as %illing and read" to rent the same for 2)33,333.33 a month.
### ### ###
Then, too, even assming arguendo that the said machineries and e!ipments cold have
generated a rental income of 2*3,333.33 a month, as pro0ected b" %itness 7amerto
CillalD, the same %old have been a gross income. Therefrom shold be dedcted or
removed, e#penses for maintenance and repairs . . . Therefore, in the determination of
the actal damages or nrealiDed rental income sed pon, there is a good basis to
calclate that at least for months in a "ear, the machineries in dispte %old have been
idle de to absence of a lessee or %hile being repaired. $n the light of the foregoing
rationaliDation and comptation, :e believe that a net nrealiDed rental income of
2'3,333.33 a month, since November )(1E, is more realistic and fair.
As to e#emplar" damages, the FTC a%arded 2'33,333.33 to ECEFTES %hich the Cort of
Appeals deleted. Bt according to the CA, there %as no clear sho%ing that petitioners acted
malevolentl", %antonl" and oppressivel". The evidence, ho%ever, sho%s other%ise. $t is a
re!isite to a%ard e#emplar" damages that the %rongfl act mst be accompanied b" bad faith,
and the gilt" acted in a %anton, fradlent, oppressive, rec+less or malevolent manner. As
previosl" stressed, petitioner Tsai.s act of prchasing the controverted properties despite her
+no%ledge of ECEFTES.s claim %as oppressive and sb0ected the alread" insolvent respondent to
gross disadvantage. 2etitioner 2BCom also received the same letters of Att". CillalD, responding
thereto on 7arch ',, )(14. Ths, 2BCom.s act of ta+ing all the properties fond in the factor" of
the financiall" handicapped respondent, inclding those properties not covered b" or inclded in
the mortgages, is e!all" oppressive and tainted %ith bad faith. Ths, %e are in agreement %ith
the FTC that an a%ard of e#emplar" damages is proper.
The amont of 2'33,333.33 for e#emplar" damages is, ho%ever, e#cessive. Article '')E of the
Civil Code provides that no proof of pecniar" loss is necessar" for the ad0dication of e#emplar"
damages, their assessment being left to the discretion of the cort in accordance %ith the
circmstances of each case. :hile the imposition of e#emplar" damages is 0stified in this case,
e!it" calls for its redction. $n Inhelder Corporation v. Court of &ppeals, A.F. No. 8-B'*B1, )''
6CFA B4E, B1B, ;7a" *3, )(1*>, %e laid do%n the rle that 0dicial discretion granted to the
corts in the assessment of damages mst al%a"s be e#ercised %ith balanced restraint and
measred ob0ectivit". Ths, here the a%ard of e#emplar" damages b" %a" of e#ample for the
pblic good shold be redced to 2)33,333.33.
B" the same to+en, attorne".s fees and other e#penses of litigation ma" be recovered %hen
e#emplar" damages are a%arded. $n or vie%, FTC.s a%ard of 2B3,333.33 as attorne".s fees and
e#penses of litigation is reasonable, given the circmstances in these cases.
:?EFEF@FE, the petitions are &EN$E&. The assailed decision and resoltion of the Cort of
Appeals in CA-A.F. CC No. *'(1E are AFF$F7E& :$T? 7@&$F$CAT$@N6. 2etitioners 2hilippine
Ban+ of Commnications and Fb" 8. Tsai are hereb" ordered to pa" 0ointl" and severall" Ever
Te#tile 7ills, $nc. the follo%ing5 ;)> 2'3,333.33 per month, as compensation for the se and
possession of the properties in !estion from November )(1E ntil sb0ect personal properties
are restored to respondent corporation9 ;'> 2)33,333.33 b" %a" of e#emplar" damages, and ;*>
2B3,333.33 as attorne".s fees and litigation e#penses. Costs against petitioners.
6@ @F&EFE&.
EN BANC
G.R. No. L->)>11 Au0u(1 *, 1925
3A.AO SA& M!LL CO., !NC., plaintiff-appellant,
vs.
A"RON!ANO G. CAST!LLO a#$ 3A.AO L!GT = "O&ER CO., !NC., defendants-appellees.
MALCOLM, J.:
The isse in this case, as annonced in the opening sentence of the decision in the trial cort
and as set forth b" consel for the parties on appeal, involves the determination of the natre of
the properties described in the complaint. The trial 0dge fond that those properties %ere
personal in natre, and as a conse!ence absolved the defendants from the complaint, %ith
costs against the plaintiff.
The &avao 6a% 7ill Co., $nc., is the holder of a lmber concession from the Aovernment of the
2hilippine $slands. $t has operated a sa%mill in the sitio of 7aa, barrio of Tigat, mnicipalit" of
&avao, 2rovince of &avao. ?o%ever, the land pon %hich the bsiness %as condcted belonged
to another person. @n the land the sa%mill compan" erected a bilding %hich hosed the
machiner" sed b" it. 6ome of the implements ths sed %ere clearl" personal propert", the
conflict concerning machines %hich %ere placed and monted on fondations of cement. $n the
contract of lease bet%een the sa%mill compan" and the o%ner of the land there appeared the
follo%ing provision5
That on the e#piration of the period agreed pon, all the improvements and bildings
introdced and erected b" the part" of the second part shall pass to the e#clsive
o%nership of the part" of the first part %ithot an" obligation on its part to pa" an"
amont for said improvements and bildings9 also, in the event the part" of the second
part shold leave or abandon the land leased before the time herein stiplated, the
improvements and bildings shall li+e%ise pass to the o%nership of the part" of the first
part as thogh the time agreed pon had e#pired5 2rovided, ho%ever, That the
machineries and accessories are not inclded in the improvements %hich %ill pass to the
part" of the first part on the e#piration or abandonment of the land leased.
$n another action, %herein the &avao 8ight J 2o%er Co., $nc., %as the plaintiff and the &avao,
6a%, 7ill Co., $nc., %as the defendant, a 0dgment %as rendered in favor of the plaintiff in that
action against the defendant in that action9 a %rit of e#ection issed thereon, and the
properties no% in !estion %ere levied pon as personalt" b" the sheriff. No third part" claim
%as filed for sch properties at the time of the sales thereof as is borne ot b" the record made
b" the plaintiff herein. $ndeed the bidder, %hich %as the plaintiff in that action, and the
defendant herein having consmmated the sale, proceeded to ta+e possession of the machiner"
and other properties described in the corresponding certificates of sale e#ected in its favor b"
the sheriff of &avao.
As connecting p %ith the facts, it shold frther be e#plained that the &avao 6a% 7ill Co., $nc.,
has on a nmber of occasions treated the machiner" as personal propert" b" e#ecting chattel
mortgages in favor of third persons. @ne of sch persons is the appellee b" assignment from the
original mortgages.
Article **,, paragraphs ) and B, of the Civil Code, is in point. According to the Code, real
propert" consists of G
). 8and, bildings, roads and constrctions of all +inds adhering to the soil9
# # # # # # # # #
B. 7achiner", li!id containers, instrments or implements intended b" the o%ner of an"
bilding or land for se in connection %ith an" indstr" or trade being carried on therein
and %hich are e#pressl" adapted to meet the re!irements of sch trade of indstr".
Appellant emphasiDes the first paragraph, and appellees the last mentioned paragraph. :e
entertain no dobt that the trial 0dge and appellees are right in their appreciation of the legal
doctrines flo%ing from the facts.
$n the first place, it mst again be pointed ot that the appellant shold have registered its
protest before or at the time of the sale of this propert". $t mst frther be pointed ot that
%hile not conclsive, the characteriDation of the propert" as chattels b" the appellant is
indicative of intention and impresses pon the propert" the character determined b" the parties.
$n this connection the decision of this cort in the case of 6tandard @il Co. of Ne% Ior+ vs.
-aramillo ;<)('*=, ,, 2hil., E*3>, %hether obiter dicta or not, frnishes the +e" to sch a
sitation.
$t is, ho%ever not necessar" to spend overl" mst time in the resoltion of this appeal on side
isses. $t is machiner" %hich is involved9 moreover, machiner" not intended b" the o%ner of an"
bilding or land for se in connection there%ith, bt intended b" a lessee for se in a bilding
erected on the land b" the latter to be retrned to the lessee on the e#piration or abandonment
of the lease.
A similar !estion arose in 2erto Fico, and on appeal being ta+en to the /nited 6tates 6preme
Cort, it %as held that machiner" %hich is movable in its natre onl" becomes immobiliDed %hen
placed in a plant b" the o%ner of the propert" or plant, bt not %hen so placed b" a tenant, a
sfrctar", or an" person having onl" a temporar" right, nless sch person acted as the
agent of the o%ner. $n the opinion %ritten b" Chief -stice :hite, %hose +no%ledge of the Civil
8a% is %ell +no%n, it %as in part said5
To determine this !estion involves fi#ing the natre and character of the propert" from
the point of vie% of the rights of Caldes and its natre and character from the point of
vie% of Nevers J Callaghan as a 0dgment creditor of the Altagracia Compan" and the
rights derived b" them from the e#ection levied on the machiner" placed b" the
corporation in the plant. Follo%ing the Code Napoleon, the 2orto Fican Code treats as
immovable ;real> propert", not onl" land and bildings, bt also attribtes immovabilit" in
some cases to propert" of a movable natre, that is, personal propert", becase of the
destination to %hich it is applied. "Things," sa"s section **, of the 2orto Fican Code,
"ma" be immovable either b" their o%n natre or b" their destination or the ob0ect to
%hich the" are applicable." Nmeros illstrations are given in the fifth sbdivision of
section **B, %hich is as follo%s5 "7achiner", vessels, instrments or implements intended
b" the o%ner of the tenements for the indstrial or %or+s that the" ma" carr" on in an"
bilding or pon an" land and %hich tend directl" to meet the needs of the said indstr"
or %or+s." ;See also Code Nap., articles B)E, B)1 et seq. to and inclsive of article B*,,
recapitlating the things %hich, thogh in themselves movable, ma" be immobiliDed.> 6o
far as the sb0ect-matter %ith %hich %e are dealing G machiner" placed in the plant G it
is plain, both nder the provisions of the 2orto Fican 8a% and of the Code Napoleon, that
machiner" %hich is movable in its natre onl" becomes immobiliDed %hen placed in a
plant b" the o%ner of the propert" or plant. 6ch reslt %old not be accomplished,
therefore, b" the placing of machiner" in a plant b" a tenant or a sfrctar" or an"
person having onl" a temporar" right. ;&emolombe, Tit. (, No. '3*9 Abr" et Fa, Tit. ',
p. )', 6ection )E,9 8arent, Tit. B, No. ,,49 and decisions !oted in FDier-?erman ed.
Code Napoleon nder articles B'' et seq.> The distinction rests, as pointed ot b"
&emolombe, pon the fact that one onl" having a temporar" right to the possession or
en0o"ment of propert" is not presmed b" the la% to have applied movable propert"
belonging to him so as to deprive him of it b" casing it b" an act of immobiliDation to
become the propert" of another. $t follo%s that abstractl" spea+ing the machiner" pt b"
the Altagracia Compan" in the plant belonging to 6ancheD did not lose its character of
movable propert" and become immovable b" destination. Bt in the concrete
immobiliDation too+ place becase of the e#press provisions of the lease nder %hich the
Altagracia held, since the lease in sbstance re!ired the ptting in of improved
machiner", deprived the tenant of an" right to charge against the lessor the cost sch
machiner", and it %as e#pressl" stiplated that the machiner" so pt in shold become a
part of the plant belonging to the o%ner %ithot compensation to the lessee. /nder sch
conditions the tenant in ptting in the machiner" %as acting bt as the agent of the o%ner
in compliance %ith the obligations resting pon him, and the immobiliDation of the
machiner" %hich reslted arose in legal effect from the act of the o%ner in giving b"
contract a permanent destination to the machiner".
# # # # # # # # #
The machiner" levied pon b" Nevers J Callaghan, that is, that %hich %as placed in the
plant b" the Altagracia Compan", being, as regards Nevers J Callaghan, movable
propert", it follo%s that the" had the right to lev" on it nder the e#ection pon the
0dgment in their favor, and the e#ercise of that right did not in a legal sense conflict %ith
the claim of Caldes, since as to him the propert" %as a part of the realt" %hich, as the
reslt of his obligations nder the lease, he cold not, for the prpose of collecting his
debt, proceed separatel" against. ;Caldes vs. Central Altagracia <)('=, ''B /.6., B1.>
Finding no reversible error in the record, the 0dgment appealed from %ill be affirmed, the costs
of this instance to be paid b" the appellant.
EN BANC
G.R. No. L-1*8*) Se;1e9ber +9, 196+
M!N3ANAO 4US COM"ANY, petitioner,
vs.
TE C!TY ASSESSOR = TREASURER a#$ 18e 4OAR3 OF TA/ A""EALS o6 Ca0aya# $e
Oro C51y, respondents.
LA4RA3OR, J.:
This is a petition for the revie% of the decision of the Cort of Ta# Appeals in C.T.A. Case No. 4)3
holding that the petitioner 7indanao Bs Compan" is liable to the pa"ment of the realt" ta# on
its maintenance and repair e!ipment herender referred to.
Fespondent Cit" Assessor of Caga"an de @ro Cit" assessed at 2,,,33 petitioner.s above-
mentioned e!ipment. 2etitioner appealed the assessment to the respondent Board of Ta#
Appeals on the grond that the same are not realt". The Board of Ta# Appeals of the Cit"
sstained the cit" assessor, so petitioner herein filed %ith the Cort of Ta# Appeals a petition for
the revie% of the assessment.
$n the Cort of Ta# Appeals the parties sbmitted the follo%ing stiplation of facts5
2etitioner and respondents, thr their respective consels agreed to the follo%ing
stiplation of facts5
). That petitioner is a pblic tilit" solel" engaged in transporting passengers and cargoes
b" motor trc+s, over its athoriDed lines in the $sland of 7indanao, collecting rates
approved b" the 2blic 6ervice Commission9
'. That petitioner has its main office and shop at Caga"an de @ro Cit". $t maintains
Branch @ffices andLor stations at $ligan Cit", 8anao9 2agadian, Hamboanga del 6r9 &avao
Cit" and Niba%e, B+idnon 2rovince9
*. That the machineries soght to be assessed b" the respondent as real properties are
the follo%ing5
;a> ?obart Electric :elder 7achine, appearing in the attached photograph, mar+ed
Anne# "A"9
;b> 6torm Boring 7achine, appearing in the attached photograph, mar+ed Anne#
"B"9
;c> 8athe machine %ith motor, appearing in the attached photograph, mar+ed
Anne# "C"9
;d> Blac+ and &ec+er Arinder, appearing in the attached photograph, mar+ed Anne#
"&"9
;e> 2E7C@ ?"dralic 2ress, appearing in the attached photograph, mar+ed Anne#
"E"9
;f> Batter" charger ;Tngar charge machine> appearing in the attached photograph,
mar+ed Anne# "F"9 and
;g> &-Engine :a+esha-7-Fel, appearing in the attached photograph, mar+ed
Anne# "A".
,. That these machineries are sitting on cement or %ooden platforms as ma" be seen in
the attached photographs %hich form part of this agreed stiplation of facts9
B. That petitioner is the o%ner of the land %here it maintains and operates a garage for its
T2/ motor trc+s9 a repair shop9 blac+smith and carpentr" shops, and %ith these
machineries %hich are placed therein, its T2/ trc+s are made9 bod" constrcted9 and
same are repaired in a condition to be serviceable in the T2/ land transportation bsiness
it operates9
E. That these machineries have never been or %ere never sed as indstrial e!ipments
to prodce finished prodcts for sale, nor to repair machineries, parts and the li+e offered
to the general pblic indiscriminatel" for bsiness or commercial prposes for %hich
petitioner has never engaged in, to date.
The Cort of Ta# Appeals having sstained the respondent cit" assessor.s rling, and having
denied a motion for reconsideration, petitioner broght the case to this Cort assigning the
follo%ing errors5
). The ?onorable Cort of Ta# Appeals erred in pholding respondents. contention that the
!estioned assessments are valid9 and that said tools, e!ipments or machineries are
immovable ta#able real properties.
'. The Ta# Cort erred in its interpretation of paragraph B of Article ,)B of the Ne% Civil
Code, and holding that prsant thereto the movable e!ipments are ta#able realties, b"
reason of their being intended or destined for se in an indstr".
*. The Cort of Ta# Appeals erred in den"ing petitioner.s contention that the respondent
Cit" Assessor.s po%er to assess and lev" real estate ta#es on machineries is frther
restricted b" section *), paragraph ;c> of Fepblic Act No. B')9 and
,. The Ta# Cort erred in den"ing petitioner.s motion for reconsideration.
Fespondents contend that said e!ipments, tho movable, are immobiliDed b" destination, in
accordance %ith paragraph B of Article ,)B of the Ne% Civil Code %hich provides5
Art. ,)B. G The follo%ing are immovable properties5
# # # # # # # # #
;B> 7achiner", receptacles, instrments or implements intended b" the o%ner of the
tenement for an indstr" or %or+s %hich ma" be carried on in a bilding or on a piece of
land, and which tend directly to meet the needs of the said industry or wor(s. ;Emphasis
ors.>
Note that the stiplation e#pressl" states that the e!ipment are placed on %ooden or cement
platforms. The" can be moved arond and abot in petitioner.s repair shop. $n the case of -. 3.
-er(en(otter vs. Cu 4njieng, E) 2hil. EE*, the 6preme Cort said5
Article *,, ;No% Art. ,)B>, paragraph ;B> of the Civil Code, gives the character of real
propert" to "machiner", li!id containers, instrments or implements intended b" the
o%ner of an" bilding or land for se in connection %ith an" indstr" or trade being
carried on therein and %hich are e"pressly adapted to meet the requirements of such
trade or industry."
$f the installation of the machiner" and e!ipment in !estion in the central of the
7abalacat 6gar Co., $nc., in lie of the other of less capacit" e#isting therein, for its
sgar and indstr", converted them into real propert" b" reason of their prpose, it
cannot be said that their incorporation there%ith %as not permanent in character becase,
as essential and principle elements of a sugar central# without them the sugar central
would be unable to function or carry on the industrial purpose for which it was
established. $nasmch as the central is permanent in character, the necessar" machiner"
and e!ipment installed for carr"ing on the sgar indstr" for %hich it has been
established mst necessaril" be permanent. ;Emphasis ors.>
6o that movable e!ipments to be immobiliDed in contemplation of the la% mst first be
"essential and principal elements" of an indstr" or %or+s %ithot %hich sch indstr" or %or+s
%old be "nable to fnction or carr" on the indstrial prpose for %hich it %as established." :e
ma" here distingish, therefore, those movable %hich become immobiliDed b" destination
becase the" are essential and principal elements in the indstr" for those %hich ma" not be so
considered immobiliDed becase the" are merely incidental, not essential and principal. Ths,
cash registers, t"pe%riters, etc., sall" fond and sed in hotels, restarants, theaters, etc. are
merel" incidentals and are not and shold not be considered immobiliDed b" destination, for
these bsinesses can contine or carr" on their fnctions %ithot these e!it" comments. Airline
companies se for+lifts, 0eep-%agons, pressre pmps, $B7 machines, etc. %hich are
incidentals, not essentials, and ths retain their movable natre. @n the other hand, machineries
of bre%eries sed in the manfactre of li!or and soft drin+s, thogh movable in natre, are
immobiliDed becase the" are essential to said indstries9 bt the deliver" trc+s and adding
machines %hich the" sall" o%n and se and are fond %ithin their indstrial componds are
merel" incidental and retain their movable natre.
6imilarl", the tools and e!ipments in !estion in this instant case are, b" their natre, not
essential and principle mnicipal elements of petitioner.s bsiness of transporting passengers
and cargoes b" motor trc+s. The" are merel" incidentals G ac!ired as movables and sed onl"
for e#pedienc" to facilitate andLor improve its service. Even %ithot sch tools and e!ipments,
its bsiness ma" be carried on, as petitioner has carried on, %ithot sch e!ipments, before
the %ar. The transportation bsiness cold be carried on %ithot the repair or service shop if its
rolling e!ipment is repaired or serviced in another shop belonging to another.
The la% that governs the determination of the !estion at isse is as follo%s5
Art. ,)B. The follo%ing are immovable propert"5
# # # # # # # # #
;B> 7achiner", receptacles, instrments or implements intended b" the o%ner of the
tenement for an indstr" or %or+s %hich ma" be carried on in a bilding or on a piece of
land, and %hich tend directl" to meet the needs of the said indstr" or %or+s9 ;Civil Code
of the 2hil.>
Aside from the element of essentialit" the above-!oted provision also re!ires that the indstr"
or %or+s be carried on in a building or on a piece of land. Ths in the case of -er(en(otter vs.
Cu 4njieng, supra, the "machiner", li!id containers, and instrments or implements" are fond
in a bilding constrcted on the land. A sa%mill %old also be installed in a bilding on land
more or less permanentl", and the sa%ing is condcted in the land or bilding.
Bt in the case at bar the e!ipments in !estion are destined onl" to repair or service the
transportation bsiness, which is not carried on in a building or permanently on a piece of land,
as demanded b" the la%. 6aid e!ipments ma" not, therefore, be deemed real propert".
Fesming %hat %e have set forth above, %e hold that the e!ipments in !estion are not
absoltel" essential to the petitioner.s transportation bsiness, and petitioner.s bsiness is not
carried on in a bilding, tenement or on a specified land, so said e!ipment ma" not be
considered real estate %ithin the meaning of Article ,)B ;c> of the Civil Code.
:?EFEF@FE, the decision sb0ect of the petition for revie% is hereb" set aside and the
e!ipment in !estion declared not sb0ect to assessment as real estate for the prposes of the
real estate ta#. :ithot costs.
6o ordered.
U.S. Su;re9e Cour1
.a:$e( ?. Ce#1ra: A:1a0ra75a, !#7., ++5 U.S. 58 @191+A
.a:$e( ?. Ce#1ra: A:1a0ra75a, !#7or;ora1e$
No(. 192, 196
Sub9511e$ Mar78 6, 191+
3e75$e$ May 12, 191+
++5 U.S. 58
&**!&LS '%M +3! 5IS+IC+ C%4+ %' +3!
42I+!5 S+&+!S '% *%+% IC%
Syllabus
The record in this case sho%s that the cort belo% did not err in bringing this case to a speed"
conclsion and avoiding the loss occasioned b" the litigation to all concerned.
A litigant cannot, after all parties have ac!iesced in the order setting the case for trial and the
cort has denied his re!est for continance, refse to proceed %ith the trial on the grond that
the time to plead has not e#pired, and %hen sch refsal to proceed is inconsistent %ith his prior
attitde in the case.
The granting of a continance is %ithin the sond discretion of the trial cort, and not sb0ect to
be revie%ed on appeal e#cept in cases of clear error and abse9 in this case, the record sho%s
that the refsal to contine on accont of absence of %itness %as not an abse, bt a 0st
e#ercise, of discretion.
/nder the circmstances of this case, and in vie% of the e#istence of an e!it" of redemption
nder prior transfers, held that a transfer of all the propert" of a corporation to one advancing
mone" to enable it to contine its bsiness %as not a conditional sale of the propert", bt a
contract creating secrit" for the mone" advanced, and, on li!idation of the assets, the
transferee stood merel" as a secred creditor
The mere form of an instrment transferring propert" of a debtor cannot e#clde the po%er of
creditors to in!ire into the realit" and sbstance of a contract nrecorded, althogh re!ired b"
la% to be recorded in order to be effective against third parties.
/nder the general la% of 2orto Fico, machiner" placed on propert" b" a tenant does not become
immobiliDed9 %hen, ho%ever, a tenant places it there prsant to contract that it shall belong to
the o%ner, it becomes immobiliDed as to that tenant and his assigns %ith notice, althogh it does
not become so as to creditors not having legal notice of the lease.
$n this case, held that the lien of the attachment of a creditor of the tenant on machiner" placed
b" the tenant on a sgar Central in 2orto Fico is sperior to the claim of the transferee of an
nrecorded lease, even thogh the lease re!ired the tenant to place the machiner" on the
propert".
B 2.F. )BB affirmed.
The facts are stated in the opinion.
7F. C?$EF -/6T$CE :?$TE delivered the opinion of the Cort.
These cases %ere consolidated belo%, tried together, a li+e statement of facts %as made
applicable to both, and the cort disposed of them in one opinion. :e shall do li+e%ise. 6tating
onl" things deemed to be essential as sho%n b" the pleadings and docments anne#ed to them
and the finding of facts made belo%, the case is this5 -oa!in 6ancheD o%ned in 2orto Fico a
tract of land of abot '' acres ;cerdas> on %hich %as a sgar hose containing a mill for
crshing cane and an evaporating apparats for manfactring the 0ice of the cane into sgar.
All of the machiner" %as anti!ated and of a limited capacit". The establishment %as +no%n as
the Central Altagracia, and 6ancheD, %hile not a cane gro%er, carried on the bsiness of a
central -- that is, of ac!iring cane gro%n b" others and manfactring it into sgar at his
factor". @n the eighteenth da" of -anar", )(3B, 6ancheD leased his land and plant to 6alvador
Castello for a period of ten "ears. The lease gave to the tenant ;Castello> the right to install in
the plant "sch machiner" as he ma" deem convenient, %hich said machiner" at the end of the
"ears mentioned ;the term of the lease> shall become the e#clsive propert"" of the lessor,
6ancheD. The tenant %as given one "ear in %hich to begin the %or+ of repairing and improving
the plant, and it %as provided that, "pon the e#piration of this term, if the necessar"
improvements shall not have been begn b" him ;Castello>, then this contract shall be nll and
void, and no case of action shall accre to an" of the contracting parties b" reason thereof."
Frther agreeing on the sb0ect of the improved machiner" %hich %as to be placed in the plant,
the contract provided5
"/pon the e#piration of the term agreed on nder this contract, an" improvement or
machiner" installed in the said central shall remain for the benefit of &on -oa!in
6ancheD, and &on 6alvador Castello shall have no right to claim an"thing for the
improvements made."
The rental %as ths provided for5
"After each crop, sch profits as ma" be prodced b" the Central Altagracia shall be distribted,
and t%ent"-five percent ;'BK> thereof shall be immediatel" paid to &on -oa!in 6ancheD as
e!ivalent for the rental of said central and of the t%ent"-t%o ;''> cerdas of land srronding
the same. The remaining sevent"-five percent ;4BK> shall belong to &on 6alvador Castello, %ho
ma" interest therein %homsoever he ma" %ish, either for the %hole or part thereof."
$t %as stiplated, ho%ever, that, in fi#ing the profits, no charge shold be made for repairs of
the e#isting machiner" or for ne% machiner" pt in, as the entire cost of these matters %as to
be borne b" the lessee, Castello. The lease provided, moreover, that, in case of the death of
6ancheD, the obligations of the contract shold be binding on his heirs, and in the case of the
death of Castello, his brother, Aerardo Castello, shold ta+e his place, "and be a contracting
part" if he so desired. @ther%ise, the plantation, in sch a condition at it ma" be at his death,
shall immediatel" pass into the possession of its o%ner, &on -oa!in 6ancheD."
$n -ne, )(3B, b" a spplementar" contract, the lease %as e#tended %ithot change of its terms
and conditions for an additional period of ten "ears, ma+ing the total term t%ent" "ears.
Althogh e#ected nder private signatre, this lease, conformabl" to the la%s of 2orto Fico,
%as prodced before a notar" and made athentic, and in sch form %as dl" registered on the
pblic records, as re!ired b" the 2orte Fican la%s.
@n the first da" of -l", )(3B, 6alvador and Aerardo Castello transferred all their rights ac!ired
nder the lease, as above stated, to Frederic+ 8. Corn%ell for "the corporation to be organiDed
nder the name of Central Altagracia, of %hich he is the trstee." This transfer bond the
corporation to all the obligations in favor of the original lessor, 6ancheD, provided that the
corporation shold isse to Castello a certain nmber of paid-p shares of its capital stoc+ and a
frther nmber of shares as the otpt of sgar from the plant increased as the reslt of its
enlarged capacit" conse!ent pon the improvement of the machiner" b" the corporation. The
lease frther provided for the emplo"ment of Castello as sperintendent at a salar", for a
sbstittion of Aerardo Castello, in the event of the absence or death of his brother 6alvador,
and, for this reason, it is to be assmed Aerardo made himself a part" to the transfer of the
lease. This transfer of the lease to the corporation %as never pt pon the pblic records. The
corporation %as organiDed nder the la%s of the 6tate of 7aine, and, nder the transfer, too+
charge of the plant. The season for grinding cane and the manfactre of sgar in 2orto Fico
sall" commences "abot the month of &ecember of each "ear, and terminates in the months
of 7a", -ne, or -l" of the "ear follo%ing, according to the amont of cane to be grond."
Central factories in 2orto Fico sall" "ma+e contracts %ith the people ;colonos> gro%ing cane,
so that gro%ers of cane %ill deliver the same to be grond, and sch contracts are sall" made
and entered into in the months of -ne, -l", and Agst."
$n other %ords, on the termination of one grinding season, in the months of -ne or -l", it is
sal in the ensing Agst to ma+e ne% contracts for the cane to be delivered in the follo%ing
grinding season, %hich, as %e have said, commences in &ecember. The contract transferring the
lease to the Central Altagracia, $ncorporated, %as made in -l", )(3B, at the end, therefore, of
the grinding season of that "ear. To %hat e#tent the corporation contracted for cane to be
delivered to it for grinding dring the season of )(3B-3E, %hich began in &ecember, )(3B, does
not appear. $t is inferable, ho%ever, that the corporation began the %or+ of installing ne%
machiner" to give the plant a larger capacit" %ithin the "ear stiplated in the lease from
6ancheD to Castello. :e sa" this becase it is certain that, in the fall of )(3E ;@ctober>, the
corporation borro%ed from the commercial firm of Nevers J Callaghan in Ne% Ior+ Cit" the sm
of t%ent"-five thosand dollars ;V'B,333> to enable the corporation to pa" for ne% and enlarged
machiner" %hich it had ordered, and %hich %as placed in the factor" in time to be sed in the
grinding season of )(3E-34, %hich began in &ecember, )(3E. :hile sch grinding season %as
progressing, on April )), )(34, the corporation, throgh its president, nder the athorit" of its
board of directors, sold to one Famon Caldes all its rights ac!ired nder the lease transferred
b" Castello. This transfer e#pressl" inclded all the machiner" previosl" placed b" the
corporation in the sgar hose, as %ell as machiner" %hich might be thereafter installed dring
the term of redemption hereafter to be referred to, and %hich, it %as declared, conformabl" to
the original lease, "shall be a part of said factor" for the manfactre of sgar." The
consideration for the sale %as stated in the contract to be "thirt"-five thosand dollars ;V*B,333>
received b" the corporation, t%ent"-five thosand for hndred dollars ;V'B,,33> %hereof had
been paid prior to this act <of sale=, and to its entire satisfaction, and the balance of nine
thosand si# hndred dollars ;V(,E33> shall be trned over to the vendor corporation b" 6enor
Caldes immediatel" pon being re!ired to do so b" the former."
This sale %as made sb0ect to a right to redeem the propert" %ithin a "ear on pa"ing Caldes the
entire amont of his debt. There %as a stiplation that Caldes assmed all the obligations of the
lease transferred b" Castello to the compan".
The ndobted prpose %as not to interfere %ith the operation of the plant b" the corporation,
since there %as a provision in the contract binding Caldes to lease the propert" to the
corporation pending the period of redemption. This sale %as passed in 2orto Fico before a notar"
pblic, bt %as never pt pon the pblic records. At the time it %as made, there %as a ver"
considerable sm npaid on the debt of Nevers J Callaghan. This fact, 0oined %ith the period
%hen the sale %ith the right to redeem %as made -- that is, the approaching end of the sgar-
ma+ing season of )(3E and )(34 -- copled %ith other facts to %hich %e shall hereafter ma+e
reference, all tend to establish that, at that time, either becase insfficient capital had been pt
into the ventre or becase the bsiness had been carried on at a loss, the affairs of the
corporation %ere embarrassed, if it %as not insolvent. A short %hile before the commencement
of the grinding season of )(34-)(31 in @ctober, )(34, in the Cit" of Ne% Ior+, the corporation,
throgh its president, declaring himself to be athoriDed b" the board of directors, sanctioned b"
a vote of the stoc+holders, apparentl" made an absolte sale of all the rights of the corporation
nder the lease, and all its title to the machiner" %hich the corporation had pt into the plant.
This sale %as declared to be for a consideration of si#t"-five thosand ;VEB,333> dollars %hich
the compan" ac+no%ledged to have received from Caldes, first, b" the pa"ment of the thirt"-five
;V*B,333> dollars cash, as stated in the previos sale made sb0ect to the e!it" of redemption,
and thirt" thosand ;V*3,333> dollars %hich "the compan" has received after%ards in cash from
Caldes." There %as a provision in the contract to the effect that, as the prpose of the previos
contract of sale, %hich had been made sb0ect to the e!it" of redemption, %as accomplished b"
the ne% sale, the previos sale %as declared to be no longer operative.
A fe% da"s after%ards, li+e%ise in the Cit" of Ne% Ior+ ;on November ', )(34>, Caldes sold to
the compan" all the rights %hich he had ac!ired from it b" the previos sale, the price being
si#t"-five thosand ;VEB,333> dollars, pa"able in installments falling de in the "ears )(31,
)(3(, )()3, and )()), respectivel". This transfer %as pt in the form of a conditional sale %hich
reserved the title in Caldes ntil the pa"ment of the deferred price, and pon the stiplation that
an" defalt b" the corporation entitled Caldes ipso facto to ta+e possession of the propert".
Neither this act of sale from Caldes to the corporation nor the one made b" the corporation to
Caldes %ere ever pt pon the pblic records.
2rior to the ma+ing of the sales 0st stated, or abot that time, the corporation defalted in the
pa"ment of a note held b" Nevers J Callaghan for a portion of the mone" %hich the" had loaned
the corporation nder the circmstances %hich %e have previosl" stated, and that firm sed in
the cort belo% the corporation to recover the debt.
The grinding season of )(34-)(31 commenced in &ecember, )(34, and %as obviosl" not a
sccessfl one, for the debt of Nevers J Callaghan %as not paid, and in 7a", )(31, a 0dgment
%as recovered b" them against the corporation for abot V)4,333, %ith interest, and in the
same month e#ection %as issed and levied pon the machiner" in the sgar hose. 2revios
to, or not long sbse!ent to, the time Nevers J Callaghan commenced their sit, the precise
date not being stated in the record, the heirs of 6ancheD, the original lessor, broght a sit in
the cort belo% against the corporation. The natre of the sit and the relief soght is not
disclosed, bt it is inferable from the facts stated that the sit either soght to recover the
propert" on the grond that there %as no po%er in Castello to transfer the lease or pon the
grond of defalt in the conditions as to pa"ment of profits as rental %hich the lease stiplated.
$t %old seem also, at abot the same time, either one or both of the Castellos broght a sit
against the compan", presmabl" pon the theor" that there had been a defalt in the
obligations assmed in their favor b" the corporation at the time it too+ the transfer of the lease.
$n the mean%hile also, probabl" as the reslt of the %ant of sccess of the corporation, discord
arose bet%een its stoc+holders, and a sit gro%ing ot of that state of things %as broght in the
lo%er cort.
This litigation %as commenced in -ne, )(31, b" the bringing b" Caldes of an action at la% in the
cort belo% to recover the plant on the grond that, b" the defalt in pa"ing one of the
installments of the price stated in the conditional sale, the right to the relief pra"ed had arisen.
@n the same da", Caldes commenced a sit in e!it" against the corporation in aid of the sit at
la%. The bill alleged the defalt of the corporation, the bringing of the sit at la%, the confsion
in the affairs of the corporation, the 0dgment and lev" of the e#ection b" Nevers and
Callaghan, and the threat to sell the machiner" nder sch e#ection, the refsal of the
corporation to deliver possession of the propert", the %aste and destrction of the vale of the
propert" %hich %old reslt if there %as no one representing the corporation having po%er to
contract for cane to be delivered dring the ne#t grinding season, etc., etc. The pra"er %as for
the appointment of a receiver to ta+e charge of the propert", %ith athorit" to carr" on the
same, ma+e the necessar" contracts for cane for the ftre, it being pra"ed that the receiver
shold be empo%ered to isse receiver.s certificates to the e#tent necessar" to the
accomplishment of the prposes %hich the bill had in vie%.
@n the same da", a bill %as filed on behalf of the corporation against Caldes. This bill attac+ed
the sale made to Caldes and b" him to the corporation. $t %as charged that the price stated to
have been paid b" Caldes as a consideration of the conditional sale %as fictitios, and that the
onl" sm he had advanced at that time %as the V*B,333 %hich it %as the prpose to secre b"
means of the sale %ith the e!it" of redemption. That, at that time, Caldes e#acted as a
consideration for his loan that he be made a director and vice-president of the compan". The bill
then stated that, it having become evident in the follo%ing atmn that the corporation %old
re!ire more mone" to increase its plant, to pa" off the sm de Nevers J Callaghan, and for
the operation of the plant, Caldes agreed to advance the mone" if he %ere made president of the
compan" at a stiplated salar", given a bons in the stoc+ of the compan", and pon the
condition that the papers be e#ected embod"ing the so-called sale of the compan" to Caldes
and the practicall" simltaneos conditional sale b" Caldes to the compan". The bill then alleged
that Caldes, having ths become the president of the compan", failed to carr" ot his agreement
to advance the mone", failed to provide for the debt of Nevers J Callaghan, mismanaged the
affairs of the propert" in man" alleged particlars, and did varios acts to the pre0dice of the
compan" and to his o%n %rongfl enrichment, %hich it is nnecessar" to recapitlate. The
necessit" of contracting for cane dring the contract season in order that the plant might
contine dring the ne#t operating season to be a going concern, and the %aste and loss %hich
%old other%ise be occasioned, %ere fll" alleged. Caldes and the firm of Nevers J Callaghan
and the individal members of that firm %ere made defendants. The pra"er %as for the
appointment of a receiver and %ith po%er to carr" on the bsiness of the central, %ith po%er, for
that prpose, to contract for cane for the coming season, %ith athorit" to isse receiver.s
certificates for the prpose of borro%ing the mone" %hich might be re!ired.
The 0dge, being abot to leave 2orto Fico for a brief period, declined to appoint a permanent
receiver, bt named a temporar" one to +eep the propert" together ntil a frther hearing cold
be had, interference in the mean%hile %ith the cstodian being en0oined. 6hortl" thereafter,
creditors of the corporation intervened and 0oined in the pra"er made b" both of the
complainants for the appointment of a receiver. $n -l", the t%o sits %ere b" order
consolidated, and, after a hearing, a receiver %as appointed and athorit" given him to contine
the propert" as a going concern and to borro% a limited amont of mone" on receiver.s
certificates, if necessar", to secre contracts for cane for the coming crop season. The e#ection
of the Nevers J Callaghan 0dgment %as sta"ed pending an appeal %hich had been ta+en to this
Cort. The onl" difference %hich seems to have arisen concerning the appointment of the
receiver gre% ot of the fact that a pra"er of the Central Altagracia, as+ing the cort to appoint
as receiver 7r. 2ettingill, a member of the bar and one of the consel of the corporation, and
%ho %as also its treasrer, %as denied. &espite this, the fair inference is that the ltimate action
of the cort %as not ob0ected to b" an"one, becase of the hope that the reslt of a sccessfl
operation of the plant dring the coming crop season might ameliorate the affairs of the
corporation, and ths prevent frther controversies. :e sa" this not onl" becase of the condct
of the parties prior to the order appointing the receiver, bt becase, after that order, the
solicitors of the Altagracia Compan" and Caldes pt a stiplation of record that, ntil the
follo%ing @ctober, no steps %hatever shold be ta+en in the proceedings, and not even then
nless the attorne"s for both parties shold be in 2orto Fico.
The hope of a beneficial reslt from the operation of the plant b" the receiver proved delsive.
As a reslt of sch operation, there %as a considerable loss represented b" otstanding
receiver.s certificates, %ith no means of pa"ing e#cept ot of the propert". @bviosl" for this
reason, the record contains a statement that, on -l" )', )(3(, a conference %as had bet%een
the cort and all parties concerned to determine %hat steps shold be ta+en to meet the
sitation. $t appears that, at that conference, the consel representing the heirs of 6ancheD and
of Nevers J Callaghan stated their opposition to a continance of the receivership.
@n -l" )4, )(3(, the cort placed a memorandm on the files, indicating its prpose to bring
the litigation, receivership, etc., to an end, and to case "immediate isse to be raised on the
pleadings for that prpose." This memorandm %as entitled in all the pending cases concerning
the propert". $t directed that demrrers %hich had been filed in the consolidated case of Caldes
against the corporation and of the corporation against Caldes be overrled, and the defendants
%ere re!ired to ans%er on or before 7onda", -l" 'E, in order that, pon the follo%ing da", the
'4th of -l", the isses raised might be tried before the cort %ithot the intervention of a
master. $t %as provided in the order, ho%ever, that nothing in this direction shold prevent the
parties from filing sch additional pleadings as it is deemed necessar" for the protection of their
rights b" %a" of cross bill or amendment, etc. To ma+e the order efficacios, it %as declared that
nothing %old be done in the sit of the heirs of 6ancheD against Castello and the Altagracia,
%hich %as pending on appeal, and that a demrrer filed to the sit of Castello against the
Central %old be overrled9 that the demrrer in the sit at la% of Caldes %old remain in
abe"ance to a%ait the final action of the cort on the trial of all the isses in the e!it" cases,
and that a sta" of the Nevers J Callaghan e#ection %old be also disposed of %hen the e!it"
cases came to be decided. This order %as follo%ed b" a memorandm opinion filed on -l" the
')st stating ver" fll" the position of the respective sits, the necessit" for action in order to
preserve the propert" from %aste, and reiterating the vie% that, %hatever might be the rights of
the Central Altagracia or of Caldes nder the lease, those rights %old be sbordinate to the
ltimate determination of the sit broght b" the heirs of 6ancheD. To the action of the cort as
above stated no ob0ection appears to have been made. @n the contrar", bet%een the time of
that order and the period fi#ed for the commencement of a hearing, the Central Altagracia,
Caldes, and Nevers J Callaghan modified their pleadings to the e#tent deemed b" them
necessar" to present for trial the isses pon %hich the" relied. $n the case of the Central
Altagracia, this %as done b" filing, on -l" '', an amended bill of complaint in its sit against
Caldes, and on -l" 'E its ans%er in the sit of Caldes. The acceptance b" Caldes of the terms of
the order %as sho%n b" an ans%er filed to the bill in the sit of the compan" and the cross-bill in
the same case, and Nevers J Callaghan manifested their ac!iescence b" obtaining leave to
ma+e themselves parties and asserting their rights b" cross-bill and ans%ers %hich it is
nnecessar" to detail.
:hen the consolidated case %as called for trial on the morning of -l" '4, the consel for the
Central Altagracia moved a continance in order to ta+e the testimon" of certain %itnesses in
2hiladelphia and Ne% Ior+ for the prpose of proving some of the allegations of the complaint as
to the %rongdoing of Caldes in administering the affairs of the corporation. This application %as
spported b" the affidavit of 7r. 2ettingill, the consel of the corporation. The record states that
the re!est for continance %as opposed b" all the other consel, and the application %as
denied. $n doing so, the cort stated5
"That the matter has been pending for more than a "ear, and that consel had fll notice
of the cort.s intention to press the matters to isse and trial, and that it is not disposed
to dela" matters at this time, %hen the admissions of the pleadings are so broad that the
proofs available here in 2orto Fico are probabl" sfficient, and the amended complaint
alread" on file in sit No. BEB, -- /aldes v. Central &ltagracia -- and the ans%er thereto
and the ans%er recentl" filed in sit No. BE, -- &ltagracia v. /aldes -- as %ell as the
cross-bill also recentl" filed in sit No. ,EB, ma+e so man" allegations and admissions as
that the real isse bet%een the parties can be plainl" seen, and that, in the opinion of the
cort, enogh proof is available here in 2orto Fico."
The cort therepon declared that the Altagracia Compan" might b" the ne#t da", if it so
desired, file e#ceptions to the ans%er in sit BEB and an ans%er to the cross-complaint --
indeed, that the corporation might, if it %ished, treat them as filed, and proceed %ith the case
and file them at an" convenient time thereafter. Therepon, the record states5
"6aid consel for the Central Altagracia stated that he desired time to file e#ceptions to
the ans%er and an ans%er to the cross-bill in sit No. BEB, and the cort granted ntil the
morning of -l" '1 for sch prpose. 8ater in the da" of -l" '4, one of the consel for
Caldes having re!ested the cort to postpone the hearing of the case ntil the morning
of the '(th becase of an ne#pected professional engagement else%here, the re!est
%as commnicated b" the cort to the other consel in the case."
Therepon the record again recites5
"7essrs. 2ettingill J Corn%ell, attorne"s for the Central Altagracia, stated that the"
%ithdre% an" statement the" have hitherto made in the case in that regard, and desired
to be nderstood that the" %old not e#cept to the ans%er in sit No. BEB, or plead or
ans%er to the cross-bill therein save and e#cept %ithin the time %hich the" contended the
rles governing this Cort of e!it" gave them, and %old stand pon %hat the"
considered their rights in that regard."
:hen the cort assembled the ne#t da", on the morning of the '1th, a statement concerning the
occrrence of the previos da" as to the continance, etc., 0st revie%ed, %as read b" the cort
in the presence of all the consel, %herepon the record recites5
"N. B. 2ettingill, consel for the Central Altagracia, in response to the same, stated that he
ob0ected to proceeding to ta+e an" evidence in an" of the cases at that time, or the
testimon" of an" %itnesses, becase the same %as not at isse or in condition for the
ta+ing of evidence, and ob0ected to the ta+ing of sch evidence ntil the isses of said
cases are made p in accordance %ith the rles of practice applicable to e!it" cases."
The record frther recites5
":hich ob0ection %as overrled b" the cort on the grond that the action called for
thereb" is not necessar". That the bill %as amended %ithin three da"s9 an ans%er %as
immediatel" filed to it and a cross-bill also filed, the said cross-bill ma+ing onl" the same
claims as %ere made in sit No. BE* at la%, and that, an"%a", the isse cold be tried on
the bill and ans%er in both sits. . . ."
This rling of the cort having been e#cepted to, the trial proceeded from da" to da", the
consel for the Central Altagracia ta+ing no part in the same and virtall" treating the
proceedings as thogh the" did not concern that corporation.
$n sbstance, the cort decided5 first, that as the reslt of the contracts bet%een Caldes and the
Central Altagracia, he %as not the o%ner of the rights of that corporation nder the lease, or of
the machiner" %hich had been placed in the sgar hose b" the Altagracia Compan", or of the
other assets of the corporation, bt that he %as merel" a secred creditor. The sm of the
secred debt %as fi#ed after ma+ing allo%ances for some not ver" material credits %hich the
corporation %as held to be entitled to. 6econd, that the 0dgment in favor of Nevers J Callaghan
%as valid, and that that firm, b" virte of its e#ection and lev" pon the machiner", had a prior
right to Caldes. Third, the sms de to varios creditors of the corporation %ere fi#ed and the
e!ities or priorities %ere classified as follo%s5 ;a> ta#es de b" the corporation and the sm of
the receiver.s certificates and certain costs9 ;b> the 0dgment of Nevers J Callaghan, and ;c> the
debt of Caldes9 ;d> debts de the other creditors. :ithot going into details, it sffices to sa"
that, for the prpose of enforcing these conclsions, the decree directed a sale of all the rights of
the Central Altagracia in and to the lease, machiner", contract, etc., and imposed the dt" pon
Caldes, if he became the prchaser, to pa" enogh cash to discharge the costs, ta#es, receiver.s
certificates, and the claim of Nevers J Callaghan.
These appeals %ere then prosected, the one b" the Central Altagracia and the other b" Caldes.
:e shall endeavor as briefl" as ma" be to dispose of the contentions relied pon to secre a
reversal.
$. +he Central &ltagracia appeal. -- The alleged errors insisted on in behalf of that compan"
relate to the asserted arbitrar" action of the cort in forcing the case to trial %ithot affording
the time %hich it is insisted the corporation %as entitled to nder the e!it" rles applicable to
the sb0ect, and second, the refsal of the cort to grant a continance pon the affidavit as to
the absence of material %itnesses.
:e thin+ all the contentions on this sb0ect are demonstrated to be devoid of merit b" the
statement of the case %hich %e have made. $n the first place, it is manifest from that statement
that the proceeding leading p to the appointment of a receiver and the po%er given to
administer the propert" %as largel" the reslt of the assent of the corporation. $n the second
place, %hen the nsccessfl financial isse of the receivership had become manifest, %e thin+
the statement ma+es it perfectl" clear that the steps ta+en b" the cort for the prpose of
bringing the case to a speed" conclsion, and ths avoiding the frther loss %hich %old reslt
to all interests concerned, %ere also ac!iesced in b" all the parties in interest %ho complied
%ith the terms of that order and too+ advantage of the rights %hich it conferred. :e thin+ also
the statement ma+es it apparent that the refsal on the part of the corporation to proceed %ith
the trial, pon the theor" that the time to plead allo%ed b" the e!it" rles had not elapsed, %as
the reslt of a change of vie% becase of the action of the cort in refsing the continance on
accont of the absent %itnesses -- a change of front %hich %as inconsistent %ith the rights
%hich the corporation had e#ercised in accord %ith the order setting the case for trial, and %ith
the rights of all the other parties to the case %hich had arisen from that order and from the
virtal approval of it, or at least ac!iescence in it, b" all concerned.
Considering the assignments of error insofar as the" relate alone to overrling of the application
for continance, based pon the absence of %itnesses, it sffices to sa" that the elementar" rle
is that the granting of a continance of the case %as pecliarl" %ithin the sond discretion of
the cort belo% -- a discretion not sb0ect to be revie%ed on appeal e#cept in case of sch clear
error as to amont to a plain abse springing from an arbitrar" e#ercise of po%er. $nstead of
coming %ithin this latter categor", %e thin+ the facts as to the refsal to contine and the
condct of the parties ma+e it clear that there %as not onl" no abse, bt a 0st e#ercise, of
discretion.
$$. &s to the &ppeal of /aldes. -- T%o propositions are relied pon5 first, that error %as
committed in treating Caldes merel" as a secred creditor, and in not holding him to be the
absolte o%ner of the rights and propert" alleged to have been transferred b" the so-called
conditional sale. 6econd, that, in an" event, error %as committed in a%arding to Nevers J
Callaghan priorit" over Caldes.
The first proposition is spported b" a reference to the 2orto Fican Code and decisions of the
6preme Cort of 6pain and the opinions of 6panish la% %riters. Bt the contention is not
relevant, and the athorities cited to sstain it are inapposite to the case to be here decided,
becase the argment rests pon an imaginar" premise -- that is, that the rling of the cort
belo% denied that right nder the 6panish la% to ma+e a conditional sale, or held that sch a
sale, if made, %old not have the effect %hich the argment insists it %as entitled to. This is tre
becase the action of the cort %as solel" based pon a premise of fact, vi$.# that, nder the
circmstances of the case and in vie% of the prior sale %ith the e!it" of redemption, the
cancellation of that sale, and the transfer made b" the corporation to Caldes, and the immediate
transfer of the same rights b" him to the corporation in the form of a conditional sale, the failre
to register an" of the contracts, and the relation of Caldes to the corporation at the time the
contracts %ere made, it reslted that %hatever might be the mere form, in sbstance and effect,
no conditional sale %as made, bt a mere contract %as entered into %hich the parties intended
to be a mere secrit" to Caldes for mone" advanced and to be advanced b" him. This being the
case, it is manifest that it is %holl" irrelevant to arge that error %as committed in not appl"ing
the assmed principles of the 2orto Fican and 6panish la% governing in the case of a conditional
sale, %hen the rling %hich the cort made proceeded pon the conclsion that there %as no
conditional sale.
The contention that, nder the 2orto Fican la%, the form %as controlling becase proof of the
sbstance %as not admissible seems not to have been raised belo%, bt, if it had been, is
obviosl" %ithot merit, as the case as presented involved not a controvers" alone bet%een the
parties to the contract, bt the effect and operation of the contract pon third parties, the
creditors of the corporation. The contention is additionall" %ithot merit since it assmes that
the mere form of the contract e#clded the po%er of creditors to in!ire into its realit" and
sbstance, even althogh the contract %as never inscribed pon the pblic records so as to bind
third parties. That its character %as sch as to re!ire inscription %e shall in a fe% moments
demonstrate in coming to consider the second proposition -- that is, pon the h"pothesis that
Caldes %as bt a secred creditor, %as error committed in sbordinating his claim to the prior
claim of Nevers J Callaghan nder their 0dgment and e#ectionU
To determine this !estion involves fi#ing the natre and character of the propert" from the
point of vie% of the rights of Caldes, and its natre and character from the point of vie% of
Nevers J Callaghan as a 0dgment creditor of the Altagracia Compan", and the rights derived b"
them from the e#ection levied on the machiner" placed b" the corporation in the plant.
Follo%ing the Code Napoleon, the 2orto Fican Code treats as immovable ;real> propert" not onl"
land and bildings, bt also attribtes immovabilit" in some cases to propert" of a movable
natre -- that is, personal propert" -- becase of the destination to %hich it is applied. "Things,"
sa"s W **, of the 2orto Fican Code, "ma" be immovable either b" their o%n natre or b" their
destination, or the ob0ect to %hich the" are applicable." Nmeros illstrations are given in the
fifth sbdivision of section **B, %hich is as follo%s5
"7achiner", vessels, instrments, or implements intended b" the o%ner of the tenements
for the indstr" or %or+s that the" ma" carr" on in an" bilding or pon an" land, and
%hich tend directl" to meet the needs of the said indstr" or %or+s."
See also Code Nap., articles B)E, B)1, et seq.# to and inclsive of article B*,, recapitlating the
things %hich, thogh in themselves movable, ma" be immobiliDed. 6o far as the sb0ect matter
%ith %hich %e are dealing -- machiner" placed in the plant -- it is plain, both nder the
provisions of the 2orto Fican la% and of the Code Napoleon, that machiner" %hich is movable in
its natre onl" becomes immobiliDed %hen placed in a plant b" the o%ner of the propert" or
plant. 6ch reslt %old not be accomplished, therefore, b" the placing of machiner" in a plant
b" a tenant or a sfrctar" or an" person having onl" a temporar" right. &emolombe, Tit. (,
No. '3*9 Abr" et Fa, Tit. ', p. )', W )E,9 8arent, Tit. B, No. ,,4, and decisions !oted in
FDier-?erman ed., Code Napoleon, nder article B'' et seq. The distinction rests, as pointed
ot b" &emolombe, pon the fact that one onl" having a temporar" right to the possession or
en0o"ment of propert" is not presmed b" the la% to have applied movable propert" belonging
to him so as to deprive him of it b" casing it, b" an act of immobiliDation, to become the
propert" of another. $t follo%s that, abstractl" spea+ing, the machiner" pt b" the Altagracia
Compan" in the plant belonging to 6ancheD did not lose its character of movable propert" and
become immovable b" destination. Bt, in the concrete, immobiliDation too+ place becase of
the e#press provisions of the lease nder %hich the Altagracia held, since the lease in sbstance
re!ired the ptting in of improved machiner", deprived the tenant of an" right to charge
against the lessor the cost of sch machiner", and it %as e#pressl" stiplated that the machiner"
so pt in shold become a part of the plant belonging to the o%ner %ithot compensation to the
lessee.
/nder sch conditions, the tenant, in ptting in the machiner", %as acting bt as the agent of
the o%ner, in compliance %ith the obligations resting pon him, and the immobiliDation of the
machiner" %hich reslted arose in legal effect from the Act of the o%ner in giving b" contract a
permanent destination to the machiner". $t is tre, sa"s Abr" and Fa, vol. ', W )E,, par. ', p.
)', that "the immobiliDation %ith %hich the article is concerned can onl" arise from an act of the
o%ner himself or his representative. ?ence, the ob0ects %hich are dedicated to the se of a piece
of land or a bilding b" a lessee cannot be considered as having become immovable b"
destination e#cept in the case %here the" have been applied for accont of the proprietor, or in
e#ection of an obligation imposed b" the lease."
$t follo%s that the machiner" placed b" the corporation in the plant, b" the fact of its being so
placed, lost its character as a movable, and became nited %ith and a part of the plant as an
immovable b" destination. $t also follo%s that, as to Caldes, %ho claimed nder the lease, and
%ho had e#pressl" assmed the obligations of the lease, the machiner", for all the prposes of
the e#ercise of his rights, %as bt a part of the real estate -- a conclsion %hich cannot be
avoided %ithot sa"ing that Caldes cold at one and the same time assert the e#istence in
himself of rights and "et repdiate the obligations reslting from the rights ths asserted.
Nevers J Callaghan %ere creditors of the corporation. The" %ere not parties to nor had the"
legal notice of the lease and its conditions from %hich alone it arose that machiner" pt in the
premises b" the Altagracia became immovable propert". The %ant of notice arose from the
failre to record the transfer from Castello to the Altagracia, or from the Altagracia to Caldes,
and from Caldes apparentl" conditionall" bac+ to the corporation -- a clear reslt of W E)* of the
Civil Code of 2orto Fico, providing, "The titles of o%nership or of other real rights relating to
immovables %hich are not properl" inscribed or annotated in the registr" of propert" shall not be
pre0dicial to third parties."
$t is not disptable that the dt" to inscribe the lease b" necessar" implication reslted from the
general provisions of article ' of the mortgage la% of 2orto Fico, as stated in paragraphs ), ',
and * thereof, and e#plicitl" also arose from the e#press re!irement of paragraph E, relating to
the registr" of "contracts for the lease of real propert" for a period e#ceeding si# "ears. . . ." $t is
tre that, in a strict sense, the contracts bet%een Castello and the Altagracia Compan" and %ith
Caldes %ere not contracts of lease, bt for the transfer of a contract of that character. Bt sch a
transfer %as clearl" a contract concerning real rights to immovable propert" %ithin the prvie%
of article E)* of the Civil Code, 0st previosl" !oted. Especiall" is this the case in vie% of the
stiplations of the lease as to the immobiliDation of movable propert" placed in the plant, and
the other obligations imposed pon the lessee.
"The sale %hich a lessee ma+es to a third person to %hom he transfers his right of lease is the
sale of an immovable right, and not simpl" a sale of a movable one."
See nmeros decisions of the corts of France, beginning %ith the decision on Febrar" ',
)1,', of the Cort of Cassation ;-ornal d 2alais <)1,'= vol. ), )4)>. See also nmeros
athorities collected nder the heading above stated in paragraph '), nder articles B)E, B)4,
and B)1 of the Code Napoleon. FDier-?erman ed. of that Code, p. E,*.
The machiner" levied pon b" Nevers J Callaghan -- that is, that %hich %as placed in the plant
b" the Altagracia Compan", being, as regards Nevers J Callaghan, movable propert", it follo%s
that the" had the right to lev" on it nder the e#ection pon the 0dgment in their favor, and
the e#ercise of that right did not in a legal sense conflict %ith the claim of Caldes, since, as to
him, the propert" %as a part of the realt", %hich as the reslt of his obligations nder the lease,
he cold not, for the prpose of collecting his debt, proceed separatel" against.
As a matter of precation, %e sa" that nothing %e have said affects the rights, %hatever the"
ma" be, of the heirs of 6ancheD, the original lessor.
&ffirmed.
T?$F& &$C$6$@N
<A.F. No. )*443B. Agst '', '333=
6EFAX6 2F@&/CT6, $NC., and 6EFA$@ T. A@M/$@8AI, petitioners# vs. 2C$ 8EA6$NA AN&
F$NANCE, $NC., respondent.
& E C $ 6 $ @ N
2ANAAN$BAN, 6.5
After agreeing to a contract stiplating that a real or immovable propert" be considered as
personal or movable, a part" is estopped from sbse!entl" claiming other%ise. ?ence, sch
propert" is a proper sb0ect of a %rit of replevin obtained b" the other contracting part".
The Case
Before s is a 2etition for Fevie% on Certiorari assailing the -anar" E, )((( &ecision of the
Cort of Appeals ;CA> in CA-AF 62 No. ,4**' and its Febrar" 'E, )((( Fesoltion den"ing
reconsideration. The decretal portion of the CA &ecision reads as follo%s5
Y:?EFEF@FE, premises considered, the assailed @rder dated Febrar" )1, )((1 and Fesoltion
dated 7arch *), )((1 in Civil Case No. M-(1-**B33 are hereb" AFF!RME3. The %rit of
preliminar" in0nction issed on -ne )B, )((1 is hereb" L!FTE3.Z
$n its Febrar" )1, )((1 @rder, the Fegional Trial Cort ;FTC> of MeDon Cit" ;Branch ')1>
issed a :rit of 6eiDre. The 7arch )1, )((1 Fesoltion denied petitionersX 7otion for 6pecial
2rotective @rder, pra"ing that the dept" sheriff be en0oined Yfrom seiDing immobiliDed or other
real properties in ;petitionersX> factor" in Cainta, FiDal and to retrn to their original place
%hatever immobiliDed machineries or e!ipments he ma" have removed.Z
The Facts
The ndispted facts are smmariDed b" the Cort of Appeals as follo%s5
Y@n Febrar" )*, )((1, respondent 2C$ 8easing and Finance, $nc. ;Y2C$ 8easingZ for short> filed
%ith the FTC-MC a complaint for <a= sm of mone" ;Anne# [EX>, %ith an application for a %rit of
replevin doc+eted as Civil Case No. M-(1-**B33.
Y@n 7arch E, )((1, pon an e#-parte application of 2C$ 8easing, respondent 0dge issed a %rit
of replevin ;Anne# [BX> directing its sheriff to seiDe and deliver the machineries and e!ipment to
2C$ 8easing after B da"s and pon the pa"ment of the necessar" e#penses.
Y@n 7arch ',, )((1, in implementation of said %rit, the sheriff proceeded to petitionerXs factor",
seiDed one machiner" %ith <the= %ord that he <%old= retrn for the other machineries.
Y@n 7arch 'B, )((1, petitioners filed a motion for special protective order ;Anne# [CX>, invo+ing
the po%er of the cort to control the condct of its officers and amend and control its processes,
pra"ing for a directive for the sheriff to defer enforcement of the %rit of replevin.
YThis motion %as opposed b" 2C$ 8easing ;Anne# [FX>, on the grond that the properties <%ere=
still personal and therefore still sb0ect to seiDre and a %rit of replevin.
Y$n their Fepl", petitioners asserted that the properties soght to be seiDed <%ere= immovable
as defined in Article ,)B of the Civil Code, the partiesX agreement to the contrar"
not%ithstanding. The" arged that to give effect to the agreement %old be pre0dicial to
innocent third parties. The" frther stated that 2C$ 8easing <%as= estopped from treating these
machineries as personal becase the contracts in %hich the alleged agreement <%ere= embodied
<%ere= totall" sham and farcical.
Y@n April E, )((1, the sheriff again soght to enforce the %rit of seiDre and ta+e possession of
the remaining properties. ?e %as able to ta+e t%o more, bt %as prevented b" the %or+ers
from ta+ing the rest.
Y@n April 4, )((1, the" %ent to <the CA= via an original action for certiorari.Z
Fling of the Cort of Appeals
Citing the Agreement of the parties, the appellate cort held that the sb0ect machines %ere
personal propert", and that the" had onl" been leased, not o%ned, b" petitioners. $t also rled
that the Y%ords of the contract are clear and leave no dobt pon the tre intention of the
contracting parties.Z @bserving that 2etitioner Ao!iola" %as an e#perienced bsinessman %ho
%as Ynot nfamiliar %ith the %a"s of the trade,Z it rled that he Yshold have realiDed the import
of the docment he signed.Z The CA frther held5
YFrthermore, to accord merit to this petition %old be to preempt the trial cort in rling
pon the case belo%, since the merits of the %hole matter are laid do%n before s via a
petition %hose sole prpose is to in!ire pon the e#istence of a grave abse of discretion
on the part of the <FTC= in issing the assailed @rder and Fesoltion. The isses raised
herein are proper sb0ects of a fll-blo%n trial, necessitating presentation of evidence b"
both parties. The contract is being enforced b" one, and <its= validit" is attac+ed b" the
other \ a matter # # # %hich respondent cort is in the best position to determine.Z
?ence, this 2etition.
The $sses
$n their 7emorandm, petitioners sbmit the follo%ing isses for or consideration5
YA. :hether or not the machineries prchased and imported b" 6EFAX6 became real
propert" b" virte of immobiliDation.
B. :hether or not the contract bet%een the parties is a loan or a lease.
Z
$n the main, the Cort %ill resolve %hether the said machines are personal, not immovable,
propert" %hich ma" be a proper sb0ect of a %rit of replevin. As a preliminar" matter, the Cort
%ill also address briefl" the procedral points raised b" respondent.
The CortXs Fling
The 2etition is not meritorios.
2reliminar" 7atter5 *rocedural 7uestions
Fespondent contends that the 2etition failed to indicate e#pressl" %hether it %as being filed
nder Fle ,B or Fle EB of the Fles of Cort. $t frther alleges that the 2etition erroneosl"
impleaded -dge ?ilario 8a!i as respondent.
There is no !estion that the present recorse is nder Fle ,B. This conclsion finds spport in
the ver" title of the 2etition, %hich is Y2etition for Fevie% on Certiorari.Z
:hile -dge 8a!i shold not have been impleaded as a respondent, sbstantial 0stice re!ires
that sch lapse b" itself shold not %arrant the dismissal of the present 2etition. $n this light,
the Cort deems it proper to remove, motu proprio, the name of -dge 8a!i from the caption of
the present case.
7ain $sse5 2ature of the Subject Machinery
2etitioners contend that the sb0ect machines sed in their factor" %ere not proper sb0ects of
the :rit issed b" the FTC, becase the" %ere in fact real propert". 6erios polic"
considerations, the" arge, militate against a contrar" characteriDation.
Fle E3 of the Fles of Cort provides that %rits of replevin are issed for the recover" of
personal propert" onl". 6ection * thereof reads5
Y6EC. *. %rder. -- /pon the filing of sch affidavit and approval of the bond, the cort shall
isse an order and the corresponding %rit of replevin describing the personal propert" alleged to
be %rongfll" detained and re!iring the sheriff forth%ith to ta+e sch propert" into his cstod".Z
@n the other hand, Article ,)B of the Civil Code enmerates immovable or real propert" as
follo%s5
YAFT. ,)B. The follo%ing are immovable propert"5
# # #....................................# # #....................................# # #
;B> 7achiner", receptacles, instrments or implements intended b" the o%ner of the
tenement for an indstr" or %or+s %hich ma" be carried on in a bilding or on a piece of
land, and %hich tend directl" to meet the needs of the said indstr" or %or+s9
# # #....................................# # #....................................# # #Z
$n the present case, the machines that %ere the sb0ects of the :rit of 6eiDre %ere placed b"
petitioners in the factor" bilt on their o%n land. $ndisptabl", the" %ere essential and principal
elements of their chocolate-ma+ing indstr". ?ence, althogh each of them %as movable or
personal propert" on its o%n, all of them have become YimmobiliDed b" destination becase the"
are essential and principal elements in the indstr".Z $n that sense, petitioners are correct in
arging that the said machines are real, not personal, propert" prsant to Article ,)B ;B> of the
Civil Code.
Be that as it ma", %e disagree %ith the sbmission of the petitioners that the said machines are
not proper sb0ects of the :rit of 6eiDre.
The Cort has held that contracting parties ma" validl" stiplate that a real propert" be
considered as personal. After agreeing to sch stiplation, the" are conse!entl" estopped from
claiming other%ise. /nder the principle of estoppel, a part" to a contract is ordinaril" preclded
from den"ing the trth of an" material fact fond therein.
?ence, in +umalad v. /icencio# the Cort pheld the intention of the parties to treat a house as a
personal propert" becase it had been made the sb0ect of a chattel mortgage. The Cort rled5
Y# # #. Althogh there is no specific statement referring to the sb0ect hose as personal
propert", "et b" ceding, selling or transferring a propert" b" %a" of chattel mortgage
defendants-appellants cold onl" have meant to conve" the hose as chattel, or at least,
intended to treat the same as sch, so that the" shold not no% be allo%ed to ma+e an
inconsistent stand b" claiming other%ise.Z
Appl"ing +umalad# the Cort in Ma(ati Leasing and 'inance Corp. v. )earever +e"tile Mills also
held that the machiner" sed in a factor" and essential to the indstr", as in the present case,
%as a proper sb0ect of a %rit of replevin becase it %as treated as personal propert" in a
contract. 2ertinent portions of the CortXs rling are reprodced herender5
Y# # #. $f a hose of strong materials, li+e %hat %as involved in the above Tmalad case,
ma" be considered as personal propert" for prposes of e#ecting a chattel mortgage
thereon as long as the parties to the contract so agree and no innocent third part" %ill be
pre0diced thereb", there is absoltel" no reason %h" a machiner", %hich is movable in its
natre and becomes immobiliDed onl" b" destination or prpose, ma" not be li+e%ise
treated as sch. This is reall" becase one %ho has so agreed is estopped from den"ing
the e#istence of the chattel mortgage.Z
$n the present case, the 8ease Agreement clearl" provides that the machines in !estion are to
be considered as personal propert". 6pecificall", 6ection )'.) of the Agreement reads as
follo%s5
Y)'.) The 2F@2EFTI is, and shall at all times be and remain, personal propert"
not%ithstanding that the 2F@2EFTI or an" part thereof ma" no% be, or hereafter become,
in an" manner affi#ed or attached to or embedded in, or permanentl" resting pon, real
propert" or an" bilding thereon, or attached in an" manner to %hat is permanent.Z
Clearl" then, petitioners are estopped from den"ing the characteriDation of the sb0ect machines
as personal propert". /nder the circmstances, the" are proper sb0ects of the :rit of 6eiDre.
$t shold be stressed, ho%ever, that or holding -- that the machines shold be deemed personal
propert" prsant to the 8ease Agreement \ is good onl" insofar as the contracting parties are
concerned. ?ence, %hile the parties are bond b" the Agreement, third persons acting in good
faith are not affected b" its stiplation characteriDing the sb0ect machiner" as personal. $n an"
event, there is no sho%ing that an" specific third part" %old be adversel" affected.
/alidity of the Lease &greement
$n their 7emorandm, petitioners contend that the Agreement is a loan and not a lease.
6bmitting docments spposedl" sho%ing that the" o%n the sb0ect machines, petitioners also
arge in their 2etition that the Agreement sffers from Yintrinsic ambigit" %hich places in
serios dobt the intention of the parties and the validit" of the lease agreement itself.Z $n their
Fepl" to respondentXs Comment, the" frther allege that the Agreement is invalid.
These argments are nconvincing. The validit" and the natre of the contract are the lis mota
of the civil action pending before the FTC. A resoltion of these !estions, therefore, is
effectivel" a resoltion of the merits of the case. ?ence, the" shold be threshed ot in the trial,
not in the proceedings involving the issance of the :rit of 6eiDre.
$ndeed, in La +onde,a 5istillers v. C&,= the Cort e#plained that the polic" nder Fle E3 %as
that !estions involving title to the sb0ect propert" \ !estions %hich petitioners are no%
raising -- shold be determined in the trial. $n that case, the Cort noted that the remed" of
defendants nder Fle E3 %as either to post a conter-bond or to !estion the sfficienc" of the
plaintiffXs bond. The" %ere not allo%ed, ho%ever, to invo+e the title to the sb0ect propert". The
Cort rled5
Y$n other %ords, the la% does not allo% the defendant to file a motion to dissolve or
discharge the %rit of seiDre ;or deliver"> on grond of insfficienc" of the complaint or of
the gronds relied pon therefor, as in proceedings on preliminar" attachment or
in0nction, and thereb" pt at isse the matter of the title or right of possession over the
specific chattel being replevied, the polic" apparentl" being that said matter shold be
ventilated and determined onl" at the trial on the merits.Z
Besides, these !estions re!ire a determination of facts and a presentation of evidence, both of
%hich have no place in a petition for certiorari in the CA nder Fle EB or in a petition for revie%
in this Cort nder Fle ,B.
eliance on the Lease &greement
$t shold be pointed ot that the Cort in this case ma" rel" on the 8ease Agreement, for
nothing on record sho%s that it has been nllified or annlled. $n fact, petitioners assailed it first
onl" in the FTC proceedings, %hich had ironicall" been institted b" respondent. Accordingl", it
mst be presmed valid and binding as the la% bet%een the parties.
Ma(ati Leasing and 'inance Corporation is also instrctive on this point. $n that case, the &eed
of Chattel 7ortgage, %hich characteriDed the sb0ect machiner" as personal propert", %as also
assailed becase respondent had allegedl" been re!ired Yto sign a printed form of chattel
mortgage %hich %as in a blan+ form at the time of signing.Z The Cort re0ected the argment
and relied on the &eed, rling as follo%s5
Y# # #. 7oreover, even granting that the charge is tre, sch fact alone does not render a
contract void ab initio, bt can onl" be a grond for rendering said contract voidable, or
annllable prsant to Article )*(3 of the ne% Civil Code, b" a proper action in cort.
There is nothing on record to sho% that the mortgage has been annlled. Neither is it
disclosed that steps %ere ta+en to nllif" the same. # # #Z
&lleged Injustice Committed on the *art of *etitioners
2etitioners contend that Yif the Cort allo%s these machineries to be seiDed, then its %or+ers
%old be ot of %or+ and thro%n into the streets.Z The" also allege that the seiDre %old nllif"
all efforts to rehabilitate the corporation.
2etitionersX argments do not preclde the implementation of the :rit. As earlier discssed, la%
and 0risprdence spport its propriet". Ceril", the above-mentioned conse!ences, if the"
come tre, shold not be blamed on this Cort, bt on the petitioners for failing to avail
themselves of the remed" nder 6ection B of Fle E3, %hich allo%s the filing of a conter-bond.
The provision states5
Y6EC. B. eturn of property. -- $f the adverse part" ob0ects to the sfficienc" of the
applicantXs bond, or of the sret" or sreties thereon, he cannot immediatel" re!ire the
retrn of the propert", bt if he does not so ob0ect, he ma", at an" time before the
deliver" of the propert" to the applicant, re!ire the retrn thereof, b" filing %ith the cort
%here the action is pending a bond e#ected to the applicant, in doble the vale of the
propert" as stated in the applicantXs affidavit for the deliver" thereof to the applicant, if
sch deliver" be ad0dged, and for the pa"ment of sch sm to him as ma" be recovered
against the adverse part", and b" serving a cop" bond on the applicant.Z
&EREFORE, the 2etition is 5!2I!5 and the assailed &ecision of the Cort of Appeals
&''IM!5. Costs against petitioners.
T?$F& &$C$6$@N
G.R. No. 16855* February 16, +))*
FELS ENERGY, !NC., 2etitioner,
vs.
TE "RO.!NCE OF 4ATANGAS a#$
TE OFF!CE OF TE "RO.!NC!AL ASSESSOR OF 4ATANGAS, Fespondents.
G.R. No. 1*)6+8 February 16, +))*
NAT!ONAL "O&ER COR"ORAT!ON, 2etitioner,
vs.
LOCAL 4OAR3 OF ASSESSMENT A""EALS OF 4ATANGAS, LAURO C. AN3AYA, 5# 85(
7a;a751y a( 18e A((e((or o6 18e "ro?5#7e o6 4a1a#0a(, a#$ 18e "RO.!NCE OF
4ATANGAS re;re(e#1e$ by 51( "ro?5#75a: A((e((or, Fespondents.
& E C $ 6 $ @ N
CALLE%O, SR., J.:
Before s are t%o consolidated cases doc+eted as A.F. No. )E1BB4 and A.F. No. )43E'1, %hich
%ere filed b" petitioners FE86 Energ", $nc. ;FE86> and National 2o%er Corporation ;N2C>,
respectivel". The first is a petition for revie% on certiorari assailing the Agst 'B, '33, &ecision
of the Cort of Appeals ;CA> in CA-A.F. 62 No. E4,(3 and its Fesoltion dated -ne '3, '33B9
the second, also a petition for revie% on certiorari, challenges the Febrar" (, '33B &ecision and
November '*, '33B Fesoltion of the CA in CA-A.F. 62 No. E4,(). Both petitions %ere
dismissed on the grond of prescription.
The pertinent facts are as follo%s5
@n -anar" )1, )((*, N2C entered into a lease contract %ith 2olar Energ", $nc. over *#*3 7:
diesel engine po%er barges moored at Bala"an Ba" in Calaca, Batangas. The contract,
denominated as an Energ" Conversion Agreement ;Agreement>, %as for a period of five "ears.
Article )3 reads5
)3.) FE62@N6$B$8$TI. NA2@C@F shall be responsible for the pa"ment of ;a> all ta#es, import
dties, fees, charges and other levies imposed b" the National Aovernment of the Fepblic of
the 2hilippines or an" agenc" or instrmentalit" thereof to %hich 2@8AF ma" be or become
sb0ect to or in relation to the performance of their obligations nder this agreement ;other than
;i> ta#es imposed or calclated on the basis of the net income of 2@8AF and 2ersonal $ncome
Ta#es of its emplo"ees and ;ii> constrction permit fees, environmental permit fees and other
similar fees and charges> and ;b> all real estate ta#es and assessments, rates and other charges
in respect of the 2o%er Barges.
6bse!entl", 2olar Energ", $nc. assigned its rights nder the Agreement to FE86. The N2C
initiall" opposed the assignment of rights, citing paragraph )4.' of Article )4 of the Agreement.
@n Agst 4, )((B, FE86 received an assessment of real propert" ta#es on the po%er barges
from 2rovincial Assessor 8aro C. Anda"a of Batangas Cit". The assessed ta#, %hich li+e%ise
covered those de for )((,, amonted to 2BE,)1,,311.,3 per annm. FE86 referred the matter
to N2C, reminding it of its obligation nder the Agreement to pa" all real estate ta#es. $t then
gave N2C the fll po%er and athorit" to represent it in an" conference regarding the real
propert" assessment of the 2rovincial Assessor.
$n a letter dated 6eptember 4, )((B, N2C soght reconsideration of the 2rovincial AssessorXs
decision to assess real propert" ta#es on the po%er barges. ?o%ever, the motion %as denied on
6eptember '', )((B, and the 2rovincial Assessor advised N2C to pa" the assessment. This
prompted N2C to file a petition %ith the 8ocal Board of Assessment Appeals ;8BAA> for the
setting aside of the assessment and the declaration of the barges as non-ta#able items9 it also
pra"ed that shold 8BAA find the barges to be ta#able, the 2rovincial Assessor be directed to
ma+e the necessar" corrections.
$n its Ans%er to the petition, the 2rovincial Assessor averred that the barges %ere real propert"
for prposes of ta#ation nder 6ection )((;c> of Fepblic Act ;F.A.> No. 4)E3.
Before the case %as decided b" the 8BAA, N2C filed a 7anifestation, informing the 8BAA that the
&epartment of Finance ;&@F> had rendered an opinion dated 7a" '3, )((E, %here it is clearl"
stated that po%er barges are not real propert" sb0ect to real propert" assessment.
@n Agst 'E, )((E, the 8BAA rendered a Fesoltion den"ing the petition. The fallo reads5
:?EFEF@FE, the 2etition is &EN$E&. FE86 is hereb" ordered to pa" the real estate ta# in the
amont of 2BE,)1,,311.,3, for the "ear )((,.
6@ @F&EFE&.
The 8BAA rled that the po%er plant facilities, %hile the" ma" be classified as movable or
personal propert", are nevertheless considered real propert" for ta#ation prposes becase the"
are installed at a specific location %ith a character of permanenc". The 8BAA also pointed ot
that the o%ner of the barges\FE86, a private corporation\is the one being ta#ed, not N2C. A
mere agreement ma+ing N2C responsible for the pa"ment of all real estate ta#es and
assessments %ill not 0stif" the e#emption of FE869 sch a privilege can onl" be granted to N2C
and cannot be e#tended to FE86. Finall", the 8BAA also rled that the petition %as filed ot of
time.
Aggrieved, FE86 appealed the 8BAAXs rling to the Central Board of Assessment Appeals ;CBAA>.
@n Agst '1, )((E, the 2rovincial Treasrer of Batangas Cit" issed a Notice of 8ev" and
:arrant b" &istraint over the po%er barges, see+ing to collect real propert" ta#es amonting to
2'*',E3',)'B.() as of -l" *), )((E. The notice and %arrant %as officiall" served to FE86 on
November 1, )((E. $t then filed a 7otion to 8ift 8ev" dated November ),, )((E, pra"ing that the
2rovincial Assessor be frther restrained b" the CBAA from enforcing the dispted assessment
dring the pendenc" of the appeal.
@n November )B, )((E, the CBAA issed an @rder lifting the lev" and distraint on the properties
of FE86 in order not to preempt and render ineffectal, ngator" and illsor" an" resoltion or
0dgment %hich the Board %old isse.
7eantime, the N2C filed a 7otion for $ntervention dated Agst 4, )((1 in the proceedings
before the CBAA. This %as approved b" the CBAA in an @rder dated 6eptember '', )((1.
&ring the pendenc" of the case, both FE86 and N2C filed several motions to admit bond to
garantee the pa"ment of real propert" ta#es assessed b" the 2rovincial Assessor ;in the event
that the 0dgment be nfavorable to them>. The bonds %ere dl" approved b" the CBAA.
@n April E, '333, the CBAA rendered a &ecision finding the po%er barges e#empt from real
propert" ta#. The dispositive portion reads5
:?EFEF@FE, the Fesoltion of the 8ocal Board of Assessment Appeals of the 2rovince of
Batangas is hereb" reversed. Fespondent-appellee 2rovincial Assessor of the 2rovince of
Batangas is hereb" ordered to drop sb0ect propert" nder AF2LTa# &eclaration No. 3)1-33(B1
from the 8ist of Ta#able 2roperties in the Assessment Foll. The 2rovincial Treasrer of Batangas
is hereb" directed to act accordingl".
6@ @F&EFE&.
Fling in favor of FE86 and N2C, the CBAA reasoned that the po%er barges belong to N2C9 since
the" are actall", directl" and e#clsivel" sed b" it, the po%er barges are covered b" the
e#emptions nder 6ection '*,;c> of F.A. No. 4)E3. As to the other 0risdictional isse, the CBAA
rled that prescription did not preclde the N2C from prsing its claim for ta# e#emption in
accordance %ith 6ection '3E of F.A. No. 4)E3. The 2rovincial Assessor filed a motion for
reconsideration, %hich %as opposed b" FE86 and N2C.
$n a complete volte face, the CBAA issed a Fesoltion on -l" *), '33) reversing its earlier
decision. The fallo of the resoltion reads5
:?EFEF@FE, premises considered, it is the resoltion of this Board that5
;a> The decision of the Board dated E April '333 is hereb" reversed.
;b> The petition of FE86, as %ell as the intervention of N2C, is dismissed.
;c> The resoltion of the 8ocal Board of Assessment Appeals of Batangas is hereb"
affirmed,
;d> The real propert" ta# assessment on FE86 b" the 2rovincial Assessor of Batangas is
li+e%ise hereb" affirmed.
6@ @F&EFE&.
FE86 and N2C filed separate motions for reconsideration, %hich %ere timel" opposed b" the
2rovincial Assessor. The CBAA denied the said motions in a Fesoltion dated @ctober )(, '33).
&issatisfied, FE86 filed a petition for revie% before the CA doc+eted as CA-A.F. 62 No. E4,(3.
7ean%hile, N2C filed a separate petition, doc+eted as CA-A.F. 62 No. E4,().
@n -anar" )4, '33', N2C filed a 7anifestationL7otion for Consolidation in CA-A.F. 62 No.
E4,(3 pra"ing for the consolidation of its petition %ith CA-A.F. 62 No. E4,(). $n a Fesoltion
dated Febrar" )', '33', the appellate cort directed N2C to re-file its motion for consolidation
%ith CA-A.F. 62 No. E4,(), since it is the ponente of the latter petition %ho shold resolve the
re!est for reconsideration.
N2C failed to compl" %ith the aforesaid resoltion. @n Agst 'B, '33,, the T%elfth &ivision of
the appellate cort rendered 0dgment in CA-A.F. 62 No. E4,(3 den"ing the petition on the
grond of prescription. The decretal portion of the decision reads5
:?EFEF@FE, the petition for revie% is &EN$E& for lac+ of merit and the assailed Fesoltions
dated -l" *), '33) and @ctober )(, '33) of the Central Board of Assessment Appeals are
AFF$F7E&.
6@ @F&EFE&.
@n 6eptember '3, '33,, FE86 timel" filed a motion for reconsideration see+ing the reversal of
the appellate cortXs decision in CA-A.F. 62 No. E4,(3.
Thereafter, N2C filed a petition for revie% dated @ctober )(, '33, before this Cort, doc+eted as
A.F. No. )EB))*, assailing the appellate cortXs decision in CA-A.F. 62 No. E4,(3. The petition
%as, ho%ever, denied in this CortXs Fesoltion of November 1, '33,, for N2CXs failre to
sfficientl" sho% that the CA committed an" reversible error in the challenged decision. N2C filed
a motion for reconsideration, %hich the Cort denied %ith finalit" in a Fesoltion dated -anar"
)(, '33B.
7eantime, the appellate cort dismissed the petition in CA-A.F. 62 No. E4,(). $t held that the
right to !estion the assessment of the 2rovincial Assessor had alread" prescribed pon the
failre of FE86 to appeal the dispted assessment to the 8BAA %ithin the period prescribed b"
la%. 6ince FE86 had lost the right to !estion the assessment, the right of the 2rovincial
Aovernment to collect the ta# %as alread" absolte.
N2C filed a motion for reconsideration dated 7arch 1, '33B, see+ing reconsideration of the
Febrar" B, '33B rling of the CA in CA-A.F. 62 No. E4,(). The motion %as denied in a
Fesoltion dated November '*, '33B.
The motion for reconsideration filed b" FE86 in CA-A.F. 62 No. E4,(3 had been earlier denied
for lac+ of merit in a Fesoltion dated -ne '3, '33B.
@n Agst *, '33B, FE86 filed the petition doc+eted as A.F. No. )E1BB4 before this Cort,
raising the follo%ing isses5
A.
:hether po%er barges, %hich are floating and movable, are personal properties and
therefore, not sb0ect to real propert" ta#.
B.
Assming that the sb0ect po%er barges are real properties, %hether the" are e#empt
from real estate ta# nder 6ection '*, of the 8ocal Aovernment Code ;"8AC">.
C.
Assming argendo that the sb0ect po%er barges are sb0ect to real estate ta#, %hether
or not it shold be N2C %hich shold be made to pa" the same nder the la%.
&.
Assming argendo that the sb0ect po%er barges are real properties, %hether or not the
same is sb0ect to depreciation 0st li+e an" other personal properties.
E.
:hether the right of the petitioner to !estion the patentl" nll and void real propert" ta#
assessment on the petitionerXs personal properties is imprescriptible.
@n -anar" )*, '33E, N2C filed its o%n petition for revie% before this Cort ;A.F. No. )43E'1>,
indicating the follo%ing errors committed b" the CA5
$
T?E C@/FT @F A22EA86 AFACE8I EFFE& $N ?@8&$NA T?AT T?E A22EA8 T@ T?E 8BAA
:A6 F$8E& @/T @F T$7E.
$$
T?E C@/FT @F A22EA86 AFACE8I EFFE& $N N@T ?@8&$NA T?AT T?E 2@:EF BAFAE6
AFE N@T 6/B-ECT T@ FEA8 2F@2EFTI TASE6.
$$$
T?E C@/FT @F A22EA86 AFACE8I EFFE& $N N@T ?@8&$NA T?AT T?E A66E667ENT @N
T?E 2@:EF BAFAE6 :A6 N@T 7A&E $N ACC@F&ANCE :$T? 8A:.
Considering that the factal antecedents of both cases are similar, the Cort ordered the
consolidation of the t%o cases in a Fesoltion dated 7arch 1, '33E.
$n an earlier Fesoltion dated Febrar" ), '33E, the Cort had re!ired the parties to sbmit
their respective 7emoranda %ithin *3 da"s from notice. Almost a "ear passed bt the parties
had not sbmitted their respective memoranda. Considering that ta#esGthe lifeblood of or
econom"Gare involved in the present controvers", the Cort %as prompted to dispense %ith the
said pleadings, %ith the end vie% of advancing the interests of 0stice and avoiding frther dela".
$n both petitions, FE86 and N2C maintain that the appeal before the 8BAA %as not time-barred.
FE86 arges that %hen N2C moved to have the assessment reconsidered on 6eptember 4, )((B,
the rnning of the period to file an appeal %ith the 8BAA %as tolled. For its part, N2C posits that
the E3-da" period for appealing to the 8BAA shold be rec+oned from its receipt of the denial of
its motion for reconsideration.
2etitionersX contentions are bereft of merit.
6ection ''E of F.A. No. 4)E3, other%ise +no%n as the 8ocal Aovernment Code of )((),
provides5
6ECT$@N ''E. 8ocal Board of Assessment Appeals. \ An" o%ner or person having legal interest
in the propert" %ho is not satisfied %ith the action of the provincial, cit" or mnicipal assessor in
the assessment of his propert" ma", %ithin si#t" ;E3> da"s from the date of receipt of the
%ritten notice of assessment, appeal to the Board of Assessment Appeals of the province or cit"
b" filing a petition nder oath in the form prescribed for the prpose, together %ith copies of the
ta# declarations and sch affidavits or docments sbmitted in spport of the appeal.
:e note that the notice of assessment %hich the 2rovincial Assessor sent to FE86 on Agst 4,
)((B, contained the follo%ing statement5
$f "o are not satisfied %ith this assessment, "o ma", %ithin si#t" ;E3> da"s from the date of
receipt hereof, appeal to the Board of Assessment Appeals of the province b" filing a petition
nder oath on the form prescribed for the prpose, together %ith copies of AF2LTa# &eclaration
and sch affidavits or docments sbmitted in spport of the appeal.
$nstead of appealing to the Board of Assessment Appeals ;as stated in the notice>, N2C opted to
file a motion for reconsideration of the 2rovincial AssessorXs decision, a remed" not sanctioned
b" la%.
The remed" of appeal to the 8BAA is available from an adverse rling or action of the provincial,
cit" or mnicipal assessor in the assessment of the propert". $t follo%s then that the
determination made b" the respondent 2rovincial Assessor %ith regard to the ta#abilit" of the
sb0ect real properties falls %ithin its po%er to assess properties for ta#ation prposes sb0ect to
appeal before the 8BAA.
:e fll" agree %ith the rationaliDation of the CA in both CA-A.F. 62 No. E4,(3 and CA-A.F. 62
No. E4,(). The t%o divisions of the appellate cort cited the case of Callanta v. @ffice of the
@mbdsman, %here %e rled that nder 6ection ''E of F.A. No 4)E3, the last action of the local
assessor on a particlar assessment shall be the notice of assessment9 it is this last action %hich
gives the o%ner of the propert" the right to appeal to the 8BAA. The procedre li+e%ise does not
permit the propert" o%ner the remed" of filing a motion for reconsideration before the local
assessor. The pertinent holding of the Cort in Callanta is as follo%s5
# # # <T=he same Code is e!all" clear that the aggrieved o%ners shold have broght their
appeals before the 8BAA. /nfortnatel", despite the advice to this effect contained in their
respective notices of assessment, the o%ners chose to bring their re!ests for a
revie%Lread0stment before the cit" assessor, a remed" not sanctioned b" the la%. To allo% this
procedre %old indeed invite corrption in the s"stem of appraisal and assessment. $t
convenientl" corts a graft-prone sitation %here vales of real propert" ma" be initiall" set
nreasonabl" high, and then sbse!entl" redced pon the re!est of a propert" o%ner. $n the
latter instance, allsions of a possible covert, illicit trade-off cannot be avoided, and in fact can
convenientl" ta+e place. 6ch occasion for mischief mst be prevented and e#cised from or
s"stem.
For its part, the appellate cort declared in CA-A.F. 62 No. E4,()5
# # #. The Cort annonces5 ?enceforth, %henever the local assessor sends a notice to the
o%ner or la%fl possessor of real propert" of its revised assessed vale, the former shall no
longer have an" 0risdiction to entertain an" re!est for a revie% or read0stment. The
appropriate form %here the aggrieved part" ma" bring his appeal is the 8BAA as provided b"
la%. $t follo%s inelctabl" that the E3-da" period for ma+ing the appeal to the 8BAA rns %ithot
interrption. This is %hat :e held in 62 E4,(3 and reaffirm toda" in 62 E4,().
To reiterate, if the ta#pa"er fails to appeal in de corse, the right of the local government to
collect the ta#es de %ith respect to the ta#pa"erXs propert" becomes absolte pon the
e#piration of the period to appeal. $t also bears stressing that the ta#pa"erXs failre to !estion
the assessment in the 8BAA renders the assessment of the local assessor final, e#ector" and
demandable, ths, preclding the ta#pa"er from !estioning the correctness of the assessment,
or from invo+ing an" defense that %old reopen the !estion of its liabilit" on the merits.
$n fine, the 8BAA acted correctl" %hen it dismissed the petitionersX appeal for having been filed
ot of time9 the CBAA and the appellate cort %ere li+e%ise correct in affirming the dismissal.
Elementar" is the rle that the perfection of an appeal %ithin the period therefor is both
mandator" and 0risdictional, and failre in this regard renders the decision final and e#ector".
$n the Comment filed b" the 2rovincial Assessor, it is asserted that the instant petition is barred
b" res 0dicata9 that the final and e#ector" 0dgment in A.F. No. )EB))* ;%here there %as a
final determination on the isse of prescription>, effectivel" precldes the claims herein9 and that
the filing of the instant petition after an adverse 0dgment in A.F. No. )EB))* constittes form
shopping.
FE86 maintains that the argment of the 2rovincial Assessor is completel" misplaced since it %as
not a part" to the erroneos petition %hich the N2C filed in A.F. No. )EB))*. $t avers that it did
not participate in the aforesaid proceeding, and the 6preme Cort never ac!ired 0risdiction
over it. As to the isse of form shopping, petitioner claims that no form shopping cold have
been committed since the elements of litis pendentia or res 0dicata are not present.
:e do not agree.
Fes 0dicata pervades ever" organiDed s"stem of 0risprdence and is fonded pon t%o
gronds embodied in varios ma#ims of common la%, namel"5 ;)> pblic polic" and necessit",
%hich ma+es it to the interest of the
6tate that there shold be an end to litigation \ repblicae t sit litim9 and ;'> the hardship on
the individal of being ve#ed t%ice for the same case \ nemo debet bis ve#ari et eadem casa.
A conflicting doctrine %old sb0ect the pblic peace and !iet to the %ill and dereliction of
individals and prefer the regalement of the litigios disposition on the part of sitors to the
preservation of the pblic tran!ilit" and happiness. As %e rled in ?eirs of Trinidad &e 8eon
Cda. de Fo#as v. Cort of Appeals5
# # # An e#isting final 0dgment or decree \ rendered pon the merits, %ithot frad or
collsion, b" a cort of competent 0risdiction acting pon a matter %ithin its athorit" \ is
conclsive on the rights of the parties and their privies. This rling holds in all other actions or
sits, in the same or an" other 0dicial tribnal of concrrent 0risdiction, toching on the points
or matters in isse in the first sit.
# # #
Corts %ill simpl" refse to reopen %hat has been decided. The" %ill not allo% the same parties
or their privies to litigate ane% a !estion once it has been considered and decided %ith finalit".
8itigations mst end and terminate sometime and some%here. The effective and efficient
administration of 0stice re!ires that once a 0dgment has become final, the prevailing part"
shold not be deprived of the frits of the verdict b" sbse!ent sits on the same isses filed
b" the same parties.
This is in accordance %ith the doctrine of res 0dicata %hich has the follo%ing elements5 ;)> the
former 0dgment mst be final9 ;'> the cort %hich rendered it had 0risdiction over the sb0ect
matter and the parties9 ;*> the 0dgment mst be on the merits9 and ;,> there mst be bet%een
the first and the second actions, identit" of parties, sb0ect matter and cases of action. The
application of the doctrine of res 0dicata does not re!ire absolte identit" of parties bt merel"
sbstantial identit" of parties. There is sbstantial identit" of parties %hen there is commnit" of
interest or privit" of interest bet%een a part" in the first and a part" in the second case even if
the first case did not implead the latter.
To recall, FE86 gave N2C the fll po%er and athorit" to represent it in an" proceeding regarding
real propert" assessment. Therefore, %hen petitioner N2C filed its petition for revie% doc+eted
as A.F. No. )EB))*, it did so not onl" on its behalf bt also on behalf of FE86. 7oreover, the
assailed decision in the earlier petition for revie% filed in this Cort %as the decision of the
appellate cort in CA-A.F. 62 No. E4,(3, in %hich FE86 %as the petitioner. Ths, the decision in
A.F. No. )EB))E is binding on petitioner FE86 nder the principle of privit" of interest. $n fine,
FE86 and N2C are sbstantiall" "identical parties" as to %arrant the application of res 0dicata.
FE86Xs argment that it is not bond b" the erroneos petition filed b" N2C is ths navailing.
@n the isse of form shopping, %e rle for the 2rovincial Assessor. Form shopping e#ists
%hen, as a reslt of an adverse 0dgment in one form, a part" see+s another and possibl"
favorable 0dgment in another form other than b" appeal or special civil action or certiorari.
There is also form shopping %hen a part" instittes t%o or more actions or proceedings
gronded on the same case, on the gamble that one or the other cort %old ma+e a favorable
disposition.
2etitioner FE86 alleges that there is no form shopping since the elements of res 0dicata are not
present in the cases at bar9 ho%ever, as alread" discssed, res 0dicata ma" be properl" applied
herein. 2etitioners engaged in form shopping %hen the" filed A.F. Nos. )E1BB4 and )43E'1
after the petition for revie% in A.F. No. )EB))E. $ndeed, petitioners %ent from one cort to
another tr"ing to get a favorable decision from one of the tribnals %hich allo%ed them to
prse their cases.
$t mst be stressed that an important factor in determining the e#istence of form shopping is
the ve#ation cased to the corts and the parties-litigants b" the filing of similar cases to claim
sbstantiall" the same reliefs. The rationale against form shopping is that a part" shold not be
allo%ed to prse simltaneos remedies in t%o different fora. Filing mltiple petitions or
complaints constittes abse of cort processes, %hich tends to degrade the administration of
0stice, %rea+s havoc pon orderl" 0dicial procedre, and adds to the congestion of the heavil"
brdened doc+ets of the corts.
Ths, there is form shopping %hen there e#ist5 ;a> identit" of parties, or at least sch parties
as represent the same interests in both actions, ;b> identit" of rights asserted and relief pra"ed
for, the relief being fonded on the same facts, and ;c> the identit" of the t%o preceding
particlars is sch that an" 0dgment rendered in the pending case, regardless of %hich part" is
sccessfl, %old amont to res 0dicata in the other.
?aving fond that the elements of res 0dicata and form shopping are present in the
consolidated cases, a discssion of the other isses is no longer necessar". Nevertheless, for the
peace and contentment of petitioners, %e shall shed light on the merits of the case.
As fond b" the appellate cort, the CBAA and 8BAA po%er barges are real propert" and are
ths sb0ect to real propert" ta#. This is also the inevitable conclsion, considering that A.F. No.
)EB))* %as dismissed for failre to sfficientl" sho% an" reversible error. Ta# assessments b"
ta# e#aminers are presmed correct and made in good faith, %ith the ta#pa"er having the
brden of proving other%ise. Besides, factal findings of administrative bodies, %hich have
ac!ired e#pertise in their field, are generall" binding and conclsive pon the Cort9 %e %ill not
assme to interfere %ith the sensible e#ercise of the 0dgment of men especiall" trained in
appraising propert". :here the 0dicial mind is left in dobt, it is a sond polic" to leave the
assessment ndistrbed. :e find no reason to depart from this rle in this case.
$n Consolidated Edison Compan" of Ne% Ior+, $nc., et al. v. The Cit" of Ne% Ior+, et al., a po%er
compan" broght an action to revie% propert" ta# assessment. @n the cit"Xs motion to dismiss,
the 6preme Cort of Ne% Ior+ held that the barges on %hich %ere monted gas trbine po%er
plants designated to generate electrical po%er, the fel oil barges %hich spplied fel oil to the
po%er plant barges, and the accessor" e!ipment monted on the barges %ere sb0ect to real
propert" ta#ation.
7oreover, Article ,)B ;(> of the Ne% Civil Code provides that "<d=oc+s and strctres %hich,
thogh floating, are intended b" their natre and ob0ect to remain at a fi#ed place on a river,
la+e, or coast" are considered immovable propert". Ths, po%er barges are categoriDed as
immovable propert" b" destination, being in the natre of machiner" and other implements
intended b" the o%ner for an indstr" or %or+ %hich ma" be carried on in a bilding or on a
piece of land and %hich tend directl" to meet the needs of said indstr" or %or+.
2etitioners maintain nevertheless that the po%er barges are e#empt from real estate ta# nder
6ection '*, ;c> of F.A. No. 4)E3 becase the" are actall", directl" and e#clsivel" sed b"
petitioner N2C, a government- o%ned and controlled corporation engaged in the sppl",
generation, and transmission of electric po%er.
:e affirm the findings of the 8BAA and CBAA that the o%ner of the ta#able properties is
petitioner FE86, %hich in fine, is the entit" being ta#ed b" the local government. As stiplated
nder 6ection '.)), Article ' of the Agreement5
@:NEF6?$2 @F 2@:EF BAFAE6. 2@8AF shall o%n the 2o%er Barges and all the fi#tres,
fittings, machiner" and e!ipment on the 6ite sed in connection %ith the 2o%er Barges %hich
have been spplied b" it at its o%n cost. 2@8AF shall operate, manage and maintain the 2o%er
Barges for the prpose of converting Fel of NA2@C@F into electricit".
$t follo%s then that FE86 cannot escape liabilit" from the pa"ment of realt" ta#es b" invo+ing its
e#emption in 6ection '*, ;c> of F.A. No. 4)E3, %hich reads5
6ECT$@N '*,. E#emptions from Feal 2ropert" Ta#. \ The follo%ing are e#empted from pa"ment
of the real propert" ta#5
# # #
;c> All machineries and e!ipment that are actall", directl" and e#clsivel" sed b" local %ater
districts and government-o%ned or controlled corporations engaged in the sppl" and
distribtion of %ater andLor generation and transmission of electric po%er9 # # #
$ndeed, the la% states that the machiner" mst be actall", directl" and e#clsivel" sed b" the
government o%ned or controlled corporation9 nevertheless, petitioner FE86 still cannot find
solace in this provision becase 6ection B.B, Article B of the Agreement provides5
@2EFAT$@N. 2@8AF nderta+es that ntil the end of the 8ease 2eriod, sb0ect to the sppl" of
the necessar" Fel prsant to Article E and to the other provisions hereof, it %ill operate the
2o%er Barges to convert sch Fel into electricit" in accordance %ith 2art A of Article 4.
$t is a basic rle that obligations arising from a contract have the force of la% bet%een the
parties. Not being contrar" to la%, morals, good cstoms, pblic order or pblic polic", the
parties to the contract are bond b" its terms and conditions.
Time and again, the 6preme Cort has stated that ta#ation is the rle and e#emption is the
e#ception. The la% does not loo+ %ith favor on ta# e#emptions and the entit" that %old see+ to
be ths privileged mst 0stif" it b" %ords too plain to be mista+en and too categorical to be
misinterpreted. Ths, appl"ing the rle of strict constrction of la%s granting ta# e#emptions,
and the rle that dobts shold be resolved in favor of provincial corporations, %e hold that FE86
is considered a ta#able entit".
The mere nderta+ing of petitioner N2C nder 6ection )3.) of the Agreement, that it shall be
responsible for the pa"ment of all real estate ta#es and assessments, does not 0stif" the
e#emption. The privilege granted to petitioner N2C cannot be e#tended to FE86. The covenant is
bet%een FE86 and N2C and does not bind a third person not priv" thereto, in this case, the
2rovince of Batangas.
$t mst be pointed ot that the protracted and circitos litigation has seriosl" reslted in the
local governmentXs deprivation of revenes. The po%er to ta# is an incident of sovereignt" and is
nlimited in its magnitde, ac+no%ledging in its ver" natre no perimeter so that secrit"
against its abse is to be fond onl" in the responsibilit" of the legislatre %hich imposes the ta#
on the constitenc" %ho are to pa" for it. The right of local government nits to collect ta#es de
mst al%a"s be pheld to avoid severe ta# erosion. This consideration is consistent %ith the
6tate polic" to garantee the atonom" of local governments and the ob0ective of the 8ocal
Aovernment Code that the" en0o" genine and meaningfl local atonom" to empo%er them to
achieve their fllest development as self-reliant commnities and ma+e them effective partners
in the attainment of national goals.
$n conclsion, %e reiterate that the po%er to ta# is the most potent instrment to raise the
needed revenes to finance and spport m"riad activities of the local government nits for the
deliver" of basic services essential to the promotion of the general %elfare and the enhancement
of peace, progress, and prosperit" of the people.
:?EFEF@FE, the 2etitions are &EN$E& and the assailed &ecisions and Fesoltions AFF$F7E&.
6@ @F&EFE&.
EN BANC
G.R. No. L-195+* Mar78 2), 1962
R!CAR3O "RES4!TERO, 5# 85( 7a;a751y a( EBe7u1or o6 18e Te(1a1e E(1a1e o6 E"ER!3!ON
"RES4!TERO, petitioner,
vs.
TE ON. %OSE F. FERNAN3E-, ELEN CARAM NA.A, a#$ 18e "RO.!NC!AL SER!FF OF
NEGROS OCC!3ENTAL, respondents.
REYES, %.4.L., J.:
2etition for a %rit of certiorari against the Cort of First $nstance of Negros @ccidental.
$t appears that dring the lifetime of Esperidion 2resbitero, 0dgment %as rendered against him
b" the Cort of Appeals on @ctober ),, )(B(, in CA-A.F. No. '314(,
... to e#ecte in favor of the plaintiff, %ithin *3 da"s from the time this 0dgment becomes
final, a deed of reconve"ance of 8ot No. 411 of the cadastral srve" of Calladolid, free
from all liens and encmbrances, and another deed of reconve"ance of a 4-hectare
portion of 8ot No. E31 of the same cadastral srve", also free from all liens and
encmbrances, or, pon failre to do so, to pa" to the plaintiff the vale of each of the
said properties, as ma" be determined b" the Cort a quo pon evidence to be presented
b" the parties before it. The defendant is frther ad0dged to pa" to the plaintiff the vale
of the prodcts received b" him from the B-hectare portion e!ivalent to '3 cavans of
pala" per hectare ever" "ear, or )'B cavans "earl", at the rate of 2)3.33 per cavan, from
)(B) ntil possession of the said B-hectare portion is finall" delivered to the plaintiff %ith
legal interest thereon from the time the complaint %as filed9 and to pa" to the plaintiff the
sm of 2),333.33 b" %a" of attorne".s fees, pls costs.
This 0dgment, %hich became final, %as a modification of a decision of the Cort of First
$nstance of Negros @ccidental, in its Civil Case No. *,(', entitled "?elen Caram Nava, plaintiff,
verss Esperidion 2resbitero, defendant."
Thereafter, plaintiff.s consel, in a letter dated &ecember 1, )(B(, soght in vain to amicabl"
settle the case throgh petitioner.s son, Ficardo 2resbitero. :hen no response %as forthcoming,
said consel as+ed for, and the cort a quo ordered on -ne (, )(E3, the issance of a partial
%rit of e#ection for the sm of 2)','B3.33. @n the follo%ing da", -ne )3, )(E3, said consel,
in another friendl" letter, reiterated his previos sggestion for an amicable settlement, bt the
same prodced no fritfl reslt. Therepon, on -ne '), )(E3, the sheriff levied pon and
garnished the sgar !otas allotted to plantation adit Nos. 'E-'*4, 'E-'*1, 'E-'*(, 'E-',3
and 'E-',) adhered to the 7a-ao 7ill &istrict and "registered in the name of Esperidion
2resbitero as the original plantation-o%ner", frnishing copies of the %rit of e#ection and the
notice of garnishment to the manager of the 7a-ao 6gar Central Compan", Bago, Negros
@ccidental, and the 6gar Mota Administration at Bacolod Cit", bt %ithot presenting for
registration copies thereof to the Fegister of &eeds.
2laintiff ?elen Caram Nava ;herein respondent> then moved the cort, on -ne '', )(E3, to hear
evidence on the mar+et vale of the lots9 and after some hearings, occasionall" protracted b"
postponements, the trial cort, on manifestation of defendant.s %illingness to cede the
properties in litigation, sspended the proceedings and ordered him to segregate the portion of
8ot E31 pertaining to the plaintiff from the mass of properties belonging to the defendant %ithin
a period to e#pire on Agst ',, )(E3, and to effect the final conve"ance of the said portion of
8ot E31 and the %hole of 8ot 411 free from an" lien and encmbrance %hatsoever. Becase of
2resbitero.s failre to compl" %ith this order %ithin the time set forth b" the cort, the plaintiff
again moved on Agst 'B, )(E3 to declare the mar+et vale of the lots in !estion to be
2',B33.33 per hectare, based on ncontradicted evidence previosl" addced. Bt the cort,
acting on a pra"er of defendant 2resbitero, in an order dated Agst '4, )(E3, granted him
t%ent" ;'3> da"s to finaliDe the srve" of 8ot E31, and ordered him to e#ecte a reconve"ance
of 8ot 411 not later than Agst *), )(E3. &efendant again defalted9 and so plaintiff, on
6eptember '), )(E3, moved the cort for pa"ment b" the defendant of the sm of 2*B,333.33
for the ), hectares of land at 2',B33.33 to the hectare, and the cort, in its order dated
6eptember ',, )(E3, gave the defendant ntil @ctober )B, )(E3 either to pa" the vale of the
), hectares at the rate given or to deliver the clean titles of the lots. @n @ctober )B, )(E3, the
defendant finall" delivered Certificate of Title No. T-'13,E covering 8ot 411, bt not the title
covering 8ot E31 becase of an e#isting encmbrance in favor of the 2hilippine National Ban+. $n
vie% thereof, ?elen Caram Nava moved for, and secred on @ctober )(, )(E3, a %rit of
e#ection for 2)4,B33.33, and on the da" follo%ing %rote the sheriff to proceed %ith the action
sale of the sgar !otas previosl" schedled for November B, )(E3. The sheriff issed the
notice of action sale on @ctober '3, )(E3.
@n @ctober '', )(E3, death overtoo+ the defendant Esperidion 2resbitero.
2roceedings for the settlement of his estate %ere commenced in 6pecial 2roceedings No. '(*E of
the Cort of First $nstance of Negros @ccidental9 and on November ,, )(E3, the special
administrator, Ficardo 2resbitero, filed an rgent motion, in Case No. *,(', to set aside the %rits
of e#ection, and to order the sheriff to desist from holding the action sale on the gronds that
the lev" on the sgar !otas %as invalid becase the notice thereof %as not registered %ith the
Fegister of &eeds, as for real propert", and that the %rits, being for sms of mone", are
nenforceable since Esperidion 2resbitero died on @ctober '', )(E3, and, therefore, cold onl"
be enforced as a mone" claim against his estate.
This rgent motion %as heard on November B, )(E3, bt the action sale proceeded on the
same date, ending in the plaintiff.s ptting p the highest bid for 2*,,(43.))9 ths, the sheriff
sold '),E,3 picls of sgar !ota to her.
@n November )3, )(E3, plaintiff Nava filed her opposition to 2resbitero.s rgent motion of
November ,, )(E39 the latter filed on 7a" ,, )(E) a spplement to his rgent motion9 and on
7a" 1 and '*, )(E), the cort contined hearings on the motion, and ltimatel" denied it on
November )1, )(E).
@n -anar" )), )(E', plaintiff Nava also filed an rgent motion to order the 7a-ao 6gar Central
to register the sgar !otas in her name and to deliver the rentals of these !otas
corresponding to the crop "ear )(E3-E) and scceeding "ears to her. The cort granted this
motion in its order dated Febrar" *, )(E'. A motion for reconsideration b" 2resbitero %as
denied in a sbse!ent order nder date of 7arch B, )(E'. :herefore, 2resbitero institted the
present proceedings for certiorari.
A preliminar" restraining %rit %as thereafter issed b" the cort against the respondents from
implementing the aforesaid orders of the respondent -dge, dated Febrar" *, )(E3 and 7arch
B, )(E', respectivel". The petition frther see+s the setting aside of the sheriff.s certificate of
sale of the sgar !otas made ot in favor of ?elen Caram Nava, and that she be directed to file
the 0dgment credit in her favor in Civil Case No. *,(' as a mone" claim in the proceedings to
settle the Estate of Esperidion 2resbitero.
The petitioner denies having been personall" served %ith notice of the garnishment of the sgar
!otas, bt this disclaimer cannot be seriosl" considered since it appears that he %as sent a
cop" of the notice throgh the chief of police of Calladolid on -ne '), )(E3, as certified to b"
the sheriff, and that he had actal +no%ledge of the garnishment, as sho%n b" his motion of
November ,, )(E3 to set aside the %rits of e#ection and to order the sheriff to desist from
holding the action sale.
6!arel" at isse in this case is %hether sgar !otas are real ;immovable> or personal
properties. $f the" be realt", then the lev" pon them b" the sheriff is nll and void for lac+ of
compliance %ith the procedre prescribed in 6ection ),, Fle *(, in relation %ith 6ection 4, Fle
B(, of the Fles of Cort re!iring "the filing %ith the register of deeds a cop" of the orders
together %ith a description of the propert" . . . ."
$n contending that sgar !otas are personal propert", the respondent, ?elen Caram Nava,
invo+ed the test formlated b" 7anresa ;* 7anresa, Eth Ed. ,*>, and opined that sgar !otas
can be carried from place to place %ithot in0r" to the land to %hich the" are attached, and are
not one of those inclded in Article ,)B of the Civil Code9 and not being ths inclded, the" fall
nder the categor" of personal properties5
AFT. ,)E. The follo%ing are deemed to be personal propert"5
# # # # # # # # #
,. $n general, all things %hich can be transported from place to place %ithot impairment
of the real propert" to %hich the" are fi#ed.
:herefore, the parties respectfll" pra" that the foregoing stiplation of facts be admitted
and approved b" this ?onorable Cort, %ithot pre0dice to the parties addcing other
evidence to prove their case not covered b" this stiplation of facts. 89wph:8.,;t
Fespondent li+e%ise points to evidence she sbmitted that sgar !otas are, in fact, transferred
apart from the plantations to %hich the" are attached, %ithot impairing, destro"ing, or
diminishing the potentialit" of either !ota or plantation. 6he %as sstained b" the lo%er cort
%hen it stated that "it is a matter of pblic +no%ledge and it is niversal practice in this
province, %hose principal indstr" is sgar, to transfer b" sale, lease, or other%ise, sgar !ota
allocations from one plantation to an" other" and that it is "specios to insist that !otas are
improvements attaching to one plantation %hen in trth and in fact the" are no longer attached
thereto for having been sold or leased a%a" to be sed in another plantation". Fespondent %old
add %eight to her argment b" invo+ing the role that sgar !otas pla" in or modern social and
economic life, and cites that the 6gar @ffice does not re!ire an" registration %ith the Fegister
of &eeds for the validit" of the sale of these !otas9 and, in fact, those here in !estion %ere not
noted do%n in the certificate of title of the land to %hich the" pertain9 and that Ficardo
2resbitero had leased sgar !otas independentl" of the land. The respondent cites frther that
the /.6.-2hilippine Trade Felations Act, approved b" the /nited 6tates Congress in )(,E, limiting
the prodction of nrefined sgar in the 2hilippines did not allocate the !otas for said nrefined
sgar among lands planted to sgarcane bt among "the sgar prodcing mills and plantation
@:NEF6", and for this reason 6ection * of E#ective @rder No. 14*, issed b" Aovernor Aeneral
7rph", athoriDes the lifting of sgar allotments from one land to another b" means onl" of
notariDed deeds.
:hile respondent.s argments are thoght-provo+ing, the" cannot stand against the positive
mandate of the pertinent statte. The 6gar 8imitation 8a% ;Act ,)EE, as amended> provides G
6EC. (. The allotment corresponding to each piece of land nder the provisions of this Act
shall be deemed to be an improvement attaching to the land entitled thereto ....
and Fepblic Act No. )1'B similarl" provides G
6EC. ,. The prodction allo%ance or !otas corresponding to each piece of land nder the
provisions of this Act shall be deemed to be an improvement attaching to the land entitled
thereto ....
And E#ective @rder No. 14* defines "plantation" as follo%s5
;a> The term .plantation. means an" specific area of land nder sole or ndivided
o%nership to %hich is attached an allotment of centrifgal sgar.
Ths, nder e#press provisions of la%, the sgar !ota allocations are accessories to land, and
can not have independent e#istence a%a" from a plantation, althogh the latter ma" var".
$ndeed, this Cort held in the case of &belarde vs. Lope$# <= *hil. >==, that even if a contract of
sale of haciendas omitted "the right, title, interest, participation, action ;and> rent" %hich the
grantors had or might have in relation to the parcels of land sold, the sale %old inclde the
!otas, it being provided in 6ection (, Act ,)EE, that the allotment is deemed an improvement
attached to the land, and that at the time the contract of sale %as signed the land devoted to
sgar %ere practicall" of no se %ithot the sgar allotment.
As an improvement attached to land, b" e#press provision of la%, thogh not ph"sicall" so
nited, the sgar !otas are inseparable therefrom, 0st li+e servitdes and other real rights
over an immovable. Article ,)B of the Civil Code, in enmerating %hat are immovable
properties, names G
)3. Contracts for pblic %or+s, and servitdes and other real rights over immovable
property. ;Emphasis spplied>
$t is b" la%, therefore, that these properties are immovable or real, Article ,)E of the Civil Code
being made to appl" onl" %hen the thing ;res> soght to be classified is not inclded in Article
,)B.
The fact that the 2hilippine Trade Act of )(,E ;/.6. 2blic 8a% *4)-4(th Congress> allo%s
transfers of sgar !otas does not militate against their immovabilit". Neither does the fact that
the 6gar Mota @ffice does not re!ire registration of sales of !otas %ith the Fegister of
&eeds for their validit", nor the fact that allocation of nrefined sgar !otas is not made among
lands planted to sgarcane bt among "the sgar prodcing mills and plantation @:NEF6",
since the lease or sale of !otas are voluntary transactions, the regime of %hich, is not
necessaril" identical to involuntary transfers or levies9 and there cannot be a sgar plantation
o%ner %ithot land to %hich the !ota is attached9 and there can e#ist no !ota %ithot there
being first a corresponding plantation.
6ince the lev" is invalid for non-compliance %ith la%, it is impertinent to discss the srvival or
non-srvival of claims after the death of the 0dgment debtor, gaged from the moment of
actal lev". 6ffice it to state that, as the case presentl" stands, the %rits of e#ection are not in
!estion, bt the lev" on the !otas, and, becase of its invalidit", the lev" amont to no lev" at
all. Neither is it necessar", or desirable, to pass pon the conscionableness or
nconscionableness of the amont prodced in the action sale as compared %ith the actal
vale of the !otas inasmch as the sale mst necessaril" be also illegal.
As to the remedial isse that the respondents have presented5 that certiorari does not lie in this
case becase the petitioner had a remed" in the lo%er cort to "sspend" the action sale, bt
did not avail thereof, it ma" be stated that the latter.s rgent motion of November ,, )(E3, a
da" before the schedled sale ;thogh nresolved b" the cort on time>, did as+ for desistance
from holding the sale.
:?EFEF@FE, the preliminar" in0nction heretofore granted is hereb" made permanent, and the
sheriff.s certificate of sale of the sgar !otas in !estion declared nll and void. Costs against
respondent Nava.