G.R. No.

L-11658

February 15, 1918

LEUNG YEE, plaintiff-appellant, vs. FRANK L. STRONG MACHINERY

COMPANY and J. G. WILLIAMSON, defendants-appellees.
CARSON, J.:
The "Compaia Agricola Filipina" bought a considerable quantity of ricecleaning machinery company from the defendant machinery company, and
executed a chattel mortgage thereon to secure payment of the purchase
price. It included in the mortgage deed the building of strong materials in
which the machinery was installed, without any reference to the land on
which it stood. The indebtedness secured by this instrument not having
been paid when it fell due, the mortgaged property was sold by the sheriff,
in pursuance of the terms of the mortgage instrument, and was bought in
by the machinery company. The mortgage was registered in the chattel
mortgage registry, and the sale of the property to the machinery company
in satisfaction of the mortgage was annotated in the same registry on
December 29, 1913.
A few weeks thereafter, on or about the 14th of January, 1914, the
"Compaia Agricola Filipina" executed a deed of sale of the land upon
which the building stood to the machinery company, but this deed of sale,
although executed in a public document, was not registered. This deed
makes no reference to the building erected on the land and would appear
to have been executed for the purpose of curing any defects which might
be found to exist in the machinery company's title to the building under
the sheriff's certificate of sale. The machinery company went into
possession of the building at or about the time when this sale took place,
that is to say, the month of December, 1913, and it has continued in
possession ever since.
At or about the time when the chattel mortgage was executed in favor of
the machinery company, the mortgagor, the "Compaia Agricola Filipina"
executed another mortgage to the plaintiff upon the building, separate and
apart from the land on which it stood, to secure payment of the balance of
its indebtedness to the plaintiff under a contract for the construction of the
building. Upon the failure of the mortgagor to pay the amount of the
indebtedness secured by the mortgage, the plaintiff secured judgment for
that amount, levied execution upon the building, bought it in at the
sheriff's sale on or about the 18th of December, 1914, and had the sheriff's
certificate of the sale duly registered in the land registry of the Province of
Cavite.
At the time when the execution was levied upon the building, the
defendant machinery company, which was in possession, filed with the

sheriff a sworn statement setting up its claim of title and demanding the
release of the property from the levy. Thereafter, upon demand of the
sheriff, the plaintiff executed an indemnity bond in favor of the sheriff in
the sum of P12,000, in reliance upon which the sheriff sold the property at
public auction to the plaintiff, who was the highest bidder at the sheriff's
sale.
This action was instituted by the plaintiff to recover possession of the
building from the machinery company.
The trial judge, relying upon the terms of article 1473 of the Civil Code,
gave judgment in favor of the machinery company, on the ground that the
company had its title to the building registered prior to the date of registry
of the plaintiff's certificate.
Article 1473 of the Civil Code is as follows:
If the same thing should have been sold to different vendees, the
ownership shall be transfer to the person who may have the first
taken possession thereof in good faith, if it should be personal
property.
Should it be real property, it shall belong to the person acquiring it
who first recorded it in the registry.
Should there be no entry, the property shall belong to the person
who first took possession of it in good faith, and, in the absence
thereof, to the person who presents the oldest title, provided there
is good faith.
The registry her referred to is of course the registry of real property, and it
must be apparent that the annotation or inscription of a deed of sale of
real property in a chattel mortgage registry cannot be given the legal
effect of an inscription in the registry of real property. By its express terms,
the Chattel Mortgage Law contemplates and makes provision for
mortgages of personal property; and the sole purpose and object of the
chattel mortgage registry is to provide for the registry of "Chattel
mortgages," that is to say, mortgages of personal property executed in the
manner and form prescribed in the statute. The building of strong
materials in which the rice-cleaning machinery was installed by the
"Compaia Agricola Filipina" was real property, and the mere fact that the
parties seem to have dealt with it separate and apart from the land on
which it stood in no wise changed its character as real property. It follows
that neither the original registry in the chattel mortgage of the building
and the machinery installed therein, not the annotation in that registry of

the sale of the mortgaged property, had any effect whatever so far as the
building was concerned.
We conclude that the ruling in favor of the machinery company cannot be
sustained on the ground assigned by the trial judge. We are of opinion,
however, that the judgment must be sustained on the ground that the
agreed statement of facts in the court below discloses that neither the
purchase of the building by the plaintiff nor his inscription of the sheriff's
certificate of sale in his favor was made in good faith, and that the
machinery company must be held to be the owner of the property under
the third paragraph of the above cited article of the code, it appearing that
the company first took possession of the property; and further, that the
building and the land were sold to the machinery company long prior to
the date of the sheriff's sale to the plaintiff.
It has been suggested that since the provisions of article 1473 of the Civil
Code require "good faith," in express terms, in relation to "possession" and
"title," but contain no express requirement as to "good faith" in relation to
the "inscription" of the property on the registry, it must be presumed that
good faith is not an essential requisite of registration in order that it may
have the effect contemplated in this article. We cannot agree with this
contention. It could not have been the intention of the legislator to base
the preferential right secured under this article of the code upon an
inscription of title in bad faith. Such an interpretation placed upon the
language of this section would open wide the door to fraud and collusion.
The public records cannot be converted into instruments of fraud and
oppression by one who secures an inscription therein in bad faith. The
force and effect given by law to an inscription in a public record
presupposes the good faith of him who enters such inscription; and rights
created by statute, which are predicated upon an inscription in a public
registry, do not and cannot accrue under an inscription "in bad faith," to
the benefit of the person who thus makes the inscription.
Construing the second paragraph of this article of the code, the supreme
court of Spain held in its sentencia of the 13th of May, 1908, that:
This rule is always to be understood on the basis of the good faith
mentioned in the first paragraph; therefore, it having been found
that the second purchasers who record their purchase had
knowledge of the previous sale, the question is to be decided in
accordance with the following paragraph. (Note 2, art. 1473, Civ.
Code, Medina and Maranon [1911] edition.)
Although article 1473, in its second paragraph, provides that the
title of conveyance of ownership of the real property that is first
recorded in the registry shall have preference, this provision must
always be understood on the basis of the good faith mentioned in

the first paragraph; the legislator could not have wished to strike it
out and to sanction bad faith, just to comply with a mere formality
which, in given cases, does not obtain even in real disputes
between third persons. (Note 2, art. 1473, Civ. Code, issued by the
publishers of the La Revista de los Tribunales, 13th edition.)
The agreed statement of facts clearly discloses that the plaintiff, when he
bought the building at the sheriff's sale and inscribed his title in the land
registry, was duly notified that the machinery company had bought the
building from plaintiff's judgment debtor; that it had gone into possession
long prior to the sheriff's sale; and that it was in possession at the time
when the sheriff executed his levy. The execution of an indemnity bond by
the plaintiff in favor of the sheriff, after the machinery company had filed
its sworn claim of ownership, leaves no room for doubt in this regard.
Having bought in the building at the sheriff's sale with full knowledge that
at the time of the levy and sale the building had already been sold to the
machinery company by the judgment debtor, the plaintiff cannot be said to
have been a purchaser in good faith; and of course, the subsequent
inscription of the sheriff's certificate of title must be held to have been
tainted with the same defect.
Perhaps we should make it clear that in holding that the inscription of the
sheriff's certificate of sale to the plaintiff was not made in good faith, we
should not be understood as questioning, in any way, the good faith and
genuineness of the plaintiff's claim against the "Compaia Agricola
Filipina." The truth is that both the plaintiff and the defendant company
appear to have had just and righteous claims against their common debtor.
No criticism can properly be made of the exercise of the utmost diligence
by the plaintiff in asserting and exercising his right to recover the amount
of his claim from the estate of the common debtor. We are strongly inclined
to believe that in procuring the levy of execution upon the factory building
and in buying it at the sheriff's sale, he considered that he was doing no
more than he had a right to do under all the circumstances, and it is highly
possible and even probable that he thought at that time that he would be
able to maintain his position in a contest with the machinery company.
There was no collusion on his part with the common debtor, and no
thought of the perpetration of a fraud upon the rights of another, in the
ordinary sense of the word. He may have hoped, and doubtless he did
hope, that the title of the machinery company would not stand the test of
an action in a court of law; and if later developments had confirmed his
unfounded hopes, no one could question the legality of the propriety of the
course he adopted.
But it appearing that he had full knowledge of the machinery company's
claim of ownership when he executed the indemnity bond and bought in
the property at the sheriff's sale, and it appearing further that the
machinery company's claim of ownership was well founded, he cannot be

said to have been an innocent purchaser for value. He took the risk and
must stand by the consequences; and it is in this sense that we find that
he was not a purchaser in good faith.
One who purchases real estate with knowledge of a defect or lack of title in
his vendor cannot claim that he has acquired title thereto in good faith as
against the true owner of the land or of an interest therein; and the same
rule must be applied to one who has knowledge of facts which should have
put him upon such inquiry and investigation as might be necessary to
acquaint him with the defects in the title of his vendor. A purchaser cannot
close his eyes to facts which should put a reasonable man upon his guard,
and then claim that he acted in good faith under the belief that there was
no defect in the title of the vendor. His mere refusal to believe that such
defect exists, or his willful closing of his eyes to the possibility of the
existence of a defect in his vendor's title, will not make him an innocent
purchaser for value, if afterwards develops that the title was in fact
defective, and it appears that he had such notice of the defects as would
have led to its discovery had he acted with that measure of precaution
which may reasonably be acquired of a prudent man in a like situation.
Good faith, or lack of it, is in its analysis a question of intention; but in
ascertaining the intention by which one is actuated on a given occasion,
we are necessarily controlled by the evidence as to the conduct and
outward acts by which alone the inward motive may, with safety, be
determined. So it is that "the honesty of intention," "the honest lawful
intent," which constitutes good faith implies a "freedom from knowledge
and circumstances which ought to put a person on inquiry," and so it is
that proof of such knowledge overcomes the presumption of good faith in
which the courts always indulge in the absence of proof to the contrary.
"Good faith, or the want of it, is not a visible, tangible fact that can be seen
or touched, but rather a state or condition of mind which can only be
judged of by actual or fancied tokens or signs." (Wilder vs. Gilman, 55 Vt.,
504, 505; Cf. Cardenas Lumber Co. vs. Shadel, 52 La. Ann., 2094-2098;
Pinkerton Bros. Co. vs. Bromley, 119 Mich., 8, 10, 17.)
We conclude that upon the grounds herein set forth the disposing part of
the decision and judgment entered in the court below should be affirmed
with costs of this instance against the appellant. So ordered.
Arellano, C.J., Johnson, Araullo, Street and Malcolm, JJ., concur.
Torres, Avancea and Fisher, JJ., took no part.
G.R. Nos. L-10817-18

February 28, 1958

ENRIQUE LOPEZ, petitioner, vs. VICENTE OROSA, JR., and PLAZA

THEATRE, INC., respondents.

FELIX, J.:
Enrique Lopez is a resident of Balayan, Batangas, doing business under the
trade name of Lopez-Castelo Sawmill. Sometime in May, 1946, Vicente
Orosa, Jr., also a resident of the same province, dropped at Lopez' house
and invited him to make an investment in the theatre business. It was
intimated that Orosa, his family and close friends were organizing a
corporation to be known as Plaza Theatre, Inc., that would engage in such
venture. Although Lopez expressed his unwillingness to invest of the same,
he agreed to supply the lumber necessary for the construction of the
proposed theatre, and at Orosa's behest and assurance that the latter
would be personally liable for any account that the said construction might
incur, Lopez further agreed that payment therefor would be on demand
and not cash on delivery basis. Pursuant to said verbal agreement, Lopez
delivered the lumber which was used for the construction of the Plaza
Theatre on May 17, 1946, up to December 4 of the same year. But of the
total cost of the materials amounting to P62,255.85, Lopez was paid only
P20,848.50, thus leaving a balance of P41,771.35.
We may state at this juncture that the Plaza Theatre was erected on a
piece of land with an area of 679.17 square meters formerly owned by
Vicente Orosa, Jr., and was acquired by the corporation on September 25,
1946, for P6,000. As Lopez was pressing Orosa for payment of the
remaining unpaid obligation, the latter and Belarmino Rustia, the president
of the corporation, promised to obtain a bank loan by mortgaging the
properties of the Plaza Theatre., out of which said amount of P41,771.35
would be satisfied, to which assurance Lopez had to accede. Unknown to
him, however, as early as November, 1946, the corporation already got a
loan for P30,000 from the Philippine National Bank with the Luzon Surety
Company as surety, and the corporation in turn executed a mortgage on
the land and building in favor of said company as counter-security. As the
land at that time was not yet brought under the operation of the Torrens
System, the mortgage on the same was registered on November 16, 1946,
under Act No. 3344. Subsequently, when the corporation applied for the
registration of the land under Act 496, such mortgage was not revealed
and thus Original Certificate of Title No. O-391 was correspondingly issued
on October 25, 1947, without any encumbrance appearing thereon.
Persistent demand from Lopez for the payment of the amount due him
caused Vicente Orosa, Jr. to execute on March 17, 1947, an alleged "deed
of assignment" of his 420 shares of stock of the Plaza Theater, Inc., at P100
per share or with a total value of P42,000 in favor of the creditor, and as
the obligation still remained unsettled, Lopez filed on November 12, 1947,
a complaint with the Court of First Instance of Batangas (Civil Case No.
4501 which later became R-57) against Vicente Orosa, Jr. and Plaza
Theater, Inc., praying that defendants be sentenced to pay him jointly and
severally the sum of P41,771.35, with legal interest from the firing of the
action; that in case defendants fail to pay the same, that the building and
the land covered by OCT No. O-391 owned by the corporation be sold at
public auction and the proceeds thereof be applied to said indebtedness;

or that the 420 shares of the capital stock of the Plaza Theatre, Inc.,
assigned by Vicente Orosa, Jr., to said plaintiff be sold at public auction for
the same purpose; and for such other remedies as may be warranted by
the circumstances. Plaintiff also caused the annotation of a notice of lis
pendens on said properties with the Register of Deeds.
Defendants Vicente Orosa, Jr. and Plaza Theatre, Inc., filed separate
answers, the first denying that the materials were delivered to him as a
promoter and later treasurer of the corporation, because he had purchased
and received the same on his personal account; that the land on which the
movie house was constructed was not charged with a lien to secure the
payment of the aforementioned unpaid obligation; and that the 420 shares
of stock of the Plaza Theatre, Inc., was not assigned to plaintiff as
collaterals but as direct security for the payment of his indebtedness. As
special defense, this defendant contended that as the 420 shares of stock
assigned and conveyed by the assignor and accepted by Lopez as direct
security for the payment of the amount of P41,771.35 were personal
properties, plaintiff was barred from recovering any deficiency if the
proceeds of the sale thereof at public auction would not be sufficient to
cover and satisfy the obligation. It was thus prayed that he be declared
exempted from the payment of any deficiency in case the proceeds from
the sale of said personal properties would not be enough to cover the
amount sought to be collected.
Defendant Plaza Theatre, Inc., on the other hand, practically set up the
same line of defense by alleging that the building materials delivered to
Orosa were on the latter's personal account; and that there was no
understanding that said materials would be paid jointly and severally by
Orosa and the corporation, nor was a lien charged on the properties of the
latter to secure payment of the same obligation. As special defense,
defendant corporation averred that while it was true that the materials
purchased by Orosa were sold by the latter to the corporation, such
transactions were in good faith and for valuable consideration thus when
plaintiff failed to claim said materials within 30 days from the time of
removal thereof from Orosa, lumber became a different and distinct specie
and plaintiff lost whatever rights he might have in the same and
consequently had no recourse against the Plaza Theatre, Inc., that the
claim could not have been refectionary credit, for such kind of obligation
referred to an indebtedness incurred in the repair or reconstruction of
something already existing and this concept did not include an entirely
new work; and that the Plaza Theatre, Inc., having been incorporated on
October 14, 1946, it could not have contracted any obligation prior to said
date. It was, therefore, prayed that the complaint be dismissed; that said
defendant be awarded the sum P 5,000 for damages, and such other relief
as may be just and proper in the premises.
The surety company, in the meantime, upon discovery that the land was
already registered under the Torrens System and that there was a notice of
lis pendens thereon, filed on August 17, 1948, or within the 1-year period
after the issuance of the certificate of title, a petition for review of the

decree of the land registration court dated October 18, 1947, which was
made the basis of OCT No. O-319, in order to annotate the rights and
interests of the surety company over said properties (Land Registration
Case No. 17 GLRO Rec. No. 296). Opposition thereto was offered by
Enrique Lopez, asserting that the amount demanded by him constituted a
preferred lien over the properties of the obligors; that the surety company
was guilty of negligence when it failed to present an opposition to the
application for registration of the property; and that if any violation of the
rights and interest of said surety would ever be made, same must be
subject to the lien in his favor.
The two cases were heard jointly and in a decision dated October 30, 1952,
the lower Court, after making an exhaustive and detailed analysis of the
respective stands of the parties and the evidence adduced at the trial, held
that defendants Vicente Orosa, Jr., and the Plaza Theatre, Inc., were jointly
liable for the unpaid balance of the cost of lumber used in the construction
of the building and the plaintiff thus acquired the materialman's lien over
the same. In making the pronouncement that the lien was merely confined
to the building and did not extend to the land on which the construction
was made, the trial judge took into consideration the fact that when
plaintiff started the delivery of lumber in May, 1946, the land was not yet
owned by the corporation; that the mortgage in favor of Luzon Surety
Company was previously registered under Act No. 3344; that the codal
provision (Art. 1923 of the old Spanish Civil Code) specifying that refection
credits are preferred could refer only to buildings which are also classified
as real properties, upon which said refection was made. It was, however,
declared that plaintiff's lien on the building was superior to the right of the
surety company. And finding that the Plaza Theatre, Inc., had no objection
to the review of the decree issued in its favor by the land registration court
and the inclusion in the title of the encumbrance in favor of the surety
company, the court a quo granted the petition filed by the latter company.
Defendants Orosa and the Plaza Theatre, Inc., were thus required to pay
jointly the amount of P41,771.35 with legal interest and costs within 90
days from notice of said decision; that in case of default, the 420 shares of
stock assigned by Orosa to plaintiff be sold at public auction and the
proceeds thereof be applied to the payment of the amount due the
plaintiff, plus interest and costs; and that the encumbrance in favor of the
surety company be endorsed at the back of OCT No. O-391, with notation I
that with respect to the building, said mortgage was subject to the
materialman's lien in favor of Enrique Lopez.
Plaintiff tried to secure a modification of the decision in so far as it declared
that the obligation of therein defendants was joint instead of solidary, and
that the lien did not extend to the land, but same was denied by order the
court of December 23, 1952. The matter was thus appealed to the Court of
appeals, which affirmed the lower court's ruling, and then to this Tribunal.
In this instance, plaintiff-appellant raises 2 issues: (1) whether a
materialman's lien for the value of the materials used in the construction of
a building attaches to said structure alone and does not extend to the land
on which the building is adhered to; and (2) whether the lower court and

the Court of Appeals erred in not providing that the material mans liens is
superior to the mortgage executed in favor surety company not only on the
building but also on the land.
It is to be noted in this appeal that Enrique Lopez has not raised any
question against the part of the decision sentencing defendants Orosa and
Plaza Theatre, Inc., to pay jointly the sum of P41,771.35, so We will not
take up or consider anything on that point. Appellant, however, contends
that the lien created in favor of the furnisher of the materials used for the
construction, repair or refection of a building, is also extended to the land
which the construction was made, and in support thereof he relies on
Article 1923 of the Spanish Civil Code, pertinent law on the matter, which
reads as follows:
ART. 1923. With respect to determinate real property and real
rights of the debtor, the following are preferred:
xxx

xxx

xxx

5. Credits for refection, not entered or recorded, with respect to

the estate upon which the refection was made, and only with
respect to other credits different from those mentioned in four
preceding paragraphs.
It is argued that in view of the employment of the phrase real estate, or
immovable property, and inasmuch as said provision does not contain any
specification delimiting the lien to the building, said article must be
construed as to embrace both the land and the building or structure
adhering thereto. We cannot subscribe to this view, for while it is true that
generally, real estate connotes the land and the building constructed
thereon, it is obvious that the inclusion of the building, separate and
distinct from the land, in the enumeration of what may constitute real
properties1 could mean only one thing that a building is by itself an
immovable property, a doctrine already pronounced by this Court in the
case of Leung Yee vs. Strong Machinery Co., 37 Phil., 644. Moreover, and in
view of the absence of any specific provision of law to the contrary, a
building is an immovable property, irrespective of whether or not said
structure and the land on which it is adhered to belong to the same owner.
A close examination of the provision of the Civil Code invoked by appellant
reveals that the law gives preference to unregistered refectionary credits
only with respect to the real estate upon which the refection or work was
made. This being so, the inevitable conclusion must be that the lien so
created attaches merely to the immovable property for the construction or
repair of which the obligation was incurred. Evidently, therefore, the lien in
favor of appellant for the unpaid value of the lumber used in the
construction of the building attaches only to said structure and to no other
property of the obligors.

Considering the conclusion thus arrived at, i.e., that the materialman's lien
could be charged only to the building for which the credit was made or
which received the benefit of refection, the lower court was right in,
holding at the interest of the mortgagee over the land is superior and
cannot be made subject to the said materialman's lien.
Wherefore, and on the strength of the foregoing considerations, the
decision appealed from is hereby affirmed, with costs against appellant. It
is so ordered.
Paras, C.J., Bengzon, Padilla, Montemayor, Reyes, A., Bautista Angelo,
Labrador, Concepcion, Reyes, J.B.L. and Endencia, JJ., concur.
Footnotes
Article 415 of the new Civil Code (Art. 334 of the old) enumerates
what are considered immovable property, among which are land,
buildings, roads and constructions of all kinds adhered to the soil.
1

G.R. No. 137705

August 22, 2000

SERG'S PRODUCTS, INC., and SERGIO T. GOQUIOLAY, petitioners, vs.

PCI LEASING AND FINANCE, INC., respondent.
PANGANIBAN, J.:
After agreeing to a contract stipulating that a real or immovable property
be considered as personal or movable, a party is estopped from
subsequently claiming otherwise. Hence, such property is a proper subject
of a writ of replevin obtained by the other contracting party.
The Case
Before us is a Petition for Review on Certiorari assailing the January 6, 1999
Decision1 of the Court of Appeals (CA)2 in CA-GR SP No. 47332 and its
February 26, 1999 Resolution3 denying reconsideration. The decretal
portion of the CA Decision reads as follows:
"WHEREFORE, premises considered, the assailed Order dated February 18,
1998 and Resolution dated March 31, 1998 in Civil Case No. Q-98-33500
are hereby AFFIRMED. The writ of preliminary injunction issued on June
15, 1998 is hereby LIFTED."4
In its February 18, 1998 Order,5 the Regional Trial Court (RTC) of Quezon
City (Branch 218)6 issued a Writ of Seizure.7 The March 18, 1998
Resolution8 denied petitioners Motion for Special Protective Order, praying

that the deputy sheriff be enjoined "from seizing immobilized or other real
properties in (petitioners) factory in Cainta, Rizal and to return to their
original place whatever immobilized machineries or equipments he may
have removed."9
The Facts
The undisputed facts are summarized by the Court of Appeals as follows: 10
"On February 13, 1998, respondent PCI Leasing and Finance, Inc. ("PCI
Leasing" for short) filed with the RTC-QC a complaint for [a] sum of money
(Annex E), with an application for a writ of replevin docketed as Civil Case
No. Q-98-33500.
"On March 6, 1998, upon an ex-parte application of PCI Leasing,
respondent judge issued a writ of replevin (Annex B) directing its sheriff to
seize and deliver the machineries and equipment to PCI Leasing after 5
days and upon the payment of the necessary expenses.
"On March 24, 1998, in implementation of said writ, the sheriff proceeded
to petitioners factory, seized one machinery with [the] word that he
[would] return for the other machineries.
"On March 25, 1998, petitioners filed a motion for special protective order
(Annex C), invoking the power of the court to control the conduct of its
officers and amend and control its processes, praying for a directive for the
sheriff to defer enforcement of the writ of replevin.
"This motion was opposed by PCI Leasing (Annex F), on the ground that
the properties [were] still personal and therefore still subject to seizure and
a writ of replevin.
"In their Reply, petitioners asserted that the properties sought to be seized
[were] immovable as defined in Article 415 of the Civil Code, the parties
agreement to the contrary notwithstanding. They argued that to give effect
to the agreement would be prejudicial to innocent third parties. They
further stated that PCI Leasing [was] estopped from treating these
machineries as personal because the contracts in which the alleged
agreement [were] embodied [were] totally sham and farcical.
"On April 6, 1998, the sheriff again sought to enforce the writ of seizure
and take possession of the remaining properties. He was able to take two
more, but was prevented by the workers from taking the rest.

"On April 7, 1998, they went to [the CA] via an original action for
certiorari."
Ruling of the Court of Appeals
Citing the Agreement of the parties, the appellate court held that the
subject machines were personal property, and that they had only been
leased, not owned, by petitioners. It also ruled that the "words of the
contract are clear and leave no doubt upon the true intention of the
contracting parties." Observing that Petitioner Goquiolay was an
experienced businessman who was "not unfamiliar with the ways of the
trade," it ruled that he "should have realized the import of the document
he signed." The CA further held:
"Furthermore, to accord merit to this petition would be to preempt the trial
court in ruling upon the case below, since the merits of the whole matter
are laid down before us via a petition whose sole purpose is to inquire upon
the existence of a grave abuse of discretion on the part of the [RTC] in
issuing the assailed Order and Resolution. The issues raised herein are
proper subjects of a full-blown trial, necessitating presentation of evidence
by both parties. The contract is being enforced by one, and [its] validity is
attacked by the other a matter x x x which respondent court is in the best
position to determine."
Hence, this Petition.11
The Issues
In their Memorandum, petitioners submit the following issues for our
consideration:
"A. Whether or not the machineries purchased and imported by SERGS
became real property by virtue of immobilization.
B. Whether or not the contract between the parties is a loan or a lease. "12
In the main, the Court will resolve whether the said machines are personal,
not immovable, property which may be a proper subject of a writ of
replevin. As a preliminary matter, the Court will also address briefly the
procedural points raised by respondent.
The Courts Ruling
The Petition is not meritorious.

Preliminary Matter:Procedural Questions

Respondent contends that the Petition failed to indicate expressly whether
it was being filed under Rule 45 or Rule 65 of the Rules of Court. It further
alleges that the Petition erroneously impleaded Judge Hilario Laqui as
respondent.
There is no question that the present recourse is under Rule 45. This
conclusion finds support in the very title of the Petition, which is "Petition
for Review on Certiorari."13
While Judge Laqui should not have been impleaded as a respondent, 14
substantial justice requires that such lapse by itself should not warrant the
dismissal of the present Petition. In this light, the Court deems it proper to
remove, motu proprio, the name of Judge Laqui from the caption of the
present case.
Main Issue: Nature of the Subject Machinery
Petitioners contend that the subject machines used in their factory were
not proper subjects of the Writ issued by the RTC, because they were in
fact real property. Serious policy considerations, they argue, militate
against a contrary characterization.
Rule 60 of the Rules of Court provides that writs of replevin are issued for
the recovery of personal property only. 15 Section 3 thereof reads:
"SEC. 3. Order. -- Upon the filing of such affidavit and approval of the bond,
the court shall issue an order and the corresponding writ of replevin
describing the personal property alleged to be wrongfully detained and
requiring the sheriff forthwith to take such property into his custody."
On the other hand, Article 415 of the Civil Code enumerates immovable or
real property as follows:
"ART. 415. The following are immovable property:
xxx

xxx

xxx

(5) Machinery, receptacles, instruments or implements intended by the

owner of the tenement for an industry or works which may be carried on in
a building or on a piece of land, and which tend directly to meet the needs
of the said industry or works;
xxx

xxx

x x x"

In the present case, the machines that were the subjects of the Writ of
Seizure were placed by petitioners in the factory built on their own land.
Indisputably, they were essential and principal elements of their chocolatemaking industry. Hence, although each of them was movable or personal
property on its own, all of them have become "immobilized by destination
because they are essential and principal elements in the industry." 16 In that
sense, petitioners are correct in arguing that the said machines are real,
not personal, property pursuant to Article 415 (5) of the Civil Code. 17
Be that as it may, we disagree with the submission of the petitioners that
the said machines are not proper subjects of the Writ of Seizure.
The Court has held that contracting parties may validly stipulate that a real
property be considered as personal.18 After agreeing to such stipulation,
they are consequently estopped from claiming otherwise. Under the
principle of estoppel, a party to a contract is ordinarily precluded from
denying the truth of any material fact found therein.
Hence, in Tumalad v. Vicencio,19 the Court upheld the intention of the
parties to treat a house as a personal property because it had been made
the subject of a chattel mortgage. The Court ruled:
"x x x. Although there is no specific statement referring to the subject
house as personal property, yet by ceding, selling or transferring a
property by way of chattel mortgage defendants-appellants could only
have meant to convey the house as chattel, or at least, intended to treat
the same as such, so that they should not now be allowed to make an
inconsistent stand by claiming otherwise."
Applying Tumalad, the Court in Makati Leasing and Finance Corp. v.
Wearever Textile Mills20 also held that the machinery used in a factory and
essential to the industry, as in the present case, was a proper subject of a
writ of replevin because it was treated as personal property in a contract.
Pertinent portions of the Courts ruling are reproduced hereunder:
"x x x. If a house of strong materials, like what was involved in the above
Tumalad case, may be considered as personal property for purposes of
executing a chattel mortgage thereon as long as the parties to the contract
so agree and no innocent third party will be prejudiced thereby, there is
absolutely no reason why a machinery, which is movable in its nature and
becomes immobilized only by destination or purpose, may not be likewise
treated as such. This is really because one who has so agreed is estopped
from denying the existence of the chattel mortgage."

In the present case, the Lease Agreement clearly provides that the
machines in question are to be considered as personal property.
Specifically, Section 12.1 of the Agreement reads as follows: 21
"12.1 The PROPERTY is, and shall at all times be and remain, personal
property notwithstanding that the PROPERTY or any part thereof may now
be, or hereafter become, in any manner affixed or attached to or
embedded in, or permanently resting upon, real property or any building
thereon, or attached in any manner to what is permanent."
Clearly then, petitioners are estopped from denying the characterization of
the subject machines as personal property. Under the circumstances, they
are proper subjects of the Writ of Seizure.

"In other words, the law does not allow the defendant to file a motion to
dissolve or discharge the writ of seizure (or delivery) on ground of
insufficiency of the complaint or of the grounds relied upon therefor, as in
proceedings on preliminary attachment or injunction, and thereby put at
issue the matter of the title or right of possession over the specific chattel
being replevied, the policy apparently being that said matter should be
ventilated and determined only at the trial on the merits."28
Besides, these questions require a determination of facts and a
presentation of evidence, both of which have no place in a petition for
certiorari in the CA under Rule 65 or in a petition for review in this Court
under Rule 45.29
Reliance on the Lease Agreement

It should be stressed, however, that our holding -- that the machines

should be deemed personal property pursuant to the Lease Agreement is
good only insofar as the contracting parties are concerned. 22 Hence, while
the parties are bound by the Agreement, third persons acting in good faith
are not affected by its stipulation characterizing the subject machinery as
personal.23 In any event, there is no showing that any specific third party
would be adversely affected.
Validity of the Lease Agreement
In their Memorandum, petitioners contend that the Agreement is a loan
and not a lease.24 Submitting documents supposedly showing that they
own the subject machines, petitioners also argue in their Petition that the
Agreement suffers from "intrinsic ambiguity which places in serious doubt
the intention of the parties and the validity of the lease agreement itself." 25
In their Reply to respondents Comment, they further allege that the
Agreement is invalid.26
These arguments are unconvincing. The validity and the nature of the
contract are the lis mota of the civil action pending before the RTC. A
resolution of these questions, therefore, is effectively a resolution of the
merits of the case. Hence, they should be threshed out in the trial, not in
the proceedings involving the issuance of the Writ of Seizure.
Indeed, in La Tondea Distillers v. CA,27 the Court explained that the policy
under Rule 60 was that questions involving title to the subject property
questions which petitioners are now raising -- should be determined in the
trial. In that case, the Court noted that the remedy of defendants under
Rule 60 was either to post a counter-bond or to question the sufficiency of
the plaintiffs bond. They were not allowed, however, to invoke the title to
the subject property. The Court ruled:

It should be pointed out that the Court in this case may rely on the Lease
Agreement, for nothing on record shows that it has been nullified or
annulled. In fact, petitioners assailed it first only in the RTC proceedings,
which had ironically been instituted by respondent. Accordingly, it must be
presumed valid and binding as the law between the parties.
Makati Leasing and Finance Corporation30 is also instructive on this point.
In that case, the Deed of Chattel Mortgage, which characterized the
subject machinery as personal property, was also assailed because
respondent had allegedly been required "to sign a printed form of chattel
mortgage which was in a blank form at the time of signing." The Court
rejected the argument and relied on the Deed, ruling as follows:
"x x x. Moreover, even granting that the charge is true, such fact alone
does not render a contract void ab initio, but can only be a ground for
rendering said contract voidable, or annullable pursuant to Article 1390 of
the new Civil Code, by a proper action in court. There is nothing on record
to show that the mortgage has been annulled. Neither is it disclosed that
steps were taken to nullify the same. x x x"
Alleged Injustice Committed on the Part of Petitioners
Petitioners contend that "if the Court allows these machineries to be
seized, then its workers would be out of work and thrown into the
streets."31 They also allege that the seizure would nullify all efforts to
rehabilitate the corporation.
Petitioners arguments do not preclude the implementation of the
Writ.1wphi1 As earlier discussed, law and jurisprudence support its
propriety. Verily, the above-mentioned consequences, if they come true,
should not be blamed on this Court, but on the petitioners for failing to

avail themselves of the remedy under Section 5 of Rule 60, which allows
the filing of a counter-bond. The provision states:
"SEC. 5. Return of property. -- If the adverse party objects to the
sufficiency of the applicants bond, or of the surety or sureties thereon, he
cannot immediately require the return of the property, but if he does not so
object, he may, at any time before the delivery of the property to the
applicant, require the return thereof, by filing with the court where the
action is pending a bond executed to the applicant, in double the value of
the property as stated in the applicants affidavit for the delivery thereof to
the applicant, if such delivery be adjudged, and for the payment of such
sum to him as may be recovered against the adverse party, and by serving
a copy bond on the applicant."
WHEREFORE, the Petition is DENIED and the assailed Decision of the
Court of Appeals AFFIRMED. Costs against petitioners. SO ORDERED.
Melo, (Chairman), Vitug, Purisima, and Gonzaga-Reyes, JJ., concur.
G.R. No. L-20329

March 16, 1923

THE STANDARD OIL COMPANY OF NEW YORK, petitioner, vs. JOAQUIN

JARAMILLO, as register of deeds of the City of Manila, respondent.
STREET, J.:
This cause is before us upon demurrer interposed by the respondent,
Joaquin Jaramillo, register of deeds of the City of Manila, to an original
petition of the Standard Oil Company of New York, seeking a peremptory
mandamus to compel the respondent to record in the proper register a
document purporting to be a chattel mortgage executed in the City of
Manila by Gervasia de la Rosa, Vda. de Vera, in favor of the Standard Oil
Company of New York.
It appears from the petition that on November 27, 1922, Gervasia de la
Rosa, Vda. de Vera, was the lessee of a parcel of land situated in the City of
Manila and owner of the house of strong materials built thereon, upon
which date she executed a document in the form of a chattel mortgage,
purporting to convey to the petitioner by way of mortgage both the
leasehold interest in said lot and the building which stands thereon.
The clauses in said document describing the property intended to be thus
mortgage are expressed in the following words:

Now, therefore, the mortgagor hereby conveys and transfer to the

mortgage, by way of mortgage, the following described personal
property, situated in the City of Manila, and now in possession of
the mortgagor, to wit:
(1) 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 subject of the said lease;
(2) The building, property of the mortgagor, situated on the
aforesaid leased premises.
After said document had been duly acknowledge and delivered, the
petitioner caused the same to be presented to the respondent, Joaquin
Jaramillo, as register of deeds of the City of Manila, for the purpose of
having the same recorded in the book of record of chattel mortgages. Upon
examination of the instrument, the respondent was of the opinion that it
was not a chattel mortgage, for the reason that the interest therein
mortgaged did not appear to be personal property, within the meaning of
the Chattel Mortgage Law, and registration was refused on this ground
only.
We are of the opinion that the position taken by the respondent is
untenable; and it is his duty to accept the proper fee and place the
instrument on record. The duties of a register of deeds in respect to the
registration of chattel mortgage are of a purely ministerial character; and
no provision of law can be cited which confers upon him any judicial or
quasi-judicial power to determine the nature of any document of which
registration is sought as a chattel mortgage.
The original provisions touching this matter are contained in section 15 of
the Chattel Mortgage Law (Act No. 1508), as amended by Act No. 2496; but
these have been transferred to section 198 of the Administrative Code,
where they are now found. There is nothing in any of these provisions
conferring upon the register of deeds any authority whatever in respect to
the "qualification," as the term is used in Spanish law, of chattel mortgage.
His duties in respect to such instruments are ministerial only. The efficacy
of the act of recording a chattel mortgage consists in the fact that it
operates as constructive notice of the existence of the contract, and the
legal effects of the contract must be discovered in the instrument itself in
relation with the fact of notice. Registration adds nothing to the
instrument, considered as a source of title, and affects nobody's rights
except as a specifies of notice.
Articles 334 and 335 of the Civil Code supply no absolute criterion for
discriminating between real property and personal property for purpose of

the application of the Chattel Mortgage Law. Those articles state rules
which, considered as a general doctrine, are law in this jurisdiction; but it
must not be forgotten that under given conditions property may have
character different from that imputed to it in said articles. It is undeniable
that the parties to a contract may by agreement treat as personal property
that which by nature would be real property; and it is a familiar
phenomenon to see things classed as real property for purposes of
taxation which on general principle might be considered personal property.
Other situations are constantly arising, and from time to time are
presented to this court, in which the proper classification of one thing or
another as real or personal property may be said to be doubtful.
The point submitted to us in this case was determined on September 8,
1914, in an administrative ruling promulgated by the Honorable James A.
Ostrand, now a Justice of this Court, but acting at that time in the capacity
of Judge of the fourth branch of the Court of First Instance of the Ninth
Judicial District, in the City of Manila; and little of value can be here added
to the observations contained in said ruling. We accordingly quote
therefrom as follows:
It is unnecessary here to determine whether or not the property
described in the document in question is real or personal; the
discussion may be confined to the point as to whether a register of
deeds has authority to deny the registration of a document
purporting to be a chattel mortgage and executed in the manner
and form prescribed by the Chattel Mortgage Law.
Then, after quoting section 5 of the Chattel Mortgage Law (Act No. 1508),
his Honor continued:
Based principally upon the provisions of section quoted the
Attorney-General of the Philippine Islands, in an opinion dated
August 11, 1909, held that a register of deeds has no authority to
pass upon the capacity of the parties to a chattel mortgage which
is presented to him for record. A fortiori a register of deeds can
have no authority to pass upon the character of the property
sought to be encumbered by a chattel mortgage. Of course, if the
mortgaged property is real instead of personal the chattel
mortgage would no doubt be held ineffective as against third
parties, but this is a question to be determined by the courts of
justice and not by the register of deeds.
In Leung Yee vs. Frank L. Strong Machinery Co. and Williamson (37 Phil.,
644), this court held that where the interest conveyed is of the nature of
real, property, the placing of the document on record in the chattel
mortgage register is a futile act; but that decision is not decisive of the

question now before us, which has reference to the function of the register
of deeds in placing the document on record.
In the light of what has been said it becomes unnecessary for us to pass
upon the point whether the interests conveyed in the instrument now in
question are real or personal; and we declare it to be the duty of the
register of deeds to accept the estimate placed upon the document by the
petitioner and to register it, upon payment of the proper fee.
The demurrer is overruled; and unless within the period of five days from
the date of the notification hereof, the respondent shall interpose a
sufficient answer to the petition, the writ of mandamus will be issued, as
prayed, but without costs. So ordered.
Araullo, C.J., Malcolm, Avancea, Ostrand, Johns, and Romualdez, JJ.,
concur.
G.R. No. L-55729 March 28, 1983
ANTONIO PUNSALAN, JR., petitioner, vs. REMEDIOS VDA. DE
LACSAMANA and THE HONORABLE JUDGE RODOLFO A. ORTIZ,
respondents.
MELENCIO-HERRERA, J.:
The sole issue presented by petitioner for resolution is whether or not
respondent Court erred in denying the Motion to Set Case for Pre-trial with
respect to respondent Remedios Vda. de Lacsamana as the case had been
dismissed on the ground of improper venue upon motion of co-respondent
Philippine National Bank (PNB).
It appears that petitioner, Antonio Punsalan, Jr., was the former registered
owner of a parcel of land consisting of 340 square meters situated in
Bamban, Tarlac. In 1963, petitioner mortgaged said land to respondent PNB
(Tarlac Branch) in the amount of P10,000.00, but for failure to pay said
amount, the property was foreclosed on December 16, 1970. Respondent
PNB (Tarlac Branch) was the highest bidder in said foreclosure proceedings.
However, the bank secured title thereto only on December 14, 1977.
In the meantime, in 1974, while the properly was still in the alleged
possession of petitioner and with the alleged acquiescence of respondent
PNB (Tarlac Branch), and upon securing a permit from the Municipal Mayor,
petitioner constructed a warehouse on said property. Petitioner declared
said warehouse for tax purposes for which he was issued Tax Declaration
No. 5619. Petitioner then leased the warehouse to one Hermogenes Sibal
for a period of 10 years starting January 1975.

On July 26, 1978, a Deed of Sale was executed between respondent PNB
(Tarlac Branch) and respondent Lacsamana over the property. This contract
was amended on July 31, 1978, particularly to include in the sale, the
building and improvement thereon. By virtue of said instruments,
respondent - Lacsamana secured title over the property in her name (TCT
No. 173744) as well as separate tax declarations for the land and building.
1

On November 22, 1979, petitioner commenced suit for "Annulment of

Deed of Sale with Damages" against herein respondents PNB and
Lacsamana before respondent Court of First Instance of Rizal, Branch XXXI,
Quezon City, essentially impugning the validity of the sale of the building
as embodied in the Amended Deed of Sale. In this connection, petitioner
alleged:
xxx xxx xxx
22. That defendant, Philippine National Bank, through its
Branch Manager ... by virtue of the request of defendant ...
executed a document dated July 31, 1978, entitled
Amendment to Deed of Absolute Sale ... wherein said
defendant bank as Vendor sold to defendant Lacsamana
the building owned by the plaintiff under Tax Declaration
No. 5619, notwithstanding the fact that said building is not
owned by the bank either by virtue of the public auction
sale conducted by the Sheriff and sold to the Philippine
National Bank or by virtue of the Deed of Sale executed by
the bank itself in its favor on September 21, 1977 ...;
23. That said defendant bank fraudulently mentioned ...
that the sale in its favor should likewise have included the
building, notwithstanding no legal basis for the same and
despite full knowledge that the Certificate of Sale executed
by the sheriff in its favor ... only limited the sale to the
land, hence, by selling the building which never became
the property of defendant, they have violated the principle
against 'pactum commisorium'.
Petitioner prayed that the Deed of Sale of the building in favor of
respondent Lacsamana be declared null and void and that damages in the
total sum of P230,000.00, more or less, be awarded to him. 2
In her Answer filed on March 4, 1980,-respondent Lacsamana averred the
affirmative defense of lack of cause of action in that she was a purchaser
for value and invoked the principle in Civil Law that the "accessory follows
the principal". 3

On March 14, 1980, respondent PNB filed a Motion to Dismiss on the

ground that venue was improperly laid considering that the building was
real property under article 415 (1) of the New Civil Code and therefore
section 2(a) of Rule 4 should apply. 4
Opposing said Motion to Dismiss, petitioner contended that the action for
annulment of deed of sale with damages is in the nature of a personal
action, which seeks to recover not the title nor possession of the property
but to compel payment of damages, which is not an action affecting title to
real property.
On April 25, 1980, respondent Court granted respondent PNB's Motion to
Dismiss as follows:
Acting upon the 'Motion to Dismiss' of the defendant
Philippine National Bank dated March 13, 1980, considered
against the plaintiff's opposition thereto dated April 1,
1980, including the reply therewith of said defendant, this
Court resolves to DISMISS the plaintiff's complaint for
improper venue considering that the plaintiff's complaint
which seeks for the declaration as null and void, the
amendment to Deed of Absolute Sale executed by the
defendant Philippine National Bank in favor of the
defendant Remedios T. Vda. de Lacsamana, on July 31,
1978, involves a warehouse allegedly owned and
constructed by the plaintiff on the land of the defendant
Philippine National Bank situated in the Municipality of
Bamban, Province of Tarlac, which warehouse is an
immovable property pursuant to Article 415, No. 1 of the
New Civil Code; and, as such the action of the plaintiff is a
real action affecting title to real property which, under
Section 2, Rule 4 of the New Rules of Court, must be tried
in the province where the property or any part thereof lies.
5

In his Motion for Reconsideration of the aforestated Order, petitioner

reiterated the argument that the action to annul does not involve
ownership or title to property but is limited to the validity of the deed of
sale and emphasized that the case should proceed with or without
respondent PNB as respondent Lacsamana had already filed her Answer to
the Complaint and no issue on venue had been raised by the latter.
On September 1, 1980,.respondent Court denied reconsideration for lack of
merit.

Petitioner then filed a Motion to Set Case for Pre-trial, in so far as

respondent Lacsamana was concerned, as the issues had already been
joined with the filing of respondent Lacsamana's Answer.

Teehankee (Chairman), Plana, Vasquez, Relova and Gutierrez, Jr., JJ.,

concur.
G.R. No. L-14597

In the Order of November 10, 1980 respondent Court denied said Motion to
Set Case for Pre-trial as the case was already dismissed in the previous
Orders of April 25, 1980 and September 1, 1980.

March 27, 1961

PASTOR TOLENTINO, petitioner, vs. BASILIO BALTAZAR, DIRECTOR OF

THE BUREAU OF LANDS and ESTATE OF ANGEL BALTAZAR,
deceased, respondents.

Hence, this Petition for Certiorari, to which we gave due course.

CONCEPCION, J.:
We affirm respondent Court's Order denying the setting for pre-trial.
Review by certiorari of a decision of the Court of Appeals.
The warehouse claimed to be owned by petitioner is an immovable or real
property as provided in article 415(l) of the Civil Code. 6 Buildings are
always immovable under the Code. 7 A building treated separately from the
land on which it stood is immovable property and the mere fact that the
parties to a contract seem to have dealt with it separate and apart from
the land on which it stood in no wise changed its character as immovable
property. 8
While it is true that petitioner does not directly seek the recovery of title or
possession of the property in question, his action for annulment of sale and
his claim for damages are closely intertwined with the issue of ownership
of the building which, under the law, is considered immovable property,
the recovery of which is petitioner's primary objective. The prevalent
doctrine is that an action for the annulment or rescission of a sale of real
property does not operate to efface the fundamental and prime objective
and nature of the case, which is to recover said real property. It is a real
action. 9
Respondent Court, therefore, did not err in dismissing the case on the
ground of improper venue (Section 2, Rule 4) 10, which was timely raised
(Section 1, Rule 16) 11.
Petitioner's other contention that the case should proceed in so far as
respondent Lacsamana is concerned as she had already filed an Answer,
which did not allege improper venue and, therefore, issues had already
been joined, is likewise untenable. Respondent PNB is an indispensable
party as the validity of the Amended Contract of Sale between the former
and respondent Lacsamana is in issue. It would, indeed, be futile to
proceed with the case against respondent Lacsamana alone.
WHEREFORE, the petition is hereby denied without prejudice to the refiling
of the case by petitioner Antonio Punsalan, Jr. in the proper forum.
Costs against petitioner. SO ORDERED.

The object of this litigation is a parcel of land located in the barrio of

Sagana, municipality of Laur, province of Nueva Ecija. Angel Baltazar filed
therefore a homestead application which was approved by the Director of
Lands on August 14, 1940. Subsequently, or on April 1, 1941, he
mortgaged the present and future improvements on said land to Pastor
Tolentino, for the sum of P1,500, with the understanding that if the same
were not paid, with interest thereon at the rate of 12% a year, within six
(6) years, Tolentino could elect, either to foreclose the mortgage or to
compel the debtor to execute a deed of absolute sale of said
improvements. After the death of Angel Baltazar in 1945, his widow and
children conveyed to his son Basilio Baltazar their rights and interest in and
to said land. Apparently relying upon this conveyance, on August 28, 1946,
Basilio Baltazar filed with the Bureau of Lands a petition praying that the
homestead application in his father's name be cancelled, and that, in lieu
thereof, his own (Basilio's)application be admitted. This petition was soon
granted. Subsequently, Homestead Patent No. V-8832 was issued to Basilio
Baltazar, and upon the authority thereof, he secured, on October 23, 1951,
Original Certificate of Title No. P-790 in his name.
On October 20, 1952, Tolentino instituted the present action against the
estate of Angel Baltazar, deceased, his son Basilio Baltazar, and the
Director of Lands, for the cancellation of said Original Certificate of Title
No. P790, upon the ground that Basilio Baltazar had secured it by fraud.
The Director of Lands filed a cross-claim, joining Tolentino in praying for the
aforementioned relief. Basilio Baltazar denied the allegation of fraud and
maintained that Tolentino had no cause of action except against the
deceased, Angel Baltazar, and that this is neither the proper action nor the
proper court to settle Tolentino's claim.
Subsequently the complaint was amended by including Monica Marcelo,
the widow of Angel Baltazar, and their children, Damiana, Mariano,
Amando and John Doe, all surnamed Baltazar, as defendants. Mariano and
Amando filed an answer admitting some allegations and denying other

allegations of the amended complaint and setting up a counterclaim.

Although Monica Marcelo submitted herself to the jurisdiction of the court
by filing a motion to dismiss, which was eventually denied, neither she nor
her other children (Damiana and John Doe Baltazar) appear to have
answered the amended complaint.
In due course, the Court of First Instance of Nueva Ecija rendered a
decision holding that Basilio Baltazar had not been guilty of fraud in
securing the homestead patent and certificate of title in his name; that the
Director of Lands was stopped from imputing fraud to Basilio Baltazar, it
being the duty of said office to know that the land in question had been
originally applied for, not Basilio Baltazar, but by Angel Baltazar; that said
land is no longer part of the public domain, and, hence, beyond the
jurisdiction and concern of said officer, a patent an a certificate of title
having already been issued to Basilio Baltazar; that Tolentino has merely a
money claim that should be filed against the estate of the deceased, Angel
Baltazar, and does not warrant cancellation of Basilio Baltazar's patent and
certificate of title, and consequently dismissing plaintiff's complaint, as
well as the cross-claim of the Director of Lands, and sentencing Tolentino to
pay P1,000.00 to Basilio Baltazar "as damages for attorney' fees", apart
from the costs.
Tolentino appealed from this decision. The Director of Lands, likewise, gave
notice of his intent to, appeal there from and then asked that Tolentino's
record on appeal be considered his (Director of Lands') own record on
appeal Although this request had not been officially approved the court,
the clerk thereof later notified the parties the said record on appeal had
been forwarded to the Court Appeals for purposes of the appeal taken by
Tolentino an the Director of Lands. Subsequently, however, the Court of
Appeals excused the Solicitor General from filing a brief on behalf of the
Director of Lands, upon the ground that his appeal had not been duly
perfected.
After appropriate proceedings, the Court of Appeals a firmed the decision
of the Court of First Instance except as to the P1,000.00 award of
damages in favor of Basilio Baltazar upon the ground that Tolentino ha
no personality to bring the present action, the same being, in effect, one
for reversion under section 101 of Common wealth Act No. 141, which may
be initiated only by the Solicitor General, and the Director of Lands not
having appealed from the decision of the court of first instance; that an
action for cancellation of a title issued by virtue of a homestead patent
should be initiated within one (1) year from the issuance thereof, which
had elapsed prior to the commencement of this case; that section 105 of
Commonwealth Act No. 141 does not prohibit the issuance of a patent in
the name of one of the heirs of the applicant for homestead patent who
died prior thereto; that the instrument executed by Angel Baltazar in favor
of Pastor Tolentino seems to partake of the nature of a chattel mortgage;

that as such it is defective and cannot be registered owing to its failure to

describe properly the improvements sought to be encumbered thereby;
that a homestead cannot become liable for the satisfaction of a debt
contracted within five (5) years from and after the date of issuance of the
corresponding patent; that the monetary obligation of Angel Baltazar in
favor of Pastor Tolentino was contracted within said period of time, and,
hence, the homestead in question cannot be annotated on Basilio
Baltazar's certificate of title, even if it had been issued in favor of the heirs
of Angel Baltazar, for otherwise, said mortgage would will be an
encumbrance upon the very homestead, and would thus contravene the
spirit of Commonwealth Act No. 141; that although there is a valid and
subsisting obligation in favor of Pastor Tolentino in the sum of P1,500, it is
not proper to sentence the heirs of Angel Baltazar to pay said amount, for
the court did not know whether the deceased had left sufficient properties
to pay the aforementioned debt and that Tolentino had brought this action
in good faith and, should not be sentenced, therefore, to pay damages.
The case is now before us on plaintiff's petition for review by certiorari.
Section 118 of Commonwealth Act No. 141 reads:
Except in favor of the Government or any of its branches, units, or
institutions, or legally constituted banking corporations, lands
acquired under the free patent or homestead provisions shall not
be subject to encumbrance or alienation from the date of the
approval of the application and for a term of five years from and
after the date of issuance of the patent or grant, nor shall they
become liable to the satisfaction of any debt contracted prior to
the expiration of said period; but the improvements or crops on the
land may be mortgaged or pledged to qualified persons,
associations, or corporations.
Pursuant to this provision a land acquired by homestead patent may
neither be encumbered or alienated from the date of the approval of the
corresponding homestead application and for a period of five (5) years
after the issuance of the patent, nor be held liable for any debt contract
within such period of time. However, said section 118 explicitly permits the
encumbrance, by mortgage or pledge of the improvements and crops on
the land, without limitation in point of time. Although the parties to a
contract may treat certain improvements and crops as chattels, insofar as
they are concerned, it is now settled in this jurisdiction that, in general,
and insofar as the public a concerned, such improvements, if falling under
the provisions of Article 415 of the Civil Code of the Philippines are
immovable property (Evangelista vs. Alto Surety & Insurance Co., Inc., L11139, April 23, 1958; Manarag vs. Ofilada, 52 Off. Gaz., 3954; Republic vs.
Ceniza, et al., L-4169, December 17, 1951; Leung Yee vs. Strong Machinery
Co., 37 Phil. 644). As a consequence, a mortgage constituted on said

improvements must be susceptible registration as a real estate mortgage

and of annotate on the certificate of title to the land of which they for part,
although the land itself may not be subject to said encumbrance, if the
debt guaranteed thereby was co traded within the period stated in said
section 118 of Commonwealth Act No. 141. Otherwise, the provision
authorizing the mortgage of the improvements would be defeated.

Clerk of Court of the Court of First Instance of Nueva Ecija to execute said
deed on behalf of Basilio Baltazar, with the same force and effect as if he
had personally signed it. Upon demand by the Register of Deeds of Nueva
Ecija, Basilio Baltazar shall moreover, surrender to him the owner's
duplicate of Original Certificate of Title No. P-790, for annotation thereon of
the mortgage thus constituted.

The Court of Appeals held that Tolentino had no personality to bring this
action, and that it could not order the cancellation of the certificate of title
of Basilio Baltazar because the only person who could apply for such relief,
the Director of Lands, had abandoned his appeal from the decision of the
court of first instance. However, the legal provision granting said right
exclusively to the Director of Lands affects plaintiff's cause of action, not
his personality to institute the present case. Moreover the Director of Lands
did not abandon his appeal. The record shows that he gave notice of his
intention to appeal and asked that plaintiff's record on appeal be
considered, as his own record on appeal. It is true that this petition was not
officially approved by the court. However, it would appear that the Director
of Lands had been led to believe the contrary, for the clerk of court of
Nueva Ecija notified the parties that the record on appeal had been
forwarded to the Court of Appeals for purposes of the appeal taken by the
plaintiff and the Director of Lands. Although such belief was erroneous, and
the appeal of such officer had not been duly perfected, this condition was
the result, evidently, not of intent to abandon the appeal, but of error or
negligence of the officer called upon to take the steps necessary therefor.

Costs against defendant Basilio Baltazar. It is so ordered.

At any rate, even if Basilio Baltazar had not been guilty of fraud in securing
the homestead patent and the certificate of title in his favor, it has been
established that when plaintiff saw the children of Angel Baltazar shortly
after his death, they promised to pay his debt in favor of Pastor Tolentino.
In other words, Basilio Baltazar knew, before he got said patent and the
certificate of title, that the present and future improvements on the land
were subject to a valid and subsisting mortgage in favor of Pastor Tolentino
and acknowledged the same. Hence, he must be deemed to have secured
such patent and title subject to a subsisting trust, insofar as plaintiff's
mortgage is concerned, and, under plaintiff's prayer for such relief as may
be deemed just and equitable, this action may be considered as one to
compel the defendant to execute the instrument necessary for the
registration of said mortgage and its annotation on plaintiff's certificate of
title.

It appears that in order to obtain financial accommodations from herein

petitioner Makati Leasing and Finance Corporation, the private respondent
Wearever Textile Mills, Inc., discounted and assigned several receivables
with the former under a Receivable Purchase Agreement. To secure the
collection of the receivables assigned, private respondent executed a
Chattel Mortgage over certain raw materials inventory as well as a
machinery described as an Artos Aero Dryer Stentering Range.

WHEREFORE, the decision appealed from is hereby reversed, and another

one shall be entered sentencing defendant Basilio Baltazar to execute,
within one (1) month from the date on which this decision shall have
become final, the corresponding deed of mortgage of said improvements in
favor of plaintiff Pastor Tolentino and, should Basilio Baltazar fail to execute
said deed of mortgage within the aforementioned period, authorizing the

G.R. No. L-58469 May 16, 1983

MAKATI LEASING and FINANCE CORPORATION, petitioner, vs.
WEAREVER TEXTILE MILLS, INC., and HONORABLE COURT OF
APPEALS, respondents.
DE CASTRO, J.:
Petition for review on certiorari of the decision of the Court of Appeals (now
Intermediate Appellate Court) promulgated on August 27, 1981 in CA-G.R.
No. SP-12731, setting aside certain Orders later specified herein, of Judge
Ricardo J. Francisco, as Presiding Judge of the Court of First instance of
Rizal Branch VI, issued in Civil Case No. 36040, as wen as the resolution
dated September 22, 1981 of the said appellate court, denying petitioner's
motion for reconsideration.

Upon private respondent's default, petitioner filed a petition for

extrajudicial foreclosure of the properties mortgage to it. However, the
Deputy Sheriff assigned to implement the foreclosure failed to gain entry
into private respondent's premises and was not able to effect the seizure of
the aforedescribed machinery. Petitioner thereafter filed a complaint for
judicial foreclosure with the Court of First Instance of Rizal, Branch VI,
docketed as Civil Case No. 36040, the case before the lower court.
Acting on petitioner's application for replevin, the lower court issued a writ
of seizure, the enforcement of which was however subsequently restrained
upon private respondent's filing of a motion for reconsideration. After
several incidents, the lower court finally issued on February 11, 1981, an
order lifting the restraining order for the enforcement of the writ of seizure

and an order to break open the premises of private respondent to enforce

said writ. The lower court reaffirmed its stand upon private respondent's
filing of a further motion for reconsideration.
On July 13, 1981, the sheriff enforcing the seizure order, repaired to the
premises of private respondent and removed the main drive motor of the
subject machinery.
The Court of Appeals, in certiorari and prohibition proceedings
subsequently filed by herein private respondent, set aside the Orders of
the lower court and ordered the return of the drive motor seized by the
sheriff pursuant to said Orders, after ruling that the machinery in suit
cannot be the subject of replevin, much less of a chattel mortgage,
because it is a real property pursuant to Article 415 of the new Civil Code,
the same being attached to the ground by means of bolts and the only way
to remove it from respondent's plant would be to drill out or destroy the
concrete floor, the reason why all that the sheriff could do to enfore the
writ was to take the main drive motor of said machinery. The appellate
court rejected petitioner's argument that private respondent is estopped
from claiming that the machine is real property by constituting a chattel
mortgage thereon.
A motion for reconsideration of this decision of the Court of Appeals having
been denied, petitioner has brought the case to this Court for review by
writ of certiorari. It is contended by private respondent, however, that the
instant petition was rendered moot and academic by petitioner's act of
returning the subject motor drive of respondent's machinery after the
Court of Appeals' decision was promulgated.
The contention of private respondent is without merit. When petitioner
returned the subject motor drive, it made itself unequivocably clear that
said action was without prejudice to a motion for reconsideration of the
Court of Appeals decision, as shown by the receipt duly signed by
respondent's representative. 1 Considering that petitioner has reserved its
right to question the propriety of the Court of Appeals' decision, the
contention of private respondent that this petition has been mooted by
such return may not be sustained.
The next and the more crucial question to be resolved in this Petition is
whether the machinery in suit is real or personal property from the point of
view of the parties, with petitioner arguing that it is a personality, while the
respondent claiming the contrary, and was sustained by the appellate
court, which accordingly held that the chattel mortgage constituted
thereon is null and void, as contended by said respondent.

A similar, if not Identical issue was raised in Tumalad v. Vicencio, 41 SCRA

143 where this Court, speaking through Justice J.B.L. Reyes, ruled:
Although there is no specific statement referring to the
subject house as personal property, yet by ceding, selling
or transferring a property by way of chattel mortgage
defendants-appellants could only have meant to convey
the house as chattel, or at least, intended to treat the
same as such, so that they should not now be allowed to
make an inconsistent stand by claiming otherwise.
Moreover, the subject house stood on a rented lot to which
defendants-appellants merely had a temporary right as
lessee, and although this can not in itself alone determine
the status of the property, it does so when combined with
other factors to sustain the interpretation that the parties,
particularly the mortgagors, intended to treat the house as
personality. Finally, unlike in the Iya cases, Lopez vs.
Orosa, Jr. & Plaza Theatre, Inc. & Leung Yee vs. F.L. Strong
Machinery & Williamson, wherein third persons assailed the
validity of the chattel mortgage, it is the defendantsappellants themselves, as debtors-mortgagors, who are
attacking the validity of the chattel mortgage in this case.
The doctrine of estoppel therefore applies to the herein
defendants-appellants, having treated the subject house as
personality.
Examining the records of the instant case, We find no logical justification to
exclude the rule out, as the appellate court did, the present case from the
application of the abovequoted pronouncement. If a house of strong
materials, like what was involved in the above Tumalad case, may be
considered as personal property for purposes of executing a chattel
mortgage thereon as long as the parties to the contract so agree and no
innocent third party will be prejudiced thereby, there is absolutely no
reason why a machinery, which is movable in its nature and becomes
immobilized only by destination or purpose, may not be likewise treated as
such. This is really because one who has so agreed is estopped from
denying the existence of the chattel mortgage.
In rejecting petitioner's assertion on the applicability of the Tumalad
doctrine, the Court of Appeals lays stress on the fact that the house
involved therein was built on a land that did not belong to the owner of
such house. But the law makes no distinction with respect to the ownership
of the land on which the house is built and We should not lay down
distinctions not contemplated by law.
It must be pointed out that the characterization of the subject machinery
as chattel by the private respondent is indicative of intention and

impresses upon the property the character determined by the parties. As

stated in Standard Oil Co. of New York v. Jaramillo, 44 Phil. 630, it is
undeniable that the parties to a contract may by agreement treat as
personal property that which by nature would be real property, as long as
no interest of third parties would be prejudiced thereby.

JOSE B.L. REYES, in behalf of the ANTI-BASES COALITION (ABC),

petitioner, vs. RAMON BAGATSING, as Mayor of the City of Manila,
respondent.

Private respondent contends that estoppel cannot apply against it because

it had never represented nor agreed that the machinery in suit be
considered as personal property but was merely required and dictated on
by herein petitioner to sign a printed form of chattel mortgage which was
in a blank form at the time of signing. This contention lacks
persuasiveness. As aptly pointed out by petitioner and not denied by the
respondent, the status of the subject machinery as movable or immovable
was never placed in issue before the lower court and the Court of Appeals
except in a supplemental memorandum in support of the petition filed in
the appellate court. Moreover, even granting that the charge is true, such
fact alone does not render a contract void ab initio, but can only be a
ground for rendering said contract voidable, or annullable pursuant to
Article 1390 of the new Civil Code, by a proper action in court. There is
nothing on record to show that the mortgage has been annulled. Neither is
it disclosed that steps were taken to nullify the same. On the other hand,
as pointed out by petitioner and again not refuted by respondent, the latter
has indubitably benefited from said contract. Equity dictates that one
should not benefit at the expense of another. Private respondent could not
now therefore, be allowed to impugn the efficacy of the chattel mortgage
after it has benefited therefrom,

This Court, in this case of first impression, at least as to some aspects, is

called upon to delineate the boundaries of the protected area of the
cognate rights to free speech and peaceable assembly, 1 against an
alleged intrusion by respondent Mayor Ramon Bagatsing. Petitioner, retired
Justice JB L. Reyes, on behalf of the Anti-Bases Coalition sought a permit
from the City of Manila to hold a peaceful march and rally on October 26,
1983 from 2:00 to 5:00 in the afternoon, starting from the Luneta, a public
park, to the gates of the United States Embassy, hardly two blocks away.
Once there, and in an open space of public property, a short program
would be held. 2 During the course of the oral argument, 3 it was stated
that after the delivery of two brief speeches, a petition based on the
resolution adopted on the last day by the International Conference for
General Disbarmament, World Peace and the Removal of All Foreign
Military Bases held in Manila, would be presented to a representative of the
Embassy or any of its personnel who may be there so that it may be
delivered to the United States Ambassador. The march would be attended
by the local and foreign participants of such conference. There was likewise
an assurance in the petition that in the exercise of the constitutional rights
to free speech and assembly, all the necessary steps would be taken by it
"to ensure a peaceful march and rally." 4

From what has been said above, the error of the appellate court in ruling
that the questioned machinery is real, not personal property, becomes
very apparent. Moreover, the case of Machinery and Engineering Supplies,
Inc. v. CA, 96 Phil. 70, heavily relied upon by said court is not applicable to
the case at bar, the nature of the machinery and equipment involved
therein as real properties never having been disputed nor in issue, and
they were not the subject of a Chattel Mortgage. Undoubtedly, the Tumalad
case bears more nearly perfect parity with the instant case to be the more
controlling jurisprudential authority.

The filing of this suit for mandamus with alternative prayer for writ of
preliminary mandatory injunction on October 20, 1983 was due to the fact
that as of that date, petitioner had not been informed of any action taken
on his request on behalf of the organization to hold a rally. On October 25,
1983, the answer of respondent Mayor was filed on his behalf by Assistant
Solicitor General Eduardo G. Montenegro. 5 It turned out that on October
19, such permit was denied. Petitioner was unaware of such a fact as the
denial was sent by ordinary mail. The reason for refusing a permit was due
to police intelligence reports which strongly militate against the
advisability of issuing such permit at this time and at the place applied for."
6
To be more specific, reference was made to persistent intelligence reports
affirm[ing] the plans of subversive/criminal elements to infiltrate and/or
disrupt any assembly or congregations where a large number of people is
expected to attend." 7 Respondent Mayor suggested, however, in
accordance with the recommendation of the police authorities, that "a
permit may be issued for the rally if it is to be held at the Rizal Coliseum or
any other enclosed area where the safety of the participants themselves
and the general public may be ensured." 8

WHEREFORE, the questioned decision and resolution of the Court of

Appeals are hereby reversed and set aside, and the Orders of the lower
court are hereby reinstated, with costs against the private respondent.
SO ORDERED.
G.R. No. L-65366 November 9, 1983

FERNANDO, C.J.

The oral argument was heard on October 25, 1983, the very same day the
answer was filed. The Court then deliberated on the matter. That same
afternoon, a minute resolution was issued by the Court granting the
mandatory injunction prayed for on the ground that there was no showing
of the existence of a clear and present danger of a substantive evil that
could justify the denial of a permit. On this point, the Court was
unanimous, but there was a dissent by Justice Aquino on the ground that
the holding of a rally in front of the US Embassy would be violative of
Ordinance No. 7295 of the City of Manila. The last sentence of such minute
resolution reads: "This resolution is without prejudice to a more extended
opinion." 9 Hence this detailed exposition of the Court's stand on the
matter.
1. It is thus clear that the Court is called upon to protect the exercise of the
cognate rights to free speech and peaceful assembly, arising from the
denial of a permit. The Constitution is quite explicit: "No law shall be
passed abridging the freedom of speech, or of the press, or the right of the
people peaceably to assemble and petition the Government for redress of
grievances." 10 Free speech, like free press, may be Identified with the
liberty to discuss publicly and truthfully any matter of public concern
without censorship or punishment. 11 There is to be then no previous
restraint on the communication of views or subsequent liability whether in
libel suits, 12 prosecution for sedition, 13 or action for damages, 14 or
contempt proceedings 15 unless there be a clear and present danger of a
substantive evil that [the State] has a right to prevent." 16 Freedom of
assembly connotes the right people to meet peaceably for consultation
and discussion of matters Of public concern. 17 It is entitled to be accorded
the utmost deference and respect. It is hot to be limited, much less denied,
except on a showing, as 's the case with freedom of expression, of a clear
and present danger of a substantive evil that the state has a right to
prevent. 18 Even prior to the 1935 Constitution, Justice Maicolm had
occasion to stress that it is a necessary consequence of our republican
institutions and complements the right of free speech. 19 To paraphrase
opinion of Justice Rutledge speaking for the majority of the American
Supreme Court Thomas v. Collins, 20 it was not by accident or coincidence
that the right to freedom of speech and of the press were toupled in a
single guarantee with the and to petition the rights of the people
peaceably to assemble and to petition the government for redress of
grievances. All these rights, while not Identical, are inseparable. the every
case, therefo re there is a limitation placed on the exercise of this right, the
judiciary is called upon to examine the effects of the challenged
governmental actuation. The sole justification for a limitation on the
exercise of this right, so fundamental to the maintenance of democratic
institutions, is the danger, of a character both grave and imminent, of a
serious evil to public safety, public morals, public health, or any other
legitimate public interest. 21

2. Nowhere is the rationale that underlies the freedom of expression and

peaceable assembly better expressed than in this excerpt from an opinion
of Justice Frankfurter: "It must never be forgotten, however, that the Bill of
Rights was the child of the Enlightenment. Back of the guaranty of free
speech lay faith in the power of an appeal to reason by all the peaceful
means for gaining access to the mind. It was in order to avert force and
explosions due to restrictions upon rational modes of communication that
the guaranty of free speech was given a generous scope. But utterance in
a context of violence can lose its significance as an appeal to reason and
become part of an instrument of force. Such utterance was not meant to
be sheltered by the Constitution." 22 What was rightfully stressed is the
abandonment of reason, the utterance, whether verbal or printed, being in
a context of violence. It must always be remembered that this right
likewise provides for a safety valve, allowing parties the opportunity to give
vent to their-views, even if contrary to the prevailing climate of opinion. For
if the peaceful means of communication cannot be availed of, resort to
non-peaceful means may be the only alternative. Nor is this the sole
reason for the expression of dissent. It means more than just the right to
be heard of the person who feels aggrieved or who is dissatisfied with
things as they are. Its value may lie in the fact that there may be
something worth hearing from the dissenter. That is to ensure a true
ferment of Ideas. There are, of course, well-defined limits. What is
guaranteed is peaceable assembly. One may not advocate disorder in the
name of protest, much less preach rebellion under the cloak of dissent. The
Constitution frowns on disorder or tumult attending a rally or assembly.
Resort to force is ruled out and outbreaks of violence to be avoided. The
utmost calm though is not required. As pointed out in an early Philippine
case, penned in 1907 to be precise, United States v. Apurado: 23 "It is
rather to be expected that more or less disorder will mark the public
assembly of the people to protest against grievances whether real or
imaginary, because on such occasions feeling is always wrought to a high
pitch of excitement, and the greater the grievance and the more intense
the feeling, the less perfect, as a rule, will be the disciplinary control of the
leaders over their irresponsible followers." 24 It bears repeating that for the
constitutional right to be invoked, riotous conduct, injury to property, and
acts of vandalism must be avoided, To give free rein to one's destructive
urges is to call for condemnation. It is to make a mockery of the high
estate occupied by intellectual liberty in our scheme of values.
3. There can be no legal objection, absent the existence of a clear and
present danger of a substantive evil, on the choice of Luneta as the place
where the peace rally would start. The Philippines is committed to the view
expressed in the plurality opinion, of 1939 vintage, of Justice Roberts in
Hague v. CIO: 25 Whenever the title of streets and parks may rest, they
have immemorially been held in trust for the use of the public and, time
out of mind, have been used for purposes of assembly, communicating
thoughts between citizens, and discussing public questions. Such use of
the streets and public places has, from ancient times, been a part of the

privileges, immunities, rights, and liberties of citizens. The privilege of a

citizen of the United States to use the streets and parks for communication
of views on national questions may be regulated in the interest of all; it is
not absolute, but relative, and must be exercised in subordination to the
general comfort and convenience, and in consonance with peace and good
order; but it must not, in the guise of regulation, be abridged or denied. 26
The above excerpt was quoted with approval in Primicias v. Fugoso. 27
Primicias made explicit what was implicit in Municipality of Cavite v. Rojas,"
28
a 1915 decision, where this Court categorically affirmed that plazas or
parks and streets are outside the commerce of man and thus nullified a
contract that leased Plaza Soledad of plaintiff-municipality. Reference was
made to such plaza "being a promenade for public use," 29 which certainly
is not the only purpose that it could serve. To repeat, there can be no valid
reason why a permit should not be granted for the or oposed march and
rally starting from a public dark that is the Luneta.
4. Neither can there be any valid objection to the use of the streets, to the
gates of the US Embassy, hardly two block-away at the Roxas Boulevard.
Primicias v. Fugoso has resolved any lurking doubt on the matter. In
holding that the then Mayor Fugoso of the City of Manila should grant a
permit for a public meeting at Plaza Miranda in Quiapo, this Court
categorically declared: "Our conclusion finds support in the decision in the
case of Willis Cox vs. State of New Hampshire, 312 U.S., 569. In that case,
the statute of New Hampshire P. L. chap. 145, section 2, providing that 'no
parade or procession upon any ground abutting thereon, shall 'De
permitted unless a special license therefor shall first be explained from the
selectmen of the town or from licensing committee,' was construed by the
Supreme Court of New Hampshire as not conferring upon the licensing
board unfettered discretion to refuse to grant the license, and held valid.
And the Supreme Court of the United States, in its decision (1941) penned
by Chief Justice Hughes affirming the judgment of the State Supreme
Court, held that 'a statute requiring persons using the public streets for a
parade or procession to procure a special license therefor from the local
authorities is not an unconstitutional abridgment of the rights of assembly
or of freedom of speech and press, where, as the statute is construed by
the state courts, the licensing authorities are strictly limited, in the
issuance of licenses, to a consideration of the time, place, and manner of
the parade or procession, with a view to conserving the public convenience
and of affording an opportunity to provide proper policing, and are not
invested with arbitrary discretion to issue or refuse license, ... " 30 Nor
should the point made by Chief Justice Hughes in a subsequent portion of
the opinion be ignored, "Civil liberties, as guaranteed by the Constitution,
imply the existence of an organized society maintaining public order
without which liberty itself would be lost in the excesses of unrestricted
abuses. The authority of a municipality to impose regulations in order to
assure the safety and convenience of the people in the use of public
highways has never been regarded as inconsistent with civil liberties but
rather as one of the means of safeguarding the good order upon which

they ultimately depend. The control of travel on the streets of cities is the
most familiar illustration of this recognition of social need. Where a
restriction of the use of highways in that relation is designed to promote
the public convenience in the interest of all, it cannot be disregarded by
the attempted exercise of some civil right which in other circumstances
would be entitled to protection." 31
5. There is a novel aspect to this case, If the rally were confined to Luneta,
no question, as noted, would have arisen. So, too, if the march would end
at another park. As previously mentioned though, there would be a short
program upon reaching the public space between the two gates of the
United States Embassy at Roxas Boulevard. That would be followed by the
handing over of a petition based on the resolution adopted at the closing
session of the Anti-Bases Coalition. The Philippines is a signatory of the
Vienna Convention on Diplomatic Relations adopted in 1961. It was
concurred in by the then Philippine Senate on May 3, 1965 and the
instrument of ratification was signed by the President on October 11, 1965,
and was thereafter deposited with the Secretary General of the United
Nations on November 15. As of that date then, it was binding on the
Philippines. The second paragraph of the Article 22 reads: "2. The receiving
State is under a special duty to take appropriate steps to protect the
premises of the mission against any intrusion or damage and to prevent
any disturbance of the peace of the mission or impairment of its dignity. "
32
The Constitution "adopts the generally accepted principles of
international law as part of the law of the land. ..." 33 To the extent that the
Vienna Convention is a restatement of the generally accepted principles of
international law, it should be a part of the law of the land. 34 That being
the case, if there were a clear and present danger of any intrusion or
damage, or disturbance of the peace of the mission, or impairment of its
dignity, there would be a justification for the denial of the permit insofar as
the terminal point would be the Embassy. Moreover, respondent Mayor
relied on Ordinance No. 7295 of the City of Manila prohibiting the holding
or staging of rallies or demonstrations within a radius of five hundred (500)
feet from any foreign mission or chancery and for other purposes. Unless
the ordinance is nullified, or declared ultra vires, its invocation as a
defense is understandable but not decisive, in view of the primacy
accorded the constitutional rights of free speech and peaceable assembly.
Even if shown then to be applicable, that question the confronts this Court.
6. There is merit to the observation that except as to the novel aspects of a
litigation, the judgment must be confined within the limits of previous
decisions. The law declared on past occasions is, on the whole, a safe
guide, So it has been here. Hence, as noted, on the afternoon of the
hearing, October 25, 1983, this Court issued the minute resolution granting
the mandatory injunction allowing the proposed march and rally scheduled
for the next day. That conclusion was inevitable ill the absence of a clear
and present danger of a substantive, evil to a legitimate public interest.

There was no justification then to deny the exercise of the constitutional

rights of tree speech and peaceable assembly. These rights are assured by
our Constitution and the Universal Declaration of Human Rights. 35 The
participants to such assembly, composed primarily of those in attendance
at the International Conference for General Disbarmament, World Peace
and the Removal of All Foreign Military Bases would start from the Luneta.
Proceeding through Roxas Boulevard to the gates of the United States
Embassy located at the same street. To repeat, it is settled law that as to
public places, especially so as to parks and streets, there is freedom of
access. Nor is their use dependent on who is the applicant for the permit,
whether an individual or a group. If it were, then the freedom of access
becomes discriminatory access, giving rise to an equal protection question.
The principle under American doctrines was given utterance by Chief
Justice Hughes in these words: "The question, if the rights of free speech
and peaceable assembly are to be preserved, is not as to the auspices
under which the meeting is held but as to its purpose; not as to The
relations of the speakers, but whether their utterances transcend the
bounds of the freedom of speech which the Constitution protects." 36 There
could be danger to public peace and safety if such a gathering were
marked by turbulence. That would deprive it of its peaceful character. Even
then, only the guilty parties should be held accountable. It is true that the
licensing official, here respondent Mayor, is not devoid of discretion in
determining whether or not a permit would be granted. It is not, however,
unfettered discretion. While prudence requires that there be a realistic
appraisal not of what may possibly occur but of what may probably occur,
given all the relevant circumstances, still the assumption especially so
where the assembly is scheduled for a specific public place is that the
permit must be for the assembly being held there. The exercise of such a
right, in the language of Justice Roberts, speaking for the American
Supreme Court, is not to be "abridged on the plea that it may be exercised
in some other place." 37
7. In fairness to respondent Mayor, he acted on the belief that Navarro v.
Villegas 38 and Pagkakaisa ng Manggagawang Pilipino (PMP.) v. Bagatsing,
39
called for application. While the General rule is that a permit should
recognize the right of the applicants to hold their assembly at a public
place of their choice, another place may be designated by the licensing
authority if it be shown that there is a clear and present danger of a
substantive evil if no such change were made. In the Navarro and the
Pagkakaisa decisions, this Court was persuaded that the clear and present
danger test was satisfied. The present situation is quite different. Hence
the decision reached by the Court. The mere assertion that subversives
may infiltrate the ranks of the demonstrators does not suffice. Not that it
should be overlooked. There was in this case, however, the assurance of
General Narciso Cabrera, Superintendent, Western Police District,
Metropolitan Police Force, that the police force is in a position to cope with
such emergency should it arise That is to comply with its duty to extend
protection to the participants of such peaceable assembly. Also from him

came the commendable admission that there were the least five previous
demonstrations at the Bayview hotel Area and Plaza Ferguson in front of
the United States Embassy where no untoward event occurred. It was
made clear by petitioner, through counsel, that no act offensive to the
dignity of the United States Mission in the Philippines would take place and
that, as mentioned at the outset of this opinion, "all the necessary steps
would be taken by it 'to ensure a peaceful march and rally.' " 40 Assistant
Solicitor General Montenegro expressed the view that the presence of
policemen may in itself be a provocation. It is a sufficient answer that they
should stay at a discreet distance, but ever ready and alert to cope with
any contingency. There is no need to repeat what was pointed out by Chief
Justice Hughes in Cox that precisely, it is the duty of the city authorities to
provide the proper police protection to those exercising their right to
peaceable assembly and freedom of expression.
8. By way of a summary the applicants for a permit to hold an assembly
should inform the licensing authority of the date, the public place where
and the time when it will take place. If it were a private place, only the
consent of the owner or the one entitled to its legal possession is required.
Such application should be filed well ahead in time to enable the public
official concerned to appraise whether there may be valid objections to the
grant of the permit or to its grant but at another public place. It is an
indispensable condition to such refusal or modification that the clear and
present danger test be the standard for the decision reached. If he is of the
view that there is such an imminent and grave danger of a substantive
evil, the applicants must be heard on the matter. Thereafter, his decision,
whether favorable or adverse, must be transmitted to them at the earliest
opportunity. Thus if so minded, then, can have recourse to the proper
judicial authority. Free speech and peaceable assembly, along with the
other intellectual freedoms, are highly ranked in our scheme of
constitutional values. It cannot be too strongly stressed that on the
judiciary, even more so than on the other departments rests the
grave and delicate responsibility of assuring respect for and deference to
such preferred rights. No verbal formula, no sanctifying phrase can, of
course, dispense with what has been so felicitiously termed by Justice
Holmes "as the sovereign prerogative of judgment." Nonetheless, the
presumption must be to incline the weight of the scales of justice on the
side of such rights, enjoying as they do precedence and primacy. Clearly
then, to the extent that there may be inconsistencies between this
resolution and that of Navarro v. Villegas, that case is pro tanto modified.
So it was made clear in the original resolution of October 25, 1983.
9. Respondent Mayor posed the issue of the applicability of Ordinance No.
7295 of the City of Manila prohibiting the holding or staging of rallies or
demonstrations within a radius of five hundred (500) feet from any foreign
mission or chancery and for other purposes. It is to be admitted that it
finds support In the previously quoted Article 22 of the Vienna Convention

on Diplomatic Relations. There was no showing, however, that the distance

between the chancery and the embassy gate is less than 500 feet. Even if
it could be shown that such a condition is satisfied. it does not follow that
respondent Mayor could legally act the way he did. The validity of his
denial of the permit sought could still be challenged. It could be argued
that a case of unconstitutional application of such ordinance to the
exercise of the right of peaceable assembly presents itself. As in this case
there was no proof that the distance is less than 500 feet, the need to pass
on that issue was obviated, Should it come, then the qualification and
observation of Justices Makasiar and Plana certainly cannot be summarily
brushed aside. The high estate accorded the rights to free speech and
peaceable assembly demands nothing less.
10. Ordinarily, the remedy in cases of this character is to set aside the
denial or the modification of the permit sought and order the respondent
official, to grant it. Nonetheless, as there was urgency in this case, the
proposed march and rally being scheduled for the next day after the
hearing, this Court. in the exercise of its conceded authority, granted the
mandatory injunction in the resolution of October 25, 1983. It may be
noted that the peaceful character of the peace march and rally on October
26 was not marred by any untoward incident. So it has been in other
assemblies held elsewhere. It is quite reassuring such that both on the part
of the national government and the citizens, reason and moderation have
prevailed. That is as it should be.
WHEREFORE, the mandatory injunction prayed for is granted. No costs.
G.R. No. L-40411

August 7, 1935

DAVAO SAW MILL CO., INC., plaintiff-appellant, vs. APRONIANO G.

CASTILLO and DAVAO LIGHT & POWER CO., INC., defendantsappellees.
MALCOLM, J.:
The issue in this case, as announced in the opening sentence of the
decision in the trial court and as set forth by counsel for the parties on
appeal, involves the determination of the nature of the properties
described in the complaint. The trial judge found that those properties
were personal in nature, and as a consequence absolved the defendants
from the complaint, with costs against the plaintiff.
The Davao Saw Mill Co., Inc., is the holder of a lumber concession from the
Government of the Philippine Islands. It has operated a sawmill in the sitio
of Maa, barrio of Tigatu, municipality of Davao, Province of Davao.
However, the land upon which the business was conducted belonged to

another person. On the land the sawmill company erected a building which
housed the machinery used by it. Some of the implements thus used were
clearly personal property, the conflict concerning machines which were
placed and mounted on foundations of cement. In the contract of lease
between the sawmill company and the owner of the land there appeared
the following provision:
That on the expiration of the period agreed upon, all the
improvements and buildings introduced and erected by the party
of the second part shall pass to the exclusive ownership of the
party of the first part without any obligation on its part to pay any
amount for said improvements and buildings; also, in the event the
party of the second part should leave or abandon the land leased
before the time herein stipulated, the improvements and buildings
shall likewise pass to the ownership of the party of the first part as
though the time agreed upon had expired: Provided, however, That
the machineries and accessories are not included in the
improvements which will pass to the party of the first part on the
expiration or abandonment of the land leased.
In another action, wherein the Davao Light & Power Co., Inc., was the
plaintiff and the Davao, Saw, Mill Co., Inc., was the defendant, a judgment
was rendered in favor of the plaintiff in that action against the defendant in
that action; a writ of execution issued thereon, and the properties now in
question were levied upon as personalty by the sheriff. No third party claim
was filed for such properties at the time of the sales thereof as is borne out
by the record made by the plaintiff herein. Indeed the bidder, which was
the plaintiff in that action, and the defendant herein having consummated
the sale, proceeded to take possession of the machinery and other
properties described in the corresponding certificates of sale executed in
its favor by the sheriff of Davao.
As connecting up with the facts, it should further be explained that the
Davao Saw Mill Co., Inc., has on a number of occasions treated the
machinery as personal property by executing chattel mortgages in favor of
third persons. One of such persons is the appellee by assignment from the
original mortgages.
Article 334, paragraphs 1 and 5, of the Civil Code, is in point. According to
the Code, real property consists of
1. Land, buildings, roads and constructions of all kinds adhering to
the soil;
xxx

xxx

xxx

5. Machinery, liquid containers, instruments or implements

intended by the owner of any building or land for use in connection
with any industry or trade being carried on therein and which are
expressly adapted to meet the requirements of such trade of
industry.
Appellant emphasizes the first paragraph, and appellees the last
mentioned paragraph. We entertain no doubt that the trial judge and
appellees are right in their appreciation of the legal doctrines flowing from
the facts.
In the first place, it must again be pointed out that the appellant should
have registered its protest before or at the time of the sale of this property.
It must further be pointed out that while not conclusive, the
characterization of the property as chattels by the appellant is indicative of
intention and impresses upon the property the character determined by
the parties. In this connection the decision of this court in the case of
Standard Oil Co. of New York vs. Jaramillo ( [1923], 44 Phil., 630), whether
obiter dicta or not, furnishes the key to such a situation.
It is, however not necessary to spend overly must time in the resolution of
this appeal on side issues. It is machinery which is involved; moreover,
machinery not intended by the owner of any building or land for use in
connection therewith, but intended by a lessee for use in a building erected
on the land by the latter to be returned to the lessee on the expiration or
abandonment of the lease.
A similar question arose in Puerto Rico, and on appeal being taken to the
United States Supreme Court, it was held that machinery which is movable
in its nature only becomes immobilized when placed in a plant by the
owner of the property or plant, but not when so placed by a tenant, a
usufructuary, or any person having only a temporary right, unless such
person acted as the agent of the owner. In the opinion written by Chief
Justice White, whose knowledge of the Civil Law is well known, it was in
part said:
To determine this question involves fixing the nature and character
of the property from the point of view of the rights of Valdes and its
nature and character from the point of view of Nevers & Callaghan
as a judgment creditor of the Altagracia Company and the rights
derived by them from the execution levied on the machinery
placed by the corporation in the plant. Following the Code
Napoleon, the Porto Rican Code treats as immovable (real)
property, not only land and buildings, but also attributes
immovability in some cases to property of a movable nature, that
is, personal property, because of the destination to which it is
applied. "Things," says section 334 of the Porto Rican Code, "may

be immovable either by their own nature or by their destination or

the object to which they are applicable." Numerous illustrations are
given in the fifth subdivision of section 335, which is as follows:
"Machinery, vessels, instruments or implements intended by the
owner of the tenements for the industrial or works that they may
carry on in any building or upon any land and which tend directly
to meet the needs of the said industry or works." (See also Code
Nap., articles 516, 518 et seq. to and inclusive of article 534,
recapitulating the things which, though in themselves movable,
may be immobilized.) So far as the subject-matter with which we
are dealing machinery placed in the plant it is plain, both
under the provisions of the Porto Rican Law and of the Code
Napoleon, that machinery which is movable in its nature only
becomes immobilized when placed in a plant by the owner of the
property or plant. Such result would not be accomplished,
therefore, by the placing of machinery in a plant by a tenant or a
usufructuary or any person having only a temporary right.
(Demolombe, Tit. 9, No. 203; Aubry et Rau, Tit. 2, p. 12, Section
164; Laurent, Tit. 5, No. 447; and decisions quoted in FuzierHerman ed. Code Napoleon under articles 522 et seq.) The
distinction rests, as pointed out by Demolombe, upon the fact that
one only having a temporary right to the possession or enjoyment
of property is not presumed by the law to have applied movable
property belonging to him so as to deprive him of it by causing it
by an act of immobilization to become the property of another. It
follows that abstractly speaking the machinery put by the
Altagracia Company in the plant belonging to Sanchez did not lose
its character of movable property and become immovable by
destination. But in the concrete immobilization took place because
of the express provisions of the lease under which the Altagracia
held, since the lease in substance required the putting in of
improved machinery, deprived the tenant of any right to charge
against the lessor the cost such machinery, and it was expressly
stipulated that the machinery so put in should become a part of
the plant belonging to the owner without compensation to the
lessee. Under such conditions the tenant in putting in the
machinery was acting but as the agent of the owner in compliance
with the obligations resting upon him, and the immobilization of
the machinery which resulted arose in legal effect from the act of
the owner in giving by contract a permanent destination to the
machinery.
xxx

xxx

xxx

The machinery levied upon by Nevers & Callaghan, that is, that
which was placed in the plant by the Altagracia Company, being,
as regards Nevers & Callaghan, movable property, it follows that

they had the right to levy on it under the execution upon the
judgment in their favor, and the exercise of that right did not in a
legal sense conflict with the claim of Valdes, since as to him the
property was a part of the realty which, as the result of his
obligations under the lease, he could not, for the purpose of
collecting his debt, proceed separately against. (Valdes vs. Central
Altagracia [192], 225 U.S., 58.)
Finding no reversible error in the record, the judgment appealed from will
be affirmed, the costs of this instance to be paid by the appellant.
Villa-Real, Imperial, Butte, and Goddard, JJ., concur.
G.R. No. 120098

xxx

x---------------------------------------------------------x
[G.R. No. 120109. October 2, 2001.]
PHILIPPINE BANK OF COMMUNICATIONS, petitioner, vs. HON. COURT
OF APPEALS, EVER TEXTILE MILLS and MAMERTO R
VILLALUZ, respondents.

xxx

The MORTGAGOR(S) hereby transfer(s) and convey(s), by way of

First Mortgage, to the MORTGAGEE, . . . certain parcel(s) of land,
together with all the buildings and improvements now existing or
which may hereafter exist thereon, situated in . . .
"Annex A"
(Real and Chattel Mortgage executed by Ever Textile Mills in favor
of PBCommunications continued)
LIST OF MACHINERIES & EQUIPMENT

October 2, 2001

RUBY L. TSAI, petitioner, vs. HON. COURT OF APPEALS, EVER

TEXTILE MILLS, INC. and MAMERTO R VILLALUZ, respondents.

xxx

A. Forty Eight (48) units of Vayrow Knitting Machines-Tompkins

made in Hongkong:
Serial Numbers Size of Machines
xxx

xxx

xxx

B. Sixteen (16) sets of Vayrow Knitting Machines made in Taiwan.

xxx

xxx

xxx

C. Two (2) Circular Knitting Machines made in West Germany.

QUISUMBING, J.:
These consolidated cases assail the decision1 of the Court of Appeals in CAG.R. CV No. 32986, affirming the decision 2 of the Regional Trial Court of
Manila, Branch 7, in Civil Case No. 89-48265. Also assailed is respondent
court's resolution denying petitioners' motion for reconsideration.

xxx

MORTGAGE
(REAL AND CHATTEL)

xxx

D. Four (4) Winding Machines.

xxx

On November 26, 1975, respondent Ever Textile Mills, Inc. (EVERTEX)

obtained a three million peso (P3,000,000.00) loan from petitioner
Philippine Bank of Communications (PBCom). As security for the loan,
EVERTEX executed in favor of PBCom, a deed of Real and Chattel Mortgage
over the lot under TCT No. 372097, where its factory stands, and the
chattels located therein as enumerated in a schedule attached to the
mortgage contract. The pertinent portions of the Real and Chattel
Mortgage are quoted below:

xxx

xxx

xxx
SCHEDULE "A"

I. TCT # 372097 - RIZAL

xxx

xxx

xxx

II. Any and all buildings and improvements now existing or

hereafter to exist on the above-mentioned lot.

III. MACHINERIES & EQUIPMENT situated, located and/or installed

on the above-mentioned lot located at . . .

auction was held and again, PBCom was the highest bidder. The sheriff
issued a Certificate of Sale on the same day.

(a) Forty eight sets (48) Vayrow Knitting Machines . . .

On March 7, 1984, PBCom consolidated its ownership over the lot and all
the properties in it. In November 1986, it leased the entire factory
premises to petitioner Ruby L. Tsai for P50,000.00 a month. On May 3,
1988, PBCom sold the factory, lock, stock and barrel to Tsai for
P9,000,000.00, including the contested machineries.

(b) Sixteen sets (16) Vayrow Knitting Machines . . .

(c) Two (2) Circular Knitting Machines . . .
(d) Two (2) Winding Machines . . .
(e) Two (2) Winding Machines . . .
IV. Any and all replacements, substitutions, additions, increases
and accretions to above properties.
xxx

xxx

xxx3

On April 23, 1979, PBCom granted a second loan of P3,356,000.00 to

EVERTEX. The loan was secured by a Chattel Mortgage over personal
properties enumerated in a list attached thereto. These listed properties
were similar to those listed in Annex A of the first mortgage deed.
After April 23, 1979, the date of the execution of the second mortgage
mentioned above, EVERTEX purchased various machines and equipments.
On November 19, 1982, due to business reverses, EVERTEX filed
insolvency proceedings docketed as SP Proc. No. LP-3091-P before the
defunct Court of First Instance of Pasay City, Branch XXVIII. The CFI issued
an order on November 24, 1982 declaring the corporation insolvent. All its
assets were taken into the custody of the Insolvency Court, including the
collateral, real and personal, securing the two mortgages as
abovementioned.
In the meantime, upon EVERTEX's failure to meet its obligation to PBCom,
the latter commenced extrajudicial foreclosure proceedings against
EVERTEX under Act 3135, otherwise known as "An Act to Regulate the Sale
of Property under Special Powers Inserted in or Annexed to Real Estate
Mortgages" and Act 1506 or "The Chattel Mortgage Law". A Notice of
Sheriff's Sale was issued on December 1, 1982.
On December 15, 1982, the first public auction was held where petitioner
PBCom emerged as the highest bidder and a Certificate of Sale was issued
in its favor on the same date. On December 23, 1982, another public

On March 16, 1989, EVERTEX filed a complaint for annulment of sale,

reconveyance, and damages with the Regional Trial Court against PBCom,
alleging inter alia that the extrajudicial foreclosure of subject mortgage
was in violation of the Insolvency Law. EVERTEX claimed that no rights
having been transmitted to PBCom over the assets of insolvent EVERTEX,
therefore Tsai acquired no rights over such assets sold to her, and should
reconvey the assets.
Further, EVERTEX averred that PBCom, without any legal or factual basis,
appropriated the contested properties, which were not included in the Real
and Chattel Mortgage of November 26, 1975 nor in the Chattel Mortgage of
April 23, 1979, and neither were those properties included in the Notice of
Sheriff's Sale dated December 1, 1982 and Certificate of Sale . . . dated
December 15, 1982.
The disputed properties, which were valued at P4,000,000.00, are: 14
Interlock Circular Knitting Machines, 1 Jet Drying Equipment, 1 Dryer
Equipment, 1 Raisin Equipment and 1 Heatset Equipment.
The RTC found that the lease and sale of said personal properties were
irregular and illegal because they were not duly foreclosed nor sold at the
December 15, 1982 auction sale since these were not included in the
schedules attached to the mortgage contracts. The trial court decreed:
WHEREFORE, judgment is hereby rendered in favor of plaintiff
corporation and against the defendants:
1. Ordering the annulment of the sale executed by defendant
Philippine Bank of Communications in favor of defendant Ruby L.
Tsai on May 3, 1988 insofar as it affects the personal properties
listed in par. 9 of the complaint, and their return to the plaintiff
corporation through its assignee, plaintiff Mamerto R. Villaluz, for
disposition by the Insolvency Court, to be done within ten (10) days
from finality of this decision;
2. Ordering the defendants to pay jointly and severally the plaintiff
corporation the sum of P5,200,000.00 as compensation for the use

and possession of the properties in question from November 1986

to February 1991 and P100,000.00 every month thereafter, with
interest thereon at the legal rate per annum until full payment;
3. Ordering the defendants to pay jointly and severally the plaintiff
corporation the sum of P50,000.00 as and for attorney's fees and
expenses of litigation;
4. Ordering the defendants to pay jointly and severally the plaintiff
corporation the sum of P200,000.00 by way of exemplary
damages;

THE HONORABLE COURT OF APPEALS (SECOND DIVISION) ERRED

IN HOLDING THAT THE DISPUTED 1981 MACHINERIES ARE NOT
REAL PROPERTIES DEEMED PART OF THE MORTGAGE DESPITE
THE CLEAR IMPORT OF THE EVIDENCE AND APPLICABLE RULINGS
OF THE SUPREME COURT.
III
THE HONORABLE COURT OF APPEALS (SECOND DIVISION) ERRED
IN DEEMING PETITIONER A PURCHASER IN BAD FAITH.
IV

5. Ordering the dismissal of the counterclaim of the defendants;

and
6. Ordering the defendants to proportionately pay the costs of suit.

THE HONORABLE COURT OF APPEALS (SECOND DIVISION) ERRED

IN ASSESSING PETITIONER ACTUAL DAMAGES, ATTORNEY'S FEES
AND EXPENSES OF LITIGATION FOR WANT OF VALID FACTUAL
AND LEGAL BASIS.

SO ORDERED.4
V
Dissatisfied, both PBCom and Tsai appealed to the Court of Appeals, which
issued its decision dated August 31, 1994, the dispositive portion of which
reads:
WHEREFORE, except for the deletion therefrom of the award; for exemplary
damages, and reduction of the actual damages, from P100,000.00 to
P20,000.00 per month, from November 1986 until subject personal
properties are restored to appellees, the judgment appealed from is hereby
AFFIRMED, in all other respects. No pronouncement as to costs. 5
Motion for reconsideration of the above decision having been denied in the
resolution of April 28, 1995, PBCom and Tsai filed their separate petitions
for review with this Court.
In G.R No. 120098, petitioner Tsai ascribed the following errors to the
respondent court:
I
THE HONORABLE COURT OF APPEALS (SECOND DIVISION) ERRED
IN EFFECT MAKING A CONTRACT FOR THE PARTIES BY TREATING
THE 1981 ACQUIRED MACHINERIES AS CHATTELS INSTEAD OF REAL
PROPERTIES WITHIN THEIR EARLIER 1975 DEED OF REAL AND
CHATTEL MORTGAGE OR 1979 DEED OF CHATTEL MORTGAGE.
II

THE HONORABLE COURT OF APPEALS (SECOND DIVISION) ERRED

IN HOLDING AGAINST PETITIONER'S ARGUMENTS ON
PRESCRIPTION AND LACHES.6
In G.R. No. 120098, PBCom raised the following issues:
I.
DID THE COURT OF APPEALS VALIDLY DECREE THE MACHINERIES LISTED
UNDER PARAGRAPH 9 OF THE COMPLAINT BELOW AS PERSONAL PROPERTY
OUTSIDE OF THE 1975 DEED OF REAL ESTATE MORTGAGE AND EXCLUDED
THEM FROM THE REAL PROPERTY EXTRAJUDICIALLY FORECLOSED BY
PBCOM DESPITE THE PROVISION IN THE 1975 DEED THAT ALL AFTERACQUIRED PROPERTIES DURING THE LIFETIME OF THE MORTGAGE SHALL
FORM PART THEREOF, AND DESPITE THE UNDISPUTED FACT THAT SAID
MACHINERIES ARE BIG AND HEAVY, BOLTED OR CEMENTED ON THE REAL
PROPERTY MORTGAGED BY EVER TEXTILE MILLS TO PBCOM, AND WERE
ASSESSED FOR REAL ESTATE TAX PURPOSES?
II
CAN PBCOM, WHO TOOK POSSESSION OF THE MACHINERIES IN QUESTION
IN GOOD FAITH, EXTENDED CREDIT FACILITIES TO EVER TEXTILE MILLS
WHICH AS OF 1982 TOTALLED P9,547,095.28, WHO HAD SPENT FOR
MAINTENANCE AND SECURITY ON THE DISPUTED MACHINERIES AND HAD

TO PAY ALL THE BACK TAXES OF EVER TEXTILE MILLS BE LEGALLY

COMPELLED TO RETURN TO EVER THE SAID MACHINERIES OR IN LIEU
THEREOF BE ASSESSED DAMAGES. IS THAT SITUATION TANTAMOUNT TO A
CASE OF UNJUST ENRICHMENT?7
The principal issue, in our view, is whether or not the inclusion of the
questioned properties in the foreclosed properties is proper. The secondary
issue is whether or not the sale of these properties to petitioner Ruby Tsai
is valid.
For her part, Tsai avers that the Court of Appeals in effect made a contract
for the parties by treating the 1981 acquired units of machinery as chattels
instead of real properties within their earlier 1975 deed of Real and Chattel
Mortgage or 1979 deed of Chattel Mortgage.8 Additionally, Tsai argues that
respondent court erred in holding that the disputed 1981 machineries are
not real properties.9 Finally, she contends that the Court of Appeals erred in
holding against petitioner's arguments on prescription and laches 10 and in
assessing petitioner actual damages, attorney's fees and expenses of
litigation, for want of valid factual and legal basis. 11
Essentially, PBCom contends that respondent court erred in affirming the
lower court's judgment decreeing that the pieces of machinery in dispute
were not duly foreclosed and could not be legally leased nor sold to Ruby
Tsai. It further argued that the Court of Appeals' pronouncement that the
pieces of machinery in question were personal properties have no factual
and legal basis. Finally, it asserts that the Court of Appeals erred in
assessing damages and attorney's fees against PBCom.
In opposition, private respondents argue that the controverted units of
machinery are not "real properties" but chattels, and, therefore, they were
not part of the foreclosed real properties, rendering the lease and the
subsequent sale thereof to Tsai a nullity.12
Considering the assigned errors and the arguments of the parties, we find
the petitions devoid of merit and ought to be denied.
Well settled is the rule that the jurisdiction of the Supreme Court in a
petition for review on certiorari under Rule 45 of the Revised Rules of Court
is limited to reviewing only errors of law, not of fact, unless the factual
findings complained of are devoid of support by the evidence on record or
the assailed judgment is based on misapprehension of facts. 13 This rule is
applied more stringently when the findings of fact of the RTC is affirmed by
the Court of Appeals.14
The following are the facts as found by the RTC and affirmed by the Court
of Appeals that are decisive of the issues: (1) the "controverted

machineries" are not covered by, or included in, either of the two
mortgages, the Real Estate and Chattel Mortgage, and the pure Chattel
Mortgage; (2) the said machineries were not included in the list of
properties appended to the Notice of Sale, and neither were they included
in the Sheriff's Notice of Sale of the foreclosed properties. 15
Petitioners contend that the nature of the disputed machineries, i.e., that
they were heavy, bolted or cemented on the real property mortgaged by
EVERTEX to PBCom, make them ipso facto immovable under Article 415 (3)
and (5) of the New Civil Code. This assertion, however, does not settle the
issue. Mere nuts and bolts do not foreclose the controversy. We have to
look at the parties' intent.
While it is true that the controverted properties appear to be immobile, a
perusal of the contract of Real and Chattel Mortgage executed by the
parties herein gives us a contrary indication. In the case at bar, both the
trial and the appellate courts reached the same finding that the true
intention of PBCOM and the owner, EVERTEX, is to treat machinery and
equipment as chattels. The pertinent portion of respondent appellate
court's ruling is quoted below:
As stressed upon by appellees, appellant bank treated the
machineries as chattels; never as real properties. Indeed, the 1975
mortgage contract, which was actually real and chattel mortgage,
militates against appellants' posture. It should be noted that the
printed form used by appellant bank was mainly for real estate
mortgages. But reflective of the true intention of appellant PBCOM
and appellee EVERTEX was the typing in capital letters,
immediately following the printed caption of mortgage, of the
phrase "real and chattel." So also, the "machineries and
equipment" in the printed form of the bank had to be inserted in
the blank space of the printed contract and connected with the
word "building" by typewritten slash marks. Now, then, if the
machineries in question were contemplated to be included in the
real estate mortgage, there would have been no necessity to ink a
chattel mortgage specifically mentioning as part III of Schedule A a
listing of the machineries covered thereby. It would have sufficed
to list them as immovables in the Deed of Real Estate Mortgage of
the land and building involved.
As regards the 1979 contract, the intention of the parties is clear
and beyond question. It refers solely tochattels. The inventory list
of the mortgaged properties is an itemization of sixty-three (63)
individually described machineries while the schedule listed only
machines and 2,996,880.50 worth of finished cotton fabrics and
natural cotton fabrics.16

In the absence of any showing that this conclusion is baseless, erroneous

or uncorroborated by the evidence on record, we find no compelling reason
to depart therefrom.
Too, assuming arguendo that the properties in question are immovable by
nature, nothing detracts the parties from treating it as chattels to secure
an obligation under the principle of estoppel. As far back as Navarro v.
Pineda, 9 SCRA 631 (1963), an immovable may be considered a personal
property if there is a stipulation as when it is used as security in the
payment of an obligation where a chattel mortgage is executed over it, as
in the case at bar.
In the instant case, the parties herein: (1) executed a contract styled as
"Real Estate Mortgage and Chattel Mortgage," instead of just "Real Estate
Mortgage" if indeed their intention is to treat all properties included therein
as immovable, and (2) attached to the said contract a separate "LIST OF
MACHINERIES & EQUIPMENT". These facts, taken together, evince the
conclusion that the parties' intention is to treat these units of machinery as
chattels. A fortiori, the contested after-acquired properties, which are of
the same description as the units enumerated under the title "LIST OF
MACHINERIES & EQUIPMENT," must also be treated as chattels.
Accordingly, we find no reversible error in the respondent appellate court's
ruling that inasmuch as the subject mortgages were intended by the
parties to involve chattels, insofar as equipment and machinery were
concerned, the Chattel Mortgage Law applies, which provides in Section 7
thereof that: "a chattel mortgage shall be deemed to cover only the
property described therein and not like or substituted property thereafter
acquired by the mortgagor and placed in the same depository as the
property originally mortgaged, anything in the mortgage to the contrary
notwithstanding."
And, since the disputed machineries were acquired in 1981 and could not
have been involved in the 1975 or 1979 chattel mortgages, it was
consequently an error on the part of the Sheriff to include subject
machineries with the properties enumerated in said chattel mortgages.
As the auction sale of the subject properties to PBCom is void, no valid title
passed in its favor. Consequently, the sale thereof to Tsai is also a nullity
under the elementary principle of nemo dat quod non habet, one cannot
give what one does not have.17
Petitioner Tsai also argued that assuming that PBCom's title over the
contested properties is a nullity, she is nevertheless a purchaser in good
faith and for value who now has a better right than EVERTEX.

To the contrary, however, are the factual findings and conclusions of the
trial court that she is not a purchaser in good faith. Well-settled is the rule
that the person who asserts the status of a purchaser in good faith and for
value has the burden of proving such assertion.18 Petitioner Tsai failed to
discharge this burden persuasively.
Moreover, a purchaser in good faith and for value is one who buys the
property of another without notice that some other person has a right to or
interest in such property and pays a full and fair price for the same, at the
time of purchase, or before he has notice of the claims or interest of some
other person in the property.19Records reveal, however, that when Tsai
purchased the controverted properties, she knew of respondent's claim
thereon. As borne out by the records, she received the letter of
respondent's counsel, apprising her of respondent's claim, dated February
27, 1987.20 She replied thereto on March 9, 1987.21 Despite her knowledge
of respondent's claim, she proceeded to buy the contested units of
machinery on May 3, 1988. Thus, the RTC did not err in finding that she
was not a purchaser in good faith.
Petitioner Tsai's defense of indefeasibility of Torrens Title of the lot where
the disputed properties are located is equally unavailing. This defense
refers to sale of lands and not to sale of properties situated therein.
Likewise, the mere fact that the lot where the factory and the disputed
properties stand is in PBCom's name does not automatically make PBCom
the owner of everything found therein, especially in view of EVERTEX's
letter to Tsai enunciating its claim.
Finally, petitioners' defense of prescription and laches is less than
convincing. We find no cogent reason to disturb the consistent findings of
both courts below that the case for the reconveyance of the disputed
properties was filed within the reglementary period. Here, in our view, the
doctrine of laches does not apply. Note that upon petitioners' adamant
refusal to heed EVERTEX's claim, respondent company immediately filed
an action to recover possession and ownership of the disputed properties.
There is no evidence showing any failure or neglect on its part, for an
unreasonable and unexplained length of time, to do that which, by
exercising due diligence, could or should have been done earlier. The
doctrine of stale demands would apply only where by reason of the lapse
of time, it would be inequitable to allow a party to enforce his legal rights.
Moreover, except for very strong reasons, this Court is not disposed to
apply the doctrine of laches to prejudice or defeat the rights of an owner. 22
As to the award of damages, the contested damages are the actual
compensation, representing rentals for the contested units of machinery,
the exemplary damages, and attorney's fees.

As regards said actual compensation, the RTC awarded P100,000.00

corresponding to the unpaid rentals of the contested properties based on
the testimony of John Chua, who testified that the P100,000.00 was based
on the accepted practice in banking and finance, business and investments
that the rental price must take into account the cost of money used to buy
them. The Court of Appeals did not give full credence to Chua's projection
and reduced the award to P20,000.00.
Basic is the rule that to recover actual damages, the amount of loss must
not only be capable of proof but must actually be proven with reasonable
degree of certainty, premised upon competent proof or best evidence
obtainable of the actual amount thereof.23 However, the allegations of
respondent company as to the amount of unrealized rentals due them as
actual damages remain mere assertions unsupported by documents and
other competent evidence. In determining actual damages, the court
cannot rely on mere assertions, speculations, conjectures or guesswork but
must depend on competent proof and on the best evidence obtainable
regarding the actual amount of loss.24 However, we are not prepared to
disregard the following dispositions of the respondent appellate court:
. . . In the award of actual damages under scrutiny, there is nothing
on record warranting the said award of P5,200,000.00,
representing monthly rental income of P100,000.00 from
November 1986 to February 1991, and the additional award of
P100,000.00 per month thereafter.
As pointed out by appellants, the testimonial evidence, consisting
of the testimonies of Jonh (sic) Chua and Mamerto Villaluz, is shy of
what is necessary to substantiate the actual damages allegedly
sustained by appellees, by way of unrealized rental income of
subject machineries and equipments.
The testimony of John Cua (sic) is nothing but an opinion or
projection based on what is claimed to be a practice in business
and industry. But such a testimony cannot serve as the sole basis
for assessing the actual damages complained of. What is more,
there is no showing that had appellant Tsai not taken possession of
the machineries and equipments in question, somebody was
willing and ready to rent the same for P100,000.00 a month.
xxx

xxx

xxx

Then, too, even assuming arguendo that the said machineries and
equipments could have generated a rental income of P30,000.00 a
month, as projected by witness Mamerto Villaluz, the same would
have been a gross income. Therefrom should be deducted or

removed, expenses for maintenance and repairs . . . Therefore, in

the determination of the actual damages or unrealized rental
income sued upon, there is a good basis to calculate that at least
four months in a year, the machineries in dispute would have been
idle due to absence of a lessee or while being repaired. In the light
of the foregoing rationalization and computation, We believe that a
net unrealized rental income of P20,000.00 a month, since
November 1986, is more realistic and fair.25
As to exemplary damages, the RTC awarded P200,000.00 to EVERTEX
which the Court of Appeals deleted. But according to the CA, there was no
clear showing that petitioners acted malevolently, wantonly and
oppressively. The evidence, however, shows otherwise.It is a requisite to
award exemplary damages that the wrongful act must be accompanied by
bad faith,26 and the guilty acted in a wanton, fraudulent, oppressive,
reckless or malevolent manner.27 As previously stressed, petitioner Tsai's
act of purchasing the controverted properties despite her knowledge of
EVERTEX's claim was oppressive and subjected the already insolvent
respondent to gross disadvantage. Petitioner PBCom also received the
same letters of Atty. Villaluz, responding thereto on March 24, 1987. 28 Thus,
PBCom's act of taking all the properties found in the factory of the
financially handicapped respondent, including those properties not covered
by or included in the mortgages, is equally oppressive and tainted with bad
faith. Thus, we are in agreement with the RTC that an award of exemplary
damages is proper.
The amount of P200,000.00 for exemplary damages is, however,
excessive. Article 2216 of the Civil Code provides that no proof of
pecuniary loss is necessary for the adjudication of exemplary damages,
their assessment being left to the discretion of the court in accordance
with the circumstances of each case.29 While the imposition of exemplary
damages is justified in this case, equity calls for its reduction. In Inhelder
Corporation v. Court of Appeals, G.R. No. L-52358, 122 SCRA 576, 585,
(May 30, 1983), we laid down the rule that judicial discretion granted to the
courts in the assessment of damages must always be exercised with
balanced restraint and measured objectivity. Thus, here the award of
exemplary damages by way of example for the public good should be
reduced to P100,000.00.
By the same token, attorney's fees and other expenses of litigation may be
recovered when exemplary damages are awarded.30 In our view, RTC's
award of P50,000.00 as attorney's fees and expenses of litigation is
reasonable, given the circumstances in these cases.
WHEREFORE, the petitions are DENIED. The assailed decision and
resolution of the Court of Appeals in CA-G.R. CV No. 32986 are AFFIRMED
WITH MODIFICATIONS. Petitioners Philippine Bank of Communications and

Ruby L. Tsai are hereby ordered to pay jointly and severally Ever Textile
Mills, Inc. the following: (1) P20,000.00 per month, as compensation for the
use and possession of the properties in question from November
198631 until subject personal properties are restored to respondent
corporation; (2) P100,000.00 by way of exemplary damages, and (3)
P50,000.00 as attorney's fees and litigation expenses. Costs against
petitioners.
SO ORDERED.
Bellosillo, Mendoza, Buena and De Leon, Jr., JJ., concur
G.R. No. L-32030

July 2, 1930

SOFIA LAVARRO, ET AL., plaintiffs-appellants, vs. REGINA LABITORIA,

ET AL., defendants-appellants.
OSTRAND, J.:
Anastacio Labitoria, who died over thirty years ago, was the original owner
of a tract of land divided into three parcels and situated in the barrio of
Mangilag, municipality of Candelaria, Province of Tayabas. He left four
children, Francisco, Liberata, Tirso, and Eustacio Labitoria. Francisco
acquired the shares of Tirso and Eustacio together with the greater part of
that of Liberata, and thus became the owner of nearly all of the land. After
his death, his children, Macario and Regina Labitoria, became the owners
of his interest in the land.
Sofia Lavarro is the daughter of Liberata Labitoria, and in or about the year
1897, her first husband, Crispulo Alcantara, borrowed P330 from Francisco
Labitoria on the condition that Alcantara should plant 3,300 coconut palms
on the land to be divided in equal shares between the parties, the loan to
be paid back by turning over to the creditor 330 coconut palms out of the
share of Alcantara and Sofia. Under this agreement, about 1,700 palms
were planted by Alcantara, but later on, further plantings were made by his
wife, Sofia Lavarro.
In July, 1916, the land was registered in the names of Macario Labitoria,
Regina Labitoria, Bernardo Labitoria, Vidal Labitoria, Ariston Lavarro, Sofia
Lavarro, and Isidro Lavaris. Nothing seems to have been said about the
improvements on the land and no special mention of them appears in the
certificate of title. Neither were the respective shares of the persons to
whom the land was adjudicated definitely determined.
On October 31, 1916, Macario, Regina, and Bernardo Labitoria and Ariston
Lavarro brought an action against Sofia Lavarro and her then husband,

Emeterio Pureza, for the partition of the land with its improvements. The
action is civil case No. 351 of the Court of First Instance of Tayabas. In her
answer in that case, Sofia Lavarro set up a cross-complaint alleging,
among other things, that she was a coowner of the land and was entitled
to a large proportion of the coconut palms thereon. The prayer of the
cross-complaint reads as follows:
Wherefore, by this cross-complaint Sofia Lavarro and Emeterio
Pureza, through their undersigned attorney, pray the court to
decree the partition of the three parcels of land described
above, with all the improvements thereon, allotting to Sofia
Lavarro and Emeterio Pureza their rightful portion, and ordering
Macario Labitoria to render the proper accounts, and to deliver to
his coheirs their proportionate part of the fruits and products of
said lands, with costs against the cross-complaint defendants.
(Emphasis supplied.)
Upon trial partition was ordered, and Sofia Lavarro was awarded 520
coconut trees and 43,391 square meters of land. She thereupon appealed
to the Supreme Court, and a decision was rendered by that court on March
24, 1927,1 in which it was held that Sofia Lavarro was entitled to 1/28 of
the land. In all the respects, the decision of the Court of First Instances was
affirmed. The partition seems to have been carried out in conformity with
the decision of the Supreme Court, and Sofia was awarded 6 hectares, 88
ares, and 77 centiares of land, together with 850 coconut palms instead of
520.
The present action was initiated by Sofia Lavarro and her daughters,
Apolonia and Isabel Alcantara, on August 15, 1927, against Regina
Labitoria and Marciano Labitoria, the latter as administrator of the estate of
the deceased Macario Labitoria. In their amended complaint, the plaintiffs
allege that on or about the year 1897, Sofia Lavarro and her husband,
Crispulo Alcantara, planted 2,850 coconut palms on the land abovementioned, of which 1,970 trees were actually alive and bearing fruit; that
after the death of Crispulo Alcantara in the year 1910, Sofia Lavarro, being
then a widow, planted 2,200 coconut palms on the same tract of land,
2,000 palms being still in existence and the greater part of them bearing
fruit; that from the year 1897, the plaintiffs had been in possession of the
above-mentioned plantings and had collected the fruits, but that the
defendants were now endeavoring to take possession of said coconut
palms; and that each coconut palm was worth P12. The plaintiffs therefore
prayed that unless the defendants paid to the plaintiffs the sum of
P47,640, the value of the 3,970 palms planted, it be ordered that said
plaintiffs be allowed to continue in possession of said coconut palms in
accordance with the law.

In their answer to the complaint, the defendants set up as special

defenses res judicata and prescription.
Upon trial, the court below, basing its decision on the case of Bautista vs.
Jimenez (24 Phil., 111), and article 361 of the Civil Code, ordered the
defendants to pay the plaintiffs the sum of P4,820 for 1,205 coconut palms
or to require the plaintiffs to purchase the land, the plaintiffs to retain the
coconut palms until the aforesaid sum was paid. From this judgment both
the plaintiffs and defendants appealed.
It is very obvious that the court below erred in rendering judgment in favor
of the plaintiffs. This is an action for compensation for improvements
alleged to have been made by the plaintiffs on the land awarded to the
defendants and is brought notwithstanding the fact that the question of
improvements was put in issue in case No. 351 and that the portion of land
due Sofia Lavarro, and the improvements as well, were determined and
adjudicated by the court in that case. Her rights in regard to the
improvements are consequently res judicata.
But it is intimated that, while in the earlier case the issues related to the
ownership of the improvements, the issue here is only a question of money
payment and that therefore the causes of action are different. Assuming,
without conceding, that such is the case, the result would be the same.
The issues in both cases arose from the same source or transactions and
should have been determined in the same case (sec. 97, Code of Civil
Procedure). A judgment upon the merits bars a subsequent suit upon the
same cause, though brought in a different form of action. (White vs. Martin,
1 Port. [Ala.], 215.) "The principle is firmly established that a party will not
be permitted to split up a single cause of action and make it the basis for
several suits. If several suits be brought for different parts of such a claim,
the pendency of the first may be pleaded in abatement of the others, and
a recovery of any part of the cause of action will be a bar to an action
brought upon the other part. Not only is it a bar to suit, but the plaintiff in
the former action cannot subsequently avail himself of the residue by way
of offset in an action against him by the opposite party." (15 R. C. L., 965)
In passing, it may be noted that a close examination of the facts in the
case of Bautista vs. Jimenez (24 Phil., 111), will show that it differs
materially from the present case; the case of Berses vs. Villanueva (25
Phil., 473), is more in point.
As to the other plaintiffs, Apolonia and Isabel Alcantara, it is sufficient to
say that if they had any claim to the property or improvements, such
claims should have been presented in the registration proceedings in 1916;
trees and plants annexed to the land are parts thereof and unless rights or
interests in such trees or plants are claimed in the registration proceedings
by others, they become the property of the persons to whom the land is
adjudicated. By timely proceedings in equity, matters of that character, if

fraudulent, may sometimes be corrected, but in the present case, the

plaintiffs Apolonia and Isabel Alcantara did not prosecute their alleged
rights until eleven years after the registration of the property, and it is
obvious that whatever rights they may have had are now lost by
prescription.
The judgment of the court below is therefore reversed, and the case is
dismissed with the costs in both instances against the plaintiffs, jointly and
severally. So ordered.
Malcolm, Villamor, Johns, Romualdez, and Villa-Real, JJ., concur.
G.R. No. L-26278

August 4, 1927

LEON SIBAL, plaintiff-appellant, vs. EMILIANO J. VALDEZ ET

AL., defendants.
EMILIANO J. VALDEZ, appellee.
JOHNSON, J.:
The action was commenced in the Court of First Instance of the Province of
Tarlac on the 14th day of December 1924. The facts are about as
conflicting as it is possible for facts to be, in the trial causes.
As a first cause of action the plaintiff alleged that the defendant Vitaliano
Mamawal, deputy sheriff of the Province of Tarlac, by virtue of a writ of
execution issued by the Court of First Instance of Pampanga, attached and
sold to the defendant Emiliano J. Valdez the sugar cane planted by the
plaintiff and his tenants on seven parcels of land described in the
complaint in the third paragraph of the first cause of action; that within one
year from the date of the attachment and sale the plaintiff offered to
redeem said sugar cane and tendered to the defendant Valdez the amount
sufficient to cover the price paid by the latter, the interest thereon and any
assessments or taxes which he may have paid thereon after the purchase,
and the interest corresponding thereto and that Valdez refused to accept
the money and to return the sugar cane to the plaintiff.
As a second cause of action, the plaintiff alleged that the defendant
Emiliano J. Valdez was attempting to harvest the palay planted in four of
the seven parcels mentioned in the first cause of action; that he had
harvested and taken possession of the palay in one of said seven parcels
and in another parcel described in the second cause of action, amounting
to 300 cavans; and that all of said palay belonged to the plaintiff.
Plaintiff prayed that a writ of preliminary injunction be issued against the
defendant Emiliano J. Valdez his attorneys and agents, restraining them (1)
from distributing him in the possession of the parcels of land described in

the complaint; (2) from taking possession of, or harvesting the sugar cane
in question; and (3) from taking possession, or harvesting the palay in said
parcels of land. Plaintiff also prayed that a judgment be rendered in his
favor and against the defendants ordering them to consent to the
redemption of the sugar cane in question, and that the defendant Valdez
be condemned to pay to the plaintiff the sum of P1,056 the value of palay
harvested by him in the two parcels above-mentioned ,with interest and
costs.
On December 27, 1924, the court, after hearing both parties and upon
approval of the bond for P6,000 filed by the plaintiff, issued the writ of
preliminary injunction prayed for in the complaint.

(2) Absolving the defendants from all liability under the complaint;
and
(3) Condemning the plaintiff and his sureties Cenon de la Cruz,
Juan Sangalang and Marcos Sibal to jointly and severally pay to the
defendant Emiliano J. Valdez the sum of P9,439.08 as follows:
(a) P6,757.40, the value of the sugar cane;
(b) 1,435.68, the value of the sugar-cane shoots;
(c) 646.00, the value of palay harvested by plaintiff;

The defendant Emiliano J. Valdez, in his amended answer, denied generally

and specifically each and every allegation of the complaint and step up the
following defenses:
(a) That the sugar cane in question had the nature of personal
property and was not, therefore, subject to redemption;
(b) That he was the owner of parcels 1, 2 and 7 described in the
first cause of action of the complaint;
(c) That he was the owner of the palay in parcels 1, 2 and 7; and
(d) That he never attempted to harvest the palay in parcels 4 and
5.
The defendant Emiliano J. Valdez by way of counterclaim, alleged that by
reason of the preliminary injunction he was unable to gather the sugar
cane, sugar-cane shoots (puntas de cana dulce) palay in said parcels of
land, representing a loss to him of P8,375.20 and that, in addition thereto,
he suffered damages amounting to P3,458.56. He prayed, for a judgment
(1) absolving him from all liability under the complaint; (2) declaring him to
be the absolute owner of the sugar cane in question and of the palay in
parcels 1, 2 and 7; and (3) ordering the plaintiff to pay to him the sum of
P11,833.76, representing the value of the sugar cane and palay in
question, including damages.
Upon the issues thus presented by the pleadings the cause was brought on
for trial. After hearing the evidence, and on April 28, 1926, the Honorable
Cayetano Lukban, judge, rendered a judgment against the plaintiff and in
favor of the defendants
(1) Holding that the sugar cane in question was personal property
and, as such, was not subject to redemption;

(d) 600.00, the value of 150 cavans of palay which the

defendant was not able to raise by reason of the injunction,
at P4 cavan. 9,439.08 From that judgment the plaintiff
appealed and in his assignments of error contends that the
lower court erred: (1) In holding that the sugar cane in
question was personal property and, therefore, not subject
to redemption;
(2) In holding that parcels 1 and 2 of the complaint belonged to
Valdez, as well as parcels 7 and 8, and that the palay therein was
planted by Valdez;
(3) In holding that Valdez, by reason of the preliminary injunction
failed to realized P6,757.40 from the sugar cane and P1,435.68
from sugar-cane shoots (puntas de cana dulce);
(4) In holding that, for failure of plaintiff to gather the sugar cane
on time, the defendant was unable to raise palay on the land,
which would have netted him the sum of P600; and.
(5) In condemning the plaintiff and his sureties to pay to the
defendant the sum of P9,439.08.
It appears from the record:
(1) That on May 11, 1923, the deputy sheriff of the Province of
Tarlac, by virtue of writ of execution in civil case No. 20203 of the
Court of First Instance of Manila (Macondray & Co., Inc. vs. Leon
Sibal),levied an attachment on eight parcels of land belonging to
said Leon Sibal, situated in the Province of Tarlac, designated in the
second of attachment as parcels 1, 2, 3, 4, 5, 6, 7 and 8 (Exhibit B,
Exhibit 2-A).

(2) That on July 30, 1923, Macondray & Co., Inc., bought said eight
parcels of land, at the auction held by the sheriff of the Province of
Tarlac, for the sum to P4,273.93, having paid for the said parcels
separately as follows (Exhibit C, and 2-A):

Parcel

1 .....................................................................
2 .....................................................................
3 .....................................................................
4 .....................................................................
5 .....................................................................
6 .....................................................................
7 with the house thereon ..........................

cane in question to Emilio J. Valdez, who paid therefor the sum of

P1,550, of which P600 was for the sugar cane (Exhibit A).
(3) That on April 29,1924, said deputy sheriff, by virtue of said writ
of execution, also attached the real property of said Leon Sibal in
Tarlac, including all of his rights, interest and participation therein,
which real property consisted of eleven parcels of land and a house
and camarin situated in one of said parcels (Exhibit A).
(4) That on June 25, 1924, eight of said eleven parcels, including
the house and the camarin, were bought by Emilio J. Valdez at the
auction held by the sheriff for the sum of P12,200. Said eight
parcels were designated in the certificate of sale as parcels 1, 3, 4,
5, 6, 7, 10 and 11. The house and camarin were situated on parcel
7 (Exhibit A).
(5) That the remaining three parcels, indicated in the certificate of
the sheriff as parcels 2, 12, and 13, were released from the
attachment by virtue of claims presented by Agustin Cuyugan and
Domiciano Tizon (Exhibit A).

(6) That on the same date, June 25, 1924, Macondray & Co. sold
and conveyed to Emilio J. Valdez for P2,579.97 all of its rights and
========== interest in the eight parcels of land acquired by it at public auction
held by the deputy sheriff of Tarlac in connection with civil case No.
20203 of the Court of First Instance of Manila, as stated above.
Said amount represented the unpaid balance of the redemption
price of said eight parcels, after payment by Leon Sibal of P2,000
(3) That within one year from the sale of said parcel of land, and on
on September 24, 1923, fro the account of the redemption price,
the 24th day of September, 1923, the judgment debtor, Leon Sibal,
as stated above. (Exhibit C and 2).
paid P2,000 to Macondray & Co., Inc., for the account of the
redemption price of said parcels of land, without specifying the
The foregoing statement of facts shows:
particular parcels to which said amount was to applied. The
redemption price said eight parcels was reduced, by virtue of said
transaction, to P2,579.97 including interest (Exhibit C and 2).
(1) The Emilio J. Valdez bought the sugar cane in question, located
in the seven parcels of land described in the first cause of action of
the complaint at public auction on May 9 and 10, 1924, for P600.
The record further shows:
8 .....................................................................

(1) That on April 29, 1924, the defendant Vitaliano Mamawal,

deputy sheriff of the Province of Tarlac, by virtue of a writ of
execution in civil case No. 1301 of the Province of Pampanga
(Emiliano J. Valdez vs. Leon Sibal 1. the same parties in the
present case), attached the personal property of said Leon Sibal
located in Tarlac, among which was included the sugar cane now in
question in the seven parcels of land described in the complaint
(Exhibit A).
(2) That on May 9 and 10, 1924, said deputy sheriff sold at public
auction said personal properties of Leon Sibal, including the sugar

(2) That on July 30, 1923, Macondray & Co. became the owner of
eight parcels of land situated in the Province of Tarlac belonging to
Leon Sibal and that on September 24, 1923, Leon Sibal paid to
Macondray & Co. P2,000 for the account of the redemption price of
said parcels.
(3) That on June 25, 1924, Emilio J. Valdez acquired from
Macondray & Co. all of its rights and interest in the said eight
parcels of land.

(4) That on June 25, 1924, Emilio J. Valdez also acquired all of the
rights and interest which Leon Sibal had or might have had on said
eight parcels by virtue of the P2,000 paid by the latter to
Macondray.
(5) That Emilio J. Valdez became the absolute owner of said eight
parcels of land.
The first question raised by the appeal is, whether the sugar cane in
question is personal or real property. It is contended that sugar cane comes
under the classification of real property as "ungathered products" in
paragraph 2 of article 334 of the Civil Code. Said paragraph 2 of article 334
enumerates as real property the following: Trees, plants, and ungathered
products, while they are annexed to the land or form an integral part of
any immovable property." That article, however, has received in recent
years an interpretation by the Tribunal Supremo de Espaa, which holds
that, under certain conditions, growing crops may be considered as
personal property. (Decision of March 18, 1904, vol. 97, Civil Jurisprudence
of Spain.)
Manresa, the eminent commentator of the Spanish Civil Code, in discussing
section 334 of the Civil Code, in view of the recent decisions of the
supreme Court of Spain, admits that growing crops are sometimes
considered and treated as personal property. He says:
No creemos, sin embargo, que esto excluya la excepcionque
muchos autores hacen tocante a la venta de toda cosecha o de
parte de ella cuando aun no esta cogida (cosa frecuente con la
uvay y la naranja), y a la de lenas, considerando ambas
como muebles. El Tribunal Supremo, en sentencia de 18 de marzo
de 1904, al entender sobre un contrato de arrendamiento de un
predio rustico, resuelve que su terminacion por desahucio no
extingue los derechos del arrendario, para recolectar o percibir los
frutos correspondientes al ao agricola, dentro del que nacieron
aquellos derechos, cuando el arrendor ha percibido a su vez el
importe de la renta integra correspondiente, aun cuando lo haya
sido por precepto legal durante el curso del juicio, fundandose para
ello, no solo en que de otra suerte se daria al desahucio un alcance
que no tiene, sino en que, y esto es lo interesante a nuestro
proposito, la consideracion de inmuebles que el articulo 334 del
Codigo Civil atribuge a los frutos pendientes, no les priva del
caracter de productos pertenecientes, como tales, a quienes a
ellos tenga derecho, Ilegado el momento de su recoleccion.
xxx

xxx

xxx

Mas actualmente y por virtud de la nueva edicion de la Ley

Hipotecaria, publicada en 16 de diciembre de 1909, con las
reformas introducidas por la de 21 de abril anterior, la hipoteca,

salvo pacto expreso que disponga lo contrario, y cualquiera que

sea la naturaleza y forma de la obligacion que garantice, no
comprende los frutos cualquiera que sea la situacion en que se
encuentre. (3 Manresa, 5. edicion, pags. 22, 23.)
From the foregoing it appears (1) that, under Spanish authorities, pending
fruits and ungathered products may be sold and transferred as personal
property; (2) that the Supreme Court of Spain, in a case of ejectment of a
lessee of an agricultural land, held that the lessee was entitled to gather
the products corresponding to the agricultural year, because said fruits did
not go with the land but belonged separately to the lessee; and (3) that
under the Spanish Mortgage Law of 1909, as amended, the mortgage of a
piece of land does not include the fruits and products existing thereon,
unless the contract expressly provides otherwise.
An examination of the decisions of the Supreme Court of Louisiana may
give us some light on the question which we are discussing. Article 465 of
the Civil Code of Louisiana, which corresponds to paragraph 2 of article
334 of our Civil Code, provides: "Standing crops and the fruits of trees not
gathered, and trees before they are cut down, are likewise immovable, and
are considered as part of the land to which they are attached."
The Supreme Court of Louisiana having occasion to interpret that provision,
held that in some cases "standing crops" may be considered and dealt with
as personal property. In the case of Lumber Co. vs. Sheriff and Tax
Collector (106 La., 418) the Supreme Court said: "True, by article 465 of
the Civil Code it is provided that 'standing crops and the fruits of trees not
gathered and trees before they are cut down . . . are considered as part of
the land to which they are attached, but the immovability provided for is
only one in abstracto and without reference to rights on or to the crop
acquired by others than the owners of the property to which the crop is
attached. . . . The existence of a right on the growing crop is a mobilization
by anticipation, a gathering as it were in advance, rendering the crop
movable quoad the right acquired therein. Our jurisprudence recognizes
the possible mobilization of the growing crop." (Citizens' Bank vs. Wiltz, 31
La. Ann., 244; Porche vs. Bodin, 28 La., Ann., 761; Sandel vs. Douglass, 27
La. Ann., 629; Lewis vs. Klotz, 39 La. Ann., 267.)
"It is true," as the Supreme Court of Louisiana said in the case of Porche
vs. Bodin (28 La. An., 761) that "article 465 of the Revised Code says that
standing crops are considered as immovable and as part of the land to
which they are attached, and article 466 declares that the fruits of an
immovable gathered or produced while it is under seizure are considered
as making part thereof, and incurred to the benefit of the person making
the seizure. But the evident meaning of these articles, is where the crops
belong to the owner of the plantation they form part of the immovable, and
where it is seized, the fruits gathered or produced inure to the benefit of
the seizing creditor.

A crop raised on leased premises in no sense forms part of the

immovable. It belongs to the lessee, and may be sold by him,
whether it be gathered or not, and it may be sold by his judgment
creditors. If it necessarily forms part of the leased premises the
result would be that it could not be sold under execution separate
and apart from the land. If a lessee obtain supplies to make his
crop, the factor's lien would not attach to the crop as a separate
thing belonging to his debtor, but the land belonging to the lessor
would be affected with the recorded privilege. The law cannot be
construed so as to result in such absurd consequences.
In the case of Citizen's Bank vs. Wiltz (31 La. Ann., 244)the court said:
If the crop quoad the pledge thereof under the act of 1874 was an
immovable, it would be destructive of the very objects of the act, it
would render the pledge of the crop objects of the act, it would
render the pledge of the crop impossible, for if the crop was an
inseparable part of the realty possession of the latter would be
necessary to that of the former; but such is not the case. True, by
article 465 C. C. it is provided that "standing crops and the fruits of
trees not gathered and trees before they are cut down are likewise
immovable and are considered as part of the land to which they
are attached;" but the immovability provided for is only one in
abstracto and without reference to rights on or to the crop acquired
by other than the owners of the property to which the crop was
attached. The immovability of a growing crop is in the order of
things temporary, for the crop passes from the state of a growing
to that of a gathered one, from an immovable to a movable. The
existence of a right on the growing crop is a mobilization by
anticipation, a gathering as it were in advance, rendering the crop
movable quoad the right acquired thereon. The provision of our
Code is identical with the Napoleon Code 520, and we may
therefore obtain light by an examination of the jurisprudence of
France.
The rule above announced, not only by the Tribunal Supremo de
Espaa but by the Supreme Court of Louisiana, is followed in practically
every state of the Union.
From an examination of the reports and codes of the State of California and
other states we find that the settle doctrine followed in said states in
connection with the attachment of property and execution of judgment is,
that growing crops raised by yearly labor and cultivation are considered
personal property. (6 Corpuz Juris, p. 197; 17 Corpus Juris, p. 379; 23
Corpus Juris, p. 329: Raventas vs. Green, 57 Cal., 254; Norris vs. Watson,
55 Am. Dec., 161; Whipple vs. Foot, 3 Am. Dec., 442; 1 Benjamin on Sales,
sec. 126; McKenzie vs. Lampley, 31 Ala., 526; Crine vs. Tifts and Co., 65
Ga., 644; Gillitt vs. Truax, 27 Minn., 528; Preston vs. Ryan, 45 Mich., 174;
Freeman on Execution, vol. 1, p. 438; Drake on Attachment, sec. 249;
Mechem on Sales, sec. 200 and 763.)

Mr. Mechem says that a valid sale may be made of a thing, which though
not yet actually in existence, is reasonably certain to come into existence
as the natural increment or usual incident of something already in
existence, and then belonging to the vendor, and then title will vest in the
buyer the moment the thing comes into existence. (Emerson vs. European
Railway Co., 67 Me., 387; Cutting vs. Packers Exchange, 21 Am. St. Rep.,
63.) Things of this nature are said to have a potential existence. A man
may sell property of which he is potentially and not actually possessed. He
may make a valid sale of the wine that a vineyard is expected to produce;
or the gain a field may grow in a given time; or the milk a cow may yield
during the coming year; or the wool that shall thereafter grow upon sheep;
or what may be taken at the next cast of a fisherman's net; or fruits to
grow; or young animals not yet in existence; or the good will of a trade and
the like. The thing sold, however, must be specific and identified. They
must be also owned at the time by the vendor. (Hull vs. Hull, 48 Conn., 250
[40 Am. Rep., 165].)
It is contended on the part of the appellee that paragraph 2 of article 334
of the Civil Code has been modified by section 450 of the Code of Civil
Procedure as well as by Act No. 1508, the Chattel Mortgage Law. Said
section 450 enumerates the property of a judgment debtor which may be
subjected to execution. The pertinent portion of said section reads as
follows: "All goods, chattels, moneys, and other property, both real and
personal, * * * shall be liable to execution. Said section 450 and most of
the other sections of the Code of Civil Procedure relating to the execution
of judgment were taken from the Code of Civil Procedure of California. The
Supreme Court of California, under section 688 of the Code of Civil
Procedure of that state (Pomeroy, p. 424) has held, without variation, that
growing crops were personal property and subject to execution.
Act No. 1508, the Chattel Mortgage Law, fully recognized that growing
crops are personal property. Section 2 of said Act provides: "All personal
property shall be subject to mortgage, agreeably to the provisions of this
Act, and a mortgage executed in pursuance thereof shall be termed a
chattel mortgage." Section 7 in part provides: "If growing crops be
mortgaged the mortgage may contain an agreement stipulating that the
mortgagor binds himself properly to tend, care for and protect the crop
while growing.
It is clear from the foregoing provisions that Act No. 1508 was enacted on
the assumption that "growing crops" are personal property. This
consideration tends to support the conclusion hereinbefore stated, that
paragraph 2 of article 334 of the Civil Code has been modified by section
450 of Act No. 190 and by Act No. 1508 in the sense that "ungathered
products" as mentioned in said article of the Civil Code have the nature of
personal property. In other words, the phrase "personal property" should be
understood to include "ungathered products."
At common law, and generally in the United States, all annual
crops which are raised by yearly manurance and labor, and

essentially owe their annual existence to cultivation by man, . may

be levied on as personal property." (23 C. J., p. 329.) On this
question Freeman, in his treatise on the Law of Executions, says:
"Crops, whether growing or standing in the field ready to be
harvested, are, when produced by annual cultivation, no part of the
realty. They are, therefore, liable to voluntary transfer as chattels.
It is equally well settled that they may be seized and sold under
execution. (Freeman on Executions, vol. p. 438.)
We may, therefore, conclude that paragraph 2 of article 334 of the Civil
Code has been modified by section 450 of the Code of Civil Procedure and
by Act No. 1508, in the sense that, for the purpose of attachment and
execution, and for the purposes of the Chattel Mortgage Law, "ungathered
products" have the nature of personal property. The lower court, therefore,
committed no error in holding that the sugar cane in question was personal
property and, as such, was not subject to redemption.
All the other assignments of error made by the appellant, as above stated,
relate to questions of fact only. Before entering upon a discussion of said
assignments of error, we deem it opportune to take special notice of the
failure of the plaintiff to appear at the trial during the presentation of
evidence by the defendant. His absence from the trial and his failure to
cross-examine the defendant have lent considerable weight to the
evidence then presented for the defense.
Coming not to the ownership of parcels 1 and 2 described in the first cause
of action of the complaint, the plaintiff made a futile attempt to show that
said two parcels belonged to Agustin Cuyugan and were the identical
parcel 2 which was excluded from the attachment and sale of real property
of Sibal to Valdez on June 25, 1924, as stated above. A comparison of the
description of parcel 2 in the certificate of sale by the sheriff (Exhibit A)
and the description of parcels 1 and 2 of the complaint will readily show
that they are not the same.
The description of the parcels in the complaint is as follows:
1. La caa dulce sembrada por los inquilinos del ejecutado Leon
Sibal 1. en una parcela de terreno de la pertenencia del citado
ejecutado, situada en Libutad, Culubasa, Bamban, Tarlac, de unas
dos hectareas poco mas o menos de superficie.
2. La caa dulce sembrada por el inquilino del ejecutado Leon Sibal
1., Ilamado Alejandro Policarpio, en una parcela de terreno de la
pertenencia del ejecutado, situada en Dalayap, Culubasa, Bamban,
Tarlac de unas dos hectareas de superficie poco mas o menos."
The description of parcel 2 given in the certificate of sale (Exhibit
A) is as follows:

2a. Terreno palayero situado en Culubasa, Bamban, Tarlac, de

177,090 metros cuadrados de superficie, linda al N. con Canuto
Sibal, Esteban Lazatin and Alejandro Dayrit; al E. con Francisco
Dizon, Felipe Mau and others; al S. con Alejandro Dayrit, Isidro
Santos and Melecio Mau; y al O. con Alejandro Dayrit and Paulino
Vergara. Tax No. 2854, vador amillarado P4,200 pesos.
On the other hand the evidence for the defendant purported to show that
parcels 1 and 2 of the complaint were included among the parcels bought
by Valdez from Macondray on June 25, 1924, and corresponded to parcel 4
in the deed of sale (Exhibit B and 2), and were also included among the
parcels bought by Valdez at the auction of the real property of Leon Sibal
on June 25, 1924, and corresponded to parcel 3 in the certificate of sale
made by the sheriff (Exhibit A). The description of parcel 4 (Exhibit 2) and
parcel 3 (Exhibit A) is as follows:
Parcels No. 4. Terreno palayero, ubicado en el barrio de
Culubasa,Bamban, Tarlac, I. F. de 145,000 metros cuadrados de
superficie, lindante al Norte con Road of the barrio of Culubasa that
goes to Concepcion; al Este con Juan Dizon; al Sur con Lucio Mao
y Canuto Sibal y al Oeste con Esteban Lazatin, su valor amillarado
asciende a la suma de P2,990. Tax No. 2856.
As will be noticed, there is hardly any relation between parcels 1 and 2 of
the complaint and parcel 4 (Exhibit 2 and B) and parcel 3 (Exhibit A). But,
inasmuch as the plaintiff did not care to appear at the trial when the
defendant offered his evidence, we are inclined to give more weight to the
evidence adduced by him that to the evidence adduced by the plaintiff,
with respect to the ownership of parcels 1 and 2 of the compliant. We,
therefore, conclude that parcels 1 and 2 of the complaint belong to the
defendant, having acquired the same from Macondray & Co. on June 25,
1924, and from the plaintiff Leon Sibal on the same date.
It appears, however, that the plaintiff planted the palay in said parcels and
harvested therefrom 190 cavans. There being no evidence of bad faith on
his part, he is therefore entitled to one-half of the crop, or 95 cavans. He
should therefore be condemned to pay to the defendant for 95 cavans
only, at P3.40 a cavan, or the sum of P323, and not for the total of 190
cavans as held by the lower court.
As to the ownership of parcel 7 of the complaint, the evidence shows that
said parcel corresponds to parcel 1 of the deed of sale of Macondray & Co,
to Valdez (Exhibit B and 2), and to parcel 4 in the certificate of sale to
Valdez of real property belonging to Sibal, executed by the sheriff as above
stated (Exhibit A). Valdez is therefore the absolute owner of said parcel,
having acquired the interest of both Macondray and Sibal in said parcel.
With reference to the parcel of land in Pacalcal, Tarlac, described in
paragraph 3 of the second cause of action, it appears from the testimony

of the plaintiff himself that said parcel corresponds to parcel 8 of the deed
of sale of Macondray to Valdez (Exhibit B and 2) and to parcel 10 in the
deed of sale executed by the sheriff in favor of Valdez (Exhibit A). Valdez is
therefore the absolute owner of said parcel, having acquired the interest of
both Macondray and Sibal therein.
In this connection the following facts are worthy of mention:

court has wisely reduced his share to 150 cavans only. At P4 a cavan, the
palay would have netted him P600.
In view of the foregoing, the judgment appealed from is hereby modified.
The plaintiff and his sureties Cenon de la Cruz, Juan Sangalang and Marcos
Sibal are hereby ordered to pay to the defendant jointly and severally the
sum of P8,900.80, instead of P9,439.08 allowed by the lower court, as
follows:

Execution in favor of Macondray & Co., May 11, 1923. Eight parcels of land
were attached under said execution. Said parcels of land were sold to
Macondray & Co. on the 30th day of July, 1923. Rice paid P4,273.93. On
September 24, 1923, Leon Sibal paid to Macondray & Co. P2,000 on the
redemption of said parcels of land. (See Exhibits B and C ).

P6,757.40 for the sugar cane;

1,220.40 for the sugar cane shoots;
323.00

Attachment, April 29, 1924, in favor of Valdez. Personal property of Sibal

was attached, including the sugar cane in question. (Exhibit A) The said
personal property so attached, sold at public auction May 9 and 10, 1924.
April 29, 1924, the real property was attached under the execution in favor
of Valdez (Exhibit A). June 25, 1924, said real property was sold and
purchased by Valdez (Exhibit A).
June 25, 1924, Macondray & Co. sold all of the land which they had
purchased at public auction on the 30th day of July, 1923, to Valdez.
As to the loss of the defendant in sugar cane by reason of the injunction,
the evidence shows that the sugar cane in question covered an area of 22
hectares and 60 ares (Exhibits 8, 8-b and 8-c); that said area would have
yielded an average crop of 1039 picos and 60 cates; that one-half of the
quantity, or 519 picos and 80 cates would have corresponded to the
defendant, as owner; that during the season the sugar was selling at P13 a
pico (Exhibit 5 and 5-A). Therefore, the defendant, as owner, would have
netted P 6,757.40 from the sugar cane in question. The evidence also
shows that the defendant could have taken from the sugar cane 1,017,000
sugar-cane shoots (puntas de cana) and not 1,170,000 as computed by the
lower court. During the season the shoots were selling at P1.20 a thousand
(Exhibits 6 and 7). The defendant therefore would have netted P1,220.40
from sugar-cane shoots and not P1,435.68 as allowed by the lower court.
As to the palay harvested by the plaintiff in parcels 1 and 2 of the
complaint, amounting to 190 cavans, one-half of said quantity should
belong to the plaintiff, as stated above, and the other half to the
defendant. The court erred in awarding the whole crop to the defendant.
The plaintiff should therefore pay the defendant for 95 cavans only, at
P3.40 a cavan, or P323 instead of P646 as allowed by the lower court.
The evidence also shows that the defendant was prevented by the acts of
the plaintiff from cultivating about 10 hectares of the land involved in the
litigation. He expected to have raised about 600 cavans of palay, 300
cavans of which would have corresponded to him as owner. The lower

for the palay harvested by plaintiff in parcels 1 and

2;

600.00 for the palay which defendant could have raised.

8,900.80
============
In all other respects, the judgment appealed from is hereby affirmed, with
costs. So ordered.
Street, Malcolm, Villamor, Romualdez and Villa-Real., JJ., concur.
G.R. No. L-17898

October 31, 1962

PASTOR D. AGO, petitioner, vs.

THE HON. COURT OF APPEALS, HON. MONTANO A. ORTIZ, Judge of
the Court of First Instance of Agusan, THE PROVINCIAL SHERIFF OF
SURIGAO and GRACE PARK ENGINEERING, INC., respondents.
LABRABOR, J.:
Appeal by certiorari to review the decision of respondent Court of Appeals
in CA-G.R. No. 26723-R entitled "Pastor D. Ago vs. The Provincial Sheriff of
Surigao, et al." which in part reads:
In this case for certiorari and prohibition with preliminary
injunction, it appears from the records that the respondent Judge of
the Court of First Instance of Agusan rendered judgment (Annex
"A") in open court on January 28, 1959, basing said judgment on a
compromise agreement between the parties.

On August 15, 1959, upon petition, the Court of First Instance

issued a writ of execution.
Petitioner's motion for reconsideration dated October 12, 1959
alleges that he, or his counsel, did not receive a formal and valid
notice of said decision, which motion for reconsideration was
denied by the court below in the order of November 14, 1959.
Petitioner now contends that the respondent Judge exceeded in his
jurisdiction in rendering the execution without valid and formal
notice of the decision.
A compromise agreement is binding between the parties and
becomes the law between them. (Gonzales vs. Gonzales G.R. No. L1254, May 21, 1948, 81 Phil. 38; Martin vs. Martin, G.R. No. L12439, May 22, 1959) .
It is a general rule in this jurisdiction that a judgment based on a
compromise agreement is not appealable and is immediately
executory, unless a motion is filed on the ground fraud, mistake or
duress. (De los Reyes vs. Ugarte, 75 Phil. 505; Lapena vs. Morfe,
G.R. No. L-10089, July 31, 1957)
Petitioner's claim that he was not notified or served notice of the
decision is untenable. The judgment on the compromise
agreement rendered by the court below dated January 28, 1959,
was given in open court. This alone is a substantial compliance as
to notice. (De los Reyes vs. Ugarte, supra)
IN VIEW THEREOF, we believe that the lower court did not exceed
nor abuse its jurisdiction in ordering the execution of the judgment.
The petition for certiorari is hereby dismissed and the writ of
preliminary injunction heretofore dissolved, with costs against the
petitioner.
IT IS SO ORDERED.
The facts of the case may be briefly stated as follows: In 1957, petitioner
Pastor D. Ago bought sawmill machineries and equipments from
respondent Grace Park Engineer domineering, Inc., executing a chattel
mortgage over said machineries and equipments to secure the payment of
balance of the price remaining unpaid of P32,000.00, which petitioner
agreed to pay on installment basis.
Petitioner Ago defaulted in his payment and so, in 1958 respondent Grace
Park Engineering, Inc. instituted extra-judicial foreclosure proceedings of

the mortgage. To enjoin said foreclosure, petitioner herein instituted

Special Civil Case No. 53 in the Court of First Instance of Agusan. The
parties to the case arrived at a compromise agreement and submitted the
same in court in writing, signed by Pastor D. Ago and the Grace Park
Engineering, Inc. The Hon. Montano A. Ortiz, Judge of the Court of First
Instance of Agusan, then presiding, dictated a decision in open court on
January 28, 1959.
Petitioner continued to default in his payments as provided in the judgment
by compromise, so Grace Park Engineering, Inc. filed with the lower court a
motion for execution, which was granted by the court on August 15, 1959.
A writ of execution, dated September 23, 1959, later followed.
The herein respondent, Provincial Sheriff of Surigao, acting upon the writ of
execution issued by the lower court, levied upon and ordered the sale of
the sawmill machineries and equipments in question. These machineries
and equipments had been taken to and installed in a sawmill building
located in Lianga, Surigao del Sur, and owned by the Golden Pacific
Sawmill, Inc., to whom, petitioner alleges, he had sold them on February
16, 1959 (a date after the decision of the lower court but before levy by
the Sheriff).
Having been advised by the sheriff that the public auction sale was set for
December 4, 1959, petitioner, on December 1, 1959, filed the petition
for certiorari and prohibition with preliminary injunction with respondent
Court of Appeals, alleging that a copy of the aforementioned judgment
given in open court on January 28, 1959 was served upon counsel for
petitioner only on September 25, 1959 (writ of execution is dated
September 23, 1959); that the order and writ of execution having been
issued by the lower court before counsel for petitioner received a copy of
the judgment, its resultant last order that the "sheriff may now proceed
with the sale of the properties levied constituted a grave abuse of
discretion and was in excess of its jurisdiction; and that the respondent
Provincial Sheriff of Surigao was acting illegally upon the allegedly void writ
of execution by levying the same upon the sawmill machineries and
equipments which have become real properties of the Golden Pacific
sawmill, Inc., and is about to proceed in selling the same without prior
publication of the notice of sale thereof in some newspaper of general
circulation as required by the Rules of Court.
The Court of Appeals, on December 8, 1959, issued a writ of preliminary
injunction against the sheriff but it turned out that the latter had already
sold at public auction the machineries in question, on December 4, 1959,
as scheduled. The respondent Grace Park Engineering, Inc. was the only
bidder for P15,000.00, although the certificate sale was not yet executed.
The Court of Appeals constructed the sheriff to suspend the issuance of a
certificate of sale of the said sawmill machineries and equipment sold by

him on December 4, 1959 until the final decision of the case. On November
9, 1960 the Court of Appeals rendered the aforequoted decision.
Before this Court, petitioner alleges that the Court of Appeals erred (1) in
holding that the rendition of judgment on compromise in open court on
January 1959 was a sufficient notice; and (2) in not resolving the other
issues raised before it, namely, (a) the legality of the public auction sale
made by the sheriff, and (b) the nature of the machineries in question,
whether they are movables or immovables.
The Court of Appeals held that as a judgment was entered by the court
below in open court upon the submission of the compromise agreement,
the parties may be considered as having been notified of said judgment
and this fact constitutes due notice of said judgment. This raises the
following legal question: Is the order dictated in open court of the
judgment of the court, and is the fact the petitioner herein was present in
open court was the judgment was dictated, sufficient notice thereof? The
provisions of the Rules of Court decree otherwise. Section 1 of Rule 35
describes the manner in which judgment shall be rendered, thus:
SECTION 1. How judgment rendered. All judgments determining
the merits of cases shall be in writing personally and directly
prepared by the judge, and signed by him, stating clearly and
distinctly the facts and the law on which it is based, filed with the
clerk of the court.
The court of first instance being a court of record, in order that a judgment
may be considered as rendered, must not only be in writing, signed by the
judge, but it must also be filed with the clerk of court. The mere
pronouncement of the judgment in open court with the stenographer
taking note thereof does not, therefore, constitute a rendition of the
judgment. It is the filing of the signed decision with the clerk of court that
constitutes rendition. While it is to be presumed that the judgment that
was dictated in open court will be the judgment of the court, the court may
still modify said order as the same is being put into writing. And even if the
order or judgment has already been put into writing and signed, while it
has not yet been delivered to the clerk for filing it is still subject to
amendment or change by the judge. It is only when the judgment signed
by the judge is actually filed with the clerk of court that it becomes a valid
and binding judgment. Prior thereto, it could still be subject to amendment
and change and may not, therefore, constitute the real judgment of the
court.
Regarding the notice of judgment, the mere fact that a party heard the
judge dictating the judgment in open court, is not a valid notice of said
judgment. If rendition thereof is constituted by the filing with the clerk of
court of a signed copy (of the judgment), it is evident that the fact that a

party or an attorney heard the order or judgment being dictated in court

cannot be considered as notice of the real judgment. No judgment can be
notified to the parties unless it has previously been rendered. The notice,
therefore, that a party has of a judgment that was being dictated is of no
effect because at the time no judgment has as yet been signed by the
judge and filed with the clerk.
Besides, the Rules expressly require that final orders or judgments be
served personally or by registered mail. Section 7 of Rule 27 provides as
follows:
SEC. 7. Service of final orders or judgments. Final orders or
judgments shall be served either personally or by registered mail.
In accordance with this provision, a party is not considered as having been
served with the judgment merely because he heard the judgment dictating
the said judgment in open court; it is necessary that he be served with a
copy of the signed judgment that has been filed with the clerk in order that
he may legally be considered as having been served with the judgment.
For all the foregoing, the fact that the petitioner herein heard the trial
judge dictating the judgment in open court, is not sufficient to constitute
the service of judgement as required by the above-quoted section 7 of Rule
2 the signed judgment not having been served upon the petitioner, said
judgment could not be effective upon him (petitioner) who had not
received it. It follows as a consequence that the issuance of the writ of
execution null and void, having been issued before petitioner her was
served, personally or by registered mail, a copy of the decision.
The second question raised in this appeal, which has been passed upon by
the Court of Appeals, concerns the validity of the proceedings of the sheriff
in selling the sawmill machineries and equipments at public auction with a
notice of the sale having been previously published.
The record shows that after petitioner herein Pastor D. Ago had purchased
the sawmill machineries and equipments he assigned the same to the
Golden Pacific Sawmill, Inc. in payment of his subscription to the shares of
stock of said corporation. Thereafter the sawmill machinery and
equipments were installed in a building and permanently attached to the
ground. By reason of such installment in a building, the said sawmill
machineries and equipment became real estate properties in accordance
with the provision of Art. 415 (5) of the Civil Code, thus:
ART. 415. The following are immovable property:
xxx

xxx

xxx

(5) Machinery, receptacles, instruments or implements tended by

the owner of the tenement for an industry or works which may be
carried on in a building or on a piece of land, and which tend
directly to meet the needs of the said industry or works;
This Court in interpreting a similar question raised before it in the case
of Berkenkotter vs. Cu Unjieng e Hijos, 61 Phil. 683, held that the
installation of the machine and equipment in the central of the Mabalacat
Sugar Co., Inc. for use in connection with the industry carried by the
company, converted the said machinery and equipment into real estate by
reason of their purpose. Paraphrasing language of said decision we hold
that by the installment of the sawmill machineries in the building of the
Gold Pacific Sawmill, Inc., for use in the sawing of logs carried on in said
building, the same became a necessary and permanent part of the building
or real estate on which the same was constructed, converting the said
machineries and equipments into real estate within the meaning of Article
415(5) above-quoted of the Civil Code of the Philippines.
Considering that the machineries and equipments in question valued at
more than P15,000.00 appear to have been sold without the necessary
advertisement of sale by publication in a newspaper, as required in Sec. 16
of Rule 39 of the Rules of Court, which is as follows:
SEC. 16. Notice of sale of property on execution. Before the sale
of property on execution, notice thereof must be given as follows:
xxx

xxx

xxx

(c) In case of real property, by posting a similar notice particularly

describing the property for twenty days in three public places in
the municipality or city where the property is situated, and also
where the property is to be sold, and, if the assessed value of the
property exceeds four hundred pesos, by publishing a copy of the
notice once a week, for the same period, in some newspaper
published or having general circulation in the province, if there be
one. If there are newspapers published in the province in both the
English and Spanish languages, then a like publication for a like
period shall be made in one newspaper published in the English
language, and in one published in the Spanish language.
the sale made by the sheriff must be declared null and void.
WHEREFORE, the decision of the Court of Appeals sought to be reviewed is
hereby set aside and We declare that the issuance of the writ of execution
in this case against the sawmill machineries and equipments purchased by
petitioner Pastor D. Ago from the Grace Park Engineering, Inc., as well as

the sale of the same by the Sheriff of Surigao, are null and void. Costs shall
be against the respondent Grace Park Engineering, Inc.
Bengzon, C.J., Bautista Angelo, Concepcion, Reyes, J.B.L., Barrera, Paredes,
Dizon, Regala and Makalintal, JJ.,concur.
Padilla, J., took no part.
G.R. No. L-15334

January 31, 1964

BOARD OF ASSESSMENT APPEALS, CITY ASSESSOR and CITY

TREASURER OF QUEZON CITY, petitioners, vs. MANILA ELECTRIC
COMPANY, respondent.
PAREDES, J.:
From the stipulation of facts and evidence adduced during the hearing, the
following appear:
On October 20, 1902, the Philippine Commission enacted Act No. 484
which authorized the Municipal Board of Manila to grant a franchise to
construct, maintain and operate an electric street railway and electric light,
heat and power system in the City of Manila and its suburbs to the person
or persons making the most favorable bid. Charles M. Swift was awarded
the said franchise on March 1903, the terms and conditions of which were
embodied in Ordinance No. 44 approved on March 24, 1903. Respondent
Manila Electric Co. (Meralco for short), became the transferee and owner of
the franchise.
Meralco's electric power is generated by its hydro-electric plant located at
Botocan Falls, Laguna and is transmitted to the City of Manila by means of
electric transmission wires, running from the province of Laguna to the said
City. These electric transmission wires which carry high voltage current, are
fastened to insulators attached on steel towers constructed by respondent
at intervals, from its hydro-electric plant in the province of Laguna to the
City of Manila. The respondent Meralco has constructed 40 of these steel
towers within Quezon City, on land belonging to it. A photograph of one of
these steel towers is attached to the petition for review, marked Annex A.
Three steel towers were inspected by the lower court and parties and the
following were the descriptions given there of by said court:
The first steel tower is located in South Tatalon, Espaa Extension,
Quezon City. The findings were as follows: the ground around one
of the four posts was excavated to a depth of about eight (8) feet,
with an opening of about one (1) meter in diameter, decreased to
about a quarter of a meter as it we deeper until it reached the
bottom of the post; at the bottom of the post were two parallel

steel bars attached to the leg means of bolts; the tower proper was
attached to the leg three bolts; with two cross metals to prevent
mobility; there was no concrete foundation but there was adobe
stone underneath; as the bottom of the excavation was covered
with water about three inches high, it could not be determined with
certainty to whether said adobe stone was placed purposely or not,
as the place abounds with this kind of stone; and the tower carried
five high voltage wires without cover or any insulating materials.
The second tower inspected was located in Kamuning Road, K-F,
Quezon City, on land owned by the petitioner approximate more
than one kilometer from the first tower. As in the first tower, the
ground around one of the four legs was excavate from seven to
eight (8) feet deep and one and a half (1-) meters wide. There
being very little water at the bottom, it was seen that there was no
concrete foundation, but there soft adobe beneath. The leg was
likewise provided with two parallel steel bars bolted to a square
metal frame also bolted to each corner. Like the first one, the
second tower is made up of metal rods joined together by means
of bolts, so that by unscrewing the bolts, the tower could be
dismantled and reassembled.
The third tower examined is located along Kamias Road, Quezon
City. As in the first two towers given above, the ground around the
two legs of the third tower was excavated to a depth about two or
three inches beyond the outside level of the steel bar foundation. It
was found that there was no concrete foundation. Like the two
previous ones, the bottom arrangement of the legs thereof were
found to be resting on soft adobe, which, probably due to high
humidity, looks like mud or clay. It was also found that the square
metal frame supporting the legs were not attached to any material
or foundation.
On November 15, 1955, petitioner City Assessor of Quezon City declared
the aforesaid steel towers for real property tax under Tax declaration Nos.
31992 and 15549. After denying respondent's petition to cancel these
declarations, an appeal was taken by respondent to the Board of
Assessment Appeals of Quezon City, which required respondent to pay the
amount of P11,651.86 as real property tax on the said steel towers for the
years 1952 to 1956. Respondent paid the amount under protest, and filed
a petition for review in the Court of Tax Appeals (CTA for short) which
rendered a decision on December 29, 1958, ordering the cancellation of
the said tax declarations and the petitioner City Treasurer of Quezon City to
refund to the respondent the sum of P11,651.86. The motion for
reconsideration having been denied, on April 22, 1959, the instant petition
for review was filed.

In upholding the cause of respondents, the CTA held that: (1) the steel
towers come within the term "poles" which are declared exempt from taxes
under part II paragraph 9 of respondent's franchise; (2) the steel towers
are personal properties and are not subject to real property tax; and (3) the
City Treasurer of Quezon City is held responsible for the refund of the
amount paid. These are assigned as errors by the petitioner in the brief.
The tax exemption privilege of the petitioner is quoted hereunder:
PAR 9. The grantee shall be liable to pay the same taxes upon its
real estate, buildings, plant (not including poles, wires,
transformers, and insulators), machinery and personal property as
other persons are or may be hereafter required by law to pay ...
Said percentage shall be due and payable at the time stated in
paragraph nineteen of Part One hereof, ... and shall be in lieu of all
taxes and assessments of whatsoever nature and by whatsoever
authority upon the privileges, earnings, income, franchise, and
poles, wires, transformers, and insulators of the grantee from
which taxes and assessments the grantee is hereby expressly
exempted. (Par. 9, Part Two, Act No. 484 Respondent's Franchise;
emphasis supplied.)
The word "pole" means "a long, comparatively slender usually cylindrical
piece of wood or timber, as typically the stem of a small tree stripped of its
branches; also by extension, a similar typically cylindrical piece or object of
metal or the like". The term also refers to "an upright standard to the top
of which something is affixed or by which something is supported; as a
dovecote set on a pole; telegraph poles; a tent pole; sometimes,
specifically a vessel's master (Webster's New International Dictionary 2nd
Ed., p. 1907.) Along the streets, in the City of Manila, may be seen
cylindrical metal poles, cubical concrete poles, and poles of the PLDT Co.
which are made of two steel bars joined together by an interlacing metal
rod. They are called "poles" notwithstanding the fact that they are no made
of wood. It must be noted from paragraph 9, above quoted, that the
concept of the "poles" for which exemption is granted, is not determined
by their place or location, nor by the character of the electric current it
carries, nor the material or form of which it is made, but the use to which
they are dedicated. In accordance with the definitions, pole is not
restricted to a long cylindrical piece of wood or metal, but includes "upright
standards to the top of which something is affixed or by which something is
supported. As heretofore described, respondent's steel supports consists of
a framework of four steel bars or strips which are bound by steel crossarms atop of which are cross-arms supporting five high voltage
transmission wires (See Annex A) and their sole function is to support or
carry such wires.

The conclusion of the CTA that the steel supports in question are embraced
in the term "poles" is not a novelty. Several courts of last resort in the
United States have called these steel supports "steel towers", and they
denominated these supports or towers, as electric poles. In their decisions
the words "towers" and "poles" were used interchangeably, and it is well
understood in that jurisdiction that a transmission tower or pole means the
same thing.
In a proceeding to condemn land for the use of electric power wires, in
which the law provided that wires shall be constructed upon suitable poles,
this term was construed to mean either wood or metal poles and in view of
the land being subject to overflow, and the necessary carrying of
numerous wires and the distance between poles, the statute was
interpreted to include towers or poles. (Stemmons and Dallas Light Co.
(Tex) 212 S.W. 222, 224; 32-A Words and Phrases, p. 365.)
The term "poles" was also used to denominate the steel supports or towers
used by an association used to convey its electric power furnished to
subscribers and members, constructed for the purpose of fastening high
voltage and dangerous electric wires alongside public highways. The steel
supports or towers were made of iron or other metals consisting of two
pieces running from the ground up some thirty feet high, being wider at
the bottom than at the top, the said two metal pieces being connected
with criss-cross iron running from the bottom to the top, constructed like
ladders and loaded with high voltage electricity. In form and structure, they
are like the steel towers in question. (Salt River Valley Users' Ass'n v.
Compton, 8 P. 2nd, 249-250.)
The term "poles" was used to denote the steel towers of an electric
company engaged in the generation of hydro-electric power generated
from its plant to the Tower of Oxford and City of Waterbury. These steel
towers are about 15 feet square at the base and extended to a height of
about 35 feet to a point, and are embedded in the cement foundations
sunk in the earth, the top of which extends above the surface of the soil in
the tower of Oxford, and to the towers are attached insulators, arms, and
other equipment capable of carrying wires for the transmission of electric
power (Connecticut Light and Power Co. v. Oxford, 101 Conn. 383, 126 Atl.
p. 1).
In a case, the defendant admitted that the structure on which a certain
person met his death was built for the purpose of supporting a
transmission wire used for carrying high-tension electric power, but
claimed that the steel towers on which it is carried were so large that their
wire took their structure out of the definition of a pole line. It was held that
in defining the word pole, one should not be governed by the wire or
material of the support used, but was considering the danger from any
elevated wire carrying electric current, and that regardless of the size or

material wire of its individual members, any continuous series of structures

intended and used solely or primarily for the purpose of supporting wires
carrying electric currents is a pole line (Inspiration Consolidation Cooper
Co. v. Bryan 252 P. 1016).
It is evident, therefore, that the word "poles", as used in Act No. 484 and
incorporated in the petitioner's franchise, should not be given a restrictive
and narrow interpretation, as to defeat the very object for which the
franchise was granted. The poles as contemplated thereon, should be
understood and taken as a part of the electric power system of the
respondent Meralco, for the conveyance of electric current from the source
thereof to its consumers. If the respondent would be required to employ
"wooden poles", or "rounded poles" as it used to do fifty years back, then
one should admit that the Philippines is one century behind the age of
space. It should also be conceded by now that steel towers, like the ones in
question, for obvious reasons, can better effectuate the purpose for which
the respondent's franchise was granted.
Granting for the purpose of argument that the steel supports or towers in
question are not embraced within the term poles, the logical question
posited is whether they constitute real properties, so that they can be
subject to a real property tax. The tax law does not provide for a definition
of real property; but Article 415 of the Civil Code does, by stating the
following are immovable property:
(1) Land, buildings, roads, and constructions of all kinds adhered to
the soil;
xxx

xxx

xxx

(3) Everything attached to an immovable in a fixed manner, in

such a way that it cannot be separated therefrom without breaking
the material or deterioration of the object;
xxx

xxx

xxx

(5) Machinery, receptacles, instruments or implements intended by

the owner of the tenement for an industry or works which may be
carried in a building or on a piece of land, and which tends directly
to meet the needs of the said industry or works;
xxx

xxx

xxx

The steel towers or supports in question, do not come within the objects
mentioned in paragraph 1, because they do not constitute buildings or
constructions adhered to the soil. They are not construction analogous to

buildings nor adhering to the soil. As per description, given by the lower
court, they are removable and merely attached to a square metal frame by
means of bolts, which when unscrewed could easily be dismantled and
moved from place to place. They can not be included under paragraph 3,
as they are not attached to an immovable in a fixed manner, and they can
be separated without breaking the material or causing deterioration upon
the object to which they are attached. Each of these steel towers or
supports consists of steel bars or metal strips, joined together by means of
bolts, which can be disassembled by unscrewing the bolts and
reassembled by screwing the same. These steel towers or supports do not
also fall under paragraph 5, for they are not machineries, receptacles,
instruments or implements, and even if they were, they are not intended
for industry or works on the land. Petitioner is not engaged in an industry
or works in the land in which the steel supports or towers are constructed.
It is finally contended that the CTA erred in ordering the City Treasurer of
Quezon City to refund the sum of P11,651.86, despite the fact that Quezon
City is not a party to the case. It is argued that as the City Treasurer is not
the real party in interest, but Quezon City, which was not a party to the
suit, notwithstanding its capacity to sue and be sued, he should not be
ordered to effect the refund. This question has not been raised in the court
below, and, therefore, it cannot be properly raised for the first time on
appeal. The herein petitioner is indulging in legal technicalities and niceties
which do not help him any; for factually, it was he (City Treasurer) whom
had insisted that respondent herein pay the real estate taxes, which
respondent paid under protest. Having acted in his official capacity as City
Treasurer of Quezon City, he would surely know what to do, under the
circumstances.
IN VIEW HEREOF, the decision appealed from is hereby affirmed, with costs
against the petitioners.
Bengzon, C.J., Padilla, Bautista Angelo, Labrador, Concepcion, Reyes, J.B.L.,
Barrera and Regala, JJ., concur.
Makalintal, J., concurs in the result.
Dizon, J., took no part.
G.R. No. L-41506

March 25, 1935

PHILIPPINE REFINING CO., INC., plaintiff-appellant, vs. FRANCISCO

JARQUE, JOSE COROMINAS, and ABOITIZ & CO., defendants.
JOSE COROMINAS, in his capacity as assignee of the estate of the
insolvent Francisco Jarque, appellee.
MALCOLM, J.:

First of all the reason why the case has been decided by the court in
banc needs explanation. A motion was presented by counsel for the
appellant in which it was asked that the case be heard and determined by
the court sitting in banc because the admiralty jurisdiction of the court was
involved, and this motion was granted in regular course. On further
investigation it appears that this was error. The mere mortgage of a ship is
a contract entered into by the parties to it without reference to navigation
or perils of the sea, and does not, therefore, confer admiralty jurisdiction.
(Bogart vs. Steamboat John Jay [1854], 17 How., 399.)
Coming now to the merits, it appears that on varying dates the Philippine
Refining Co., Inc., and Francisco Jarque executed three mortgages on the
motor vessels Pandan and Zaragoza. These documents were recorded in
the record of transfers and incumbrances of vessels for the port of Cebu
and each was therein denominated a "chattel mortgage". Neither of the
first two mortgages had appended an affidavit of good faith. The third
mortgage contained such an affidavit, but this mortgage was not
registered in the customs house until May 17, 1932, or within the period of
thirty days prior to the commencement of insolvency proceedings against
Francisco Jarque; also, while the last mentioned mortgage was subscribed
by Francisco Jarque and M. N. Brink, there was nothing to disclose in what
capacity the said M. N. Brink signed. A fourth mortgage was executed by
Francisco Jarque and Ramon Aboitiz on the motorship Zaragoza and was
entered in the chattel mortgage registry of the register of deeds on May
12, 1932, or again within the thirty-day period before the institution of
insolvency proceedings. These proceedings were begun on June 2, 1932,
when a petition was filed with the Court of First Instance of Cebu in which it
was prayed that Francisco Jarque be declared an insolvent debtor, which
soon thereafter was granted, with the result that an assignment of all the
properties of the insolvent was executed in favor of Jose Corominas.
On these facts, Judge Jose M. Hontiveros declined to order the foreclosure
of the mortgages, but on the contrary sustained the special defenses of
fatal defectiveness of the mortgages. In so doing we believe that the trial
judge acted advisedly.
Vessels are considered personal property under the civil law. (Code of
Commerce, article 585.) Similarly under the common law, vessels are
personal property although occasionally referred to as a peculiar kind of
personal property. (Reynolds vs. Nielson [1903], 96 Am. Rep., 1000;
Atlantic Maritime Co vs. City of Gloucester [1917], 117 N. E., 924.) Since
the term "personal property" includes vessels, they are subject to
mortgage agreeably to the provisions of the Chattel Mortgage Law. (Act No.
1508, section 2.) Indeed, it has heretofore been accepted without
discussion that a mortgage on a vessel is in nature a chattel mortgage.
(McMicking vs. Banco Espaol-Filipino [1909], 13 Phil., 429; Arroyo vs. Yu
de Sane [1930], 54 Phil., 511.) The only difference between a chattel

mortgage of a vessel and a chattel mortgage of other personalty is that it

is not now necessary for a chattel mortgage of a vessel to be noted n the
registry of the register of deeds, but it is essential that a record of
documents affecting the title to a vessel be entered in the record of the
Collector of Customs at the port of entry. (Rubiso and Gelito vs. Rivera
[1917], 37 Phil., 72; Arroyo vs. Yu de Sane, supra.) Otherwise a mortgage
on a vessel is generally like other chattel mortgages as to its requisites and
validity. (58 C.J., 92.)

us disregard article 585 of the Code of Commerce, but no reason is shown

for holding this article not in force. Counsel would further have us revise
doctrines heretofore announced in a series of cases, which it is not
desirable to do since those principles were confirmed after due liberation
and constitute a part of the commercial law of the Philippines. And finally
counsel would have us make rulings on points entirely foreign to the issues
of the case. As neither the facts nor the law remains in doubt, the seven
assigned errors will be overruled.

The Chattell Mortgage Law in its section 5, in describing what shall be

deemed sufficient to constitute a good chattel mortgage, includes the
requirement of an affidavit of good faith appended to the mortgage and
recorded therewith. The absence of the affidavit vitiates a mortgage as
against creditors and subsequent encumbrancers. (Giberson vs. A. N.
Jureidini Bros. [1922], 44 Phil., 216; Benedicto de Tarrosa vs. F. M. Yap Tico
& Co. and Provincial Sheriff of Occidental Negros [1923], 46 Phil., 753.) As
a consequence a chattel mortgage of a vessel wherein the affidavit of good
faith required by the Chattel Mortgage Law is lacking, is unenforceable
against third persons.

Judgment affirmed, the costs of this instance to be paid by the appellant.

In effect appellant asks us to find that the documents appearing in the

record do not constitute chattel mortgages or at least to gloss over the
failure to include the affidavit of good faith made a requisite for a good
chattel mortgage by the Chattel Mortgage Law. Counsel would further have

Avancea, C.J., Street, Villa-Real, Abad Santos, Hull, Vickers, Imperial,

Butte, and Goddard, JJ., concur.