G.R. Nos.

L-10817-18 February 28, 1958

ENRIQUE LOPEZ, petitioner,

vs.
VICENTE OROSA, JR., and PLAZA THEATRE, INC., respondents.

Nicolas Belmonte and Benjamin T. de Peralta for petitioner.

Tolentino & Garcia and D. R. Cruz for respondent Luzon Surety Co., Inc. Jose B. Macatangay for respondent Plaza
Theatre, Inc.

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.

Republic v Bantigue
SECOND DIVISION D E C I S I O N
SERENO, J.:
This Rule 45 Petition requires this Court to address the issue of the proper scope of the delegated jurisdiction of
municipal trial courts in land registration cases. Petitioner Republic of the Philippines (Republic) assails the Decision of
the Court of Appeals (CA)​[1]​ in CA-G.R. CV No. 70349, which affirmed the Decision of the Municipal Trial Court (MTC) of
San Juan, Batangas​[2]​ in LRC Case No. N-98-20, LRA Record No. 68329, granting respondent Bantigue Point Development
Corporations (Corporation) application for original registration of a parcel of land. Since only questions of law have been
raised, petitioner need not have filed a Motion for Reconsideration of the assailed CA Decision before filing this Petition
for Review.
The Facts
On 17 July 1997, respondent Bantigue Point Development Corporation filed with the Regional Trial Court (RTC) of
Rosario, Batangas an application for original registration of title over a parcel of land with an assessed value
of ₱4,330, ₱1,920 and ₱8,670, or a total assessed value of ₱14,920 for the entire property, more particularly described as
Lot 8060 of Cad 453-D, San Juan Cadastre, with an area of more or less 10,732 square meters, located at Barangay
Barualte, San Juan, Batangas. ​[3]
On 18 July 1997, the RTC issued an Order setting the case for initial hearing on 22 October 1997.​[4]​ On 7 August 1997, it
issued a second Order setting the initial hearing on 4 November 1997.​[5]
Petitioner Republic filed its Opposition to the application for registration on 8 January 1998 while the records were still
with the RTC.​[6]

On 31 March 1998, the RTC Clerk of Court transmitted motu proprio the records of the case to the MTC of San Juan,
because the assessed value of the property was allegedly less than ₱100,000.​[7]
Thereafter, the MTC entered an Order of General Default​[8]​ and commenced with the reception of evidence.​[9]​ Among
the documents presented by respondent in support of its application are Tax Declarations,​[10]​ a Deed of Absolute Sale
in its favor,​[11]​ and a Certification from the Department of Environment and Natural Resources (DENR) Community
Environment and Natural Resources Office (CENRO) of Batangas City that the lot in question is within the alienable and
disposable zone.​[12]​ Thereafter, it awarded the land to respondent Corporation.​[13]
Acting on an appeal filed by the Republic,​[14]​ the CA ruled that since the former had actively participated in the
proceedings before the lower court, but failed to raise the jurisdictional challenge therein, petitioner is thereby
estopped from questioning the jurisdiction of the lower court on appeal.​[15]​ The CA further found that respondent
Corporation had sufficiently established the latters registrable title over the subject property after having proven open,
continuous, exclusive and notorious possession and occupation of the subject land by itself and its
predecessors-in-interest even before the outbreak of World War II.​[16]
Dissatisfied with the CAs ruling, petitioner Republic filed this instant Rule 45 Petition and raised the following arguments
in support of its appeal:

I.

THE REPUBLIC CANNOT BE ESTOPPED FROM QUESTIONING THE JURISDICTION OF THE MUNICIPAL TRIAL COURT OVER
THE APPLICATION FOR ORIGINAL REGISTRATION OF LAND TITLE EVEN FOR THE FIRST TIME ON APPEAL

II.

THE MUNICIPAL TRIAL COURT FAILED TO ACQUIRE JURISDICTION OVER THE APPLICATION FOR ORIGINAL REGISTRATION
OF LAND TITLE.​[17]
The Courts Ruling
We uphold the jurisdiction of the MTC, but remand the case to the court a quo for further proceedings in order to
determine if the property in question forms part of the alienable and disposable land of the public domain.
I
The Republic is not estopped from raising the issue of jurisdiction in this case.
At the outset, we rule that petitioner Republic is not estopped from questioning the jurisdiction of the lower court, even
if the former raised the jurisdictional question only on appeal. The rule is settled that lack of jurisdiction over the subject
matter may be raised at any stage of the proceedings.​[18]​ Jurisdiction over the subject matter is conferred only by the
Constitution or the law.​[19]​ It cannot be acquired through a waiver or enlarged by the omission of the parties or
conferred by the acquiescence of the court.​[20]​ Consequently, questions of jurisdiction may be cognizable even if raised
for the first time on appeal.​[21]
The ruling of the Court of Appeals that a party may be estopped from raising such [jurisdictional] question if he has
actively taken part in the very proceeding which he questions, belatedly objecting to the courts jurisdiction in the event
that the judgment or order subsequently rendered is adverse to him​[22]​ is based on the doctrine of estoppel by laches.
We are aware of that doctrine first enunciated by this Court in Tijam v. Sibonghanoy.​[23]​ In Tijam, the party-litigant
actively participated in the proceedings before the lower court and filed pleadings therein. Only 15 years thereafter, and
after receiving an adverse Decision on the merits from the appellate court, did the party-litigant question the lower
courts jurisdiction. Considering the unique facts in that case, we held that estoppel by laches had already precluded the
party-litigant from raising the question of lack of jurisdiction on appeal. In Figueroa v. People,​[24]​ we cautioned
that Tijam must be construed as an exception to the general rule and applied only in the most exceptional cases whose
factual milieu is similar to that in the latter case.
The facts are starkly different in this case, making the exceptional rule in Tijam inapplicable. Here, petitioner Republic
filed its Opposition to the application for registration when the records were still with the RTC.​[25]​ At that point,
petitioner could not have questioned the delegated jurisdiction of the MTC, simply because the case was not yet with
that court. When the records were transferred to the MTC, petitioner neither filed pleadings nor requested affirmative
relief from that court. On appeal, petitioner immediately raised the jurisdictional question in its Brief.​[26]​Clearly, the
exceptional doctrine of estoppel by laches is inapplicable to the instant appeal.
Laches has been defined as the failure or neglect, for an unreasonable and unexplained length of time, to do that which,
by exercising due diligence, could or should have been done earlier; it is negligence or omission to assert a right within a
reasonable time, warranting the presumption that the party entitled to assert it either has abandoned or declined to
assert it.​[27]​ In this case, petitioner Republic has not displayed such unreasonable failure or neglect that would lead us
to conclude that it has abandoned or declined to assert its right to question the lower court's jurisdiction.

II
The Municipal Trial Court properly acquired jurisdiction over the case.
In assailing the jurisdiction of the lower courts, petitioner Republic raised two points of contention: (a) the period for
setting the date and hour of the initial hearing; and (b) the value of the land to be registered.

First, petitioner argued that the lower court failed to acquire jurisdiction over the application, because the RTC set the
date and hour of the initial hearing beyond the 90-day period provided under the Property Registration Decree.​[28]
We disagree.

The Property Registration Decree provides:

Sec. 23. Notice of initial hearing, publication, etc. - The court shall, within five days from filing of the application, issue an
order setting the date and hour of the initial hearing which shall not be earlier than forty-five days nor later than ninety
days from the date of the order. x x x.

In this case, the application for original registration was filed on 17 July 1997.​[29]​ On 18 July 1997, or a day after the
filing of the application, the RTC immediately issued an Order setting the case for initial hearing on 22 October 1997,
which was 96 days from the Order.​[30]​ While the date set by the RTC was beyond the 90-day period provided for in
Section 23, this fact did not affect the jurisdiction of the trial court. In Republic v. Manna Properties, Inc.,​[31]​petitioner
Republic therein contended that there was failure to comply with the jurisdictional requirements for original
registration, because there were 125 days between the Order setting the date of the initial hearing and the initial
hearing itself. We ruled that the lapse of time between the issuance of the Order setting the date of initial hearing and
the date of the initial hearing itself was not fatal to the application. Thus, we held:
x x x [A] party to an action has no control over the Administrator or the Clerk of Court acting as a land court; he has no
right to meddle unduly with the business of such official in the performance of his duties. A party cannot intervene in
matters within the exclusive power of the trial court. No fault is attributable to such party if the trial court errs on
matters within its sole power. It is unfair to punish an applicant for an act or omission over which the applicant has
neither responsibility nor control, especially if the applicant has complied with all the requirements of the law.​[32]

Indeed, it would be the height of injustice to penalize respondent Corporation by dismissing its application for
registration on account of events beyond its control.
Moreover, since the RTC issued a second Order on 7 August 1997 setting the initial hearing on 4 November
1997,​[33]​within the 90-day period provided by law, petitioner Republic argued that the jurisdictional defect was still not
cured, as the second Order was issued more than five days from the filing of the application, again contrary to the
prescribed period under the Property Registration Decree.​[34]
Petitioner is incorrect.
The RTCs failure to issue the Order setting the date and hour of the initial hearing within five days from the filing of the
application for registration, as provided in the Property Registration Decree, did not affect the courts its jurisdiction.
Observance of the five-day period was merely directory, and failure to issue the Order within that period did not deprive
the RTC of its jurisdiction over the case. To rule that compliance with the five-day period is mandatory would make
jurisdiction over the subject matter dependent upon the trial court. Jurisdiction over the subject matter is conferred only
by the Constitution or the law.​[35]​ It cannot be contingent upon the action or inaction of the court.
This does not mean that courts may disregard the statutory periods with impunity. We cannot assume that the law
deliberately meant the provision to become meaningless and to be treated as a dead letter.​[36]​ However, the records of
this case do not show such blatant disregard for the law. In fact, the RTC immediately set the case for initial hearing a
day after the filing of the application for registration,​[37]​ except that it had to issue a second Order because the initial
hearing had been set beyond the 90-day period provided by law.
Second, petitioner contended​[38]​ that since the selling price of the property based on the Deed of Sale annexed to
respondents application for original registration was ₱160,000,​[39]​ the MTC did not have jurisdiction over the case.
Under Section 34 of the Judiciary Reorganization Act, as amended,​[40]​ the MTCs delegated jurisdiction to try cadastral
and land registration cases is limited to lands, the value of which should not exceed ₱100,000.
We are not persuaded.
The delegated jurisdiction of the MTC over cadastral and land registration cases is indeed set forth in the Judiciary
Reorganization Act, which provides:
Sec. 34. Delegated Jurisdiction in Cadastral and Land Registration Cases. - Metropolitan Trial Courts, Municipal Trial
Courts, and Municipal Circuit Trial Courts may be assigned by the Supreme Court to hear and determine cadastral or
land registration cases covering lots where there is no controversy or opposition, or contested lots where the value of
which does not exceed One hundred thousand pesos (₱100,000.00), such value to be ascertained by the affidavit of the
claimant or by agreement of the respective claimants if there are more than one, or from the corresponding tax
declaration of the real property. Their decision in these cases shall be appealable in the same manner as decisions of the
Regional Trial Courts. (As amended by R.A. No. 7691) (Emphasis supplied.)
Thus, the MTC has delegated jurisdiction in cadastral and land registration cases in two instances: first, where there is no
controversy or opposition; or, second, over contested lots, the value of which does not exceed ₱100,000.

The case at bar does not fall under the first instance, because petitioner opposed respondent Corporations application
for registration on 8 January 1998.​[41]
However, the MTC had jurisdiction under the second instance, because the value of the lot in this case does not
exceed ₱100,000.
Contrary to petitioners contention, the value of the land should not be determined with reference to its selling price.
Rather, Section 34 of the Judiciary Reorganization Act provides that the value of the property sought to be registered
may be ascertained in three ways: first, by the affidavit of the claimant; second, by agreement of the respective
claimants, if there are more than one; or, third, from the corresponding tax declaration of the real property.​[42]
In this case, the value of the property cannot be determined using the first method, because the records are bereft of
any affidavit executed by respondent as to the value of the property. Likewise, valuation cannot be done through the
second method, because this method finds application only where there are multiple claimants who agree on and make
a joint submission as to the value of the property. Here, only respondent Bantigue Point Development Corporation
claims the property.
The value of the property must therefore be ascertained with reference to the corresponding Tax Declarations
submitted by respondent Corporation together with its application for registration. From the records, we find that the
assessed value of the property is ₱4,330, ₱1,920 and ₱8,670, or a total assessed value of ₱14,920 for the entire
property.​[43]​Based on these Tax Declarations, it is evident that the total value of the land in question does not
exceed ₱100,000. Clearly, the MTC may exercise its delegated jurisdiction under the Judiciary Reorganization Act, as
amended.
III
A certification from the CENRO is not sufficient proof that the property in question is alienable and disposable land of
the public domain.

Even as we affirm the propriety of the MTCs exercise of its delegated jurisdiction, we find that the lower court erred in
granting respondent Corporations application for original registration in the absence of sufficient proof that the property
in question was alienable and disposable land of the public domain.
The Regalian doctrine dictates that all lands of the public domain belong to the State.​[44]​ The applicant for land
registration has the burden of overcoming the presumption of State ownership by establishing through incontrovertible
evidence that the land sought to be registered is alienable or disposable based on a positive act of the
government.​[45]​ We held in Republic v. T.A.N. Properties, Inc. that a CENRO certification is insufficient to prove the
alienable and disposable character of the land sought to be registered.​[46]​ The applicant must also show sufficient proof
that the DENR Secretary has approved the land classification and released the land in question as alienable and
disposable.​[47]
Thus, the present rule is that an application for original registration must be accompanied by (1) a CENRO or
PENRO​[48]​ Certification; and (2) a copy of the original classification approved by the DENR Secretary and certified as a
true copy by the legal custodian of the official records.​[49]

Here, respondent Corporation only presented a CENRO certification in support of its application.​[50]​ Clearly, this falls
short of the requirements for original registration.
We therefore remand this case to the court a quo for reception of further evidence to prove that the property in
question forms part of the alienable and disposable land of the public domain. If respondent Bantigue Point
Development Corporation presents a certified true copy of the original classification approved by the DENR Secretary,
the application for original registration should be granted. If it fails to present sufficient proof that the land in question is
alienable and disposable based on a positive act of the government, the application should be denied.
WHEREFORE, premises considered, the instant Petition for Review is DENIED. Let this case be REMANDED to the
Municipal Trial Court of San Juan, Batangas, for reception of evidence to prove that the property sought to be registered
is alienable and disposable land of the public domain.
SO ORDERED.

Castillo v Escutin
CHICO-NAZARIO, J.:

Before this Court is a Petition for Review on Certiorari [1] under Rule 45 of the Rules of Court filed by petitioner Dinah C.
Castillo seeking the reversal and setting aside of the Decision,[2] dated 18 October 2005, of the Court of Appeals in
CA-G.R. SP No. 90533, as well as the Resolution,[3] dated 11 January 2006 of the same court denying reconsideration of
its afore-mentioned Decision. The Court of Appeals, in its assailed Decision, affirmed the Joint Resolution[4] dated 28
April 2004 and Joint Order[5] dated 20 June 2005 of the Office of the Deputy Ombudsman for Luzon in
OMB-L-A-03-0573-F and OMB-L-C-03-0728-F, dismissing petitioner Dinah C. Castillos complaint for grave misconduct and
violation of Section 3(e) of Republic Act No. 3019, the Anti-Graft and Corrupt Practices Act, as amended, against
respondent public officers Antonio M. Escutin (Escutin), Aquilina A. Mistas (Mistas) and Marietta L. Linatoc (Linatoc),
together with private individuals Lauro S. Leviste II (Leviste) and Benedicto L. Orense (Orense).

Petitioner is a judgment creditor of a certain Raquel K. Moratilla (Raquel), married to Roel Buenaventura. In the course
of her search for properties to satisfy the judgment in her favor, petitioner discovered that Raquel, her mother Urbana
Kalaw (Urbana), and sister Perla K. Moratilla (Perla), co-owned Lot 13713, a parcel of land consisting of 15,000 square
meters, situated at Brgy. Bugtongnapulo, Lipa City, Batangas, and covered by Tax Declaration No. 00449.

Petitioner set about verifying the ownership of Lot 13713. She was able to secure an Order[6] dated 4 March 1999
issued by Secretary Horacio R. Morales, Jr. of the Department of Agrarian Reform (DAR) approving the application of
Summit Point Golf & Country Club, Inc. for conversion of several agricultural landholdings, including Lot 13713 owned by
Perla K. Mortilla, et al. and covered by Tax Declaration No. 00449, to residential, commercial, and recreational uses. She
was also able to get from the Office of the City Assessor, Lipa City, a Certification[7] stating that Lot 13713, covered by
Tax Declaration No. 00554-A, was in the name of co-owners Raquel, Urbana, and Perla; and a certified true copy of Tax
Declaration No. 00554-A itself.[8] Lastly, the Register of Deeds of Lipa City issued a Certification[9] attesting that Lot
13713 in the name of co-owners Raquel, Urbana, and Perla, was not covered by a certificate of title, whether judicial or
patent, or subject to the issuance of a Certificate of Land Ownership Award or patent under the Comprehensive Agrarian
Reform Program.

Only thereafter did petitioner proceed to levy on execution Lot 13713, and the public auction sale of the same was
scheduled on 14 May 2002. Sometime in May 2002, before the scheduled public auction sale, petitioner learned that Lot
13713 was inside the Summit Point Golf and Country Club Subdivision owned by Summit Point Realty and Development
Corporation (Summit Realty). She immediately went to the Makati City office of Summit Realty to meet with its Vice
President, Orense. However, she claimed that Orense did not show her any document to prove ownership of Lot 13713
by Summit Realty, and even threatened her that the owners of Summit Realty, the Leviste family, was too powerful and
influential for petitioner to tangle with.

The public auction sale pushed through on 14 May 2002, and petitioner bought Raquels 1/3 pro-indiviso share in Lot
13713.

On 4 June 2002, petitioner had the following documents, on her acquisition of Raquels 1/3 pro-indiviso share in Lot
13713, recorded in the Primary Entry Book and Registration Book of the Register of Deeds of Lipa City in accordance with
Act No. 3344[10]: (a) Notice of Levy;[11] (b) Certificate of Sale;[12] (c) Affidavit of Publication;[13] and (d) Writ of
Execution.[14]

Subsequently, petitioner was issued by the City Assessor of Lipa City Tax Declaration No. 00942-A,[15] indicating that she
owned 5,000 square meters of Lot 13713, while Urbana and Perla owned the other 10,000 square meters.

When petitioner attempted to pay real estate taxes for her 5,000-square-meter share in Lot 13713, she was shocked to
find out that, without giving her notice, her Tax Declaration No. 00942-A was cancelled. Lot 13713 was said to be
encompassed in and overlapping with the 105,648 square meter parcel of land known as Lot 1-B, covered by Transfer
Certificate of Title (TCT) No. 129642[16] and Tax Declaration No. 00949-A,[17] both in the name of Francisco Catigbac
(Catigbac). The reverse side of TCT No. 129642 bore three entries, reflecting the supposed sale of Lot 1-B to Summit
Realty, to wit:
ENTRY NO. 184894: SPECIAL POWER OF ATTORNEY: In favor of LEONARDO YAGIN: For purposes more particularly
stipulated in the contract ratified before Atty. Ernesto M. Vergara of Lipa City as per Doc. No. 639; Page No. 29; Book No.
LXXVI; Series of 1976.

Date of instrument 2-6-1976

Date of inscription 6-26-2002 at 11:20 a.m.

ENTRY NO. 185833: SALE IN FAVOR OF SUMMIT POINT REALTY & DEVELOPMENT CORP:

ENTRY NO. 185834: BIR CLEARANCE: Of the parcel of land described in this cert. of title is hereby sold and cancelled TCT
No. 134609(SN-6672938) Vol. 671-A, having been issued by virtue of the aforesaid instrument ratified before Perfecto L.
Dimayuga, Notary Public for Makati City as per Doc. No. 148; Page 31, Book No. LXVII, Series of 2002.

Date of instrument: July 22, 2002

Date of inscription: July 25, 2002 at 2:30 P.M.[18]

On 25 July 2002, at 2:30 p.m., TCT No. 129642 in the name of Catigbac was cancelled and TCT No. T-134609 in the name
of Summit Realty was issued in its place.

The foregoing incidents prompted petitioner to file a Complaint Affidavit[19] before the Office of the Deputy
Ombudsman for Luzon charging several public officers and private individuals as follows:

32. I respectfully charge that on or about the months of June 2002 and July 2002 and onwards in Lipa City, Atty. Antonio
M. [Escutin], the Register of Deeds of Lipa City[;] Aquilina A. Mistas, the Local Assessment Operations Officer III of the
City Assessors Office of Lipa City[;] Marietta Linatoc, Records Clerk, Office of the City Assessor of Lipa City, who are
public officers and acting in concert and conspiring with Lauro S. Leviste II and Benedicto L. Orense, Executive
Vice-President and Vice-President, respectively[,] of Summit Point Realty and Development Corporation x x x while in the
discharge of their administrative functions did then and there unlawfully, through evident bad faith, gross inexcusable
negligence and with manifest partiality towards Summit caused me injury in the sum of P20,000,000.00 by cancelling my
TD #00942-A in the Office of the City Assessor of Lipa City and instead issuing in the name of Francisco Catigbac TC
#00949-A when aforesaid personalities well knew that TCT No. 129642 was already cancelled and therefore not legally
entitled to a new tax declaration thereby manifestly favoring Summit Point Realty and Development Corporation who
now appears to be the successor-in-interest of Francisco Catigbac, all to my damage and prejudice.[20] (Emphasis ours.)

Petitioners Complaint Affidavit gave rise to simultaneous administrative and preliminary (criminal) investigations,
docketed as OMB-L-A-03-0573-F and OMB-L-C-03-0728-F, respectively.

Petitioner pointed out several irregularities in the circumstances surrounding the alleged sale of Lot 1-B to Summit
Realty and in the documents evidencing the same.
The supposed Deed of Absolute Sale in favor of Summit Realty executed on 22 July 2002 by Leonardo Yagin (Yagin), as
Catigbacs attorney-in-fact, appeared to be a one-way street. It did not express the desire of Summit Realty, as vendee,
to purchase Lot 1-B or indicate its consent and conformity to the terms of the Deed. No representative of Summit Realty
signed the left margin of each and every page of said Deed. It also did not appear from the Deed that a representative of
Summit Realty presented himself before the Notary Public who notarized the said document. The Tax Identification
Numbers of Yagin, as vendor, and Summit Realty, as vendee, were not stated in the Deed.

Petitioner also averred that, being a corporation, Summit Realty could only act through its Board of Directors. However,
when the Deed of Absolute Sale of Lot 1-B was presented for recording before the Register of Deeds, it was not
accompanied by a Secretarys Certificate attesting to the existence of a Board Resolution which authorized said purchase
by Summit Realty. There was no entry regarding such a Secretarys Certificate and/or Board Resolution, whether on TCT
No. 129642 or TCT No. T-134609. A Secretarys Certificate eventually surfaced, but it was executed only on 30 July 2002,
five days after TCT No. T-134609 in the name of Summit Realty was already issued.

The Deed of Absolute Sale was presented before and recorded by the Register of Deeds of Lipa City on 25 July 2002 at
2:30 p.m., at exactly the same date and time TCT No. T-134609 was issued to Summit Realty. Petitioner theorizes that
for this to happen, TCT No. T-134609 was already prepared and ready even before the presentation for recording of the
Deed of Absolute Sale before the Register of Deeds.

Moreover, Catigbac had long been dead and buried. The agency Catigbac supposedly executed in favor of Yagin was
extinguished by Catigbacs death. Thus, petitioner argued, Yagin no longer had authority to execute on 22 July 2002 the
Deed of Absolute Sale of Lot 1-B in favor of Summit Realty, making the said Deed null and void ab initio.

Petitioner asserted that Summit Realty was well-aware of Catigbacs death, having acknowledged the same in LRC Case
No. 00-0376, the Petition for Issuance of New Owners Duplicate of TCT No. 181 In Lieu of Lost One, filed by Summit
Realty before the Regional Trial Court (RTC) of Lipa City. During the ex parte presentation of evidence in the latter part of
2000, Orense testified on behalf of Summit Realty that Catigbacs property used to form part of a bigger parcel of land,
Lot 1 of Plan Psu-12014, measuring 132,975 square meters, covered by TCT No. 181 in the name of Catigbac; after
Catigbacs death, Lot 1 was informally subdivided into several parts among his heirs and/or successors-in-interest, some
of whom again transferred their shares to other persons; Summit Realty separately bought subdivided parts of Lot 181
from their respective owners, with a consolidated area of 105,648 square meters, and identified as Lot 1-B after survey;
despite the subdivision and transfer of ownership of Lot 1, TCT No. 181 covering the same was never cancelled; and the
owners duplicate of TCT No. 181 was lost and the fact of such loss was annotated at the back of the original copy of TCT
No. 181 with the Registry of Deeds. Subsequently, in an Order[21] dated 3 January 2001, the RTC granted the Petition in
LRC Case No. 00-0376 and directed the issuance of a new owners duplicate of TCT No. 181 in the name of Catigbac,
under the same terms and condition as in its original form.

Petitioner further cast doubt on the acts undertaken by Summit Realty in connection with Catigbacs property,
purportedly without legal personality and capacity. The Special Power of Attorney dated 6 February 1976 granted Yagin
the right to sue on behalf of Catigbac, yet it was Summit Realty which instituted LRC Case No. 00-0376, and Yagin had no
participation at all in said case. Likewise, it was not Yagin, but Orense, who, through a letter[22] dated 27 June 2001,
requested the cancellation of TCT No. 181 covering Lot 1 and the issuance of a new certificate of title for Lot 1-B. Hence,
it was Orenses request which resulted in the issuance of TCT No. 129642 in the name of Catigbac, later cancelled and
replaced by TCT No. T-134609 in the name of Summit Realty.

Lastly, petitioner questioned why, despite the cancellation of TCT No. 129642 in the name of Catigbac and the issuance
in its place of TCT No. T-134609 in the name of Summit Realty, it was the former cancelled title which was used as basis
for canceling petitioners Tax Declaration No. 00942-A. Tax Declaration No. 00949-A was thus still issued in the name of
Catigbac, instead of Summit Realty.

Piecing everything together, petitioner recounted in her Complaint Affidavit the alleged scheme perpetrated against her
and the involvement therein of each of the conspirators:

28. Summit Point Realty and Development Corporation went into action right after I paid Orense a visit sometime May
2002. Summit resurrected from the grave. (sic) Francisco Catigbac whom they knew to be long dead to face possible
litigation. This is the height of malice and bad faith on the part of Summit through its Lauro Leviste II, the Executive Vice
President and Benedicto Orense, the Vice President. I had only in my favor a tax declaration to show my interest and
ownership over the 5, 000 sq.m. of the subject parcel of land. Evidently, Leviste and Orense came to the desperate
conclusion that they needed a TCT which is a far better title than any tax declaration.
Both then methodically commenced their evil and illegal scheme by causing on June 26, 2002 at 11:20 a.m. the
inscription with the Register of Deeds of Lipa City of a purported Special Power of Attorney in favor of Leonardo Yagin
(Annex I). Next, the Deed of Absolute Sale (Annex J) was made the following month in order to make it appear that Yagin
unilaterally sold to Summit the subject parcel of land purportedly belonging to Francisco Catigbac. Since the latter was
already dead and realizing that the agency was already extinguished, Annex J was not signed or executed by Leviste or
Orense. This fact however did not deter the two from securing a BIR clearance on July 25, 2002. Also, on this same day,
July 25, 2002, Annex J was presented to Atty. [Escutin] at 2:30 p.m. simultaneously, at exactly the same time of 2:30 p.m.
TCT No. T-134609 in Summits name was issued by Atty. [Escutin] WITHOUT benefit of the submission of the necessary
documentation such as the Board Resolution, DAR Clearance, Revenue Tax Receipts for documentary stamps, real
property tax clearance, proof of payment of transfer tax, tax declaration, articles of incorporation, SEC certification,
license to sell and/or certificate of registration by HLURB, etc. Without the total and lightning speed cooperation of Atty.
[Escutin] to close his eyes to the total absence of said vital documents, the desperately needed TCT to erase my interest
and ownership would not have come into existence. Atty. [Escutin] had indeed acted in concert and in conspiracy with
Leviste and Orense in producing Annex H and Annex K.

29. Thereafter, Leviste and Orense utilized the already cancelled TCT No. 129642 in the name of Francisco Catigbac to be
the basis in seeking the cancellation of TD #00942A in my name (Annex F). The Tax Mapping Division of the Office of City
Assessor of Lipa City opined that my 5,000 sq.m. was (sic) part and parcel of the 105,648 sq.m. covered by TCT No.
129642. A photocopy of the Certification from said division is hereto marked and attached as Annex P, hereof. Aquilina
Mistas, the Local Assessment Operations Officer III of the Office of the City Assessor of Lipa City then conveniently
caused the disappearance of my Notice of Levy and other supporting documents which she had personally received from
me on March 13, 2002. For her part of the conspiracy likewise, Marietta Linatoc, Records Clerk, forthwith cancelled by
TD#00942-A and in lieu thereof she issued TD #00949-A in the name of Francisco Catigbac. I dare say so because Mistas
and Linatoc were presented a cancelled TCT as basis for obliterating my 5,000 sq.m. The fact of cancellation is clearly
stated on the posterior side of TCT No. 129642. Both can read. But the two nevertheless proceeded with dispatch in
canceling my TD, though they had ample time and opportunity to reject the request of Summit who is not even the
registered owner appearing on TCT No. 129642. Francisco Catigbac could not have been in front of Mistas and Linatoc
because he was already six feet below the ground. Mistas and Linatoc could have demanded presentation of the
document authorizing Summit in requesting for the cancellation of my TD. Also, they could have demanded from
Summit any document transferring my interest and ownership in favor of a third party. Or, at least, they could have
annotated in Tax Declaration No. 00949-A the fact that I bought my 5,000 sq.m. from a public auction sale duly
conducted by the court sheriff. Alternatively, Linatoc and Mistas should have advised Summit to the effect that since
they already appear to be the owners of the subject parcel of land, the new tax declaration should bear their name
instead. Mistas and Linatoc indeed conspired with Summit in the illegal and unwarranted cancellation of my TD and in
covering up the behind-the-scenes activities of Summit by making it appear that it was Francisco Catigbac who caused
the cancellation. Even Leonardo Yagin, the alleged attorney-in-fact did not appear before Mistas and Linatoc. Yagin
could not have appeared because he is rumored to be long dead. The aforementioned acts of the two benefitted (sic)
Summit through their manifest partiality, evident bad faith and/or gross inexcusable negligence. Perhaps, there is some
truth to the rumor that Yagin is dead because he does not even have a TIN in the questioned Deed of Absolute Sale. If
indeed Yagin is already dead or inexistent[,] the allged payment of the purchase price of P5,282,400.00 on July 25, 2002
is a mere product of the fertile imagination of Orense and Leviste. To dispute this assertion[,] the live body of Leonardo
Yagin must be presented by Orense and Leviste.[23]

After filing her Affidavit Complaint, petitioner attempted to have the Sheriffs Deed of Final Sale/Conveyance of her 5,000
square meter pro-indiviso share in Lot 13713 registered with the Register of Deeds of Lipa City. She also sought the
annotation of her Affidavit of Adverse Claim on the said 5,000 square meters on TCT No. T-134609 of Summit Realty.

Escutin, the Register of Deeds of Lipa City, relying on the finding of Examiner Juanita H. Sta. Ana (Sta. Ana), refused to
have the Sheriffs Deed of Final Sale/Conveyance registered, since:
The Sheriffs Deed of Final Sale/Conveyance is a Mode of Transfers (sic) ownership in favor of the Plaintiff, [Dinah] C.
Castillo, (sic) However[,] it happen (sic) that the presented Tax Declaration [No.] 00942-A is already transfer (sic) in the
name of the said [Dinah] C. Castillo, therefore[,] the registration of Sheriff (sic) Final Sale is no longer necessary.[24]

Escutin likewise denied petitioners request to have her Affidavit of Adverse Claim annotated on TCT No. T-134609 on the
following grounds:

1. The claimants (sic) rights or interest is not adverse to the registered owner. The registered owner is Summit Point
Realty and Development Corporation under Transfer Certificate of Title No. T-134609 of the Registry of Deeds for Lipa
City.

2. The records of the Registry reveals that the source of the rights or interest of the adverse claimant is by virtue of a
Levy on Execution by the Regional Trial Court Fourth Judicial Region, Branch 30, San Pablo City, in Civil Case No. SP-4489
(1996), [Dinah] C. Castillo vs. Raquel Buenaventura. The registered owner, Summit Point Realty and Development
Corporation nor its predecessor-in-interest are not the judgment debtor or a party in the said case. Simply stated, there
is no privity of contract between them (Consulta No. 1044 and 1119). If ever, her adverse claim is against Raquel
Buenaventura, the judgment debtor who holds no title over the property.[25]

Escutin did mention, however, that petitioner may elevate en consulta to the Land Registration Authority (LRA) the
denial of her request for registration of the Sheriffs Deed of Final Sale/Conveyance and annotation of her adverse claim
on TCT No. T-134609. This petitioner did on 3 July 2003.

While her Consulta was pending before the LRA, petitioner filed a Supplemental Complaint Affidavit[26] and a Second
Supplemental Complaint Affidavit[27] with the Office of the Deputy Ombudsman for Luzon, bringing to its attention the
aforementioned developments. In her Second Supplemental Complaint Affidavit, petitioner prayed that Sta. Ana be
included as a co-respondent in OMB-L-A-03-0573-F and OMB-L-C-03-0728-F, averring that the latters actuation deprived
petitioner of a factual basis for securing a new title in her favor over her 5,000 square meter pro-indiviso share in Lot
13713, because the public auction sale of the said property to her could never become final without the registration of
the Sheriffs Deed.

The persons charged in OMB-L-A-03-0573-F and OMB-L-C-03-0728-F filed their respective Counter-Affidavits.

Respondent Escutin clarified in his Counter Affidavit that TCT No. T-134609 reflected the same date and time of entry of
the Deed of Absolute Sale between Yagin (as Catigbacs attorney-in-fact) and Summit Realty, i.e., 25 July 2002 at 2:30
p.m., in accordance with Section 56[28] of Presidential Decree No. 1529, otherwise known as the Property Registration
Decree. He emphasized that his duty as Register of Deeds to register the Deed of Absolute Sale presented before him
was purely ministerial. If the document was legal and in due form, and there was nothing mutilated or irregular on its
face, the Register of Deeds had no authority to inquire into its intrinsic validity based upon proofs aliunde. It was not
true that he allowed the registration of the Deed of Absolute Sale notwithstanding the absence of the required
documents supporting the application for registration thereof. On the contrary, all the required documents such as the
DAR Clearance, Bureau of Internal Revenue (BIR) Certificate Authorizing Registration (CAR), Real Property Tax, Transfer
Tax, Secretarys Certificate and Articles of Incorporation of Summit Realty were submitted. While it was true that the
Secretarys Certificate did not accompany the Deed of Absolute Sale upon the presentation of the latter for registration,
Section 117 of the Property Registration Decree gives the party seeking registration five days to comply with the rest of
the requirements; and only if the party should still fail to submit the same would it result in the denial of the
registration. The License to Sell and the Housing and Land Use Regulatory Board Registration of Summit Realty are only
required when a subdivision project is presented for registration. The use of TINs in certain documents is a BIR
requirement. The BIR itself did not require from Yagin as vendor his TIN in the Deed of Absolute Sale, and issued the CAR
even in the absence thereof. The Register of Deeds, therefore, was only bound by the CAR. As to the Certification earlier
issued by the Register of Deeds of Lipa City attesting that Lot 13713 in the name of co-owners Raquel, Urbana, and Perla,
was not covered by any certificate of title, Escutin explained that the Register of Deeds was not technically equipped to
determine whether a cadastral lot number was within a titled property or not. Lastly, Escutin denied conspiring or
participating in the cancellation of petitioners Tax Declaration No. 00942-A for, as Register of Deeds, he was not
concerned with the issuance (or cancellation) of tax declarations.

Respondent Mistas, the Assistant City Assessor for Administration of the Office of the City Assessor, Lipa City, disputed
petitioners allegations that she personally received from petitioner copies of the Notice of Levy and other supporting
documents, and that she caused the disappearance thereof. Although she admitted that said documents were shown to
her by petitioner, she referred petitioner to the Receiving Clerk, Lynie Reyes, who accordingly received the same. Mistas
maintained that she was not the custodian of records of the Office and she should not be held responsible for the
missing documents. She opined that petitioners documents could have been among those misplaced or destroyed when
the Office of the City Assessor was flooded with water leaking from the toilet of the Office of the City Mayor. As
Assistant City Assessor for Administration, Mistas identified her main function to be the control and management of all
phases of administrative matters and support. She had no hand in the cancellation of petitioners Tax Declaration No.
00942-A, and the issuance of Catigbacs Tax Declaration No. 00949-A for such function pertained to another division over
which she did not exercise authority. Thus, it was also not within her function or authority to demand the presentation
of certain documents to support the cancellation of petitioners Tax Declaration No. 00942-A or to cause the annotation
of petitioners interest on Catigbacs Tax Declaration No. 00949-A.

Respondent Linatoc averred that as Local Assessment Operation Officer II of the Office of the City Assessor, Lipa City, she
was in charge of safekeeping and updating the North District Records. With respect to the transfer of a tax declaration
from one name to another, her duty was limited only to the act of preparing the new tax declaration and assigning it a
number, in lieu of the cancelled tax declaration. It was a purely ministerial duty. She had no authority to demand the
presentation of any document or question the validity of the transfer. Neither was it within her jurisdiction to determine
whether petitioners interest should have been annotated on Catigbacs Tax Declaration No. 00949-A. Examining the
documents presented in support of the transfer of the tax declaration to anothers name was a function belonging to
other divisions of the Office of the City Assessors. The flow of work, the same as in any other ordinary transaction,
mandated her to cancel petitioners Tax Declaration No. 00942-A, and to prepare and release Catigbacs Tax Declaration
No. 00949-A after the transfer had been reviewed and approved by other divisions of the Office. It was also not true that
TCT No. 129642 in the name of Catigbac was already cancelled when it was presented before the Office of the City
Assessors; the photocopy of said certificate of title with the Office bore no mark of cancellation.

Leviste and Orense, the private individuals charged with the respondent public officers, admitted that they were
corporate officers of Summit Realty. They related that Summit Realty bought a parcel of land measuring 105,648 square
meters, later identified as Lot 1-B, previously included in TCT No. 181, then specifically covered by TCT No. 129642, both
in the name of Catigbac. As a result of such purchase, ownership of Lot 1-B was transferred from Catigbac to Summit
Realty. Summit Realty had every reason to believe in good faith that said property was indeed owned by Catigbac on the
basis of the latters certificate of title over the same. Catigbacs right as registered owner of Lot 1-B under TCT No.
181/No. 129642, was superior to petitioners, which was based on a mere tax declaration. Leviste and Orense rebutted
petitioners assertion that the Deed of Absolute Sale between Yagin, as Catigbacs attorney-in-fact, and Summit Realty
was a one-way street. The Deed was actually signed on the left margin by both Yagin and the representative of Summit
Realty. The inadvertent failure of the representative of Summit Realty to sign the last page of the Deed and of both
parties to indicate their TINs therein did not invalidate the sale, especially since the Deed was signed by witnesses
attesting to its due execution. Questions as regards the scope of Catigbacs Special Power of Attorney in favor of Yagin
and the effectivity of the same after Catigbacs death can only be raised in an action directly attacking the title of Summit
Realty over Lot 1-B, and not in an administrative case and/or preliminary investigation before the Ombudsman, which
constituted a collateral attack against said title. Leviste and Orense further explained that since the owners duplicate of
TCT No. 181 was lost and was judicially ordered replaced only on 3 January 2001, entries/inscriptions were necessarily
made thereon after said date. As to Orenses failure to show petitioner any document proving ownership of Lot 1-B by
Summit Realty when the latter paid him a visit, it was not due to the lack of such documents, but because of petitioners
failure to establish her right to peruse the same. Orense also denied ever threatening petitioner during their meeting.
Finally, according to Leviste and Orense, petitioners allegations were based on mere conjectures and unsupported by
evidence. That particular acts were done or not done by certain public officials was already beyond the control of Leviste
and Orense, and just because they benefited from these acts did not mean that they had a hand in the commission or
omission of said public officials.

After more exchange of pleadings, OMB-L-A-03-0573-F and OMB-L-C-03-0728-F were finally submitted for resolution.

In a Joint Resolution[29] dated 28 April 2004, the Office of the Deputy Ombudsman for Luzon gave more credence to
respondent Escutins defenses, as opposed to petitioners charges against him:
Going to the charges against respondent Escutin, he convincingly explained that he allowed the registration of the
allegedly defective Deed of Sale because he, as Register of Deeds, has no power to look into the intrinsic validity [of] the
contract presented to him for registration, owing to the ministerial character of his function. Moreover, as sufficiently
explained by said respondent, all the documents required for the registration of the Deed of Sale were submitted by the
applicant.

We likewise find said respondents explanation satisfactory that Section 56 of P.D. 1529 mandates that the TCT bear the
date of registration of the instrument on which the said TCTs issuance was based. It is for this reason that TCT 134609
bears the same date and time as the registration of the Deed of Absolute Sale, which deed served as basis for its
issuance.

As to his denial to register [herein petitioners] Affidavit of Adverse Claim and Sheriffs Certificate of Final Sale, through
the issuance by the Registry of Deeds Examiner Juanita H. Sta. Ana, of the 29 June 2003 Order denying registration
thereof, such matter had been raised by herein [petitioner] in a letter-consulta to the Administrator of the Land
Registration Authority (LRA) on 03 July 2003. As the criminal and administrative charges respecting this issue is
premised, in part, on a matter still pending with the LRA, we find it premature to make a finding on the same.

It is for the same reason that we deny the motion contained in the Second Supplemental Complaint Affidavit praying for
the inclusion, as additional respondent, of Juanita H. Sta. Ana, who is impleaded solely on the basis of having signed, by
authority of Escutin, the 29 July 2003 Order of denial of [petitioners] application for registration.

Finally, respondent Escutin was able to successfully demonstrate, through Consulta 2103 dated 25 July 1994, wherein
the denial of registration by the Examiner of the Registry of Deeds of Quezon City was upheld by the LRA Administrator,
that the (sic) it was practice in the different Registries that Examiners are given authority by the Register to sign letters
of denial.[30]

The Office of the Deputy Ombudsman for Luzon declared in the same Joint Resolution that there was no basis to hold
respondents Mistas and Linatoc administratively or criminally liable:

In this respect, this Office notes that while [herein petitioner] alleges that Aquilina Mistas caused the disappearance of
the Notice of Levy and other supporting documents received from [petitioner] on 13 March 2003 when she applied for
the issuance of a Tax Declaration in her favor, she did not present her receiving copy thereof showing that it was Mistas
who received said documents from her. Neither did she show that Mistas is the employee responsible for record
safekeeping.

Next, we find, as convincingly answered, the allegation that respondent Marietta Linatoc cancelled Tax Declaration No.
00942-A and issued Tax Declaration 00949-Q (sic) on the basis of a cancelled Transfer Certificate of Title upon the behest
of Summit [Realty], which was not the registered owner of the property.
Respondent Linatoc, meeting squarely [petitioners] allegation, admits having physically cancelled Tax Declaration No.
00942-A and having prepared a new declaration covering the same property in Catigbacs [name], as mandated by the
flow of work in the City Assessors Office. However, she denies having the authority or discretion to evaluate the
correctness and sufficiency of the documents supporting the application for the issuance of the Tax Declaration, arguing
that her official function is limited to the physical preparation of a new tax declaration, the assignment of a new tax
declaration number and the cancellation of the old tax declaration, after the application had passed the other divisions
of the City Assessors Office.

Verily, [petitioner] failed to establish that respondent Mistas and Linatoc, are the ones officially designated to receive
applications for issuance of Tax Declaration, evaluate the sufficiency of the documents supporting such applications, and
on the basis of the foregoing recommend or order the cancellation of an existing Tax Declaration and direct the
annotation of any fact affecting the property and direct the issuance of a new tax declaration covering the same
property.

In fact, there is even a discrepancy as to the official designation of said respondents. While [petitioner] impleads Mistas,
in her capacity as Local Assessment Officer, and Linatoc, in her capacity as Records Clerk, Mistas, in her counter-affidavit,
alleges a different designation, i.e., Assistant City Assessor for Administration, while Linatoc claims to be the Local
Assessment Operation Officer II of the City Assessors Office.

With the scope of work of said respondents not having been neatly defined by [petitioner], this Office cannot make a
definitive determination of their liability for Grave Misconduct and violation of Section 3(e) of R.A. No. 3019, which
charges both relate to the performance or discharge of Mistas and Linatocs official duties.[31]

Neither did the Office of the Deputy Ombudsman for Luzon find any probable cause to criminally charge private
individuals Leviste and Orense for the following reasons:

Anent private respondents, with the alleged conspiracy to unlawfully cause the transfer of the title of [herein
petitioners] property to Summit sufficiently explained by respondent Register of Deeds, such allegation against private
respondents loses a legal leg to stand on.

Inasmuch as [petitioner] was not able to sufficiently outline the official functions of respondents Mistas and Linatoc to
pin down their specific accountabilities, the imputation that private respondent (sic) conspired with said public
respondents respecting the cancellation of Tax Declaration No. 00942-A is likewise stripped of any factual and legal
bases.[32]

As to whether petitioner was indeed unlawfully deprived of her 5,000 square meter property, which issue comprised the
very premise of OMB-L-A-03-0573-F and OMB-L-C-03-0728-F, the Office of the Deputy Ombudsman for Luzon ruled that
such matter was not within its jurisdiction and should be raised in a civil action before the courts of justice.

In the end, the Office of the Ombudsman decreed:

WHEREFORE premises considered, it is respectfully recommended that : (1) the administrative case against public
respondents ANTONIO M. ESCUTIN, AQUILINA A. MISTAS and MARIETA L. LINATOC be DISMISSED, for lack of substantial
evidence; and (2) the criminal case against the same respondents including private respondent LAURO S. LEVISTE II and
BENEDICTO L. ORENSE, be DISMISSED, for lack of probable cause.[33]

In a Joint Order[34] dated 20 June 2005, the Office of the Deputy Ombudsman for Luzon denied petitioners Motion for
Reconsideration.
The Office of the Deputy Ombudsman for Luzon, in its Joint Order, took notice of the Resolution dated 17 December
2002 of the LRA in Consulta No. 3483, which involved circumstances similar to those in petitioners case. The LRA
distinguished between two systems of land registration: one is the Torrens system for registered lands under the
Property Registration Decree, and the other is the system of registration for unregistered land under Act No. 3344 (now
Section 113 of the Property Registration Decree). These systems are separate and distinct from each other. For
documents involving registered lands, the same should be recorded under the Property Registration Decree. The
registration, therefore, of an instrument under the wrong system produces no legal effect. Since it appeared that in
Consulta No. 3483, the registration of the Kasulatan ng Sanglaan, the Certificate of Sale and the Affidavit of
Consolidation was made under Act No. 3344, it did not produce any legal effect on the disputed property, because the
said property was already titled when the aforementioned documents were executed and presented for registration,
and their registration should have been made under the Property Registration Decree.

Furthermore, the Office of the Deputy Ombudsman for Luzon, in the same Joint Order, took into account petitioners
withdrawal of her appeal en consulta before the LRA of the denial by the Register of Deeds of her request for
registration of the Sheriffs Deed of Final Sale/Conveyance and Affidavit of Adverse Claim, which prompted the LRA
Administrator to declare the consulta moot and academic. For want of a categorical declaration on the registerability of
petitioners documents from the LRA, the competent authority to rule on the said matter, there could be no basis for a
finding that respondent public officers could be held administratively or criminally liable for the acts imputed to them.

Petitioner sought recourse from the Court of Appeals by filing a Petition for Review under Rule 43 of the Rules of Court
challenging the 28 April 2004 Joint Resolution and 20 June 2005 Joint Order of the Office of the Deputy Ombudsman for
Luzon.[35] The appeal was docketed as CA-G.R. SP No. 90533.

The Court of Appeals promulgated its Decision[36] on 18 October 2005, also finding no reason to administratively or
criminally charge respondents. Essentially, the appellate court adjudged that petitioner can not impute corrupt motives
to respondents acts:

Without evidence showing that respondents received any gift, money or other pay-off or that they were induced by
offers of such, the Court cannot impute any taint of direct corruption in the questioned acts of respondents. Thus, any
indication of intent to violate the laws or of flagrant disregard of established rule may be negated by respondents honest
belief that their acts were sanctioned under the provisions of existing law and regulations. Such is the situation in the
case at bar. Respondent Register of Deeds acted in the honest belief that the agency recognized by the court in LRC Case
No. 00-0376 between the registered owner Francisco Catigbac and Leonardo Yagin subsisted with respect to the
conveyance or sale of Lot 1 to Summit as the vendee, and that the Special Power of Attorney and Deed of Absolute Sale
presented as evidence during said proceedings are valid and binding. Hence, respondent Escutin was justified in
believing that there is no legal infirmity or defect in registering the documents and proceeding with the transfer of title
of Lot 1 in the name of the new owner Summit. On the other hand, respondent Linatoc could not be held
administratively liable for effecting the cancellation in the course of ordinary flow of work in the City Assessors Office
after the documents have undergone the necessary evaluation and verification by her superiors.[37]

The Court of Appeals referred to the consistent policy of the Supreme Court not to interfere with the exercise by the
Ombudsman of his investigatory power. If the Ombudsman, using professional judgment, finds the case dismissible, the
Court shall respect such findings, unless clothed with grave abuse of discretion. The appellate court pronounced that
there was no grave abuse of discretion on the part of the Office of the Deputy Ombudsman for Luzon in dismissing
petitioners Complaint Affidavit against respondents.

Hence, the dispositive portion of the Decision of the Court of Appeals reads:
WHEREFORE, premises considered, the present petition is hereby DISMISSED for lack of merit. The challenged Joint
Resolution dated April 28, 2004 and Joint Order dated June 20, 2005 in OMB-L-A-03-0573-F and OMB-L-C-03-0728-F are
hereby AFFIRMED.[38]

In its Resolution dated 11 January 2006, the Court of Appeals denied petitioners Motion for Reconsideration for failing
to present new matter which the appellate court had not already considered in its earlier Decision.

Petitioner now comes before this Court via the instant Petition for Review on Certiorari, with the following assignment
of errors:

I. THE HONORABLE COURT OF APPEALS PATENTLY ERRED IN AFFIRMING THE CANCELLATION OF THE TAX DECLARATION
00942 OF PETITIONER IN VIOLATION OF SECTION 109 OF PRESIDENTIAL DECREE 1529, OTHERWISE KNOWN AS THE
PROPERTY REGISTRATION ACT (sic);

II. THE HONORABLE COURT OF APPEALS PATENTLY ERRED IN RULING THAT RESPONDENTS COULD NOT BE HELD
ADMINISTRATIVELY LIABLE FOR UNDULY FAVORING SUMMIT TO THE DAMAGE AND PREJUDICE OF PETITIONER.[39]

The Petition at bar is without merit.

As to the first issue, petitioner invokes Section 109 of the Property, Registration Decree which provides:

SEC. 109. Notice and replacement of lost duplicate certificate. In case of loss or theft of an owners duplicate certificate
of title, due notice under oath shall be sent by the owner or by someone in his behalf to the Register of Deeds of the
province or city where the land lies as soon as the loss or theft is discovered. If a duplicate certificate is lost or destroyed,
or cannot be produced by a person applying for the entry of a new certificate to him or for the registration of any new
instrument, a sworn statement of the fact of such loss or destruction may be filed by the registered owner or other
person in interest and registered.

Upon the petition of the registered owner or other person in interest, the court may, after notice and due hearing, direct
the issuance of a new duplicate certificate, which shall contain a memorandum of the fact that it is issued in place of the
lost duplicate certificate, but shall in all respects be entitled to like faith and credit as the original duplicate, and shall
thereafter be regarded as such for all purposes of this decree.

Petitioner argues that the RTC, in LRC Case No. 00-0376, only ordered the issuance of a new owners duplicate of TCT No.
181 in lieu of the lost one. However, respondents did not only issue a new owners duplicate of TCT No. 181, but also
cancelled petitioners Tax Declaration No. 00942-A and issued in its place Tax Declaration No. 00949-A in the name of
Catigbac. Respondents did not even annotate petitioners existing right over 5,000 square meters of Lot 1-B or notify
petitioner of the cancellation of her Tax Declaration No. 00942-A. Petitioner maintains that a new owners duplicate of
title is not a mode of acquiring ownership, nor is it a mode of losing one. Under Section 109 of the Property Registration
Decree, the new duplicate of title was issued only to replace the old; it cannot cancel existing titles.

Petitioners position on this issue rests on extremely tenuous arguments and befuddled reasoning.

Before anything else, the Court must clarify that a title is different from a certificate of title. Title is generally defined as
the lawful cause or ground of possessing that which is ours. It is that which is the foundation of ownership of property,
real or personal.[40] Title, therefore, may be defined briefly as that which constitutes a just cause of exclusive
possession, or which is the foundation of ownership of property.[41] Certificate of title, on the other hand, is a mere
evidence of ownership; it is not the title to the land itself.[42] Under the Torrens system, a certificate of title may be an
Original Certificate of Title, which constitutes a true copy of the decree of registration; or a Transfer Certificate of Title,
issued subsequent to the original registration.
Summit Realty acquired its title to Lot 1-B, not from the issuance of the new owners duplicate of TCT No. 181, but from
its purchase of the same from Yagin, the attorney-in-fact of Catigbac, the registered owner of the said property. Summit
Realty merely sought the issuance of a new owners duplicate of TCT No. 181 in the name of Catigbac so that it could
accordingly register thereon the sale in its favor of a substantial portion of Lot 1 covered by said certificate, later
identified as Lot 1-B. Catigbacs title to Lot 1-B passed on by sale to Summit Realty, giving the latter the right to seek the
separation of the said portion from the rest of Lot 1 and the issuance of a certificate of title specifically covering the
same. This resulted in the issuance of TCT No. 129642 in the name of Catigbac, covering Lot 1-B, which was subsequently
cancelled and replaced by TCT No. T-134609 in the name of Summit Realty.

Petitioners reliance on Section 109 of the Property Registration Decree is totally misplaced. It provides for the
requirements for the issuance of a lost duplicate certificate of title. It cannot, in any way, be related to the cancellation
of petitioners tax declaration.

The cancellation of petitioners Tax Declaration No. 00942-A was not because of the issuance of a new owners duplicate
of TCT No. 181, but of the fact that Lot 1-B, which encompassed the 5,000 square meters petitioner lays claim to, was
already covered by TCT No. 181 (and subsequently by TCT No. 129642) in the name of Catigbac. A certificate of title
issued is an absolute and indefeasible evidence of ownership of the property in favor of the person whose name appears
therein. It is binding and conclusive upon the whole world.[43] All persons must take notice, and no one can plead
ignorance of the registration.[44] Therefore, upon presentation of TCT No. 129642, the Office of the City Assessor must
recognize the ownership of Lot 1-B by Catigbac and issue in his name a tax declaration for the said property. And since
Lot 1-B is already covered by a tax declaration in the name of Catigbac, accordingly, any other tax declaration for the
same property or portion thereof in the name of another person, not supported by any certificate of title, such that of
petitioner, must be cancelled; otherwise, the City Assessor would be twice collecting a realty tax from different persons
on one and the same property.

As between Catigbacs title, covered by a certificate of title, and petitioners title, evidenced only by a tax declaration, the
former is evidently far superior and is, in the absence of any other certificate of title to the same property, conclusive
and indefeasible as to Catigbacs ownership of Lot 1-B. Catigbacs certificate of title is binding upon the whole world,
including respondent public officers and even petitioner herself. Time and again, the Court has ruled that tax
declarations and corresponding tax receipts cannot be used to prove title to or ownership of a real property inasmuch as
they are not conclusive evidence of the same.[45] Petitioner acquired her title to the 5,000 square meter property from
Raquel, her judgment debtor who, it is important to note, likewise only had a tax declaration to evidence her title. In
addition, the Court of Appeals aptly observed that, [c]uriously, as to how and when petitioners alleged
predecessor-in-interest, Raquel K. Moratilla and her supposed co-owners acquired portions of Lot 1 described as Lot
13713 stated in TD No. 00449, petitioner had so far remained utterly silent.[46]

Petitioners allegations of defects or irregularities in the sale of Lot 1-B to Summit Realty by Yagin, as Catigbacs
attorney-in-fact, are beyond the jurisdiction of the Office of the Deputy Ombudsman for Luzon to consider. It must be
remembered that Summit Realty had already acquired a certificate of title, TCT No. T-134609, in its name over Lot 1-B,
which constitutes conclusive and indefeasible evidence of its ownership of the said property and, thus, cannot be
collaterally attacked in the administrative and preliminary investigations conducted by the Office of the Ombudsman for
Luzon. Section 48 of the Property Registration Decree categorically provides that a certificate of title shall not be subject
to collateral attack. It cannot be altered, modified, or cancelled except in a direct proceeding in accordance with law.
For this same reason, the Court has no jurisdiction to grant petitioners prayer in the instant Petition for the cancellation
of TCT No. T-134609 in the name of Summit Realty.

Which now brings the Court to the second issue raised by petitioner on the administrative liability of respondents.
Before the Court proceeds to tackle this issue, it establishes that petitioners Complaint Affidavit before the Office of the
Ombudsman for Luzon gave rise to two charges: (1) OMB-L-A-03-0573-F involved the administrative charge for Gross
Misconduct against respondent public officers; and (2) OMB-L-C-03-0728-F concerned the criminal charge for violation
of Section 3(e) of the Anti-Graft and Corrupt Practices Act[47] against respondent public officers and private individuals
Leviste and Orense. The Office of the Deputy Ombudsman for Luzon, affirmed by the Court of Appeals, dismissed both
charges. In the Petition at bar, petitioner only assails the dismissal of the administrative charge for grave misconduct
against respondent public officers. Since petitioner did not raise as an issue herein the dismissal by the Office of the
Deputy Ombudsman for Luzon, affirmed by the Court of Appeals, of the criminal charge against respondent public
officers for violation of Section 3(e) of the Anti-Graft and Corrupt Practices Act, the same became final and
executory.[48]

In Domingo v. Quimson,[49] the Court adopted the well-written report and recommendation of its Clerk of Court on the
administrative matter then pending and involving the charge of gross or serious misconduct:

"Under Section 36, par. (b) [1] of PD No. 807, otherwise known as the Civil Service Decree of the Philippines,
'misconduct' is a ground for disciplinary action. And under MC No. 8, S. 1970, issued by the Civil Service Commission on
July 28, 1970, which sets the 'Guidelines in the Application of Penalties in Administrative Cases and other Matters
Relative Thereto,' the administrative offense of 'grave misconduct' carries with it the maximum penalty of dismissal from
the service (Sec. IV-C[3], MC No. 8, S. 1970). But the term 'misconduct' as an administrative offense has a well defined
meaning. It was defined in Amosco vs. Judge Magno, Adm. Mat. No. 439-MJ, Res. September 30, 1976, as referring 'to a
transgression of some established and definite rule of action, more particularly, unlawful behavior or gross negligence by
the public officer.' It is a misconduct 'such as affects the performance of his duties as an officer and not such only as
effects his character as a private individual.' In the recent case of Oao vs. Pabato, etc., Adm. Mat. No. 782-MJ, Res. July
29, 1977, the Court defined 'serious misconduct' as follows:

Hence, even assuming that the dismissal of the case is erroneous, this would be merely an error of judgment and not
serious misconduct. The term `serious misconduct is a transgression of some established and definite rule of action
more particularly, unlawful behavior of gross negligence by the magistrate. It implies a wrongful intention and not a
mere error of judgment. For serious misconduct to exist, there must be reliable evidence showing that the judicial acts
complained of were corrupt or inspired by intention to violate the law, or were a persistent disregard of well-known
legal rules. We have previously ruled that negligence and ignorance on the part of a judge are inexcusable if they imply a
manifest injustice which cannot be explained by a reasonable interpretation. This is not so in the case at bar. (Italics
supplied.)

To reiterate, for grave misconduct to exist, there must be reliable evidence showing that the acts complained of were
corrupt or inspired by an intention to violate the law, or were a persistent disregard of well-known legal rules. Both the
Office of the Deputy Ombudsman for Luzon and the Court of Appeals found that there was no sufficient evidence to
substantiate petitioners charge of grave misconduct against respondents. For this Court to reverse the rulings of the
Office of the Deputy Ombudsman for Luzon and the Court of Appeals, it must necessarily review the evidence presented
by the parties and decide on a question of fact. Once it is clear that the issue invites a review of the evidence presented,
the question posed is one of fact.[50]

Factual issues are not cognizable by this Court in a Petition for Review under Rule 45 of the Rules of Court. In order to
resolve this issue, the Court would necessarily have to look into the probative value of the evidence presented in the
proceedings below. It is not the function of the Court to reexamine or reevaluate the evidence all over again. This Court
is not a trier of facts, its jurisdiction in these cases being limited to reviewing only errors of law that may have been
committed by the lower courts or administrative bodies performing quasi-judicial functions. It should be emphasized
that findings made by an administrative body, which has acquired expertise, are accorded not only respect but even
finality by the Court. In administrative proceedings, the quantum of evidence required is only substantial.[51]

Absent a clear showing of grave abuse of discretion, the Court shall not disturb findings of fact. The Court cannot weigh
once more the evidence submitted, not only before the Ombudsman, but also before the Court of Appeals. Under
Section 27 of Republic Act No. 6770, findings of fact by the Ombudsman are conclusive, as long as they are supported by
substantial evidence.[52] Substantial evidence is the amount of relevant evidence which a reasonable mind might accept
as adequate to justify a conclusion.[53]

The Court finds no reason to disturb the finding of the Office of the Deputy Ombudsman for Luzon and the Court of
Appeals that respondents did not commit gross misconduct. Evident from the 28 April 2004 Joint Resolution of the
former and the 18 October 2005 Decision of the latter is that they arrived at such findings only after a meticulous
consideration of the evidence submitted by the parties.

Respondents were able to clearly describe their official functions and to convincingly explain that they had only acted in
accordance therewith in their dealings with petitioner and/or her documents. Respondents also enjoy in their favor the
presumption of regularity in the performance of their official duty. The burden of proving otherwise by substantial
evidence falls on petitioner, who failed to discharge the same.

From the very beginning, petitioner was unable to identify correctly the positions held by respondents Mistas and
Linatoc at the Office of the City Assessor. How then could she even assert that a particular action was within or without
their jurisdiction to perform? While it may be true that petitioner should have at least been notified that her Tax
Declaration No. 00942-A was being cancelled, she was not able to establish that such would be the responsibility of
respondents Mistas or Linatoc. Moreover, petitioner did not present statutory, regulatory, or procedural basis for her
insistence that respondents should have done or not done a particular act. A perfect example was her assertion that
respondents Mistas and Linatoc should have annotated her interest on Tax Declaration No. 00949-A in the name of
Catigbac. However, she failed to cite any law or rule which authorizes or recognizes the annotation of an adverse
interest on a tax declaration. Finally, absent any reliable evidence, petitioners charge that respondents conspired with
one another and with corporate officers of Summit Realty is nothing more than speculation, surmise, or conjecture. Just
because the acts of respondents were consistently favorable to Summit Realty does not mean that there was a
concerted effort to cause petitioner prejudice. Respondents actions were only consistent with the recognition of the title
of Catigbac over Lot 1-B, transferred by sale to Summit Realty, registered under the Torrens system, and accordingly
evidenced by certificates of title.

WHEREFORE, premises considered, the instant Petition for Review is hereby DENIED. The Decision dated 18 October
2005 and Resolution dated 11 January 2006 of the Court of Appeals in CA-G.R. SP No. 90533 are hereby AFFIRMED in
toto. Costs against the petitioner Dinah C. Castillo

EN BANC

G.R. Nos. L-10837-38 May 30, 1958

ASSOCIATED INSURANCE and SURETY COMPANY, INC., plaintiff,

vs.
ISABEL IYA, ADRIANO VALINO and LUCIA VALINO, defendants.

ISABEL IYA, plaintiff,

vs.
ADRIANO VALINO, LUCIA VALINO and ASSOCIATED INSURANCE and SURETY COMPANY. INC., defendants.
Jovita L. de Dios for defendant Isabel Iya.
M. Perez Cardenas and Apolonio Abola for defendant Associated Insurance and Surety Co., Inc.

FELIX, J.:

Adriano Valino and Lucia A. Valino, husband and wife, were the owners and possessors of a house of strong materials
constructed on Lot No. 3, Block No. 80 of the Grace Park Subdivision in Caloocan, Rizal, which they purchased on
installment basis from the Philippine Realty Corporation. On November 6, 1951, to enable her to purchase on credit rice
from the NARIC, Lucia A. Valino filed a bond in the sum of P11,000.00 (AISCO Bond No. G-971) subscribed by the
Associated Insurance and Surety Co., Inc., and as counter-guaranty therefor, the spouses Valino executed an alleged
chattel mortgage on the aforementioned house in favor of the surety company, which encumbrance was duly registered
with the Chattel Mortgage Register of Rizal on December 6, 1951. It is admitted that at the time said undertaking took
place, the parcel of land on which the house is erected was still registered in the name of the Philippine Realty
Corporation. Having completed payment on the purchase price of the lot, the Valinos were able to secure on October
18, 1958, a certificate of title in their name (T.C.T. No. 27884). Subsequently, however, or on October 24, 1952, the
Valinos, to secure payment of an indebtedness in the amount of P12,000.00, executed a real estate mortgage over the
lot and the house in favor of Isabel Iya, which was duly registered and annotated at the back of the certificate of title.

On the other hand, as Lucia A. Valino, failed to satisfy her obligation to the NARIC, the surety company was compelled to
pay the same pursuant to the undertaking of the bond. In turn, the surety company demanded reimbursement from the
spouses Valino, and as the latter likewise failed to do so, the company foreclosed the chattel mortgage over the house.
As a result thereof, a public sale was conducted by the Provincial Sheriff of Rizal on December 26, 1952, wherein the
property was awarded to the surety company for P8,000.00, the highest bid received therefor. The surety company then
caused the said house to be declared in its name for tax purposes (Tax Declaration No. 25128).

Sometime in July, 1953, the surety company learned of the existence of the real estate mortgage over the lot covered by
T.C.T. No. 26884 together with the improvements thereon; thus, said surety company instituted Civil Case No. 2162 of
the Court of First Instance of Manila naming Adriano and Lucia Valino and Isabel Iya, the mortgagee, as defendants. The
complaint prayed for the exclusion of the residential house from the real estate mortgage in favor of defendant Iya and
the declaration and recognition of plaintiff's right to ownership over the same in virtue of the award given by the
Provincial Sheriff of Rizal during the public auction held on December 26, 1952. Plaintiff likewise asked the Court to
sentence the spouses Valino to pay said surety moral and exemplary damages, attorney's fees and costs. Defendant
Isabel Iya filed her answer to the complaint alleging among other things, that in virtue of the real estate mortgage
executed by her co-defendants, she acquired a real right over the lot and the house constructed thereon; that the
auction sale allegedly conducted by the Provincial Sheriff of Rizal as a result of the foreclosure of the chattel mortgage
on the house was null and void for non-compliance with the form required by law. She, therefore, prayed for the
dismissal of the complaint and anullment of the sale made by the Provincial Sheriff. She also demanded the amount of
P5,000.00 from plaintiff as counterclaim, the sum of P5,000.00 from her co-defendants as crossclaim, for attorney's fees
and costs.

Defendants spouses in their answer admitted some of the averments of the complaint and denied the others. They,
however, prayed for the dismissal of the action for lack of cause of action, it being alleged that plaintiff was already the
owner of the house in question, and as said defendants admitted this fact, the claim of the former was already satisfied.

On October 29, 1953, Isabel Iya filed another civil action against the Valinos and the surety company (Civil Case No. 2504
of the Court of First Instance of Manila) stating that pursuant to the contract of mortgage executed by the spouses
Valino on October 24, 1952, the latter undertook to pay a loan of P12,000.00 with interest at 12% per annum or P120.00
a month, which indebtedness was payable in 4 years, extendible for only one year; that to secure payment thereof, said
defendants mortgaged the house and lot covered by T.C.T. No. 27884 located at No. 67 Baltazar St., Grace Park
Subdivision, Caloocan, Rizal; that the Associated Insurance and Surety Co., Inc., was included as a party defendant
because it claimed to have an interest on the residential house also covered by said mortgage; that it was stipulated in
the aforesaid real estate mortgage that default in the payment of the interest agreed upon would entitle the mortgagee
to foreclose the same even before the lapse of the 4-year period; and as defendant spouses had allegedly failed to pay
the interest for more than 6 months, plaintiff prayed the Court to order said defendants to pay the sum of P12,000.00
with interest thereon at 12% per annum from March 25, 1953, until fully paid; for an additional sum equivalent to 20%
of the total obligation as damages, and for costs. As an alternative in case such demand may not be met and satisfied
plaintiff prayed for a decree of foreclosure of the land, building and other improvements thereon to be sold at public
auction and the proceeds thereof applied to satisfy the demands of plaintiff; that the Valinos, the surety company and
any other person claiming interest on the mortgaged properties be barred and foreclosed of all rights, claims or equity
of redemption in said properties; and for deficiency judgment in case the proceeds of the sale of the mortgaged
property would be insufficient to satisfy the claim of plaintiff.

Defendant surety company, in answer to this complaint insisted on its right over the building, arguing that as the lot on
which the house was constructed did not belong to the spouses at the time the chattel mortgage was executed, the
house might be considered only as a personal property and that the encumbrance thereof and the subsequent
foreclosure proceedings made pursuant to the provisions of the Chattel Mortgage Law were proper and legal. Defendant
therefore prayed that said building be excluded from the real estate mortgage and its right over the same be declared
superior to that of plaintiff, for damages, attorney's fees and costs.

Taking side with the surety company, defendant spouses admitted the due execution of the mortgage upon the land but
assailed the allegation that the building was included thereon, it being contended that it was already encumbered in
favor of the surety company before the real estate mortgage was executed, a fact made known to plaintiff during the
preparation of said contract and to which the latter offered no objection. As a special defense, it was asserted that the
action was premature because the contract was for a period of 4 years, which had not yet elapsed.

The two cases were jointly heard upon agreement of the parties, who submitted the same on a stipulation of facts, after
which the Court rendered judgment dated March 8, 1956, holding that the chattel mortgage in favor of the Associated
Insurance and Surety Co., Inc., was preferred and superior over the real estate mortgage subsequently executed in favor
of Isabel Iya. It was ruled that as the Valinos were not yet the registered owner of the land on which the building in
question was constructed at the time the first encumbrance was made, the building then was still a personality and a
chattel mortgage over the same was proper. However, as the mortgagors were already the owner of the land at the time
the contract with Isabel Iya was entered into, the building was transformed into a real property and the real estate
mortgage created thereon was likewise adjudged as proper. It is to be noted in this connection that there is no evidence
on record to sustain the allegation of the spouses Valino that at the time they mortgaged their house and lot to Isabel
Iya, the latter was told or knew that part of the mortgaged property, i.e., the house, had previously been mortgaged to
the surety company.

The residential building was, therefore, ordered excluded from the foreclosure prayed for by Isabel Iya, although the
latter could exercise the right of a junior encumbrance. So the spouses Valino were ordered to pay the amount
demanded by said mortgagee or in their default to have the parcel of land subject of the mortgage sold at public auction
for the satisfaction of Iya's claim.

There is no question as to appellant's right over the land covered by the real estate mortgage; however, as the building
constructed thereon has been the subject of 2 mortgages; controversy arise as to which of these encumbrances should
receive preference over the other. The decisive factor in resolving the issue presented by this appeal is the
determination of the nature of the structure litigated upon, for where it be considered a personality, the foreclosure of
the chattel mortgage and the subsequent sale thereof at public auction, made in accordance with the Chattel Mortgage
Law would be valid and the right acquired by the surety company therefrom would certainly deserve prior recognition;
otherwise, appellant's claim for preference must be granted. The lower Court, deciding in favor of the surety company,
based its ruling on the premise that as the mortgagors were not the owners of the land on which the building is erected
at the time the first encumbrance was made, said structure partook of the nature of a personal property and could
properly be the subject of a chattel mortgage. We find reason to hold otherwise, for as this Court, defining the nature or
character of a building, has said:

. . . 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
properties (Art. 415, new Civil Code) could only mean one thing — that a building is by itself an immovable property . . .
Moreover, and in view of the absence of any specific provision 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. (Lopez vs.
Orosa, G.R. Nos. supra, p. 98).

A building certainly cannot be divested of its character of a realty by the fact that the land on which it is constructed
belongs to another. To hold it the other way, the possibility is not remote that it would result in confusion, for to cloak
the building with an uncertain status made dependent on the ownership of the land, would create a situation where a
permanent fixture changes its nature or character as the ownership of the land changes hands. In the case at bar, as
personal properties could only be the subject of a chattel mortgage (Section 1, Act 3952) and as obviously the structure
in question is not one, the execution of the chattel mortgage covering said building is clearly invalid and a nullity. While
it is true that said document was correspondingly registered in the Chattel Mortgage Register of Rizal, this act produced
no effect whatsoever for where the interest conveyed is in the nature of a real property, the registration of the
document in the registry of chattels is merely a futile act. Thus, the registration of the chattel mortgage of a building of
strong materials produce no effect as far as the building is concerned (Leung Yee vs. Strong Machinery Co., 37 Phil., 644).
Nor can we give any consideration to the contention of the surety that it has acquired ownership over the property in
question by reason of the sale conducted by the Provincial Sheriff of Rizal, for as this Court has aptly pronounced:

A mortgage creditor who purchases real properties at an extrajudicial foreclosure sale thereof by virtue of a chattel
mortgage constituted in his favor, which mortgage has been declared null and void with respect to said real properties,
acquires no right thereto by virtue of said sale (De la Riva vs. Ah Keo, 60 Phil., 899).

Wherefore the portion of the decision of the lower Court in these two cases appealed from holding the rights of the
surety company, over the building superior to that of Isabel Iya and excluding the building from the foreclosure prayed
for by the latter is reversed and appellant Isabel Iya's right to foreclose not only the land but also the building erected
thereon is hereby recognized, and the proceeds of the sale thereof at public auction (if the land has not yet been sold),
shall be applied to the unsatisfied judgment in favor of Isabel Iya. This decision however is without prejudice to any right
that the Associated Insurance and Surety Co., Inc., may have against the spouses Adriano and Lucia Valino on account of
the mortgage of said building they executed in favor of said surety company. Without pronouncement as to costs. It is so
ordered.

Paras, C.J., Bengzon, Montemayor, Reyes, A., Bautista Angelo, Labrador, Concepcion, Reyes, J.B.L., and Endencia, JJ.,
concur.

G.R. No. L-30173 September 30, 1971

GAVINO A. TUMALAD and GENEROSA R. TUMALAD, plaintiffs-appellees,

vs.
ALBERTA VICENCIO and EMILIANO SIMEON, defendants-appellants.

Castillo & Suck for plaintiffs-appellees.

Jose Q. Calingo for defendants-appellants.

REYES, J.B.L., J.:

Case certified to this Court by the Court of Appeals (CA-G.R. No. 27824-R) for the reason that only questions of law are
involved.

This case was originally commenced by defendants-appellants in the municipal court of Manila in Civil Case No. 43073,
for ejectment. Having lost therein, defendants-appellants appealed to the court a quo (Civil Case No. 30993) which also
rendered a decision against them, the dispositive portion of which follows:

WHEREFORE, the court hereby renders judgment in favor of the plaintiffs and against the defendants, ordering the latter
to pay jointly and severally the former a monthly rent of P200.00 on the house, subject-matter of this action, from
March 27, 1956, to January 14, 1967, with interest at the legal rate from April 18, 1956, the filing of the complaint, until
fully paid, plus attorney's fees in the sum of P300.00 and to pay the costs.

It appears on the records that on 1 September 1955 defendants-appellants executed a chattel mortgage in favor of
plaintiffs-appellees over their house of strong materials located at No. 550 Int. 3, Quezon Boulevard, Quiapo, Manila,
over Lot Nos. 6-B and 7-B, Block No. 2554, which were being rented from Madrigal & Company, Inc. The mortgage was
registered in the Registry of Deeds of Manila on 2 September 1955. The herein mortgage was executed to guarantee a
loan of P4,800.00 received from plaintiffs-appellees, payable within one year at 12% per annum. The mode of payment
was P150.00 monthly, starting September, 1955, up to July 1956, and the lump sum of P3,150 was payable on or before
August, 1956. It was also agreed that default in the payment of any of the amortizations, would cause the remaining
unpaid balance to becomeimmediately due and Payable and —

the Chattel Mortgage will be enforceable in accordance with the provisions of Special Act No. 3135, and for this purpose,
the Sheriff of the City of Manila or any of his deputies is hereby empowered and authorized to sell all the Mortgagor's
property after the necessary publication in order to settle the financial debts of P4,800.00, plus 12% yearly interest, and
attorney's fees... 2

When defendants-appellants defaulted in paying, the mortgage was extrajudicially foreclosed, and on 27 March 1956,
the house was sold at public auction pursuant to the said contract. As highest bidder, plaintiffs-appellees were issued
the corresponding certificate of sale.3 Thereafter, on 18 April 1956, plaintiffs-appellant commenced Civil Case No. 43073
in the municipal court of Manila, praying, among other things, that the house be vacated and its possession surrendered
to them, and for defendants-appellants to pay rent of P200.00 monthly from 27 March 1956 up to the time the
possession is surrendered.4 On 21 September 1956, the municipal court rendered its decision —

... ordering the defendants to vacate the premises described in the complaint; ordering further to pay monthly the
amount of P200.00 from March 27, 1956, until such (time that) the premises is (sic) completely vacated; plus attorney's
fees of P100.00 and the costs of the suit.5

Defendants-appellants, in their answers in both the municipal court and court a quo impugned the legality of the chattel
mortgage, claiming that they are still the owners of the house; but they waived the right to introduce evidence, oral or
documentary. Instead, they relied on their memoranda in support of their motion to dismiss, predicated mainly on the
grounds that: (a) the municipal court did not have jurisdiction to try and decide the case because (1) the issue involved,
is ownership, and (2) there was no allegation of prior possession; and (b) failure to prove prior demand pursuant to
Section 2, Rule 72, of the Rules of Court.6

During the pendency of the appeal to the Court of First Instance, defendants-appellants failed to deposit the rent for
November, 1956 within the first 10 days of December, 1956 as ordered in the decision of the municipal court. As a
result, the court granted plaintiffs-appellees' motion for execution, and it was actually issued on 24 January 1957.
However, the judgment regarding the surrender of possession to plaintiffs-appellees could not be executed because the
subject house had been already demolished on 14 January 1957 pursuant to the order of the court in a separate civil
case (No. 25816) for ejectment against the present defendants for non-payment of rentals on the land on which the
house was constructed.

The motion of plaintiffs for dismissal of the appeal, execution of the supersedeas bond and withdrawal of deposited
rentals was denied for the reason that the liability therefor was disclaimed and was still being litigated, and under
Section 8, Rule 72, rentals deposited had to be held until final disposition of the appeal.7

On 7 October 1957, the appellate court of First Instance rendered its decision, the dispositive portion of which is quoted
earlier. The said decision was appealed by defendants to the Court of Appeals which, in turn, certified the appeal to this
Court. Plaintiffs-appellees failed to file a brief and this appeal was submitted for decision without it.

Defendants-appellants submitted numerous assignments of error which can be condensed into two questions, namely: .

(a) Whether the municipal court from which the case originated had jurisdiction to adjudicate the same;

(b) Whether the defendants are, under the law, legally bound to pay rentals to the plaintiffs during the period of
one (1) year provided by law for the redemption of the extrajudicially foreclosed house.

We will consider these questions seriatim.

(a) Defendants-appellants mortgagors question the jurisdiction of the municipal court from which the case originated,
and consequently, the appellate jurisdiction of the Court of First Instance a quo, on the theory that the chattel mortgage
is void ab initio; whence it would follow that the extrajudicial foreclosure, and necessarily the consequent auction sale,
are also void. Thus, the ownership of the house still remained with defendants-appellants who are entitled to possession
and not plaintiffs-appellees. Therefore, it is argued by defendants-appellants, the issue of ownership will have to be
adjudicated first in order to determine possession. lt is contended further that ownership being in issue, it is the Court of
First Instance which has jurisdiction and not the municipal court.

Defendants-appellants predicate their theory of nullity of the chattel mortgage on two grounds, which are: (a) that, their
signatures on the chattel mortgage were obtained through fraud, deceit, or trickery; and (b) that the subject matter of
the mortgage is a house of strong materials, and, being an immovable, it can only be the subject of a real estate
mortgage and not a chattel mortgage.

On the charge of fraud, deceit or trickery, the Court of First Instance found defendants-appellants' contentions as not
supported by evidence and accordingly dismissed the charge,8 confirming the earlier finding of the municipal court that
"the defense of ownership as well as the allegations of fraud and deceit ... are mere allegations."9

It has been held in Supia and Batiaco vs. Quintero and Ayala10 that "the answer is a mere statement of the facts which
the party filing it expects to prove, but it is not evidence;11 and further, that when the question to be determined is one
of title, the Court is given the authority to proceed with the hearing of the cause until this fact is clearly established. In
the case of Sy vs. Dalman,12 wherein the defendant was also a successful bidder in an auction sale, it was likewise held
by this Court that in detainer cases the aim of ownership "is a matter of defense and raises an issue of fact which should
be determined from the evidence at the trial." What determines jurisdiction are the allegations or averments in the
complaint and the relief asked for. 13

Moreover, even granting that the charge is true, fraud or deceit does not render a contract void ab initio, and can only
be a ground for rendering the contract voidable or annullable pursuant to Article 1390 of the New Civil Code, by a
proper action in court. 14 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. Hence, defendants-appellants' claim of ownership on the basis of a
voidable contract which has not been voided fails.

It is claimed in the alternative by defendants-appellants that even if there was no fraud, deceit or trickery, the chattel
mortgage was still null and void ab initio because only personal properties can be subject of a chattel mortgage. The rule
about the status of buildings as immovable property is stated in Lopez vs. Orosa, Jr. and Plaza Theatre Inc.,15 cited in
Associated Insurance Surety Co., Inc. vs. Iya, et al. 16 to the effect that —

... it is obvious that the inclusion of the building, separate and distinct from the land, in the enumeration of what may
constitute real properties (art. 415, New Civil Code) could only mean one thing — that a building is by itself an
immovable property irrespective of whether or not said structure and the land on which it is adhered to belong to the
same owner.

Certain deviations, however, have been allowed for various reasons. In the case of Manarang and Manarang vs.
Ofilada,17 this Court stated that "it is undeniable that the parties to a contract may by agreement treat as personal
property that which by nature would be real property", citing Standard Oil Company of New York vs. Jaramillo. 18 In the
latter case, the mortgagor conveyed and transferred to the mortgagee by way of mortgage "the following described
personal property." 19 The "personal property" consisted of leasehold rights and a building. Again, in the case of Luna
vs. Encarnacion,20 the subject of the contract designated as Chattel Mortgage was a house of mixed materials, and this
Court hold therein that it was a valid Chattel mortgage because it was so expressly designated and specifically that the
property given as security "is a house of mixed materials, which by its very nature is considered personal property." In
the later case of Navarro vs. Pineda,21 this Court stated that —

The view that parties to a deed of chattel mortgage may agree to consider a house as personal property for the
purposes of said contract, "is good only insofar as the contracting parties are concerned. It is based, partly, upon the
principle of estoppel" (Evangelista vs. Alto Surety, No. L-11139, 23 April 1958). In a case, a mortgaged house built on a
rented land was held to be a personal property, not only because the deed of mortgage considered it as such, but also
because it did not form part of the land (Evangelists vs. Abad, [CA]; 36 O.G. 2913), for it is now settled that an object
placed on land by one who had only a temporary right to the same, such as the lessee or usufructuary, does not become
immobilized by attachment (Valdez vs. Central Altagracia, 222 U.S. 58, cited in Davao Sawmill Co., Inc. vs. Castillo, et al.,
61 Phil. 709). Hence, if a house belonging to a person stands on a rented land belonging to another person, it may be
mortgaged as a personal property as so stipulated in the document of mortgage. (Evangelista vs. Abad, Supra.) It should
be noted, however that the principle is predicated on statements by the owner declaring his house to be a chattel, a
conduct that may conceivably estop him from subsequently claiming otherwise. (Ladera vs. C.N. Hodges, [CA] 48 O.G.
5374): 22

In the contract now before Us, the house on rented land is not only expressly designated as Chattel Mortgage; it
specifically provides that "the mortgagor ... voluntarily CEDES, SELLS and TRANSFERS by way of Chattel Mortgage23 the
property together with its leasehold rights over the lot on which it is constructed and participation ..." 24 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 defendats-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 personalty. Finally unlike in the Iya cases, Lopez vs. Orosa, Jr. and Plaza Theatre, Inc. 25 and Leung Yee vs. F.
L. Strong Machinery and Williamson, 26 wherein third persons assailed the validity of the chattel mortgage,27 it is the
defendants-appellants 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 personalty.
(b) Turning to the question of possession and rentals of the premises in question. The Court of First Instance noted
in its decision that nearly a year after the foreclosure sale the mortgaged house had been demolished on 14 and 15
January 1957 by virtue of a decision obtained by the lessor of the land on which the house stood. For this reason, the
said court limited itself to sentencing the erstwhile mortgagors to pay plaintiffs a monthly rent of P200.00 from 27
March 1956 (when the chattel mortgage was foreclosed and the house sold) until 14 January 1957 (when it was torn
down by the Sheriff), plus P300.00 attorney's fees.

Appellants mortgagors question this award, claiming that they were entitled to remain in possession without any
obligation to pay rent during the one year redemption period after the foreclosure sale, i.e., until 27 March 1957. On this
issue, We must rule for the appellants.

Chattel mortgages are covered and regulated by the Chattel Mortgage Law, Act No. 1508.28 Section 14 of this Act allows
the mortgagee to have the property mortgaged sold at public auction through a public officer in almost the same
manner as that allowed by Act No. 3135, as amended by Act No. 4118, provided that the requirements of the law
relative to notice and registration are complied with. 29 In the instant case, the parties specifically stipulated that "the
chattel mortgage will be enforceable in accordance with the provisions of Special Act No. 3135 ... ." 30 (Emphasis
supplied).

Section 6 of the Act referred to 31 provides that the debtor-mortgagor (defendants-appellants herein) may, at any time
within one year from and after the date of the auction sale, redeem the property sold at the extra judicial foreclosure
sale. Section 7 of the same Act 32 allows the purchaser of the property to obtain from the court the possession during
the period of redemption: but the same provision expressly requires the filing of a petition with the proper Court of First
Instance and the furnishing of a bond. It is only upon filing of the proper motion and the approval of the corresponding
bond that the order for a writ of possession issues as a matter of course. No discretion is left to the court. 33 In the
absence of such a compliance, as in the instant case, the purchaser can not claim possession during the period of
redemption as a matter of right. In such a case, the governing provision is Section 34, Rule 39, of the Revised Rules of
Court 34 which also applies to properties purchased in extrajudicial foreclosure proceedings.35 Construing the said
section, this Court stated in the aforestated case of Reyes vs. Hamada.

In other words, before the expiration of the 1-year period within which the judgment-debtor or mortgagor may redeem
the property, the purchaser thereof is not entitled, as a matter of right, to possession of the same. Thus, while it is true
that the Rules of Court allow the purchaser to receive the rentals if the purchased property is occupied by tenants, he is,
nevertheless, accountable to the judgment-debtor or mortgagor as the case may be, for the amount so received and the
same will be duly credited against the redemption price when the said debtor or mortgagor effects the redemption.
Differently stated, the rentals receivable from tenants, although they may be collected by the purchaser during the
redemption period, do not belong to the latter but still pertain to the debtor of mortgagor. The rationale for the Rule, it
seems, is to secure for the benefit of the debtor or mortgagor, the payment of the redemption amount and the
consequent return to him of his properties sold at public auction. (Emphasis supplied)

The Hamada case reiterates the previous ruling in Chan vs. Espe.36

Since the defendants-appellants were occupying the house at the time of the auction sale, they are entitled to remain in
possession during the period of redemption or within one year from and after 27 March 1956, the date of the auction
sale, and to collect the rents or profits during the said period.

It will be noted further that in the case at bar the period of redemption had not yet expired when action was instituted
in the court of origin, and that plaintiffs-appellees did not choose to take possession under Section 7, Act No. 3135, as
amended, which is the law selected by the parties to govern the extrajudicial foreclosure of the chattel mortgage.
Neither was there an allegation to that effect. Since plaintiffs-appellees' right to possess was not yet born at the filing of
the complaint, there could be no violation or breach thereof. Wherefore, the original complaint stated no cause of
action and was prematurely filed. For this reason, the same should be ordered dismissed, even if there was no
assignment of error to that effect. The Supreme Court is clothed with ample authority to review palpable errors not
assigned as such if it finds that their consideration is necessary in arriving at a just decision of the cases. 37

It follows that the court below erred in requiring the mortgagors to pay rents for the year following the foreclosure sale,
as well as attorney's fees.

FOR THE FOREGOING REASONS, the decision appealed from is reversed and another one entered, dismissing the
complaint. With costs against plaintiffs-appellees.

Concepcion, C.J., Dizon, Makalintal, Zaldivar, Castro, Fernando, Teehankee, Barredo, Villamor and Makasiar, JJ., concur.

epublic of the Philippines

SUPREME COURT
Manila

EN BANC

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.

Ross, Lawrence and Selph for petitioner.

City Fiscal Revilla and Assistant City Fiscal Rodas for 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, Avanceña, Ostrand, Johns, and Romualdez, JJ., concur.

Republic of the Philippines

SUPREME COURT
Manila

FIRST DIVISION

G.R. No. L-50008 August 31, 1987

PRUDENTIAL BANK, petitioner,

vs.
HONORABLE DOMINGO D. PANIS, Presiding Judge of Branch III, Court of First Instance of Zambales and Olongapo City;
FERNANDO MAGCALE & TEODULA BALUYUT-MAGCALE, respondents.

PARAS, J.:

This is a petition for review on certiorari of the November 13, 1978 Decision * of the then Court of First Instance of
Zambales and Olongapo City in Civil Case No. 2443-0 entitled "Spouses Fernando A. Magcale and Teodula
Baluyut-Magcale vs. Hon. Ramon Y. Pardo and Prudential Bank" declaring that the deeds of real estate mortgage
executed by respondent spouses in favor of petitioner bank are null and void.

The undisputed facts of this case by stipulation of the parties are as follows:

... on November 19, 1971, plaintiffs-spouses Fernando A. Magcale and Teodula Baluyut Magcale secured a loan in the
sum of P70,000.00 from the defendant Prudential Bank. To secure payment of this loan, plaintiffs executed in favor of
defendant on the aforesaid date a deed of Real Estate Mortgage over the following described properties:

l. A 2-STOREY, SEMI-CONCRETE, residential building with warehouse spaces containing a total floor area of 263 sq.
meters, more or less, generally constructed of mixed hard wood and concrete materials, under a roofing of cor. g. i.
sheets; declared and assessed in the name of FERNANDO MAGCALE under Tax Declaration No. 21109, issued by the
Assessor of Olongapo City with an assessed value of P35,290.00. This building is the only improvement of the lot.

2. THE PROPERTY hereby conveyed by way of MORTGAGE includes the right of occupancy on the lot where the
above property is erected, and more particularly described and bounded, as follows:
A first class residential land Identffied as Lot No. 720, (Ts-308, Olongapo Townsite Subdivision) Ardoin Street, East
Bajac-Bajac, Olongapo City, containing an area of 465 sq. m. more or less, declared and assessed in the name of
FERNANDO MAGCALE under Tax Duration No. 19595 issued by the Assessor of Olongapo City with an assessed value of
P1,860.00; bounded on the

NORTH:By No. 6, Ardoin Street

SOUTH: By No. 2, Ardoin Street

EAST: By 37 Canda Street, and

WEST: By Ardoin Street.

All corners of the lot marked by conc. cylindrical monuments of the Bureau of Lands as visible limits. ( Exhibit "A, " also
Exhibit "1" for defendant).

Apart from the stipulations in the printed portion of the aforestated deed of mortgage, there appears a rider typed at
the bottom of the reverse side of the document under the lists of the properties mortgaged which reads, as follows:

AND IT IS FURTHER AGREED that in the event the Sales Patent on the lot applied for by the Mortgagors as herein stated
is released or issued by the Bureau of Lands, the Mortgagors hereby authorize the Register of Deeds to hold the
Registration of same until this Mortgage is cancelled, or to annotate this encumbrance on the Title upon authority from
the Secretary of Agriculture and Natural Resources, which title with annotation, shall be released in favor of the herein
Mortgage.

From the aforequoted stipulation, it is obvious that the mortgagee (defendant Prudential Bank) was at the outset aware
of the fact that the mortgagors (plaintiffs) have already filed a Miscellaneous Sales Application over the lot, possessory
rights over which, were mortgaged to it.

Exhibit "A" (Real Estate Mortgage) was registered under the Provisions of Act 3344 with the Registry of Deeds of
Zambales on November 23, 1971.

On May 2, 1973, plaintiffs secured an additional loan from defendant Prudential Bank in the sum of P20,000.00. To
secure payment of this additional loan, plaintiffs executed in favor of the said defendant another deed of Real Estate
Mortgage over the same properties previously mortgaged in Exhibit "A." (Exhibit "B;" also Exhibit "2" for defendant).
This second deed of Real Estate Mortgage was likewise registered with the Registry of Deeds, this time in Olongapo City,
on May 2,1973.

On April 24, 1973, the Secretary of Agriculture issued Miscellaneous Sales Patent No. 4776 over the parcel of land,
possessory rights over which were mortgaged to defendant Prudential Bank, in favor of plaintiffs. On the basis of the
aforesaid Patent, and upon its transcription in the Registration Book of the Province of Zambales, Original Certificate of
Title No. P-2554 was issued in the name of Plaintiff Fernando Magcale, by the Ex-Oficio Register of Deeds of Zambales,
on May 15, 1972.

For failure of plaintiffs to pay their obligation to defendant Bank after it became due, and upon application of said
defendant, the deeds of Real Estate Mortgage (Exhibits "A" and "B") were extrajudicially foreclosed. Consequent to the
foreclosure was the sale of the properties therein mortgaged to defendant as the highest bidder in a public auction sale
conducted by the defendant City Sheriff on April 12, 1978 (Exhibit "E"). The auction sale aforesaid was held despite
written request from plaintiffs through counsel dated March 29, 1978, for the defendant City Sheriff to desist from going
with the scheduled public auction sale (Exhibit "D")." (Decision, Civil Case No. 2443-0, Rollo, pp. 29-31).
Respondent Court, in a Decision dated November 3, 1978 declared the deeds of Real Estate Mortgage as null and void
(Ibid., p. 35).

On December 14, 1978, petitioner filed a Motion for Reconsideration (Ibid., pp. 41-53), opposed by private respondents
on January 5, 1979 (Ibid., pp. 54-62), and in an Order dated January 10, 1979 (Ibid., p. 63), the Motion for
Reconsideration was denied for lack of merit. Hence, the instant petition (Ibid., pp. 5-28).

The first Division of this Court, in a Resolution dated March 9, 1979, resolved to require the respondents to comment
(Ibid., p. 65), which order was complied with the Resolution dated May 18,1979, (Ibid., p. 100), petitioner filed its Reply
on June 2,1979 (Ibid., pp. 101-112).

Thereafter, in the Resolution dated June 13, 1979, the petition was given due course and the parties were required to
submit simultaneously their respective memoranda. (Ibid., p. 114).

On July 18, 1979, petitioner filed its Memorandum (Ibid., pp. 116-144), while private respondents filed their
Memorandum on August 1, 1979 (Ibid., pp. 146-155).

In a Resolution dated August 10, 1979, this case was considered submitted for decision (Ibid., P. 158).

In its Memorandum, petitioner raised the following issues:

1. WHETHER OR NOT THE DEEDS OF REAL ESTATE MORTGAGE ARE VALID; AND

2. WHETHER OR NOT THE SUPERVENING ISSUANCE IN FAVOR OF PRIVATE RESPONDENTS OF MISCELLANEOUS

SALES PATENT NO. 4776 ON APRIL 24, 1972 UNDER ACT NO. 730 AND THE COVERING ORIGINAL CERTIFICATE OF TITLE
NO. P-2554 ON MAY 15,1972 HAVE THE EFFECT OF INVALIDATING THE DEEDS OF REAL ESTATE MORTGAGE.
(Memorandum for Petitioner, Rollo, p. 122).

This petition is impressed with merit.

The pivotal issue in this case is whether or not a valid real estate mortgage can be constituted on the building erected on
the land belonging to another.

The answer is in the affirmative.

In the enumeration of properties under Article 415 of the Civil Code of the Philippines, this Court ruled that, "it is
obvious that the inclusion of "building" separate and distinct from the land, in said provision of law can only mean that a
building is by itself an immovable property." (Lopez vs. Orosa, Jr., et al., L-10817-18, Feb. 28, 1958; Associated Inc. and
Surety Co., Inc. vs. Iya, et al., L-10837-38, May 30,1958).

Thus, while it is true that a mortgage of land necessarily includes, in the absence of stipulation of the improvements
thereon, buildings, still a building by itself may be mortgaged apart from the land on which it has been built. Such a
mortgage would be still a real estate mortgage for the building would still be considered immovable property even if
dealt with separately and apart from the land (Leung Yee vs. Strong Machinery Co., 37 Phil. 644). In the same manner,
this Court has also established that possessory rights over said properties before title is vested on the grantee, may be
validly transferred or conveyed as in a deed of mortgage (Vda. de Bautista vs. Marcos, 3 SCRA 438 [1961]).

Coming back to the case at bar, the records show, as aforestated that the original mortgage deed on the 2-storey
semi-concrete residential building with warehouse and on the right of occupancy on the lot where the building was
erected, was executed on November 19, 1971 and registered under the provisions of Act 3344 with the Register of
Deeds of Zambales on November 23, 1971. Miscellaneous Sales Patent No. 4776 on the land was issued on April 24,
1972, on the basis of which OCT No. 2554 was issued in the name of private respondent Fernando Magcale on May 15,
1972. It is therefore without question that the original mortgage was executed before the issuance of the final patent
and before the government was divested of its title to the land, an event which takes effect only on the issuance of the
sales patent and its subsequent registration in the Office of the Register of Deeds (Visayan Realty Inc. vs. Meer, 96 Phil.
515; Director of Lands vs. De Leon, 110 Phil. 28; Director of Lands vs. Jurado, L-14702, May 23, 1961; Pena "Law on
Natural Resources", p. 49). Under the foregoing considerations, it is evident that the mortgage executed by private
respondent on his own building which was erected on the land belonging to the government is to all intents and
purposes a valid mortgage.

As to restrictions expressly mentioned on the face of respondents' OCT No. P-2554, it will be noted that Sections 121,
122 and 124 of the Public Land Act, refer to land already acquired under the Public Land Act, or any improvement
thereon and therefore have no application to the assailed mortgage in the case at bar which was executed before such
eventuality. Likewise, Section 2 of Republic Act No. 730, also a restriction appearing on the face of private respondent's
title has likewise no application in the instant case, despite its reference to encumbrance or alienation before the patent
is issued because it refers specifically to encumbrance or alienation on the land itself and does not mention anything
regarding the improvements existing thereon.

But it is a different matter, as regards the second mortgage executed over the same properties on May 2, 1973 for an
additional loan of P20,000.00 which was registered with the Registry of Deeds of Olongapo City on the same date.
Relative thereto, it is evident that such mortgage executed after the issuance of the sales patent and of the Original
Certificate of Title, falls squarely under the prohibitions stated in Sections 121, 122 and 124 of the Public Land Act and
Section 2 of Republic Act 730, and is therefore null and void.

Petitioner points out that private respondents, after physically possessing the title for five years, voluntarily surrendered
the same to the bank in 1977 in order that the mortgaged may be annotated, without requiring the bank to get the prior
approval of the Ministry of Natural Resources beforehand, thereby implicitly authorizing Prudential Bank to cause the
annotation of said mortgage on their title.

However, the Court, in recently ruling on violations of Section 124 which refers to Sections 118, 120, 122 and 123 of
Commonwealth Act 141, has held:

... Nonetheless, we apply our earlier rulings because we believe that as in pari delicto may not be invoked to defeat the
policy of the State neither may the doctrine of estoppel give a validating effect to a void contract. Indeed, it is generally
considered that as between parties to a contract, validity cannot be given to it by estoppel if it is prohibited by law or is
against public policy (19 Am. Jur. 802). It is not within the competence of any citizen to barter away what public policy by
law was to preserve (Gonzalo Puyat & Sons, Inc. vs. De los Amas and Alino supra). ... (Arsenal vs. IAC, 143 SCRA 54
[1986]).

This pronouncement covers only the previous transaction already alluded to and does not pass upon any new contract
between the parties (Ibid), as in the case at bar. It should not preclude new contracts that may be entered into between
petitioner bank and private respondents that are in accordance with the requirements of the law. After all, private
respondents themselves declare that they are not denying the legitimacy of their debts and appear to be open to new
negotiations under the law (Comment; Rollo, pp. 95-96). Any new transaction, however, would be subject to whatever
steps the Government may take for the reversion of the land in its favor.

PREMISES CONSIDERED, the decision of the Court of First Instance of Zambales & Olongapo City is hereby MODIFIED,
declaring that the Deed of Real Estate Mortgage for P70,000.00 is valid but ruling that the Deed of Real Estate Mortgage
for an additional loan of P20,000.00 is null and void, without prejudice to any appropriate action the Government may
take against private respondents.

SO ORDERED.

Teehankee, C.J., Narvasa, Cruz and Gancayco, JJ., concur.

Republic of the Philippines

SUPREME COURT
Manila

EN BANC

G.R. No. L-17870 September 29, 1962

MINDANAO BUS COMPANY, petitioner,

vs.
THE CITY ASSESSOR & TREASURER and the BOARD OF TAX APPEALS of Cagayan de Oro City, respondents.

Binamira, Barria and Irabagon for petitioner.

Vicente E. Sabellina for respondents.

LABRADOR, J.:

This is a petition for the review of the decision of the Court of Tax Appeals in C.T.A. Case No. 710 holding that the
petitioner Mindanao Bus Company is liable to the payment of the realty tax on its maintenance and repair equipment
hereunder referred to.

Respondent City Assessor of Cagayan de Oro City assessed at P4,400 petitioner's above-mentioned equipment.
Petitioner appealed the assessment to the respondent Board of Tax Appeals on the ground that the same are not realty.
The Board of Tax Appeals of the City sustained the city assessor, so petitioner herein filed with the Court of Tax Appeals
a petition for the review of the assessment.

In the Court of Tax Appeals the parties submitted the following stipulation of facts:

Petitioner and respondents, thru their respective counsels agreed to the following stipulation of facts:

1. That petitioner is a public utility solely engaged in transporting passengers and cargoes by motor trucks, over its
authorized lines in the Island of Mindanao, collecting rates approved by the Public Service Commission;

2. That petitioner has its main office and shop at Cagayan de Oro City. It maintains Branch Offices and/or stations at
Iligan City, Lanao; Pagadian, Zamboanga del Sur; Davao City and Kibawe, Bukidnon Province;

3. That the machineries sought to be assessed by the respondent as real properties are the following:

(a) Hobart Electric Welder Machine, appearing in the attached photograph, marked Annex "A";

(b) Storm Boring Machine, appearing in the attached photograph, marked Annex "B";
(c) Lathe machine with motor, appearing in the attached photograph, marked Annex "C";

(d) Black and Decker Grinder, appearing in the attached photograph, marked Annex "D";

(e) PEMCO Hydraulic Press, appearing in the attached photograph, marked Annex "E";

(f) Battery charger (Tungar charge machine) appearing in the attached photograph, marked Annex "F"; and

(g) D-Engine Waukesha-M-Fuel, appearing in the attached photograph, marked Annex "G".

4. That these machineries are sitting on cement or wooden platforms as may be seen in the attached photographs which
form part of this agreed stipulation of facts;

5. That petitioner is the owner of the land where it maintains and operates a garage for its TPU motor trucks; a repair
shop; blacksmith and carpentry shops, and with these machineries which are placed therein, its TPU trucks are made;
body constructed; and same are repaired in a condition to be serviceable in the TPU land transportation business it
operates;

6. That these machineries have never been or were never used as industrial equipments to produce finished products
for sale, nor to repair machineries, parts and the like offered to the general public indiscriminately for business or
commercial purposes for which petitioner has never engaged in, to date.1awphîl.nèt

The Court of Tax Appeals having sustained the respondent city assessor's ruling, and having denied a motion for
reconsideration, petitioner brought the case to this Court assigning the following errors:

1. The Honorable Court of Tax Appeals erred in upholding respondents' contention that the questioned assessments are
valid; and that said tools, equipments or machineries are immovable taxable real properties.

2. The Tax Court erred in its interpretation of paragraph 5 of Article 415 of the New Civil Code, and holding that pursuant
thereto the movable equipments are taxable realties, by reason of their being intended or destined for use in an
industry.

3. The Court of Tax Appeals erred in denying petitioner's contention that the respondent City Assessor's power to assess
and levy real estate taxes on machineries is further restricted by section 31, paragraph (c) of Republic Act No. 521; and

4. The Tax Court erred in denying petitioner's motion for reconsideration.

Respondents contend that said equipments, tho movable, are immobilized by destination, in accordance with paragraph
5 of Article 415 of the New Civil Code which provides:

Art. 415. — The following are immovable properties:

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. (Emphasis ours.)
Note that the stipulation expressly states that the equipment are placed on wooden or cement platforms. They can be
moved around and about in petitioner's repair shop. In the case of B. H. Berkenkotter vs. Cu Unjieng, 61 Phil. 663, the
Supreme Court said:

Article 344 (Now Art. 415), paragraph (5) of the Civil Code, gives the character of real property to "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 or
industry."

If the installation of the machinery and equipment in question in the central of the Mabalacat Sugar Co., Inc., in lieu of
the other of less capacity existing therein, for its sugar and industry, converted them into real property by reason of their
purpose, it cannot be said that their incorporation therewith was not permanent in character because, as essential and
principle elements of a sugar central, without them the sugar central would be unable to function or carry on the
industrial purpose for which it was established. Inasmuch as the central is permanent in character, the necessary
machinery and equipment installed for carrying on the sugar industry for which it has been established must necessarily
be permanent. (Emphasis ours.)

So that movable equipments to be immobilized in contemplation of the law must first be "essential and principal
elements" of an industry or works without which such industry or works would be "unable to function or carry on the
industrial purpose for which it was established." We may here distinguish, therefore, those movable which become
immobilized by destination because they are essential and principal elements in the industry for those which may not be
so considered immobilized because they are merely incidental, not essential and principal. Thus, cash registers,
typewriters, etc., usually found and used in hotels, restaurants, theaters, etc. are merely incidentals and are not and
should not be considered immobilized by destination, for these businesses can continue or carry on their functions
without these equity comments. Airline companies use forklifts, jeep-wagons, pressure pumps, IBM machines, etc.
which are incidentals, not essentials, and thus retain their movable nature. On the other hand, machineries of breweries
used in the manufacture of liquor and soft drinks, though movable in nature, are immobilized because they are essential
to said industries; but the delivery trucks and adding machines which they usually own and use and are found within
their industrial compounds are merely incidental and retain their movable nature.

Similarly, the tools and equipments in question in this instant case are, by their nature, not essential and principle
municipal elements of petitioner's business of transporting passengers and cargoes by motor trucks. They are merely
incidentals — acquired as movables and used only for expediency to facilitate and/or improve its service. Even without
such tools and equipments, its business may be carried on, as petitioner has carried on, without such equipments,
before the war. The transportation business could be carried on without the repair or service shop if its rolling
equipment is repaired or serviced in another shop belonging to another.

The law that governs the determination of the question at issue is 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; (Civil Code of the Phil.)

Aside from the element of essentiality the above-quoted provision also requires that the industry or works be carried on
in a building or on a piece of land. Thus in the case of Berkenkotter vs. Cu Unjieng, supra, the "machinery, liquid
containers, and instruments or implements" are found in a building constructed on the land. A sawmill would also be
installed in a building on land more or less permanently, and the sawing is conducted in the land or building.

But in the case at bar the equipments in question are destined only to repair or service the transportation business,
which is not carried on in a building or permanently on a piece of land, as demanded by the law. Said equipments may
not, therefore, be deemed real property.

Resuming what we have set forth above, we hold that the equipments in question are not absolutely essential to the
petitioner's transportation business, and petitioner's business is not carried on in a building, tenement or on a specified
land, so said equipment may not be considered real estate within the meaning of Article 415 (c) of the Civil Code.

WHEREFORE, the decision subject of the petition for review is hereby set aside and the equipment in question declared
not subject to assessment as real estate for the purposes of the real estate tax. Without costs.

So ordered.

Bengzon, C.J., Padilla, Bautista Angelo, Reyes, J.B.L., Paredes, Dizon and Makalintal, JJ., concur.
Regala, Concepcion and Barrera JJ., took no part.
Republic of the Philippines
SUPREME COURT
Manila

EN BANC

G.R. No. L-26278 August 4, 1927

LEON SIBAL , plaintiff-appellant,

vs.
EMILIANO J. VALDEZ ET AL., defendants.
EMILIANO J. VALDEZ, appellee.

J. E. Blanco for appellant.

Felix B. Bautista and Santos and Benitez for 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.

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;

(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;

(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 ..................................................................... P1.00
2 ..................................................................... 2,000.00
3 ..................................................................... 120.93
4 ..................................................................... 1,000.00
5 ..................................................................... 1.00
6 ..................................................................... 1.00
7 with the house thereon .......................... 150.00
8 .....................................................................
1,000.00
==========
4,273.93
(3) That within one year from the sale of said parcel of land, and on the 24th day of September, 1923, the judgment
debtor, Leon Sibal, paid P2,000 to Macondray & Co., Inc., for the account of the redemption price of said parcels of land,
without specifying the 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).

The record further shows:

(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.º — 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 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 on September
24, 1923, fro the account of the redemption price, as stated above. (Exhibit C and 2).

The foregoing statement of facts shows:

(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.

(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 España, 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 año 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 España 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 caña dulce sembrada por los inquilinos del ejecutado Leon Sibal 1.º 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 caña dulce sembrada por el inquilino del ejecutado Leon Sibal 1.º, 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 Mañu and others; al S. con Alejandro
Dayrit, Isidro Santos and Melecio Mañu; 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 Maño 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:

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 ).

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 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:

P6,757.40 for the sugar cane;

1,220.40 for the sugar cane shoots;
323.00 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.

Republic of the Philippines

SUPREME COURT
Manila

EN BANC

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., defendants-appellees.

Arsenio Suazo and Jose L. Palma Gil and Pablo Lorenzo and Delfin Joven for appellant.
J.W. Ferrier for appellees.

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 Fuzier-Herman 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.