JEAN JAMAILAH TOMUGDAN JD – 2

Property Case Digests

Makati Leasing and Finance Corp. vs Wearever Textile Mills Inc.,

G.R. No. 58469 May 16, 1983

Facts:

Wearever Textile in order to obtain a financial accommodation from Makati Leasing, discounted
andassigned several receivables with the former under a Receivable Purchase Agreement. To
secure thecollection of the receivables assigned, Waerever executed a Chattel Mortgage over
certain rawmaterials inventory as well as a machinery described as an Artos Aero Dryer
Stentering Range.Upon Wearever's default, Makati Leasing filed a petition for extrajudicial
foreclosure of the propertiesmortgage to it. However, the Deputy Sheriff assigned to implement
the foreclosure failed to gain entryinto Wearever's premises and was not able to effect the seizure
of the machinery. Makati Leasingthereafter filed a complaint for judicial foreclosure with the CFI
Rizal.RTC then issued a writ of seizure, the enforcement of which was restrained upon
Wearever's filing of a motion for reconsideration. finally issued on 11 February 1981, an order to
break open the premisesof Wearever to enforce said writ.The sheriff enforcing the seizure order,
repaired to the premises of Wearever and removed the maindrive motor of the subject
machinery.CA set aside the orders of the RTC and ordered the return of the drive motor seized
by the sheriff after ruling that the machinery in suit cannot be the subject of replevin, much less of
a chattelmortgage, because it is a real property pursuant to Article 415 of the new Civil Code. CA
also rejectedthe argument that Wearever is estopped from claiming that the machine is real
property byconstituting a chattel mortgage thereon. A motion for reconsideration was filed by
Makati Leasing, butit was denied. Hence this petition.

Issue:
Whether the machinery in suit is real or personal property?

Ruling:
If a house of strong materials, like what was involved in the above Tumalad case, may be
consideredas personal property for purposes of executing a chattel mortgage thereon as long as
the parties tothe contract so agree and no innocent third party will be prejudiced thereby, there is
absolutely noreason why a machinery, which is movable in its nature and becomes immobilized
only by destinationor purpose, may not be likewise treated as such. This is really because one
who has so agreed isestopped from denying the existence of the chattel mortgage.It must be
pointed out that the characterization of the subject machinery as chattel by the privaterespondent
is indicative of intention and impresses upon the property the character determined by theparties.
As stated in Standard Oil Co. of New York vs. Jaramillo, 44 Phil. 630, it is undeniable that
theparties to a contract may by agreement treat as personal property that which by nature would
be realproperty, as long as no interest of third parties would be prejudiced thereby

PRUDENTIAL BANK vs. HONORABLE DOMINGO D. PANIS

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

Facts:
Spouses Magcale secured a loan from Prudential Bank. As security, respondent’s spouses
executed a real estate mortgage, their residential building as security. Since the respondents was
not able to fulfil their obligation, the security was extrajudiciaily foreclosed and was eventually
sold in a public auction. Hence this case, to assail the validity of the mortgage and to recover the
foreclosed land.

Issue:
Whether or not a real estate mortgage can be instituted on the building of a land belonging to
another

Held:
While it is true that a mortgage of land necessarily includes in the absence
of stipulation of the improvements thereon, buildings, still a building in itself may be
mortgaged by itself apart from the land on which it is built. Such a mortgage would still be
considered as a REM for the building would still be considered as immovable property even if
dealt with separately and apart from the land. The original mortgage on the building and right to
occupancy of the land
was executed before the issuance of the sales patent and before the
government was divested of title to the land. Under the foregoing, it is
evident that the mortgage executed by private respondent on his own building was a valid
mortgage.

SERG'S PRODUCTS, INC., and SERGIO T. GOQUILAY vs. PCI LEASING AND FINANCE,
INC
G.R. No. 137705 August 22, 2000

FACTS:

PANGANIBAN, J.:

PCI Leasing and Finance filed a complaint for sum of money against
Serg's Products, Inc., with an application for a writ of replevin to seize the latter's machineries and
equipments. The application was granted but, to defer the enforcement of the writ, Serg filed a
motion for special protective order. PCI opposed that the properties were
personal while Serg asserted that they were immovables per the enumeration of Article 415 & of
the Civil Code and that the contracts containing the agreement of treating the properties as
immovables were totally sham and farcical. OM appela, it was held tha the properties were
personal per the agreement , and they had only been leased by Serg: and ruled that “the words of
the contract are clear and left no doubt upon the true intention of the parties” and “as an
experienced businessman, Goquilay should have realized the import of the document he signed.”

ISSUE:
Whether or not the alleged machineries were real properties or personal properties

RULING:

The machineries, although immovables, should be treated as personal properties. The machines
were placed by Serg in the factory built on their own land to be used for chocolate-making; hence,
they became “immobilized by destination” for being essential and principal elements to Serg’s
business or industry. However, said machines, which were immobilized due to their deistination,
can be subjects for seizure if it was validly stipulated in a contract that such real properties shall
be considered as personal. When both parties agreed to the stipulation, they are consequently
estopped from claiming otherwise since under the principle of estoppel, a party to a contract is
ordinarily precluded from denying the truth of any material fact found therein. In their Agreement,
Sec. 12.1 provides, “The PROPERTY is, xx xx, personal property notwithstanding that the
PROPERTY, xx xx become, in any manner affixed or attached to or embedded in, or permanently
resting upon, real property or any building thereon, or attached in any manner to what is
permanent.”
Santos Evangelista v. Alto Surety & Insurance Co., Inc.,
G.R. No. L-11139 April 23, 1958

Facts:
In 1949, Santos Evangelista instituted Civil Case No. 8235 of the CFI Manila (Santos Evangelista
vs. Ricardo Rivera) for a sum of money. On the same date, he obtained a writ of attachment,
which was levied upon a house, built by Rivera on a land situated in Manila and leased to him, by
filing copy of said writ and the corresponding notice of attachment with the Office of the Register
of Deeds of Manila. In due course, judgment was rendered in favor of Evangelista, who bought
the house at public auction held in compliance with the writ of execution issued in said case on 8
October 1951. The corresponding definite deed of sale was issued to him on 22 October 1952,
upon expiration of the period of redemption. When Evangelista sought to take possession of the
house, Rivera refused to surrender it, upon the ground that he had leased the property from the
Alto Surety & Insurance Co., Inc. and that the latter is now the true owner of said property. It
appears that on 10 May 1952, a definite deed of sale of the same house had been issued to Alto
Surety, as the highest bidder at an auction sale held, on 29 September 1950, in compliance with
a writ of execution issued in Civil Case 6268 of the same court (Alto Surety & Insurance vs.
Maximo Quiambao, Rosario Guevara and Ricardo Rivera)" in which judgment for the sum of
money, had been rendered in favor of Alto Surety. Hence, on 13 June 1953, Evangelista
instituted an action against Alto Surety and Ricardo Rivera, for the purpose of establishing his title
over said house, and securing possession thereof, apart from recovering damages. After due
trial, the CFI Manila rendered judgment for Evangelista, sentencing Rivera and Alto Surety to
deliver the house in question to Evangelista and to pay him, jointly and severally, P40.00 a month
from October 1952, until said delivery. The decision was however reversed by the Court of
Appeals, which absolved Alto Surety from the complaint on account that although the writ of
attachment in favor of Evangelista had been filed with the Register of Deeds of Manila prior to the
sale in favor of Alto Surety, Evangelista did not acquire thereby a preferential lien, the attachment
having been levied as if the house in question were immovable property.

Issue:
Whether or not a house constructed by the lessee of the land on which it is built, should be dealt
with, for purpose of attachment, as immovable property?

Ruling:
The court ruled that the house is not personal property, much less a debt, credit or other personal
property not capable of manual delivery, but immovable property. As held in Laddera vs. Hodges
(48 OG 5374), "a true building is immovable or real property, whether it is erected by the owner of
the land or by a usufructuary or lessee.” The opinion that the house of Rivera should have been
attached, as "personal property capable of manual delivery, by taking and safely keeping in his
custody", for it declared that "Evangelista could not have validly purchased Ricardo Rivera's
house from the sheriff as the latter was not in possession thereof at the time he sold it at a public
auction” is untenable. Parties to a deed of chattel mortgage may agree to consider a house as
personal property for purposes of said contract. However, this view is good only insofar as the
contracting parties are concerned. It is based, partly, upon the principle of estoppel. Neither this
principle, nor said view, is applicable to strangers to said contract. The rules on execution do not
allow, and should not be interpreted as to allow, the special consideration that parties to a
contract may have desired to impart to real estate as personal property, when they are not
ordinarily so. Sales on execution affect the public and third persons. The regulation governing
sales on execution are for public officials to follow. The form of proceedings prescribed for each
kind of property is suited to its character, not to the character which the parties have given to it or
desire to give it. The regulations were never intended to suit the consideration that parties, may
have privately given to the property levied upon. The court therefore affirms the decision of the
CA with cost against Alto Surety.
PASTOR TOLENTINO vs. BASILIO BALTAZAR, DIRECTOR OF THE BUREAU OF LANDS and ESTATE
OF ANGEL BALTAZAR
G.R. No. L-14597 March 27, 1961

Facts:

On August 14, 1940, Angel Baltazar filed therefore a homestead application which was approved by the Director of
Lands. On April 1, 1941, he mortgaged the present and future improvements on said land to Pastor Tolentino, with
the understanding that failure to pay, Tolentino could elect, either to foreclose the mortgage or to compel the debtor
to execute a deed of absolute sale of said improvements. On August 28, 1946, after the death of Baltazar, Basilio
Baltazar(son) filed and was granted and Original Certificate of Title in his name. On October 20, 1952, petitioner
Tolentino instituted an action for the cancellation of said OCT. The court denied the petition upon the ground that the
instrument executed in favor of Tolentino partake of the nature of a chattel mortgage and it cannot be registered for
failure to describe properly the improvements sought to be encumbered thereby that a homestead cannot become
liable for the satisfaction of a debt contracted within five (5) years from and after the date of issuance of the
corresponding patent.

Issue:

Whether a homestead cannot become liable for the satisfaction of a debt contracted within five (5) years from and
after the date of issuance

Ruling:

A land acquired by homestead patent may neither be encumbered or alienated from the date of the
approval of the corresponding homestead application and for a period of five (5) years after the issuance of the
patent, nor be held liable for any debt contract within such period of time. However, said section 118 explicitly permits
the encumbrance, by mortgage or pledge of the improvements and crops on the land, without limitation in point of
time. Although the parties to a contract may treat certain improvements and crops as chattels, however, if falling
under the provisions of Article 415 of the Civil Code of the Philippines are immovable property.