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 mandamusto compel the
respondent to record in the proper register a document
purporting to be a chattel mortgage executed in the City of
Manila by Gervasia de la Rosa, Vda. de Vera, in favor of the
Standard Oil Company of New York.
It appears from the petition that on November 27, 1922,
Gervasia de la Rosa, Vda. de Vera, was the lessee of a parcel
of land situated in the City of Manila and owner of the house of
strong materials built thereon, upon which date she executed a
document in the form of a chattel mortgage, purporting to
convey to the petitioner by way of mortgage both the leasehold
interest in said lot and the building which stands thereon.
The clauses in said document describing the property intended
to be thus mortgage are expressed in the following words:
Now, therefore, the mortgagor hereby conveys and transfer
to the mortgage, by way of mortgage, the following
described personal property, situated in the City of Manila,
and now in possession of the mortgagor, to wit:
(1) All of the right, title, and interest of the mortgagor in and
to the contract of lease hereinabove referred to, and in and
to the premises the subject of the said lease;
(2) The building, property of the mortgagor, situated on the
aforesaid leased premises.
After said document had been duly acknowledge and delivered,
the petitioner caused the same to be presented to the
respondent, Joaquin Jaramillo, as register of deeds of the City
of Manila, for the purpose of having the same recorded in the
book of record of chattel mortgages. Upon examination of the
instrument, the respondent was of the opinion that it was not a
chattel mortgage, for the reason that the interest therein
mortgaged did not appear to be personal property, within the
meaning of the Chattel Mortgage Law, and registration was
refused on this ground only.
We are of the opinion that the position taken by the respondent
is untenable; and it is his duty to accept the proper fee and
place the instrument on record. The duties of a register of
deeds in respect to the registration of chattel mortgage are of a
purely ministerial character; and no provision of law can be
cited which confers upon him any judicial or quasi-judicial power
to determine the nature of any document of which registration is
sought as a chattel mortgage.
The original provisions touching this matter are contained in
section 15 of the Chattel Mortgage Law (Act No. 1508), as
amended by Act No. 2496; but these have been transferred to
section 198 of the Administrative Code, where they are now
found. There is nothing in any of these provisions conferring
upon the register of deeds any authority whatever in respect to
the "qualification," as the term is used in Spanish law, of chattel
mortgage. His duties in respect to such instruments are
ministerial only. The efficacy of the act of recording a chattel
mortgage consists in the fact that it operates as constructive
notice of the existence of the contract, and the legal effects of
the contract must be discovered in the instrument itself in
relation with the fact of notice. Registration adds nothing to the
instrument, considered as a source of title, and affects nobody's
rights except as a specifies of notice.
Articles 334 and 335 of the Civil Code supply no absolute
criterion for discriminating between real property and personal
property for purpose of the application of the Chattel Mortgage
Law. Those articles state rules which, considered as a general
doctrine, are law in this jurisdiction; but it must not be forgotten
that under given conditions property may have character
different from that imputed to it in said articles. It is undeniable
that the parties to a contract may by agreement treat as
personal property that which by nature would be real property;
and it is a familiar phenomenon to see things classed as real
property for purposes of taxation which on general principle
might be considered personal property. Other situations are
constantly arising, and from time to time are presented to this
court, in which the proper classification of one thing or another
as real or personal property may be said to be doubtful.
The point submitted to us in this case was determined on
September 8, 1914, in an administrative ruling promulgated by
the Honorable James A. Ostrand, now a Justice of this Court,
but acting at that time in the capacity of Judge of the fourth
branch of the Court of First Instance of the Ninth Judicial
District, in the City of Manila; and little of value can be here
added to the observations contained in said ruling. We
accordingly quote therefrom as follows:
It is unnecessary here to determine whether or not the
property described in the document in question is real or
personal; the discussion may be confined to the point as to
whether a register of deeds has authority to deny the
registration of a document purporting to be a chattel
mortgage and executed in the manner and form prescribed
by the Chattel Mortgage Law.
Then, after quoting section 5 of the Chattel Mortgage Law (Act
No. 1508), his Honor continued:
Based principally upon the provisions of section quoted the
Attorney-General of the Philippine Islands, in an opinion
dated August 11, 1909, held that a register of deeds has no
authority to pass upon the capacity of the parties to a
chattel mortgage which is presented to him for record. A
fortiori a register of deeds can have no authority to pass
upon the character of the property sought to be
encumbered by a chattel mortgage. Of course, if the
mortgaged property is real instead of personal the chattel
mortgage would no doubt be held ineffective as against
third parties, but this is a question to be determined by the
courts of justice and not by the register of deeds.
In Leung Yee vs. Frank L. Strong Machinery Co. and
Williamson (37 Phil., 644), this court held that where the interest
conveyed is of the nature of real, property, the placing of the
document on record in the chattel mortgage register is a futile
act; but that decision is not decisive of the question now before
us, which has reference to the function of the register of deeds
in placing the document on record.
In the light of what has been said it becomes unnecessary for
us to pass upon the point whether the interests conveyed in the
instrument now in question are real or personal; and we declare
it to be the duty of the register of deeds to accept the estimate
placed upon the document by the petitioner and to register it,
upon payment of the proper fee.
The demurrer is overruled; and unless within the period of five
days from the date of the notification hereof, the respondent
shall interpose a sufficient answer to the petition, the writ
of mandamus will be issued, as prayed, but without costs. So
ordered.
Araullo, C.J., Malcolm, Avancea, Ostrand, Johns, and
Romualdez, JJ., concur.










G.R. No. L-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.












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



G.R. No. 32030
SOFIA LAVARRO, ET AL., plaintiffs-appellants,
vs.
REGINA LABITORIA, ET AL., defendants-appellants.
M. H. de Joya and Enrique Tiangco for plaintiffs-appellants.
Mariano Escueta for defendants-appellants.
OSTRAND, J.:
Anastacio Labitoria, who died over thirty years ago, was the original
owner of a tract of land divided into three parcels and situated in the
barrio of Mangilag, municipality of Candelaria, Province of Tayabas.
He left four children, Francisco, Liberata, Tirso, and Eustacio Labitoria.
Francisco acquired the shares of Tirso and Eustacio together with the
greater part of that of Liberata, and thus became the owner of nearly
all of the land. After his death, his children, Macario and Regina
Labitoria, became the owners of his interest in the land.
Sofia Lavarro is the daughter of Liberata Labitoria, and in or about the
year 1897, her first husband, Crispulo Alcantara, borrowed P330 from
Francisco Labitoria on the condition that Alcantara should plant 3,300
coconut palms on the land to be divided in equal shares between the
parties, the loan to be paid back by turning over to the creditor 330
coconut palms out of the share of Alcantara and Sofia. Under this
agreement, about 1,700 palms were planted by Alcantara, but later
on, further plantings were made by his wife, Sofia Lavarro.
In July, 1916, the land was registered in the names of Macario
Labitoria, Regina Labitoria, Bernardo Labitoria, Vidal Labitoria, Ariston
Lavarro, Sofia Lavarro, and Isidro Lavaris. Nothing seems to have
been said about the improvements on the land and no special
mention of them appears in the certificate of title. Neither were the
respective shares of the persons to whom the land was adjudicated
definitely determined.
On October 31, 1916, Macario, Regina, and Bernardo Labitoria and
Ariston Lavarro brought an action against Sofia Lavarro and her then
husband, Emeterio Pureza, for the partition of the land with its
improvements. The action is civil case No. 351 of the Court of First
Instance of Tayabas. In her answer in that case, Sofia Lavarro set up a
cross-complaint alleging, among other things, that she was a coowner
of the land and was entitled to a large proportion of the coconut
palms thereon. The prayer of the cross-complaint reads as follows:
Wherefore, by this cross-complaint Sofia Lavarro and Emeterio
Pureza, through their undersigned attorney, pray the court to decree
the partition of the three parcels of land described above, with all the
improvements thereon, allotting to Sofia Lavarro and Emeterio Pureza
their rightful portion, and ordering Macario Labitoria to render the
proper accounts, and to deliver to his coheirs their proportionate part
of the fruits and products of said lands, with costs against the cross-
complaint defendants. (Emphasis supplied.)
Upon trial partition was ordered, and Sofia Lavarro was awarded 520
coconut trees and 43,391 square meters of land. She thereupon
appealed to the Supreme Court, and a decision was rendered by that
court on March 24, 1927,
[[
1
]]
in which it was held that Sofia Lavarro
was entitled to 1/28 of the land. In all the respects, the decision of
the Court of First Instances was affirmed. The partition seems to have
been carried out in conformity with the decision of the Supreme
Court, and Sofia was awarded 6 hectares, 88 ares, and 77 centiares of
land, together with 850 coconut palms instead of 520.
The present action was initiated by Sofia Lavarro and her daughters,
Apolonia and Isabel Alcantara, on August 15, 1927, against Regina
Labitoria and Marciano Labitoria, the latter as administrator of the
estate of the deceased Macario Labitoria. In their amended
complaint, the plaintiffs allege that on or about the year 1897, Sofia
Lavarro and her husband, Crispulo Alcantara, planted 2,850 coconut
palms on the land above-mentioned, of which 1,970 trees were
actually alive and bearing fruit; that after the death of Crispulo
Alcantara in the year 1910, Sofia Lavarro, being then a widow,
planted 2,200 coconut palms on the same tract of land, 2,000 palms
being still in existence and the greater part of them bearing fruit; that
from the year 1897, the plaintiffs had been in possession of the
above-mentioned plantings and had collected the fruits, but that the
defendants were now endeavoring to take possession of said coconut
palms; and that each coconut palm was worth P12. The plaintiffs
therefore prayed that unless the defendants paid to the plaintiffs the
sum of P47,640, the value of the 3,970 palms planted, it be ordered
that said plaintiffs be allowed to continue in possession of said
coconut palms in accordance with the law.
In their answer to the complaint, the defendants set up as special
defenses res judicataand prescription.
Upon trial, the court below, basing its decision on the case of Bautista
vs. Jimenez (24 Phil., 111), and article 361 of the Civil Code, ordered
the defendants to pay the plaintiffs the sum of P4,820 for 1,205
coconut palms or to require the plaintiffs to purchase the land, the
plaintiffs to retain the coconut palms until the aforesaid sum was
paid. From this judgment both the plaintiffs and defendants
appealed.
It is very obvious that the court below erred in rendering judgment in
favor of the plaintiffs. This is an action for compensation for
improvements alleged to have been made by the plaintiffs on the
land awarded to the defendants and is brought notwithstanding the
fact that the question of improvements was put in issue in case No.
351 and that the portion of land due Sofia Lavarro, and the
improvements as well, were determined and adjudicated by the
court in that case. Her rights in regard to the improvements are
consequently res judicata.
But it is intimated that, while in the earlier case the issues related to
the ownership of the improvements, the issue here is only a question
of money payment and that therefore the causes of action are
different. Assuming, without conceding, that such is the case, the
result would be the same. The issues in both cases arose from the
same source or transactions and should have been determined in the
same case (sec. 97, Code of Civil Procedure). A judgment upon the
merits bars a subsequent suit upon the same cause, though brought
in a different form of action. (White vs. Martin, 1 Port. [Ala.], 215.)
"The principle is firmly established that a party will not be permitted
to split up a single cause of action and make it the basis for several
suits. If several suits be brought for different parts of such a claim,
the pendency of the first may be pleaded in abatement of the others,
and a recovery of any part of the cause of action will be a bar to an
action brought upon the other part. Not only is it a bar to suit, but the
plaintiff in the former action cannot subsequently avail himself of the
residue by way of offset in an action against him by the opposite
party." (15 R. C. L., 965) In passing, it may be noted that a close
examination of the facts in the case of Bautista vs. Jimenez (24 Phil.,
111), will show that it differs materially from the present case; the
case of Berses vs. Villanueva (25 Phil., 473), is more in point.
As to the other plaintiffs, Apolonia and Isabel Alcantara, it is sufficient
to say that if they had any claim to the property or improvements,
such claims should have been presented in the registration
proceedings in 1916; trees and plants annexed to the land are parts
thereof and unless rights or interests in such trees or plants are
claimed in the registration proceedings by others, they become the
property of the persons to whom the land is adjudicated. By timely
proceedings in equity, matters of that character, if fraudulent, may
sometimes be corrected, but in the present case, the plaintiffs
Apolonia and Isabel Alcantara did not prosecute their alleged rights
until eleven years after the registration of the property, and it is
obvious that whatever rights they may have had are now lost by
prescription.
The judgment of the court below is therefore reversed, and the case
is dismissed with the costs in both instances against the plaintiffs,
jointly and severally. So ordered.
Malcolm, Villamor, Johns, Romualdez, and Villa-Real, JJ., concur.








G.R. 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:
x x x x x x x x x
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 properties
1
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.







G.R. No. L-16218 November 29, 1962
ANTONIA BICERRA, DOMINGO BICERRA, BERNARDO BICERRA,
CAYETANO BICERRA, LINDA BICERRA, PIO BICERRA and EUFRICINA
BICERRA, plaintiffs-appellants,
vs.
TOMASA TENEZA and BENJAMIN BARBOSA, defendants-appellees.
Agripino Brillantes and Alberto B. Bravo for plaintiffs-appellants.
Ernesto Parol for defendants-appellees.
MAKALINTAL, J.:
This case is before us on appeal from the order of the Court of First
Instance of Abra dismissing the complaint filed by appellants, upon
motion of defendants-appellate on the ground that the action was
within the exclude (original) jurisdiction of the Justice of the Peace
Court of Lagangilang, of the same province.
The complaint alleges in substance that appellants were the owners
of the house, worth P200.00, built on and owned by them and
situated in the said municipality Lagangilang; that sometime in
January 1957 appealed forcibly demolished the house, claiming to be
the owners thereof; that the materials of the house, after it was
dismantled, were placed in the custody of the barrio lieutenant of the
place; and that as a result of appellate's refusal to restore the house
or to deliver the material appellants the latter have suffered actual
damages the amount of P200.00, plus moral and consequential
damages in the amount of P600.00. The relief prayed for is that "the
plaintiffs be declared the owners of the house in question and/or the
materials that resulted in (sic) its dismantling; (and) that the
defendants be orders pay the sum of P200.00, plus P600.00 as
damages, the costs."
The issue posed by the parties in this appeal is whether the action
involves title to real property, as appellants contend, and therefore is
cognizable by the Court of First Instance (Sec. 44, par. [b], R.A. 296, as
amended), whether it pertains to the jurisdiction of the Justice of the
Peace Court, as stated in the order appealed from, since there is no
real property litigated, the house having ceased to exist, and the
amount of the demand does exceed P2,000.00 (Sec. 88, id.)
1

The dismissal of the complaint was proper. A house is classified as
immovable property by reason of its adherence to the soil on which it
is built (Art. 415, par. 1, Civil Code). This classification holds true
regardless of the fact that the house may be situated on land
belonging to a different owner. But once the house is demolished, as
in this case, it ceases to exist as such and hence its character as an
immovable likewise ceases. It should be noted that the complaint
here is for recovery of damages. This is the only positive relief prayed
for by appellants. To be sure, they also asked that they be declared
owners of the dismantled house and/or of the materials. However,
such declaration in no wise constitutes the relief itself which if
granted by final judgment could be enforceable by execution, but is
only incidental to the real cause of action to recover damages.
The order appealed from is affirmed. The appeal having been
admitted in forma pauperis, no costs are adjudged.
Bengzon, C.J., Padilla, Bautista Angelo, Labrador, Concepcion, Reyes,
J.B.L., Barrera, Paredes, Dizon and Regala, JJ., concur.





G.R. No. L-11658 February 15, 1918
LEUNG YEE, plaintiff-appellant,
vs.
FRANK L. STRONG MACHINERY COMPANY and J. G.
WILLIAMSON, defendants-appellees.
Booram and Mahoney for appellant.
Williams, Ferrier and SyCip for appellees.
CARSON, J.:
The "Compaia Agricola Filipina" bought a considerable quantity of
rice-cleaning machinery company from the defendant machinery
company, and executed a chattel mortgage thereon to secure
payment of the purchase price. It included in the mortgage deed the
building of strong materials in which the machinery was installed,
without any reference to the land on which it stood. The
indebtedness secured by this instrument not having been paid when
it fell due, the mortgaged property was sold by the sheriff, in
pursuance of the terms of the mortgage instrument, and was bought
in by the machinery company. The mortgage was registered in the
chattel mortgage registry, and the sale of the property to the
machinery company in satisfaction of the mortgage was annotated in
the same registry on December 29, 1913.
A few weeks thereafter, on or about the 14th of January, 1914, the
"Compaia Agricola Filipina" executed a deed of sale of the land upon
which the building stood to the machinery company, but this deed of
sale, although executed in a public document, was not registered.
This deed makes no reference to the building erected on the land and
would appear to have been executed for the purpose of curing any
defects which might be found to exist in the machinery company's
title to the building under the sheriff's certificate of sale. The
machinery company went into possession of the building at or about
the time when this sale took place, that is to say, the month of
December, 1913, and it has continued in possession ever since.
At or about the time when the chattel mortgage was executed in
favor of the machinery company, the mortgagor, the "Compaia
Agricola Filipina" executed another mortgage to the plaintiff upon the
building, separate and apart from the land on which it stood, to
secure payment of the balance of its indebtedness to the plaintiff
under a contract for the construction of the building. Upon the failure
of the mortgagor to pay the amount of the indebtedness secured by
the mortgage, the plaintiff secured judgment for that amount, levied
execution upon the building, bought it in at the sheriff's sale on or
about the 18th of December, 1914, and had the sheriff's certificate of
the sale duly registered in the land registry of the Province of Cavite.
At the time when the execution was levied upon the building, the
defendant machinery company, which was in possession, filed with
the sheriff a sworn statement setting up its claim of title and
demanding the release of the property from the levy. Thereafter,
upon demand of the sheriff, the plaintiff executed an indemnity bond
in favor of the sheriff in the sum of P12,000, in reliance upon which
the sheriff sold the property at public auction to the plaintiff, who
was the highest bidder at the sheriff's sale.
This action was instituted by the plaintiff to recover possession of the
building from the machinery company.
The trial judge, relying upon the terms of article 1473 of the Civil
Code, gave judgment in favor of the machinery company, on the
ground that the company had its title to the building registered prior
to the date of registry of the plaintiff's certificate.
Article 1473 of the Civil Code is as follows:
If the same thing should have been sold to different vendees, the
ownership shall be transfer to the person who may have the first
taken possession thereof in good faith, if it should be personal
property.
Should it be real property, it shall belong to the person acquiring it
who first recorded it in the registry.
Should there be no entry, the property shall belong to the person
who first took possession of it in good faith, and, in the absence
thereof, to the person who presents the oldest title, provided there is
good faith.
The registry her referred to is of course the registry of real property,
and it must be apparent that the annotation or inscription of a deed
of sale of real property in a chattel mortgage registry cannot be given
the legal effect of an inscription in the registry of real property. By its
express terms, the Chattel Mortgage Law contemplates and makes
provision for mortgages of personal property; and the sole purpose
and object of the chattel mortgage registry is to provide for the
registry of "Chattel mortgages," that is to say, mortgages of personal
property executed in the manner and form prescribed in the statute.
The building of strong materials in which the rice-cleaning machinery
was installed by the "Compaia Agricola Filipina" was real property,
and the mere fact that the parties seem to have dealt with it separate
and apart from the land on which it stood in no wise changed its
character as real property. It follows that neither the original registry
in the chattel mortgage of the building and the machinery installed
therein, not the annotation in that registry of the sale of the
mortgaged property, had any effect whatever so far as the building
was concerned.
We conclude that the ruling in favor of the machinery company
cannot be sustained on the ground assigned by the trial judge. We
are of opinion, however, that the judgment must be sustained on the
ground that the agreed statement of facts in the court below
discloses that neither the purchase of the building by the plaintiff nor
his inscription of the sheriff's certificate of sale in his favor was made
in good faith, and that the machinery company must be held to be
the owner of the property under the third paragraph of the above
cited article of the code, it appearing that the company first took
possession of the property; and further, that the building and the
land were sold to the machinery company long prior to the date of
the sheriff's sale to the plaintiff.
It has been suggested that since the provisions of article 1473 of the
Civil Code require "good faith," in express terms, in relation to
"possession" and "title," but contain no express requirement as to
"good faith" in relation to the "inscription" of the property on the
registry, it must be presumed that good faith is not an essential
requisite of registration in order that it may have the effect
contemplated in this article. We cannot agree with this contention. It
could not have been the intention of the legislator to base the
preferential right secured under this article of the code upon an
inscription of title in bad faith. Such an interpretation placed upon
the language of this section would open wide the door to fraud and
collusion. The public records cannot be converted into instruments of
fraud and oppression by one who secures an inscription therein in
bad faith. The force and effect given by law to an inscription in a
public record presupposes the good faith of him who enters such
inscription; and rights created by statute, which are predicated upon
an inscription in a public registry, do not and cannot accrue under an
inscription "in bad faith," to the benefit of the person who thus
makes the inscription.
Construing the second paragraph of this article of the code, the
supreme court of Spain held in its sentencia of the 13th of May, 1908,
that:
This rule is always to be understood on the basis of the good faith
mentioned in the first paragraph; therefore, it having been found
that the second purchasers who record their purchase had
knowledge of the previous sale, the question is to be decided in
accordance with the following paragraph. (Note 2, art. 1473, Civ.
Code, Medina and Maranon [1911] edition.)
Although article 1473, in its second paragraph, provides that the title
of conveyance of ownership of the real property that is first recorded
in the registry shall have preference, this provision must always be
understood on the basis of the good faith mentioned in the first
paragraph; the legislator could not have wished to strike it out and to
sanction bad faith, just to comply with a mere formality which, in
given cases, does not obtain even in real disputes between third
persons. (Note 2, art. 1473, Civ. Code, issued by the publishers of
the La Revista de los Tribunales, 13th edition.)
The agreed statement of facts clearly discloses that the plaintiff,
when he bought the building at the sheriff's sale and inscribed his
title in the land registry, was duly notified that the machinery
company had bought the building from plaintiff's judgment debtor;
that it had gone into possession long prior to the sheriff's sale; and
that it was in possession at the time when the sheriff executed his
levy. The execution of an indemnity bond by the plaintiff in favor of
the sheriff, after the machinery company had filed its sworn claim of
ownership, leaves no room for doubt in this regard. Having bought in
the building at the sheriff's sale with full knowledge that at the time
of the levy and sale the building had already been sold to the
machinery company by the judgment debtor, the plaintiff cannot be
said to have been a purchaser in good faith; and of course, the
subsequent inscription of the sheriff's certificate of title must be held
to have been tainted with the same defect.
Perhaps we should make it clear that in holding that the inscription of
the sheriff's certificate of sale to the plaintiff was not made in good
faith, we should not be understood as questioning, in any way, the
good faith and genuineness of the plaintiff's claim against the
"Compaia Agricola Filipina." The truth is that both the plaintiff and
the defendant company appear to have had just and righteous claims
against their common debtor. No criticism can properly be made of
the exercise of the utmost diligence by the plaintiff in asserting and
exercising his right to recover the amount of his claim from the estate
of the common debtor. We are strongly inclined to believe that in
procuring the levy of execution upon the factory building and in
buying it at the sheriff's sale, he considered that he was doing no
more than he had a right to do under all the circumstances, and it is
highly possible and even probable that he thought at that time that
he would be able to maintain his position in a contest with the
machinery company. There was no collusion on his part with the
common debtor, and no thought of the perpetration of a fraud upon
the rights of another, in the ordinary sense of the word. He may have
hoped, and doubtless he did hope, that the title of the machinery
company would not stand the test of an action in a court of law; and
if later developments had confirmed his unfounded hopes, no one
could question the legality of the propriety of the course he adopted.
But it appearing that he had full knowledge of the machinery
company's claim of ownership when he executed the indemnity bond
and bought in the property at the sheriff's sale, and it appearing
further that the machinery company's claim of ownership was well
founded, he cannot be said to have been an innocent purchaser for
value. He took the risk and must stand by the consequences; and it is
in this sense that we find that he was not a purchaser in good faith.
One who purchases real estate with knowledge of a defect or lack of
title in his vendor cannot claim that he has acquired title thereto in
good faith as against the true owner of the land or of an interest
therein; and the same rule must be applied to one who has
knowledge of facts which should have put him upon such inquiry and
investigation as might be necessary to acquaint him with the defects
in the title of his vendor. A purchaser cannot close his eyes to facts
which should put a reasonable man upon his guard, and then claim
that he acted in good faith under the belief that there was no defect
in the title of the vendor. His mere refusal to believe that such defect
exists, or his willful closing of his eyes to the possibility of the
existence of a defect in his vendor's title, will not make him an
innocent purchaser for value, if afterwards develops that the title was
in fact defective, and it appears that he had such notice of the defects
as would have led to its discovery had he acted with that measure of
precaution which may reasonably be acquired of a prudent man in a
like situation. Good faith, or lack of it, is in its analysis a question of
intention; but in ascertaining the intention by which one is actuated
on a given occasion, we are necessarily controlled by the evidence as
to the conduct and outward acts by which alone the inward motive
may, with safety, be determined. So it is that "the honesty of
intention," "the honest lawful intent," which constitutes good faith
implies a "freedom from knowledge and circumstances which ought
to put a person on inquiry," and so it is that proof of such knowledge
overcomes the presumption of good faith in which the courts always
indulge in the absence of proof to the contrary. "Good faith, or the
want of it, is not a visible, tangible fact that can be seen or touched,
but rather a state or condition of mind which can only be judged of
by actual or fancied tokens or signs." (Wilder vs. Gilman, 55 Vt., 504,
505; Cf. Cardenas Lumber Co. vs. Shadel, 52 La. Ann., 2094-2098;
Pinkerton Bros. Co. vs. Bromley, 119 Mich., 8, 10, 17.)
We conclude that upon the grounds herein set forth the disposing
part of the decision and judgment entered in the court below should
be affirmed with costs of this instance against the appellant. So
ordered.
Arellano, C.J., Johnson, Araullo, Street and Malcolm, JJ., concur.
Torres, Avancea and Fisher, JJ., took no part.



G.R. No. L-61311 September 2l, 1987
FELICIDAD VILLANUEVA, FERNANDO CAISIP, ANTONIO LIANG,
FELINA MIRANDA, RICARDO PUNO, FLORENCIO LAXA, and RENE
OCAMPO, petitioners,
vs.
HON. MARIANO CASTAEDA, JR., Presiding Judge of the Court of
First Instance of Pampanga, Branch III, VICENTE A. MACALINO,
Officer-in-Charge, Office of the Mayor, San Fernando,
Pampanga,respondents.

CRUZ, J.:
There is in the vicinity of the public market of San Fernando,
Pampanga, along Mercado Street, a strip of land measuring 12 by 77
meters on which stands a conglomeration of vendors stalls together
forming what is commonly known as a talipapa. This is the subject of
the herein petition. The petitioners claim they have a right to remain
in and conduct business in this area by virtue of a previous
authorization granted to them by the municipal government. The
respondents deny this and justify the demolition of their stalls as
illegal constructions on public property. At the petitioners' behest, we
have issued a temporary restraining order to preserve the status
quobetween the parties pending our decision. 1 Now we shall rule on
the merits.
This dispute goes back to November 7, 1961, when the municipal
council of San Fernando adopted Resolution No. 218 authorizing
some 24 members of the Fernandino United Merchants and Traders
Association to construct permanent stags and sell in the above-
mentioned place.
2
The action was protested on November 10, 1961,
in Civil Case No. 2040, where the Court of First Instance of Pampanga,
Branch 2, issued a writ of preliminary injunction that prevented the
defendants from constructing the said stalls until final resolution of
the controversy.
3
On January 18, 1964, while this case was pending,
the municipal council of San Fernando adopted Resolution G.R. No.
29, which declared the subject area as "the parking place and as the
public plaza of the municipality,
4
thereby impliedly revoking
Resolution No. 218, series of 1961. Four years later, on November 2,
1968, Judge Andres C. Aguilar decided the aforesaid case and held
that the land occupied by the petitioners, being public in nature, was
beyond the commerce of man and therefore could not be the subject
of private occupancy.
5
The writ of preliminary injunction was made
permanent.
6

The decision was apparently not enforced, for the petitioners were
not evicted from the place; in fact, according to then they and the
128 other persons were in 1971 assigned specific areas or space
allotments therein for which they paid daily fees to the municipal
government.
7
The problem appears to have festered for some more
years under a presumably uneasy truce among the protagonists,
none of whom made any move, for some reason that does not
appear in the record. Then, on January 12, 1982, the Association of
Concerned Citizens and Consumers of San Fernando filed a petition
for the immediate implementation of Resolution No. 29, to restore
the subject property "to its original and customary use as a public
plaza.
8

Acting thereon after an investigation conducted by the municipal
attorney,
9
respondent Vicente A. Macalino, as officer-in-charge of
the office of the mayor of San Fernando, issued on June 14, 1982, a
resolution requiring the municipal treasurer and the municipal
engineer to demolish the stalls in the subject place beginning July 1,
1982. 10 The reaction of the petitioners was to file a petition for
prohibition with the Court of First Instance of Pampanga, docketed as
Civil Case No. 6470, on June 26, 1982. The respondent judge denied
the petition on July 19, 1982, 11 and the motion for reconsideration
on August 5, 1982, 12 prompting the petitioners to come to this
Court on certiorari to challenge his decision. 13
As required, respondent Macalino filed his comment 14 on the
petition, and the petitioners countered with their reply. 15 In
compliance with our resolution of February 2, 1983, the petitioners
submitted their memorandum 16 and respondent Macalino, for his
part, asked that his comment be considered his memorandum. 17 On
July 28, 1986, the new officer-in-charge of the office of the mayor of
San Fernando, Paterno S. Guevarra, was impleaded in lieu of Virgilio
Sanchez, who had himself earlier replaced the original respondent
Macalino. 18
After considering the issues and the arguments raised by the parties
in their respective pleadings, we rule for the respondents. The
petition must be dismissed.
There is no question that the place occupied by the petitioners and
from which they are sought to be evicted is a public plaza, as found
by the trial court in Civil Case No. 2040. This finding was made after
consideration of the antecedent facts as especially established by the
testimony of former San Fernando Mayor Rodolfo Hizon, who later
became governor of Pampanga, that the National Planning
Commission had reserved the area for a public plaza as early as 1951.
This intention was reiterated in 1964 through the adoption of
Resolution No. 29. 19
It does not appear that the decision in this case was appealed or has
been reversed. In Civil Case G.R. No. 6740, which is the subject of this
petition, the respondent judge saw no reason to disturb the finding in
Civil Case No. 2040 and indeed used it as a basis for his own decision
sustaining the questioned order.
20

The basic contention of the petitioners is that the disputed area is
under lease to them by virtue of contracts they had entered into with
the municipal government, first in 1961 insofar as the original
occupants were concerned, and later with them and the other
petitioners by virtue of the space allocations made in their favor in
1971 for which they saw they are paying daily fees.
21
The municipal
government has denied making such agreements. In any case, they
argue, since the fees were collected daily, the leases, assuming their
validity, could be terminated at will, or any day, as the claimed
rentals indicated that the period of the leases was from day to day.
22

The parties belabor this argument needlessly.
A public plaza is beyond the commerce of man and so cannot be the
subject of lease or any other contractual undertaking. This is
elementary. Indeed, this point was settled as early as in Municipality
of Cavite vs. Rojas,
23
decided in 1915, where the Court declared as
null and void the lease of a public plaza of the said municipality in
favor of a private person.
Justice Torres said in that case:
According to article 344 of the Civil Code: "Property for public use in
provinces and in towns comprises the provincial and town roads, the
squares, streets, fountains, and public waters, the promenades, and
public works of general service supported by said towns or provinces.
The said Plaza Soledad being a promenade for public use, the
municipal council of Cavite could not in 1907 withdraw or exclude
from public use a portion thereof in order to lease it for the sole
benefit of the defendant Hilaria Rojas. In leasing a portion of said
plaza or public place to the defendant for private use the plaintiff
municipality exceeded its authority in the exercise of its powers by
executing a contract over a thing of which it could not dispose, nor is
it empowered so to do.
The Civil Code, article 1271, prescribes that everything which is not
outside the commerce of man may be the object of a contract, and
plazas and streets are outside of this commerce, as was decided by
the supreme court of Spain in its decision of February 12, 1895, which
says: "communal things that cannot be sold because they are by their
very nature outside of commerce are those for public use, such as the
plazas, streets, common lands, rivers, fountains, etc."
Therefore, it must be concluded that the contract, Exhibit C, whereby
the municipality of Cavite leased to Hilaria Rojas a portion of the
Plaza Soledad is null and void and of no force or effect, because it is
contrary to the law and the thing leased cannot be the object of a
was held that the City of contract.
In Muyot vs. de la Fuente,
24
it was held that the City of Manila could
not lease a portion of a public sidewalk on Plaza Sta. Cruz, being
likewise beyond the commerce of man.
Echoing Rojas, the decision said:
Appellants claim that they had obtained permit from the present of
the City of Manila, to connect booths Nos. 1 and 2, along the
premises in question, and for the use of spaces where the booths
were constructed, they had paid and continued paying the
corresponding rentals. Granting this claim to be true, one should not
entertain any doubt that such permit was not legal, because the City
of Manila does not have any power or authority at all to lease a
portion of a public sidewalk. The sidewalk in question, forming part of
the public plaza of Sta. Cruz, could not be a proper subject matter of
the contract, as it was not within the commerce of man (Article 1347,
new Civil Code, and article 1271, old Civil Code). Any contract entered
into by the City of Manila in connection with the sidewalk, is ipso
facto null and ultra vires. (Municipality of Cavite vs. Roxas, et a1, 30
Phil. 603.) The sidewalk in question was intended for and was used by
the public, in going from one place to another. "The streets and
public places of the city shall be kept free and clear for the use of the
public, and the sidewalks and crossings for the pedestrians, and the
same shall only be used or occupied for other purpose as provided by
ordinance or regulation; ..." (Sec. 1119, Revised Ordinances of the
City of Manila.) The booths in question served as fruit stands for their
owners and often, if not always, blocked the fire passage of
pedestrians who had to take the plaza itself which used to be clogged
with vehicular traffic.
Exactly in point is Espiritu vs. Municipal Council of
Pozorrubio,
25
where the Supreme Court declared:
There is absolutely no question that the town plaza cannot be used
for the construction of market stalls, specially of residences, and that
such structures constitute a nuisance subject to abatement according
to law. Town plazas are properties of public dominion, to be devoted
to public use and to be made available to the public in general They
are outside the common of man and cannot be disposed of or even
leased by the municipality to private parties.
Applying this well-settled doctrine, we rule that the petitioners had
no right in the first place to occupy the disputed premises and cannot
insist in remaining there now on the strength of their alleged lease
contracts. They should have realized and accepted this earlier,
considering that even before Civil Case No. 2040 was decided, the
municipalcouncil of San Fernando had already adopted Resolution
No. 29, series of 1964, declaring the area as the parking place and
public plaza of the municipality.
It is the decision in Civil Case No. 2040 and the said resolution of the
municipal council of San Fernando that respondent Macalino was
seeking to enforce when he ordered the demolition of the stags
constructed in the disputed area. As officer-in-charge of the office of
the mayor, he had the duty to clear the area and restore it to its
intended use as a parking place and public plaza of the municipality
of San Fernando, conformably to the aforementioned orders from
the court and the council. It is, therefore, not correct to say that he
had acted without authority or taken the law into his hands in issuing
his order.
Neither can it be said that he acted whimsically in exercising his
authority for it has been established that he directed the demolition
of the stalls only after, upon his instructions, the municipal attorney
had conducted an investigation, to look into the complaint filed by
the Association of Concerned Citizens and Consumers of San
Fernando.
26
There is evidence that the petitioners were notified of
this hearing,
27
which they chose to disregard. Photographs of the
disputed area,
28
which does look congested and ugly, show that the
complaint was valid and that the area really needed to be cleared, as
recommended by the municipal attorney.
The Court observes that even without such investigation and
recommendation, the respondent mayor was justified in ordering the
area cleared on the strength alone of its status as a public plaza as
declared by the judicial and legislative authorities. In calling first for
the investigation (which the petitioner saw fit to boycott), he was just
scrupulously paying deference to the requirements of due process, to
remove an taint of arbitrariness in the action he was caged upon to
take.
Since the occupation of the place in question in 1961 by the original
24 stallholders (whose number later ballooned to almost 200), it has
deteriorated increasingly to the great prejudice of the community in
general. The proliferation of stags therein, most of them makeshift
and of flammable materials, has converted it into a veritable fire trap,
which, added to the fact that it obstructs access to and from the
public market itself, has seriously endangered public safety. The filthy
condition of the talipapa, where fish and other wet items are sold,
has aggravated health and sanitation problems, besides pervading
the place with a foul odor that has spread into the surrounding areas.
The entire place is unsightly, to the dismay and embarrassment of the
inhabitants, who want it converted into a showcase of the town of
which they can all be proud. The vendors in the talipapa have also
spilled into the street and obstruct the flow of traffic, thereby
impairing the convenience of motorists and pedestrians alike. The
regular stallholders in the public market, who pay substantial rentals
to the municipality, are deprived of a sizable volume of business from
prospective customers who are intercepted by the talipapa vendors
before they can reach the market proper. On top of all these, the
people are denied the proper use of the place as a public plaza,
where they may spend their leisure in a relaxed and even beautiful
environment and civic and other communal activities of the town can
be held.
The problems caused by the usurpation of the place by the
petitioners are covered by the police power as delegated to the
municipality under the general welfare clause.
29
This authorizes the
municipal council "to enact such ordinances and make such
regulations, not repugnant to law, as may be necessary to carry into
effect and discharge the powers and duties conferred upon it by law
and such as shall seem necessary and proper to provide for the
health and safety, promote the prosperity, improve the morals,
peace, good order, comfort, and convenience of the municipality and
the inhabitants thereof, and for the protection of property therein."
This authority was validly exercised in this casethrough the adoption
of Resolution No. 29, series of 1964, by the municipal council of San
Fernando.
Even assuming a valid lease of the property in dispute, the resolution
could have effectively terminated the agreement for it is settled that
the police power cannot be surrendered or bargained away through
the medium of a contract.
30
In fact, every contract affecting the
public interest suffers a congenital infirmity in that it contains an
implied reservation of the police power as a postulate of the existing
legal order.
31
This power can be activated at any time to change the
provisions of the contract, or even abrogate it entirely, for the
promotion or protection of the general welfare. Such an act will not
militate against the impairment clause, which is subject to and
limited by the paramount police power.
32

We hold that the respondent judge did not commit grave abuse of
discretion in denying the petition for prohibition. On the contrary, he
acted correctly in sustaining the right and responsibility of the mayor
to evict the petitioners from the disputed area and clear it of an the
structures illegally constructed therein.
The Court feels that it would have been far more amiable if the
petitioners themselves, recognizing their own civic duty, had at the
outset desisted from their original stance and withdrawn in good
grace from the disputed area to permit its peaceful restoration as a
public plaza and parking place for the benefit of the whole
municipality. They owned this little sacrifice to the community in
general which has suffered all these many years because of their
intransigence. Regrettably, they have refused to recognize that in the
truly democratic society, the interests of the few should yield to
those of the greater number in deference to the principles that the
welfare of the people is the supreme law and overriding purpose. We
do not see any altruism here. The traditional ties of sharing are
absent here. What we find, sad to say, is a cynical disdaining of the
spirit of "bayanihan," a selfish rejection of the cordial virtues of
"pakikisama " and "pagbibigayan" which are the hallmarks of our
people.
WHEREFORE, the petition is DISMISSED. The decision dated July 19,
1982, and the order-dated August 5, 1982, are AFFIRMED. The
temporary restraining order dated August 9, 1982, is LIFTED. This
decision is immediately executory. Costs against the petitioners.
SO ORDERED.
Teehankee, C.J., Narvasa and Paras, JJ., concur.



G.R. No. L-18456 November 30, 1963
CONRADO P. NAVARRO, plaintiff-appellee,
vs.
RUFINO G. PINEDA, RAMONA REYES, ET AL., defendants-appellants.
Deogracias Taedo, Jr. for plaintiff-appellee.
Renato A. Santos for defendants-appellants.
PAREDES, J.:
On December 14, 1959, defendants Rufino G. Pineda and his mother
Juana Gonzales (married to Gregorio Pineda), borrowed from plaintiff
Conrado P. Navarro, the sum of P2,500.00, payable 6 months after
said date or on June 14, 1959. To secure the indebtedness, Rufino
executed a document captioned "DEED OF REAL ESTATE and CHATTEL
MORTGAGES", whereby Juana Gonzales, by way of Real Estate
Mortgage hypothecated a parcel of land, belonging to her, registered
with the Register of Deeds of Tarlac, under Transfer Certificate of
Title No. 25776, and Rufino G. Pineda, by way of Chattel Mortgage,
mortgaged his two-story residential house, having a floor area of 912
square meters, erected on a lot belonging to Atty. Vicente Castro,
located at Bo. San Roque, Tarlac, Tarlac; and one motor truck,
registered in his name, under Motor Vehicle Registration Certificate
No. A-171806. Both mortgages were contained in one instrument,
which was registered in both the Office of the Register of Deeds and
the Motor Vehicles Office of Tarlac.
When the mortgage debt became due and payable, the defendants,
after demands made on them, failed to pay. They, however, asked
and were granted extension up to June 30, 1960, within which to pay.
Came June 30, defendants again failed to pay and, for the second
time, asked for another extension, which was given, up to July 30,
1960. In the second extension, defendant Pineda in a document
entitled "Promise", categorically stated that in the remote event he
should fail to make good the obligation on such date (July 30, 1960),
the defendant would no longer ask for further extension and there
would be no need for any formal demand, and plaintiff could proceed
to take whatever action he might desire to enforce his rights, under
the said mortgage contract. In spite of said promise, defendants,
failed and refused to pay the obligation.
On August 10, 1960, plaintiff filed a complaint for foreclosure of the
mortgage and for damages, which consisted of liquidated damages in
the sum of P500.00 and 12% per annum interest on the principal,
effective on the date of maturity, until fully paid.
Defendants, answering the complaint, among others, stated
Defendants admit that the loan is overdue but deny that portion of
paragraph 4 of the First Cause of Action which states that the
defendants unreasonably failed and refuse to pay their obligation to
the plaintiff the truth being the defendants are hard up these days
and pleaded to the plaintiff to grant them more time within which to
pay their obligation and the plaintiff refused;
WHEREFORE, in view of the foregoing it is most respectfully prayed
that this Honorable Court render judgment granting the defendants
until January 31, 1961, within which to pay their obligation to the
plaintiff.
On September 30, 1960, plaintiff presented a Motion for summary
Judgment, claiming that the Answer failed to tender any genuine and
material issue. The motion was set for hearing, but the record is not
clear what ruling the lower court made on the said motion. On
November 11, 1960, however, the parties submitted a Stipulation of
Facts, wherein the defendants admitted the indebtedness, the
authenticity and due execution of the Real Estate and Chattel
Mortgages; that the indebtedness has been due and unpaid since
June 14, 1960; that a liability of 12% per annum as interest was
agreed, upon failure to pay the principal when due and P500.00 as
liquidated damages; that the instrument had been registered in the
Registry of Property and Motor Vehicles Office, both of the province
of Tarlac; that the only issue in the case is whether or not the
residential house, subject of the mortgage therein, can be considered
a Chattel and the propriety of the attorney's fees.
On February 24, 1961, the lower court held
... WHEREFORE, this Court renders decision in this Case:
(a) Dismissing the complaint with regard to defendant Gregorio
Pineda;
(b) Ordering defendants Juana Gonzales and the spouses Rufino
Pineda and Ramon Reyes, to pay jointly and severally and within
ninety (90) days from the receipt of the copy of this decision to the
plaintiff Conrado P. Navarro the principal sum of P2,550.00 with 12%
compounded interest per annum from June 14, 1960, until said
principal sum and interests are fully paid, plus P500.00 as liquidated
damages and the costs of this suit, with the warning that in default of
said payment of the properties mentioned in the deed of real estate
mortgage and chattel mortgage (Annex "A" to the complaint) be sold
to realize said mortgage debt, interests, liquidated damages and
costs, in accordance with the pertinent provisions of Act 3135, as
amended by Act 4118, and Art. 14 of the Chattel Mortgage Law, Act
1508; and
(c) Ordering the defendants Rufino Pineda and Ramona Reyes, to
deliver immediately to the Provincial Sheriff of Tarlac the personal
properties mentioned in said Annex "A", immediately after the lapse
of the ninety (90) days above-mentioned, in default of such payment.
The above judgment was directly appealed to this Court, the
defendants therein assigning only a single error, allegedly committed
by the lower court, to wit
In holding that the deed of real estate and chattel mortgages
appended to the complaint is valid, notwithstanding the fact that the
house of the defendant Rufino G. Pineda was made the subject of the
chattel mortgage, for the reason that it is erected on a land that
belongs to a third person.
Appellants contend that article 415 of the New Civil Code, in
classifying a house as immovable property, makes no distinction
whether the owner of the land is or not the owner of the building;
the fact that the land belongs to another is immaterial, it is enough
that the house adheres to the land; that in case of immovables by
incorporation, such as houses, trees, plants, etc; the Code does not
require that the attachment or incorporation be made by the owner
of the land, the only criterion being the union or incorporation with
the soil. In other words, it is claimed that "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 v. Orosa,
G.R. Nos. L-10817-8, Feb. 28, 1958). (See also the case of Leung Yee v.
Strong Machinery Co., 37 Phil. 644). Appellants argue that since only
movables can be the subject of a chattel mortgage (sec. 1, Act No.
3952) then the mortgage in question which is the basis of the present
action, cannot give rise to an action for foreclosure, because it is
nullity. (Citing Associated Ins. Co., et al. v. Isabel Iya v. Adriano Valino,
et al., L-10838, May 30, 1958.)
The trial court did not predicate its decision declaring the deed of
chattel mortgage valid solely on the ground that the house
mortgaged was erected on the land which belonged to a third
person, but also and principally on the doctrine of estoppel, in that
"the parties have so expressly agreed" in the mortgage to consider
the house as chattel "for its smallness and mixed materials
of sawali and wood". In construing arts. 334 and 335 of the Spanish
Civil Code (corresponding to arts. 415 and 416, N.C.C.), for purposes
of the application of the Chattel Mortgage Law, it was held that
under certain conditions, "a property may have a 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 whichby nature would be real property" (Standard Oil Co. of N.Y.
v. Jaranillo, 44 Phil. 632-633)."There can not be any question that a
building of mixed materials may be the subject of a chattel mortgage,
in which case, it is considered as between the parties as personal
property. ... The matter depends on the circumstances and the
intention of the parties". "Personal property may retain its character
as such where it is so agreed by the parties interested even though
annexed to the realty ...". (42 Am. Jur. 209-210, cited in Manarang, et
al. v. Ofilada, et al., G.R. No. L-8133, May 18, 1956; 52 O.G. No. 8, p.
3954.) The view that parties to a deed of chattel mortgagee 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 principles of estoppel ..."
(Evangelista v. Alto Surety, No. L-11139, Apr. 23, 1958). In a case, a
mortgage 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 (Evangelista v.
Abad [CA];36 O.G. 2913), for it is now well settled that an object
placed on land by one who has only a temporary right to the same,
such as a lessee or usufructuary, does not become immobilized by
attachment (Valdez v. Central Altagracia, 222 U.S. 58, cited in Davao
Sawmill Co., Inc. v. 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 is so stipulated in
the document of mortgage. (Evangelista v. 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,
et al.. v. C. N. Hodges, et al., [CA]; 48 O.G. 5374). The doctrine,
therefore, gathered from these cases is that although in some
instances, a house of mixed materials has been considered as a
chattel between them, has been recognized, it has been a constant
criterion nevertheless that, with respect to third persons, who are
not parties to the contract, and specially in execution proceedings,
the house is considered as an immovable property (Art. 1431, New
Civil Code).
In the case at bar, the house in question was treated as personal or
movable property, by the parties to the contract themselves. In the
deed of chattel mortgage, appellant Rufino G. Pineda conveyed by
way of "Chattel Mortgage" "my personal properties", a residential
house and a truck. The mortgagor himself grouped the house with
the truck, which is, inherently a movable property. The house which
was not even declared for taxation purposes was small and made of
light construction materials: G.I. sheets roofing, sawali and wooden
walls and wooden posts; built on land belonging to another.
The cases cited by appellants are not applicable to the present case.
The Iya cases (L-10837-38, supra), refer to a building or a house of
strong materials, permanently adhered to the land, belonging to the
owner of the house himself. In the case of Lopez v. Orosa, (L-10817-
18), the subject building was a theatre, built of materials worth more
than P62,000, attached permanently to the soil. In these cases and in
the Leung Yee case, supra, third persons assailed the validity of the
deed of chattel mortgages; in the present case, it was one of the
parties to the contract of mortgages who assailed its validity.
CONFORMABLY WITH ALL THE FOREGOING, the decision appealed
from, should be, as it is hereby affirmed, with costs against
appellants.
Bengzon, C.J., Padilla, Bautista Angelo, Labrador, Barrera, Dizon,
Regala, and Makalintal, JJ., concur.