G.R. No.

L-55729 March 28, 1983

ANTONIO PUNSALAN, JR., petitioner,
vs.
REMEDIOS VDA. DE LACSAMANA and THE HONORABLE JUDGE RODOLFO A. ORTIZ, respondents.
Benjamin S. Benito & Associates for petitioner.
Expedito Yummul for private respondent.
MELENCIO-HERRERA, J.:
The sole issue presented by petitioner for resolution is whether or not respondent Court erred in denying the Motion to Set Case
for Pre-trial with respect to respondent Remedios Vda. de Lacsamana as the case had been dismissed on the ground of
improper venue upon motion of co-respondent Philippine National Bank (PNB).
It appears that petitioner, Antonio Punsalan, Jr., was the former registered owner of a parcel of land consisting of 340 square
meters situated in Bamban, Tarlac. In 1963, petitioner mortgaged said land to respondent PNB (Tarlac Branch) in the amount of
P10,000.00, but for failure to pay said amount, the property was foreclosed on December 16, 1970. Respondent PNB (Tarlac
Branch) was the highest bidder in said foreclosure proceedings. However, the bank secured title thereto only on December 14,
1977.
In the meantime, in 1974, while the properly was still in the alleged possession of petitioner and with the alleged acquiescence
of respondent PNB (Tarlac Branch), and upon securing a permit from the Municipal Mayor, petitioner constructed a warehouse
on said property. Petitioner declared said warehouse for tax purposes for which he was issued Tax Declaration No. 5619.
Petitioner then leased the warehouse to one Hermogenes Sibal for a period of 10 years starting January 1975.
On July 26, 1978, a Deed of Sale was executed between respondent PNB (Tarlac Branch) and respondent Lacsamana over the
property. This contract was amended on July 31, 1978, particularly to include in the sale, the building and improvement thereon.
By virtue of said instruments, respondent - Lacsamana secured title over the property in her name (TCT No. 173744) as well as
separate tax declarations for the land and building. 1
On November 22, 1979, petitioner commenced suit for "Annulment of Deed of Sale with Damages" against herein respondents
PNB and Lacsamana before respondent Court of First Instance of Rizal, Branch XXXI, Quezon City, essentially impugning the
validity of the sale of the building as embodied in the Amended Deed of Sale. In this connection, petitioner alleged:
xxx xxx xxx
22. That defendant, Philippine National Bank, through its Branch Manager ... by virtue of the request of
defendant ... executed a document dated July 31, 1978, entitled Amendment to Deed of Absolute Sale ...
wherein said defendant bank as Vendor sold to defendant Lacsamana the building owned by the plaintiff under
Tax Declaration No. 5619, notwithstanding the fact that said building is not owned by the bank either by virtue
of the public auction sale conducted by the Sheriff and sold to the Philippine National Bank or by virtue of the
Deed of Sale executed by the bank itself in its favor on September 21, 1977 ...;
23. That said defendant bank fraudulently mentioned ... that the sale in its favor should likewise have included
the building, notwithstanding no legal basis for the same and despite full knowledge that the Certificate of Sale
executed by the sheriff in its favor ... only limited the sale to the land, hence, by selling the building which never
became the property of defendant, they have violated the principle against 'pactum commisorium'.
Petitioner prayed that the Deed of Sale of the building in favor of respondent Lacsamana be declared null and void and that
damages in the total sum of P230,000.00, more or less, be awarded to him. 2
In her Answer filed on March 4, 1980,-respondent Lacsamana averred the affirmative defense of lack of cause of action in that
she was a purchaser for value and invoked the principle in Civil Law that the "accessory follows the principal". 3
On March 14, 1980, respondent PNB filed a Motion to Dismiss on the ground that venue was improperly laid considering that the
building was real property under article 415 (1) of the New Civil Code and therefore section 2(a) of Rule 4 should apply. 4
Opposing said Motion to Dismiss, petitioner contended that the action for annulment of deed of sale with damages is in the
nature of a personal action, which seeks to recover not the title nor possession of the property but to compel payment of
damages, which is not an action affecting title to real property.
On April 25, 1980, respondent Court granted respondent PNB's Motion to Dismiss as follows:
Acting upon the 'Motion to Dismiss' of the defendant Philippine National Bank dated March 13, 1980,
considered against the plaintiff's opposition thereto dated April 1, 1980, including the reply therewith of said
defendant, this Court resolves to DISMISS the plaintiff's complaint for improper venue considering that the
plaintiff's complaint which seeks for the declaration as null and void, the amendment to Deed of Absolute Sale

executed by the defendant Philippine National Bank in favor of the defendant Remedios T. Vda. de Lacsamana,
on July 31, 1978, involves a warehouse allegedly owned and constructed by the plaintiff on the land of the
defendant Philippine National Bank situated in the Municipality of Bamban, Province of Tarlac, which
warehouse is an immovable property pursuant to Article 415, No. 1 of the New Civil Code; and, as such the
action of the plaintiff is a real action affecting title to real property which, under Section 2, Rule 4 of the New
Rules of Court, must be tried in the province where the property or any part thereof lies. 5
In his Motion for Reconsideration of the aforestated Order, petitioner reiterated the argument that the action to annul does not
involve ownership or title to property but is limited to the validity of the deed of sale and emphasized that the case should
proceed with or without respondent PNB as respondent Lacsamana had already filed her Answer to the Complaint and no issue
on venue had been raised by the latter.
On September 1, 1980,.respondent Court denied reconsideration for lack of merit.
Petitioner then filed a Motion to Set Case for Pre-trial, in so far as respondent Lacsamana was concerned, as the issues had
already been joined with the filing of respondent Lacsamana's Answer.
In the Order of November 10, 1980 respondent Court denied said Motion to Set Case for Pre-trial as the case was already
dismissed in the previous Orders of April 25, 1980 and September 1, 1980.
Hence, this Petition for Certiorari, to which we gave due course.
We affirm respondent Court's Order denying the setting for pre-trial.
The warehouse claimed to be owned by petitioner is an immovable or real property as provided in article 415(l) of the Civil
Code. 6 Buildings are always immovable under the Code. 7 A building treated separately from the land on which it stood is

immovable property and the mere fact that the parties to a contract seem to have dealt with it separate and apart from the
land on which it stood in no wise changed its character as immovable property. 8
While it is true that petitioner does not directly seek the recovery of title or possession of the property in question, his action for
annulment of sale and his claim for damages are closely intertwined with the issue of ownership of the building which, under the
law, is considered immovable property, the recovery of which is petitioner's primary objective. The prevalent doctrine is that an
action for the annulment or rescission of a sale of real property does not operate to efface the fundamental and prime objective
and nature of the case, which is to recover said real property. It is a real action. 9
Respondent Court, therefore, did not err in dismissing the case on the ground of improper venue (Section 2, Rule 4) 10, which

was timely raised (Section 1, Rule 16) 11.

Petitioner's other contention that the case should proceed in so far as respondent Lacsamana is concerned as she had already
filed an Answer, which did not allege improper venue and, therefore, issues had already been joined, is likewise untenable.
Respondent PNB is an indispensable party as the validity of the Amended Contract of Sale between the former and respondent
Lacsamana is in issue. It would, indeed, be futile to proceed with the case against respondent Lacsamana alone.
WHEREFORE, the petition is hereby denied without prejudice to the refiling of the case by petitioner Antonio Punsalan, Jr. in the
proper forum.
Costs against petitioner.
SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila
FIRST DIVISION
G.R. No. L-50008 August 31, 1987
PRUDENTIAL BANK, petitioner,
vs.
HONORABLE DOMINGO D. PANIS, Presiding Judge of Branch III, Court of First Instance of Zambales and Olongapo
City; FERNANDO MAGCALE & TEODULA BALUYUT-MAGCALE, respondents.

PARAS, J.:
This is a petition for review on certiorari of the November 13, 1978 Decision

* of the then Court of First Instance of Zambales and Olongapo

City in Civil Case No. 2443-0 entitled "Spouses Fernando A. Magcale and Teodula Baluyut-Magcale vs. Hon. Ramon Y. Pardo and Prudential Bank" declaring that
the deeds of real estate mortgage executed by respondent spouses in favor of petitioner bank are null and void.

The undisputed facts of this case by stipulation of the parties are as follows:
... on November 19, 1971, plaintiffs-spouses Fernando A. Magcale and Teodula Baluyut Magcale secured a
loan in the sum of P70,000.00 from the defendant Prudential Bank. To secure payment of this loan, plaintiffs
executed in favor of defendant on the aforesaid date a deed of Real Estate Mortgage over the following
described properties:
l. A 2-STOREY, SEMI-CONCRETE, residential building with warehouse spaces containing a total floor area of
263 sq. meters, more or less, generally constructed of mixed hard wood and concrete materials, under a
roofing of cor. g. i. sheets; declared and assessed in the name of FERNANDO MAGCALE under Tax
Declaration No. 21109, issued by the Assessor of Olongapo City with an assessed value of P35,290.00. This
building is the only improvement of the lot.
2. THE PROPERTY hereby conveyed by way of MORTGAGE includes the right of occupancy on the lot where
the above property is erected, and more particularly described and bounded, as follows:
A first class residential land Identffied as Lot No. 720, (Ts-308, Olongapo Townsite
Subdivision) Ardoin Street, East Bajac-Bajac, Olongapo City, containing an area of 465 sq. m.
more or less, declared and assessed in the name of FERNANDO MAGCALE under Tax
Duration No. 19595 issued by the Assessor of Olongapo City with an assessed value of
P1,860.00; bounded on the
NORTH: By No. 6, Ardoin Street
SOUTH: By No. 2, Ardoin Street
EAST: By 37 Canda Street, and
WEST: By Ardoin Street.
All corners of the lot marked by conc. cylindrical monuments of the Bureau of
Lands as visible limits. ( Exhibit "A, " also Exhibit "1" for defendant).
Apart from the stipulations in the printed portion of the aforestated deed of mortgage, there
appears a rider typed at the bottom of the reverse side of the document under the lists of the
properties mortgaged which reads, as follows:

AND IT IS FURTHER AGREED that in the event the Sales Patent on the lot
applied for by the Mortgagors as herein stated is released or issued by the
Bureau of Lands, the Mortgagors hereby authorize the Register of Deeds to
hold the Registration of same until this Mortgage is cancelled, or to annotate
this encumbrance on the Title upon authority from the Secretary of
Agriculture and Natural Resources, which title with annotation, shall be
released in favor of the herein Mortgage.
From the aforequoted stipulation, it is obvious that the mortgagee (defendant Prudential Bank)
was at the outset aware of the fact that the mortgagors (plaintiffs) have already filed a
Miscellaneous Sales Application over the lot, possessory rights over which, were mortgaged
to it.
Exhibit "A" (Real Estate Mortgage) was registered under the Provisions of Act 3344 with the
Registry of Deeds of Zambales on November 23, 1971.
On May 2, 1973, plaintiffs secured an additional loan from defendant Prudential Bank in the
sum of P20,000.00. To secure payment of this additional loan, plaintiffs executed in favor of
the said defendant another deed of Real Estate Mortgage over the same properties previously
mortgaged in Exhibit "A." (Exhibit "B;" also Exhibit "2" for defendant). This second deed of
Real Estate Mortgage was likewise registered with the Registry of Deeds, this time in
Olongapo City, on May 2,1973.
On April 24, 1973, the Secretary of Agriculture issued Miscellaneous Sales Patent No. 4776 over the parcel of
land, possessory rights over which were mortgaged to defendant Prudential Bank, in favor of plaintiffs. On the
basis of the aforesaid Patent, and upon its transcription in the Registration Book of the Province of Zambales,
Original Certificate of Title No. P-2554 was issued in the name of Plaintiff Fernando Magcale, by the Ex-Oficio
Register of Deeds of Zambales, on May 15, 1972.
For failure of plaintiffs to pay their obligation to defendant Bank after it became due, and upon application of
said defendant, the deeds of Real Estate Mortgage (Exhibits "A" and "B") were extrajudicially foreclosed.
Consequent to the foreclosure was the sale of the properties therein mortgaged to defendant as the highest
bidder in a public auction sale conducted by the defendant City Sheriff on April 12, 1978 (Exhibit "E"). The
auction sale aforesaid was held despite written request from plaintiffs through counsel dated March 29, 1978,
for the defendant City Sheriff to desist from going with the scheduled public auction sale (Exhibit "D")."
(Decision, Civil Case No. 2443-0, Rollo, pp. 29-31).
Respondent Court, in a Decision dated November 3, 1978 declared the deeds of Real Estate Mortgage as null and void (Ibid., p.
35).
On December 14, 1978, petitioner filed a Motion for Reconsideration (Ibid., pp. 41-53), opposed by private respondents on
January 5, 1979 (Ibid., pp. 54-62), and in an Order dated January 10, 1979 (Ibid., p. 63), the Motion for Reconsideration was
denied for lack of merit. Hence, the instant petition (Ibid., pp. 5-28).
The first Division of this Court, in a Resolution dated March 9, 1979, resolved to require the respondents to comment (Ibid., p.
65), which order was complied with the Resolution dated May 18,1979, (Ibid., p. 100), petitioner filed its Reply on June 2,1979
(Ibid., pp. 101-112).
Thereafter, in the Resolution dated June 13, 1979, the petition was given due course and the parties were required to submit
simultaneously their respective memoranda. (Ibid., p. 114).
On July 18, 1979, petitioner filed its Memorandum (Ibid., pp. 116-144), while private respondents filed their Memorandum on
August 1, 1979 (Ibid., pp. 146-155).
In a Resolution dated August 10, 1979, this case was considered submitted for decision (Ibid., P. 158).
In its Memorandum, petitioner raised the following issues:
1. WHETHER OR NOT THE DEEDS OF REAL ESTATE MORTGAGE ARE VALID; AND
2. WHETHER OR NOT THE SUPERVENING ISSUANCE IN FAVOR OF PRIVATE RESPONDENTS OF MISCELLANEOUS
SALES PATENT NO. 4776 ON APRIL 24, 1972 UNDER ACT NO. 730 AND THE COVERING ORIGINAL CERTIFICATE OF
TITLE NO. P-2554 ON MAY 15,1972 HAVE THE EFFECT OF INVALIDATING THE DEEDS OF REAL ESTATE MORTGAGE.
(Memorandum for Petitioner, Rollo, p. 122).
This petition is impressed with merit.
The pivotal issue in this case is whether or not a valid real estate mortgage can be constituted on the building erected on the
land belonging to another.

The answer is in the affirmative.

In the enumeration of properties under Article 415 of the Civil Code of the Philippines, this Court ruled that, "it is obvious that the
inclusion of "building" separate and distinct from the land, in said provision of law can only mean that a building is by itself an
immovable property." (Lopez vs. Orosa, Jr., et al., L-10817-18, Feb. 28, 1958; Associated Inc. and Surety Co., Inc. vs. Iya, et al.,
L-10837-38, May 30,1958).
Thus, while it is true that a mortgage of land necessarily includes, in the absence of stipulation of the improvements thereon,
buildings, still a building by itself may be mortgaged apart from the land on which it has been built. Such a mortgage would be
still a real estate mortgage for the building would still be considered immovable property even if dealt with separately and apart
from the land (Leung Yee vs. Strong Machinery Co., 37 Phil. 644). In the same manner, this Court has also established that
possessory rights over said properties before title is vested on the grantee, may be validly transferred or conveyed as in a deed
of mortgage (Vda. de Bautista vs. Marcos, 3 SCRA 438 [1961]).
Coming back to the case at bar, the records show, as aforestated that the original mortgage deed on the 2-storey semi-concrete
residential building with warehouse and on the right of occupancy on the lot where the building was erected, was executed on
November 19, 1971 and registered under the provisions of Act 3344 with the Register of Deeds of Zambales on November 23,
1971. Miscellaneous Sales Patent No. 4776 on the land was issued on April 24, 1972, on the basis of which OCT No. 2554 was
issued in the name of private respondent Fernando Magcale on May 15, 1972. It is therefore without question that the original
mortgage was executed before the issuance of the final patent and before the government was divested of its title to the land, an
event which takes effect only on the issuance of the sales patent and its subsequent registration in the Office of the Register of
Deeds (Visayan Realty Inc. vs. Meer, 96 Phil. 515; Director of Lands vs. De Leon, 110 Phil. 28; Director of Lands vs. Jurado, L14702, 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.

Republic of the Philippines

SUPREME COURT
Manila
EN BANC
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.

public of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. L-20329

March 16, 1923

THE STANDARD OIL COMPANY OF NEW YORK, petitioner,

vs.
JOAQUIN JARAMILLO, as register of deeds of the City of Manila, respondent.
Ross, Lawrence and Selph for petitioner.
City Fiscal Revilla and Assistant City Fiscal Rodas for respondent.
STREET, J.:
This cause is before us upon demurrer interposed by the respondent, Joaquin Jaramillo, register of deeds of the City of Manila,
to an original petition of the Standard Oil Company of New York, seeking a peremptory 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.

Republic of the Philippines

SUPREME COURT
Manila
EN BANC
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 abovementioned, 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 which by 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.

Republic of the Philippines

SUPREME COURT
Manila
EN BANC
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. O391 owned by the corporation be sold at public auction and the proceeds thereof be applied to said indebtedness; or that the
420 shares of the capital stock of the Plaza Theatre, Inc., assigned by Vicente Orosa, Jr., to said plaintiff be sold at public
auction for the same purpose; and for such other remedies as may be warranted by the circumstances. Plaintiff also caused the
annotation of a notice of lis pendens on said properties with the Register of Deeds.
Defendants Vicente Orosa, Jr. and Plaza Theatre, Inc., filed separate answers, the first denying that the materials were delivered
to him as a promoter and later treasurer of the corporation, because he had purchased and received the same on his personal
account; that the land on which the movie house was constructed was not charged with a lien to secure the payment of the
aforementioned unpaid obligation; and that the 420 shares of stock of the Plaza Theatre, Inc., was not assigned to plaintiff as
collaterals but as direct security for the payment of his indebtedness. As special defense, this defendant contended that as the
420 shares of stock assigned and conveyed by the assignor and accepted by Lopez as direct security for the payment of the
amount of P41,771.35 were personal properties, plaintiff was barred from recovering any deficiency if the proceeds of the sale
thereof at public auction would not be sufficient to cover and satisfy the obligation. It was thus prayed that he be declared
exempted from the payment of any deficiency in case the proceeds from the sale of said personal properties would not be
enough to cover the amount sought to be collected.
Defendant Plaza Theatre, Inc., on the other hand, practically set up the same line of defense by alleging that the building
materials delivered to Orosa were on the latter's personal account; and that there was no understanding that said materials

would be paid jointly and severally by Orosa and the corporation, nor was a lien charged on the properties of the latter to secure
payment of the same obligation. As special defense, defendant corporation averred that while it was true that the materials
purchased by Orosa were sold by the latter to the corporation, such transactions were in good faith and for valuable
consideration thus when plaintiff failed to claim said materials within 30 days from the time of removal thereof from Orosa,
lumber became a different and distinct specie and plaintiff lost whatever rights he might have in the same and consequently had
no recourse against the Plaza Theatre, Inc., that the claim could not have been refectionary credit, for such kind of obligation
referred to an indebtedness incurred in the repair or reconstruction of something already existing and this concept did not
include an entirely new work; and that the Plaza Theatre, Inc., having been incorporated on October 14, 1946, it could not have
contracted any obligation prior to said date. It was, therefore, prayed that the complaint be dismissed; that said defendant be
awarded the sum P 5,000 for damages, and such other relief as may be just and proper in the premises.
The surety company, in the meantime, upon discovery that the land was already registered under the Torrens System and that
there was a notice of lis pendens thereon, filed on August 17, 1948, or within the 1-year period after the issuance of the
certificate of title, a petition for review of the decree of the land registration court dated October 18, 1947, which was made the
basis of OCT No. O-319, in order to annotate the rights and interests of the surety company over said properties (Land
Registration Case No. 17 GLRO Rec. No. 296). Opposition thereto was offered by Enrique Lopez, asserting that the amount
demanded by him constituted a preferred lien over the properties of the obligors; that the surety company was guilty of
negligence when it failed to present an opposition to the application for registration of the property; and that if any violation of the
rights and interest of said surety would ever be made, same must be subject to the lien in his favor.
The two cases were heard jointly and in a decision dated October 30, 1952, the lower Court, after making an exhaustive and
detailed analysis of the respective stands of the parties and the evidence adduced at the trial, held that defendants Vicente
Orosa, Jr., and the Plaza Theatre, Inc., were jointly liable for the unpaid balance of the cost of lumber used in the construction of
the building and the plaintiff thus acquired the materialman's lien over the same. In making the pronouncement that the lien was
merely confined to the building and did not extend to the land on which the construction was made, the trial judge took into
consideration the fact that when plaintiff started the delivery of lumber in May, 1946, the land was not yet owned by the
corporation; that the mortgage in favor of Luzon Surety Company was previously registered under Act No. 3344; that the codal
provision (Art. 1923 of the old Spanish Civil Code) specifying that refection credits are preferred could refer only to buildings
which are also classified as real properties, upon which said refection was made. It was, however, declared that plaintiff's lien on
the building was superior to the right of the surety company. And finding that the Plaza Theatre, Inc., had no objection to the
review of the decree issued in its favor by the land registration court and the inclusion in the title of the encumbrance in favor of
the surety company, the court a quo granted the petition filed by the latter company. Defendants Orosa and the Plaza Theatre,
Inc., were thus required to pay jointly the amount of P41,771.35 with legal interest and costs within 90 days from notice of said
decision; that in case of default, the 420 shares of stock assigned by Orosa to plaintiff be sold at public auction and the proceeds
thereof be applied to the payment of the amount due the plaintiff, plus interest and costs; and that the encumbrance in favor of
the surety company be endorsed at the back of OCT No. O-391, with notation I that with respect to the building, said mortgage
was subject to the materialman's lien in favor of Enrique Lopez.
Plaintiff tried to secure a modification of the decision in so far as it declared that the obligation of therein defendants was joint
instead of solidary, and that the lien did not extend to the land, but same was denied by order the court of December 23, 1952.
The matter was thus appealed to the Court of appeals, which affirmed the lower court's ruling, and then to this Tribunal. In this
instance, plaintiff-appellant raises 2 issues: (1) whether a materialman's lien for the value of the materials used in the
construction of a building attaches to said structure alone and does not extend to the land on which the building is adhered to;
and (2) whether the lower court and the Court of Appeals erred in not providing that the material mans liens is superior to the
mortgage executed in favor surety company not only on the building but also on the land.
It is to be noted in this appeal that Enrique Lopez has not raised any question against the part of the decision sentencing
defendants Orosa and Plaza Theatre, Inc., to pay jointly the sum of P41,771.35, so We will not take up or consider anything on
that point. Appellant, however, contends that the lien created in favor of the furnisher of the materials used for the construction,
repair or refection of a building, is also extended to the land which the construction was made, and in support thereof he relies
on Article 1923 of the Spanish Civil Code, pertinent law on the matter, which reads as follows:
ART. 1923. With respect to determinate real property and real rights of the debtor, the following are preferred:
xxx

xxx

xxx

5. Credits for refection, not entered or recorded, with respect to the estate upon which the refection was made, and only
with respect to other credits different from those mentioned in four preceding paragraphs.
It is argued that in view of the employment of the phrase real estate, or immovable property, and inasmuch as said provision
does not contain any specification delimiting the lien to the building, said article must be construed as to embrace both the land
and the building or structure adhering thereto. We cannot subscribe to this view, for while it is true that generally, real estate
connotes the land and the building constructed thereon, it is obvious that the inclusion of the building, separate and distinct from
the land, in the enumeration of what may constitute real 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.

epublic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. L-26278

August 4, 1927

LEON SIBAL , plaintiff-appellant,

vs.
EMILIANO J. VALDEZ ET AL., defendants.
EMILIANO J. VALDEZ, appellee.
J. E. Blanco for appellant.
Felix B. Bautista and Santos and Benitez for appellee.
JOHNSON, J.:
The action was commenced in the Court of First Instance of the Province of Tarlac on the 14th day of December 1924. The facts
are about as conflicting as it is possible for facts to be, in the trial causes.
As a first cause of action the plaintiff alleged that the defendant Vitaliano Mamawal, deputy sheriff of the Province of Tarlac, by
virtue of a writ of execution issued by the Court of First Instance of Pampanga, attached and sold to the defendant Emiliano J.
Valdez the sugar cane planted by the plaintiff and his tenants on seven parcels of land described in the complaint in the third
paragraph of the first cause of action; that within one year from the date of the attachment and sale the plaintiff offered to
redeem said sugar cane and tendered to the defendant Valdez the amount sufficient to cover the price paid by the latter, the
interest thereon and any assessments or taxes which he may have paid thereon after the purchase, and the interest
corresponding thereto and that Valdez refused to accept the money and to return the sugar cane to the plaintiff.
As a second cause of action, the plaintiff alleged that the defendant Emiliano J. Valdez was attempting to harvest the palay
planted in four of the seven parcels mentioned in the first cause of action; that he had harvested and taken possession of the
palay in one of said seven parcels and in another parcel described in the second cause of action, amounting to 300 cavans; and
that all of said palay belonged to the plaintiff.
Plaintiff prayed that a writ of preliminary injunction be issued against the defendant Emiliano J. Valdez his attorneys and agents,
restraining them (1) from distributing him in the possession of the parcels of land described in the complaint; (2) from taking
possession of, or harvesting the sugar cane in question; and (3) from taking possession, or harvesting the palay in said parcels
of land. Plaintiff also prayed that a judgment be rendered in his favor and against the defendants ordering them to consent to the
redemption of the sugar cane in question, and that the defendant Valdez be condemned to pay to the plaintiff the sum of P1,056
the value of palay harvested by him in the two parcels above-mentioned ,with interest and costs.
On December 27, 1924, the court, after hearing both parties and upon approval of the bond for P6,000 filed by the plaintiff,
issued the writ of preliminary injunction prayed for in the complaint.
The defendant Emiliano J. Valdez, in his amended answer, denied generally and specifically each and every allegation of the
complaint and step up the following defenses:
(a) That the sugar cane in question had the nature of personal property and was not, therefore, subject to redemption;
(b) That he was the owner of parcels 1, 2 and 7 described in the first cause of action of the complaint;
(c) That he was the owner of the palay in parcels 1, 2 and 7; and

(d) That he never attempted to harvest the palay in parcels 4 and 5.

The defendant Emiliano J. Valdez by way of counterclaim, alleged that by reason of the preliminary injunction he was unable to
gather the sugar cane, sugar-cane shoots (puntas de cana dulce) palay in said parcels of land, representing a loss to him of
P8,375.20 and that, in addition thereto, he suffered damages amounting to P3,458.56. He prayed, for a judgment (1) absolving
him from all liability under the complaint; (2) declaring him to be the absolute owner of the sugar cane in question and of the
palay in parcels 1, 2 and 7; and (3) ordering the plaintiff to pay to him the sum of P11,833.76, representing the value of the sugar
cane and palay in question, including damages.
Upon the issues thus presented by the pleadings the cause was brought on for trial. After hearing the evidence, and on April 28,
1926, the Honorable Cayetano Lukban, judge, rendered a judgment against the plaintiff and in favor of the defendants
(1) Holding that the sugar cane in question was personal property and, as such, was not subject to redemption;
(2) Absolving the defendants from all liability under the complaint; and
(3) Condemning the plaintiff and his sureties Cenon de la Cruz, Juan Sangalang and Marcos Sibal to jointly and
severally pay to the defendant Emiliano J. Valdez the sum of P9,439.08 as follows:
(a) P6,757.40, the value of the sugar cane;
(b) 1,435.68, the value of the sugar-cane shoots;
(c) 646.00, the value of palay harvested by plaintiff;
(d) 600.00, the value of 150 cavans of palay which the defendant was not able to raise by reason of the
injunction, at P4 cavan. 9,439.08 From that judgment the plaintiff appealed and in his assignments of error
contends that the lower court erred: (1) In holding that the sugar cane in question was personal property and,
therefore, not subject to redemption;
(2) In holding that parcels 1 and 2 of the complaint belonged to Valdez, as well as parcels 7 and 8, and that the palay
therein was planted by Valdez;
(3) In holding that Valdez, by reason of the preliminary injunction failed to realized P6,757.40 from the sugar cane and
P1,435.68 from sugar-cane shoots (puntas de cana dulce);
(4) In holding that, for failure of plaintiff to gather the sugar cane on time, the defendant was unable to raise palay on the
land, which would have netted him the sum of P600; and.
(5) In condemning the plaintiff and his sureties to pay to the defendant the sum of P9,439.08.
It appears from the record:
(1) That on May 11, 1923, the deputy sheriff of the Province of Tarlac, by virtue of writ of execution in civil case No.
20203 of the Court of First Instance of Manila (Macondray & Co., Inc. vs. Leon Sibal),levied an attachment on eight
parcels of land belonging to said Leon Sibal, situated in the Province of Tarlac, designated in the second of attachment
as parcels 1, 2, 3, 4, 5, 6, 7 and 8 (Exhibit B, Exhibit 2-A).
(2) That on July 30, 1923, Macondray & Co., Inc., bought said eight parcels of land, at the auction held by the sheriff of
the Province of Tarlac, for the sum to P4,273.93, having paid for the said parcels separately as follows (Exhibit C, and
2-A):
(3) That within one year from the sale of said parcel of land, and on the 24th day of September, 1923, the judgment
debtor, Leon Sibal, paid P2,000 to Macondray & Co., Inc., for the account of the redemption price of said parcels of
land, without specifying the particular parcels to which said amount was to applied. The redemption price said eight
parcels was reduced, by virtue of said transaction, to P2,579.97 including interest (Exhibit C and 2).
The record further shows:
(1) That on April 29, 1924, the defendant Vitaliano Mamawal, deputy sheriff of the Province of Tarlac, by virtue of a writ
of execution in civil case No. 1301 of the Province of Pampanga (Emiliano J. Valdez vs. Leon Sibal 1. the same
parties in the present case), attached the personal property of said Leon Sibal located in Tarlac, among which was
included the sugar cane now in question in the seven parcels of land described in the complaint (Exhibit A).
(2) That on May 9 and 10, 1924, said deputy sheriff sold at public auction said personal properties of Leon Sibal,
including the sugar cane in question to Emilio J. Valdez, who paid therefor the sum of P1,550, of which P600 was for
the sugar cane (Exhibit A).
(3) That on April 29,1924, said deputy sheriff, by virtue of said writ of execution, also attached the real property of said
Leon Sibal in Tarlac, including all of his rights, interest and participation therein, which real property consisted of eleven
parcels of land and a house and camarin situated in one of said parcels (Exhibit A).
(4) That on June 25, 1924, eight of said eleven parcels, including the house and the camarin, were bought by Emilio J.
Valdez at the auction held by the sheriff for the sum of P12,200. Said eight parcels were designated in the certificate of
sale as parcels 1, 3, 4, 5, 6, 7, 10 and 11. The house and camarin were situated on parcel 7 (Exhibit A).

(5) That the remaining three parcels, indicated in the certificate of the sheriff as parcels 2, 12, and 13, were released
from the attachment by virtue of claims presented by Agustin Cuyugan and Domiciano Tizon (Exhibit A).
(6) That on the same date, June 25, 1924, Macondray & Co. sold and conveyed to Emilio J. Valdez for P2,579.97 all of
its rights and interest in the eight parcels of land acquired by it at public auction held by the deputy sheriff of Tarlac in
connection with civil case No. 20203 of the Court of First Instance of Manila, as stated above. Said amount represented
the unpaid balance of the redemption price of said eight parcels, after payment by Leon Sibal of P2,000 on September
24, 1923, fro the account of the redemption price, as stated above. (Exhibit C and 2).
The foregoing statement of facts shows:
(1) The Emilio J. Valdez bought the sugar cane in question, located in the seven parcels of land described in the first
cause of action of the complaint at public auction on May 9 and 10, 1924, for P600.
(2) That on July 30, 1923, Macondray & Co. became the owner of eight parcels of land situated in the Province of Tarlac
belonging to Leon Sibal and that on September 24, 1923, Leon Sibal paid to Macondray & Co. P2,000 for the account
of the redemption price of said parcels.
(3) That on June 25, 1924, Emilio J. Valdez acquired from Macondray & Co. all of its rights and interest in the said eight
parcels of land.
(4) That on June 25, 1924, Emilio J. Valdez also acquired all of the rights and interest which Leon Sibal had or might
have had on said eight parcels by virtue of the P2,000 paid by the latter to Macondray.
(5) That Emilio J. Valdez became the absolute owner of said eight parcels of land.
The first question raised by the appeal is, whether the sugar cane in question is personal or real property. It is contended that
sugar cane comes under the classification of real property as "ungathered products" in paragraph 2 of article 334 of the Civil
Code. Said paragraph 2 of article 334 enumerates as real property the following: Trees, plants, and ungathered products, while
they are annexed to the land or form an integral part of any immovable property." That article, however, has received in recent
years an interpretation by the Tribunal Supremo de Espaa, which holds that, under certain conditions, growing crops may be
considered as personal property. (Decision of March 18, 1904, vol. 97, Civil Jurisprudence of Spain.)
Manresa, the eminent commentator of the Spanish Civil Code, in discussing section 334 of the Civil Code, in view of the recent
decisions of the supreme Court of Spain, admits that growing crops are sometimes considered and treated as personal property.
He says:
No creemos, sin embargo, que esto excluya la excepcionque muchos autores hacen tocante a la venta de toda
cosecha o de parte de ella cuando aun no esta cogida (cosa frecuente con la uvay y la naranja), y a la de lenas,
considerando ambas como muebles. El Tribunal Supremo, en sentencia de 18 de marzo de 1904, al entender sobre un
contrato de arrendamiento de un predio rustico, resuelve que su terminacion por desahucio no extingue los derechos
del arrendario, para recolectar o percibir los frutos correspondientes al ao agricola, dentro del que nacieron aquellos
derechos, cuando el arrendor ha percibido a su vez el importe de la renta integra correspondiente, aun cuando lo haya
sido por precepto legal durante el curso del juicio, fundandose para ello, no solo en que de otra suerte se daria al
desahucio un alcance que no tiene, sino en que, y esto es lo interesante a nuestro proposito, la consideracion de
inmuebles que el articulo 334 del Codigo Civil atribuge a los frutos pendientes, no les priva del caracter de productos
pertenecientes, como tales, a quienes a ellos tenga derecho, Ilegado el momento de su recoleccion.
xxx

xxx

xxx

Mas actualmente y por virtud de la nueva edicion de la Ley Hipotecaria, publicada en 16 de diciembre de 1909, con las
reformas introducidas por la de 21 de abril anterior, la hipoteca, salvo pacto expreso que disponga lo contrario, y
cualquiera que sea la naturaleza y forma de la obligacion que garantice, no comprende los frutos cualquiera que sea la
situacion en que se encuentre. (3 Manresa, 5. edicion, pags. 22, 23.)
From the foregoing it appears (1) that, under Spanish authorities, pending fruits and ungathered products may be sold and
transferred as personal property; (2) that the Supreme Court of Spain, in a case of ejectment of a lessee of an agricultural land,
held that the lessee was entitled to gather the products corresponding to the agricultural year, because said fruits did not go with
the land but belonged separately to the lessee; and (3) that under the Spanish Mortgage Law of 1909, as amended, the
mortgage of a piece of land does not include the fruits and products existing thereon, unless the contract expressly provides
otherwise.
An examination of the decisions of the Supreme Court of Louisiana may give us some light on the question which we are
discussing. Article 465 of the Civil Code of Louisiana, which corresponds to paragraph 2 of article 334 of our Civil Code,
provides: "Standing crops and the fruits of trees not gathered, and trees before they are cut down, are likewise immovable, and
are considered as part of the land to which they are attached."
The Supreme Court of Louisiana having occasion to interpret that provision, held that in some cases "standing crops" may be
considered and dealt with as personal property. In the case of Lumber Co. vs. Sheriff and Tax Collector (106 La., 418) the
Supreme Court said: "True, by article 465 of the Civil Code it is provided that 'standing crops and the fruits of trees not gathered
and trees before they are cut down . . . are considered as part of the land to which they are attached, but the immovability
provided for is only one in abstracto and without reference to rights on or to the crop acquired by others than the owners of the
property to which the crop is attached. . . . The existence of a right on the growing crop is a mobilization by anticipation, a
gathering as it were in advance, rendering the crop movable quoad the right acquired therein. Our jurisprudence recognizes the
possible mobilization of the growing crop." (Citizens' Bank vs. Wiltz, 31 La. Ann., 244; Porche vs. Bodin, 28 La., Ann., 761;
Sandel vs. Douglass, 27 La. Ann., 629; Lewis vs. Klotz, 39 La. Ann., 267.)

"It is true," as the Supreme Court of Louisiana said in the case of Porche vs. Bodin (28 La. An., 761) that "article 465 of the
Revised Code says that standing crops are considered as immovable and as part of the land to which they are attached, and
article 466 declares that the fruits of an immovable gathered or produced while it is under seizure are considered as making part
thereof, and incurred to the benefit of the person making the seizure. But the evident meaning of these articles, is where the
crops belong to the owner of the plantation they form part of the immovable, and where it is seized, the fruits gathered or
produced inure to the benefit of the seizing creditor.
A crop raised on leased premises in no sense forms part of the immovable. It belongs to the lessee, and may be sold by
him, whether it be gathered or not, and it may be sold by his judgment creditors. If it necessarily forms part of the leased
premises the result would be that it could not be sold under execution separate and apart from the land. If a lessee
obtain supplies to make his crop, the factor's lien would not attach to the crop as a separate thing belonging to his
debtor, but the land belonging to the lessor would be affected with the recorded privilege. The law cannot be construed
so as to result in such absurd consequences.
In the case of Citizen's Bank vs. Wiltz (31 La. Ann., 244)the court said:
If the crop quoad the pledge thereof under the act of 1874 was an immovable, it would be destructive of the very objects
of the act, it would render the pledge of the crop objects of the act, it would render the pledge of the crop impossible, for
if the crop was an inseparable part of the realty possession of the latter would be necessary to that of the former; but
such is not the case. True, by article 465 C. C. it is provided that "standing crops and the fruits of trees not gathered and
trees before they are cut down are likewise immovable and are considered as part of the land to which they are
attached;" but the immovability provided for is only one in abstracto and without reference to rights on or to the crop
acquired by other than the owners of the property to which the crop was attached. The immovability of a growing crop is
in the order of things temporary, for the crop passes from the state of a growing to that of a gathered one, from an
immovable to a movable. The existence of a right on the growing crop is a mobilization by anticipation, a gathering as it
were in advance, rendering the crop movable quoad the right acquired thereon. The provision of our Code is identical
with the Napoleon Code 520, and we may therefore obtain light by an examination of the jurisprudence of France.
The rule above announced, not only by the Tribunal Supremo de Espaa but by the Supreme Court of Louisiana, is followed in
practically every state of the Union.
From an examination of the reports and codes of the State of California and other states we find that the settle doctrine followed
in said states in connection with the attachment of property and execution of judgment is, that growing crops raised by yearly
labor and cultivation are considered personal property. (6 Corpuz Juris, p. 197; 17 Corpus Juris, p. 379; 23 Corpus Juris, p. 329:
Raventas vs. Green, 57 Cal., 254; Norris vs. Watson, 55 Am. Dec., 161; Whipple vs. Foot, 3 Am. Dec., 442; 1 Benjamin on
Sales, sec. 126; McKenzie vs. Lampley, 31 Ala., 526; Crine vs. Tifts and Co., 65 Ga., 644; Gillitt vs. Truax, 27 Minn., 528;
Preston vs. Ryan, 45 Mich., 174; Freeman on Execution, vol. 1, p. 438; Drake on Attachment, sec. 249; Mechem on Sales, sec.
200 and 763.)
Mr. Mechem says that a valid sale may be made of a thing, which though not yet actually in existence, is reasonably certain to
come into existence as the natural increment or usual incident of something already in existence, and then belonging to the
vendor, and then title will vest in the buyer the moment the thing comes into existence. (Emerson vs. European Railway Co., 67
Me., 387; Cutting vs. Packers Exchange, 21 Am. St. Rep., 63.) Things of this nature are said to have a potential existence. A
man may sell property of which he is potentially and not actually possessed. He may make a valid sale of the wine that a
vineyard is expected to produce; or the gain a field may grow in a given time; or the milk a cow may yield during the coming
year; or the wool that shall thereafter grow upon sheep; or what may be taken at the next cast of a fisherman's net; or fruits to
grow; or young animals not yet in existence; or the good will of a trade and the like. The thing sold, however, must be specific
and identified. They must be also owned at the time by the vendor. (Hull vs. Hull, 48 Conn., 250 [40 Am. Rep., 165].)
It is contended on the part of the appellee that paragraph 2 of article 334 of the Civil Code has been modified by section 450 of
the Code of Civil Procedure as well as by Act No. 1508, the Chattel Mortgage Law. Said section 450 enumerates the property of
a judgment debtor which may be subjected to execution. The pertinent portion of said section reads as follows: "All goods,
chattels, moneys, and other property, both real and personal, * * * shall be liable to execution. Said section 450 and most of the
other sections of the Code of Civil Procedure relating to the execution of judgment were taken from the Code of Civil Procedure
of California. The Supreme Court of California, under section 688 of the Code of Civil Procedure of that state (Pomeroy, p. 424)
has held, without variation, that growing crops were personal property and subject to execution.
Act No. 1508, the Chattel Mortgage Law, fully recognized that growing crops are personal property. Section 2 of said Act
provides: "All personal property shall be subject to mortgage, agreeably to the provisions of this Act, and a mortgage executed in
pursuance thereof shall be termed a chattel mortgage." Section 7 in part provides: "If growing crops be mortgaged the mortgage
may contain an agreement stipulating that the mortgagor binds himself properly to tend, care for and protect the crop while
growing.
It is clear from the foregoing provisions that Act No. 1508 was enacted on the assumption that "growing crops" are personal
property. This consideration tends to support the conclusion hereinbefore stated, that paragraph 2 of article 334 of the Civil Code
has been modified by section 450 of Act No. 190 and by Act No. 1508 in the sense that "ungathered products" as mentioned in
said article of the Civil Code have the nature of personal property. In other words, the phrase "personal property" should be
understood to include "ungathered products."
At common law, and generally in the United States, all annual crops which are raised by yearly manurance and labor,
and essentially owe their annual existence to cultivation by man, . may be levied on as personal property." (23 C. J., p.
329.) On this question Freeman, in his treatise on the Law of Executions, says: "Crops, whether growing or standing in
the field ready to be harvested, are, when produced by annual cultivation, no part of the realty. They are, therefore,
liable to voluntary transfer as chattels. It is equally well settled that they may be seized and sold under execution.
(Freeman on Executions, vol. p. 438.)
We may, therefore, conclude that paragraph 2 of article 334 of the Civil Code has been modified by section 450 of the Code of
Civil Procedure and by Act No. 1508, in the sense that, for the purpose of attachment and execution, and for the purposes of the

Chattel Mortgage Law, "ungathered products" have the nature of personal property. The lower court, therefore, committed no
error in holding that the sugar cane in question was personal property and, as such, was not subject to redemption.
All the other assignments of error made by the appellant, as above stated, relate to questions of fact only. Before entering upon
a discussion of said assignments of error, we deem it opportune to take special notice of the failure of the plaintiff to appear at
the trial during the presentation of evidence by the defendant. His absence from the trial and his failure to cross-examine the
defendant have lent considerable weight to the evidence then presented for the defense.
Coming not to the ownership of parcels 1 and 2 described in the first cause of action of the complaint, the plaintiff made a futile
attempt to show that said two parcels belonged to Agustin Cuyugan and were the identical parcel 2 which was excluded from the
attachment and sale of real property of Sibal to Valdez on June 25, 1924, as stated above. A comparison of the description of
parcel 2 in the certificate of sale by the sheriff (Exhibit A) and the description of parcels 1 and 2 of the complaint will readily show
that they are not the same.
The description of the parcels in the complaint is as follows:
1. La caa dulce sembrada por los inquilinos del ejecutado Leon Sibal 1. en una parcela de terreno de la pertenencia
del citado ejecutado, situada en Libutad, Culubasa, Bamban, Tarlac, de unas dos hectareas poco mas o menos de
superficie.
2. La caa dulce sembrada por el inquilino del ejecutado Leon Sibal 1., Ilamado Alejandro Policarpio, en una parcela
de terreno de la pertenencia del ejecutado, situada en Dalayap, Culubasa, Bamban, Tarlac de unas dos hectareas de
superficie poco mas o menos." The description of parcel 2 given in the certificate of sale (Exhibit A) is as follows:
2a. Terreno palayero situado en Culubasa, Bamban, Tarlac, de 177,090 metros cuadrados de superficie, linda al N. con
Canuto Sibal, Esteban Lazatin and Alejandro Dayrit; al E. con Francisco Dizon, Felipe Mau and others; al S. con
Alejandro Dayrit, Isidro Santos and Melecio Mau; y al O. con Alejandro Dayrit and Paulino Vergara. Tax No. 2854,
vador amillarado P4,200 pesos.
On the other hand the evidence for the defendant purported to show that parcels 1 and 2 of the complaint were included among
the parcels bought by Valdez from Macondray on June 25, 1924, and corresponded to parcel 4 in the deed of sale (Exhibit B
and 2), and were also included among the parcels bought by Valdez at the auction of the real property of Leon Sibal on June 25,
1924, and corresponded to parcel 3 in the certificate of sale made by the sheriff (Exhibit A). The description of parcel 4 (Exhibit
2) and parcel 3 (Exhibit A) is as follows:
Parcels No. 4. Terreno palayero, ubicado en el barrio de Culubasa,Bamban, Tarlac, I. F. de 145,000 metros
cuadrados de superficie, lindante al Norte con Road of the barrio of Culubasa that goes to Concepcion; al Este con
Juan Dizon; al Sur con Lucio Mao y Canuto Sibal y al Oeste con Esteban Lazatin, su valor amillarado asciende a la
suma de P2,990. Tax No. 2856.
As will be noticed, there is hardly any relation between parcels 1 and 2 of the complaint and parcel 4 (Exhibit 2 and B) and
parcel 3 (Exhibit A). But, inasmuch as the plaintiff did not care to appear at the trial when the defendant offered his evidence, we
are inclined to give more weight to the evidence adduced by him that to the evidence adduced by the plaintiff, with respect to the
ownership of parcels 1 and 2 of the compliant. We, therefore, conclude that parcels 1 and 2 of the complaint belong to the
defendant, having acquired the same from Macondray & Co. on June 25, 1924, and from the plaintiff Leon Sibal on the same
date.
It appears, however, that the plaintiff planted the palay in said parcels and harvested therefrom 190 cavans. There being no
evidence of bad faith on his part, he is therefore entitled to one-half of the crop, or 95 cavans. He should therefore be
condemned to pay to the defendant for 95 cavans only, at P3.40 a cavan, or the sum of P323, and not for the total of 190 cavans
as held by the lower court.
As to the ownership of parcel 7 of the complaint, the evidence shows that said parcel corresponds to parcel 1 of the deed of sale
of Macondray & Co, to Valdez (Exhibit B and 2), and to parcel 4 in the certificate of sale to Valdez of real property belonging to
Sibal, executed by the sheriff as above stated (Exhibit A). Valdez is therefore the absolute owner of said parcel, having acquired
the interest of both Macondray and Sibal in said parcel.
With reference to the parcel of land in Pacalcal, Tarlac, described in paragraph 3 of the second cause of action, it appears from
the testimony of the plaintiff himself that said parcel corresponds to parcel 8 of the deed of sale of Macondray to Valdez (Exhibit
B and 2) and to parcel 10 in the deed of sale executed by the sheriff in favor of Valdez (Exhibit A). Valdez is therefore the
absolute owner of said parcel, having acquired the interest of both Macondray and Sibal therein.
In this connection the following facts are worthy of mention:
Execution in favor of Macondray & Co., May 11, 1923. Eight parcels of land were attached under said execution. Said parcels of
land were sold to Macondray & Co. on the 30th day of July, 1923. Rice paid P4,273.93. On September 24, 1923, Leon Sibal
paid to Macondray & Co. P2,000 on the redemption of said parcels of land. (See Exhibits B and C ).
Attachment, April 29, 1924, in favor of Valdez. Personal property of Sibal was attached, including the sugar cane in question.
(Exhibit A) The said personal property so attached, sold at public auction May 9 and 10, 1924. April 29, 1924, the real property
was attached under the execution in favor of Valdez (Exhibit A). June 25, 1924, said real property was sold and purchased by
Valdez (Exhibit A).
June 25, 1924, Macondray & Co. sold all of the land which they had purchased at public auction on the 30th day of July, 1923, to
Valdez.

As to the loss of the defendant in sugar cane by reason of the injunction, the evidence shows that the sugar cane in question
covered an area of 22 hectares and 60 ares (Exhibits 8, 8-b and 8-c); that said area would have yielded an average crop of 1039
picos and 60 cates; that one-half of the quantity, or 519 picos and 80 cates would have corresponded to the defendant, as
owner; that during the season the sugar was selling at P13 a pico (Exhibit 5 and 5-A). Therefore, the defendant, as owner, would
have netted P 6,757.40 from the sugar cane in question. The evidence also shows that the defendant could have taken from the
sugar cane 1,017,000 sugar-cane shoots (puntas de cana) and not 1,170,000 as computed by the lower court. During the
season the shoots were selling at P1.20 a thousand (Exhibits 6 and 7). The defendant therefore would have netted P1,220.40
from sugar-cane shoots and not P1,435.68 as allowed by the lower court.
As to the palay harvested by the plaintiff in parcels 1 and 2 of the complaint, amounting to 190 cavans, one-half of said quantity
should belong to the plaintiff, as stated above, and the other half to the defendant. The court erred in awarding the whole crop to
the defendant. The plaintiff should therefore pay the defendant for 95 cavans only, at P3.40 a cavan, or P323 instead of P646 as
allowed by the lower court.
The evidence also shows that the defendant was prevented by the acts of the plaintiff from cultivating about 10 hectares of the
land involved in the litigation. He expected to have raised about 600 cavans of palay, 300 cavans of which would have
corresponded to him as owner. The lower court has wisely reduced his share to 150 cavans only. At P4 a cavan, the palay would
have netted him P600.
In view of the foregoing, the judgment appealed from is hereby modified. The plaintiff and his sureties Cenon de la Cruz, Juan
Sangalang and Marcos Sibal are hereby ordered to pay to the defendant jointly and severally the sum of P8,900.80, instead of
P9,439.08 allowed by the lower court, as follows:
P6,757.40 for the sugar cane;
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-40411

August 7, 1935

DAVAO SAW MILL CO., INC., plaintiff-appellant,

vs.
APRONIANO G. CASTILLO and DAVAO LIGHT & POWER CO., INC., defendants-appellees.
Arsenio Suazo and Jose L. Palma Gil and Pablo Lorenzo and Delfin Joven for appellant.
J.W. Ferrier for appellees.
MALCOLM, J.:
The issue in this case, as announced in the opening sentence of the decision in the trial court and as set forth by counsel for the
parties on appeal, involves the determination of the nature of the properties described in the complaint. The trial judge found that
those properties were personal in nature, and as a consequence absolved the defendants from the complaint, with costs against
the plaintiff.
The Davao Saw Mill Co., Inc., is the holder of a lumber concession from the Government of the Philippine Islands. It has
operated a sawmill in the sitio of Maa, barrio of Tigatu, municipality of Davao, Province of Davao. However, the land upon which
the business was conducted belonged to another person. On the land the sawmill company erected a building which housed the
machinery used by it. Some of the implements thus used were clearly personal property, the conflict concerning machines which
were placed and mounted on foundations of cement. In the contract of lease between the sawmill company and the owner of the
land there appeared the following provision:
That on the expiration of the period agreed upon, all the improvements and buildings introduced and erected by the
party of the second part shall pass to the exclusive ownership of the party of the first part without any obligation on its
part to pay any amount for said improvements and buildings; also, in the event the party of the second part should leave
or abandon the land leased before the time herein stipulated, the improvements and buildings shall likewise pass to the
ownership of the party of the first part as though the time agreed upon had expired: Provided, however, That the
machineries and accessories are not included in the improvements which will pass to the party of the first part on the
expiration or abandonment of the land leased.
In another action, wherein the Davao Light & Power Co., Inc., was the plaintiff and the Davao, Saw, Mill Co., Inc., was the
defendant, a judgment was rendered in favor of the plaintiff in that action against the defendant in that action; a writ of execution
issued thereon, and the properties now in question were levied upon as personalty by the sheriff. No third party claim was filed
for such properties at the time of the sales thereof as is borne out by the record made by the plaintiff herein. Indeed the bidder,
which was the plaintiff in that action, and the defendant herein having consummated the sale, proceeded to take possession of
the machinery and other properties described in the corresponding certificates of sale executed in its favor by the sheriff of
Davao.
As connecting up with the facts, it should further be explained that the Davao Saw Mill Co., Inc., has on a number of occasions
treated the machinery as personal property by executing chattel mortgages in favor of third persons. One of such persons is the
appellee by assignment from the original mortgages.

Article 334, paragraphs 1 and 5, of the Civil Code, is in point. According to the Code, real property consists of
1. Land, buildings, roads and constructions of all kinds adhering to the soil;
xxx

xxx

xxx

5. Machinery, liquid containers, instruments or implements intended by the owner of any building or land for use in
connection with any industry or trade being carried on therein and which are expressly adapted to meet the
requirements of such trade of industry.
Appellant emphasizes the first paragraph, and appellees the last mentioned paragraph. We entertain no doubt that the trial
judge and appellees are right in their appreciation of the legal doctrines flowing from the facts.
In the first place, it must again be pointed out that the appellant should have registered its protest before or at the time of the
sale of this property. It must further be pointed out that while not conclusive, the characterization of the property as chattels by
the appellant is indicative of intention and impresses upon the property the character determined by the parties. In this
connection the decision of this court in the case of Standard Oil Co. of New 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.
xxx

xxx

xxx

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

Villa-Real, Imperial, Butte, and Goddard, JJ., concur.

Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. L-17870

September 29, 1962

MINDANAO BUS COMPANY, petitioner,

vs.
THE CITY ASSESSOR & TREASURER and the BOARD OF TAX APPEALS of Cagayan de Oro City,respondents.
Binamira, Barria and Irabagon for petitioner.
Vicente E. Sabellina for respondents.
LABRADOR, J.:
This is a petition for the review of the decision of the Court of Tax Appeals in C.T.A. Case No. 710 holding that the petitioner
Mindanao Bus Company is liable to the payment of the realty tax on its maintenance and repair equipment hereunder referred
to.
Respondent City Assessor of Cagayan de Oro City assessed at P4,400 petitioner's above-mentioned equipment. Petitioner
appealed the assessment to the respondent Board of Tax Appeals on the ground that the same are not realty. The Board of Tax
Appeals of the City sustained the city assessor, so petitioner herein filed with the Court of Tax Appeals a petition for the review of
the assessment.
In the Court of Tax Appeals the parties submitted the following stipulation of facts:
Petitioner and respondents, thru their respective counsels agreed to the following stipulation of facts:
1. That petitioner is a public utility solely engaged in transporting passengers and cargoes by motor trucks, over its
authorized lines in the Island of Mindanao, collecting rates approved by the Public Service Commission;
2. That petitioner has its main office and shop at Cagayan de Oro City. It maintains Branch Offices and/or stations at
Iligan City, Lanao; Pagadian, Zamboanga del Sur; Davao City and Kibawe, Bukidnon Province;
3. That the machineries sought to be assessed by the respondent as real properties are the following:
(a) Hobart Electric Welder Machine, appearing in the attached photograph, marked Annex "A";
(b) Storm Boring Machine, appearing in the attached photograph, marked Annex "B";

(c) Lathe machine with motor, appearing in the attached photograph, marked Annex "C";
(d) Black and Decker Grinder, appearing in the attached photograph, marked Annex "D";
(e) PEMCO Hydraulic Press, appearing in the attached photograph, marked Annex "E";
(f) Battery charger (Tungar charge machine) appearing in the attached photograph, marked Annex "F"; and
(g) D-Engine Waukesha-M-Fuel, appearing in the attached photograph, marked Annex "G".
4. That these machineries are sitting on cement or wooden platforms as may be seen in the attached photographs
which form part of this agreed stipulation of facts;
5. That petitioner is the owner of the land where it maintains and operates a garage for its TPU motor trucks; a repair
shop; blacksmith and carpentry shops, and with these machineries which are placed therein, its TPU trucks are made;
body constructed; and same are repaired in a condition to be serviceable in the TPU land transportation business it
operates;
6. That these machineries have never been or were never used as industrial equipments to produce finished products
for sale, nor to repair machineries, parts and the like offered to the general public indiscriminately for business or
commercial purposes for which petitioner has never engaged in, to date.
1awphl.nt

The Court of Tax Appeals having sustained the respondent city assessor's ruling, and having denied a motion for
reconsideration, petitioner brought the case to this Court assigning the following errors:
1. The Honorable Court of Tax Appeals erred in upholding respondents' contention that the questioned assessments are
valid; and that said tools, equipments or machineries are immovable taxable real properties.
2. The Tax Court erred in its interpretation of paragraph 5 of Article 415 of the New Civil Code, and holding that pursuant
thereto the movable equipments are taxable realties, by reason of their being intended or destined for use in an
industry.
3. The Court of Tax Appeals erred in denying petitioner's contention that the respondent City Assessor's power to
assess and levy real estate taxes on machineries is further restricted by section 31, paragraph (c) of Republic Act No.
521; and
4. The Tax Court erred in denying petitioner's motion for reconsideration.
Respondents contend that said equipments, tho movable, are immobilized by destination, in accordance with paragraph 5 of
Article 415 of the New Civil Code which provides:
Art. 415. The following are immovable properties:
xxx

xxx

xxx

(5) Machinery, receptacles, instruments or implements intended by the owner of the tenement for an industry or works
which may be carried on in a building or on a piece of land, and which tend directly to meet the needs of the said
industry or works. (Emphasis ours.)
Note that the stipulation expressly states that the equipment are placed on wooden or cement platforms. They can be moved
around and about in petitioner's repair shop. In the case of B. H. Berkenkotter vs. Cu Unjieng, 61 Phil. 663, the Supreme Court
said:
Article 344 (Now Art. 415), paragraph (5) of the Civil Code, gives the character of real property to "machinery, liquid
containers, instruments or implements intended by the owner of any building or land for use in connection with any
industry or trade being carried on therein and which are expressly adapted to meet the requirements of such trade or
industry."
If the installation of the machinery and equipment in question in the central of the Mabalacat Sugar Co., Inc., in lieu of
the other of less capacity existing therein, for its sugar and industry, converted them into real property by reason of their
purpose, it cannot be said that their incorporation therewith was not permanent in character because, as essential and
principle elements of a sugar central, without them the sugar central would be unable to function or carry on the
industrial purpose for which it was established. Inasmuch as the central is permanent in character, the necessary
machinery and equipment installed for carrying on the sugar industry for which it has been established must necessarily
be permanent. (Emphasis ours.)
So that movable equipments to be immobilized in contemplation of the law must first be "essential and principal elements" of an
industry or works without which such industry or works would be "unable to function or carry on the industrial purpose for which it
was established." We may here distinguish, therefore, those movable which become immobilized by destination because they
are essential and principal elements in the industry for those which may not be so considered immobilized because they
are merely incidental, not essential and principal. Thus, cash registers, typewriters, etc., usually found and used in hotels,
restaurants, theaters, etc. are merely incidentals and are not and should not be considered immobilized by destination, for these
businesses can continue or carry on their functions without these equity comments. Airline companies use forklifts, jeep-wagons,
pressure pumps, IBM machines, etc. which are incidentals, not essentials, and thus retain their movable nature. On the other
hand, machineries of breweries used in the manufacture of liquor and soft drinks, though movable in nature, are immobilized

because they are essential to said industries; but the delivery trucks and adding machines which they usually own and use and
are found within their industrial compounds are merely incidental and retain their movable nature.
Similarly, the tools and equipments in question in this instant case are, by their nature, not essential and principle municipal
elements of petitioner's business of transporting passengers and cargoes by motor trucks. They are merely incidentals
acquired as movables and used only for expediency to facilitate and/or improve its service. Even without such tools and
equipments, its business may be carried on, as petitioner has carried on, without such equipments, before the war. The
transportation business could be carried on without the repair or service shop if its rolling equipment is repaired or serviced in
another shop belonging to another.
The law that governs the determination of the question at issue is as follows:
Art. 415. The following are immovable property:
xxx

xxx

xxx

(5) Machinery, receptacles, instruments or implements intended by the owner of the tenement for an industry or works
which may be carried on in a building or on a piece of land, and which tend directly to meet the needs of the said
industry or works; (Civil Code of the Phil.)
Aside from the element of essentiality the above-quoted provision also requires that the industry or works be carried on in a
building or on a piece of land. Thus in the case of Berkenkotter vs. Cu Unjieng, supra, the "machinery, liquid containers, and
instruments or implements" are found in a building constructed on the land. A sawmill would also be installed in a building on
land more or less permanently, and the sawing is conducted in the land or building.
But in the case at bar the equipments in question are destined only to repair or service the transportation business, which is not
carried on in a building or permanently on a piece of land, as demanded by the law. Said equipments may not, therefore, be
deemed real property.
Resuming what we have set forth above, we hold that the equipments in question are not absolutely essential to the petitioner's
transportation business, and petitioner's business is not carried on in a building, tenement or on a specified land, so said
equipment may not be considered real estate within the meaning of Article 415 (c) of the Civil Code.
WHEREFORE, the decision subject of the petition for review is hereby set aside and the equipment in question declared not
subject to assessment as real estate for the purposes of the real estate tax. Without costs.
So ordered.
Bengzon, C.J., Padilla, Bautista Angelo, Reyes, J.B.L., Paredes, Dizon and Makalintal, JJ., concur.
Regala, Concepcion and Barrera JJ., took no par

Dream Village Neighborhood Association Inc., Represented by its Incumbent President, Greg Seriego, Petitioner, vs.
Bases Conversion Development Authority, Respondent
G.R. No. 192896, July 24, 2013
Facts: Dream Village, composed of more than 2,000 families have been occupying the disputed lot continuously, exclusively
and notoriously since the year 1985. Said lot used to be a part of the Hacienda de Maricaban, which was subsequently
purchased by the government of the United States of America (USA) and was converted to Fort William McKinley. Later on, USA
transferred 30 hectares of it to the Manila Railroad Company, while the rest were still in the name of US Government. Finally, on
December of 1956, the US government ceded Fort William McKinley to the Republic of the Philippines (RP) and was renamed
Fort Bonifacio, reserved for military purposes. On January 1986, President Marcos Issued Proclamation No. 2476 declaring
certain portions of Fort Bonifacio alienable and disposable, thus allowing sale to the settlers of home lots in Upper Bicutan,
Lower Bicutan, Signal Village, and Western Bicutan. President Corazon Aquino on the other hand amended the proclamation of
Pres. Marcos and limited the lots which were open for disposition. On March of 1992, the Bases conversion and Development
Authority (BCDA) was created to oversee and accelerate the conversion of Clark and Military Reservations to productive civilian
uses, which then authorized the President of the Philippines to sell the lands covered in whole or in part, specifically to raise
capital for the BCDA. BCDA asserted its title to Dream Village owing to the fact that BCDAs titles over Fort Bonifacio are valid
and commercially valuable to the agency, however, due to the passage of time, was contended to have been abandoned to
Dream Village, and that BCDAs right over it has already prescribed.
Issue: Whether the area occupied by Dream Village is susceptible of acquisition by prescription.
Ruling: No. Property of the State or any of its subdivisions not patrimonial in character shall not be the object of prescription
(Art.1113, NCC). Also, under Article 422 of the Civil Code, public domain lands become patrimonial property only if there is a
declaration that these are alienable or disposable, together with an express government manifestation that the property is
already patrimonial or no longer retained for public service or the development of national wealth. Only when the property has
become patrimonial can the prescriptive period for the acquisition of property of the public dominion begin to run. It is also
stipulated under PD 1529 that before the acquisitive prescription can commence, the property must expressly declared by the

State that it is no longer intended for public service or the development of national wealth, and that absent such express
declaration, the land remains to be property of public dominion. Subsequent proclamations over vast portions of Maricaban
exempted the lot where Dream Village was situated from being open for disposition, thus Fort Bonifacio remains a property of
public Dominion of the State because although declared alienable and disposable, it is reserved for some public service or
development of national wealth, and thus, the acquisitive prescription asserted by Dream Village has not even begun to run.
Thus, the area occupied by Dream Village is still not susceptible of acquisition by prescription.

Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. 179987

September 3, 2013

HEIRS OF MARIO MALABANAN, (Represented by Sally A. Malabanan), Petitioners,

vs.
REPUBLIC OF THE PHILIPPINES, Respondent.
RESOLUTION
BERSAMIN, J.:
For our consideration and resolution are the motions for reconsideration of the parties who both assail the decision promulgated
on April 29, 2009, whereby we upheld the ruling of the Court of Appeals (CA) denying the application of the petitioners for the
registration of a parcel of land situated in Barangay Tibig, Silang, Cavite on the ground that they had not established by sufficient
evidence their right to the registration in accordance with either Section 14(1) or Section 14(2) of Presidential Decree No. 1529
(Property Registration Decree).
Antecedents
The property subject of the application for registration is a parcel of land situated in Barangay Tibig, Silang Cavite, more
particularly identified as Lot 9864-A, Cad-452-D, with an area of 71,324-square meters. On February 20, 1998, applicant Mario
Malabanan, who had purchased the property from Eduardo Velazco, filed an application for land registration covering the
property in the Regional Trial Court (RTC) in Tagaytay City, Cavite, claiming that the property formed part of the alienable and
disposable land of the public domain, and that he and his predecessors-in-interest had been in open, continuous, uninterrupted,
public and adverse possession and occupation of the land for more than 30 years, thereby entitling him to the judicial
confirmation of his title.1
To prove that the property was an alienable and disposable land of the public domain, Malabanan presented during trial a
certification dated June 11, 2001 issued by the Community Environment and Natural Resources Office (CENRO) of the
Department of Environment and Natural Resources (DENR), which reads:
This is to certify that the parcel of land designated as Lot No. 9864 Cad 452-D, Silang Cadastre as surveyed for Mr. Virgilio
Velasco located at Barangay Tibig, Silang, Cavite containing an area of 249,734 sq. meters as shown and described on the Plan
Ap-04-00952 is verified to be within the Alienable or Disposable land per Land Classification Map No. 3013 established under
Project No. 20-A and approved as such under FAO 4-1656 on March 15, 1982. 2

After trial, on December 3, 2002, the RTC rendered judgment granting Malabanans application for land registration, disposing
thusly:
WHEREFORE, this Court hereby approves this application for registration and thus places under the operation of Act 141, Act
496 and/or P.D. 1529, otherwise known as Property Registration Law, the lands described in Plan Csd-04-0173123-D, Lot 9864A and containing an area of Seventy One Thousand Three Hundred Twenty Four (71,324) Square Meters, as supported by its
technical description now forming part of the record of this case, in addition to other proofs adduced in the name of MARIO
MALABANAN, who is of legal age, Filipino, widower, and with residence at Munting Ilog, Silang, Cavite.
Once this Decision becomes final and executory, the corresponding decree of registration shall forthwith issue.
SO ORDERED.3
The Office of the Solicitor General (OSG) appealed the judgment to the CA, arguing that Malabanan had failed to prove that the
property belonged to the alienable and disposable land of the public domain, and that the RTC erred in finding that he had been
in possession of the property in the manner and for the length of time required by law for confirmation of imperfect title.
On February 23, 2007, the CA promulgated its decision reversing the RTC and dismissing the application for registration of
Malabanan. Citing the ruling in Republic v. Herbieto (Herbieto),4 the CA declared that under Section 14(1) of the Property
Registration Decree, any period of possession prior to the classification of the land as alienable and disposable was
inconsequential and should be excluded from the computation of the period of possession. Noting that the CENRO-DENR
certification stated that the property had been declared alienable and disposable only on March 15, 1982, Velazcos possession
prior to March 15, 1982 could not be tacked for purposes of computing Malabanans period of possession.
Due to Malabanans intervening demise during the appeal in the CA, his heirs elevated the CAs decision of February 23, 2007
to this Court through a petition for review on certiorari.
The petitioners assert that the ruling in Republic v. Court of Appeals and Corazon Naguit 5 (Naguit) remains the controlling
doctrine especially if the property involved is agricultural land. In this regard, Naguit ruled that any possession of agricultural land
prior to its declaration as alienable and disposable could be counted in the reckoning of the period of possession to perfect title
under the Public Land Act (Commonwealth Act No. 141) and the Property Registration Decree. They point out that the ruling in
Herbieto, to the effect that the declaration of the land subject of the application for registration as alienable and disposable
should also date back to June 12, 1945 or earlier, was a mere obiter dictum considering that the land registration proceedings
therein were in fact found and declared void ab initio for lack of publication of the notice of initial hearing.
The petitioners also rely on the ruling in Republic v. T.A.N. Properties, Inc. 6 to support their argument that the property had been
ipso jure converted into private property by reason of the open, continuous, exclusive and notorious possession by their
predecessors-in-interest of an alienable land of the public domain for more than 30 years. According to them, what was essential
was that the property had been "converted" into private property through prescription at the time of the application without regard
to whether the property sought to be registered was previously classified as agricultural land of the public domain.
As earlier stated, we denied the petition for review on certiorari because Malabanan failed to establish by sufficient evidence
possession and occupation of the property on his part and on the part of his predecessors-in interest since June 12, 1945, or
earlier.
Petitioners Motion for Reconsideration
In their motion for reconsideration, the petitioners submit that the mere classification of the land as alienable or disposable
should be deemed sufficient to convert it into patrimonial property of the State. Relying on the rulings in Spouses De Ocampo v.
Arlos,7 Menguito v. Republic8 and Republic v. T.A.N. Properties, Inc.,9 they argue that the reclassification of the land as alienable
or disposable opened it to acquisitive prescription under the Civil Code; that Malabanan had purchased the property from
Eduardo Velazco believing in good faith that Velazco and his predecessors-in-interest had been the real owners of the land with
the right to validly transmit title and ownership thereof; that consequently, the ten-year period prescribed by Article 1134 of the
Civil Code, in relation to Section 14(2) of the Property Registration Decree, applied in their favor; and that when Malabanan filed
the application for registration on February 20, 1998, he had already been in possession of the land for almost 16 years
reckoned from 1982, the time when the land was declared alienable and disposable by the State.
The Republics Motion for Partial Reconsideration
The Republic seeks the partial reconsideration in order to obtain a clarification with reference to the application of the rulings in
Naguit and Herbieto.
Chiefly citing the dissents, the Republic contends that the decision has enlarged, by implication, the interpretation of Section
14(1) of the Property Registration Decree through judicial legislation. It reiterates its view that an applicant is entitled to
registration only when the land subject of the application had been declared alienable and disposable since June 12, 1945 or
earlier.
Ruling
We deny the motions for reconsideration.
In reviewing the assailed decision, we consider to be imperative to discuss the different classifications of land in relation to the
existing applicable land registration laws of the Philippines.
Classifications of land according to ownership

Land, which is an immovable property,10 may be classified as either of public dominion or of private ownership. 11Land is
considered of public dominion if it either: (a) is intended for public use; or (b) belongs to the State, without being for public use,
and is intended for some public service or for the development of the national wealth. 12 Land belonging to the State that is not of
such character, or although of such character but no longer intended for public use or for public service forms part of the
patrimonial property of the State.13 Land that is other than part of the patrimonial property of the State, provinces, cities and
municipalities is of private ownership if it belongs to a private individual.
Pursuant to the Regalian Doctrine (Jura Regalia), a legal concept first introduced into the country from the West by Spain
through the Laws of the Indies and the Royal Cedulas,14 all lands of the public domain belong to the State. 15 This means that the
State is the source of any asserted right to ownership of land, and is charged with the conservation of such patrimony. 16
All lands not appearing to be clearly under private ownership are presumed to belong to the State. Also, public lands remain part
of the inalienable land of the public domain unless the State is shown to have reclassified or alienated them to private persons. 17

Classifications of public lands

according to alienability
Whether or not land of the public domain is alienable and disposable primarily rests on the classification of public lands made
under the Constitution. Under the 1935 Constitution,18 lands of the public domain were classified into three, namely, agricultural,
timber and mineral.19 Section 10, Article XIV of the 1973 Constitution classified lands of the public domain into seven, specifically,
agricultural, industrial or commercial, residential, resettlement, mineral, timber or forest, and grazing land, with the reservation
that the law might provide other classifications. The 1987 Constitution adopted the classification under the 1935 Constitution into
agricultural, forest or timber, and mineral, but added national parks. 20 Agricultural lands may be further classified by law
according to the uses to which they may be devoted.21 The identification of lands according to their legal classification is done
exclusively by and through a positive act of the Executive Department. 22
Based on the foregoing, the Constitution places a limit on the type of public land that may be alienated. Under Section 2, Article
XII of the 1987 Constitution, only agricultural lands of the public domain may be alienated; all other natural resources may not
be.
Alienable and disposable lands of the State fall into two categories, to wit: (a) patrimonial lands of the State, or those classified
as lands of private ownership under Article 425 of the Civil Code, 23 without limitation; and (b) lands of the public domain, or the
public lands as provided by the Constitution, but with the limitation that the lands must only be agricultural. Consequently, lands
classified as forest or timber, mineral, or national parks are not susceptible of alienation or disposition unless they are
reclassified as agricultural.24 A positive act of the Government is necessary to enable such reclassification, 25 and the exclusive
prerogative to classify public lands under existing laws is vested in the Executive Department, not in the courts. 26 If, however,
public land will be classified as neither agricultural, forest or timber, mineral or national park, or when public land is no longer
intended for public service or for the development of the national wealth, thereby effectively removing the land from the ambit of
public dominion, a declaration of such conversion must be made in the form of a law duly enacted by Congress or by a
Presidential proclamation in cases where the President is duly authorized by law to that effect. 27 Thus, until the Executive
Department exercises its prerogative to classify or reclassify lands, or until Congress or the President declares that the State no
longer intends the land to be used for public service or for the development of national wealth, the Regalian Doctrine is
applicable.
Disposition of alienable public lands
Section 11 of the Public Land Act (CA No. 141) provides the manner by which alienable and disposable lands of the public
domain, i.e., agricultural lands, can be disposed of, to wit:
Section 11. Public lands suitable for agricultural purposes can be disposed of only as follows, and not otherwise:
(1) For homestead settlement;
(2) By sale;
(3) By lease; and
(4) By confirmation of imperfect or incomplete titles;
(a) By judicial legalization; or
(b) By administrative legalization (free patent).
The core of the controversy herein lies in the proper interpretation of Section 11(4), in relation to Section 48(b) of the Public Land
Act, which expressly requires possession by a Filipino citizen of the land since June 12, 1945, or earlier, viz:
Section 48. The following-described citizens of the Philippines, occupying lands of the public domain or claiming to own any
such lands or an interest therein, but whose titles have not been perfected or completed, may apply to the Court of First Instance
of the province where the land is located for confirmation of their claims and the issuance of a certificate of title thereafter, under
the Land Registration Act, to wit:
xxxx
(b) Those who by themselves or through their predecessors-in-interest have been in open, continuous, exclusive, and notorious
possession and occupation of alienable and disposable lands of the public domain, under a bona fide claim of acquisition of
ownership, since June 12, 1945, or earlier, immediately preceding the filing of the applications for confirmation of title, except

when prevented by war or force majeure. These shall be conclusively presumed to have performed all the conditions essential to
a Government grant and shall be entitled to a certificate of title under the provisions of this chapter. (Bold emphasis supplied)
Note that Section 48(b) of the Public Land Act used the words "lands of the public domain" or "alienable and disposable lands of
the public domain" to clearly signify that lands otherwise classified, i.e., mineral, forest or timber, or national parks, and lands of
patrimonial or private ownership, are outside the coverage of the Public Land Act. What the law does not include, it excludes.
The use of the descriptive phrase "alienable and disposable" further limits the coverage of Section 48(b) to only the agricultural
lands of the public domain as set forth in Article XII, Section 2 of the 1987 Constitution. Bearing in mind such limitations under
the Public Land Act, the applicant must satisfy the following requirements in order for his application to come under Section
14(1) of the Property Registration Decree,28 to wit:
1. The applicant, by himself or through his predecessor-in-interest, has been in possession and occupation of the
property subject of the application;
2. The possession and occupation must be open, continuous, exclusive, and notorious;
3. The possession and occupation must be under a bona fide claim of acquisition of ownership;
4. The possession and occupation must have taken place since June 12, 1945, or earlier; and
5. The property subject of the application must be an agricultural land of the public domain.
Taking into consideration that the Executive Department is vested with the authority to classify lands of the public domain,
Section 48(b) of the Public Land Act, in relation to Section 14(1) of the Property Registration Decree, presupposes that the land
subject of the application for registration must have been already classified as agricultural land of the public domain in order for
the provision to apply. Thus, absent proof that the land is already classified as agricultural land of the public domain, the
Regalian Doctrine applies, and overcomes the presumption that the land is alienable and disposable as laid down in Section
48(b) of the Public Land Act. However, emphasis is placed on the requirement that the classification required by Section 48(b) of
the Public Land Act is classification or reclassification of a public land as agricultural.
The dissent stresses that the classification or reclassification of the land as alienable and disposable agricultural land should
likewise have been made on June 12, 1945 or earlier, because any possession of the land prior to such classification or
reclassification produced no legal effects. It observes that the fixed date of June 12, 1945 could not be minimized or glossed
over by mere judicial interpretation or by judicial social policy concerns, and insisted that the full legislative intent be respected.
We find, however, that the choice of June 12, 1945 as the reckoning point of the requisite possession and occupation was the
sole prerogative of Congress, the determination of which should best be left to the wisdom of the lawmakers. Except that said
date qualified the period of possession and occupation, no other legislative intent appears to be associated with the fixing of the
date of June 12, 1945. Accordingly, the Court should interpret only the plain and literal meaning of the law as written by the
legislators.
Moreover, an examination of Section 48(b) of the Public Land Act indicates that Congress prescribed no requirement that the
land subject of the registration should have been classified as agricultural since June 12, 1945, or earlier. As such, the
applicants imperfect or incomplete title is derived only from possession and occupation since June 12, 1945, or earlier. This
means that the character of the property subject of the application as alienable and disposable agricultural land of the public
domain determines its eligibility for land registration, not the ownership or title over it.
Alienable public land held by a possessor, either personally or through his predecessors-in-interest, openly, continuously and
exclusively during the prescribed statutory period is converted to private property by the mere lapse or completion of the
period.29 In fact, by virtue of this doctrine, corporations may now acquire lands of the public domain for as long as the lands were
already converted to private ownership, by operation of law, as a result of satisfying the requisite period of possession
prescribed by the Public Land Act.30 It is for this reason that the property subject of the application of Malabanan need not be
classified as alienable and disposable agricultural land of the public domain for the entire duration of the requisite period of
possession.
To be clear, then, the requirement that the land should have been classified as alienable and disposable agricultural land at the
time of the application for registration is necessary only to dispute the presumption that the land is inalienable.
The declaration that land is alienable and disposable also serves to determine the point at which prescription may run against
the State. The imperfect or incomplete title being confirmed under Section 48(b) of the Public Land Act is title that is acquired by
reason of the applicants possession and occupation of the alienable and disposable agricultural land of the public domain.
Where all the necessary requirements for a grant by the Government are complied with through actual physical, open,
continuous, exclusive and public possession of an alienable and disposable land of the public domain, the possessor is deemed
to have acquired by operation of law not only a right to a grant, but a grant by the Government, because it is not necessary that
a certificate of title be issued in order that such a grant be sanctioned by the courts. 31
If one follows the dissent, the clear objective of the Public Land Act to adjudicate and quiet titles to unregistered lands in favor of
qualified Filipino citizens by reason of their occupation and cultivation thereof for the number of years prescribed by law 32 will be
defeated. Indeed, we should always bear in mind that such objective still prevails, as a fairly recent legislative development
bears out, when Congress enacted legislation (Republic Act No. 10023) 33 in order to liberalize stringent requirements and
procedures in the adjudication of alienable public land to qualified applicants, particularly residential lands, subject to area
limitations.34
On the other hand, if a public land is classified as no longer intended for public use or for the development of national wealth by
declaration of Congress or the President, thereby converting such land into patrimonial or private land of the State, the
applicable provision concerning disposition and registration is no longer Section 48(b) of the Public Land Act but the Civil Code,
in conjunction with Section 14(2) of the Property Registration Decree. 35 As such, prescription can now run against the State.

To sum up, we now observe the following rules relative to the disposition of public land or lands of the public domain, namely:
(1) As a general rule and pursuant to the Regalian Doctrine, all lands of the public domain belong to the State and are
inalienable. Lands that are not clearly under private ownership are also presumed to belong to the State and, therefore,
may not be alienated or disposed;
(2) The following are excepted from the general rule, to wit:
(a) Agricultural lands of the public domain are rendered alienable and disposable through any of the exclusive
modes enumerated under Section 11 of the Public Land Act. If the mode is judicial confirmation of imperfect
title under Section 48(b) of the Public Land Act, the agricultural land subject of the application needs only to be
classified as alienable and disposable as of the time of the application, provided the applicants possession and
occupation of the land dated back to June 12, 1945, or earlier. Thereby, a conclusive presumption that the
applicant has performed all the conditions essential to a government grant arises, 36 and the applicant becomes
the owner of the land by virtue of an imperfect or incomplete title. By legal fiction, the land has already ceased
to be part of the public domain and has become private property.37
(b) Lands of the public domain subsequently classified or declared as no longer intended for public use or for
the development of national wealth are removed from the sphere of public dominion and are considered
converted into patrimonial lands or lands of private ownership that may be alienated or disposed through any of
the modes of acquiring ownership under the Civil Code. If the mode of acquisition is prescription, whether
ordinary or extraordinary, proof that the land has been already converted to private ownership prior to the
requisite acquisitive prescriptive period is a condition sine qua non in observance of the law (Article 1113, Civil
Code) that property of the State not patrimonial in character shall not be the object of prescription.
To reiterate, then, the petitioners failed to present sufficient evidence to establish that they and their predecessors-in-interest had
been in possession of the land since June 12, 1945. Without satisfying the requisite character and period of possession possession and occupation that is open, continuous, exclusive, and notorious since June 12, 1945, or earlier - the land cannot
be considered ipso jure converted to private property even upon the subsequent declaration of it as alienable and disposable.
Prescription never began to run against the State, such that the land has remained ineligible for registration under Section 14(1)
of the Property Registration Decree. Likewise, the land continues to be ineligible for land registration under Section 14(2) of the
Property Registration Decree unless Congress enacts a law or the President issues a proclamation declaring the land as no
longer intended for public service or for the development of the national wealth.
1wphi1

Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. L-17898

October 31, 1962

PASTOR D. AGO, petitioner,

vs.
THE HON. COURT OF APPEALS, HON. MONTANO A. ORTIZ, Judge of the Court of First Instance of Agusan, THE
PROVINCIAL SHERIFF OF SURIGAO and GRACE PARK ENGINEERING, INC., respondents.
Jose M. Luison for petitioner.
Norberto J. Quisumbing for respondent Grace Park Engineering, Inc.
The Provincial Fiscal of Surigao for respondent Sheriff of Surigao.
LABRABOR, J.:
Appeal by certiorari to review the decision of respondent Court of Appeals in CA-G.R. No. 26723-R entitled "Pastor D. Ago vs.
The Provincial Sheriff of Surigao, et al." which in part reads:
In this case for certiorari and prohibition with preliminary injunction, it appears from the records that the respondent
Judge of the Court of First Instance of Agusan rendered judgment (Annex "A") in open court on January 28, 1959,
basing said judgment on a compromise agreement between the parties.
On August 15, 1959, upon petition, the Court of First Instance issued a writ of execution.
Petitioner's motion for reconsideration dated October 12, 1959 alleges that he, or his counsel, did not receive a formal
and valid notice of said decision, which motion for reconsideration was denied by the court below in the order of
November 14, 1959.
Petitioner now contends that the respondent Judge exceeded in his jurisdiction in rendering the execution without valid
and formal notice of the decision.
A compromise agreement is binding between the parties and becomes the law between them. (Gonzales vs. Gonzales
G.R. No. L-1254, May 21, 1948, 81 Phil. 38; Martin vs. Martin, G.R. No. L-12439, May 22, 1959) .

It is a general rule in this jurisdiction that a judgment based on a compromise agreement is not appealable and is
immediately executory, unless a motion is filed on the ground fraud, mistake or duress. (De los Reyes vs. Ugarte, 75
Phil. 505; Lapena vs. Morfe, G.R. No. L-10089, July 31, 1957)
Petitioner's claim that he was not notified or served notice of the decision is untenable. The judgment on the
compromise agreement rendered by the court below dated January 28, 1959, was given in open court. This alone is a
substantial compliance as to notice. (De los Reyes vs. Ugarte, supra)
IN VIEW THEREOF, we believe that the lower court did not exceed nor abuse its jurisdiction in ordering the execution of
the judgment. The petition for certiorari is hereby dismissed and the writ of preliminary injunction heretofore dissolved,
with costs against the petitioner.
IT IS SO ORDERED.
The facts of the case may be briefly stated as follows: In 1957, petitioner Pastor D. Ago bought sawmill machineries and
equipments from respondent Grace Park Engineer domineering, Inc., executing a chattel mortgage over said machineries and
equipments to secure the payment of balance of the price remaining unpaid of P32,000.00, which petitioner agreed to pay on
installment basis.
Petitioner Ago defaulted in his payment and so, in 1958 respondent Grace Park Engineering, Inc. instituted extra-judicial
foreclosure proceedings of the mortgage. To enjoin said foreclosure, petitioner herein instituted Special Civil Case No. 53 in the
Court of First Instance of Agusan. The parties to the case arrived at a compromise agreement and submitted the same in court
in writing, signed by Pastor D. Ago and the Grace Park Engineering, Inc. The Hon. Montano A. Ortiz, Judge of the Court of First
Instance of Agusan, then presiding, dictated a decision in open court on January 28, 1959.
Petitioner continued to default in his payments as provided in the judgment by compromise, so Grace Park Engineering, Inc.
filed with the lower court a motion for execution, which was granted by the court on August 15, 1959. A writ of execution, dated
September 23, 1959, later followed.
The herein respondent, Provincial Sheriff of Surigao, acting upon the writ of execution issued by the lower court, levied upon and
ordered the sale of the sawmill machineries and equipments in question. These machineries and equipments had been taken to
and installed in a sawmill building located in Lianga, Surigao del Sur, and owned by the Golden Pacific Sawmill, Inc., to whom,
petitioner alleges, he had sold them on February 16, 1959 (a date after the decision of the lower court but before levy by the
Sheriff).
Having been advised by the sheriff that the public auction sale was set for December 4, 1959, petitioner, on December 1, 1959,
filed the petition for certiorari and prohibition with preliminary injunction with respondent Court of Appeals, alleging that a copy of
the aforementioned judgment given in open court on January 28, 1959 was served upon counsel for petitioner only on
September 25, 1959 (writ of execution is dated September 23, 1959); that the order and writ of execution having been issued by
the lower court before counsel for petitioner received a copy of the judgment, its resultant last order that the "sheriff may now
proceed with the sale of the properties levied constituted a grave abuse of discretion and was in excess of its jurisdiction; and
that the respondent Provincial Sheriff of Surigao was acting illegally upon the allegedly void writ of execution by levying the
same upon the sawmill machineries and equipments which have become real properties of the Golden Pacific sawmill, Inc., and
is about to proceed in selling the same without prior publication of the notice of sale thereof in some newspaper of general
circulation as required by the Rules of Court.
The Court of Appeals, on December 8, 1959, issued a writ of preliminary injunction against the sheriff but it turned out that the
latter had already sold at public auction the machineries in question, on December 4, 1959, as scheduled. The respondent
Grace Park Engineering, Inc. was the only bidder for P15,000.00, although the certificate sale was not yet executed. The Court
of Appeals constructed the sheriff to suspend the issuance of a certificate of sale of the said sawmill machineries and equipment
sold by him on December 4, 1959 until the final decision of the case. On November 9, 1960 the Court of Appeals rendered the
aforequoted decision.
Before this Court, petitioner alleges that the Court of Appeals erred (1) in holding that the rendition of judgment on compromise
in open court on January 1959 was a sufficient notice; and (2) in not resolving the other issues raised before it, namely, (a) the
legality of the public auction sale made by the sheriff, and (b) the nature of the machineries in question, whether they are
movables or immovables.
The Court of Appeals held that as a judgment was entered by the court below in open court upon the submission of the
compromise agreement, the parties may be considered as having been notified of said judgment and this fact constitutes due
notice of said judgment. This raises the following legal question: Is the order dictated in open court of the judgment of the court,
and is the fact the petitioner herein was present in open court was the judgment was dictated, sufficient notice thereof? The
provisions of the Rules of Court decree otherwise. Section 1 of Rule 35 describes the manner in which judgment shall be
rendered, thus:
SECTION 1. How judgment rendered. All judgments determining the merits of cases shall be in writing personally
and directly prepared by the judge, and signed by him, stating clearly and distinctly the facts and the law on which it is
based, filed with the clerk of the court.

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

xxx

xxx

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

xxx

xxx

(c) In case of real property, by posting a similar notice particularly describing the property for twenty days in three public
places in the municipality or city where the property is situated, and also where the property is to be sold, and, if the

assessed value of the property exceeds four hundred pesos, by publishing a copy of the notice once a week, for the
same period, in some newspaper published or having general circulation in the province, if there be one. If there are
newspapers published in the province in both the English and Spanish languages, then a like publication for a like
period shall be made in one newspaper published in the English language, and in one published in the Spanish
language.
the sale made by the sheriff must be declared null and void.
WHEREFORE, the decision of the Court of Appeals sought to be reviewed is hereby set aside and We declare that the issuance
of the writ of execution in this case against the sawmill machineries and equipments purchased by petitioner Pastor D. Ago from
the Grace Park Engineering, Inc., as well as the sale of the same by the Sheriff of Surigao, are null and void. Costs shall be
against the respondent Grace Park Engineering, Inc.
Bengzon, C.J., Bautista Angelo, Concepcion, Reyes, J.B.L., Barrera, Paredes, Dizon, Regala and Makalintal, JJ.,concur.
Padilla, J., took no part

Republic of the Philippines

SUPREME COURT
Manila
SECOND DIVISION
G.R. No. L-58469 May 16, 1983
MAKATI LEASING and FINANCE CORPORATION, petitioner,
vs.
WEAREVER TEXTILE MILLS, INC., and HONORABLE COURT OF APPEALS, respondents.
Loreto C. Baduan for petitioner.

Ramon D. Bagatsing & Assoc. (collaborating counsel) for petitioner.

Jose V. Mancella for respondent.

DE CASTRO, J.:
Petition for review on certiorari of the decision of the Court of Appeals (now Intermediate Appellate Court) promulgated on
August 27, 1981 in CA-G.R. No. SP-12731, setting aside certain Orders later specified herein, of Judge Ricardo J. Francisco, as
Presiding Judge of the Court of First instance of Rizal Branch VI, issued in Civil Case No. 36040, as wen as the resolution dated
September 22, 1981 of the said appellate court, denying petitioner's motion for reconsideration.
It appears that in order to obtain financial accommodations from herein petitioner Makati Leasing and Finance Corporation, the
private respondent Wearever Textile Mills, Inc., discounted and assigned several receivables with the former under a Receivable
Purchase Agreement. To secure the collection of the receivables assigned, private respondent executed a Chattel Mortgage
over certain raw materials inventory as well as a machinery described as an Artos Aero Dryer Stentering Range.
Upon private respondent's default, petitioner filed a petition for extrajudicial foreclosure of the properties mortgage to it.
However, the Deputy Sheriff assigned to implement the foreclosure failed to gain entry into private respondent's premises and
was not able to effect the seizure of the aforedescribed machinery. Petitioner thereafter filed a complaint for judicial foreclosure
with the Court of First Instance of Rizal, Branch VI, docketed as Civil Case No. 36040, the case before the lower court.
Acting on petitioner's application for replevin, the lower court issued a writ of seizure, the enforcement of which was however
subsequently restrained upon private respondent's filing of a motion for reconsideration. After several incidents, the lower court
finally issued on February 11, 1981, an order lifting the restraining order for the enforcement of the writ of seizure and an order
to break open the premises of private respondent to enforce said writ. The lower court reaffirmed its stand upon private
respondent's filing of a further motion for reconsideration.
On July 13, 1981, the sheriff enforcing the seizure order, repaired to the premises of private respondent and removed the main
drive motor of the subject machinery.
The Court of Appeals, in certiorari and prohibition proceedings subsequently filed by herein private respondent, set aside the
Orders of the lower court and ordered the return of the drive motor seized by the sheriff pursuant to said Orders, after ruling that
the machinery in suit cannot be the subject of replevin, much less of a chattel mortgage, because it is a real property pursuant to
Article 415 of the new Civil Code, the same being attached to the ground by means of bolts and the only way to remove it from
respondent's plant would be to drill out or destroy the concrete floor, the reason why all that the sheriff could do to enfore the writ
was to take the main drive motor of said machinery. The appellate court rejected petitioner's argument that private respondent is
estopped from claiming that the machine is real property by constituting a chattel mortgage thereon.
A motion for reconsideration of this decision of the Court of Appeals having been denied, petitioner has brought the case to this
Court for review by writ of certiorari. It is contended by private respondent, however, that the instant petition was rendered moot
and academic by petitioner's act of returning the subject motor drive of respondent's machinery after the Court of Appeals'
decision was promulgated.
The contention of private respondent is without merit. When petitioner returned the subject motor drive, it made itself
unequivocably clear that said action was without prejudice to a motion for reconsideration of the Court of Appeals decision, as
shown by the receipt duly signed by respondent's representative. 1 Considering that petitioner has reserved its right to

question the propriety of the Court of Appeals' decision, the contention of private respondent that this petition has been
mooted by such return may not be sustained.
The next and the more crucial question to be resolved in this Petition is whether the machinery in suit is real or personal property
from the point of view of the parties, with petitioner arguing that it is a personality, while the respondent claiming the contrary,
and was sustained by the appellate court, which accordingly held that the chattel mortgage constituted thereon is null and void,
as contended by said respondent.
A similar, if not Identical issue was raised in Tumalad v. Vicencio, 41 SCRA 143 where this Court, speaking through Justice
J.B.L. Reyes, ruled:
Although there is no specific statement referring to the subject house as personal property, yet by ceding,
selling or transferring a property by way of chattel mortgage defendants-appellants could only have meant to
convey the house as chattel, or at least, intended to treat the same as such, so that they should not now be
allowed to make an inconsistent stand by claiming otherwise. Moreover, the subject house stood on a rented lot
to which defendants-appellants merely had a temporary right as lessee, and although this can not in itself alone
determine the status of the property, it does so when combined with other factors to sustain the interpretation
that the parties, particularly the mortgagors, intended to treat the house as personality. Finally, unlike in the Iya
cases, Lopez vs. Orosa, Jr. & Plaza Theatre, Inc. & Leung Yee vs. F.L. Strong Machinery &
Williamson, wherein third persons assailed the validity of the chattel mortgage, it is the defendants-appellants
themselves, as debtors-mortgagors, who are attacking the validity of the chattel mortgage in this case. The

doctrine of estoppel therefore applies to the herein defendants-appellants, having treated the subject house as
personality.
Examining the records of the instant case, We find no logical justification to exclude the rule out, as the appellate court did, the
present case from the application of the abovequoted pronouncement. If a house of strong materials, like what was involved in
the above Tumalad case, may be considered as personal property for purposes of executing a chattel mortgage thereon as long
as the parties to the contract so agree and no innocent third party will be prejudiced thereby, there is absolutely no reason why a
machinery, which is movable in its nature and becomes immobilized only by destination or purpose, may not be likewise treated
as such. This is really because one who has so agreed is estopped from denying the existence of the chattel mortgage.
In rejecting petitioner's assertion on the applicability of the Tumalad doctrine, the Court of Appeals lays stress on the fact that the
house involved therein was built on a land that did not belong to the owner of such house. But the law makes no distinction with
respect to the ownership of the land on which the house is built and We should not lay down distinctions not contemplated by
law.
It must be pointed out that the characterization of the subject machinery as chattel by the private respondent is indicative of
intention and impresses upon the property the character determined by the parties. As stated inStandard Oil Co. of New York v.
Jaramillo, 44 Phil. 630, it is undeniable that the parties to a contract may by agreement treat as personal property that which by
nature would be real property, as long as no interest of third parties would be prejudiced thereby.
Private respondent contends that estoppel cannot apply against it because it had never represented nor agreed that the
machinery in suit be considered as personal property but was merely required and dictated on by herein petitioner to sign a
printed form of chattel mortgage which was in a blank form at the time of signing. This contention lacks persuasiveness. As aptly
pointed out by petitioner and not denied by the respondent, the status of the subject machinery as movable or immovable was
never placed in issue before the lower court and the Court of Appeals except in a supplemental memorandum in support of the
petition filed in the appellate court. Moreover, even granting that the charge is true, such fact alone does not render a contract
void ab initio, but can only be a ground for rendering said contract voidable, or annullable pursuant to Article 1390 of the new
Civil Code, by a proper action in court. There is nothing on record to show that the mortgage has been annulled. Neither is it
disclosed that steps were taken to nullify the same. On the other hand, as pointed out by petitioner and again not refuted by
respondent, the latter has indubitably benefited from said contract. Equity dictates that one should not benefit at the expense of
another. Private respondent could not now therefore, be allowed to impugn the efficacy of the chattel mortgage after it has
benefited therefrom,
From what has been said above, the error of the appellate court in ruling that the questioned machinery is real, not personal
property, becomes very apparent. Moreover, the case of Machinery and Engineering Supplies, Inc. v. CA, 96 Phil. 70, heavily
relied upon by said court is not applicable to the case at bar, the nature of the machinery and equipment involved therein as real
properties never having been disputed nor in issue, and they were not the subject of a Chattel Mortgage. Undoubtedly, the
Tumalad case bears more nearly perfect parity with the instant case to be the more controlling jurisprudential authority.
WHEREFORE, the questioned decision and resolution of the Court of Appeals are hereby reversed and set aside, and the
Orders of the lower court are hereby reinstated, with costs against the private respondent.

Republic of the Philippines

SUPREME COURT
Manila

EN BANC
G.R. No. L-15260

August 18, 1920

FAUSTO RUBISO, plaintiff-appellant,

vs.
FLORENTINO RIVERA, ET AL., defendants-appellees.
Canillas and Cardenas for appellant.
M. P. Leuterio for appellees.
VILLAMOR, J.:
About April, 1915, Fausto Rubiso and Florentino Rivera had a litigation concerning the ownership of the pilot boatValentina.
Rivera acquired it on January 4, 1915, from its original owner the Chinaman Sy Qui, but did not inscribe his title in the mercantile
registry according to article 573 of the Code of Commerce in relation to article 2 of Act No. 1900. Subsequently Rubiso bought
said pilot boat in a sale at public auction for the sum of P55.45 on January 23, 1915, and inscribed his title in the mercantile
registry on March 4th of the same year. The suit was decided by the Court of First Instance of Manila in favor of the plaintiff
Rubiso on September 6, 1915. On the 11th day of said month the court issued a writ of execution, upon the petition of the
plaintiff, in order to proceed, as said plaintiff alleged, to the salvage of the pilot boat which at that time was stranded in the sitio of
Tingloy, Batangas. The order of execution was stayed upon the filing of a bond for P1,800 by the defendant Rivera who alleged
in support of his objection, that the pilot boat was already salvaged and had been taken to Maricaban, Batangas. The judgment
having been brought to this court by appeal it was affirmed in a judgment rendered on October 30, 1917 (R.G. N. 11407). 1 The
cause having been sent to the Court of First Instance for the execution of judgment the sheriff of Batangas who undertook to
enforce the writ of execution was able to deliver to the plaintiff Rubiso nothing but the pilot boat itself in a seriously damaged
condition and two useless sails.
Such are the facts which gave rise to the present action for the recovery of the damages in the sum of P1,200 which the plaintiff
and appellant Fausto Rubiso alleges he has suffered by the destruction and loss of the pilot boat Valentina and its equipment
which were caused, according to the complaint, by the fault and negligence of the defendants Florentino Rivera and others.
The answer having been filed and the trial having taken place, the court rendered judgment in favor of the defendants without
any special pronouncement as to costs. From this judgment the plaintiff appealed. The motion for new trial having been
overruled, the appellant presented the corresponding bill of exceptions assigning in his brief the following a errors: (a) The
finding that there was not sufficient evidence to establish the amount of the expenses sought to be recovered; (b) the finding that
the pilot boat Valentina had no legal value in August, 1915; (c) in rendering judgment absolving the defendants in this case; and
(d) in overruling the motion for new trial presented by the plaintiff on the ground that the judgment is against the weight of the
evidence.
In a series of uninterrupted decision before and after the promulgation of the Civil Code, the doctrine has been established that
all judgment for damages whether arising from a breach of contract or resulting from some provision of law, must be based upon
satisfactory evidence of the real existence of the damages alleged to have been suffered. (Sanz vs. Lavin and Bros., 6 Phil.,
299.)
Has the existence of the damages sought to be recovered in this case been satisfactorily established? The court below decided
this question of fact adversely to the plaintiff and we are of the opinion that this findings is sustained by the evidence. Plaintiff
declares that in February, 1915, he visited and examined the pilot boatValentina in the barrio of Tingloy and that on said day he
found it in good condition, and that he saw all of its tackle and rigging; but on cross-examination by the attorney for the
defendants he admitted that on said date he was unable to take possession of the vessel because the person in charge of it
would not permit him even to approach. Estanislao Jili who accompanied Fausto Rubiso in order to see the pilot
boat Valentina in February, 1915, affirms that they did not go on board the vessel because the person in charge of it would not
permit them to do so. This same witness and Jose Soriano as a witness of the plaintiff state that at that time the boat was not in
a seaworthy condition, because its bottom was damaged and it had no equipments.
If what has been said is not yet sufficient to find that the pretense of the appellant as to his first assignment of error is
unsustainable, we still have the uncontradicted testimony of Juan Velino, Irineo Martinez and Mariano Villas, witnesses for the
defendants, who declared on the seriously damaged condition of the pilot boat long before its acquisition by the appellant.
Juan Velino declared that in August, 1914, the boat was aground in Dayhagan, Mindoro; it was somewhat repaired and about
November of the same year it sailed from that place and suffered on the way such damages and troubles that it had to be taken
to Tingloy for new repair, some vessels' tools and equipments having been borrowed from another boat because those of
the Valentina had been destroyed; and the storm destroyed the vessel so much that it could not be taken to the Island of
Maricaban except by means of rafts. To the same effect is the testimony of Irineo Martinez. Mariano Villas testified that in
December, 1914, the Valentina anchored in Tingloy alongside his vessel and as he was interested in the purchase of this pilot
boat, the sale of which was advertised in Manila, he examined it and then saw that he would not buy it even for P400, because it
was completely destroyed. There can be no doubt as to the competency of this witness to testify on the question of the price of
the pilot boat Valentina because according to him he had ordered the construction of boats of the same size and condition
during that period. The lower court declares in its judgment that this witness appears to it as sufficiently trustworthy, and we find
no basis whatever on the record to doubt the correctness of the finding of the trial judge who saw and observed him while he
was testifying.

We, therefore, are of the opinion that the finding of the court that there was not sufficient proof to establish the amount of the
defendants' claim is in accordance with the merits of the case.
As to the second error assigned by the appellant it should be noted that, as appears in the record the pilot boatValentina was
stranded in Tingloy since the month of November, 1914, that is, two months before it had been acquired by the plaintiff at public
auction and ten months before the judgment declaring him to be the owner thereof, was rendered. The appellant, in his first
complaint of April 10, 1915, for the recovery of the pilot boatValentina, affirms that the boat was then in the same worthless
condition in which it was in 1914, and the evidence we have examined in this case show that in fact in August or September,
1915, it was in the worse of conditions and was utterly worthless. Without attempting to determine the durability of a boat made
of wood stranded for a period of ten months, as is the case with the boat in question, we are of the opinion, and so declare, that
according to the proofs adduced in this case, the court did not err in declaring in its judgment that the pilot boat Valentina did not
have any legal value in August, 1915.
The defendant in his brief interposes the defense of res judicata based upon the judgment of this court in the action between
Fausto Rubiso et al. and Florentino Rivera who are the parties in the present case.
In that case it was held:
With respect to the indemnification for damages claimed by the plaintiff, besides the fact [that according to the
proceedings taken subsequently to the date on which the judgment appealed from was rendered, it appears that the
pilot boat has already left in good condition the place where it had been stranded and is at present found anchored in
the port of Maricaban,] the truth is that the record does not offer positive proof of the amount of the damages caused,
and on the other hand it cannot be declared that the defendant had acted in bad faith for he acquired the vessel
previous to its acquisition at public auction by the plaintiff Rubiso who, for the reason already given, is the true and sole
owner of said pilot boat. (Decision of October 30, 1917, R. G. No. 11407 [Rubiso and Gelito vs. Rivera, 37 Phil., 72].)
It having been declared in a previous action that the defendant Rivera did not act in bad faith and that therefore he was not liable
for damages, it would be necessary to show in the present case that the destruction of the boat and the loss of its equipments
took place after the final judgment was rendered in that case and by reason of the fault and negligence of the defendants, which
is not the case here. What appears from the evidence presented by the defendant and uncontradicted by that presented by the
adverse parties, is that from September, 1915, to March 7, 1918, which was the date of the execution of the judgment of this
court affirming that of the lower court, the boat continued aground in the Island of Maricaban awaiting the final judgment in the
action with respect to ownership and naturally exposed to the action of sea water and the inclemencies of the weather, things
which were beyond the control of the defendant Rivera.
It thus now appears that the damages claimed by the plaintiff are the same damages that he claimed in the first action. To speak
more accurately, the appellant first sued for the recovery of the vessel and damages in the sum of P1,750. Judgment was
rendered as to the first in his favor but against him as to the second. And now he comes back again claiming damages.
The case now under consideration is analogous to that of Palanca Tanguinlay vs. Quiros (10 Phil., 360). In that case the
question was extensively discussed whether a previous judgment constitutes an adjudication of the subject-matter of a new suit
between the same parties to such extent that it can not again be tried anew. It was held that according to articles 306 and 307 of
the Code of Civil Procedure, a judgment rendered in an action for the recovery damages for property lost is a bar to any other
action between the same parties for the recovery of the same property or its value. In the course of the decision the court held:
The American books are full of similar cases, an instance being Hatch vs. Coddington (32 Minn., 92), in which it was
held that a former action between the same parties to recover damages for a wrongful conversion of personal property
was a bar to a subsequent suit to recover possession of the specific property itself, notwithstanding the difference of
form and that the relief sought and the subject-matter of the cause of action were regarded as the same. Nor is it
altogether clear that the law of Spain was different. Seor Manresa, in his commentary on article 1252 of the Civil Code,
cites a decision of the supreme court of 25th of April, 1900 (vol. 8, p. 555), holding that in a real action a judgment in a
former personal suit between the same parties for indemnity for the use of the same property operated as cosa juzgada.
From what has been said the judgment appealed from should be, and is hereby, affirmed, with costs against the appellant. So
ordered.

Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. L-8414

February 28, 1957

MANGHARAM B. HEMMANI, petitioner-appellant,

vs.
THE EXPORT CONTROL COMMITTEE, respondent-appellee.
De la Cruz, Fernandez & Mate for appellant.
Office of the Solicitor General Ambrosio Padilla and Assistant Solicitor General Jose G. Bautista for appellee.
The Solicitor General has made a accurate exposition of the facts of the case. They may be summarized as follows: On August
28, 1952, petitioner requested permission from the Export Control Committee, created under section 2 of Republic Act No. 613
and composed of the Secretary of Agriculture and Natural Resources as Chairman, the Secretary of National Defense and the
Administrator of the Economic Coordination, as Members, to ship to his Hudson Sedan, Model 1949, Motor No. 48149039,
valued at P4,500, to Osaka, Japan, on board theS. S. President Wilson, "to be used in connection with his business thereat."
The respondent Committee approved the request on the same day, on condition that petitioner would file a bond equal to the
value of the car, to guarantee the return of the same in the Philippines within six months from the date of its shipment.
On August 29, 1952, petitioner posted with the Filipinas Compaia de Seguros a surety bond (Annex A) in the sum of P4,500 in
favor of the Republic of the Philippines (Bureau of Customs), guaranteeing that the Hudson Sedan car would be re-exported
back to the Philippines from Japan within six months from the execution of the bond. Accordingly, petitioner took the car in
question to Osaka, Japan, on August 29, 1952, but failed to bring it back to the Philippines as promised. Instead petitioner filed
two requests for extension of six months each to be followed to re-export the car back to the Philippines until March 1, 1954,
alleging that he was still on a business tour and it would be impracticable to return the car on time. Notwithstanding the two
extensions given him by the respondent the car in question was not brought back in the Philippines.
On February 24, 1954, Atty. Teotimo A. Roja, in behalf of the petitioner, requested the respondent to order the cancellation of the
surety bond of P4,500 that he and the Filipinas Compaia de Seguros (Bond No. 27914) had executed, alleging that it would be
impracticable and expensive to return the car to Manila, considering its dilapidated condition and utility in Japan, but the
respondent denied said request, though at its meeting held on February 24, 1954 it decided to reduce the liability under the bond
to P2,250.00 for the reason that this was the value that the car would have at the state it was then if it were brought back in the
Philippines, thus allowing a depreciation of 15 per cent each year.
On May 13, 1954, petitioner requested respondent for reconsideration of its resolution of February 24, 1954, alleging that: (1)
the Committee had no jurisdiction to imposed said penalty; and (2) granting, for the sake of argument that the Committee had
jurisdiction to impose said penalty, the penalty imposed was highly excessive and violative of the Constitutional prohibition
against excessive fines". Again this motion for reconsideration was denied by the respondent under date of June 30, 1954;
hence the institution of this petition in the Court of First Instance of Manila on July 6, 1954, which was answered by the Solicitor
General in due time. The case was then submitted on the stipulation embodying the facts aforementioned, and the Court
rendered decision on September 24, 1954. dismissing the petition for lack of merit, with costs against the petitioner. From this
decision the petitioner appealed to Us and in the instance his counsel maintains that the lower court erred:
1. In not finding that appellant's car in question is personal effect and therefore not subject to statutory or reglementary
prohibition against exportation;
2. In not sustaining appellant's claim that the bringing out of his car in the instant case did not constitute exportation;
3. In not finding that the respondent had acted without jurisdiction in requiring appellant to file a bond and later ordering
its forfeiture; and
4. In denying the petition for certiorari.

Section 3 of Republic Act No. 613, approved on May 11, 1951, authorizes the President "to control, curtail, regulate and/or
prohibit the exportation or re-exportation of materials, goods and things referred to in Section 2 of the Act and to issue rules and
regulations as would be necessary to carry out the provisions thereof". Section 2 of said Act prescribes in turn "that all applicants
for permit to export or re-export any of the articles mentioned in the preceeding section 1, should be filed before a Committee to
be composed of the Secretary of Agriculture and Natural Resources as Chairman, the Secretary of National Defense and the
Administrator of Economic Coordination as Members". Republic Act No. 613 further provides the following:
SEC. 1. In order to promote economic rehabilitation and development and to safeguard national security, it shall be
unlawful to any person, association or corporation to export or re-export to any point outside thePHILIPPINES
MACHINERIES AND THEIR SPARE PARTS, scrap metals, medicines, foodstuffs, abaca seedlings, gasoline, oil,
lubricants and military equipment or supplies suitable for military use without a permit from the President which may be
issued in accordance with the provisions of the next succeeding section.
In virtue of the power vested in him, the President issued on June 19, 1951, Executive Order No. 453, series of that year (47 Off.
Gaz. No. 6, p. 2793), section 2 whereof reads as follows:
SEC. 2. The exportation of all articles included in the list marked Annex A, hereto attached as an integral part of this
Order, is absolutely prohibited: Provided, however, That licenses issued or authority granted prior to the effectivity of
Republic Act No. 613, by the Interdepartmental Committee from February 28, 1951, by the Civil Aeronautics Board or
the Civil Aeronautics Administration and by the Sugar Quota Office on nonferrous metals pursuant to the Cabinet
Resolution of November 21, 1950, are valid and subsisting.
(The articles pertinent to this case that are included in the list marked Annex A referred to above as enumerated in Paragraph IV
of said annex which will be quoted hereafter).
The President, however, amended this Executive Order by another, No. 482, issued on October 31, 1951 (47 Off. Gaz., No. 10,
p. 5039), in the following manner:
SEC. 2. The exportation of all articles in the list marked Annex A, hereto attached as an integral part of this Order, is
absolutely prohibited; Provided, however, That in exceptionally meritorious cases and where the Committee is fully
satisfied that the overall economic and military requirements of the country are not prejudiced, such exportation may be
allowed subject to the provisions of Section 4 of this Order, (which refers only to applications concerning articles
included in the list marked Annex C and not in Annex A).
Because of the amendment made by Executive Order No. 482, the Hudson Sedan automobile herein involved was allowed by
the Committee to be exported to Osaka, Japan, with the obligation on the part of the plaintiff to report it back to the Philippines
from Japan within the period granted to him to do so, extensions included, which obligation he failed to fulfill. Naturally, he is in
duty bound to abide by the consequences of his failure and must pay the amount of the bond he posted, as ultimately reduced,
or P2,250. Plaintiff, however, contends that this car in question was his personal effect and, therefore, not subject to statutory or
reglementary prohibition against exportation. It seems, however, that plaintiff confuses the term "personal effects" with "property
of the person" or personal property". As pointed out by the Solicitor General:
The word "personal" used with "effects" much restrict its meaning (Child vs. Orton, 183, A. 709, 710-119 N. J. Eq. 438),
and certainly (that meaning, cannot be understanding without any qualifying words includes only such tangible property
as attends the person.
Among the articles the exportation of which is prohibited according to said Executive Order are:
IV. Imported Machinery (light and heavy), mechanical, electrical, agricultural, construction, engineering,
andtransportation equipment of all types, including surplus equipment, spare parts, accessories, wires and other allied
articles, except those already approved by the Bureau of Customs or NICA or order Government agencies as well as
licenses covered in section 2 herein.
It is undisputed that petitioner's car is covered with the term "transportation equipment of all types" and not as "personal
effects", as counsel would want to classify it. Petitioner's car was admittedly brought by him to Osaka, Japan, "to be
used in connection with his business" (p. 16, Record on Appeal) , and that when he asked for extension of time to reexport the motor vehicle back to the Philippines, his reason was that he was still on a business tour, (p. 17, Record on
Appeal).
If by personal effects of passengers in transit transportation equipment used in one's business were included, then it
would be a simple matter to defeat the intention of the law, that is, to promote the economic and industrial development
of the country. To seal any possible loophole, the Executive Order made it clear that exportation of all articles included in
the list is prohibited irrespective of the use for which they were intended.
The cardinal rule in the interpretation of law is to ascertain and give effect to the legislative intent (Roldan and
Daza vs. Villaroman (1949), 69 Phil. 12), and the intention of the Legislature in enacting a law is part of the law itself, and is to
be followed and applied, where ascertainable, in construing apparently conflicting provisions (Altaban vs. Masbate Consolidated
Mining Co., et al. (1940) 69 Phil. 696). These principles of statutory construction are more true in the case at bar because the
wording of the law is too plain and clear.

On the other hand, the Solicitor General further contends that contrary to the assertions of plaintiff's counsel, the respondent is
expressly authorized by the provisions of section 6 of said Executive Order No. 453 to require the petitioner to file a bond in this
case to insure either the reaching of goods to their intended destination or its return to the Philippines, and section 4 of Republic
Act No. 613 provides that in case of a violation of said Acts which regulates, controls and/or prohibits certain exports from the
Philippines, the materials intended for export in violation of said Act and the rules and regulations thereunder, shall be
confiscated by and forfeited to the Government. Consequently, if the petitioner violated the provisions of said Executive Orders
by not returning or re-exporting back to the Philippines the automobile in question, and this property cannot be confiscated
because it is beyond the jurisdiction of this country, it would appeal to reason that plaintiff should pay the equivalent value of the
automobile which he placed beyond the reach of the Government to the Philippines, That is why he was required to give the
bond and should pay the Government for the automobile that it should not seized and forfeit.
But even assuming arguendo, that the respondent were not authorized to require the petitioner to file the bond in question,
nevertheless, the Republic of the Philippines being a political entity has an incident to its sovereignty the capacity to enter into
contracts and take bonds in cases appropriate to the just exercise of its power through its instrumentalities or agencies
whenever, as in the instant case, such contracts or bonds are not prohibited by law, although the making of such contracts or the
taking of such bonds may not have been specifically prescribed by any pre-existing statute (Solicitor General's brief, p. 6-8).
Certainly petitioner could not have taken from the Philippines his automobile if he had not furnished the bond required from him
and which he voluntarily furnished. He had been enjoying the benefits which the bond intended to secure and now he cannot
come and allege that he is not bound by the terms of the bond. The present case has a legal aspect similar to the one We
solved in the case of Compaia General de Tabacos de Filipinas and S. S. Co. of 1912& S. S. Co. Svandoorg (A. P. Moller,
Maersk Line), petitioner, vs. The Collector of Internal Revenue, respondent, G.R. No. L-9071, promulgated January 31, 1957. It
appeared in that case:
That while the M/V Hulda Maersk, represented locally by Tabacalera, was moored alongside Manila's Pier no. 9, its
chief steward, Henry Anderson, took from its stores 30 cases of cigarettes of foreign manufacture, which he sold to two
persons in uniform for two thousand dollars ($2,000.00). With this help the cargo was surreptitiously unloaded and
withdrawn from the pier, import taxes unpaid. The Customs authorities somehow discovered the anomaly, and promptly
investigated. Anderson admitted the sale; Captain Jansen, the ship's master, swore that the cigarettes belonged to the
ship's stores and declared their willingness to pay the corresponding duties upon presentation of the bill to their local
agents, the Tabacalera. The latter in turn, thru its Acting Manager of the Shipping Department Edward N. Bosch, who
was present during the investigation, signed the following guaranty:
The Commission of Customs
Manila
DEAR SIR:
We hereby confirm our agreement to pay immediately upon presentation of the corresponding bills, all taxes
due on 30 (Thirty) Cases Chesterfield, Lucky Strike and Camel cigarettes, each case containing fifty cartoons
of two hundred cigarettes each, removed from the above vessel.
Accordingly, on March 5, 1952, upon receipt of the corresponding bill, Tabacalera paid the amount of P6,613.05
representing specific taxes on the aforesaid cigarettes. Thereafter it submitted a request for refund, which the Collector
of Internal Revenue denied, and the Court of Tax Appeals likewise denied.
In the cited case Tabacalera's demand for returned was made after the ship Hulda Maersk and the persons involved in the
attempted smuggle had already left the Philippines, a fact that the Bureau of Customs would not have allowed to happen if the
Tabacalera had not agreed to pay the taxes due upon presentation of the bill, and We affirmed the decision of the Board of Tax
Appeals rendered in the case.
Wherefore, on the strength of the foregoing considerations and finding no error in the decision appealed from, We hereby
affirmed the same, with costs against plaintiff. It is so ordered.

EN BANC
[G. R. No. 5013. March 11, 1909.]
JEREMIAH J. HARTY, Roman Catholic Archbishop of Manila, Plaintif-Appellee, vs. THE
MUNICIPALITY OF VICTORIA, Province of Tarlac, Defendant-Appellant.
DECISION
TORRES, J.:
On January 17, 1908, the representative of Mgr. Jeremiah J. Harty, archbishop of the Roman
Catholic Church, as the legal administrator of the properties and rights of the Catholic Church
within the archbishopric of Manila, filed a written complaint in the Court of First Instance of Tarlac
against the municipality of Victoria, alleging that the parish of the said town had been and was
then the owner of a parcel of land within the said municipality, known as the plaza of the church
of Victoria; that it had acquired said parcel of land more than sixty years previously, and had
continued to possess the same ever since up to 1901, in which year the Defendantmunicipality
unlawfully and forcibly seized the said property, claiming to be entitled thereto and retaining it to
the present day. For the purposes of the complaint, a description of the metes and bounds of the
land in question was set forth in the writing, and Plaintif prayed that, in view of what was therein
set forth, judgment be entered holding that the said land was the property of the parish of
Victoria, of the Roman Catholic Apostolic Church, and that the Defendant be ordered to vacate
the same and to pay the costs of the action.
The Defendant municipality answered the complaint through its attorney and offered a general
denial of all the facts stated therein, especially of those numbered 4, 5, 6, and 7; in special
defense it alleged that the plaza described in No. 4 of the complaint was founded when the sitio
denominated Canarum, a barrio of the town of Tarlac, was converted into a civil town in 1855;
that the parish of Tarlac was established many years after the civil town, and that therefore, it
neither had then, nor has now any title to the plaza claimed, and that the complaint injured
theDefendant, and for this reason it prayed that judgment be entered absolving the Defendant of
the complaint with costs and damages against the Plaintif.
Evidence was adduced by both parties, and the documents exhibited, to one of which
the Plaintifobjected, were made of record; the trial court rendered judgment on the 15th of June,
1908, holding that the parish of Victoria of the Roman Catholic Apostolic Church, had a better
right to the possession of the land described in the complaint, and sentenced the Defendant to
vacate the same and to pay the costs. To said judgment the representative of the Defendants

excepted and moved for a new trial on the ground that it was contrary to the weight of the
evidence, and he notified the court that, if his motion were overruled, he would appeal to the
Supreme Court. The motion for a new trial was overruled; the Defendant excepted, and
presented the corresponding bill of exceptions which, after receipt of a copy had been
acknowledged by the adverse party, was approved. On the 1st of September last,
the Appellant was ordered to furnish bond in the sum of P1,000 to insure the fulfillment of the
judgment in the event that it should be totally or partially affirmed. To said order
the Defendant excepted, but furnished the bond as directed by the court.
In the view of the nature of the action brought by the Plaintif against the municipality of Victoria,
Province of Tarlac, the question that has arisen between the contending parties consists only in
determining who is the owner and proprietor of the parcel of land that surrounds the parish
church of the said town, and which is called the public plaza of the same.
Article 339 of the Civil Code reads:

chanrobles virt ualawlibrary

Property of public ownership is:

chanrobles virt ualawlibrary

1.
That destined to the public use, such as roads, canals, rivers, torrents, ports, and
bridges constructed by the State, and banks, shores, roadsteads, and that of a similar
character.
Article 344 of said code also reads:

chanrobles virtualawlibrary

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 the said towns or provinces.
From the evidence presented by both parties it appears that the town of Victoria, which was
formerly only a barrio of the town of Tarlac and known as Canarum, was converted into a town in
1855, and named Victoria; to this end they must have laid out the streets and the plaza of the
town, in the center of which were situated the church and parish house from the
commencement, and at the expiration of about twelve years the parish of said town was
constituted and the priest who was to perform the office of curate was appointed; that from the
very beginning, the large tract of land that surrounds the church and the parish house was
known as a public plaza, destined to the use of all the residents of the recently founded town;
public performances and religious processions were held thereon without hindrance either on the
part of the local authorities or of the curate of said town.
It must be assumed that the principal residents of the old barrio, being interested in the
conversion of the barrio into a civil town, arranged in such a way that the barrio, as the center of
the future town which was subsequently called Victoria, should have streets and a public plaza
with its church and parish house, and also a tribunal or building destined for the use of the
municipality and the local official at the time called the gobernadorcillo and later on capitan
municipal, as has occurred in the foundation of all the towns in these Islands, under the old
administrative laws.
It may be true that the father of the witness Casimiro Taedo, who owned the space of land
where the church and parish house were erected, had voluntarily donated it to the Catholic
Church, the only known at the time, but proper proof is lacking that the donation affirmed by the
said Tanedo comprehended the whole of the large tract which at the present time constitutes the
plaza of the town.
It was a custom observed by all the towns established administratively in these Islands under the
old Laws of the Indies, that on their creation, a certain amount of land was always reserved for
plazas, commons, and special and communal property, and as it is unquestionable that the said
large space of land was left vacant in the center of the town of Victoria when it was constituted
as a civil town, more than twelve years prior to the appointment of a permanent curate therein,
there are good grounds to suppose that the late Vicente Tanedo donated the land now occupied
by the church and parish house in said municipality for religious purposes, or to the church, but
not to the parish curate, because at the time there was no curate at the new town of Victoria.
Even though all the remaining space of land which now forms the great plaza of the town of
Victoria had been owned by the said Tanedo, it must be presumed that he waived his right
thereto for the benefit of the townspeople, since from the creation or establishment of the town,
down to the present day, all the residents, including the curate of said town, have enjoyed the
free use of said plaza; it has not been satisfactorily shown that the municipality or the principales
of the town of Victoria had donated the whole of said land to the curate of Victoria or to the
Catholic Church, as alleged, nor could it have been so donated, it being a public plaza destined
to public use and was not private ownership, or patrimony of the town of Victoria, or of the
Province of Tarlac.
It should be noted that, among other things, plazas destined to the public use are not subject to
prescription. (Art. 1936, Civil Code. )
cralaw

That both the curates and the gobernadorcillos of the said town procured fruit trees and plants to
be set out in the plaza, does not constitute an act of private ownership, but evidences the public

use thereof, or perhaps the intention to improve the and embellish the said plaza for the benefit
of the townspeople.
Certain it is that the Plaintif has not proven that the Catholic Church or the parish of Victoria was
the owner or proprietor of the said extensive piece of land which now forms the public plaza of
said town, nor that it was in possession thereof under the form and conditions required by law,
inasmuch as it has been fully proven that said plaza has been used without let or hindrance by
the public and the residents of the town of Victoria ever since its creation. For the above reasons
it is our opinion that the judgment appealed from should be reversed, and that it should be held,
as we do hereby hold, that the whole of the land not occupied by the church of the town of
Victoria and its parish house, is a public plaza of the said town, of public use, and that in
consequence thereof, the Defendant is absolved of the complaint without any special ruling as to
the costs of both instances.

EN BANC

G.R. No. L-3279 March 11, 1908

THE CITY OF MANILA, petitioner-appellee, vs. THE INSULAR GOVERNMENT, ET AL., respondents-appellants.
Attorney-General Araneta for the Government.
Modesto Reyes for appellee.
JOHNSON, J. :chanrobles virtual law library
On the 11th day of November, 1904, the city of Manila, through its attorney, filed a petition in the Court of Land Registration for
the registration of a certain parcel or tract of land described by metes and bounds in the first paragraph of said petition as
follows:

A parcel of land situated in Paco, a district of this city. It is bounded on the north by properties belonging to Chas. M. Stone,
Prudencio de Leon, Asuncion Ventura, Petra Carnero y Garcia, Evaristo Roxas and brothers, Silvestra Sarmiento, Evaristo
Gonzalez y Valdes, Mariano Vergara, Bernardo Yalon, Julio Gonzaga, Leoncia Maalac, Geronimo Morales, Antonio Bautista,
Doroteo Palacio, and Gualberta de los Reyes; on the south and on the east by property owned by Miguel Fabie and brothers,
and on the west by properties belonging to Gualberta de los Reyes and Toribia Cruz. Beginning at the intersection of the
northern line of Calle Real and the eastern line of Calle Peafrancia (new street lines), approved on 21st December, 1903, and
17th February, 1904, respectively, by the Municipal Board, thence S. 4 degrees and 8 minutes E., 157.09 meters to the point
marked "0;) thence N., 79 degrees 37 minutes W., 1830 meters along the southern boundary of the property owned by Evaristo
Gonzalez Valdes and Mariano Vergara to point No. 1; thence N. 11 degrees 25 minutes E., 6.20 meters along the western
boundary of the property belonging to Mariano Vergara to point No. 2; thence N. 86 degrees 38 minutes W., 29.60 meters along
the southern boundary of the property owned by Mariano Vergara to point No. 3; thence N. 4 degrees 14 minutes E., 22.49
meters along the western boundary of the property of Mariano Vergara, to point No. 4; thence No. 11 degrees 42 minutes W.,
5.71 meters along the western boundary of the property belonging to Bernardo Yalon to point No. 5; thence s. 89 degrees 50
minutes W., 78.00 meters to a stone monument along the southern boundary of the property owned by Julio Gonzaga, Leoncia
Maalac, Geronimo Morales, to point No. 6; thence N. 89 degrees 22 minutes W., 24.17 meters along the southern boundary of
the property belonging to Antonio Bautista, to point No. 7; thence S. 55 degrees 56 minutes W., 16.81 meters along the
southeastern boundary of the property owned by Doroteo Palacio to point No. 8; thence N. 86 degrees 49 minutes W., 25.50
meters along the southern boundary of the properties owned by Doroteo Palacio and Gualberta de los Reyes to point No. 9;
thence S. 15 degrees 30 minutes W., 16.47 meters to a stone monument, along the eastern boundary of the property owned by
Gualberta de los Reyes and Toribia Cruz to point No. 10; thence S. 7 degrees 35 minutes W., 14.16 meters along the eastern
boundary of the property owned by Toribia Cruz to point No. 11; thence S. 75 degrees 39 minutes E., 14.37 meters along the
northern boundary of the property of Miguel Fabie and brothers to point No. 12; thence N. 88 degrees 3 minutes E., 45.35
meters along the northern boundary of the property belonging to Miguel Fabie and brothers to point No. 13; thence S. 89
degrees 11 minutes E., 70.15 meters to a stone monument to Miguel Fabie and brothers to point No. 14; thence S. 86 degrees
33 minutes E., 85.07 meters to a stone monument along the northern boundary of the property of Miguel Fabie and brothers to
point No. 15; thence N. 83 degrees 8 minutes E., 14.49 meters along the northern boundary of the property owned by Miguel
Fabie and brothers to point no. 16; thence N. 47 degrees E., 158.35 meters along the northwestern boundary of Miguel Fabie
and brothers to point No. 17; thence N. 70 degrees 22 minutes W., 40.74 meters along the southern boundary of the properties
owned by Charles M. Stone, Prudencio de Leon, and Asuncion Ventura (Looban) to point No. 18; thence N. 83 degrees 22
minutes W., 7.38 meters along a stone fence and the southern boundary of the properties belonging to Asuncion Ventura
(Looban) and Petra Garcia to point No. 19; thence S. 30 degrees 34 minutes W., 21.12 meters along a stone fence and the
western boundary of the property owned by Petra Carnero y Garcia to point No. 20; thence S. 74 degrees 58 minutes W., 8.70
meters along the northern boundary of the property of Evaristo Roxas and brothers to point No. 21; thence s. 22 degrees 4
minutes W., 34.75 meters along the eastern boundary of the property owned by Evaristo Roxas and brothers to point 22; thence
N. 68 degrees 47 minutes W., 26.40 meters along the southern boundary of the property belonging to Evaristo Roxas and
brothers to point No. 23; thence S. 68 degrees 47 minutes W., 85.61 meters along the eastern boundary of the properties owned
by Silvestra Sarmiento and Evaristo Gonzalez y Valdes to point No. 24; thence N. 84 degrees 58 minutes W., 12.85 meters to a
stone monument along the southern boundary of the property owned by Evaristo Gonzalez Valdes to point No. 25; thence N. 79
degrees 37 minutes W., 11.10 meters along the southern boundary of the property owned by Evaristo Gonzalez Valdes to point
No. 0, the point of the beginning. Containing 10,472.23 square meters of extension. Bearings magnetic.
The said city alleged that it was the absolute owner of the said land; that said land was assessed by the city of Manila in the sum
of $1,780, United States currency; that there existed no liens of whatever character against said land; that the land was
unoccupied; that the said city obtained title to the said land by reason of being the successor to all the rights and actions of the
old city of Manila ( ayuntamiento de Manila), to which said property formerly belonged.chanroblesvirtualawlibrary chanrobles
virtual law library
To this petition of the petitioner, the Insular Government presented the following opposition to the registration of said land:
The Solicitor-General, representing the Insular Government, appears before the court, and states:chanrobles virtual law library
I. That the city of Manila, represented by its attorney, Modesto Reyes, requests that, in compliance with the Land Registration
Act, a parcel of land situated in Paco, a district of this city, of which it claims to be the absolute owner, and the description of
which is specified in the petition be inscribed in its name.chanroblesvirtualawlibrary chanrobles virtual law library
II. That the land in question is the property of the Government of the United States under the control of the Insular
Government.chanroblesvirtualawlibrary chanrobles virtual law library
III. That by virtue thereof, the Solicitor-General opposes the inscription asked for, and requests the court to deny the petition with
the costs.
To this petition of the petitioner one Geronimo Morales also presented the following opposition to the registration of a portion of
the land described in the second paragraph of said petition:
Now comes the undersigned before this court and says:chanrobles virtual law library
1. That the city of Manila, by its attorney, Modesto Reyes, has, in conformity with the provisions of the Land Registration Act,
applied for the registration of a certain parcel of land located in the district of Paco, of this city, of which it alleges sole and
absolute ownership, and the description of which is included in the application.chanroblesvirtualawlibrary chanrobles virtual law
library

2. That the plan and description of the said land as they appear in the petition are incorrect, for there is included in the same a
part of a building lot belonging to the undersigned, and situated in the barrio of Rosario of said district, with an area of 84 meters
more or less, as will be seen in the plan to be filed later.chanroblesvirtualawlibrary chanrobles virtual law library
3. Therefore, the undersigned files his opposition to the registration applied for, as far as it has any bearing on the building lot of
the undersigned which is included in the plan and description of the applicant, and this honorable court is requested to deny the
application as far as it relates to the said building lot, with the costs against the petitioner.
After the presentation of the petition on the part of the said petitioner, one of the examiners of titles of the Court of Land
Registration made an examination of the title claimed by the petitioner and made the following report to the judge of the said
court of Land Registration.
The examiner of titles of this judicial district, after going over the papers in the case of the city, represented by its attorney,
Modesto Reyes, states that:chanrobles virtual law library
1. The application filed by the city of Manila, is not accompanied by any document relative to its alleged ownership, but sets forth
that said city, as the successor in rights and interest of the former ayuntamiento de Manila, is the owner of the land described in
the petition above referred to.chanroblesvirtualawlibrary chanrobles virtual law library
2. In the office of the register of deeds there is no record of any act or contract opposing the claim of the applicant; nor does
there appear, from the investigations held, any fact contrary to those quoted in the application. The present limits of the land in
question may be held as correct.chanroblesvirtualawlibrary chanrobles virtual law library
3. The city of Manila, in order to acquire title to the land above mentioned, must show the ownership which the former
ayuntamiento had over said land.
OPINION.
Based on the above report, the undersigned is of the opinion that the title of the city of Manila, represented by its attorney,
Modesto Reyes, is defective and can not be registered.chanroblesvirtualawlibrary chanrobles virtual law library
Manila, December 7, 1904.
AGUEDO VELARDE.
On the 14th of March, 1905, the cause was duly brought on for trial and during the trial of said cause the petitioner attempted to
establish by proof the following factschanrobles virtual law library
First. That said land formerly belonged to the old city of Manila ( ayuntamiento de Manila) under the sovereignty of
Spain.chanroblesvirtualawlibrary chanrobles virtual law library
Second. That the present city of Manila is at present the owner of said land by virtue of being the successor of the old city of
Manila.chanroblesvirtualawlibrary chanrobles virtual law library
Third. That the old city of Manila from the year 1894 until the change of sovereignty in the Philippine Archipelago had rented said
land, had received rents therefor, and in a general way had administered the same.chanroblesvirtualawlibrary chanrobles virtual
law library
The respondent, the Central Government of the Philippine Islands, presented no proof whatever in opposition to the claim of the
petitioner, relying the fact that the petitioner was not entitled to have said land registered, for the following reasons:chanrobles
virtual law library
First. That the land in question was public land, belonging to the Central Government; that the same had never been granted to
aNy person or corporation or municipality by the Spanish Government.chanroblesvirtualawlibrary chanrobles virtual law library
Second. That the city of Manila, neither the present nor the old city, was the owner of said land.chanroblesvirtualawlibrary
chanrobles virtual law library
On the 15th day of February, 1906, the judge of the said court filed his decision by which he denied the registration of the land
claimed by the said Geronimo Morales and granted the registration of the rest of said described property in favor of the said city.
Against this order allowing the registration of said tract of land the respondent duly excepted and gave notice of his intention to
appeal.chanroblesvirtualawlibrary chanrobles virtual law library
The Attorney-General, representing the respondent in this court, made the following assignment of error:
There is nothing in the record which justifies the conclusion of the judgment of the court below, to the effect that the land in
question is owned by the city of Manila.

The only proof presented during the trial by the petitioner which tended in any way to support its claim was that in the year 1894
and thereafter the old city of Manila ( ayuntamiento de Manila) rented said land and received the rent therefor, and that the
present city of Manila succeeded to the rights of said old city. No proof was offered by the plaintiff, documentary or other, to
show in any way by what right said old city exercised this right of control over said property.chanroblesvirtualawlibrary
chanrobles virtual law library
We are of the opinion, and so hold, that the mere renting of property and receiving the rent therefor can not, of themselves, in
the absence of other proof, support a claim of ownership of such property.chanroblesvirtualawlibrary chanrobles virtual law
library
It has been argued that every pueblo organized by the Spanish Government in its insular possessions has had granted to it, as a
matter of course, certain lands for public purposes, such as public commons, pasture lands, etc. Our attention has not been
called to any law or royal decree in which this contention is supported and we have searched in vain to find such a provision.
Upon the contrary we have found a royal decree of the - day of - showing that the people of the pueblo of Dilao (now the barrio
of Paco in which this very land is located) had petitioned for a grant of a comunal, etc., and which was
denied.chanroblesvirtualawlibrary chanrobles virtual law library
One of the earliest provisions of law relating to the rights of pueblos in the insular possessions of the Spanish Government is
that de las reducciones, y pueblos de indios (settlements and pueblos of natives) of December 1, 1573, as amended by that of
the 10th of October, 1618, found in Law VIII, Title III of Book VI of the Recopilacion de las Leyes de Indias, and which it as
follows:
The sites whereon the pueblos and settlements are to be built must have water facilities, lands, forests, entrances and exits,
lands for cultivation, and an exido (common, public land) one league long, wherein the natives may keep their cattle, without
mingling them with those owned by Spaniards.
This provision of law seems to have been amplified in article 53 of the Ordinances of Good Government, dated February 26,
1768, and extended to the pueblos of the Philippine Islands by proclamation on the 11th day of September, 1801. This article
clearly indicates that these lands should be designated by the Spanish Government for the use and benefit de las reducciones, y
pueblos de los indios. Said article 53 is in part as follows:
It is held to be comunal (common public) the territory of the settlements and pueblos inhabited by natives, to which, from the
time of their foundation or organization, the necessary lands were alloted in conformity with Law VII, Title III, Book VI of the
Recopilacion de las Leyes de Indias, etc.
This article 53 clearly indicates the following:chanrobles virtual law library
First. That the King continued to be the absolute owner of said lands;chanrobles virtual law library
Second. That the pueblos were only given the mere usufruct of the same;chanrobles virtual law library
Third. That the King might at any time annul such grant; andchanrobles virtual law library
Fourth. That a designation, of the particular land so granted, was a necessary prerequisite for the holding of the same for the
purposes indicated, by the said pueblo. (See Autos Acordados, Vol. I, pp. 29, 48.)chanrobles virtual law library
As a further confirmation of the fact that the pueblos of the Philippine Islands did not have, as a matter of right, a comunal, etc.,
unless the same had been expressly granted, we find the following provision in the royal decree of February 28, 1883, which is
as follows:
On the recommendation of the minister for the colonies, and in conformity with the opinion submitted by the council of the state,
sitting in banc, I hereby decree the following:chanrobles virtual law library
ARTICLE 1. The legua comunal for the Philippine Islands, under the provisions of Law VIII, Title III, Book VI, of the Recopilacion
de Indias, as far as the pueblos already established and those which may be established thereafter are concerned, shall be of
an area of 20,000 feet, equivalent to a league of 20 degrees, without regard to the geometrical figure resulting from the
topography of the locality, or to conditions relating to property rights over the land itself or over land adjoining the
same.chanroblesvirtualawlibrary chanrobles virtual law library
ART. 2. The pueblos not having said land alloted to them may apply and obtain the same by means of the corresponding
proceedings.chanroblesvirtualawlibrary chanrobles virtual law library
ART. 3. When the conditions so require, the pueblos may institute proceedings to obtain an extension of said comunal land, in
order that the latter may be in keeping with the number of inhabitants, the number of heads of each pueblo. Given at the palace,
on February 28, 1883.
Following this royal decree we have the superior decreto of the 1st of August, 1883, relating to the legua comunal, with the
following provisions:

Legua comunal. - In order to comply with and carry out the provisions of the royal decree of February 28 of the current year,
published in the Gaceta de Manila on June 28 last, and relating to the legua comunal, on the recommendation of the direccion
general de administracion civil, I hereby order that the following regulations be observed:chanrobles virtual law library
1. The provincial chiefs shall take special care to inform the gobernadorcillos of the towns under their control of the decree
relating to the legua comunal, making them understand that the superficial extension to be occupied by the same is that
corresponding to a square, the sides of which measure 20,000 feet, equivalent to a square league, ( de veinte al drado), and
that the land should be uncultivated or untilled.chanroblesvirtualawlibrary chanrobles virtual law library
2. The towns not having said portion of land assigned may apply for the same to this central government through the chief of the
province or district, inclosing with the petition a report of the principalia, stating the said circumstance and as many particulars as
may exist in their archives regarding the matter.chanroblesvirtualawlibrary chanrobles virtual law library

3. The said documents shall be forwarded to the direccion general de administracion civil, through the provincial chief, and the
said office, upon the information from the bureau of forestry, shall recommend to me what it may deem
proper.chanroblesvirtualawlibrary chanrobles virtual law library
4. After the " legua comunal" has been granted by this Government, the bureau of forestry shall proceed to the setting up of the
boundary marks of the same, executing a certificate of the land, which, after being signed by the officer conducting the
proceedings and by the principalia of the town, will be submitted for my approval through the direccion general de administracion
civil.chanroblesvirtualawlibrary chanrobles virtual law library
5. For the legua comunal uncultivated land will be selected, whenever possible, which may be in proper condition for the pasture
of cattle and cultivation of building timber and the necessary industries to meet the requirements of the
inhabitants.chanroblesvirtualawlibrary chanrobles virtual law library
6. In order to increase the said communal land, when the requirements of the towns may demand, it will be necessary to institute
new proceedings, which will be annexed to a statement signed by the principalia, showing the number of the inhabitants of the
town, the kind and number of the extension of the lands which, bearing in mind the local conditions, they may deem necessary
to meet the requirements of the former and nourishment for the latter.chanroblesvirtualawlibrary chanrobles virtual law library
7. These statements will be forwarded to the direccion general by the chief of the province, together with his opinion, in which he
will sTate whether or not he considers the petition to be unreasonable.chanroblesvirtualawlibrary chanrobles virtual law library
8. The offices under the department of finance will furnish the direccion general de administracion with the necessary documents
for verifying the truth of the declarations made by the principalias of the towns, regarding the number of the inhabitants and
heads of cattle.chanroblesvirtualawlibrary chanrobles virtual law library
9. The direccion general de administracion civil, with the report of the bureau of forestry and, should it be deemed necessary, of
the board of agriculture, shall recommend to me the extension to be finally marked for the legua
comunal.chanroblesvirtualawlibrary chanrobles virtual law library
10. After the area of the land has been determined by this general government, the bureau of forestry shall proceed with the
appointment and the setting of marks of the new communal land, a certificate being executed in the same form as previously
stated.chanroblesvirtualawlibrary chanrobles virtual law library
11. The expenses arising from the proceedings, as well as those arising from the setting up of boundary marks of the legua
comunal and its final establishment, must be paid by the town to which the concession has been granted. (Gazette No. 42,
August 11.)
By the royal decree of the 23rd of December, 1870, it was made necessary by monuments or otherwise to mark the division
lines of the different pueblos of the Philippine Islands. ( Gaceta de Madrid, February 24.)chanrobles virtual law library
By the royal order of the 17th of January, 1885, it was provided that, when a pueblo should show to the Government of the
Philippine Islands that its legua comunal was insufficient, it might, upon petition, have such lines increased. ( Gaceta de Madrid,
March 15, 1885.)chanrobles virtual law library
The royal decree of the 19th of May, 1893, relating to the municipal government ( Gaceta de Madrid, May 22, 1893) contains no
provisions with reference to the granting to pueblos of the legua comunal, etc.chanroblesvirtualawlibrary chanrobles virtual law
library
The question of the right of pueblos in the insular possessions of the Spanish Government to public lands has come before the
Supreme Court of the United States several times in its relation to pueblos in the territory acquired by the United States from the
King of Spain.chanroblesvirtualawlibrary chanrobles virtual law library
In the case of Grisar vs. McDowell (6 Wallace, 363, 373) Justice Field in discussing this question said:

These laws provided for the assignment to the pueblos, for their use and the use of their inhabitants, of land not exceeding in
extent 4 square leagues. Such assignment was to be made by the public authorities of the Government upon the original
establishment of the pueblo, or afterwards upon the petition of its officers or inhabitants; and the land to be measured off in a
square or prolonged form, according to the nature and condition of the country. All lands within the general limits stated, which
had previously become private property or were required for public purposes, were reserved and excepted from the
assignment.chanroblesvirtualawlibrary chanrobles virtual law library
Until the lands were thus definitely assigned and measured off, the right or claim of the pueblo was an imperfect one. It was a
right which the Government might refuse to recognize at all, or might recognize in a qualified form; it might be burdened with
conditions, and it might be restricted to less limits than the 4 square leagues, which was the usual quantity assigned.
In the case of United States vs. Santa Fe (165 U. S., 707), in which this same question was involved, Justice White of the
Supreme Court of the United States said:
It can not be doubted that under the law of Spain it was necessary that the proper authorities should particularly designate the
land to be acquired by towns or pueblos before a vested right or title to the use thereof could arise.
Elizondo, in his work entitled Practica Universal Forense (vol. 5, p. 226), makes the following statement relating to the question
presented here:
There is nothing whatever designated by law as belonging to towns, other than that which by royal privilege, custom, or contract
between man and man is granted to them, so that although there be assigned to the towns at the time of their constitution
territorio or pertinencias, which may be common to all the residents, without each one having the right to use them separately, it
is a prerogative reserved to the sovereigns to divided the terminos of the provinces and towns, assigning to these the use and
enjoyment, but the domain remaining in the sovereigns themselves.
Chief Justice Fuller, speaking for the court in the case of United States vs. Sandoval and in the case of Morton vs. United States
(167 U.S., 278, 297), said:
"Under the laws of the Indies, lands not actually allotted to setters remained the property of the King, to be disposed of by him or
by those on whom he might confer that power. As Mr. Hall says (Chap. VII, 122): "The fee of the lands embraced within the
limits of pueblos continued to remain in the sovereign, and never in the pueblo as a corporate body."
The petitioner herein not having presented proof showing that the land in question had been granted to it by the former
sovereign in these Islands, and not having shown that it was entitled to said lands by virtue of some law of the present sovereign
of these Islands, the Court of Land Registration was not empowered to grant the registration of said lands in favor of said
petitioner. The judgment, therefore, of the lower court is hereby reversed. So ordered.chanroblesvirtualawlibrary chanrobles
virtual law library.

Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. L-24950

March 25, 1926

VIUDA DE TAN TOCO, plaintiff-appellant,

vs.
THE MUNICIPAL COUNCIL OF ILOILO, defendant-appellee.
Arroyo & Evangelista for appellant.
Provincial Fiscal Borromeo Veloso for appelle.
VILLAMOR, J.:
It appears from the record that the widow of Tan Toco had sued the municipal council of Iloilo for the amount of P42,966.40,
being the purchase price of two strips of land, one on Calle J. M. Basa consisting of 592 square meters, and the other on Calle
Aldiguer consisting of 59 square meters, which the municipality of Iloilo had appropriated for widening said street. The Court of
First Instance of Iloilo sentenced the said municipality to pay the plaintiff the amount so claimed, plus the interest, and the said
judgment was on appeal affirmed by this court.1
On account of lack of funds the municipality of Iloilo was unable to pay the said judgment, wherefore plaintiff had a writ of
execution issue against the property of the said municipality, by virtue of which the sheriff attached two auto trucks used for
street sprinkling, one police patrol automobile, the police stations on Mabini street, and in Molo and Mandurriao and the concrete
structures, with the corresponding lots, used as markets by Iloilo, Molo, and Mandurriao.
After notice of the sale of said property had been made, and a few days before the sale, the provincial fiscal of Iloilo filed a
motion which the Court of First Instance praying that the attachment on the said property be dissolved, that the said attachment
be declared null and void as being illegal and violative of the rights of the defendant municipality.
Plaintiffs counsel objected o the fiscal's motion but the court, by order of August 12, 1925, declared the attachment levied upon
the aforementioned property of the defendant municipality null and void, thereby dissolving the said attachment.
From this order the plaintiff has appealed by bill of exceptions. The fundamental question raised by appellant in her four
assignments of error is whether or not the property levied upon is exempt from execution.
The municipal law, section 2165 of the Administrative Code, provides that:
Municipalities are political bodies corporate, and as such are endowed with the faculties of municipal corporations, to be
exercised by and through their respective municipal government in conformity with law.
It shall be competent for them, in their proper corporate name, to sue and be sued, to contract and be contracted with,
to acquire and hold real and personal property for municipal purposes, and generally to exercise the powers hereinafter
specified or otherwise conferred upon them by law.
For the purposes of the matter here in question, the Administrative Code does not specify the kind of property that a municipality
may acquire. However, article 343 of the Civil Code divides the property of provinces and towns (municipalities) into property for
public use and patrimonial property. According to article 344 of the same Code, provincial roads and foot-path, squares, streets,
fountains and public waters, drives and public improvements of general benefit built at the expense of the said towns or
provinces, are property for public use.

All other property possessed by the said towns and provinces is patrimonial and shall be subject to the provisions of the Civil
Code except as provided by special laws.
Commenting upon article 344, Mr. Manresa says that "In accordance with administrative legislation" (Spanish) we must
distinguish, as to the patrimonial property of the towns, "between that a common benefit and that which is private property of the
town. The first differs from property for public use in that generally its enjoyment is less, as it is limited to neighbors or to a group
or class thereof; and, furthermore, such use, more or less general, is not intrinsic with this kind of property, for by its very nature
it may be enjoyed as though it were private property. The third group, that is, private property, is used in the name of the town or
province by the entities representing it and, like and private property, giving a source of revenue."
Such distinction, however, is of little practical importance in this jurisdiction in view of the different principles underlying the
functions of a municipality under the American rule. Notwithstanding this, we believe that the principle governing property of the
public domain of the State is applicable to property for public use of the municipalities as said municipal is similar in character.
The principle is that the property for public use of the State is not within the commerce of man and, consequently, is inalienable
and not subject to prescription. Likewise, property for public of the municipality is not within the commerce of man so long as it is
used by the public and, consequently, said property is also inalienable.
The American Law is more explicit about this matter as expounded by Mcquilin in Municipal Corporations, volume 3, paragraph
1160, where he says that:
States statutes often provide the court houses, jails and other buildings owned by municipalities and the lots on which
they stand shall be exempt from attachment and execution. But independent of express statutory exemption, as a
general proposition, property, real and personal, held by municipal corporations, in trust for the benefit of their
inhabitants, and used for public purposes, is exempt.
For example, public buildings, school houses, streets, squares, parks, wharves, engines and engine houses, and the
like, are not subject to execution. So city waterworks, and a stock of liquors carried in a town dispensary, are exempt.
The reason for the exemption is obvious. Municipal corporations are created for public purposes and for the good of the
citizens in their aggregate or public capacity. That they may properly discharge such public functions corporate property
and revenues are essential, and to deny them these means the very purpose of their creation would be materially
impeded, and in some instances practically destroy it. Respecting this subject the Supreme Court of Louisiana
remarked: "On the first view of this question there is something very repugnant to the moral sense in the idea that a
municipal corporation should contract debts, and that, having no resources but the taxes which are due to it, these
should not be subjected by legal process to the satisfaction of its creditors. This consideration, deduced from the
principles of moral equity has only given way to the more enlarged contemplation of the great and paramount interests
of public order and the principles of government."
It is generally held that property owned by a municipality, where not used for a public purpose but for quasi private
purposes, is subject to execution on a judgment against the municipality, and may be sold. This rule applies to shares of
stock owned by a municipal corporation, and the like. But the mere fact that corporate property held for public uses is
being temporarily used for private purposes does not make it subject execution.
If municipal property exempt from execution is destroyed, the insurance money stands in lieu thereof and is also
exempt.
The members or inhabitants of a municipal corporation proper are not personally liable for the debts of the municipality,
except that in the New England States the individual liability of the inhabitant is generally maintained.
In Corpus Juris, vol 23, page 355, the following is found:
Where property of a municipal or other public corporation is sough to be subjected to execution to satisfy judgments
recovered against such corporation, the question as to whether such property is leviable or not is to be determined by
the usage and purposes for which it is held. The rule is that property held for public uses, such as public buildings,
streets, squares parks, promenades, wharves, landing places fire engines, hose and hose carriages, engine houses,
public markets, hospitals, cemeteries, and generally everything held for governmental purposes, is not subject to levy
and sale under execution against such corporation. The rule also applies to funds in the hands of a public officer.
Likewise it has been held that taxes due to a municipal corporation or country cannot be seized under execution by a
creditor of such corporation. But where a municipal corporation or country owns in its proprietary, as distinguished from
its public or governmental capacity, property not useful or used for a public purpose but for quasi private purposes, the
general rule is that such property may be seized and sold under execution against the corporation, precisely as similar
property of individuals is seized and sold. But property held for public purposes is not subject to execution merely
because it is temporarily used for private purposes, although if the public use is wholly abandoned it becomes subject to
execution. Whether or not property held as public property is necessary for the public use is a political, rather than a
judicial question.
In the case of City of New Orleans vs. Louisiana Construction Co., Ltd. (140 U. S., 654; 35 Law. ed., 556), it was held that a
wharf for unloading sugar and molasses, open to the public, was property for the public use of the City of New Orleans and was
not subject to attachment for the payment of the debts of the said city.

In that case it was proven that the said wharf was a parcel of land adjacent to the Mississippi River where all shipments of sugar
and molasses taken to New Orleans were unloaded.
That city leased the said wharf to the Louisiana Construction Company, Ltd., in order that it might erect warehouses so that the
merchandise upon discharge might not be spoiled by the elements. The said company was given the privilege of charging
certain fees for storing merchandise in the said warehouses and the public in general had the right to unload sugar and
molasses there by paying the required fees, 10 per cent of which was turned over to the city treasury.
The United States Supreme Court on an appeal held that the wharf was public property, that it never ceased to be such in order
to become private property of the city; wherefore the company could not levy execution upon the wharf in order to collect the
amount of the judgment rendered in favor thereof.
In the case of Klein vs. City of New Orleans (98 U. S., 149; 25 Law. ed., 430), the Supreme Court of the United States that a
public wharf on the banks of the Mississippi River was public property and not subject to execution for the payment of a debt of
the City of New Orleans where said wharf was located.
In this case a parcel of land adjacent to the Mississippi River, which formerly was the shore of the river and which later enlarged
itself by accession, was converted into a wharf by the city for public use, who charged a certain fee for its use.
It was held that the land was public property as necessary as a public street and was not subject to execution on account of the
debts of the city. It was further held that the fees collected where also exempt from execution because they were a part of the
income of the city.
In the case of Tufexis vs. Olaguera and Municipal Council of Guinobatan (32 Phil., 654), the question raised was whether for the
payment of a debt to a third person by the concessionaire of a public market, the said public market could be attached and sold
at public auction. The Supreme Court held that:
Even though a creditor is unquestionably entitled to recover out of his debtor's property, yet when among such property
there is included the special right granted by the Government of usufruct in a building intended for a public service, and
when this privilege is closely related to a service of a public character, such right of the creditor to the collection of a
debt owed him by the debtor who enjoys the said special privilege of usufruct in a public market is not absolute and may
be exercised only through the action of court of justice with respect to the profits or revenue obtained under the special
right of usufruct enjoyed by debtor.
The special concession of the right of usufruct in a public market cannot be attached like any ordinary right, because
that would be to permit a person who has contracted with the state or with the administrative officials thereof to conduct
and manage a service of a public character, to be substituted, without the knowledge and consent of the administrative
authorities, by one who took no part in the contract, thus giving rise to the possibility of the regular course of a public
service being disturbed by the more or less legal action of a grantee, to the prejudice of the state and the public
interests.
The privilege or franchise granted to a private person to enjoy the usufruct of a public market cannot lawfully be
attached and sold, and a creditor of such person can recover his debt only out of the income or revenue obtained by the
debtor from the enjoyment or usufruct of the said privilege, in the same manner that the rights of such creditors of a
railroad company can be exercised and their credit collected only out of the gross receipts remaining after deduction
has been made therefrom of the operating expenses of the road. (Law of November 12, 1896, extended to the overseas
provinces by the royal order of August 3, 1886.)
For the reasons contained in the authorities above quoted we believe that this court would have reached the same conclusion if
the debtor had been municipality of Guinobatan and the public market had been levied upon by virtue of the execution.
It is evident that the movable and immovable property of a municipality, necessary for governmental purpose, may not be
attached and sold for the payment of a judgment against the municipality. The supreme reason for this rule is the character of
the public use to which such kind of property is devoted. The necessity for government service justifies that the property of
public of the municipality be exempt from execution just as it is necessary to exempt certain property of private individuals in
accordance with section 452 of the Code of Civil Procedure.
Even the municipal income, according to the above quoted authorities, is exempt from levy and execution. In volume 1, page
467, Municipal Corporations by Dillon we find that:
Municipal corporations are instituted by the supreme authority of a state for the public good. They exercise, by
delegation from the legislature, a portion of the sovereign power. The main object of their creation is to act as
administrative agencies for the state, and to provide for the police and local government of certain designated civil
divisions of its territory. To this end they are invested with certain governmental powers and charged with civil, political,
and municipal duties. To enable them beneficially to exercise these powers and discharge these duties, they are clothed
with the authority to raise revenues, chiefly by taxation, and subordinately by other modes as by licenses, fines, and
penalties. The revenue of the public corporation is the essential means by which it is enabled to perform its appointed
work. Deprived of its regular and adequate supply of revenue, such a corporation is practically destroyed and the ends
of its erection thwarted. Based upon considerations of this character, it is the settled doctrine of the law that only the
public property but also the taxes and public revenues of such corporations cannot be seized under execution against

them, either in the treasury or when in transit to it. Judgments rendered for taxes, and the proceeds of such judgments
in the hands of officers of the law, are not subject to execution unless so declared by statute. The doctrine of the
inviolability of the public revenues by the creditor is maintained, although the corporation is in debt, and has no means
of payment but the taxes which it is authorized to collect.
Another error assigned by counsel for appellant is the holding of the court a quo that the proper remedy for collecting the
judgment in favor of the plaintiff was by way or mandamus.
While this question is not necessarily included in the one which is the subject of this appeal, yet we believe that the holding of
the court, assigned as error by appellant's counsel, is true when, after a judgment is rendered against a municipality, it has no
property subject to execution. This doctrine is maintained by Dillon (Municipal Corporations, vol. 4, par. 1507, 5th ed.) based
upon the decisions of several States of the Union upholding the same principle and which are cited on page 2679 of the
aforesaid work. In this sense this assignment of error, we believe, is groundless.
By virtue of all the foregoing, the judgment appealed from should be and is hereby affirmed with costs against the appellant. So
ordered.

PALANCA VS COMMONWEALTH
Section 1 of Republic Act 2056 is explicit in that "Any provision or provisions of law to the contrary notwithstanding, the
construction or building of dams, dikes ... which encroaches into any public navigable river, stream, coastal waters and any other
navigable public waters or waterways ... shall be ordered removed as public nuisance or as prohibited construction as herein
provided ... The record shows that the petitioners' fishpond permit was issued in 1948 while the Act took effect on June 3, 1958.
Therefore, the Secretary's more specific authority to remove dikes constructed in fishponds whenever they obstruct or impede
the free passage of any navigable river or stream or would cause inundation of agricultural areas (Section 2, Republic Act 2056)
takes precedence. Moreover, the power of the Secretary of Public Works to investigate and clear public streams from
unauthorized encroachments and obstructions was granted as early as Act 3708 of the old Philippine Legislature and has been
upheld by this Court in the cases of Palanca v. Commonwealth (69 Phil. 449) and Meneses v. Commonwealth (69 Phil. 647).
The same rule was applied in Lovina v. Moreno, (supra) Santos etc., et al. v. Secretary of Public Works and Communications (19
SCRA 637).
All in all, we find no grave abuse of discretion or an illegal exercise of authority on the part of the Secretary of Public Works and
Communications in ordering the removal of the encroachments designated as Nos. 1, 2, 3, 4 and 5 of Exhibit "A".

Republic of the Philippines

SUPREME COURT
Manila
EN BANC

G.R. No. L-20871 April 30, 1971

KER & CO., LTD., petitioner,
vs.
JOSE B. LINGAD, as Acting Commissioner of Internal Revenue, respondent.
Ross, Selph and Carrascoso for petitioner.
Office of the Solicitor General Arturo A. Alafriz, Solicitor Alejandro B. Afurong and Special Atty. Balbino Gatdula, Jr. for
respondent.

FERNANDO, J.:
Petitioner Ker & Co., Ltd. would have us reverse a decision of the Court of Tax Appeals, holding it liable as a commercial broker
under Section 194 (t) of the National Internal Revenue Code. Its plea, notwithstanding the vigorous effort of its counsel, is not
sufficiently persuasive. An obstacle, well-nigh insuperable stands in the way. The decision under review conforms to and is in
accordance with the controlling doctrine announced in the recent case of Commissioner of Internal Revenue v.

Constantino. 1 The decisive test, as therein set forth, is the retention of the ownership of the goods delivered to the

possession of the dealer, like herein petitioner, for resale to customers, the price and terms remaining subject to the
control of the firm consigning such goods. The facts, as found by respondent Court, to which we defer, unmistakably
indicate that such a situation does exist. The juridical consequences must inevitably follow. We affirm.
It was shown that petitioner was assessed by the then Commissioner of Internal Revenue Melecio R. Domingo the sum of
P20,272.33 as the commercial broker's percentage tax, surcharge, and compromise penalty for the period from July 1, 1949 to
December 31, 1953. There was a request on the part of petitioner for the cancellation of such assessment, which request was
turned down. As a result, it filed a petition for review with the Court of Tax Appeals. In its answer, the then Commissioner
Domingo maintained his stand that petitioner should be taxed in such amount as a commercial broker. In the decision now under
review, promulgated on October 19, 1962, the Court of Tax Appeals held petitioner taxable except as to the compromise penalty
of P500.00, the amount due from it being fixed at P19,772.33.
Such liability arose from a contract of petitioner with the United States Rubber International, the former being referred to as the
Distributor and the latter specifically designated as the Company. The contract was to apply to transactions between the former
and petitioner, as Distributor, from July 1, 1948 to continue in force until terminated by either party giving to the other sixty days'
notice. 2 The shipments would cover products "for consumption in Cebu, Bohol, Leyte, Samar, Jolo, Negros Oriental, and

Mindanao except [the] province of Davao", petitioner, as Distributor, being precluded from disposing such products
elsewhere than in the above places unless written consent would first be obtained from the Company. 3 Petitioner, as
Distributor, is required to exert every effort to have the shipment of the products in the maximum quantity and to promote
in every way the sale thereof. 4 The prices, discounts, terms of payment, terms of delivery and other conditions of sale
were subject to change in the discretion of the Company. 5
Then came this crucial stipulation: "The Company shall from time to time consign to the Distributor and the Distributor will
receive, accept and/or hold upon consignment the products specified under the terms of this agreement in such quantities as in
the judgment of the Company may be necessary for the successful solicitation and maintenance of business in the territory, and
the Distributor agrees that responsibility for the final sole of all goods delivered shall rest with him. All goods on consignment
shall remain the property of the Company until sold by the Distributor to the purchaser or purchasers, but all sales made by the
Distributor shall be in his name, in which the sale price of all goods sold less the discount given to the Distributor by the
Company in accordance with the provision of paragraph 13 of this agreement, whether or not such sale price shall have been
collected by the Distributor from the purchaser or purchasers, shall immediately be paid and remitted by the Distributor to the
Company. It is further agreed that this agreement does not constitute Distributor the agent or legal representative 4 of the
Company for any purpose whatsoever. Distributor is not granted any right or authority to assume or to create any obligation or
responsibility, express or implied, in behalf of or in the name of the Company, or to bind the Company in any manner or thing
whatsoever." 6
All specifications for the goods ordered were subject to acceptance by the Company with petitioner, as Distributor, required to
accept such goods shipped as well as to clear the same through customs and to arrange for delivery in its warehouse in Cebu
City. Moreover, orders are to be filled in whole or in part from the stocks carried by the Company's neighboring branches,
subsidiaries or other sources of Company's brands. 7 Shipments were to be invoiced at prices to be agreed upon, with the

customs duties being paid by petitioner, as Distributor, for account of the Company. 8 Moreover, all resale prices, lists,
discounts and general terms and conditions of local resale were to be subject to the approval of the Company and to
change from time to time in its discretion. 9 The dealer, as Distributor, is allowed a discount of ten percent on the net
amount of sales of merchandise made under such agreement. 10 On a date to be determined by the Company, the
petitioner, as Distributor, was required to report to it data showing in detail all sales during the month immediately
preceding, specifying therein the quantities, sizes and types together with such information as may be required for
accounting purposes, with the Company rendering an invoice on sales as described to be dated as of the date of
inventory and sales report. As Distributor, petitioner had to make payment on such invoice or invoices on due date with
the Company being privileged at its option to terminate and cancel the agreement forthwith upon the failure to comply with
this obligation. 11 The Company, at its own expense, was to keep the consigned stock fully insured against loss or damage
by fire or as a result of fire, the policy of such insurance to be payable to it in the event of loss. Petitioner, as Distributor,
assumed full responsibility with reference to the stock and its safety at all times; and upon request of the Company at any
time, it was to render inventory of the existing stock which could be subject to change. 12 There was furthermore this
equally tell-tale covenant: "Upon the termination or any cancellation of this agreement all goods held on consignment shall
be held by the Distributor for the account of the Company, without expense to the Company, until such time as provision
can be made by the Company for disposition." 13
The issue with the Court of Tax Appeals, as with us now, is whether the relationship thus created is one of vendor and vendee or
of broker and principal. Not that there would have been the slightest doubt were it not for the categorical denial in the contract
that petitioner was not constituted as "the agent or legal representative of the Company for any purpose whatsoever." It would
be, however, to impart to such an express disclaimer a meaning it should not possess to ignore what is manifestly the role
assigned to petitioner considering the instrument as a whole. That would be to lose sight altogether of what has been agreed
upon. The Court of Tax Appeals was not misled in the language of the decision now on appeal: "That the petitioner Ker & Co.,
Ltd. is, by contractual stipulation, an agent of U.S. Rubber International is borne out by the facts that petitioner can dispose of
the products of the Company only to certain persons or entities and within stipulated limits, unless excepted by the contract or by
the Rubber Company (Par. 2); that it merely receives, accepts and/or holds upon consignment the products, which remain
properties of the latter company (Par. 8); that every effort shall be made by petitioner to promote in every way the sale of the
products (Par. 3); that sales made by petitioner are subject to approval by the company (Par. 12); that on dates determined by
the rubber company, petitioner shall render a detailed report showing sales during the month (Par. 14); that the rubber company

shall invoice the sales as of the dates of inventory and sales report (Par. 14); that the rubber company agrees to keep the
consigned goods fully insured under insurance policies payable to it in case of loss (Par. 15); that upon request of the rubber
company at any time, petitioner shall render an inventory of the existing stock which may be checked by an authorized
representative of the former (Par. 15); and that upon termination or cancellation of the Agreement, all goods held on
consignment shall be held by petitioner for the account of the rubber company until their disposition is provided for by the latter
(Par. 19). All these circumstances are irreconcilably antagonistic to the idea of an independent merchant." 14 Hence its

conclusion: "However, upon analysis of the contract, as a whole, together with the actual conduct of the parties in respect
thereto, we have arrived at the conclusion that the relationship between them is one of brokerage or agency." 15 We find
ourselves in agreement, notwithstanding the able brief filed on behalf of petitioner by its counsel. As noted at the outset,
we cannot heed petitioner's plea for reversal.
1. According to the National Internal Revenue Code, a commercial broker "includes all persons, other than importers,
manufacturers, producers, or bona fide employees, who, for compensation or profit, sell or bring about sales or purchases of
merchandise for other persons or bring proposed buyers and sellers together, or negotiate freights or other business for owners
of vessels or other means of transportation, or for the shippers, or consignors or consignees of freight carried by vessels or other
means of transportation. The term includes commission merchants." 16 The controlling decision as to the test to be followed as

to who falls within the above definition of a commercial broker is that of Commissioner of Internal Revenue v.
Constantino. 17 In the language of Justice J. B. L. Reyes, who penned the opinion: "Since the company retained ownership
of the goods, even as it delivered possession unto the dealer for resale to customers, the price and terms of which were
subject to the company's control, the relationship between the company and the dealer is one of agency, ... ." 18 An excerpt
from Salisbury v. Brooks 19 cited in support of such a view follows: " 'The difficulty in distinguishing between contracts of
sale and the creation of an agency to sell has led to the establishment of rules by the application of which this difficulty
may be solved. The decisions say the transfer of title or agreement to transfer it for a price paid or promised is the
essence of sale. If such transfer puts the transferee in the attitude or position of an owner and makes him liable to the
transferor as a debtor for the agreed price, and not merely as an agent who must account for the proceeds of a resale, the
transaction is a sale; while the essence of an agency to sell is the delivery to an agent, not as his property, but as the
property of the principal, who remains the owner and has the right to control sales, fix the price, and terms, demand and
receive the proceeds less the agent's commission upon sales made.' " 20 The opinion relied on the work of Mechem on
Sales as well as Mechem on Agency. Williston and Tiedman both of whom wrote treatises on Sales, were likewise referred
to.
Equally relevant is this portion of the Salisbury opinion: "It is difficult to understand or appreciate the necessity or presence of
these mutual requirements and obligations on any theory other than that of a contract of agency. Salisbury was to furnish the mill
and put the timber owned by him into a marketable condition in the form of lumber; Brooks was to furnish the funds necessary
for that purpose, sell the manufactured product, and account therefor to Salisbury upon the specific terms of the agreement, less
the compensation fixed by the parties in lieu of interest on the money advanced and for services as agent. These requirements
and stipulations are in tent with any other conception of the contract. If it constitutes an agreement to sell, they are meaningless.
But they cannot be ignored. They were placed there for some purpose, doubtless as the result of definite antecedent
negotiations therefore, consummated by the final written expression of the agreement." 21 Hence the Constantino opinion could

categorically affirm that the mere disclaimer in a contract that an entity like petitioner is not "the agent or legal
representative for any purpose whatsoever" does not suffice to yield the conclusion that it is an independent merchant if
the control over the goods for resale of the goods consigned is pervasive in character. The Court of Tax Appeals decision
now under review pays fealty to such an applicable doctrine.
2. No merit therefore attaches to the first error imputed by petitioner to the Court of Tax Appeals. Neither did such Court fail to
appreciate in its true significance the act and conduct pursued in the implementation of the contract by both the United States
Rubber International and petitioner, as was contended in the second assignment of error. Petitioner ought to have been aware
that there was no need for such an inquiry. The terms of the contract, as noted, speak quite clearly. There is lacking that degree
of ambiguity sufficient to give rise to serious doubt as to what was contemplated by the parties. A reading thereof discloses that
the relationship arising therefrom was not one of seller and purchaser. If it were thus intended, then it would not have included
covenants which in their totality would negate the concept of a firm acquiring as vendee goods from another. Instead, the
stipulations were so worded as to lead to no other conclusion than that the control by the United States Rubber International
over the goods in question is, in the language of the Constantino opinion, "pervasive". The insistence on a relationship opposed
to that apparent from the language employed might even yield the impression that such a mode of construction was resorted to
in order that the applicability of a taxing statute might be rendered nugatory. Certainly, such a result is to be avoided.
Nor is it to be lost sight of that on a matter left to the discretion of the Court of Tax Appeals which has developed an expertise in
view of its function being limited solely to the interpretation of revenue laws, this Court is not prepared to substitute its own
judgment unless a grave abuse of discretion is manifest. It would be to frustrate the objective for which administrative tribunals
are created if the judiciary, absent such a showing, is to ignore their appraisal on a matter that forms the staple of their

epublic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. L-28379

March 27, 1929

THE GOVERNMENT OF THE PHILIPPINE ISLANDS, applicant-appellant,

vs.
CONSORCIA CABANGIS, ET AL., claimants-appellees.
Attorney-General Jaranilla for appellant.
Abad Santos, Camus & Delgado for appellees.
VILLA-REAL, J.:
The Government of the Philippine Islands appeals to this court from the judgment of the Court of First Instance of Manila in
cadastral proceeding No. 373 of the Court of First Instance of Manila, G. L. R. O. Cadastral Record No. 373, adjudicating the
title and decreeing the registration of lots Nos. 36, 39 and 40, block 3055 of the cadastral survey of the City of Manila in favor of
Consuelo, Consorcia, Elvira and Tomas, surnamed Cabangis, in equal parts, and dismissing the claims presented by the
Government of the Philippine Islands and the City of Manila.
In support of its appeal, the appellant assigns the following alleged errors as committed by the trial court in its judgment, to wit:
1. The lower court erred in not holding that the lots in question are of the public domain, the same having been gained
from the sea (Manila Bay) by accession, by fillings made by the Bureau of Public Works and by the construction of the
break-water (built by the Bureau of Navigation) near the mouth of Vitas Estero.
2. The lower court erred in holding that the lots in question formed part of the big parcel of land belonging to the
spouses Maximo Cabangis and Tita Andres, and in holding that these spouses and their successors in interest have
been in continuous, public, peaceful and uninterrupted possession of said lots up to the time this case came up.
3. The lower court erred in holding that said lots existed before, but that due to the current of the Pasig River and to the
action of the big waves in Manila Bay during the south-west monsoons, the same disappeared.
4. The lower court erred in adjudicating the registration of the lands in question in the name of the appellees, and in
denying the appellant's motion for a new trial.
A preponderance of the evidence in the record which may properly be taken into consideration in deciding the case, proves the
following facts:
Lots 36, 39 and 40, block 3035 of cadastral proceeding No. 71 of the City of Manila, G. L. R. O. Record No. 373, were formerly a
part of a large parcel of land belonging to the predecessor of the herein claimants and appellees. From the year 1896 said land
began to wear away, due to the action of the waves of Manila Bay, until the year 1901 when the said lots became completely
submerged in water in ordinary tides, and remained in such a state until 1912 when the Government undertook the dredging of
Vitas Estuary in order to facilitate navigation, depositing all the sand and silt taken from the bed of the estuary on the low lands
which were completely covered with water, surrounding that belonging to the Philippine Manufacturing Company, thereby slowly
and gradually forming the lots, the subject matter of this proceeding.
Up to the month of February, 1927 nobody had declared lot 39 for the purposes of taxation, and it was only in the year 1926 that
Dr. Pedro Gil, in behalf of the claimants and appellees, declared lot No. 40 for such purpose.
In view of the facts just stated, as proved by a preponderance of the evidence, the question arises: Who owns lots 36, 39 and 40
in question?
The claimants-appellees contend that inasmuch as the said lots once formed a part of a large parcel of land belonging to their
predecessors, whom they succeeded, and their immediate predecessor in interest, Tomas Cabangis, having taken possession
thereof as soon as they were reclaimed, giving his permission to some fishermen to dry their fishing nets and deposit
their bancas thereon, said lots belong to them.
Article 339, subsection 1, of the Civil Code, reads:
Article 339. Property of public ownership is
1. That devoted to public use, such as roads, canals, rivers, torrents, ports and bridges constructed by the State,
riverbanks, shorts, roadsteads, and that of a similar character.
xxx

xxx

xxx

Article 1, case 3, of the Law of Waters of August 3, 1866, provides as follows:

ARTICLE 1. The following are part of the national domain open to public use:
xxx

xxx

xxx

3. The Shores. By the shore is understood that space covered and uncovered by the movement of the tide. Its interior
or terrestrial limit is the line reached by the highest equinoctial tides. Where the tides are not appreciable, the shore
begins on the land side at the line reached by the sea during ordinary storms or tempests.
In the case of Aragon vs. Insular Government (19 Phil., 223), with reference to article 339 of the Civil Code just quoted, this court
said:

We should not be understood, by this decision, to hold that in a case of gradual encroachment or erosion by the ebb and flow of
the tide, private property may not become 'property of public ownership,' as defined in article 339 of the code, where it appears
that the owner has to all intents and purposes abandoned it and permitted it to be totally destroyed, so as to become a part of
the 'playa' (shore of the seas), 'rada' (roadstead), or the like. . . .
In the Enciclopedia Juridica Espanola, volume XII, page 558, we read the following:
With relative frequency the opposite phenomenon occurs; that is, the sea advances and private properties are
permanently invaded by the waves, and in this case they become part of the shore or beach. They then pass to the
public domain, but the owner thus dispossessed does not retain any right to the natural products resulting from their
new nature; it is a de facto case of eminent domain, and not subject to indemnity.
Now then , when said land was reclaimed, did the claimants-appellees or their predecessors recover it as their original property?
As we have seen, the land belonging to the predecessors of the herein claimants-appellees began to wear way in 1896, owing
to the gradual erosion caused by the ebb and flow of the tide, until the year 1901, when the waters of Manila Bay completely
submerged a portion of it, included within lots 36, 39 and 40 here in question, remaining thus under water until reclaimed as a
result of certain work done by the Government in 1912. According to the above-cited authorities said portion of land, that is, lots
36, 39 and 40, which was private property, became a part of the public domain. The predecessors of the herein claimantsappellees could have protected their land by building a retaining wall, with the consent of competent authority, in 1896 when the
waters of the sea began to wear it away, in accordance with the provisions of Article 29 of the aforecited Law of Waters of
August 3, 1866, and their failure to do so until 1901, when a portion of the same became completely covered by said waters,
remaining thus submerged until 1912, constitutes abandonment.
Now then: The lots under discussion having been reclaimed from the seas as a result of certain work done by the Government,
to whom do they belong?
The answer to this question is found in article 5 of the aforementioned Law of Waters, which is as follows:

ART. 5. Lands reclaimed from the sea in consequence of works constructed by the State, or by the provinces, pueblos
or private persons, with proper permission, shall become the property of the party constructing such works, unless
otherwise provided by the terms of the grant of authority.
The fact that from 1912 some fishermen had been drying their fishing nets and depositing their bancas on lots 36, 39 and 40, by
permission of Tomas Cabangis, does not confer on the latter or his successors the ownership of said lots, because, as they were
converted into public land, no private person could acquire title thereto except in the form and manner established by the law.
In the case of Buzon vs. Insular Government and City of Manila (13 Phil., 324), cited by the claimants-appellees, this court,
admitting the findings and holdings of the lower court, said the following:
If we heed the parol evidence, we find that the seashore was formerly about one hundred brazas distant from the land
in question; that, in the course of time, and by the removal of a considerable quantity of sand from the shore at the back
of the land for the use of the street car company in filling in Calle Cervantes, the sea water in ordinary tides now covers
part of the land described in the petition.
The fact that certain land, not the bed of a river or of the sea, is covered by sea water during the period of ordinary high
tide, is not a reason established by any law to cause the loss thereof, especially when, as in the present case, it
becomes covered by water owing to circumstances entirely independent of the will of the owner.
In the case of Director of Lands vs. Aguilar (G.R. No. 22034), 1 also cited by the claimants-appellees, wherein the Government
adduced no evidence in support of its contention, the lower court said in part:
The contention of the claimants Cabangis is to the effect that said lots are a part of the adjoining land adjudicated to
their deceased father, Don Tomas Cabangis, which, for over fifty years had belonged to their deceased grandmother,
Tita Andres, and that, due to certain improvements made in Manila Bay, the waters of the sea covered a large part of
the lots herein claimed.
The Government of the Philippine Islands also claims the ownership of said lots, because, at ordinary high tide, they are
covered by the sea.
Upon petition of the parties, the lower court made an ocular inspection of said lots on September 12, 1923, and on said
inspection found some light material houses built thereon, and that on that occasion the waters of the sea did not reach
the aforesaid lots.
From the evidence adduced at the trial of this cause, it may be inferred that Tita Andres, during her lifetime was the
owner of a rather large parcel of land which was adjudicated by a decree to her son Tomas Cabangis; the lots now in
question are contiguous to that land and are covered by the waters of the sea at extraordinary high tide; some 50 years
before the sea did not reach said strip of land, and on it were constructed, for the most part, light material houses,
occupied by the tenants of Tita Andres, to whom they paid rent. Upon her death, her son Tomas Cabangis succeeded to
the possession, and his children succeeded him, they being the present claimants, Consuelo, Jesus, Tomas, and
Consorcia Cabangis.

The Government of the Philippine Islands did not adduce any evidence in support of its contention, with the exception of
registry record No. 8147, to show that the lots here in question were not excluded from the application presented in said
proceeding.
It will be seen that in the case of Buzon vs. Insular Government and City of Manila, cited above, the rise of the waters of the sea
that covered the lands there in dispute, was due not to the action of the tide but to the fact that a large quantity of sand was
taken from the sea at the side of said land in order to fill in Cervantes Street, and this court properly held that because of this
act, entirely independent of the will of the owner of said land, the latter could not lose the ownership thereof, and the mere fact
that the waters of the sea covered it as a result of said act, is not sufficient to convert it into public land, especially, as the land
was high and appropriate for building purposes.
In the case of the Director of Lands vs. Aguilar also cited by the claimants-appellees, the Insular Government did not present
any evidence in support of its contention, thus leaving uncontradicted the evidence adduced by the claimants Aguilar et al., as to
the ownership, possession and occupation of said lots.
In the instant case the evidence shows that from 1896, the waves of Manila Bay had been gradually and constantly washing
away the sand that formed the lots here in question, until 1901, when the sea water completely covered them, and thus they
remained until the year 1912. In the latter year they were reclaimed from the sea by filling in with sand and silt extracted from the
bed of Vitas Estuary when the Government dredged said estuary in order to facilitate navigation. Neither the herein claimantsappellees nor their predecessors did anything to prevent their destruction.
In conclusion, then, we hold that the lots in question having disappeared on account of the gradual erosion due to the ebb and
flow of the tide, and having remained in such a state until they were reclaimed from the sea by the filling in done by the
Government, they are public land. (Aragon vs. Insular Government, 19 Phil., 223; Francisco vs. Government of the Philippine
Islands, 28 Phil., 505).
By virtue whereof, the judgment appealed from is reversed and lots Nos. 36, 39 and 40 of cadastral proceeding No. 373 of the
City of Manila are held to be public land belonging to the Government of the United States under the administration and control
of the Government of the Philippine Islands. So ordered.