PROPERTY LAW

Atty. Charlito Martin R. Mendoza, 3rd place 2004 Bar Examinations

NCC 414-418 (1st assignment)

Handwritten digest of cases to be submitted on the day of Final Exam

List of Cases
I.
Classification of Property
A. Immovable and Movable (See R.A. Nos. 349, 7170 and 7719)
1. Ladera v. Hodges, Vol. 48 No. 12 Official Gazette 5374
2. Mindanao Bus Co. v. City Assessor and Treasurer, 6 SCRA 197
3. Makati Leasing & Finance Corp. v. Wearever Textiles, 122 SCRA 296
4. Santos Evangelista v. Alto Surety & Insurance Co., Inc. 103 Phil. 401
5. Tsai v. Court of Appeals, 366 SCRA 324
6. Sergs Products, Inc. v. PCI Leasing and Finance, Inc. 338 SCRA 499
7. Burgos, Sr. v. Chief of Staff, AFP 133 SCRA 800
8. Lopez v. Orosa, Jr., and Plaza Theatre, Inc., 103 Phil. 98
9. Yap v. Tanada, 163 SCRA 464
10. Machinery & Engineering Supplies, Inc. v. Court of Appeals, 96 Phil. 70
11. Capitol Wireless, Inc. v. The Provincial Treasurer of Batangas, G.R. No. 180110, 30 May 2016
12. Fels Energy, Inc. v. Province of Batangas, G.R. No. 168557, 16 February 2007

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 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.
SO ORDERED.
Makasiar (Chairman), Aquino, Concepcion Jr., Guerrero and Escolin JJ., concur.
Abad Santos, J., concurs in the result.

Footnotes
1 p. 52, Rollo.

Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. L-11139

April 23, 1958

SANTOS EVANGELISTA, petitioner,

vs.
ALTO SURETY & INSURANCE CO., INC., respondent.
Gonzalo D. David for petitioner.
Raul A. Aristorenas and Benjamin Relova for respondent.
CONCEPCION, J.:
This is an appeal by certiorari from a decision of the Court of Appeals.
Briefly, the facts are: On June 4, 1949, petitioner herein, Santos Evangelista, instituted Civil Case No. 8235 of the
Court of First, Instance of Manila entitled " Santos Evangelista vs. Ricardo Rivera," for a sum of money. On the
same date, he obtained a writ of attachment, which levied upon a house, built by Rivera on a land situated in Manila
and leased to him, by filing copy of said writ and the corresponding notice of attachment with the Office of the
Register of Deeds of Manila, on June 8, 1949. In due course, judgment was rendered in favor of Evangelista, who,
on October 8, 1951, bought the house at public auction held in compliance with the writ of execution issued in said
case. The corresponding definite deed of sale was issued to him on October 22, 1952, upon expiration of the period
of redemption. When Evangelista sought to take possession of the house, Rivera refused to surrender it, upon the
ground that he had leased the property from the Alto Surety & Insurance Co., Inc. respondent herein and that
the latter is now the true owner of said property. It appears that on May 10, 1952, a definite deed of sale of the same
house had been issued to respondent, as the highest bidder at an auction sale held, on September 29, 1950, in
compliance with a writ of execution issued in Civil Case No. 6268 of the same court, entitled "Alto Surety &
Insurance Co., Inc. vs. Maximo Quiambao, Rosario Guevara and Ricardo Rivera," in which judgment, for the sum of
money, had been rendered in favor respondent herein, as plaintiff therein. Hence, on June 13, 1953, Evangelista
instituted the present action against respondent and Ricardo Rivera, for the purpose of establishing his
(Evangelista) title over said house, securing possession thereof, apart from recovering damages.
In its answer, respondent alleged, in substance, that it has a better right to the house, because the sale made, and
the definite deed of sale executed, in its favor, on September 29, 1950 and May 10, 1952, respectively, precede the
sale to Evangelista (October 8, 1951) and the definite deed of sale in his favor (October 22, 1952). It, also, made
some special defenses which are discussed hereafter. Rivera, in effect, joined forces with respondent. After due
trial, the Court of First Instance of Manila rendered judgment for Evangelista, sentencing Rivera and respondent to
deliver the house in question to petitioner herein and to pay him, jointly and severally, forty pesos (P40.00) a month
from October, 1952, until said delivery, plus costs.
On appeal taken by respondent, this decision was reversed by the Court of Appeals, which absolved said
respondent from the complaint, upon the ground that, although the writ of attachment in favor of Evangelista had
been filed with the Register of Deeds of Manila prior to the sale in favor of respondent, Evangelista did not acquire
thereby a preferential lien, the attachment having been levied as if the house in question were immovable property,
although in the opinion of the Court of Appeals, it is "ostensibly a personal property." As such, the Court of Appeals
held, "the order of attachment . . . should have been served in the manner provided in subsection (e) of section 7 of
Rule 59," of the Rules of Court, reading:
The property of the defendant shall be attached by the officer executing the order in the following manner:

(e) Debts and credits, and other personal property not capable of manual delivery, by leaving with the
person owing such debts, or having in his possession or under his control, such credits or other personal
property, or with, his agent, a copy of the order, and a notice that the debts owing by him to the defendant,
and the credits and other personal property in his possession, or under his control, belonging to the
defendant, are attached in pursuance of such order. (Emphasis ours.)
However, the Court of Appeals seems to have been of the opinion, also, that the house of Rivera should have been
attached in accordance with subsection (c) of said section 7, as "personal property capable of manual delivery, by
taking and safely keeping in his custody", for it declared that "Evangelists could not have . . . validly purchased
Ricardo Rivera's house from the sheriff as the latter was not in possession thereof at the time he sold it at a public
auction."
Evangelista now seeks a review, by certiorari, of this decision of the Court of Appeals. In this connection, it is not
disputed that although the sale to the respondent preceded that made to Evangelists, the latter would have a better
right if the writ of attachment, issued in his favor before the sale to the respondent, had been properly executed or
enforced. This question, in turn, depends upon whether the house of Ricardo Rivera is real property or not. In the
affirmative case, the applicable provision would be subsection (a) of section 7, Rule 59 of the Rules of Court,
pursuant to which the attachment should be made "by filing with the registrar of deeds a copy of the order, together
with a description of the property attached, and a notice that it is attached, and by leaving a copy of such order,
description, and notice with the occupant of the property, if any there be."
Respondent maintains, however, and the Court of Appeals held, that Rivera's house is personal property, the levy
upon which must be made in conformity with subsections (c) and (e) of said section 7 of Rule 59. Hence, the main
issue before us is whether a house, constructed the lessee of the land on which it is built, should be dealt with, for
purpose, of attachment, as immovable property, or as personal property.
It is, our considered opinion that said house is not personal property, much less a debt, credit or other personal
property not capable of manual delivery, but immovable property. As explicitly held, in Laddera vs. Hodges (48 Off.
Gaz., 5374), "a true building (not merely superimposed on the soil) is immovable or real property, whether it is
erected by the owner of the land or by usufructuary or lessee. This is the doctrine of our Supreme Court in Leung
Yee vs. Strong Machinery Company, 37 Phil., 644. And it is amply supported by the rulings of the French Court. . . ."
It is true that the parties to a deed of chattel mortgage may agree to consider a house as personal property for
purposes of said contract (Luna vs. Encarnacion, * 48 Off. Gaz., 2664; Standard Oil Co. of New York vs.Jaramillo,
44 Phil., 630; De Jesus vs. Juan Dee Co., Inc., 72 Phil., 464). However, this view is good only insofar as
the contracting parties are concerned. It is based, partly, upon the principle of estoppel. Neither this principle, nor
said view, is applicable to strangers to said contract. Much less is it in point where there has been no
contractwhatsoever, with respect to the status of the house involved, as in the case at bar. Apart from this,
in Manarang vs. Ofilada (99 Phil., 108; 52 Off. Gaz., 3954), we held:
The question now before us, however, is: Does the fact that the parties entering into a contract regarding a
house gave said property the consideration of personal property in their contract, bind the sheriff in
advertising the property's sale at public auction as personal property? It is to be remembered that in the
case at bar the action was to collect a loan secured by a chattel mortgage on the house. It is also to be
remembered that in practice it is the judgment creditor who points out to the sheriff the properties that the
sheriff is to levy upon in execution, and the judgment creditor in the case at bar is the party in whose favor
the owner of the house had conveyed it by way of chattel mortgage and, therefore, knew its consideration as
personal property.
These considerations notwithstanding, we hold that the rules on execution do not allow, and, we
should notinterpret them in such a way as to allow, the special consideration that parties to a contract may
have desired to impart to real estate, for example, as personal property, when they are, not ordinarily
so. Sales on execution affect the public and third persons. The regulation governing sales on execution are
for public officials to follow. The form of proceedings prescribed for each kind of property is suited to its
character, not to the character, which the parties have given to it or desire to give it. When the rules speak of
personal property, property which is ordinarily so considered is meant; and when real property is spoken
of, it means property which is generally known as real property. The regulations were never intended to suit
the consideration that parties may have privately given to the property levied upon. Enforcement of

regulations would be difficult were the convenience or agreement of private parties to determine or govern
the nature of the proceedings. We therefore hold that the mere fact that a house was the subject of the
chattel mortgage and was considered as personal property by the parties does not make said house
personal property for purposes of the notice to be given for its sale of public auction. This ruling is
demanded by the need for a definite, orderly and well defined regulation for official and public guidance and
would prevent confusion and misunderstanding.
We, therefore, declare that the house of mixed materials levied upon on execution, although subject of a
contract of chattel mortgage between the owner and a third person, is real property within the purview of
Rule 39, section 16, of the Rules of Court as it has become a permanent fixture of the land, which, is real
property. (42 Am. Jur. 199-200; Leung Yee vs. Strong Machinery Co., 37 Phil., 644; Republic vs. Ceniza, et
al., 90 Phil., 544; Ladera,, et al. vs. Hodges, et al., [C.A.] Off. Gaz. 5374.)" (Emphasis ours.)
The foregoing considerations apply, with equal force, to the conditions for the levy of attachment, for it similarly
affects the public and third persons.
It is argued, however, that, even if the house in question were immovable property, its attachment by Evangelista
was void or ineffective, because, in the language of the Court of Appeals, "after presenting a Copy of the order of
attachment in the Office of the Register of Deeds, the person who might then be in possession of the house, the
sheriff took no pains to serve Ricardo Rivera, or other copies thereof." This finding of the Court of Appeals is neither
conclusive upon us, nor accurate.
The Record on Appeal, annexed to the petition for Certiorari, shows that petitioner alleged, in paragraph 3 of the
complaint, that he acquired the house in question "as a consequence of the levy of an attachment and execution of
the judgment in Civil Case No. 8235" of the Court of First Instance of Manila. In his answer (paragraph 2), Ricardo
Rivera admitted said attachment execution of judgment. He alleged, however, by way a of special defense, that the
title of respondent "is superior to that of plaintiff because it is based on a public instrument," whereas Evangelista
relied upon a "promissory note" which "is only a private instrument"; that said Public instrument in favor of
respondent "is superior also to the judgment in Civil Case No. 8235"; and that plaintiff's claim against Rivera
amounted only to P866, "which is much below the real value" of said house, for which reason it would be "grossly
unjust to acquire the property for such an inadequate consideration." Thus, Rivera impliedly admitted that his house
had been attached, that the house had been sold to Evangelista in accordance with the requisite formalities, and
that said attachment was valid, although allegedly inferior to the rights of respondent, and the consideration for the
sale to Evangelista was claimed to be inadequate.
Respondent, in turn, denied the allegation in said paragraph 3 of the complaint, but only " for the reasons stated in
its special defenses" namely: (1) that by virtue of the sale at public auction, and the final deed executed by the
sheriff in favor of respondent, the same became the "legitimate owner of the house" in question; (2) that respondent
"is a buyer in good faith and for value"; (3) that respondent "took possession and control of said house"; (4) that
"there was no valid attachment by the plaintiff and/or the Sheriff of Manila of the property in question as neither took
actual or constructive possession or control of the property at any time"; and (5) "that the alleged registration of
plaintiff's attachment, certificate of sale and final deed in the Office of Register of Deeds, Manila, if there was any, is
likewise, not valid as there is no registry of transactions covering houses erected on land belonging to or leased
from another." In this manner, respondent claimed a better right, merely under the theory that, in case of double sale
of immovable property, the purchaser who first obtains possession in good faith, acquires title, if the sale has not
been "recorded . . . in the Registry of Property" (Art. 1544, Civil Code of the Philippines), and that the writ of
attachment and the notice of attachment in favor of Evangelista should be considered unregistered, "as there is no
registry of transactions covering houses erected on land belonging to or leased from another." In fact, said article
1544 of the Civil Code of the Philippines, governing double sales, was quoted on page 15 of the brief for respondent
in the Court of Appeals, in support of its fourth assignment of error therein, to the effect that it "has preference or
priority over the sale of the same property" to Evangelista.
In other words, there was no issue on whether copy of the writ and notice of attachment had been served on
Rivera. No evidence whatsoever, to the effect that Rivera had not been served with copies of said writ and notice,
was introduced in the Court of First Instance. In its brief in the Court of Appeals, respondent did not aver, or even,
intimate, that no such copies were served by the sheriff upon Rivera. Service thereof on Rivera had been impliedly
admitted by the defendants, in their respective answers, and by their behaviour throughout the proceedings in the
Court of First Instance, and, as regards respondent, in the Court of Appeals. In fact, petitioner asserts in his brief

herein (p. 26) that copies of said writ and notice were delivered to Rivera, simultaneously with copies of the
complaint, upon service of summons, prior to the filing of copies of said writ and notice with the register deeds,
and the truth of this assertion has not been directly and positively challenged or denied in the brief filed before us by
respondent herein. The latter did not dare therein to go beyond making a statement for the first time in the course
of these proceedings, begun almost five (5) years ago (June 18, 1953) reproducing substantially the
aforementioned finding of the Court of Appeals and then quoting the same.
Considering, therefore, that neither the pleadings, nor the briefs in the Court of Appeals, raised an issue on whether
or not copies of the writ of attachment and notice of attachment had been served upon Rivera; that the defendants
had impliedly admitted-in said pleadings and briefs, as well as by their conduct during the entire proceedings, prior
to the rendition of the decision of the Court of Appeals that Rivera had received copies of said documents; and
that, for this reason, evidently, no proof was introduced thereon, we, are of the opinion, and so hold that the finding
of the Court of Appeals to the effect that said copies had not been served upon Rivera is based upon a
misapprehension of the specific issues involved therein and goes beyond the range of such issues, apart from
being contrary to the aforementioned admission by the parties, and that, accordingly, a grave abuse of discretion
was committed in making said finding, which is, furthermore, inaccurate.
Wherefore, the decision of the Court of Appeals is hereby reversed, and another one shall be entered affirming that
of the Court of First Instance of Manila, with the costs of this instance against respondent, the Alto Surety and
Insurance Co., Inc. It is so ordered.
Paras, C.J., Bengzon, Montemayor, Reyes, A., Bautista Angelo, Labrador, Reyes, J.B.L., Endencia and Felix,
JJ.,concur.

Republic of the Philippines

SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 120098

October 2, 2001

RUBY L. TSAI, petitioner,

vs.
HON. COURT OF APPEALS, EVER TEXTILE MILLS, INC. and MAMERTO R VILLALUZ, respondents.
x---------------------------------------------------------x
[G.R. No. 120109. October 2, 2001.]
PHILIPPINE BANK OF COMMUNICATIONS, petitioner,
vs.
HON. COURT OF APPEALS, EVER TEXTILE MILLS and MAMERTO R VILLALUZ, respondents.
QUISUMBING, J.:
These consolidated cases assail the decision1 of the Court of Appeals in CA-G.R. CV No. 32986, affirming the
decision2 of the Regional Trial Court of Manila, Branch 7, in Civil Case No. 89-48265. Also assailed is respondent
court's resolution denying petitioners' motion for reconsideration.
On November 26, 1975, respondent Ever Textile Mills, Inc. (EVERTEX) obtained a three million peso
(P3,000,000.00) loan from petitioner Philippine Bank of Communications (PBCom). As security for the loan,
EVERTEX executed in favor of PBCom, a deed of Real and Chattel Mortgage over the lot under TCT No. 372097,
where its factory stands, and the chattels located therein as enumerated in a schedule attached to the mortgage
contract. The pertinent portions of the Real and Chattel Mortgage are quoted below:
MORTGAGE
(REAL AND CHATTEL)
xxx

xxx

xxx

The MORTGAGOR(S) hereby transfer(s) and convey(s), by way of First Mortgage, to the MORTGAGEE, . .
. certain parcel(s) of land, together with all the buildings and improvements now existing or which may
hereafter exist thereon, situated in . . .
"Annex A"
(Real and Chattel Mortgage executed by Ever Textile Mills in favor of PBCommunications continued)
LIST OF MACHINERIES & EQUIPMENT
A. Forty Eight (48) units of Vayrow Knitting Machines-Tompkins made in Hongkong:
Serial Numbers Size of Machines
xxx

xxx

xxx

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

xxx

xxx

xxx

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

xxx

xxx

xxx

D. Four (4) Winding Machines.

xxx

xxx

xxx
SCHEDULE "A"

I. TCT # 372097 - RIZAL

xxx

xxx

xxx

II. Any and all buildings and improvements now existing or hereafter to exist on the above-mentioned lot.
III. MACHINERIES & EQUIPMENT situated, located and/or installed on the above-mentioned lot located at .
..
(a) Forty eight sets (48) Vayrow Knitting Machines . . .
(b) Sixteen sets (16) Vayrow Knitting Machines . . .
(c) Two (2) Circular Knitting Machines . . .
(d) Two (2) Winding Machines . . .
(e) Two (2) Winding Machines . . .
IV. Any and all replacements, substitutions, additions, increases and accretions to above properties.
xxx

xxx

xxx3

On April 23, 1979, PBCom granted a second loan of P3,356,000.00 to EVERTEX. The loan was secured by a
Chattel Mortgage over personal properties enumerated in a list attached thereto. These listed properties were
similar to those listed in Annex A of the first mortgage deed.
After April 23, 1979, the date of the execution of the second mortgage mentioned above, EVERTEX purchased
various machines and equipments.
On November 19, 1982, due to business reverses, EVERTEX filed insolvency proceedings docketed as SP Proc.
No. LP-3091-P before the defunct Court of First Instance of Pasay City, Branch XXVIII. The CFI issued an order on
November 24, 1982 declaring the corporation insolvent. All its assets were taken into the custody of the Insolvency
Court, including the collateral, real and personal, securing the two mortgages as abovementioned.
In the meantime, upon EVERTEX's failure to meet its obligation to PBCom, the latter commenced extrajudicial
foreclosure proceedings against EVERTEX under Act 3135, otherwise known as "An Act to Regulate the Sale of
Property under Special Powers Inserted in or Annexed to Real Estate Mortgages" and Act 1506 or "The Chattel
Mortgage Law". A Notice of Sheriff's Sale was issued on December 1, 1982.
On December 15, 1982, the first public auction was held where petitioner PBCom emerged as the highest bidder
and a Certificate of Sale was issued in its favor on the same date. On December 23, 1982, another public auction
was held and again, PBCom was the highest bidder. The sheriff issued a Certificate of Sale on the same day.

On March 7, 1984, PBCom consolidated its ownership over the lot and all the properties in it. In November 1986, it
leased the entire factory premises to petitioner Ruby L. Tsai for P50,000.00 a month. On May 3, 1988, PBCom sold
the factory, lock, stock and barrel to Tsai for P9,000,000.00, including the contested machineries.
On March 16, 1989, EVERTEX filed a complaint for annulment of sale, reconveyance, and damages with the
Regional Trial Court against PBCom, alleging inter alia that the extrajudicial foreclosure of subject mortgage was in
violation of the Insolvency Law. EVERTEX claimed that no rights having been transmitted to PBCom over the assets
of insolvent EVERTEX, therefore Tsai acquired no rights over such assets sold to her, and should reconvey the
assets.
Further, EVERTEX averred that PBCom, without any legal or factual basis, appropriated the contested properties,
which were not included in the Real and Chattel Mortgage of November 26, 1975 nor in the Chattel Mortgage of
April 23, 1979, and neither were those properties included in the Notice of Sheriff's Sale dated December 1, 1982
and Certificate of Sale . . . dated December 15, 1982.
The disputed properties, which were valued at P4,000,000.00, are: 14 Interlock Circular Knitting Machines, 1 Jet
Drying Equipment, 1 Dryer Equipment, 1 Raisin Equipment and 1 Heatset Equipment.
The RTC found that the lease and sale of said personal properties were irregular and illegal because they were not
duly foreclosed nor sold at the December 15, 1982 auction sale since these were not included in the schedules
attached to the mortgage contracts. The trial court decreed:
WHEREFORE, judgment is hereby rendered in favor of plaintiff corporation and against the defendants:
1. Ordering the annulment of the sale executed by defendant Philippine Bank of Communications in favor of
defendant Ruby L. Tsai on May 3, 1988 insofar as it affects the personal properties listed in par. 9 of the
complaint, and their return to the plaintiff corporation through its assignee, plaintiff Mamerto R. Villaluz, for
disposition by the Insolvency Court, to be done within ten (10) days from finality of this decision;
2. Ordering the defendants to pay jointly and severally the plaintiff corporation the sum of P5,200,000.00 as
compensation for the use and possession of the properties in question from November 1986 to February
1991 and P100,000.00 every month thereafter, with interest thereon at the legal rate per annum until full
payment;
3. Ordering the defendants to pay jointly and severally the plaintiff corporation the sum of P50,000.00 as and
for attorney's fees and expenses of litigation;
4. Ordering the defendants to pay jointly and severally the plaintiff corporation the sum of P200,000.00 by
way of exemplary damages;
5. Ordering the dismissal of the counterclaim of the defendants; and
6. Ordering the defendants to proportionately pay the costs of suit.
SO ORDERED.4
Dissatisfied, both PBCom and Tsai appealed to the Court of Appeals, which issued its decision dated August 31,
1994, the dispositive portion of which reads:
WHEREFORE, except for the deletion therefrom of the award; for exemplary damages, and reduction of the actual
damages, from P100,000.00 to P20,000.00 per month, from November 1986 until subject personal properties are
restored to appellees, the judgment appealed from is hereby AFFIRMED, in all other respects. No pronouncement
as to costs.5
Motion for reconsideration of the above decision having been denied in the resolution of April 28, 1995, PBCom and
Tsai filed their separate petitions for review with this Court.

In G.R No. 120098, petitioner Tsai ascribed the following errors to the respondent court:
I
THE HONORABLE COURT OF APPEALS (SECOND DIVISION) ERRED IN EFFECT MAKING A
CONTRACT FOR THE PARTIES BY TREATING THE 1981 ACQUIRED MACHINERIES AS CHATTELS
INSTEAD OF REAL PROPERTIES WITHIN THEIR EARLIER 1975 DEED OF REAL AND CHATTEL
MORTGAGE OR 1979 DEED OF CHATTEL MORTGAGE.
II
THE HONORABLE COURT OF APPEALS (SECOND DIVISION) ERRED IN HOLDING THAT THE
DISPUTED 1981 MACHINERIES ARE NOT REAL PROPERTIES DEEMED PART OF THE MORTGAGE
DESPITE THE CLEAR IMPORT OF THE EVIDENCE AND APPLICABLE RULINGS OF THE SUPREME
COURT.
III
THE HONORABLE COURT OF APPEALS (SECOND DIVISION) ERRED IN DEEMING PETITIONER A
PURCHASER IN BAD FAITH.
IV
THE HONORABLE COURT OF APPEALS (SECOND DIVISION) ERRED IN ASSESSING PETITIONER
ACTUAL DAMAGES, ATTORNEY'S FEES AND EXPENSES OF LITIGATION FOR WANT OF VALID
FACTUAL AND LEGAL BASIS.
V
THE HONORABLE COURT OF APPEALS (SECOND DIVISION) ERRED IN HOLDING AGAINST
PETITIONER'S ARGUMENTS ON PRESCRIPTION AND LACHES.6
In G.R. No. 120098, PBCom raised the following issues:
I.
DID THE COURT OF APPEALS VALIDLY DECREE THE MACHINERIES LISTED UNDER PARAGRAPH 9 OF
THE COMPLAINT BELOW AS PERSONAL PROPERTY OUTSIDE OF THE 1975 DEED OF REAL ESTATE
MORTGAGE AND EXCLUDED THEM FROM THE REAL PROPERTY EXTRAJUDICIALLY FORECLOSED BY
PBCOM DESPITE THE PROVISION IN THE 1975 DEED THAT ALL AFTER-ACQUIRED PROPERTIES DURING
THE LIFETIME OF THE MORTGAGE SHALL FORM PART THEREOF, AND DESPITE THE UNDISPUTED FACT
THAT SAID MACHINERIES ARE BIG AND HEAVY, BOLTED OR CEMENTED ON THE REAL PROPERTY
MORTGAGED BY EVER TEXTILE MILLS TO PBCOM, AND WERE ASSESSED FOR REAL ESTATE TAX
PURPOSES?
II
CAN PBCOM, WHO TOOK POSSESSION OF THE MACHINERIES IN QUESTION IN GOOD FAITH, EXTENDED
CREDIT FACILITIES TO EVER TEXTILE MILLS WHICH AS OF 1982 TOTALLED P9,547,095.28, WHO HAD
SPENT FOR MAINTENANCE AND SECURITY ON THE DISPUTED MACHINERIES AND HAD TO PAY ALL THE
BACK TAXES OF EVER TEXTILE MILLS BE LEGALLY COMPELLED TO RETURN TO EVER THE SAID
MACHINERIES OR IN LIEU THEREOF BE ASSESSED DAMAGES. IS THAT SITUATION TANTAMOUNT TO A
CASE OF UNJUST ENRICHMENT?7
The principal issue, in our view, is whether or not the inclusion of the questioned properties in the foreclosed
properties is proper. The secondary issue is whether or not the sale of these properties to petitioner Ruby Tsai is
valid.

For her part, Tsai avers that the Court of Appeals in effect made a contract for the parties by treating the 1981
acquired units of machinery as chattels instead of real properties within their earlier 1975 deed of Real and Chattel
Mortgage or 1979 deed of Chattel Mortgage.8 Additionally, Tsai argues that respondent court erred in holding that
the disputed 1981 machineries are not real properties.9 Finally, she contends that the Court of Appeals erred in
holding against petitioner's arguments on prescription and laches10 and in assessing petitioner actual damages,
attorney's fees and expenses of litigation, for want of valid factual and legal basis.11
Essentially, PBCom contends that respondent court erred in affirming the lower court's judgment decreeing that the
pieces of machinery in dispute were not duly foreclosed and could not be legally leased nor sold to Ruby Tsai. It
further argued that the Court of Appeals' pronouncement that the pieces of machinery in question were personal
properties have no factual and legal basis. Finally, it asserts that the Court of Appeals erred in assessing damages
and attorney's fees against PBCom.
In opposition, private respondents argue that the controverted units of machinery are not "real properties" but
chattels, and, therefore, they were not part of the foreclosed real properties, rendering the lease and the subsequent
sale thereof to Tsai a nullity.12
Considering the assigned errors and the arguments of the parties, we find the petitions devoid of merit and ought to
be denied.
Well settled is the rule that the jurisdiction of the Supreme Court in a petition for review on certiorari under Rule 45
of the Revised Rules of Court is limited to reviewing only errors of law, not of fact, unless the factual findings
complained of are devoid of support by the evidence on record or the assailed judgment is based on
misapprehension of facts.13 This rule is applied more stringently when the findings of fact of the RTC is affirmed by
the Court of Appeals.14
The following are the facts as found by the RTC and affirmed by the Court of Appeals that are decisive of the issues:
(1) the "controverted machineries" are not covered by, or included in, either of the two mortgages, the Real Estate
and Chattel Mortgage, and the pure Chattel Mortgage; (2) the said machineries were not included in the list of
properties appended to the Notice of Sale, and neither were they included in the Sheriff's Notice of Sale of the
foreclosed properties.15
Petitioners contend that the nature of the disputed machineries, i.e., that they were heavy, bolted or cemented on
the real property mortgaged by EVERTEX to PBCom, make them ipso facto immovable under Article 415 (3) and (5)
of the New Civil Code. This assertion, however, does not settle the issue. Mere nuts and bolts do not foreclose the
controversy. We have to look at the parties' intent.
While it is true that the controverted properties appear to be immobile, a perusal of the contract of Real and Chattel
Mortgage executed by the parties herein gives us a contrary indication. In the case at bar, both the trial and the
appellate courts reached the same finding that the true intention of PBCOM and the owner, EVERTEX, is to treat
machinery and equipment as chattels. The pertinent portion of respondent appellate court's ruling is quoted below:
As stressed upon by appellees, appellant bank treated the machineries as chattels; never as real properties.
Indeed, the 1975 mortgage contract, which was actually real and chattel mortgage, militates against
appellants' posture. It should be noted that the printed form used by appellant bank was mainly for real
estate mortgages. But reflective of the true intention of appellant PBCOM and appellee EVERTEX was the
typing in capital letters, immediately following the printed caption of mortgage, of the phrase "real and
chattel." So also, the "machineries and equipment" in the printed form of the bank had to be inserted in the
blank space of the printed contract and connected with the word "building" by typewritten slash marks. Now,
then, if the machineries in question were contemplated to be included in the real estate mortgage, there
would have been no necessity to ink a chattel mortgage specifically mentioning as part III of Schedule A a
listing of the machineries covered thereby. It would have sufficed to list them as immovables in the Deed of
Real Estate Mortgage of the land and building involved.
As regards the 1979 contract, the intention of the parties is clear and beyond question. It refers solely
tochattels. The inventory list of the mortgaged properties is an itemization of sixty-three (63) individually
described machineries while the schedule listed only machines and 2,996,880.50 worth of finished cotton
fabrics and natural cotton fabrics.16

In the absence of any showing that this conclusion is baseless, erroneous or uncorroborated by the evidence on
record, we find no compelling reason to depart therefrom.
Too, assuming arguendo that the properties in question are immovable by nature, nothing detracts the parties from
treating it as chattels to secure an obligation under the principle of estoppel. As far back as Navarro v. Pineda, 9
SCRA 631 (1963), an immovable may be considered a personal property if there is a stipulation as when it is used
as security in the payment of an obligation where a chattel mortgage is executed over it, as in the case at bar.
In the instant case, the parties herein: (1) executed a contract styled as "Real Estate Mortgage and Chattel
Mortgage," instead of just "Real Estate Mortgage" if indeed their intention is to treat all properties included therein as
immovable, and (2) attached to the said contract a separate "LIST OF MACHINERIES & EQUIPMENT". These
facts, taken together, evince the conclusion that the parties' intention is to treat these units of machinery as chattels.
A fortiori, the contested after-acquired properties, which are of the same description as the units enumerated under
the title "LIST OF MACHINERIES & EQUIPMENT," must also be treated as chattels.
Accordingly, we find no reversible error in the respondent appellate court's ruling that inasmuch as the subject
mortgages were intended by the parties to involve chattels, insofar as equipment and machinery were concerned,
the Chattel Mortgage Law applies, which provides in Section 7 thereof that: "a chattel mortgage shall be deemed to
cover only the property described therein and not like or substituted property thereafter acquired by the mortgagor
and placed in the same depository as the property originally mortgaged, anything in the mortgage to the contrary
notwithstanding."
And, since the disputed machineries were acquired in 1981 and could not have been involved in the 1975 or 1979
chattel mortgages, it was consequently an error on the part of the Sheriff to include subject machineries with the
properties enumerated in said chattel mortgages.
As the auction sale of the subject properties to PBCom is void, no valid title passed in its favor. Consequently, the
sale thereof to Tsai is also a nullity under the elementary principle of nemo dat quod non habet, one cannot give
what one does not have.17
Petitioner Tsai also argued that assuming that PBCom's title over the contested properties is a nullity, she is
nevertheless a purchaser in good faith and for value who now has a better right than EVERTEX.
To the contrary, however, are the factual findings and conclusions of the trial court that she is not a purchaser in
good faith. Well-settled is the rule that the person who asserts the status of a purchaser in good faith and for value
has the burden of proving such assertion.18 Petitioner Tsai failed to discharge this burden persuasively.
Moreover, a purchaser in good faith and for value is one who buys the property of another without notice that some
other person has a right to or interest in such property and pays a full and fair price for the same, at the time of
purchase, or before he has notice of the claims or interest of some other person in the property.19Records reveal,
however, that when Tsai purchased the controverted properties, she knew of respondent's claim thereon. As borne
out by the records, she received the letter of respondent's counsel, apprising her of respondent's claim, dated
February 27, 1987.20 She replied thereto on March 9, 1987.21 Despite her knowledge of respondent's claim, she
proceeded to buy the contested units of machinery on May 3, 1988. Thus, the RTC did not err in finding that she
was not a purchaser in good faith.
Petitioner Tsai's defense of indefeasibility of Torrens Title of the lot where the disputed properties are located is
equally unavailing. This defense refers to sale of lands and not to sale of properties situated therein. Likewise, the
mere fact that the lot where the factory and the disputed properties stand is in PBCom's name does not
automatically make PBCom the owner of everything found therein, especially in view of EVERTEX's letter to Tsai
enunciating its claim.
Finally, petitioners' defense of prescription and laches is less than convincing. We find no cogent reason to disturb
the consistent findings of both courts below that the case for the reconveyance of the disputed properties was filed
within the reglementary period. Here, in our view, the doctrine of laches does not apply. Note that upon petitioners'
adamant refusal to heed EVERTEX's claim, respondent company immediately filed an action to recover possession
and ownership of the disputed properties. There is no evidence showing any failure or neglect on its part, for an
unreasonable and unexplained length of time, to do that which, by exercising due diligence, could or should have

been done earlier. The doctrine of stale demands would apply only where by reason of the lapse of time, it would be
inequitable to allow a party to enforce his legal rights. Moreover, except for very strong reasons, this Court is not
disposed to apply the doctrine of laches to prejudice or defeat the rights of an owner.22
As to the award of damages, the contested damages are the actual compensation, representing rentals for the
contested units of machinery, the exemplary damages, and attorney's fees.
As regards said actual compensation, the RTC awarded P100,000.00 corresponding to the unpaid rentals of the
contested properties based on the testimony of John Chua, who testified that the P100,000.00 was based on the
accepted practice in banking and finance, business and investments that the rental price must take into account the
cost of money used to buy them. The Court of Appeals did not give full credence to Chua's projection and reduced
the award to P20,000.00.
Basic is the rule that to recover actual damages, the amount of loss must not only be capable of proof but must
actually be proven with reasonable degree of certainty, premised upon competent proof or best evidence obtainable
of the actual amount thereof.23 However, the allegations of respondent company as to the amount of unrealized
rentals due them as actual damages remain mere assertions unsupported by documents and other competent
evidence. In determining actual damages, the court cannot rely on mere assertions, speculations, conjectures or
guesswork but must depend on competent proof and on the best evidence obtainable regarding the actual amount
of loss.24 However, we are not prepared to disregard the following dispositions of the respondent appellate court:
. . . In the award of actual damages under scrutiny, there is nothing on record warranting the said award of
P5,200,000.00, representing monthly rental income of P100,000.00 from November 1986 to February 1991,
and the additional award of P100,000.00 per month thereafter.
As pointed out by appellants, the testimonial evidence, consisting of the testimonies of Jonh (sic) Chua and
Mamerto Villaluz, is shy of what is necessary to substantiate the actual damages allegedly sustained by
appellees, by way of unrealized rental income of subject machineries and equipments.
The testimony of John Cua (sic) is nothing but an opinion or projection based on what is claimed to be a
practice in business and industry. But such a testimony cannot serve as the sole basis for assessing the
actual damages complained of. What is more, there is no showing that had appellant Tsai not taken
possession of the machineries and equipments in question, somebody was willing and ready to rent the
same for P100,000.00 a month.
xxx

xxx

xxx

Then, too, even assuming arguendo that the said machineries and equipments could have generated a
rental income of P30,000.00 a month, as projected by witness Mamerto Villaluz, the same would have been
a gross income. Therefrom should be deducted or removed, expenses for maintenance and repairs . . .
Therefore, in the determination of the actual damages or unrealized rental income sued upon, there is a
good basis to calculate that at least four months in a year, the machineries in dispute would have been idle
due to absence of a lessee or while being repaired. In the light of the foregoing rationalization and
computation, We believe that a net unrealized rental income of P20,000.00 a month, since November 1986,
is more realistic and fair.25
As to exemplary damages, the RTC awarded P200,000.00 to EVERTEX which the Court of Appeals deleted. But
according to the CA, there was no clear showing that petitioners acted malevolently, wantonly and oppressively. The
evidence, however, shows otherwise.It is a requisite to award exemplary damages that the wrongful act must be
accompanied by bad faith,26 and the guilty acted in a wanton, fraudulent, oppressive, reckless or malevolent
manner.27 As previously stressed, petitioner Tsai's act of purchasing the controverted properties despite her
knowledge of EVERTEX's claim was oppressive and subjected the already insolvent respondent to gross
disadvantage. Petitioner PBCom also received the same letters of Atty. Villaluz, responding thereto on March 24,
1987.28 Thus, PBCom's act of taking all the properties found in the factory of the financially handicapped
respondent, including those properties not covered by or included in the mortgages, is equally oppressive and
tainted with bad faith. Thus, we are in agreement with the RTC that an award of exemplary damages is proper.

The amount of P200,000.00 for exemplary damages is, however, excessive. Article 2216 of the Civil Code provides
that no proof of pecuniary loss is necessary for the adjudication of exemplary damages, their assessment being left
to the discretion of the court in accordance with the circumstances of each case.29 While the imposition of
exemplary damages is justified in this case, equity calls for its reduction. In Inhelder Corporation v. Court of Appeals,
G.R. No. L-52358, 122 SCRA 576, 585, (May 30, 1983), we laid down the rule that judicial discretion granted to the
courts in the assessment of damages must always be exercised with balanced restraint and measured objectivity.
Thus, here the award of exemplary damages by way of example for the public good should be reduced to
P100,000.00.
By the same token, attorney's fees and other expenses of litigation may be recovered when exemplary damages are
awarded.30 In our view, RTC's award of P50,000.00 as attorney's fees and expenses of litigation is reasonable,
given the circumstances in these cases.
WHEREFORE, the petitions are DENIED. The assailed decision and resolution of the Court of Appeals in CA-G.R.
CV No. 32986 are AFFIRMED WITH MODIFICATIONS. Petitioners Philippine Bank of Communications and Ruby L.
Tsai are hereby ordered to pay jointly and severally Ever Textile Mills, Inc. the following: (1) P20,000.00 per month,
as compensation for the use and possession of the properties in question from November 198631 until subject
personal properties are restored to respondent corporation; (2) P100,000.00 by way of exemplary damages, and (3)
P50,000.00 as attorney's fees and litigation expenses. Costs against petitioners.
SO ORDERED.
Bellosillo, Mendoza, Buena and De Leon, Jr., JJ., concur.

Footnotes
1

Rollo, G.R. No. 120098, pp. 23-45.

Id. at 23-24.

Folder of Exhibits, pp. 5-12.

Rollo, G.R. No. 120098, pp. 23-24.

Id. at 45.

Rollo, G.R. No. 120098, pp. 23-25.

Rollo, G.R. No. 120098, pp. 9-10.

Rollo, G.R. No. 120098, p. 25.

Id., at 33.

10

Id., at 49.

11

Id., at 44.

12

Id., at 133.

13

Congregation of the Religious of the Virgin Mary v. Court of Appeals, 291 SCRA 385, 391-392 (1998).

14

Manlapaz. Court of Appeals, 147 SCRA 236, 239 (1987).

15

Rollo, G.R No. 120109, pp. 62-63.

16

Rollo, G.R. No. 120098, pp. 68-69.

17

Segura vs. Segura, 165 SCRA 368,375 (1988); Noel vs. Court of Appeals, G.R. No. 59550, 240 SCRA
78,88 (1995).
18

Mathay v. Court of Appeals, 295 SCRA 556, 575 (1998).

19

Diaz-Duarte vs. Ong, 298 SCRA 388, 397 (1998).

20

Exhibit "U", Folder of Exhibits, p.64.

21

Exhibit "V", Id., at 66.

22

Noel vs. Court of Appeals, 240 SCRA 78,90 (1995).

23

Ace Hailers Corporation v. CA, et al., G.R No. 127934, August 23, 2000, p. 11.

24

Barzaga vs. Court of Appeals, 268 SCRA 105, 113-114 (1997).

25

Rollo G.R. No. 120109, pp. 43-44.

26

"J" Marketing Corp. vs. Sia, Jr., 285 SCRA 580, 583-584 (1998).

27

Cervantes vs. Court of Appeals, 304 SCRA 25, 33 (1997).

28

Exhibit "X", Folder of Exhibits, p. 69.

29

Art. 2216. Civil Code. No proof of pecuniary loss is necessary in order that moral, nominal, temperate
liquidated or exemplary damages may be adjudicated. The assessment of such damages, except liquidated
ones, is left to the discretion of the court, according to the circumstances of each case.
30

Vital-Gozon v. Court of Appeals, 292 SCRA 124, 147 (1998).

31

The time when PBCom leased the disputed properties to Tsai. CA Rollo, p. 34.

THIRD DIVISION
[G.R. No. 137705. August 22, 2000]
SERGS PRODUCTS, INC., and SERGIO T. GOQUIOLAY, Petitioners, vs. PCI LEASING
AND FINANCE, INC., Respondent.
DECISION
PANGANIBAN, J.: chanrobles virtual law library
After agreeing to a contract stipulating that a real or immovable property be considered as
personal or movable, a party is estopped from subsequently claiming otherwise. Hence,
such property is a proper subject of a writ of replevin obtained by the other contracting
party.
The Case chanrobles virtual law library
Before us is a Petition for Review on Certiorari assailing the January 6, 1999 Decision1 of
the Court of Appeals (CA)[2 in CA-GR SP No. 47332 and its February 26, 1999
Resolution[3 denying reconsideration. The decretal portion of the CA Decision reads as
follows: chanrobles virtual law library
WHEREFORE, premises considered, the assailed Order dated February 18, 1998 and
Resolution dated March 31, 1998 in Civil Case No. Q-98-33500 are herebyAFFIRMED. The
writ of preliminary injunction issued on June 15, 1998 is herebyLIFTED.4 chanrobles virtual
law library
In its February 18, 1998 Order,5 the Regional Trial Court (RTC) of Quezon City (Branch
218)[6 issued a Writ of Seizure.[7 The March 18, 1998 Resolution[8 denied petitioners
Motion for Special Protective Order, praying that the deputy sheriff be enjoined from
seizing immobilized or other real properties in (petitioners) factory in Cainta, Rizal and to
return to their original place whatever immobilized machineries or equipments he may
have removed.[9
The Facts chanrobles virtual law library
The undisputed facts are summarized by the Court of Appeals as follows:10 chanrobles
virtual law library
On February 13, 1998, respondent PCI Leasing and Finance, Inc. (PCI Leasing for short)
filed with the RTC-QC a complaint for [a] sum of money (Annex E), with an application for
a writ of replevin docketed as Civil Case No. Q-98-33500. chanrobles virtual law library
On March 6, 1998, upon an ex-parte application of PCI Leasing, respondent judge issued a
writ of replevin (Annex B) directing its sheriff to seize and deliver the machineries and
equipment to PCI Leasing after 5 days and upon the payment of the necessary
expenses. chanrobles virtual law library
On March 24, 1998, in implementation of said writ, the sheriff proceeded to petitioners
factory, seized one machinery with [the] word that he [would] return for the other
machineries. chanrobles virtual law library

On March 25, 1998, petitioners filed a motion for special protective order (Annex C),
invoking the power of the court to control the conduct of its officers and amend and
control its processes, praying for a directive for the sheriff to defer enforcement of the writ
of replevin. chanrobles virtual law library
This motion was opposed by PCI Leasing (Annex F), on the ground that the properties
[were] still personal and therefore still subject to seizure and a writ of
replevin. chanrobles virtual law library
In their Reply, petitioners asserted that the properties sought to be seized [were]
immovable as defined in Article 415 of the Civil Code, the parties agreement to the
contrary notwithstanding. They argued that to give effect to the agreement would be
prejudicial to innocent third parties. They further stated that PCI Leasing [was] estopped
from treating these machineries as personal because the contracts in which the alleged
agreement [were] embodied [were] totally sham and farcical. chanrobles virtual law
library
On April 6, 1998, the sheriff again sought to enforce the writ of seizure and take
possession of the remaining properties. He was able to take two more, but was prevented
by the workers from taking the rest. chanrobles virtual law library
On April 7, 1998, they went to [the CA] via an original action for certiorari.
Ruling of the Court of Appeals chanrobles virtual law library
Citing the Agreement of the parties, the appellate court held that the subject machines
were personal property, and that they had only been leased, not owned, by petitioners. It
also ruled that the words of the contract are clear and leave no doubt upon the true
intention of the contracting parties. Observing that Petitioner Goquiolay was an
experienced businessman who was not unfamiliar with the ways of the trade, it ruled that
he should have realized the import of the document he signed. The CA further
held: chanrobles virtual law library
Furthermore, to accord merit to this petition would be to preempt the trial court in ruling
upon the case below, since the merits of the whole matter are laid down before us via a
petition whose sole purpose is to inquire upon the existence of a grave abuse of discretion
on the part of the [RTC] in issuing the assailed Order and Resolution. The issues raised
herein are proper subjects of a full-blown trial, necessitating presentation of evidence by
both parties. The contract is being enforced by one, and [its] validity is attacked by the
other a matter x x x which respondent court is in the best position to
determine. chanrobles virtual law library
Hence, this Petition.11
The Issues chanrobles virtual law library
In their Memorandum, petitioners submit the following issues for our
consideration: chanrobles virtual law library
A. Whether or not the machineries purchased and imported by SERGS became real
property by virtue of immobilization. chanrobles virtual law library
B. Whether or not the contract between the parties is a loan or a lease.12 chanrobles
virtual law library

In the main, the Court will resolve whether the said machines are personal, not
immovable, property which may be a proper subject of a writ of replevin. As a preliminary
matter, the Court will also address briefly the procedural points raised by respondent.
The Courts Ruling chanrobles virtual law library
The Petition is not meritorious.
Preliminary Matter:Procedural Questionschanrobles virtual law library
Respondent contends that the Petition failed to indicate expressly whether it was being
filed under Rule 45 or Rule 65 of the Rules of Court. It further alleges that the Petition
erroneously impleaded Judge Hilario Laqui as respondent. chanrobles virtual law library
There is no question that the present recourse is under Rule 45. This conclusion finds
support in the very title of the Petition, which is Petition for Review on
Certiorari.13 chanrobles virtual law library
While Judge Laqui should not have been impleaded as a respondent,14substantial justice
requires that such lapse by itself should not warrant the dismissal of the present Petition.
In this light, the Court deems it proper to remove, motu proprio, the name of Judge Laqui
from the caption of the present case.
Main Issue: Nature of the Subject Machinerychanrobles virtual law library
Petitioners contend that the subject machines used in their factory were not proper
subjects of the Writ issued by the RTC, because they were in fact real property. Serious
policy considerations, they argue, militate against a contrary characterization. chanrobles
virtual law library
Rule 60 of the Rules of Court provides that writs of replevin are issued for the recovery of
personal property only.15 Section 3 thereof reads: chanrobles virtual law library
SEC. 3. Order. -- Upon the filing of such affidavit and approval of the bond, the court shall
issue an order and the corresponding writ of replevin describing the personal property
alleged to be wrongfully detained and requiring the sheriff forthwith to take such property
into his custody. chanrobles virtual law library
On the other hand, Article 415 of the Civil Code enumerates immovable or real property as
follows: chanrobles virtual law library
ART. 415. The following are immovable property:
x x x....................................x x x....................................x x x chanrobles virtual law library
(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;
x x x....................................x x x....................................x x x chanrobles virtual law library
In the present case, the machines that were the subjects of the Writ of Seizure were
placed by petitioners in the factory built on their own land. Indisputably, they were
essential and principal elements of their chocolate-making industry. Hence, although each

of them was movable or personal property on its own, all of them have become
immobilized by destination because they are essential and principal elements in the
industry.16 In that sense, petitioners are correct in arguing that the said machines are real,
not personal, property pursuant to Article 415 (5) of the Civil Code.[17 chanrobles virtual
law library
Be that as it may, we disagree with the submission of the petitioners that the said
machines are not proper subjects of the Writ of Seizure. chanrobles virtual law library
The Court has held that contracting parties may validly stipulate that a real property be
considered as personal.18 After agreeing to such stipulation, they are consequently
estopped from claiming otherwise. Under the principle of estoppel, a party to a contract is
ordinarily precluded from denying the truth of any material fact found therein. chanrobles
virtual law library
Hence, in Tumalad v. Vicencio,19 the Court upheld the intention of the parties to treat
a house as a personal property because it had been made the subject of a chattel
mortgage. The Court ruled: chanrobles virtual law library
x x x. Although there is no specific statement referring to the subject house as personal
property, yet by ceding, selling or transferring a property by way of chattel mortgage
defendants-appellants could only have meant to convey the house as chattel, or at least,
intended to treat the same as such, so that they should not now be allowed to make an
inconsistent stand by claiming otherwise.chanrobles virtual law library
Applying Tumalad, the Court in Makati Leasing and Finance Corp. v. Wearever Textile
Mills[20] also held that the machinery used in a factory and essential to the industry, as in
the present case, was a proper subject of a writ of replevin because it was treated as
personal property in a contract. Pertinent portions of the Courts ruling are reproduced
hereunder: chanrobles virtual law library
x x x. If a house of strong materials, like what was involved in the above Tumalad case,
may be considered as personal property for purposes of executing a chattel mortgage
thereon as long as the parties to the contract so agree and no innocent third party will be
prejudiced thereby, there is absolutely no reason why a machinery, which is movable in its
nature and becomes immobilized only by destination or purpose, may not be likewise
treated as such. This is really because one who has so agreed is estopped from denying
the existence of the chattel mortgage. chanrobles virtual law library
In the present case, the Lease Agreement clearly provides that the machines in question
are to be considered as personal property. Specifically, Section 12.1 of the Agreement
reads as follows:21 chanrobles virtual law library
12.1 The PROPERTY is, and shall at all times be and remain, personal property
notwithstanding that the PROPERTY or any part thereof may now be, or hereafter become,
in any manner affixed or attached to or embedded in, or permanently resting upon, real
property or any building thereon, or attached in any manner to what is
permanent. chanrobles virtual law library
Clearly then, petitioners are estopped from denying the characterization of the subject
machines as personal property. Under the circumstances, they are proper subjects of the
Writ of Seizure. chanrobles virtual law library
It should be stressed, however, that our holding -- that the machines should be deemed
personal property pursuant to the Lease Agreement is good only insofar as the contracting

parties are concerned.22 Hence, while the parties are bound by the Agreement, third
persons acting in good faith are not affected by its stipulation characterizing the subject
machinery as personal.[23 In any event, there is no showing that any specific third party
would be adversely affected.
Validity of the Lease Agreement chanrobles virtual law library
In their Memorandum, petitioners contend that the Agreement is a loan and not a
lease.24 Submitting documents supposedly showing that they own the subject machines,
petitioners also argue in their Petition that the Agreement suffers from intrinsic ambiguity
which places in serious doubt the intention of the parties and the validity of the lease
agreement itself.[25 In their Reply to respondents Comment, they further allege that the
Agreement is invalid.[26 chanrobles virtual law library
These arguments are unconvincing. The validity and the nature of the contract are the lis
mota of the civil action pending before the RTC. A resolution of these questions, therefore,
is effectively a resolution of the merits of the case. Hence, they should be threshed out in
the trial, not in the proceedings involving the issuance of the Writ of Seizure. chanrobles
virtual law library
Indeed, in La Tondea Distillers v. CA,27 the Court explained that the policy under Rule 60
was that questions involving title to the subject property questions which petitioners are
now raising -- should be determined in the trial. In that case, the Court noted that the
remedy of defendants under Rule 60 was either to post a counter-bond or to question the
sufficiency of the plaintiffs bond. They were not allowed, however, to invoke the title to
the subject property. The Court ruled: chanrobles virtual law library
In other words, the law does not allow the defendant to file a motion to dissolve or
discharge the writ of seizure (or delivery) on ground of insufficiency of the complaint or of
the grounds relied upon therefor, as in proceedings on preliminary attachment or
injunction, and thereby put at issue the matter of the title or right of possession over the
specific chattel being replevied, the policy apparently being that said matter should be
ventilated and determined only at the trial on the merits.28 chanrobles virtual law library
Besides, these questions require a determination of facts and a presentation of evidence,
both of which have no place in a petition for certiorari in the CA under Rule 65 or in a
petition for review in this Court under Rule 45.29
Reliance on the Lease Agreement chanrobles virtual law library
It should be pointed out that the Court in this case may rely on the Lease Agreement, for
nothing on record shows that it has been nullified or annulled. In fact, petitioners assailed
it first only in the RTC proceedings, which had ironically been instituted by respondent.
Accordingly, it must be presumed valid and binding as the law between the
parties. chanrobles virtual law library
Makati Leasing and Finance Corporation30 is also instructive on this point. In that case, the
Deed of Chattel Mortgage, which characterized the subject machinery as personal
property, was also assailed because respondent had allegedly been required to sign a
printed form of chattel mortgage which was in a blank form at the time of signing. The
Court rejected the argument and relied on the Deed, ruling as follows: chanrobles virtual
law library
x x x. Moreover, even granting that the charge is true, such fact alone does not render a
contract void ab initio, but can only be a ground for rendering said contract voidable, or

annullable pursuant to Article 1390 of the new Civil Code, by a proper action in court.
There is nothing on record to show that the mortgage has been annulled. Neither is it
disclosed that steps were taken to nullify the same. x x x
Alleged Injustice Committed on the Part of Petitioners chanrobles virtual law library
Petitioners contend that if the Court allows these machineries to be seized, then its
workers would be out of work and thrown into the streets.31 They also allege that the
seizure would nullify all efforts to rehabilitate the corporation. chanrobles virtual law
library
Petitioners arguments do not preclude the implementation of the Writ. As earlier
discussed, law and jurisprudence support its propriety. Verily, the above-mentioned
consequences, if they come true, should not be blamed on this Court, but on the
petitioners for failing to avail themselves of the remedy under Section 5 of Rule 60, which
allows the filing of a counter-bond. The provision states: chanrobles virtual law library
SEC. 5. Return of property. -- If the adverse party objects to the sufficiency of the
applicants bond, or of the surety or sureties thereon, he cannot immediately require the
return of the property, but if he does not so object, he may, at any time before the delivery
of the property to the applicant, require the return thereof, by filing with the court where
the action is pending a bond executed to the applicant, in double the value of the property
as stated in the applicants affidavit for the delivery thereof to the applicant, if such
delivery be adjudged, and for the payment of such sum to him as may be recovered
against the adverse party, and by serving a copy bond on the applicant. chanrobles virtual
law library
WHEREFORE, the Petition is DENIED and the assailed Decision of the Court of
Appeals AFFIRMED. Costs against petitioners. chanrobles virtual law library
SO ORDERED. chanrobles virtual law library
Melo, (Chairman), Vitug, Purisima, and Gonzaga-Reyes, JJ., concur.

Endnotes:
1

Rollo, pp. 177-180.

Penned by Justice Romeo A. Brawner (Division acting chairman), with the concurrence of
Justices Eloy R. Bello Jr. and Martin S. Villarama Jr.
3

Rollo, p. 189.

CA Decision, p. 3; rollo, p. 179.

Rollo, p. 356.

Presided by Judge Hilario L. Laqui.

Rollo, pp. 23-24.

Rollo, pp. 78-79.

Motion for Special Protective Order, pp. 3-4; rollo, pp. 76-77.

10

CA Decision, pp. 1-2; rollo, pp. 177-178.

11

The case was deemed submitted for resolution on October 21, 1999, upon receipt by this
Court of the petitioners Memorandum signed by Atty. Victor Basilio N. De Leon of Antonio
R. Bautista & Partners. Respondents Memorandum, which was signed by Atty. Amador F.
Brioso Jr. of Perez & Calima Law Offices, had been filed earlier on September 29, 1999.
12 Petitioners Memorandum, p. 3; rollo, p. 376.

13

Section 1, Rule 45 of the Rules of Court.

14

Section 4 (a) of Rule 45 provides that the petition shall state the full name of the
parties, without impleading the lower courts or judges thereof either as petitioners or
respondents.
15

BA Finance v. CA, 258 SCRA 102, July 5, 1996; Filinvest Credit v. CA, 248 SCRA 549,
September 27, 1995; Machinery Engineering Supply v. CA, 96 Phil. 70, October 29, 1954.
16

Mindanao Bus Co. v. City Assessor and Treasurer, 6 SCRA 197, September 29, 1962, per
Labrador, J. See also Vitug, Compendium of Civil Law and Jurisprudence, 1986 ed., pp. 99100.
17

Peoples Bank & Trust Co. v. Dahican Lumber, 20 SCRA 84, May 16, 1967; Burgos v. Chief
of Staff, 133 SCRA 800, December 26, 1984; Davao Sawmill Co. v. Castillo, 61 Phil. 709,
August 7, 1935.
18

Chua Peng Hian v. CA, 133 SCRA 572, December 19, 1984; Standard Oil Co. v. Jaranillo,
44 Phil. 630, March 16, 1923; Luna v. Encarnacion, 91 Phil. 531, June 30, 1952;
Manarang v. Ofilada, 99 Phil. 109, May 18, 1956; Peoples Bank & Trust Co. v. Dahican
Lumber, supra.
19

41 SCRA 143, 153, September 30, 1971, per Reyes, JBL, J.

20

122 SCRA 296, 300, May 16, 1983, per De Castro, J.

21

Rollo, p. 262.

22

Evangelista v. Alto Surety and Insurance Co., 103 Phil. 401, April 23, 1958;
Navarro v. Pineda, 9 SCRA 631, November 30, 1963.
23

Vitug, supra, pp. 100-101.

24

Petitioners Memorandum, p. 8; rollo, p. 381.

25

Petition, p. 10; rollo, p. 12.

26

Reply, p. 7; rollo, p. 301.

27

209 SCRA 553, 567, June 8, 1992, per Narvasa, CJ.

28

Ibid.

29

See Fuentes v. Court of Appeals, 268 SCRA 703, February 26, 1997.

30

Supra, p. 301.

31

Petition, p. 16; rollo, p. 18.

Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. L-64261 December 26, 1984
JOSE BURGOS, SR., JOSE BURGOS, JR., BAYANI SORIANO and J. BURGOS MEDIA SERVICES,
INC.,petitioners,
vs.
THE CHIEF OF STAFF, ARMED FORCES OF THE PHILIPPINES, THE CHIEF, PHILIPPINE CONSTABULARY,
THE CHIEF LEGAL OFFICER, PRESIDENTIAL SECURITY COMMAND, THE JUDGE ADVOCATE GENERAL,
ET AL., respondents.
Lorenzo M. Taada, Wigberto E. Taada, Martiniano Vivo, Augusto Sanchez, Joker P. Arroyo, Jejomar Binay and
Rene Saguisag for petitioners.
The Solicitor General for respondents.

ESCOLIN, J.:
Assailed in this petition for certiorari prohibition and mandamus with preliminary mandatory and prohibitory
injunction is the validity of two [2] search warrants issued on December 7, 1982 by respondent Judge Ernani CruzPano, Executive Judge of the then Court of First Instance of Rizal [Quezon City], under which the premises known
as No. 19, Road 3, Project 6, Quezon City, and 784 Units C & D, RMS Building, Quezon Avenue, Quezon City,
business addresses of the "Metropolitan Mail" and "We Forum" newspapers, respectively, were searched, and office
and printing machines, equipment, paraphernalia, motor vehicles and other articles used in the printing, publication
and distribution of the said newspapers, as well as numerous papers, documents, books and other written literature
alleged to be in the possession and control of petitioner Jose Burgos, Jr. publisher-editor of the "We Forum"
newspaper, were seized.
Petitioners further pray that a writ of preliminary mandatory and prohibitory injunction be issued for the return of the
seized articles, and that respondents, "particularly the Chief Legal Officer, Presidential Security Command, the
Judge Advocate General, AFP, the City Fiscal of Quezon City, their representatives, assistants, subalterns,
subordinates, substitute or successors" be enjoined from using the articles thus seized as evidence against
petitioner Jose Burgos, Jr. and the other accused in Criminal Case No. Q- 022782 of the Regional Trial Court of
Quezon City, entitled People v. Jose Burgos, Jr. et al. 1
In our Resolution dated June 21, 1983, respondents were required to answer the petition. The plea for preliminary
mandatory and prohibitory injunction was set for hearing on June 28, 1983, later reset to July 7, 1983, on motion of
the Solicitor General in behalf of respondents.
At the hearing on July 7, 1983, the Solicitor General, while opposing petitioners' prayer for a writ of preliminary
mandatory injunction, manifested that respondents "will not use the aforementioned articles as evidence in the
aforementioned case until final resolution of the legality of the seizure of the aforementioned articles. ..." 2 With this
manifestation, the prayer for preliminary prohibitory injunction was rendered moot and academic.
Respondents would have this Court dismiss the petition on the ground that petitioners had come to this Court
without having previously sought the quashal of the search warrants before respondent judge. Indeed, petitioners,
before impugning the validity of the warrants before this Court, should have filed a motion to quash said warrants in
the court that issued them. 3 But this procedural flaw notwithstanding, we take cognizance of this petition in view of
the seriousness and urgency of the constitutional issues raised not to mention the public interest generated by the
search of the "We Forum" offices, which was televised in Channel 7 and widely publicized in all metropolitan dailies.
The existence of this special circumstance justifies this Court to exercise its inherent power to suspend its rules. In

the words of the revered Mr. Justice Abad Santos in the case of C. Vda. de Ordoveza v. Raymundo, 4 "it is always in
the power of the court [Supreme Court] to suspend its rules or to except a particular case from its operation,
whenever the purposes of justice require it...".
Respondents likewise urge dismissal of the petition on ground of laches. Considerable stress is laid on the fact that
while said search warrants were issued on December 7, 1982, the instant petition impugning the same was filed
only on June 16, 1983 or after the lapse of a period of more than six [6] months.
Laches is failure or negligence for an unreasonable and unexplained length of time to do that which, by exercising
due diligence, could or should have been done earlier. It is negligence or omission to assert a right within a
reasonable time, warranting a presumption that the party entitled to assert it either has abandoned it or declined to
assert it. 5
Petitioners, in their Consolidated Reply, explained the reason for the delay in the filing of the petition thus:
Respondents should not find fault, as they now do [p. 1, Answer, p. 3, Manifestation] with the fact
that the Petition was filed on June 16, 1983, more than half a year after the petitioners' premises had
been raided.
The climate of the times has given petitioners no other choice. If they had waited this long to bring
their case to court, it was because they tried at first to exhaust other remedies. The events of the
past eleven fill years had taught them that everything in this country, from release of public funds to
release of detained persons from custody, has become a matter of executive benevolence or
largesse
Hence, as soon as they could, petitioners, upon suggestion of persons close to the President, like
Fiscal Flaminiano, sent a letter to President Marcos, through counsel Antonio Coronet asking the
return at least of the printing equipment and vehicles. And after such a letter had been sent, through
Col. Balbino V. Diego, Chief Intelligence and Legal Officer of the Presidential Security Command,
they were further encouraged to hope that the latter would yield the desired results.
After waiting in vain for five [5] months, petitioners finally decided to come to Court. [pp. 123-124,
Rollo]
Although the reason given by petitioners may not be flattering to our judicial system, We find no ground to punish or
chastise them for an error in judgment. On the contrary, the extrajudicial efforts exerted by petitioners quite evidently
negate the presumption that they had abandoned their right to the possession of the seized property, thereby
refuting the charge of laches against them.
Respondents also submit the theory that since petitioner Jose Burgos, Jr. had used and marked as evidence some
of the seized documents in Criminal Case No. Q- 022872, he is now estopped from challenging the validity of the
search warrants. We do not follow the logic of respondents. These documents lawfully belong to petitioner Jose
Burgos, Jr. and he can do whatever he pleases with them, within legal bounds. The fact that he has used them as
evidence does not and cannot in any way affect the validity or invalidity of the search warrants assailed in this
petition.
Several and diverse reasons have been advanced by petitioners to nullify the search warrants in question.
1. Petitioners fault respondent judge for his alleged failure to conduct an examination under oath or affirmation of the
applicant and his witnesses, as mandated by the above-quoted constitutional provision as wen as Sec. 4, Rule 126
of the Rules of Court . 6 This objection, however, may properly be considered moot and academic, as petitioners
themselves conceded during the hearing on August 9, 1983, that an examination had indeed been conducted by
respondent judge of Col. Abadilla and his witnesses.
2. Search Warrants No. 20-82[a] and No. 20- 82[b] were used to search two distinct places: No. 19, Road 3, Project
6, Quezon City and 784 Units C & D, RMS Building, Quezon Avenue, Quezon City, respectively. Objection is
interposed to the execution of Search Warrant No. 20-82[b] at the latter address on the ground that the two search

warrants pinpointed only one place where petitioner Jose Burgos, Jr. was allegedly keeping and concealing the
articles listed therein, i.e., No. 19, Road 3, Project 6, Quezon City. This assertion is based on that portion of Search
Warrant No. 20- 82[b] which states:
Which have been used, and are being used as instruments and means of committing the crime of
subversion penalized under P.D. 885 as amended and he is keeping and concealing the same at 19
Road 3, Project 6, Quezon City.
The defect pointed out is obviously a typographical error. Precisely, two search warrants were applied for and
issued because the purpose and intent were to search two distinct premises. It would be quite absurd and illogical
for respondent judge to have issued two warrants intended for one and the same place. Besides, the addresses of
the places sought to be searched were specifically set forth in the application, and since it was Col. Abadilla himself
who headed the team which executed the search warrants, the ambiguity that might have arisen by reason of the
typographical error is more apparent than real. The fact is that the place for which Search Warrant No. 20- 82[b] was
applied for was 728 Units C & D, RMS Building, Quezon Avenue, Quezon City, which address appeared in the
opening paragraph of the said warrant. 7 Obviously this is the same place that respondent judge had in mind when
he issued Warrant No. 20-82 [b].
In the determination of whether a search warrant describes the premises to be searched with sufficient particularity,
it has been held "that the executing officer's prior knowledge as to the place intended in the warrant is relevant. This
would seem to be especially true where the executing officer is the affiant on whose affidavit the warrant had issued,
and when he knows that the judge who issued the warrant intended the building described in the affidavit, And it has
also been said that the executing officer may look to the affidavit in the official court file to resolve an ambiguity in
the warrant as to the place to be searched." 8
3. Another ground relied upon to annul the search warrants is the fact that although the warrants were directed
against Jose Burgos, Jr. alone, articles b belonging to his co-petitioners Jose Burgos, Sr., Bayani Soriano and the J.
Burgos Media Services, Inc. were seized.
Section 2, Rule 126 of the Rules of Court, enumerates the personal properties that may be seized under a search
warrant, to wit:
Sec. 2. Personal Property to be seized. A search warrant may be issued for the search and
seizure of the following personal property:
[a] Property subject of the offense;
[b] Property stolen or embezzled and other proceeds or fruits of the offense; and
[c] Property used or intended to be used as the means of committing an offense.
The above rule does not require that the property to be seized should be owned by the person against whom the
search warrant is directed. It may or may not be owned by him. In fact, under subsection [b] of the above-quoted
Section 2, one of the properties that may be seized is stolen property. Necessarily, stolen property must be owned
by one other than the person in whose possession it may be at the time of the search and seizure. Ownership,
therefore, is of no consequence, and it is sufficient that the person against whom the warrant is directed has control
or possession of the property sought to be seized, as petitioner Jose Burgos, Jr. was alleged to have in relation to
the articles and property seized under the warrants.
4. Neither is there merit in petitioners' assertion that real properties were seized under the disputed warrants. Under
Article 415[5] of the Civil Code of the Philippines, "machinery, receptables, 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" are considered immovable property. In Davao
Sawmill Co. v. Castillo 9 where this legal provision was invoked, this Court ruled that machinery which is movable by
nature becomes immobilized when placed by the owner of the tenement, property or plant, but not so when placed
by a tenant, usufructuary, or any other person having only a temporary right, unless such person acted as the agent
of the owner.

In the case at bar, petitioners do not claim to be the owners of the land and/or building on which the machineries
were placed. This being the case, the machineries in question, while in fact bolted to the ground remain movable
property susceptible to seizure under a search warrant.
5. The questioned search warrants were issued by respondent judge upon application of Col. Rolando N. Abadilla
Intelligence Officer of the P.C. Metrocom. 10 The application was accompanied by the Joint Affidavit of Alejandro M.
Gutierrez and Pedro U. Tango, 11 members of the Metrocom Intelligence and Security Group under Col. Abadilla
which conducted a surveillance of the premises prior to the filing of the application for the search warrants on
December 7, 1982.
It is contended by petitioners, however, that the abovementioned documents could not have provided sufficient
basis for the finding of a probable cause upon which a warrant may validly issue in accordance with Section 3,
Article IV of the 1973 Constitution which provides:
SEC. 3. ... and no search warrant or warrant of arrest shall issue except upon probable cause to be
determined by the judge, or such other responsible officer as may be authorized by law, after
examination under oath or affirmation of the complainant and the witnesses he may produce, and
particularly describing the place to be searched and the persons or things to be seized.
We find petitioners' thesis impressed with merit. Probable cause for a search is defined as such facts and
circumstances which would lead a reasonably discreet and prudent man to believe that an offense has been
committed and that the objects sought in connection with the offense are in the place sought to be searched. And
when the search warrant applied for is directed against a newspaper publisher or editor in connection with the
publication of subversive materials, as in the case at bar, the application and/or its supporting affidavits must contain
a specification, stating with particularity the alleged subversive material he has published or is intending to publish.
Mere generalization will not suffice. Thus, the broad statement in Col. Abadilla's application that petitioner "is in
possession or has in his control printing equipment and other paraphernalia, news publications and other
documents which were used and are all continuously being used as a means of committing the offense of
subversion punishable under Presidential Decree 885, as amended ..." 12 is a mere conclusion of law and does not
satisfy the requirements of probable cause. Bereft of such particulars as would justify a finding of the existence of
probable cause, said allegation cannot serve as basis for the issuance of a search warrant and it was a grave error
for respondent judge to have done so.
Equally insufficient as basis for the determination of probable cause is the statement contained in the joint affidavit
of Alejandro M. Gutierrez and Pedro U. Tango, "that the evidence gathered and collated by our unit clearly shows
that the premises above- mentioned and the articles and things above-described were used and are continuously
being used for subversive activities in conspiracy with, and to promote the objective of, illegal organizations such as
the Light-a-Fire Movement, Movement for Free Philippines, and April 6 Movement." 13
In mandating that "no warrant shall issue except upon probable cause to be determined by the judge, ... after
examination under oath or affirmation of the complainant and the witnesses he may produce; 14 the Constitution
requires no less than personal knowledge by the complainant or his witnesses of the facts upon which the issuance
of a search warrant may be justified. In Alvarez v. Court of First Instance, 15 this Court ruled that "the oath required
must refer to the truth of the facts within the personal knowledge of the petitioner or his witnesses, because the
purpose thereof is to convince the committing magistrate, not the individual making the affidavit and seeking the
issuance of the warrant, of the existence of probable cause." As couched, the quoted averment in said joint affidavit
filed before respondent judge hardly meets the test of sufficiency established by this Court in Alvarez case.
Another factor which makes the search warrants under consideration constitutionally objectionable is that they are in
the nature of general warrants. The search warrants describe the articles sought to be seized in this wise:
1] All printing equipment, paraphernalia, paper, ink, photo (equipment, typewriters, cabinets, tables,
communications/recording equipment, tape recorders, dictaphone and the like used and/or
connected in the printing of the "WE FORUM" newspaper and any and all documents
communication, letters and facsimile of prints related to the "WE FORUM" newspaper.

2] Subversive documents, pamphlets, leaflets, books, and other publication to promote the
objectives and piurposes of the subversive organization known as Movement for Free Philippines,
Light-a-Fire Movement and April 6 Movement; and,
3] Motor vehicles used in the distribution/circulation of the "WE FORUM" and other subversive
materials and propaganda, more particularly,
1] Toyota-Corolla, colored yellow with Plate No. NKA 892;
2] DATSUN pick-up colored white with Plate No. NKV 969
3] A delivery truck with Plate No. NBS 524;
4] TOYOTA-TAMARAW, colored white with Plate No. PBP 665; and,
5] TOYOTA Hi-Lux, pick-up truck with Plate No. NGV 427 with marking "Bagong
Silang."
In Stanford v. State of Texas 16 the search warrant which authorized the search for "books, records, pamphlets,
cards, receipts, lists, memoranda, pictures, recordings and other written instruments concerning the Communist
Party in Texas," was declared void by the U.S. Supreme Court for being too general. In like manner, directions to
"seize any evidence in connectionwith the violation of SDC 13-3703 or otherwise" have been held too general, and
that portion of a search warrant which authorized the seizure of any "paraphernalia which could be used to violate
Sec. 54-197 of the Connecticut General Statutes [the statute dealing with the crime of conspiracy]" was held to be a
general warrant, and therefore invalid. 17 The description of the articles sought to be seized under the search
warrants in question cannot be characterized differently.
In the Stanford case, the U.S. Supreme Courts calls to mind a notable chapter in English history: the era of
disaccord between the Tudor Government and the English Press, when "Officers of the Crown were given roving
commissions to search where they pleased in order to suppress and destroy the literature of dissent both Catholic
and Puritan Reference herein to such historical episode would not be relevant for it is not the policy of our
government to suppress any newspaper or publication that speaks with "the voice of non-conformity" but poses no
clear and imminent danger to state security.
As heretofore stated, the premises searched were the business and printing offices of the "Metropolitan Mail" and
the "We Forum newspapers. As a consequence of the search and seizure, these premises were padlocked and
sealed, with the further result that the printing and publication of said newspapers were discontinued.
Such closure is in the nature of previous restraint or censorship abhorrent to the freedom of the press guaranteed
under the fundamental law, 18 and constitutes a virtual denial of petitioners' freedom to express themselves in print.
This state of being is patently anathematic to a democratic framework where a free, alert and even militant press is
essential for the political enlightenment and growth of the citizenry.
Respondents would justify the continued sealing of the printing machines on the ground that they have been
sequestered under Section 8 of Presidential Decree No. 885, as amended, which authorizes "the sequestration of
the property of any person, natural or artificial, engaged in subversive activities against the government and its duly
constituted authorities ... in accordance with implementing rules and regulations as may be issued by the Secretary
of National Defense." It is doubtful however, if sequestration could validly be effected in view of the absence of any
implementing rules and regulations promulgated by the Minister of National Defense.
Besides, in the December 10, 1982 issue of the Daily Express, it was reported that no less than President Marcos
himself denied the request of the military authorities to sequester the property seized from petitioners on December
7, 1982. Thus:
The President denied a request flied by government prosecutors for sequestration of the WE
FORUM newspaper and its printing presses, according to Information Minister Gregorio S. Cendana.

On the basis of court orders, government agents went to the We Forum offices in Quezon City and
took a detailed inventory of the equipment and all materials in the premises.
Cendaa said that because of the denial the newspaper and its equipment remain at the disposal of
the owners, subject to the discretion of the court. 19
That the property seized on December 7, 1982 had not been sequestered is further confirmed by the reply of then
Foreign Minister Carlos P. Romulo to the letter dated February 10, 1983 of U.S. Congressman Tony P. Hall
addressed to President Marcos, expressing alarm over the "WE FORUM " case. 20 In this reply dated February 11,
1983, Minister Romulo stated:
2. Contrary to reports, President Marcos turned down the recommendation of our authorities to close
the paper's printing facilities and confiscate the equipment and materials it uses. 21
IN VIEW OF THE FOREGOING, Search Warrants Nos. 20-82[a] and 20-82[b] issued by respondent judge on
December 7, 1982 are hereby declared null and void and are accordingly set aside. The prayer for a writ of
mandatory injunction for the return of the seized articles is hereby granted and all articles seized thereunder are
hereby ordered released to petitioners. No costs.
SO ORDERED.
Fernando, C.J., Teehankee, Makasiar, Concepcion, Jr., Melencio-Herrera, Plana, Relova, Gutierrez, Jr., De la
Fuente and Cuevas, JJ., concur.
Aquino, J., took no part.

Separate Opinions

ABAD SANTOS, J., concurring

I am glad to give my concurrence to the ponencia of Mr. Justice Escolin At the same time I wish to state my own
reasons for holding that the search warrants which are the subject of the petition are utterly void.
The action against "WE FORUM" was a naked suppression of press freedom for the search warrants were issued in
gross violation of the Constitution.
The Constitutional requirement which is expressed in Section 3, Article IV, stresses two points, namely: "(1) that no
warrant shall issue but upon probable cause, to be determined by the judge in the manner set forth in said provision;
and (2) that the warrant shall particularly describe the things to be seized." (Stonehill vs. Diokno, 126 Phil. 738, 747:
20 SCRA 383 [1967].)
Any search warrant is conducted in disregard of the points mentioned above will result in wiping "out completely one
of the most fundamental rights guaranteed in our Constitution, for it would place the sanctity of the domicile and the
privacy of communication and correspondence at the mercy of the whims caprice or passion of peace officers."
(Ibid, p. 748.)
The two search warrants were issued without probable cause. To satisfy the requirement of probable cause a
specific offense must be alleged in the application; abstract averments will not suffice. In the case at bar nothing
specifically subversive has been alleged; stated only is the claim that certain objects were being used as
instruments and means of committing the offense of subversion punishable under P.D. No. 885, as amended. There

is no mention of any specific provision of the decree. I n the words of Chief Justice C Concepcion, " It would be legal
heresy of the highest order, to convict anybody" of violating the decree without reference to any determinate
provision thereof.
The search warrants are also void for lack of particularity. Both search warrants authorize Col. Rolando Abadilla to
seize and take possession, among other things, of the following:
Subversive documents, pamphlets, leaflets, books and other publication to promote the objectives
and purposes of the subversive organizations known as Movement for Free Philippines, Light-a-Fire
Movement and April 6 Movement.
The obvious question is: Why were the documents, pamphlets, leaflets, books, etc. subversive? What did they
contain to make them subversive? There is nothing in the applications nor in the warrants which answers the
questions. I must, therefore, conclude that the warrants are general warrants which are obnoxious to the
Constitution.
In point of fact, there was nothing subversive published in the WE FORUM just as there is nothing subversive which
has been published in MALAYA which has replaced the former and has the same content but against which no
action has been taken.
Conformably with existing jurisprudence everything seized pursuant to the warrants should be returned to the
owners and all of the items are subject to the exclusionary rule of evidence.
Teehankee, J., concur.

Separate Opinions
ABAD SANTOS, J., concurring
I am glad to give my concurrence to the ponencia of Mr. Justice Escolin At the same time I wish to state my own
reasons for holding that the search warrants which are the subject of the petition are utterly void.
The action against "WE FORUM" was a naked suppression of press freedom for the search warrants were issued in
gross violation of the Constitution.
The Constitutional requirement which is expressed in Section 3, Article IV, stresses two points, namely: "(1) that no
warrant shall issue but upon probable cause, to be determined by the judge in the manner set forth in said provision;
and (2) that the warrant shall particularly describe the things to be seized." (Stonehill vs. Diokno, 126 Phil. 738, 747:
20 SCRA 383 [1967].)
Any search warrant is conducted in disregard of the points mentioned above will result in wiping "out completely one
of the most fundamental rights guaranteed in our Constitution, for it would place the sanctity of the domicile and the
privacy of communication and correspondence at the mercy of the whims caprice or passion of peace officers."
(Ibid, p. 748.)
The two search warrants were issued without probable cause. To satisfy the requirement of probable cause a
specific offense must be alleged in the application; abstract averments will not suffice. In the case at bar nothing
specifically subversive has been alleged; stated only is the claim that certain objects were being used as
instruments and means of committing the offense of subversion punishable under P.D. No. 885, as amended. There
is no mention of any specific provision of the decree. I n the words of Chief Justice C Concepcion, " It would be legal
heresy of the highest order, to convict anybody" of violating the decree without reference to any determinate
provision thereof.

The search warrants are also void for lack of particularity. Both search warrants authorize Col. Rolando Abadilla to
seize and take possession, among other things, of the following:
Subversive documents, pamphlets, leaflets, books and other publication to promote the objectives
and purposes of the subversive organizations known as Movement for Free Philippines, Light-a-Fire
Movement and April 6 Movement.
The obvious question is: Why were the documents, pamphlets, leaflets, books, etc. subversive? What did they
contain to make them subversive? There is nothing in the applications nor in the warrants which answers the
questions. I must, therefore, conclude that the warrants are general warrants which are obnoxious to the
Constitution.
In point of fact, there was nothing subversive published in the WE FORUM just as there is nothing subversive which
has been published in MALAYA which has replaced the former and has the same content but against which no
action has been taken.
Conformably with existing jurisprudence everything seized pursuant to the warrants should be returned to the
owners and all of the items are subject to the exclusionary rule of evidence.
Teehankee, J., concur.
Footnotes
1 Petition, P. 44, Rollo.
2 Manifestation and Opposition, p. 75, Rollo.
3 Templo v. Dela Cruz, 60 SCRA 295.
4 463 Phil. 275.
5 Tijam v. Sibonghanoy, 23 SCRA 29.
6 Sec. 4, Rule 126, Rules of Court provides:
Sec. 4. Examination of the Applicant. The municipal or city judge must, before issuing the
warrant, personally examine on oath or affirmation the complainant and any witnesses he may
produce and take their deposition in writing and attach them to the record, in addition to any
affidavits presented to them.
7 The opening paragraph of Search Warrant No. 20- 82 [b] reads:
"It appearing to the satisfaction of the undersigned after examination under oath of Maj. Alejandro M.
Gutierrez and Lt. Pedro U. Tango, that there are good and sufficient reason to believe that Jose
Burgos, Jr. Publisher-Editor of "WE FORUM" with office address at 784 Units C & D, RMS Building,
Quezon Avenue, Quezon City, has in his possession and control at said address the following; ... :
8 68 Am. Jur. 2d., 729.
9 61 Phil. 709. Annex "C", Petition, pp. 51-52,
10 Rollo.
11 Annex "B", Petition, pp. 53-54, Rollo.
12 Annex "C", Petition, p. 51, Rollo.

13 Annex "D", Petition, p. 54, Rollo.

14 Sec. 3, Art. IV, 1973 Constitution.
15 64 Phil. 33.
18 Sec. 9. Art. IV of the Constitution
19 Annex "K", Consolidated Reply, p. 175, Rollo.
20 Annex "L", Consolidated Reply, p. 178, Rollo.
21 Annex "M", Consolidated Reply, p. 179, Rollo.

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. O-391 owned by the corporation
be sold at public auction and the proceeds thereof be applied to said indebtedness; or that the 420 shares of the
capital stock of the Plaza Theatre, Inc., assigned by Vicente Orosa, Jr., to said plaintiff be sold at public auction for
the same purpose; and for such other remedies as may be warranted by the circumstances. Plaintiff also caused the
annotation of a notice of lis pendens on said properties with the Register of Deeds.
Defendants Vicente Orosa, Jr. and Plaza Theatre, Inc., filed separate answers, the first denying that the materials
were delivered to him as a promoter and later treasurer of the corporation, because he had purchased and received
the same on his personal account; that the land on which the movie house was constructed was not charged with a

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

the land on which the building is adhered to; and (2) whether the lower court and the Court of Appeals erred in not
providing that the material mans liens is superior to the mortgage executed in favor surety company not only on the
building but also on the land.
It is to be noted in this appeal that Enrique Lopez has not raised any question against the part of the decision
sentencing defendants Orosa and Plaza Theatre, Inc., to pay jointly the sum of P41,771.35, so We will not take up
or consider anything on that point. Appellant, however, contends that the lien created in favor of the furnisher of the
materials used for the construction, repair or refection of a building, is also extended to the land which the
construction was made, and in support thereof he relies on Article 1923 of the Spanish Civil Code, pertinent law on
the matter, which reads as follows:
ART. 1923. With respect to determinate real property and real rights of the debtor, the following are
preferred:
xxx

xxx

xxx

5. Credits for refection, not entered or recorded, with respect to the estate upon which the refection was
made, and only with respect to other credits different from those mentioned in four preceding paragraphs.
It is argued that in view of the employment of the phrase real estate, or immovable property, and inasmuch as said
provision does not contain any specification delimiting the lien to the building, said article must be construed as to
embrace both the land and the building or structure adhering thereto. We cannot subscribe to this view, for while it is
true that generally, real estate connotes the land and the building constructed thereon, it is obvious that the inclusion
of the building, separate and distinct from the land, in the enumeration of what may constitute real properties1 could
mean only one thing that a building is by itself an immovable property, a doctrine already pronounced by this
Court in the case of Leung Yee vs. Strong Machinery Co., 37 Phil., 644. Moreover, and in view of the absence of
any specific provision of law to the contrary, a building is an immovable property, irrespective of whether or not said
structure and the land on which it is adhered to belong to the same owner.
A close examination of the provision of the Civil Code invoked by appellant reveals that the law gives preference to
unregistered refectionary credits only with respect to the real estate upon which the refection or work was made.
This being so, the inevitable conclusion must be that the lien so created attaches merely to the immovable property
for the construction or repair of which the obligation was incurred. Evidently, therefore, the lien in favor of appellant
for the unpaid value of the lumber used in the construction of the building attaches only to said structure and to no
other property of the obligors.
Considering the conclusion thus arrived at, i.e., that the materialman's lien could be charged only to the building for
which the credit was made or which received the benefit of refection, the lower court was right in, holding at the
interest of the mortgagee over the land is superior and cannot be made subject to the said materialman's lien.
Wherefore, and on the strength of the foregoing considerations, the decision appealed from is hereby affirmed, with
costs against appellant. It is so ordered.
Paras, C.J., Bengzon, Padilla, Montemayor, Reyes, A., Bautista Angelo, Labrador, Concepcion, Reyes, J.B.L. and
Endencia, JJ., concur.

Footnotes
1

Article 415 of the new Civil Code (Art. 334 of the old) enumerates what are considered immovable
property, among which are land, buildings, roads and constructions of all kinds adhered to the soil.

Republic of the Philippines

SUPREME COURT
Manila
FIRST DIVISION
G.R. No. L-32917 July 18, 1988
JULIAN S. YAP, petitioner,
vs.
HON. SANTIAGO O. TAADA, etc., and GOULDS PUMPS INTERNATIONAL (PHIL.), INC., respondents.
Paterno P. Natinga for private respondent.

NARVASA, J.:
The petition for review on certiorari at bar involves two (2) Orders of respondent Judge Taada 1 in Civil Case No.
10984. The first, dated September 16, 1970, denied petitioner Yap's motion to set aside execution sale and to
quash alias writ of execution. The second, dated November 21, 1970, denied Yap's motion for reconsideration. The
issues concerned the propriety of execution of a judgment claimed to be "incomplete, vague and non-final," and the
denial of petitioner's application to prove and recover damages resulting from alleged irregularities in the process of
execution.
The antecedents will take some time in the telling. The case began in the City Court of Cebu with the filing by
Goulds Pumps International (Phil.), Inc. of a complaint 2 against Yap and his wife 3 seeking recovery of P1,459.30
representing the balance of the price and installation cost of a water pump in the latter's premises. 4 The case
resulted in a judgment by the City Court on November 25, 1968, reading as follows:
When this case was called for trial today, Atty. Paterno Natinga appeared for the plaintiff Goulds and
informed the court that he is ready for trial. However, none of the defendants appeared despite
notices having been served upon them.
Upon petition Atty. Natinga, the plaintiff is hereby allowed to present its evidence ex-parte.
After considering the evidence of the plaintiff, the court hereby renders judgment in favor of the
plaintiff and against the defendant (Yap), ordering the latter to pay to the former the sum of Pl,459.30
with interest at the rate of 12% per annum until fully paid, computed from August 12, 1968, date of
the filing of the complaint; to pay the sum of P364.80 as reasonable attorney's fees, which is
equivalent " to 25% of the unpaid principal obligation; and to pay the costs, if any.
Yap appealed to the Court of First Instance. The appeal was assigned to the sala of respondent Judge Taada. For
failure to appear for pre-trial on August 28, 1968, this setting being intransferable since the pre-trial had already
been once postponed at his instance, 5 Yap was declared in default by Order of Judge Taada dated August 28,
1969, 6 reading as follows:
When this case was called for pre-trial this morning, the plaintiff and counsel appeared, but neither
the defendants nor his counsel appeared despite the fact that they were duly notified of the pre-trial
set this morning. Instead he filed an Ex-Parte Motion for Postponement which this Court received
only this morning, and on petition of counsel for the plaintiff that the Ex-Parte Motion for
Postponement was not filed in accordance with the Rules of Court he asked that the same be denied
and the defendants be declared in default; .. the motion for the plaintiff being well- grounded, the
defendants are hereby declared in default and the Branch Clerk of Court ..is hereby authorized to
receive evidence for the plaintiff and .. submit his report within ten (10) days after reception of
evidence.

Goulds presented evidence ex parte and judgment by default was rendered the following day by Judge Taada
requiring Yap to pay to Goulds (1) Pl,459.30 representing the unpaid balance of the pump purchased by him; (2)
interest of 12% per annum thereon until fully paid; and (3) a sum equivalent to 25% of the amount due as attorney's
fees and costs and other expenses in prosecuting the action. Notice of the judgment was served on Yap on
September 1, 1969. 7
On September 16, 1969 Yap filed a motion for reconsideration. 8 In it he insisted that his motion for postponement
should have been granted since it expressed his desire to explore the possibility of an amicable settlement; that the
court should give the parties time to arrive at an amicable settlement failing which, he should be allowed to present
evidence in support of his defenses (discrepancy as to the price and breach of warranty). The motion was not
verified or accompanied by any separate affidavit. Goulds opposed the motion. Its opposition 9 drew attention to the
eleventh-hour motion for postponement of Yap which had resulted in the cancellation of the prior hearing of June 30,
1969 despite Goulds' vehement objection, and the re-setting thereof on August 28, 1969 with intransferable
character; it averred that Yap had again sought postponement of this last hearing by another eleventh-hour motion
on the plea that an amicable settlement would be explored, yet he had never up to that time ever broached the
matter, 10 and that this pattern of seeking to obtain last-minute postponements was discernible also in the
proceedings before the City Court. In its opposition, Goulds also adverted to the examination made by it of the
pump, on instructions of the City Court, with a view to remedying the defects claimed to exist by Yap; but the
examination had disclosed the pump's perfect condition. Yap's motion for reconsideration was denied by Order
dated October 10, 1969, notice of which was received by Yap on October 4, 1969. 11
On October 15, 1969 Judge Taada issued an Order granting Goulds' Motion for Issuance of Writ of Execution
dated October 14, 1969, declaring the reasons therein alleged to be meritorious. 12 Yap forthwith filed an "Urgent
Motion for Reconsideration of Order" dated October 17, 1969, 13 contending that the judgment had not yet become
final, since contrary to Goulds' view, his motion for reconsideration was not pro forma for lack of an affidavit of merit,
this not being required under Section 1 (a) of Rule 37 of the Rules of Court upon which his motion was grounded.
Goulds presented an opposition dated October 22, 1969. 14 It pointed out that in his motion for reconsideration Yap
had claimed to have a valid defense to the action, i.e., ".. discrepancy as to price and breach of seller's warranty," in
effect, that there was fraud on Goulds' paint; Yap's motion for reconsideration should therefore have been supported
by an affidavit of merit respecting said defenses; the absence thereof rendered the motion for reconsideration fatally
defective with the result that its filing did not interrupt the running of the period of appeal. The opposition also drew
attention to the failure of the motion for reconsideration to specify the findings or conclusions in the judgment
claimed to be contrary to law or not supported by the evidence, making it a pro forma motion also incapable of
stopping the running of the appeal period. On October 23, 1969, Judge Taada denied Yap's motion for
reconsideration and authorized execution of the judgment. 15 Yap sought reconsideration of this order, by another
motion dated October 29, 1969. 16 This motion was denied by Order dated January 26, 1970. 17 Again Yap moved
for reconsideration, and again was rebuffed, by Order dated April 28, 1970. 18
In the meantime the Sheriff levied on the water pump in question, 19 and by notice dated November 4, 1969,
scheduled the execution sale thereof on November 14, 1969. 20 But in view of the pendency of Yap's motion for
reconsideration of October 29, 1969, suspension of the sale was directed by Judge Taada in an order dated
November 6, 1969. 21
Counsel for the plaintiff is hereby given 10 days time to answer the Motion, dated October 29, 1969,
from receipt of this Order and in the meantime, the Order of October 23, 1969, insofar as it orders
the sheriff to enforce the writ of execution is hereby suspended.
It appears however that a copy of this Order was not transmitted to the Sheriff "through oversight, inadvertence and
pressure of work" of the Branch Clerk of Court. 22 So the Deputy Provincial Sheriff went ahead with the scheduled
auction sale and sold the property levied on to Goulds as the highest bidder. 23 He later submitted the requisite
report to the Court dated November 17, 1969, 24 as well as the "Sheriffs Return of Service" dated February 13,
1970, 25 in both of which it was stated that execution had been "partially satisfied." It should be observed that up to
this time, February, 1970, Yap had not bestirred himself to take an appeal from the judgment of August 29, 1969.
On May 9, 1970 Judge Taada ordered the issuance of an alias writ of execution on Gould's ex parte motion
therefor. 26 Yap received notice of the Order on June 11. Twelve (1 2) days later, he filed a "Motion to Set Aside
Execution Sale and to Quash Alias Writ of Execution." 27 As regards the original, partial execution of the judgment,
he argued that

1) "the issuance of the writ of execution on October 16, 1969 was contrary to law, the judgment sought to be
executed not being final and executory;" and
2) "the sale was made without the notice required by Sec. 18, Rule 39, of the New Rules of Court," i.e., notice by
publication in case of execution sale of real property, the pump and its accessories being immovable because
attached to the ground with character of permanency (Art. 415, Civil Code).
And with respect to the alias writ, he argued that it should not have issued because
1) "the judgment sought to be executed is null and void" as "it deprived the defendant of his day in court" and "of
due process;"
2) "said judgment is incomplete and vague" because there is no starting point for computation of the interest
imposed, or a specification of the "other expenses incurred in prosecuting this case" which Yap had also been
ordered to pay;
3) "said judgment is defective because it contains no statement of facts but a mere recital of the evidence; and
4) "there has been a change in the situation of the parties which makes execution unjust and inequitable" because
Yap suffered damages by reason of the illegal execution.
Goulds filed an opposition on July 6, 1970. Yap's motion was thereafter denied by Order dated September 16, 1970.
Judge Taada pointed out that the motion had "become moot and academic" since the decision of August 29, 1969,
"received by the defendant on September 1, 1969 had long become final when the Order for the Issuance of a Writ
of Execution was promulgated on October 15, 1969." His Honor also stressed that
The defendant's Motion for Reconsideration of the Courts decision was in reality one for new trial.
Regarded as motion for new trial it should allege the grounds for new trial, provided for in the Rules
of Court, to be supported by affidavit of merits; and this the defendant failed to do. If the defendant
sincerely desired for an opportunity to submit to an amicable settlement, which he failed to do extra
judicially despite the ample time before him, he should have appeared in the pre- trial to achieve the
same purpose.
Judge Taada thereafter promulgated another Order dated September 21, 1970 granting a motion of Goulds for
completion of execution of the judgment of August 29, 1969 to be undertaken by the City Sheriff of Cebu. Once
more, Yap sought reconsideration. He submitted a "Motion for Reconsideration of Two Orders" dated October 13,
1970, 28 seeking the setting aside not only of this Order of September 21, 1970 but also that dated September 16,
1970, denying his motion to set aside execution dated June 23, 1970. He contended that the Order of September
21, 1970 (authorizing execution by the City Sheriff) was premature, since the 30-day period to appeal from the
earlier order of September 16, 1970 (denying his motion to set aside) had not yet expired. He also reiterated his
view that his motion for reconsideration dated September 15, 1969 did not require that it be accompanied by an
affidavit of merits. This last motion was also denied for "lack of merits," by Order dated November 21, 1970. 29
On December 3, 1970, Yap filed a "Notice of Appeal" manifesting his intention to appeal to the Supreme Court on
certiorari only on questions of law, "from the Order ... of September 16, 1970 ... and from the Order ... of November
21, 1970, ... pursuant to sections 2 and 3 of Republic Act No. 5440." He filed his petition for review with this Court
on January 5, 1971, after obtaining an extension therefor. 30
The errors of law he attributes to the Court a quo are the following: 31
1) refusing to invalidate the execution pursuant to its Order of October 16, 1969 although the judgment had not then
become final and executory and despite its being incomplete and vague;
2) ignoring the fact that the execution sale was carried out although it (the Court) had itself ordered suspension of
execution on November 6, 1969;

3) declining to annul the execution sale of the pump and accessories subject of the action although made without
the requisite notice prescribed for the sale of immovables; and
4) refusing to allow the petitioner to prove irregularities in the process of execution which had resulted in damages to
him.
Notice of the Trial Court's judgment was served on Yap on September 1, 1969. His motion for reconsideration
thereof was filed 15 days thereafter, on September 16, 1969. Notice of the Order denying the motion was received
by him on October 14, 1969. The question is whether or not the motion for reconsideration which was not
verified, or accompanied by an affidavit of merits (setting forth facts constituting his meritorious defenses to the suit)
or other sworn statement (stating facts excusing his failure to appear at the pre-trial was pro forma and
consequently had not interrupted the running of the period of appeal. It is Yap's contention that his motion was
not pro forma for lack of an affidavit of merits, such a document not being required by Section 1 (a) of Rule 37 of the
Rules of Court upon which his motion was based. This is incorrect.
Section 2, Rule 37 precisely requires that when the motion for new trial is founded on Section 1 (a), it should be
accompanied by an affidavit of merit.
xxx xxx xxx
When the motion is made for the causes mentioned in subdivisions (a) and (b) of the preceding
section, it shall be proved in the manner provided for proof of motions. Affidavit or affidavits of merits
shall also be attached to a motion for the cause mentioned in subdivision (a) which may be rebutted
by counter-affidavits.
xxx xxx xxx 32
Since Yap himself asserts that his motion for reconsideration is grounded on Section 1 (a) of Rule 37, 33 i.e., fraud,
accident, mistake or excusable negligence which ordinary prudence could not have guarded against and by reason
of which ... (the) aggrieved party has probably been impaired in his rights" this being in any event clear from a
perusal of the motion which theorizes that he had "been impaired in his rights" because he was denied the right to
present evidence of his defenses (discrepancy as to price and breach of warranty) it was a fatal omission to fail to
attach to his motion an affidavit of merits, i.e., an affidavit "showing the facts (not conclusions) constituting the valid
x x defense which the movant may prove in case a new trial is granted." 34 The requirement of such an affidavit is
essential because obviously "a new trial would be a waste of the court's time if the complaint turns out to be
groundless or the defense ineffective." 35
In his motion for reconsideration, Yap also contended that since he had expressed a desire to explore the possibility
of an amicable settlement, the Court should have given him time to do so, instead of declaring him in default and
thereafter rendering judgment by default on Gould's ex parte evidence.
The bona fides of this desire to compromise is however put in doubt by the attendant circumstances. It was
manifested in an eleventh-hour motion for postponement of the pre-trial which had been scheduled with
intransferable character since it had already been earlier postponed at Yap's instance; it had never been mentioned
at any prior time since commencement of the litigation; such a possible compromise (at least in general or
preliminary terms) was certainly most appropriate for consideration at the pre-trial; in fact Yap was aware that the
matter was indeed a proper subject of a pre-trial agenda, yet he sought to avoid appearance at said pre-trial which
he knew to be intransferable in character. These considerations and the dilatory tactics thus far attributable to himseeking postponements of hearings, or failing to appear therefor despite notice, not only in the Court of First
Instance but also in the City Court proscribe belief in the sincerity of his avowed desire to negotiate a
compromise. Moreover, the disregard by Yap of the general requirement that "(n)otice of a motion shall be served
by the applicant to all parties concerned at least three (3) days before the hearing thereof, together with a copy of
the motion, and of any affidavits and other papers accompanying it," 36 for which no justification whatever has been
offered, also militates against the bona fides of Yap's expressed wish for an amicable settlement. The relevant
circumstances do not therefore justify condemnation, as a grave abuse of discretion, or a serious mistake, of the
refusal of the Trial Judge to grant postponement upon this proferred ground.

The motion for reconsideration did not therefore interrupt the running of the period of appeal. The time during which
it was pending before the court from September 16, 1969 when it was filed with the respondent Court until
October 14, 1969 when notice of the order denying the motion was received by the movant could not be
deducted from the 30-day period of appeal. 37 This is the inescapable conclusion from a consideration of Section 3
of Rule 41 which in part declares that, "The "time during which a motion to set aside the judgment or order or for a
new trial has been pending shall be deducted, unless such motion fails to satisfy the requirements of Rule 37. 38
Notice of the judgment having been received by Yap on September 1, 1969, and the period of appeal therefrom not
having been interrupted by his motion for reconsideration filed on September 16, 1969, the reglementary period of
appeal expired thirty (30) days after September 1, 1969, or on October 1, 1969, without an appeal being taken by
Yap. The judgment then became final and executory; Yap could no longer take an appeal therefrom or from any
other subsequent orders; and execution of judgment correctly issued on October 15, 1969, "as a matter of right." 39
The next point discussed by Yap, that the judgment is incomplete and vague, is not well taken. It is true that the
decision does not fix the starting time of the computation of interest on the judgment debt, but this is inconsequential
since that time is easily determinable from the opinion, i.e., from the day the buyer (Yap) defaulted in the payment of
his obligation, 40 on May 31, 1968. 41 The absence of any disposition regarding his counterclaim is also immaterial
and does not render the judgment incomplete. Yap's failure to appear at the pre-trial without justification and despite
notice, which caused the declaration of his default, was a waiver of his right to controvert the plaintiff s proofs and of
his right to prove the averments of his answer, inclusive of the counterclaim therein pleaded. Moreover, the
conclusion in the judgment of the merit of the plaintiff s cause of action was necessarily and at the same time a
determination of the absence of merit of the defendant's claim of untenability of the complaint and of malicious
prosecution.
Yap's next argument that the water pump had become immovable property by its being installed in his residence is
also untenable. The Civil Code considers as immovable property, among others, anything "attached to an
immovable in a fixed manner, in such a way that it cannot be separated therefrom without breaking the material or
deterioration of the object." 42 The pump does not fit this description. It could be, and was in fact separated from
Yap's premises without being broken or suffering deterioration. Obviously the separation or removal of the pump
involved nothing more complicated than the loosening of bolts or dismantling of other fasteners.
Yap's last claim is that in the process of the removal of the pump from his house, Goulds' men had trampled on the
plants growing there, destroyed the shed over the pump, plugged the exterior casings with rags and cut the
electrical and conduit pipes; that he had thereby suffered actual-damages in an amount of not less than P 2,000.00,
as well as moral damages in the sum of P 10,000.00 resulting from his deprivation of the use of his water supply;
but the Court had refused to allow him to prove these acts and recover the damages rightfully due him. Now, as to
the loss of his water supply, since this arose from acts legitimately done, the seizure on execution of the water pump
in enforcement of a final and executory judgment, Yap most certainly is not entitled to claim moral or any other form
of damages therefor.
WHEREFORE, the petition is DENIED and the appeal DISMISSED, and the Orders of September 16, 1970 and
November 21, 1970 subject thereof, AFFIRMED in toto. Costs against petitioner.
Cruz, Gancayco, Grio-Aquino and Medialdea, JJ., concur.

Footnotes
1 Then presiding Judge of Branch V of the Court of First Instance of Cebu City.
2 Annex E, petition, pp. 34-35, Rollo.
3 However Mrs. Minerva V. Yap was subsequently dropped from the complaint.
4 Yap's answer (rollo, pp. 36 et seq put up the defense that the purchase document did not reflect
his real agreement with Goulds, and he had made several complaints about the pump to no

avail.Gould's claim is that the examination of the pump showed it to be in good working order, but
the Yaps had refused to attest thereto despite being present during the examination (rollo, pp. 72 et
seq).
5 Infra: footnote No. 1, p. 3.
6 Rollo, p. 188.
7 Id., P. 10.
8 Id., pp. 41-42.
9 Id., pp. 43 et seq. An additional ground for postponement was that he would be in Barili, Cebu, on
the date of the pre-trial.
10 It appears that the pump was delivered and installed at the Yaps' premises in December, 1967:
Rollo, pp. 34 et seq.
11 Rollo, p. 10.
12 Id ,p. 114.
13 Id., p. 115.
14 Id., P. 117.
15 Id., p. 11.
16 Id., p. 124 et seq. The motion reiterated prior arguments and in addition, contained a
"Specification of findings not supported by evidence" and a "Specification of conclusions contrary to
law." An opposition thereto was filed under date of Nov. 27, 1969 (Rollo, p. 128)
17 Id., p. 133.
18 Id., p. 135.
19 Id., pp. 52, 53.
20 Id., p. 54.
21 Id., p. 56, SEE paragraphs 18 and 19, petition.
22 Rollo, pp. 137, 134,
23 Id., p. 131. The Certificate of Sale is dated November 14,1969.
24 Id p. 123.
25 Id., p. 57.
26 Par. 21, petition, p. 12, Rollo.
27 Rollo, pp. 22, et seq.
28 Id., pp. 30 et seq.

29 Id., p. 142. Page 472

30 Granted by Resolution dated January 4, 1971, for 15 days from December 8 (Rollo, p. 5)
31 Rollo, pp. 5-6.
32 Emphasis supplied.
33 SEE footnote No. 14, supra.
34 SEE Coombs v. Santos, 24 Phil. 446, 451, cited in Feria, Civil Procedure. 1969 ed., p. 514; see,
too, Moran, Comments on the Rules, 1979 ed., Vol. 2, pp. 214-215, citing numerous cases;
parenthetical insertion supplied.
35 Moran, op. cit., p. 215, citing Vda. de Yulo v. Chua Chuco et al., 48 O.G. 5.54; Baguieran v. Court
of Appeals, L-14551 July 31, 1961, 2 SCRA 873.
36 SEE Sections 4, 5 and 6, Rule 15; Manila Surety & Fidelity Co. v. Batu Construction Co., L-1
6636, June 24, 1965; Fulton Insurance Co. v. Manila Railroad Co., L-24263, November 18, 1967,
cited in Moran, op cit., p. 214.
37 BP No. 129 has since reduced the period of appeal to 15 days except in special proceedings or
cases where multiple appeals are allowed.
38 Emphasis supplied; see Coombs v. Santos, 24 Phil. 446, 461, and Alfonso v. Bustamante, 98
Phil. 158, cited in Feria, op. cit, pp. 514515; and Capinpin et al. v. Isip, L-14018, Aug. 31, 1959, cited
in Moran, op. cit.
39 Sec. 1, Rule 39; See Amor v. Jugo et al., 77 Phil. 703.
40 Rollo, p. 39.
41 Id., pp. 35, 193
42 ART. 415, par. (3).42 ART. 415, par. (3).

Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. L-7057

October 29, 1954

MACHINERY & ENGINEERING SUPPLIES, INC., petitioner,

vs.
THE HONORABLE COURT OF APPEALS, HON. POTENCIANO PECSON, JUDGE OF THE COURT OF FIRST
INSTANCE OF MANILA, IPO LIMESTONE CO., INC., and ANTONIO VILLARAMA, respondents.
Vicente J. Francisco for petitioner.
Capistrano and Capistrano for respondents.
CONCEPCION, J.:
This is an appeal by certiorari, taken by petitioner Machinery and Engineering Supplies Inc., from a decision of the
Court of Appeals denying an original petition for certiorari filed by said petitioner against Hon. Potenciano Pecson,
Ipo Limestone Co., Inc., and Antonio Villarama, the respondents herein.
The pertinent facts are set forth in the decision of the Court of Appeals, from which we quote:
On March 13, 1953, the herein petitioner filed a complaint for replevin in the Court of First Instance of
Manila, Civil Case No. 19067, entitled "Machinery and Engineering Supplies, Inc., Plaintiff, vs. Ipo Limestone
Co., Inc., and Dr. Antonio Villarama, defendants", for the recovery of the machinery and equipment sold and
delivered to said defendants at their factory in barrio Bigti, Norzagaray, Bulacan. Upon application ex-parte
of the petitioner company, and upon approval of petitioner's bond in the sum of P15,769.00, on March
13,1953, respondent judge issued an order, commanding the Provincial Sheriff of Bulacan to seize and take
immediate possession of the properties specified in the order (Appendix I, Answer). On March 19, 1953, two
deputy sheriffs of Bulacan, the said Ramon S. Roco, and a crew of technical men and laborers proceeded to
Bigti, for the purpose of carrying the court's order into effect. Leonardo Contreras, Manager of the
respondent Company, and Pedro Torres, in charge thereof, met the deputy sheriffs, and Contreras handed
to them a letter addressed to Atty. Leopoldo C. Palad, ex-oficio Provincial Sheriff of Bulacan, signed by Atty.
Adolfo Garcia of the defendants therein, protesting against the seizure of the properties in question, on the
ground that they are not personal properties. Contending that the Sheriff's duty is merely ministerial, the
deputy sheriffs, Roco, the latter's crew of technicians and laborers, Contreras and Torres, went to the
factory. Roco's attention was called to the fact that the equipment could not possibly be dismantled without
causing damages or injuries to the wooden frames attached to them. As Roco insisted in dismantling the
equipment on his own responsibility, alleging that the bond was posted for such eventuality, the deputy
sheriffs directed that some of the supports thereof be cut (Appendix 2). On March 20, 1953, the defendant
Company filed an urgent motion, with a counter-bond in the amount of P15,769, for the return of the
properties seized by the deputy sheriffs. On the same day, the trial court issued an order, directing the
Provincial Sheriff of Bulacan to return the machinery and equipment to the place where they were installed
at the time of the seizure (Appendix 3). On March 21, 1953, the deputy sheriffs returned the properties
seized, by depositing them along the road, near the quarry, of the defendant Company, at Bigti, without the
benefit of inventory and without re-installing hem in their former position and replacing the destroyed posts,
which rendered their use impracticable. On March 23, 1953, the defendants' counsel asked the provincial
Sheriff if the machinery and equipment, dumped on the road would be re-installed tom their former position
and condition (letter, Appendix 4). On March 24, 1953, the Provincial Sheriff filed an urgent motion in court,
manifesting that Roco had been asked to furnish the Sheriff's office with the expenses, laborers, technical
men and equipment, to carry into effect the court's order, to return the seized properties in the same way
said Roco found them on the day of seizure, but said Roco absolutely refused to do so, and asking the court
that the Plaintiff therein be ordered to provide the required aid or relieve the said Sheriff of the duty of
complying with the said order dated March 20, 1953 (Appendix 5). On March 30, 1953, the trial court
ordered the Provincial Sheriff and the Plaintiff to reinstate the machinery and equipment removed by them in
their original condition in which they were found before their removal at the expense of the Plaintiff

(Appendix 7). An urgent motion of the Provincial Sheriff dated April 15, 1953, praying for an extension of 20
days within which to comply with the order of the Court (appendix 10) was denied; and on May 4, 1953, the
trial court ordered the Plaintiff therein to furnish the Provincial Sheriff within 5 days with the necessary funds,
technical men, laborers, equipment and materials to effect the repeatedly mentioned re-installation
(Appendix 13). (Petitioner's brief, Appendix A, pp. I-IV.)
Thereupon petitioner instituted in the Court of Appeals civil case G.R. No. 11248-R, entitled "Machinery and
Engineering Supplies, Inc. vs. Honorable Potenciano Pecson, Provincial Sheriff of Bulacan, Ipo Limestone Co., Inc.,
and Antonio Villarama." In the petition therein filed, it was alleged that, in ordering the petitioner to furnish the
provincial sheriff of Bulacan "with necessary funds, technical men, laborers, equipment and materials, to effect the
installation of the machinery and equipment" in question, the Court of Firs Instance of Bulacan had committed a
grave abuse if discretion and acted in excess of its jurisdiction, for which reason it was prayed that its order to this
effect be nullified, and that, meanwhile, a writ of preliminary injunction be issued to restrain the enforcement o said
order of may 4, 1953. Although the aforementioned writ was issued by the Court of Appeals, the same subsequently
dismissed by the case for lack of merit, with costs against the petitioner, upon the following grounds:
While the seizure of the equipment and personal properties was ordered by the respondent Court, it is,
however, logical to presume that said court did not authorize the petitioner or its agents to destroy, as they
did, said machinery and equipment, by dismantling and unbolting the same from their concrete basements,
and cutting and sawing their wooden supports, thereby rendering them unserviceable and beyond repair,
unless those parts removed, cut and sawed be replaced, which the petitioner, not withstanding the
respondent Court's order, adamantly refused to do. The Provincial Sheriff' s tortious act, in obedience to the
insistent proddings of the president of the Petitioner, Ramon S. Roco, had no justification in law,
notwithstanding the Sheriffs' claim that his duty was ministerial. It was the bounden duty of the respondent
Judge to give redress to the respondent Company, for the unlawful and wrongful acts committed by the
petitioner and its agents. And as this was the true object of the order of March 30, 1953, we cannot hold that
same was within its jurisdiction to issue. The ministerial duty of the Sheriff should have its limitations. The
Sheriff knew or must have known what is inherently right and inherently wrong, more so when, as in this
particular case, the deputy sheriffs were shown a letter of respondent Company's attorney, that the
machinery were not personal properties and, therefore, not subject to seizure by the terms of the order.
While it may be conceded that this was a question of law too technical to decide on the spot, it would not
have costs the Sheriff much time and difficulty to bring the letter to the court's attention and have the
equipment and machinery guarded, so as not to frustrate the order of seizure issued by the trial court. But
acting upon the directives of the president of the Petitioner, to seize the properties at any costs, in issuing
the order sought to be annulled, had not committed abuse of discretion at all or acted in an arbitrary or
despotic manner, by reason of passion or personal hostility; on the contrary, it issued said order, guided by
the well known principle that of the property has to be returned, it should be returned in as good a condition
as when taken (Bachrach Motor Co., Inc., vs. Bona, 44 Phil., 378). If any one had gone beyond the scope of
his authority, it is the respondent Provincial Sheriff. But considering that fact that he acted under the
pressure of Ramon S. Roco, and that the order impugned was issued not by him, but by the respondent
Judge, We simply declare that said Sheriff' act was most unusual and the result of a poor judgment.
Moreover, the Sheriff not being an officer exercising judicial functions, the writ may not reach him,
forcertiorari lies only to review judicial actions.
The Petitioner complains that the respondent Judge had completely disregarded his manifestation that the
machinery and equipment seized were and still are the Petitioner's property until fully paid for and such
never became immovable. The question of ownership and the applicability of Art. 415 of the new Civil Code
are immaterial in the determination of the only issue involved in this case. It is a matter of evidence which
should be decided in the hearing of the case on the merits. The question as to whether the machinery or
equipment in litigation are immovable or not is likewise immaterial, because the only issue raised before the
trial court was whether the Provincial Sheriff of Bulacan, at the Petitioner's instance, was justified in
destroying the machinery and in refusing to restore them to their original form , at the expense of the
Petitioner. Whatever might be the legal character of the machinery and equipment, would not be in any way
justify their justify their destruction by the Sheriff's and the said Petitioner's. (Petitioner's brief, Appendix A,
pp. IV-VII.)

A motion for reconsideration of this decision of the Court of Appeals having been denied , petitioner has brought the
case to Us for review by writ of certiorari. Upon examination of the record, We are satisfied, however that the Court
of Appeals was justified in dismissing the case.
The special civil action known as replevin, governed by Rule 62 of Court, is applicable only to "personal property".
Ordinarily replevin may be brought to recover any specific personal property unlawfully taken or detained
from the owner thereof, provided such property is capable of identification and delivery; but replevin will not
lie for the recovery of real property or incorporeal personal property. (77 C. J. S. 17) (Emphasis supplied.)
When the sheriff repaired to the premises of respondent, Ipo Limestone Co., Inc., machinery and equipment in
question appeared to be attached to the land, particularly to the concrete foundation of said premises, in a fixed
manner, in such a way that the former could not be separated from the latter "without breaking the material or
deterioration of the object." Hence, in order to remove said outfit, it became necessary, not only to unbolt the same,
but , also, to cut some of its wooden supports. Moreover, said machinery and equipment were "intended by the
owner of the tenement for an industry" carried on said immovable and tended." For these reasons, they were
already immovable property pursuant to paragraphs 3 and 5 of Article 415 of Civil Code of the Philippines, which are
substantially identical to paragraphs 3 and 5 of Article 334 of the Civil Code of Spain. As such immovable property,
they were not subject to replevin.
In so far as an article, including a fixture annexed by a tenant, is regarded as part of the realty, it is not the
subject for personality; . . . .
. . . the action of replevin does not lie for articles so annexed to the realty as to be part as to be part thereof,
as, for example, a house or a turbine pump constituting part of a building's cooling system; . . . (36 C. J. S.
1000 & 1001)
Moreover, as the provincial sheriff hesitated to remove the property in question, petitioner's agent and president, Mr.
Ramon Roco, insisted "on the dismantling at his own responsibility," stating that., precisely, "that is the reason why
plaintiff posted a bond ." In this manner, petitioner clearly assumed the corresponding risks.
Such assumption of risk becomes more apparent when we consider that, pursuant to Section 5 of Rule 62 of the
Rules of Court, the defendant in an action for replevin is entitled to the return of the property in dispute upon the
filing of a counterbond, as provided therein. In other words, petitioner knew that the restitution of said property to
respondent company might be ordered under said provision of the Rules of Court, and that, consequently, it may
become necessary for petitioner to meet the liabilities incident to such return.
Lastly, although the parties have not cited, and We have not found, any authority squarely in point obviously real
property are not subject to replevin it is well settled that, when the restitution of what has been ordered, the goods
in question shall be returned in substantially the same condition as when taken (54 C.J., 590-600, 640-641).
Inasmuch as the machinery and equipment involved in this case were duly installed and affixed in the premises of
respondent company when petitioner's representative caused said property to be dismantled and then removed, it
follows that petitioner must also do everything necessary to the reinstallation of said property in conformity with its
original condition.
Wherefore, the decision of the Court of Appeals is hereby affirmed, with costs against the petitioner. So ordered.
Pablo, Bengzon, Padilla, Montemayor, Reyes, A., Jugo, Bautista Angelo and Reyes, J.B.L., JJ., concur.
Paras, C.J., concurs in the result.

Republic of the Philippines

SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 168557

February 16, 2007

FELS ENERGY, INC., Petitioner,

vs.
THE PROVINCE OF BATANGAS and
THE OFFICE OF THE PROVINCIAL ASSESSOR OF BATANGAS, Respondents.
x----------------------------------------------------x
G.R. No. 170628

February 16, 2007

NATIONAL POWER CORPORATION, Petitioner,

vs.
LOCAL BOARD OF ASSESSMENT APPEALS OF BATANGAS, LAURO C. ANDAYA, in his capacity as the
Assessor of the Province of Batangas, and the PROVINCE OF BATANGAS represented by its Provincial
Assessor, Respondents.
DECISION
CALLEJO, SR., J.:
Before us are two consolidated cases docketed as G.R. No. 168557 and G.R. No. 170628, which were filed by
petitioners FELS Energy, Inc. (FELS) and National Power Corporation (NPC), respectively. The first is a petition for
review on certiorari assailing the August 25, 2004 Decision1 of the Court of Appeals (CA) in CA-G.R. SP No. 67490
and its Resolution2 dated June 20, 2005; the second, also a petition for review on certiorari, challenges the February
9, 2005 Decision3 and November 23, 2005 Resolution4 of the CA in CA-G.R. SP No. 67491. Both petitions were
dismissed on the ground of prescription.
The pertinent facts are as follows:
On January 18, 1993, NPC entered into a lease contract with Polar Energy, Inc. over 3x30 MW diesel engine power
barges moored at Balayan Bay in Calaca, Batangas. The contract, denominated as an Energy Conversion
Agreement5 (Agreement), was for a period of five years. Article 10 reads:
10.1 RESPONSIBILITY. NAPOCOR shall be responsible for the payment of (a) all taxes, import duties, fees,
charges and other levies imposed by the National Government of the Republic of the Philippines or any agency or
instrumentality thereof to which POLAR may be or become subject to or in relation to the performance of their
obligations under this agreement (other than (i) taxes imposed or calculated on the basis of the net income of
POLAR and Personal Income Taxes of its employees and (ii) construction permit fees, environmental permit fees
and other similar fees and charges) and (b) all real estate taxes and assessments, rates and other charges in
respect of the Power Barges.6
Subsequently, Polar Energy, Inc. assigned its rights under the Agreement to FELS. The NPC initially opposed the
assignment of rights, citing paragraph 17.2 of Article 17 of the Agreement.
On August 7, 1995, FELS received an assessment of real property taxes on the power barges from Provincial
Assessor Lauro C. Andaya of Batangas City. The assessed tax, which likewise covered those due for 1994,
amounted to P56,184,088.40 per annum. FELS referred the matter to NPC, reminding it of its obligation under the
Agreement to pay all real estate taxes. It then gave NPC the full power and authority to represent it in any
conference regarding the real property assessment of the Provincial Assessor.

In a letter7 dated September 7, 1995, NPC sought reconsideration of the Provincial Assessors decision to assess
real property taxes on the power barges. However, the motion was denied on September 22, 1995, and the
Provincial Assessor advised NPC to pay the assessment.8 This prompted NPC to file a petition with the Local Board
of Assessment Appeals (LBAA) for the setting aside of the assessment and the declaration of the barges as nontaxable items; it also prayed that should LBAA find the barges to be taxable, the Provincial Assessor be directed to
make the necessary corrections.9
In its Answer to the petition, the Provincial Assessor averred that the barges were real property for purposes of
taxation under Section 199(c) of Republic Act (R.A.) No. 7160.
Before the case was decided by the LBAA, NPC filed a Manifestation, informing the LBAA that the Department of
Finance (DOF) had rendered an opinion10 dated May 20, 1996, where it is clearly stated that power barges are not
real property subject to real property assessment.
On August 26, 1996, the LBAA rendered a Resolution11 denying the petition. The fallo reads:
WHEREFORE, the Petition is DENIED. FELS is hereby ordered to pay the real estate tax in the amount
ofP56,184,088.40, for the year 1994.
SO ORDERED.12
The LBAA ruled that the power plant facilities, while they may be classified as movable or personal property, are
nevertheless considered real property for taxation purposes because they are installed at a specific location with a
character of permanency. The LBAA also pointed out that the owner of the bargesFELS, a private corporationis
the one being taxed, not NPC. A mere agreement making NPC responsible for the payment of all real estate taxes
and assessments will not justify the exemption of FELS; such a privilege can only be granted to NPC and cannot be
extended to FELS. Finally, the LBAA also ruled that the petition was filed out of time.
Aggrieved, FELS appealed the LBAAs ruling to the Central Board of Assessment Appeals (CBAA).
On August 28, 1996, the Provincial Treasurer of Batangas City issued a Notice of Levy and Warrant by
Distraint13over the power barges, seeking to collect real property taxes amounting to P232,602,125.91 as of July 31,
1996. The notice and warrant was officially served to FELS on November 8, 1996. It then filed a Motion to Lift Levy
dated November 14, 1996, praying that the Provincial Assessor be further restrained by the CBAA from enforcing
the disputed assessment during the pendency of the appeal.
On November 15, 1996, the CBAA issued an Order14 lifting the levy and distraint on the properties of FELS in order
not to preempt and render ineffectual, nugatory and illusory any resolution or judgment which the Board would
issue.
Meantime, the NPC filed a Motion for Intervention15 dated August 7, 1998 in the proceedings before the CBAA. This
was approved by the CBAA in an Order16 dated September 22, 1998.
During the pendency of the case, both FELS and NPC filed several motions to admit bond to guarantee the payment
of real property taxes assessed by the Provincial Assessor (in the event that the judgment be unfavorable to them).
The bonds were duly approved by the CBAA.
On April 6, 2000, the CBAA rendered a Decision17 finding the power barges exempt from real property tax. The
dispositive portion reads:
WHEREFORE, the Resolution of the Local Board of Assessment Appeals of the Province of Batangas is hereby
reversed. Respondent-appellee Provincial Assessor of the Province of Batangas is hereby ordered to drop subject
property under ARP/Tax Declaration No. 018-00958 from the List of Taxable Properties in the Assessment Roll. The
Provincial Treasurer of Batangas is hereby directed to act accordingly.
SO ORDERED.18

Ruling in favor of FELS and NPC, the CBAA reasoned that the power barges belong to NPC; since they are
actually, directly and exclusively used by it, the power barges are covered by the exemptions under Section 234(c)
of R.A. No. 7160.19 As to the other jurisdictional issue, the CBAA ruled that prescription did not preclude the NPC
from pursuing its claim for tax exemption in accordance with Section 206 of R.A. No. 7160. The Provincial Assessor
filed a motion for reconsideration, which was opposed by FELS and NPC.
In a complete volte face, the CBAA issued a Resolution20 on July 31, 2001 reversing its earlier decision. The fallo of
the resolution reads:
WHEREFORE, premises considered, it is the resolution of this Board that:
(a) The decision of the Board dated 6 April 2000 is hereby reversed.
(b) The petition of FELS, as well as the intervention of NPC, is dismissed.
(c) The resolution of the Local Board of Assessment Appeals of Batangas is hereby affirmed,
(d) The real property tax assessment on FELS by the Provincial Assessor of Batangas is likewise hereby
affirmed.
SO ORDERED.21
FELS and NPC filed separate motions for reconsideration, which were timely opposed by the Provincial Assessor.
The CBAA denied the said motions in a Resolution22 dated October 19, 2001.
Dissatisfied, FELS filed a petition for review before the CA docketed as CA-G.R. SP No. 67490. Meanwhile, NPC
filed a separate petition, docketed as CA-G.R. SP No. 67491.
On January 17, 2002, NPC filed a Manifestation/Motion for Consolidation in CA-G.R. SP No. 67490 praying for the
consolidation of its petition with CA-G.R. SP No. 67491. In a Resolution23 dated February 12, 2002, the appellate
court directed NPC to re-file its motion for consolidation with CA-G.R. SP No. 67491, since it is the ponente of the
latter petition who should resolve the request for reconsideration.
NPC failed to comply with the aforesaid resolution. On August 25, 2004, the Twelfth Division of the appellate court
rendered judgment in CA-G.R. SP No. 67490 denying the petition on the ground of prescription. The decretal portion
of the decision reads:
WHEREFORE, the petition for review is DENIED for lack of merit and the assailed Resolutions dated July 31, 2001
and October 19, 2001 of the Central Board of Assessment Appeals are AFFIRMED.
SO ORDERED.24
On September 20, 2004, FELS timely filed a motion for reconsideration seeking the reversal of the appellate courts
decision in CA-G.R. SP No. 67490.
Thereafter, NPC filed a petition for review dated October 19, 2004 before this Court, docketed as G.R. No. 165113,
assailing the appellate courts decision in CA-G.R. SP No. 67490. The petition was, however, denied in this Courts
Resolution25 of November 8, 2004, for NPCs failure to sufficiently show that the CA committed any reversible error
in the challenged decision. NPC filed a motion for reconsideration, which the Court denied with finality in a
Resolution26 dated January 19, 2005.
Meantime, the appellate court dismissed the petition in CA-G.R. SP No. 67491. It held that the right to question the
assessment of the Provincial Assessor had already prescribed upon the failure of FELS to appeal the disputed
assessment to the LBAA within the period prescribed by law. Since FELS had lost the right to question the
assessment, the right of the Provincial Government to collect the tax was already absolute.

NPC filed a motion for reconsideration dated March 8, 2005, seeking reconsideration of the February 5, 2005 ruling
of the CA in CA-G.R. SP No. 67491. The motion was denied in a Resolution27 dated November 23, 2005.
The motion for reconsideration filed by FELS in CA-G.R. SP No. 67490 had been earlier denied for lack of merit in a
Resolution28 dated June 20, 2005.
On August 3, 2005, FELS filed the petition docketed as G.R. No. 168557 before this Court, raising the following
issues:
A.
Whether power barges, which are floating and movable, are personal properties and therefore, not subject to real
property tax.
B.
Assuming that the subject power barges are real properties, whether they are exempt from real estate tax under
Section 234 of the Local Government Code ("LGC").
C.
Assuming arguendo that the subject power barges are subject to real estate tax, whether or not it should be NPC
which should be made to pay the same under the law.
D.
Assuming arguendo that the subject power barges are real properties, whether or not the same is subject to
depreciation just like any other personal properties.
E.
Whether the right of the petitioner to question the patently null and void real property tax assessment on the
petitioners personal properties is imprescriptible.29
On January 13, 2006, NPC filed its own petition for review before this Court (G.R. No. 170628), indicating the
following errors committed by the CA:
I
THE COURT OF APPEALS GRAVELY ERRED IN HOLDING THAT THE APPEAL TO THE LBAA WAS FILED OUT
OF TIME.
II
THE COURT OF APPEALS GRAVELY ERRED IN NOT HOLDING THAT THE POWER BARGES ARE NOT
SUBJECT TO REAL PROPERTY TAXES.
III
THE COURT OF APPEALS GRAVELY ERRED IN NOT HOLDING THAT THE ASSESSMENT ON THE POWER
BARGES WAS NOT MADE IN ACCORDANCE WITH LAW.30
Considering that the factual antecedents of both cases are similar, the Court ordered the consolidation of the two
cases in a Resolution31 dated March 8, 2006.1awphi1.net

In an earlier Resolution dated February 1, 2006, the Court had required the parties to submit their respective
Memoranda within 30 days from notice. Almost a year passed but the parties had not submitted their respective
memoranda. Considering that taxesthe lifeblood of our economyare involved in the present controversy, the
Court was prompted to dispense with the said pleadings, with the end view of advancing the interests of justice and
avoiding further delay.
In both petitions, FELS and NPC maintain that the appeal before the LBAA was not time-barred. FELS argues that
when NPC moved to have the assessment reconsidered on September 7, 1995, the running of the period to file an
appeal with the LBAA was tolled. For its part, NPC posits that the 60-day period for appealing to the LBAA should
be reckoned from its receipt of the denial of its motion for reconsideration.
Petitioners contentions are bereft of merit.
Section 226 of R.A. No. 7160, otherwise known as the Local Government Code of 1991, provides:
SECTION 226. Local Board of Assessment Appeals. Any owner or person having legal interest in the property
who is not satisfied with the action of the provincial, city or municipal assessor in the assessment of his property
may, within sixty (60) days from the date of receipt of the written notice of assessment, appeal to the Board of
Assessment Appeals of the province or city by filing a petition under oath in the form prescribed for the purpose,
together with copies of the tax declarations and such affidavits or documents submitted in support of the appeal.
We note that the notice of assessment which the Provincial Assessor sent to FELS on August 7, 1995, contained
the following statement:
If you are not satisfied with this assessment, you may, within sixty (60) days from the date of receipt hereof, appeal
to the Board of Assessment Appeals of the province by filing a petition under oath on the form prescribed for the
purpose, together with copies of ARP/Tax Declaration and such affidavits or documents submitted in support of the
appeal.32
Instead of appealing to the Board of Assessment Appeals (as stated in the notice), NPC opted to file a motion for
reconsideration of the Provincial Assessors decision, a remedy not sanctioned by law.
The remedy of appeal to the LBAA is available from an adverse ruling or action of the provincial, city or municipal
assessor in the assessment of the property. It follows then that the determination made by the respondent Provincial
Assessor with regard to the taxability of the subject real properties falls within its power to assess properties for
taxation purposes subject to appeal before the LBAA.33
We fully agree with the rationalization of the CA in both CA-G.R. SP No. 67490 and CA-G.R. SP No. 67491. The
two divisions of the appellate court cited the case of Callanta v. Office of the Ombudsman,34 where we ruled that
under Section 226 of R.A. No 7160,35 the last action of the local assessor on a particular assessment shall be the
notice of assessment; it is this last action which gives the owner of the property the right to appeal to the LBAA. The
procedure likewise does not permit the property owner the remedy of filing a motion for reconsideration before the
local assessor. The pertinent holding of the Court in Callanta is as follows:
x x x [T]he same Code is equally clear that the aggrieved owners should have brought their appeals before the
LBAA. Unfortunately, despite the advice to this effect contained in their respective notices of assessment, the
owners chose to bring their requests for a review/readjustment before the city assessor, a remedy not sanctioned by
the law. To allow this procedure would indeed invite corruption in the system of appraisal and assessment. It
conveniently courts a graft-prone situation where values of real property may be initially set unreasonably high, and
then subsequently reduced upon the request of a property owner. In the latter instance, allusions of a possible
covert, illicit trade-off cannot be avoided, and in fact can conveniently take place. Such occasion for mischief must
be prevented and excised from our system.36
For its part, the appellate court declared in CA-G.R. SP No. 67491:
x x x. The Court announces: Henceforth, whenever the local assessor sends a notice to the owner or lawful
possessor of real property of its revised assessed value, the former shall no longer have any jurisdiction to entertain

any request for a review or readjustment. The appropriate forum where the aggrieved party may bring his appeal is
the LBAA as provided by law. It follows ineluctably that the 60-day period for making the appeal to the LBAA runs
without interruption. This is what We held in SP 67490 and reaffirm today in SP 67491.37
To reiterate, if the taxpayer fails to appeal in due course, the right of the local government to collect the taxes due
with respect to the taxpayers property becomes absolute upon the expiration of the period to appeal.38 It also bears
stressing that the taxpayers failure to question the assessment in the LBAA renders the assessment of the local
assessor final, executory and demandable, thus, precluding the taxpayer from questioning the correctness of the
assessment, or from invoking any defense that would reopen the question of its liability on the merits.39
In fine, the LBAA acted correctly when it dismissed the petitioners appeal for having been filed out of time; the
CBAA and the appellate court were likewise correct in affirming the dismissal. Elementary is the rule that the
perfection of an appeal within the period therefor is both mandatory and jurisdictional, and failure in this regard
renders the decision final and executory.40
In the Comment filed by the Provincial Assessor, it is asserted that the instant petition is barred by res judicata; that
the final and executory judgment in G.R. No. 165113 (where there was a final determination on the issue of
prescription), effectively precludes the claims herein; and that the filing of the instant petition after an adverse
judgment in G.R. No. 165113 constitutes forum shopping.
FELS maintains that the argument of the Provincial Assessor is completely misplaced since it was not a party to the
erroneous petition which the NPC filed in G.R. No. 165113. It avers that it did not participate in the aforesaid
proceeding, and the Supreme Court never acquired jurisdiction over it. As to the issue of forum shopping, petitioner
claims that no forum shopping could have been committed since the elements of litis pendentia or res judicata are
not present.
We do not agree.
Res judicata pervades every organized system of jurisprudence and is founded upon two grounds embodied in
various maxims of common law, namely: (1) public policy and necessity, which makes it to the interest of the
State that there should be an end to litigation republicae ut sit litium; and (2) the hardship on the individual of being
vexed twice for the same cause nemo debet bis vexari et eadem causa. A conflicting doctrine would subject the
public peace and quiet to the will and dereliction of individuals and prefer the regalement of the litigious disposition
on the part of suitors to the preservation of the public tranquility and happiness.41 As we ruled in Heirs of Trinidad
De Leon Vda. de Roxas v. Court of Appeals:42
x x x An existing final judgment or decree rendered upon the merits, without fraud or collusion, by a court of
competent jurisdiction acting upon a matter within its authority is conclusive on the rights of the parties and their
privies. This ruling holds in all other actions or suits, in the same or any other judicial tribunal of concurrent
jurisdiction, touching on the points or matters in issue in the first suit.
xxx
Courts will simply refuse to reopen what has been decided. They will not allow the same parties or their privies to
litigate anew a question once it has been considered and decided with finality. Litigations must end and terminate
sometime and somewhere. The effective and efficient administration of justice requires that once a judgment has
become final, the prevailing party should not be deprived of the fruits of the verdict by subsequent suits on the same
issues filed by the same parties.
This is in accordance with the doctrine of res judicata which has the following elements: (1) the former judgment
must be final; (2) the court which rendered it had jurisdiction over the subject matter and the parties; (3) the
judgment must be on the merits; and (4) there must be between the first and the second actions, identity of parties,
subject matter and causes of action. The application of the doctrine of res judicata does not require absolute identity
of parties but merely substantial identity of parties. There is substantial identity of parties when there is community
of interest or privity of interest between a party in the first and a party in the second case even if the first case did
not implead the latter.43

To recall, FELS gave NPC the full power and authority to represent it in any proceeding regarding real property
assessment. Therefore, when petitioner NPC filed its petition for review docketed as G.R. No. 165113, it did so not
only on its behalf but also on behalf of FELS. Moreover, the assailed decision in the earlier petition for review filed in
this Court was the decision of the appellate court in CA-G.R. SP No. 67490, in which FELS was the petitioner. Thus,
the decision in G.R. No. 165116 is binding on petitioner FELS under the principle of privity of interest. In fine, FELS
and NPC are substantially "identical parties" as to warrant the application of res judicata. FELSs argument that it is
not bound by the erroneous petition filed by NPC is thus unavailing.
On the issue of forum shopping, we rule for the Provincial Assessor. Forum shopping exists when, as a result of an
adverse judgment in one forum, a party seeks another and possibly favorable judgment in another forum other than
by appeal or special civil action or certiorari. There is also forum shopping when a party institutes two or more
actions or proceedings grounded on the same cause, on the gamble that one or the other court would make a
favorable disposition.44
Petitioner FELS alleges that there is no forum shopping since the elements of res judicata are not present in the
cases at bar; however, as already discussed, res judicata may be properly applied herein. Petitioners engaged in
forum shopping when they filed G.R. Nos. 168557 and 170628 after the petition for review in G.R. No. 165116.
Indeed, petitioners went from one court to another trying to get a favorable decision from one of the tribunals which
allowed them to pursue their cases.
It must be stressed that an important factor in determining the existence of forum shopping is the vexation caused to
the courts and the parties-litigants by the filing of similar cases to claim substantially the same reliefs.45 The
rationale against forum shopping is that a party should not be allowed to pursue simultaneous remedies in two
different fora. Filing multiple petitions or complaints constitutes abuse of court processes, which tends to degrade
the administration of justice, wreaks havoc upon orderly judicial procedure, and adds to the congestion of the
heavily burdened dockets of the courts.46
Thus, there is forum shopping when there exist: (a) identity of parties, or at least such parties as represent the same
interests in both actions, (b) identity of rights asserted and relief prayed for, the relief being founded on the same
facts, and (c) the identity of the two preceding particulars is such that any judgment rendered in the pending case,
regardless of which party is successful, would amount to res judicata in the other.47
Having found that the elements of res judicata and forum shopping are present in the consolidated cases, a
discussion of the other issues is no longer necessary. Nevertheless, for the peace and contentment of petitioners,
we shall shed light on the merits of the case.
As found by the appellate court, the CBAA and LBAA power barges are real property and are thus subject to real
property tax. This is also the inevitable conclusion, considering that G.R. No. 165113 was dismissed for failure to
sufficiently show any reversible error. Tax assessments by tax examiners are presumed correct and made in good
faith, with the taxpayer having the burden of proving otherwise.48 Besides, factual findings of administrative bodies,
which have acquired expertise in their field, are generally binding and conclusive upon the Court; we will not assume
to interfere with the sensible exercise of the judgment of men especially trained in appraising property. Where the
judicial mind is left in doubt, it is a sound policy to leave the assessment undisturbed.49 We find no reason to depart
from this rule in this case.
In Consolidated Edison Company of New York, Inc., et al. v. The City of New York, et al.,50 a power company
brought an action to review property tax assessment. On the citys motion to dismiss, the Supreme Court of New
York held that the barges on which were mounted gas turbine power plants designated to generate electrical power,
the fuel oil barges which supplied fuel oil to the power plant barges, and the accessory equipment mounted on the
barges were subject to real property taxation.
Moreover, Article 415 (9) of the New Civil Code provides that "[d]ocks and structures which, though floating, are
intended by their nature and object to remain at a fixed place on a river, lake, or coast" are considered immovable
property. Thus, power barges are categorized as immovable property by destination, being in the nature of
machinery and other implements intended by the owner for an industry or work which may be carried on in a
building or on a piece of land and which tend directly to meet the needs of said industry or work.51

Petitioners maintain nevertheless that the power barges are exempt from real estate tax under Section 234 (c) of
R.A. No. 7160 because they are actually, directly and exclusively used by petitioner NPC, a government- owned and
controlled corporation engaged in the supply, generation, and transmission of electric power.
We affirm the findings of the LBAA and CBAA that the owner of the taxable properties is petitioner FELS, which in
fine, is the entity being taxed by the local government. As stipulated under Section 2.11, Article 2 of the Agreement:
OWNERSHIP OF POWER BARGES. POLAR shall own the Power Barges and all the fixtures, fittings, machinery
and equipment on the Site used in connection with the Power Barges which have been supplied by it at its own cost.
POLAR shall operate, manage and maintain the Power Barges for the purpose of converting Fuel of NAPOCOR into
electricity.52
It follows then that FELS cannot escape liability from the payment of realty taxes by invoking its exemption in
Section 234 (c) of R.A. No. 7160, which reads:
SECTION 234. Exemptions from Real Property Tax. The following are exempted from payment of the real
property tax:
xxx
(c) All machineries and equipment that are actually, directly and exclusively used by local water districts and
government-owned or controlled corporations engaged in the supply and distribution of water and/or generation and
transmission of electric power; x x x
Indeed, the law states that the machinery must be actually, directly and exclusively used by the government owned
or controlled corporation; nevertheless, petitioner FELS still cannot find solace in this provision because Section 5.5,
Article 5 of the Agreement provides:
OPERATION. POLAR undertakes that until the end of the Lease Period, subject to the supply of the necessary Fuel
pursuant to Article 6 and to the other provisions hereof, it will operate the Power Barges to convert such Fuel into
electricity in accordance with Part A of Article 7.53
It is a basic rule that obligations arising from a contract have the force of law between the parties. Not being contrary
to law, morals, good customs, public order or public policy, the parties to the contract are bound by its terms and
conditions.54
Time and again, the Supreme Court has stated that taxation is the rule and exemption is the exception.55 The law
does not look with favor on tax exemptions and the entity that would seek to be thus privileged must justify it by
words too plain to be mistaken and too categorical to be misinterpreted.56 Thus, applying the rule of strict
construction of laws granting tax exemptions, and the rule that doubts should be resolved in favor of provincial
corporations, we hold that FELS is considered a taxable entity.
The mere undertaking of petitioner NPC under Section 10.1 of the Agreement, that it shall be responsible for the
payment of all real estate taxes and assessments, does not justify the exemption. The privilege granted to petitioner
NPC cannot be extended to FELS. The covenant is between FELS and NPC and does not bind a third person not
privy thereto, in this case, the Province of Batangas.
It must be pointed out that the protracted and circuitous litigation has seriously resulted in the local governments
deprivation of revenues. The power to tax is an incident of sovereignty and is unlimited in its magnitude,
acknowledging in its very nature no perimeter so that security against its abuse is to be found only in the
responsibility of the legislature which imposes the tax on the constituency who are to pay for it.57 The right of local
government units to collect taxes due must always be upheld to avoid severe tax erosion. This consideration is
consistent with the State policy to guarantee the autonomy of local governments58 and the objective of the Local
Government Code that they enjoy genuine and meaningful local autonomy to empower them to achieve their fullest
development as self-reliant communities and make them effective partners in the attainment of national goals.59

In conclusion, we reiterate that the power to tax is the most potent instrument to raise the needed revenues to
finance and support myriad activities of the local government units for the delivery of basic services essential to the
promotion of the general welfare and the enhancement of peace, progress, and prosperity of the people.60
WHEREFORE, the Petitions are DENIED and the assailed Decisions and Resolutions AFFIRMED.
SO ORDERED.
ROMEO J. CALLEJO, SR.
Associate Justice
WE CONCUR:
CONSUELO YNARES-SANTIAGO
Associate Justice

MA. ALICIA AUSTRIA-MARTINEZ

Asscociate Justice

MINITA V. CHICO-NAZARIO
Associate Justice
ATTESTATION
I attest that the conclusions in the above Decision had been reached in consultation before the case was assigned
to the writer of the opinion of the Courts Division.
CONSUELO YNARES-SANTIAGO
Associate Justice
Chairperson
CERTIFICATION
Pursuant to Section 13, Article VIII of the Constitution and the Division Chairpersons Attestation, it is hereby
certified that the conclusions in the above decision were reached in consultation before the case was assigned to
the writer of the opinion of the Courts Division.
REYNATO S. PUNO
Chief Justice

Footnotes
1

Penned by Associate Justice Marina L. Buzon, with Associate Justices Mario L. Guaria III and Santiago
Javier Ranada (retired), concurring; rollo (G.R. No. 168557), pp. 103-116.
2

Penned by Associate Justice Marina L. Buzon, with Associate Justices Mario L. Guaria III and Santiago
Javier Ranada; concurring; id. at 118-120.
3

Penned by Associate Justice Mario L. Guaria III, with Associate Justices Marina L. Buzon and Santiago
Javier Ranada; concurring; rollo (G.R. No. 170628), pp. 59-64.
4

Penned by Associate Justice Mario L. Guaria III, with Associate Justices Marina L. Buzon and Santiago
Javier Ranada; concurring; id. at 65.
5

Rollo (G.R. No. 168557), pp. 121-245.

Id. at 155.

Id. at 249-250.

Id. at 253-255.

Rollo (G.R. No. 168557), pp. 256-267.

10

Id. at 286-288.

11

Id. at 289-294.

12

Id. at 294.

13

Rollo (G.R. No. 170628), pp. 122-124.

14

Id. at 129.

15

Rollo (G.R. No. 168557), pp. 364-369.

16

Id. at 370-372.

17

Id. at 383-394.

18

Id. at 394.

19

Otherwise known as the "Local Government Code of 1991."

20

Rollo (G.R. No. 168557), pp. 425-431.

21

Id. at 430-431.

22

Id. at 478.

23

CA Rollo (CA-G.R. SP No. 67490), p. 422.

24

Rollo (G.R. No. 168557), pp. 49-50.

25

Id. at 605.

26

Id. at 606.

27

Rollo (G.R. No. 170628), p. 65.

28

Rollo (G.R. No. 168557), pp. 23-25.

29

Id. at 61.

30

Rollo (G.R. No. 170628), pp. 18-19.

31

Rollo (G.R. No. 168557), p. 637.

32

Id. at 246 (Italics supplied).

33

Systems Plus Computer College of Caloocan City v. Local Government of Caloocan City, 455 Phil. 956,
962-963 (2003).
34

G.R. Nos. 115253-74, January 30, 1998, 285 SCRA 648.

35

Formerly Section 30 of The Real Property Tax Code.

36

Callanta v. Office of the Ombudsman, supra note 33, at 661-662.

37

Rollo (G.R. No. 170628), pp. 62-63.

38

Manila Electric Company v. Barlis, G. R. No. 114231, June 29, 2004, 433 SCRA 11, 32.

39

Id. at 32-33.

40

See Borja Estate v. Ballad, G.R. No. 152550, June 8, 2005, 459 SCRA 657, 668, 670.

41

Cruz v. Court of Appeals, G.R. No. 164797, February 13, 2006, 482 SCRA 379, 395, citing Heirs of the
Late Faustina Adalid v. Court of Appeals, 459 SCRA 27, 41 (2005).
42

G.R. No. 138660, February 5, 2004, 422 SCRA 101.

43

Id. at 116.

44

Municipality of Taguig v. Court of Appeals, G.R. No. 142619, September 13, 2005, 469 SCRA 588, 594595.
45

Foronda v. Guerrero, Adm. Case No. 5469, August 10, 2004, 436 SCRA 9, 23.

46

Wee v. Galvez, G.R. No. 147394, August 11, 2004, 436 SCRA 96, 108-109.

47

Hongkong and Shanghai Banking Corporation Limited v. Catalan, G.R. Nos. 159590 and 159591, October
18, 2004, 440 SCRA 498, 513-514.
48

Commissioner of Internal Revenue v. Hantex Trading Co., Inc., G.R. No. 136975, March 31, 2005, 454
SCRA 301, 329.
49

Cagayan Robina Sugar Milling Co. v. Court of Appeals, 396 Phil. 830, 840 (2000).

50

80 Misc.2d 1065 (1975).

51

J. Vitug, civil law volume ii, property, ownership, and its modifications, 3-4 (2003).

52

Rollo (G.R. No. 168557), p. 135.

53

Id. at 142. (Emphasis supplied)

54

L & L Lawrence Footwear, Inc. v. PCI Leasing and Finance Corporation, G.R. No. 160531, August 30,
2005, 468 SCRA 393, 402.
55

Commissioner of Internal Revenue v. Philippine Long Distance Telephone Company, G.R. No. 140230,
December 15, 2005, 478 SCRA 61, 74.
56

Republic v. City of Kidapawan, G.R. No. 166651, December 9, 2005, 477 SCRA 324, 335, citing SeaLand Service, Inc. v. Court of Appeals, 357 SCRA 441, 444 (2001).

57

Mactan Cebu International Airport Authority v. Marcos, G.R. No. 120082, September 11, 1996, 261 SCRA
667, 679.
58

CONSTITUTION, Section 25, Article II, and Section 2, Article X.

59

Republic Act No. 7160, Section 2(a).

60

Mactan Cebu International Airport Authority v. Marcos, supra note 56, at 690.