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Star Two (SPV-AMC), Inc., vs Paper City Corporation of the Philippines, G.R.

Elevated Concrete Water Tank


No. 169211, March 6, 2013 And other Improvements listed in Annex "A"
C. Power Plants Nos. 1 and 2
FACTS: Fabrication Building
Various Fuel, Water Tanks and Pumps
For review is a Petition for Review on Certiorari filed by Rizal Commercial Banking Transformers
Corporation now substituted by Star Two (SPV-AMC), Inc.
Annex "B"
 Respondent Paper City is a domestic corporation engaged in the
D. D. Material Handling Equipment
manufacture of paper products. Paper City applied for and was granted
Paper Plant No. 3
loans and credit accommodations in peso and dollar denominations by
RCBC secured by 4 Deeds of Continuing Chattel Mortgages on its  The MTI was later amended to increase the contributions of the RCBC and
machineries and equipments found inside its paper plants. Union Bank. As a consequence, they executed a Deed of Amendment to
MTI but still included as part of the mortgaged properties by way of a first
 However, a unilateral Cancellation of Deed of Continuing Chattel Mortgage
mortgage the various machineries and equipments located in and bolted to
on Inventory of Merchandise/Stocks-in-Trade was executed by RCBC over
and/or forming part of buildings.
the merchandise and stocks-in-trade covered by the continuing chattel
mortgages.  A Second Supplemental Indenture to the MTI was executed to increase the
amount of the loan secured against the existing properties composed of
 RCBC, Metrobank and Union Bank (creditor banks with RCBC instituted
land, building, machineries and equipments and inventories described in
as the trustee bank) entered into a Mortgage Trust Indenture (MTI) with
Annexes "A" and "B."
Paper City. In the said MTI, Paper City acquired an additional P170,
000,000.00 from the creditor banks in addition to the previous loan from  Finally, a Third Supplemental Indenture to the MTI was executed to
RCBC amounting to P110, 000,000.00. increase the existing loan obligation with an additional security composed
of a newly constructed two-storey building and other improvements,
 The old loan of P110,000,000.00 was partly secured by various parcels of
machineries and equipments located in the existing plant site.
land situated in Valenzuela City. The new loan obligation
of P170,000,000.00 would be secured by the same five (5) Deeds of Real  Paper City was able to comply with its loan obligations but economic crisis
Estate Mortgage and additional real and personal properties described in an ensued which made it difficult for Paper City to meet the terms of its
annex to MTI, Annex "B" which covered the machineries and equipments obligations leading to payment defaults. Consequently, RCBC filed a
of Paper City. Petition for Extrajudicial Foreclosure.
 The petition was for the extra-judicial foreclosure of eight parcels of land
including all improvements thereon which were sold in favor of the creditor
Annex "A" banks RCBC, Union Bank and Metrobank as the highest bidders.
This foreclosure sale prompted Paper City to file a Complaint against the creditor
A. Office Building
banks alleging that the extra-judicial sale of the properties and plants was null and
Building 1, 2, 3, 4, and 5
void due to lack of prior notice and attendance of gross and evident bad faith on the
Boiler House
part of the creditor banks.
Workers’ Quarter/Restroom
Canteen Acting on the said motion, the trial court issued an Order denying the prayer and
Guardhouse, Parking Shed, Elevated Guard ruled that the machineries and equipments were included in the annexes and form
Post and other amenities part of the MTI.
B. Pollution Tank Nos. 1 and 2.
Reserve Water Tank and Swimming Pool Paper City filed its Motion for Reconsideration which was favorably granted by the
Waste Water Treatment Tank trial court with justification that the disputed machineries and equipments are
chattels by agreement of the parties through their inclusion in the four Deeds of

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Chattel Mortgage and the deed of cancellation executed by RCBC was not valid were subsequent to the chattel mortgages. Without doubt, the real estate
because it was done unilaterally and without the consent of Paper City. mortgages superseded the earlier chattel mortgages.

The CA affirmed the Order. The real estate mortgage over the machineries and equipments is even in full
accord with the classification of such properties by the Civil Code of the
ISSUE: Philippines as immovable property. Thus:
Whether the subsequent contracts of the parties such as Mortgage Trust Indenture as
well as the subsequent supplementary amendments included in its coverage of Article 415. The following are immovable property:
mortgaged properties the subject machineries and equipment; and
(1) Land, buildings, roads and constructions of all kinds adhered to the soil;
Whether or not the subject machineries and equipment were considered real
properties and should therefore be included in the extra-judicial foreclosure which in
xxxx
turn were sold to the banks.

RULING: (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
Petition was granted. piece of land, and which tend directly to meet the needs of the said industry or
works;
1. Repeatedly, the parties stipulated that the properties mortgaged by Paper City
to RCBC are various parcels of land including the buildings and existing
LAUREL V. ABROGAR
improvements thereon as well as the machineries and equipments, which as
G.R. NO. 155076 (JANUARY 13, 2009)
stated in the granting clause of the original mortgage, are "more particularly Personal Property
described and listed that is to say, the real and personal properties listed in
Annexes ‘A’ and ‘B’ x x x of which the Paper City is the lawful and registered
owner." Significantly, Annexes "A" and "B" are itemized listings of the FACTS:
buildings, machineries and equipments typed single spaced in twenty-seven
pages of the document made part of the records. As held in Gateway Philippine Long Distance Telephone Company (PLDT) filed a complaint for theft
Electronics Corp. v. Land Bank of the Philippines,49 the rule in this jurisdiction under Article 308 of the Revised Penal Code against Baynet Co., Ltd. (Baynet) for
is that the contracting parties may establish any agreement, term, and condition stealing its business. PLDT alleged that Baynet offered phone cards to people in
they may deem advisable, provided they are not contrary to law, morals or Japan to call their friends and relatives in the Philippines using PLDT's facilities
public policy. The right to enter into lawful contracts constitutes one of the and equipment.
liberties guaranteed by the Constitution.
ISSUE:

Whether or not the PLDT's business of providing telecommunication services is a


2. Contrary to the finding of the CA, the Extra-Judicial Foreclosure of Mortgage personal property under Article 308 of the Revised Penal Code.
includes the machineries and equipments of respondent. Considering that the
Indenture which is the instrument of the mortgage that was foreclosed exactly HELD:
states through the Deed of Amendment that the machineries and equipments
listed in Annexes "A" and "B" form part of the improvements listed and No, PLDT's business of providing telecommunication services is not a personal
located on the parcels of land subject of the mortgage, such machineries and property under Article 308 of the Revised Penal Code.
equipments are surely part of the foreclosure of the "real estate properties,
including all improvements thereon" as prayed for in the petition. The real
Personal property under the Revised Penal Code covers both tangible and intangible
estate mortgages which specifically included the machineries and equipments
properties but must be considered with the word "take" in the law. There is "taking"

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of personal property, and theft is consummated when the offender unlawfully Held: No. Significantly, while Article 559 permits an owner who has lost or has
acquires possession of personal property even if for a short time; or if such property been unlawfully deprived of a movable to recover the exact same thing from the
is under the dominion and control of the thief. The statutory definition of "taking" current possessor, BPI simply claims ownership of the equivalent amount of money,
clearly indicates that not all personal properties may be the proper subjects of i.e., the value thereof, which it had mistakenly debited from FMIC’s account and
theft. The general rule is that only movable properties, which have physical or credited to Tevesteco’s, and subsequently traced to Franco’s account.
material existence and susceptible of occupation by another are proper subjects of
theft. Movable properties under Article 308 of the Revised Penal Code should be
distinguished from the rights or interest to which they relate to. While the rights or
interests are properties, they are not considered personal properties under Article Money bears no earmarks of peculiar ownership, and this characteristic is all the
308 of the Revised Penal Code. more manifest in the instant case which involves money in a banking transaction
gone awry. Its primary function is to pass from hand to hand as a medium of
PLDT's business is intangible and cannot be taken by another and not the proper exchange, without other evidence of its title. Money, which had been passed through
subjects of theft because they are without form or substance. various transactions in the general course of banking business, even if of traceable
origin, is no exception.

LEUNG YEE V. F.L STRONG MACHINERY CO. AND WILLIAMSON


37 SCRA 644
BPI vs Court of Appeals
FACTS:
538 SCRA 184, GR No. 123498, November 23, 2007 1. First mortgage: Compania Agricola Filipina bought rice-cleaning machinery
from the machinery company and this was secured by a chattel mortgage on the
Posted by Pius Morados on January 12, 2012 machinery and the building to which it
was installed. Upon failure to pay, the chattel mortgage was foreclosed, the
Facts: Franco opened 3 accounts with BPI with the total amount of P2,000,000.00. building and machinery sold in public auction and bought by the machinery
The said amount used to open these accounts is traceable to a check issued by company.
Tevesteco. The funding for the P2,000,000.00 check was part of the P80,000,000.00
debited by BPI from FMIC’s account (with a deposit of P100,000,000.00) and 2. Days after, the Compania Agricola Filipina executed a deed of sale over the
credited to Tevesteco’s account pursuant to an Authority to Debit which was land to which the building stood in favor of the machinery company. This was done
allegedly forged as claimed by FMIC. to cure any defects that may arise in the
machinery company’s ownership of the building.
Tevesteco effected several withdrawals already from its account amounting to
3. Second mortgage: on or about the date to which the chattel
P37,455,410.54 including the P2,000,000.00 paid to Franco.
mortgage was excecuted, Compania executed a real estate
mortgage over the building in favor of Leung Yee, distinct and
Franco issued two checks which were dishonoured upon presentment for payment
separate from the land. This is to secure payment for its indebtedness for the
due to garnishment of his account filed by BPI.
construction of the building. Upon failure to pay, the mortgage was foreclosed.
BPI claimed that it had a better right to the amounts which consisted of part of the 4. The machinery company then filed a case, demanding that it be
money allegedly fraudulently withdrawn from it by Tevesteco and ending up in declared the rightful owner of the building. The trial court held that it was
Franco’s account. BPI urges us that the legal consequence of FMIC’s forgery claim the machinery company which was the rightful owner
is that the money transferred by BPI to Tevesteco is its own, and considering that it as it had its title before the building was registered prior to the date of
was able to recover possession of the same when the money was redeposited by registry of Leung Yee’s certificate.
Franco, it had the right to set up its ownership thereon and freeze Franco’s accounts.

Issue: WON the bank has a better right to the deposits in Franco’s account.

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HELD: Serg's Products, Inc. v. PCI Leasing and Finance, Inc.
G.R. No. 137705 (August 22, 2000) Case Digest
The building in which the machinery was installed was real property, and Real Properties
the mere fact that the parties seem to have dealt with it separate and apart
from the land on which it stood in no wise changed the character as real property. FACTS:

It follows that neither the original registry in the chattel mortgage registry of the PCI Leasing and Finance, Inc. (PCI) filed a complaint for a sum of money with an
instrument purporting to be a chattel mortgage of the building and application of writ of replevin. The judge issued a writ of replevin directing its
the machinery installed therein, nor the annotation in the registry of the sheriff to seize and deliver the machinery and equipment to PCI.
sale of the mortgaged property, had any effect whatever so far as the building
is concerned. Serg filed a motion for special protective order praying for a directive for the sheriff
to defer the enforcement of the writ of replevin contending that the machines were
not proper subjects of the writ because they are in fact real property defined in
Prudential Bank v. Panis Article 415 of the Civil Code.
G.R. No. 5008 (August 31, 1988)
Article 415 of the Civil Code: Real Property ART. 415. The following are immovable property:

FACTS: xxx

The spouses Magcale obtained a Php 70, 000 loan from Prudential Bank secured by (5) Machinery, receptacles, instruments or implements intended by the owner of the
a Deed of Real Estate Mortgage over a 2-storey, semi-concrete residential building tenement for an industry or works which may be carried on in a building or on a
including the right of occupancy on the land. piece of land, and which tend directly to meet the needs of the said industry or
works;
When the spouses Magcale executed this mortgage, the land still belonged to the
government as the Sales Patent over the lot applied for by the spouses Magcale was xxx
not yet issued.
PCI opposed the motion on the ground that Section 12.1 of their Lease Agreement
ISSUE: clearly provided that the machines were to be considered as personal property.

Whether or not a real estate mortgage over a building erected on the land belonging 2.1 The PROPERTY is, and shall at all times be and remain, personal property
to another is valid. 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
HELD: resting upon, real property or any building thereon, or attached in any manner to
what is permanent.
Yes, a real estate mortgage over a building erected on the land belonging to another
is valid. ISSUE:

Article 415 of the Civil Code provides the inclusion of "building" separate and Whether the machinery are considered a real or personal property.
distinct from the land, which can only mean that a building is by itself an immovable
property. HELD:

A mortgage of land necessarily includes buildings unless otherwise stipulated. A The machinery are considered personal property.
building by itself, however, may be mortgaged apart from the land on which it has
been built. Such a mortgage would still be a real estate mortgage for the building The Court has held that contracting parties may validly stipulate that a real property
alone would still be considered an immovable property. be considered as personal. After agreeing to such stipulation, they are consequently

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estopped from claiming otherwise. Under the principle of estoppel, a party to a HELD:
contract is ordinarily precluded from denying the truth of any material fact found
therein. The court ruled that the house is not personal property, much less a debt, credit or
other personal property not capable of manual delivery, but immovable property. As
Hence, Serg is estopped from denying the characterization of the machinery as held in Laddera vs. Hodges (48 OG 5374), "a true building is immovable or real
personal property, which are proper subjects of Writ of Seizure. property, whether it is erected by the owner of the land or by a usufructuary or
lessee.” The opinion that the house of Rivera should have been attached, as
Evangelista v. Alto Surety "personal property capable of manual delivery, by taking and safely keeping in his
custody", for it declared that "Evangelista could not have validly purchased Ricardo
FACTS: Rivera's house from the sheriff as the latter was not in possession thereof at the time
he sold it at a public auction” is untenable. Parties to a deed of chattel mortgage may
In 1949, Santos Evangelista instituted Civil Case No. 8235 of the CFI Manila agree to consider a house as personal property for purposes of said contract.
(Santos Evangelista vs. Ricardo Rivera) for a sum of money. On the same date, he However, this view is good only insofar as the contracting parties are concerned. It
obtained a writ of attachment, which was levied upon a house, built by Rivera on a is based, partly, upon the principle of estoppel. Neither this principle, nor said view,
land situated in Manila and leased to him, by filing copy of said writ and the is applicable to strangers to said contract. The rules on execution do not allow, and
corresponding notice of attachment with the Office of the Register of Deeds of should not be interpreted as to allow, the special consideration that parties to a
Manila. In due course, judgment was rendered in favor of Evangelista, who bought contract may have desired to impart to real estate as personal property, when they
the house at public auction held in compliance with the writ of execution issued in are not ordinarily so. Sales on execution affect the public and third persons. The
said case on 8 October 1951. The corresponding definite deed of sale was issued to regulation governing sales on execution are for public officials to follow. The form
him on 22 October 1952, upon expiration of the period of redemption. When of proceedings prescribed for each kind of property is suited to its character, not to
Evangelista sought to take possession of the house, Rivera refused to surrender it, the character which the parties have given to it or desire to give it. The regulations
upon the ground that he had leased the property from the Alto Surety & Insurance were never intended to suit the consideration that parties, may have privately given
Co., Inc. and that the latter is now the true owner of said property. It appears that on to the property levied upon. The court therefore affirms the decision of the CA with
10 May 1952, a definite deed of sale of the same house had been issued to Alto cost against Alto Surety.
Surety, as the highest bidder at an auction sale held, on 29 September 1950, in
compliance with a writ of execution issued in Civil Case 6268 of the same court Davao Sawmill v. Castillo
(Alto Surety & Insurance vs. Maximo Quiambao, Rosario Guevara and Ricardo
Rivera)" in which judgment for the sum of money, had been rendered in favor of DAVAO SAW MILL vs. APRONIANO G. CASTILLO and DAVAO LIGHT &
Alto Surety. Hence, on 13 June 1953, Evangelista instituted an action against Alto POWER CO., INC. G.R. No. L-40411 August 7, 1935
Surety and Ricardo Rivera, for the purpose of establishing his title over said house,
and securing possession thereof, apart from recovering damages. After due trial, the FACTS:
CFI Manila rendered judgment for Evangelista, sentencing Rivera and Alto Surety
to deliver the house in question to Evangelista and to pay him, jointly and severally, Davao Saw Mill Co., Inc., is the holder of a lumber concession from the
P40.00 a month from October 1952, until said delivery. The decision was however Government of the Philippine Islands. However, the land upon which the business
reversed by the Court of Appeals, which absolved Alto Surety from the complaint was conducted belonged to another person. On the land the sawmill company
on account that although the writ of attachment in favor of Evangelista had been erected a building which housed the machinery used by it. Some of the implements
filed with the Register of Deeds of Manila prior to the sale in favor of Alto Surety, thus used were clearly personal property, the conflict concerning machines which
Evangelista did not acquire thereby a preferential lien, the attachment having been were placed and mounted on foundations of cement. In the contract of lease between
levied as if the house in question were immovable property. the sawmill company and the owner of the land there appeared the following
provision: That on the expiration of the period agreed upon, all the improvements
ISSUE: and buildings introduced and erected by the party of the second part shall pass to the
exclusive ownership of the lessor without any obligation on its part to pay any
Whether or not a house constructed by the lessee of the land on which it is built, amount for said improvements and buildings; which do not include the machineries
should be dealt with, for purpose of attachment, as immovable property? and accessories in the improvements.

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its obligation to PBCom, the latter commenced extrajudicial foreclosure proceedings
against EVERTEX under Act 3135 and Act 1506 or "The Chattel Mortgage Law".
In another action wherein the Davao Light & Power Co., Inc., was the plaintiff and PBCom then consolidated its ownership over the lot and all the properties in it. It
the Davao, Saw, Mill Co., Inc., was the defendant, a judgment was rendered in favor leased the entire factory premises to Ruby Tsai and sold to the same the factory,
of the plaintiff in that action against the defendant; a writ of execution issued lock, stock and barrel including the contested machineries.
thereon, and the properties now in question were levied upon as personalty by the
sheriff. No third party claim was filed for such properties at the time of the sales EVERTEX filed a complaint for annulment of sale, reconveyance, and
thereof as is borne out by the record made by the plaintiff herein damages against PBCom, alleging inter alia that the extrajudicial foreclosure of
subject mortgage was not valid, and that PBCom, without any legal or factual basis,
It must be noted also that on number of occasion, Davao Sawmill treated the appropriated the contested properties which were not included in the Real and
machinery as personal property by executing chattel mortgages in favor of third Chattel Mortgage of the first mortgage contract nor in the second contract which is a
persons. One of such is the appellee by assignment from the original mortgages. Chattel Mortgage, and neither were those properties included in the Notice of
Sheriff's Sale.
The lower court rendered decision in favor of the defendants herein. Hence, this
instant appeal. ISSUES:

ISSUE: 1) W/N the contested properties are personal or movable properties

whether or not the machineries and equipments were personal in nature. 2) W/N the sale of these properties to a third person (Tsai) by the bank through an
irregular foreclosure sale is valid.
RULING/ RATIONALE:
HELD:
Yes. The Supreme Court affirmed the decision of the lower court.
1) Nature of the Properties and Intent of the Parties
Machinery which is movable in its nature only becomes immobilized when placed in
a plant by the owner of the property or plant, but not when so placed by a tenant, a The nature of the disputed machineries, i.e., that they were heavy, bolted or
usufructuary, or any person having only a temporary right, unless such person acted cemented on the real property mortgaged does not make them ipso facto immovable
as the agent of the owner. under Article 415 (3) and (5) of the New Civil Code. While it is true that the
properties appear to be immobile, a perusal of the contract of Real and Chattel
Tsai v. CA Mortgage executed by the parties herein reveal their intent, that is - to treat
machinery and equipment as chattels.
October 2, 2001
In the first mortgage contract, reflective of the true intention of PBCOM and
FACTS: 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
Ever Textile Mills, Inc. (EVERTEX) obtained loan from Philippine Bank of equipment" in the printed form of the bank had to be inserted in the blank space of
Communications (PBCom), secured by a deed of Real and Chattel Mortgage over the printed contract and connected with the word "building" by typewritten slash
the lot where its factory stands, and the chattels located therein as enumerated in a marks. Now, then, if the machineries in question were contemplated to be included
schedule attached to the mortgage contract. PBCom again granted a second loan to in the real estate mortgage, there would have been no necessity to ink a chattel
EVERTEX which was secured by a Chattel Mortgage over personal properties mortgage specifically mentioning as part III of Schedule A a listing of the
enumerated in a list attached thereto. These listed properties were similar to those machineries covered thereby. It would have sufficed to list them as immovables in
listed in the first mortgage deed. After the date of the execution of the second the Deed of Real Estate Mortgage of the land and building involved. As regards the
mortgage mentioned above, EVERTEX purchased various machines and second contract, the intention of the parties is clear and beyond question. It refers
equipments. Upon EVERTEX's failure to meet solely to chattels. The inventory list of the mortgaged properties is an itemization of

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63 individually described machineries while the schedule listed only machines and Note: This is merely a case digest to aid in remembering the important points of a
2,996,880.50 worth of finished cotton fabrics and natural cotton fabrics. case. It is still advisable for any student of law to read the full text of assigned cases.

UNDER PRINCIPLE OF STOPPEL ISSUE:

Assuming arguendo that the properties in question are immovable by nature, nothing Whether or not the machineries and equipments are considered immobilized and
detracts the parties from treating it as chattels to secure an obligation under the thus subject to a realty tax
principle of estoppel. As far back as Navarro v. Pineda, an immovable may be
considered a personal property if there is a stipulation as when it is used as security HELD:
in the payment of an obligation where a chattel mortgage is executed over it.
The Supreme Court decided otherwise and held that said machineries and
2) Sale of the Properties Not Included in the Subject of Chattel Mortgage is Not equipments are not subject to the assessment of real estate tax.
Valid
Said equipments are not considered immobilized as they are merely incidental, not
The auction sale of the subject properties to PBCom is void. Inasmuch as the esential and principal to the business of the petitioner. The transportation business
subject mortgages were intended by the parties to involve chattels, insofar as could be carried on without repair or service shops of its rolling equipment as they
equipment and machinery were concerned, the Chattel Mortgage Law applies. can be repaired or services in another shop belonging to another
Section 7 provides thereof that: "a chattel mortgage shall be deemed to cover only
the property described therein and not like or substituted property thereafter MERALCO SECURITIES INDUSTRIAL CORPORATION, petitioner, vs.
acquired by the mortgagor and placed in the same depository as the property CENTRAL BOARD OF ASSESSMENT APPEALS, BOARD OF
originally mortgaged, anything in the mortgage to the contrary notwithstanding." ASSESSMENT APPEALS OF LAGUNA and PROVINCIAL ASSESSOR OF
Since the disputed machineries were acquired later after the two mortgage contracts LAGUNA, respondents.
were executed, it was consequently an error on the part of the Sheriff to include
subject machineries with the properties enumerated in said chattel mortgages. G.R. No. L-46245 May 31, 1982

As the lease and sale of said personal properties were irregular and illegal because FACTS:
they were not duly foreclosed nor sold at the auction, no valid title passed in its
favor. Consequently, the sale thereof to Ruby Tsai is also a nullity under the Pursuant to a pipeline concession issued under the Petroleum Act of 1949, Republic
elementary principle of nemo dat quod non habet, one cannot give what one does Act No. 387, Meralco Securities installed from Batangas to Manila a pipeline system
not have. ## consisting of cylindrical steel pipes joined together and buried not less than one
meter below the surface along the shoulder of the public highway. The pipes are
Mindanao Bus Co. v. City Assessor Digest embedded in the soil and are firmly and solidly welded together so as to preclude
G.R. No. L-17870 29 September 1962 breakage or damage thereto and prevent leakage or seepage of the oil. The valves
are welded to the pipes so as to make the pipeline system one single piece of
FACTS: property from end to end.
Petitioner is a public utility company engaged in the transport of passengers and In order to repair, replace, remove or transfer segments of the pipeline, the pipes
cargo by motor vehicles in Mindanao with main offices in Cagayan de Oro (CDO). have to be cold-cut by means of a rotary hard-metal pipe-cutter after digging or
Petitioner likewise owned a land where it maintains a garage, a repair shop and excavating them out of the ground where they are buried. In points where the
blacksmith or carpentry shops. The machineries are placed thereon in wooden and pipeline traversed rivers or creeks, the pipes were laid beneath the bed thereof.
cement platforms. The City Assessor of CDO then assessed a P4,400 realty tax on Hence, the pipes are permanently attached to the land.
said machineries and repair equipment. Petitioner appealed to the Board of Tax
Appeals but it sustained the City Assessor's decision, while the Court of Tax Pursuant to the Assessment Law, Commonwealth Act No. 470, the provincial
Appeals (CTA) sustained the same. assessor of Laguna treated the pipeline as real property and issued tax declarations,
containing the assessed values of portions of the pipeline.

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Meralco appealed the assessments to the defendants, but the latter ruled that pipeline WHEREFORE, the questioned decision and resolution are affirmed. The petition is
is subject to realty tax. The defendants argued that the pipeline is subject to realty dismissed. No costs.
tax because they are contemplated in Assessment Law and Real Property Tax Code;
that they do not fall within the category of property exempt from realty tax under LO V. KJS ECO-FRAMEWORK SYSTEM PHIL INC G.R. NO 149420 (2003)
those laws; that Articles 415 & 416 of the Civil Code, defining real and personal
property have no applications to this case because these pipes are constructions FACTS:
adhered to soil and things attached to the land in a fixed manner, and that Meralco
Securities is not exempt from realty tax under petroleum law. Respondent KJS Eco-Framework System is a corporation engaged in the sale of
steel scaffoldings, while petitioner Sonny Lo, doing business under the name of
Meralco insists that its pipeline is not subject to realty tax because it is not real San’s Enterprises, is a building contractor.
property within the meaning of Art. 415.
1. In February 1990, petitioner ordered scaffolding equipments from the
ISSUE: respondent amounting to P540, 425.80. He paid a down payment of P150,000 and
the balance was to be paid in 10 monthly installments
Whether the aforementioned pipelines are subject to realty tax.
2. However, Lo was only able to pay the first 2 monthly installments due to
HELD: financial difficulties despite demands from the respondent

Yes, the pipelines are subject to realty tax. 3. In October 1990, petitioner and respondent executed a deed of assignment
whereby petitioner assigned to respondent his receivables of P335,462.14 from
Section 2 of the Assessment Law provides that the realty tax is due “on real Jomero Realty Corp
property, including land, buildings, machinery, and other improvements.” This
provision is reproduced with some modification in Section 38, Real Property Tax 4. But when respondent tried to collect the said credit from Jomero Realty Corp,
Code, which provides that “there shall be levied, assessed, and collected xxx annual the latter refused to honor the deed of assignment because it claimed that the
ad valorem tax on real property such as land, buildings, machinery, and other petitioner was also indebted to it. As such, KJS sent Lo a demand letter but the latter
improvements affixed or attached to real property xxx.” refused to pay, claiming that his obligation had been extinguished when they
executed the deed of assignment
It is incontestable that the pipeline of Meralco Securities does not fall within any of
the classes of exempt real property enumerated in section 3 of the Assessment Law 5. Subsequently, respondent filed an action for recovery of sum of money against
and section 40 of the Real Property Tax Code. petitioner.

Pipeline means a line of pipe connected to pumps, valves and control devices for 6. Petitioner argued that his obligation was extinguished with the execution of the
conveying liquids, gases or finely divided solids. It is a line of pipe running upon or deed of assignment of credit. Respondent alleged that Jomero Realty Corp refused to
in the earth, carrying with it the right to the use of the soil in which it is placed. honor the deed of assignment because it claimed that the petitioner had outstanding
indebtedness to it

Article 415[l] and [3] provides that real property may consist of constructions of all 7. The trial court dismissed the complaint on the ground that the assignment of
kinds adhered to the soil and everything attached to an immovable in a fixed credit extinguished the bligation
manner, in such a way that it cannot be separated therefrom without breaking the
material or deterioration of the object. 8. Upon appeal, CA reversed the trial court decision and held in favor of KJS. CA
held that
The pipeline system in question is indubitably a construction adhering to the soil. It
is attached to the land in such a way that it cannot be separated therefrom without a. Petitioner failed to comply with his warranty under the deed
dismantling the steel pipes which were welded to form the pipeline.

Page 8 of 15
b. The object of the deed did not exist at the time of the transaction, rendering it the solvency of the debtor, unless it has been so expressly stipulated or unless the
void under Art 1409 NCC insolvency was prior to the sale and of common knowledge.

c. Petitioner violated the terms of the deed of assignment when he failed to execute From the above provision, petitioner, as vendor or assignor, is bound to warrant the
and do all acts necessary to effectually enable the respondent to recover the existence and legality of the credit at the time of the sale or assignment. When
collectibles Jomero claimed that it was no longer indebted to petitioner since the latter also had
an unpaid obligation to it, it essentially meant that its obligation to petitioner has
ISSUE: been extinguished by compensation. In other words, respondent alleged the non-
existence of the credit and asserted its claim to petitioner’s warranty under the
WON the deed of assignment extinguished the petitioner’s obligation assignment. Therefore, it necessary for the petitioner to make good its warranty and
pay the obligation.
HELD:
Furthermore, the petitioner breached his obligation under the Deed of Assignment,
No, the petitioner’s obligation was not extinguished with the execution of the deed to execute and do all such further acts and deeds as shall be reasonably necessary to
of assignment. effectually enable said ASSIGNEE to recover whatever collectibles said
ASSIGNOR has in accordance with the true intent and meaning of these presents.
An assignment of credit is an agreement by virtue of which the owner of a credit,
known as the assignor, by a legal cause, such as sale, dacion en pago, exchange or Indeed, by warranting the existence of the credit, petitioner should be deemed to
donation, and without the consent of the debtor, transfers his credit and accessory have ensured the performance thereof in case the same is later found to be
rights to another, known as the assignee, who acquires the power to enforce it to the inexistent. He should be held liable to pay to respondent the amount of his
same extent as the assignor could enforce it against the debtor. indebtedness.

In dacion en pago, as a special mode of payment, the debtor offers another thing to WOODRIDGE V ARB
the creditor who accepts it as equivalent of payment of an outstanding debt. In order
that there be a valid dation in payment, the following are the requisites: (1) There WOODRIDGE SCHOOL, INC., and MIGUELA JIMENEZ-JAVIER,
must be the performance of the prestation in lieu of payment (animo solvendi) which Petitioners, v. ARB CONSTRUCTION CO., INC., Respondent.
may consist in the delivery of a corporeal thing or a real right or a credit against the
third person; (2) There must be some difference between the prestation due and that G.R. No. 157285, 2007 February 16, Corona, R.C.J., (First Division)
which is given in substitution (aliud pro alio); (3) There must be an agreement
between the creditor and debtor that the obligation is immediately extinguished by The use of the subdivision roads by the general public does not strip it of its private
reason of the performance of a prestation different from that due. The undertaking character. The road is not converted into public property by mere tolerance of the
really partakes in one sense of the nature of sale, that is, the creditor is really buying subdivision owner of the public's passage through it.
the thing or property of the debtor, payment for which is to be charged against the
debtor’s debt. As such, the vendor in good faith shall be responsible, for the
existence and legality of the credit at the time of the sale but not for the solvency of Petitioner Woodridge School is the usufructuary of a parcel of land in the
the debtor, in specified circumstances. name of spouses Ernesto T. Matugas and Filomena U. Matugas. Its co-petitioner,
Miguela Jimenez–Javier, is the registered owner of the adjacent lot to that of
Hence, it may well be that the assignment of credit, which is in the nature of a sale Woodridge.
of personal property, produced the effects of a dation in payment which may
extinguish the obligation. However, as in any other contract of sale, the vendor or Respondent ARB Construction is the owner and developer of Soldiers
assignor is bound by certain warranties. More specifically, the first paragraph of Hills Subdivision in Bacoor, Cavite, which is composed of four phases. Phase 1 of
Article 1628 of the Civil Code provides: the subdivision was already accessible from the Marcos Alvarez Avenue. To provide
the same accessibility to the residents of Phase II of the subdivision, ARB
The vendor in good faith shall be responsible for the existence and legality of the constructed the disputed road to link the two phases.
credit at the time of the sale, unless it should have been sold as doubtful; but not for

Page 9 of 15
Petitioners’ properties sit right in the middle of several estates: Phase 1 of ISSUES:
Soldiers Hills Subdivision in the north, a creek in the east and Green Valley
Subdivision in the farther east, a road within Soldiers Hills Subdivision IV which 1. Whether the disputed road is a property of public dominion pursuant to the
leads to the Marcos Alvarez Avenue in the west, and Phase III of Soldiers Hills
last clause of Article 420 (1), and, as such, is not a valid subject for legal
Subdivision in the south.
easement.
Petitioners offered to pay ARB P50,000 as indemnity for the use of the
road. ARB refused the offer and fenced the perimeter of the road fronting the 2. Whether the offer of petitioners amounting to P50,000 is a sufficient
properties of petitioners, thus, cutting off petitioners’ access to and from the public compensation for their use of the road.
highway.

After failing to settle the matter amicably, petitioners jointly filed a DECISION:
complaint in the RTC to enjoin ARB from depriving them of the use of the disputed
subdivision road and to seek a compulsory right of way after payment of proper
With regard to the first issue, The Supreme Court says, no. The Court held that the
indemnity. The RTC rendered its decision in favor of petitioners relying on the
ruling of the Supreme Court in White Plains Association, Inc. vs. Legaspi (193 road lots in a private subdivision are private property, hence, the local government
SCRA 765) stating that the government automatically becomes the owner of the should first acquire them by donation, purchase, or expropriation, if they are to be
subdivisions’ roads the moment the subdivision plan is approved, and thus is open to utilized as a public road (Abellana, Sr. v. Court of Appeals). Otherwise, they remain
public use without any need for compensation. to be private properties of the owner developer.

Respondent ARB elevated the case to the Court of Appeals. The appellate The use of the subdivision roads by the general public does not strip it of its private
court reversed the Trial Court’s decision and stating that the ruling of the Supreme
character. The road is not converted into public property by mere tolerance of the
Court in the 1991 case of White Plains Subdivision is not applicable as it was not
similarly situated as in the present case. However the appellate court went on to rule subdivision owner of the public's passage through it. The local government should
that a compulsory right of way exists in favor of petitioners as there is no other first acquire them by donation, purchase, or expropriation, if they are to be utilized
existing adequate outlet to and from petitioners’ properties to the Marcos Alvarez as a public road. In the present case, since no donation has been made in favor of any
Avenue other than the subject existing road lot belonging to ARB. In addition, it local government and the title to the road lot is still registered in the name of ARB,
awarded P500,000 to ARB as compensation for the wear and tear that petitioners’ the disputed property remains private.
use of the road would contribute to.
With regard to the second issue, the Supreme Court again says, no. In order to be
Unsatisfied with the ruling of the appellate court, petitioners elevated the
entitled to a legal easement of right of way, the following requisites must concur: (1)
matter to the Supreme Court arguing that ARB is not entitled to be paid any
the dominant estate is surrounded by other immovables and has no adequate outlet
indemnity since the contested road lot is a property of public dominion pursuant to
Article 420 of the Civil Code because the disputed road falls under the category of to a public highway; (2) payment of proper indemnity; (3) The isolation was not due
“others of similar character” which is the last clause of Article 420 (1). Hence, it is a to acts of the proprietor of the dominant estate and; (4) the right of way claimed is at
property of public dominion which can be used by the general public without need the point least prejudicial to the servient estate. In the present case, all of the
for compensation. requisites are present except for number two.

Petitioners also assert that their initial offer of P50,000 should be The appellate and trial courts found that the properties of petitioners are enclosed by
sufficient compensation for the right of way. Further, they should not be held other estates without any adequate access to a public highway except the subject
accountable for the increase in the value of the property since the delay was road lot which leads to Marcos Alvarez Avenue. Although it was shown that the
attributable to the stubborn refusal of ARB to accept their offer.
shortest distance from the properties to the highway is toward the east across a creek,
this alternative route does not provide an adequate outlet for the students of the
proposed school.

Page 10 of 15
They owned the land. Oppositor Republic of the Philippines: Subject land was
The Civil Code categorically provides for the measure by which the proper timberland or unclassified forest.
indemnity may be computed. Under Article 649, paragraph 2, it is stated:
RULING OF THE TRIAL COURT:Application for registration of title by Zarate
and the claims of private oppositors is dismissed.
“Should this easement be established in such a
RULING OF THE COURT OF APPEALS:CA affirmed the ruling of the Trial
manner that its use may be continuous for all the needs of the
Court.
dominant estate, establishing a permanent passage, the
indemnity shall consist of the value of the land occupied and
RULING OF THE SUPREME COURT:
the amount of the damage caused to the servient estate.”
The petition is DENIED. Ruling of the CA and Trial Court is affirmed. Subject
Having settled the legal issues, the Supreme Court ordered the remand of the case to lands were released as alienable and disposable only in 1973. The application for
the trial court for the reception of evidence and determination of the limits of the registration was filed in 1976. Thus, the applicant and/or private oppositors
property to be covered by the easement, the proper indemnity to be paid and the possessed the land for only 3 years prior to the filing of application and the 30-year
respective contributions of petitioners. requirement imposed by CA 141 (Public Land Act) was not met. The applicant (and
oppositors) failed to show evidence that they have complied with the requisites
provided by law – 1) the land applied for was alienable and disposable. 2) the
The petition was PARTIALLY GRANTED. applicant and his predecessors-in-interest had occupied and possessed the land
openly, continuously, exclusively, and adversely for 30 years immediately preceding
the filing of application. More than 1/2 of the total area applied for are not in the
ZARATE v. DIRECTOR OF LANDS possession of the applicant and thus, he cannot claim exclusive and notorious
possession under the claim of ownership, nor can he support his claim of title
FACTS: through acquisitive prescription. A positive act of government is needed to convert
forest land into alienable or disposable land. Possession of forest lands, which are
Petittioner Francisco Zarate applied for registration of title of 3 parcels of land in incapable of private appropriation, no matter how long cannot ripen into private
Tangalan, Aklan. He claims that he bought the land from Josefino Tirol, who ownership.
inherited the same from Ignacio Tirol. There were different oppositors to his
application
SECRETARY OF DENR VS YAP
ISSUE: Natural Resources and Environmental Laws: Regalian Doctrine
GR No. 167707; Oct 8, 2008
WON subject parcels of land are registrable under petitioner’s name. Petitioner: FACTS:
Geodetic Engineer’s testimony and certification show that the subject propertyis
alienable and disposable.Respondent Preciosa Tirol Davila: She is the daughter of This petition is for a review on certiorari of the decision of the Court of Appeals
Ignacio Tirol. She opposed saying that the land was not donated by his father to (CA) affirming that of the Regional Trial Court (RTC) in Kalibo Aklan, which
Josefino. granted the petition for declaratory relief filed by respondents-claimants Mayor Jose
Yap et al, and ordered the survey of Boracay for titling purposes.
Respondent DBP:
On Nov. 10, 1978, President Marcos issued Proclamation No. 1801 declaring
The lots are owned by spouses Molo and was mortgaged to them. When the Boracay Island as a tourist zone and marine reserve. Claiming that Proc. No. 1801
mortgage was foreclosed, the land became the bank’s property precluded them from filing an application for a judicial confirmation of imperfect
title or survey of land for titling purposes, respondents-claimants filed a petition for
Respondents Toriaga: declaratory relief with the RTC in Kalibo, Aklan.

Page 11 of 15
The Republic, through the Office of the Solicitor General (OSG) opposed the of maximizing their utilization and hastening their... development consistent with
petition countering that Boracay Island was an unclassified land of the public public interest.
domain. It formed part of the mass of lands classified as “public forest,” which was
not available for disposition pursuant to section 3(a) of PD No. 705 or the Revised On February 14, 1979, by virtue of Executive Order (E.O.) No. 525 issued by then
Forestry Code. President Ferdinand Marcos, PEA was designated as the agency primarily
responsible for integrating, directing and coordinating all reclamation projects for
ISSUE: and on behalf of the National

Whether unclassified lands of the public domain are automatically deemed Government.
agricultural land, therefore making these lands alienable. On October 26, 2004, then President Gloria Macapagal-Arroyo issued E.O. No. 380
transforming PEA into PRA, which shall perform all the powers and functions of the
HELD: PEA relating to reclamation activities.
No. To prove that the land subject of an application for registration is alienable, the By virtue of its mandate, PRA reclaimed several portions of the foreshore and
applicant must establish the existence of a positive act of the government such as a offshore areas of Manila Bay, including those located in Parañaque City, and was
presidential proclamation or an executive order, an administrative action, issued Original Certificates of Title (OCT Nos. 180, 202, 206, 207, 289, 557, and
investigative reports of the Bureau of Lands investigators, and a legislative act or 559) and Transfer Certificates of
statute.
Title (TCT Nos. 104628, 7312, 7309, 7311, 9685, and 9686) over the reclaimed
A positive act declaring land as alienable and disposable is required. In keeping with lands.
the presumption of state ownership, the Court has time and again emphasized that
there must be a positive act of the government, such as an official proclamation, On February 19, 2003, then Parañaque City Treasurer Liberato M. Carabeo
declassifying inalienable public land into disposable land for agricultural or other (Carabeo) issued Warrants of Levy on PRA's reclaimed properties (Central Business
purposes. Park and Barangay San Dionisio) located in Parañaque City based on the assessment
for delinquent real property... taxes made by then Parañaque City Assessor Soledad
The Regalian Doctrine dictates that all lands of the public domain belong to the Medina Cue for tax years 2001 and 2002.
State, that the State is the source of any asserted right to ownership of land and
On January 8, 2010, the RTC rendered its decision dismissing PRA's petition. In
charged with the conservation of such patrimony.
ruling that PRA was not exempt from payment of real property taxes, the RTC
All lands not otherwise appearing to be clearly within private ownership are reasoned out that it was a GOCC under Section 3 of P.D. No. 1084. It was organized
presumed to belong to the State. Thus, all lands that have not been acquired from the as a stock corporation because it had an... authorized capital stock divided into no
government, either by purchase or by grant, belong to the State as part of the par value shares. In fact, PRA admitted its corporate personality and that said
inalienable public domain. properties were registered in its name as shown by the certificates of title. Therefore,
as a GOCC, local tax exemption is withdrawn by virtue of Section 193... of Republic
Act (R.A.) No. 7160 [Local Government Code (LGC)] which was the prevailing law
REPUBLIC v. CITY OF PARAÑAQUE, GR No. 191109, 2012-07-18 in 2001 and 2002 with respect to real property taxation. The RTC also ruled that the
FACTS: tax exemption claimed by PRA under E.O. No. 654 had already been expressly
repealed by R.A. No.
The Public Estates Authority (PEA) is a government corporation created by virtue of
Presidential Decree (P.D.) No. 1084 (Creating the Public Estates Authority, 7160 and that PRA failed to comply with the procedural requirements in Section 206
Defining its Powers and Functions, Providing Funds Therefor and For Other thereof.
Purposes) which took... effect on February 4, 1977 to provide a coordinated, PRA asserts that it is not a GOCC under Section 2(13) of the Introductory
economical and efficient reclamation of lands, and the administration and operation Provisions of the Administrative Code. Neither is it a GOCC under Section 16,
of lands belonging to, managed and/or operated by, the government with the object Article XII of the 1987 Constitution because it is not required to meet the test of
economic viability. Instead, PRA is a... government instrumentality vested with

Page 12 of 15
corporate powers and performing an essential public service pursuant to Section THE TRIAL COURT GRAVELY ERRED IN FAILING TO CONSIDER THAT
2(10) of the Introductory Provisions of the Administrative Code. Although it has a RECLAIMED LANDS ARE PART OF THE PUBLIC DOMAIN AND, HENCE,
capital stock divided into shares, it is not authorized to distribute... dividends and EXEMPT FROM REAL PROPERTY TAX.
allotment of surplus and profits to its stockholders. Therefore, it may not be
classified as a stock corporation because it lacks the second requisite of a stock RULING:
corporation which is the distribution of dividends and allotment of surplus and
The Court finds merit in the petition.
profits to the... stockholders.
In the case at bench, PRA is not a GOCC because it is neither a stock nor a non-
It insists that it may not be classified as a non-stock corporation because it has no
stock corporation. It cannot be considered as a stock corporation because although it
members and it is not organized for charitable, religious, educational, professional,
has a capital stock divided into no par value shares as provided in Section 7... of
cultural, recreational, fraternal, literary, scientific, social, civil service, or similar
P.D.
purposes, like... trade, industry, agriculture and like chambers as provided in Section
88 of the Corporation Code. No. 1084, it is not authorized to distribute dividends, surplus allotments or profits to
stockholders. There is no provision whatsoever in P.D. No. 1084 or in any of the
Moreover, PRA points out that it was not created to compete in the market place as
subsequent executive issuances pertaining to PRA, particularly, E.O. No. 525,...
there was no competing reclamation company operated by the private sector. Also,
E.O.
while PRA is vested with corporate powers under P.D. No. 1084, such circumstance
does not make it a corporation but... merely an incorporated instrumentality and that No. 654... and EO No. 798... that authorizes PRA to distribute dividends, surplus
the mere fact that an incorporated instrumentality of the National Government holds allotments or profits to its stockholders.
title to real property does not make said instrumentality a GOCC. Section 48,
Chapter 12, Book I of the Administrative Code of 1987 recognizes a... scenario PRA cannot be considered a non-stock corporation either because it does not have
where a piece of land owned by the Republic is titled in the name of a department, members. A non-stock corporation must have members.
agency or instrumentality.
Moreover, it was not organized for any of the purposes mentioned in Section 88 of
Thus, PRA insists that, as an incorporated instrumentality of the National the Corporation Code. Specifically, it... was created to manage all government
Government, it is exempt from payment of real property tax except when the reclamation projects.
beneficial use of the real property is granted to a taxable person. PRA claims that
based on Section 133(o) of the LGC, local... governments cannot tax the national Likewise, it is worthy to mention Section 14, Chapter 4, Title I, Book III of the
government which delegate to local governments the power to tax. Administrative Code of 1987, thus:

It explains that reclaimed lands are part of the public domain, owned by the State, SEC 14. Power to Reserve Lands of the Public and Private Dominion of the
thus, exempt from the payment of real estate taxes. Reclaimed lands retain their Government.-
inherent potential as areas for public use or public service. While the subject
reclaimed lands are still in its... hands, these lands remain public lands and form part (1) The President shall have the power to reserve for settlement or public use, and
of the public domain. Hence, the assessment of real property taxes made on said for specific public purposes, any of the lands of the public domain, the use of which
lands, as well as the levy thereon, and the public sale thereof on April 7, 2003, is not otherwise directed by law. The reserved land shall thereafter remain subject to
including the issuance of the certificates of sale in favor of... the respondent the specific public... purpose indicated until otherwise provided by law or
Parañaque City, are invalid and of no force and effect. proclamation.

Reclaimed lands such as the subject lands in issue are reserved lands for public use.
ISSUES:
They are properties of public dominion. The ownership of such lands remains with
Whether the Trial Court erred when it failed to consider that reclaimed lands are part the State unless they are withdrawn by law or presidential proclamation from public
of the public domain. use.

Under Section 2, Article XII of the 1987 Constitution, the foreshore and submerged
areas of Manila Bay are part of the "lands of the public domain, waters x x x and

Page 13 of 15
other natural resources" and consequently "owned by the State." As such, foreshore HELD:
and submerged areas No. Given the length discussions of questions of law, we would need to dissect
them. The case settles down the correct interpretation of Sec. 14 (1) and (2) of PD
"shall not be alienated," unless they are classified as "agricultural lands" of the 1529 along with CA 141
public domain. The mere reclamation of these areas by PEA does not convert these 1. It should be noted here first that CA 141, particularly Section 48 (b) vests
inalienable natural resources of the State into alienable or disposable lands of the the right to ownership to those who satisfy its prerequisites, while PD
public domain. There must be... a law or presidential proclamation officially 1529 Sec 14 (1) recognizes such rights. One did not repeal the other.
classifying these reclaimed lands as alienable or disposable and open to disposition 2. It is also recognized that the change of the term “alienable and disposable”
or concession. Moreover, these reclaimed lands cannot be classified as alienable or from “agricultural” by PD 1073 did limit the lands to be registered, as we
disposable if the law has reserved them for some public or... quasi-public use. may take a look at Sec. 9 of CA 141.
The Court holds that the correct interpretation for Section 14 (1) is Naguit, not
As the Court has repeatedly ruled, properties of public dominion are not subject to
Herbierto, the latter being only an orbiter dicta to a case where the MTC did not
execution or foreclosure sale.
acquire jurisdiction to settle the original registration. Thus:
Thus, the assessment, levy and foreclosure made on the subject reclaimed lands by 1. The requirement of bona fide ownership since June 12, 1945 is satisfied
respondent, as well as the issuances of certificates of... title in favor of respondent, when at the time of the application, the land is already classified as
are without basis. alienable and disposable. Ad proximum antecedents fiat relation nisi
impediatur sentencia.
PRINCIPLES: 2. A contrary ruling with result to absurdity rendering the presumption of the
right nugatory and the provision inoperative, aggravated by the fact that at
Two requisites must concur before one may be classified as a stock corporation, the time the Philippine is still not an independent state.
namely: (1) that it has capital stock divided into shares; and (2) that it is authorized 3. The correct interpretation then is that if the State, at the time the
to distribute dividends and allotments of surplus and profits to its stockholders. If application is made, has not yet deemed it proper to release the property
only one... requisite is present, it cannot be properly classified as a stock for alienation or disposition, the presumption is that the government is still
corporation. As for non-stock corporations, they must have members and must not reserving the right to utilize the property; hence, the need to preserve its
distribute any part of their income to said members. ownership in the State irrespective of the length of adverse possession
even if in good faith. If the reverse is true, then there is already an
HEIRS OF MALABANAN VS. REPUBLIC intention on the part of the State to abdicate its exclusive prerogative over
August 6, 2017Light G.R. No. 179987 the property.
FACTS: The Court rules that the interpretation for Sec 14 (2) requires a mix of interpretation
1. On February 20, 1998, Mario Malabanan filed an application for original of Art. 1113, Art. 1137, and Art. 420-422 of the New Civil Code.
registration of title covering a parcel of land in Silang, Cavite which he 1. It is well settled, per Art. 1113, that only objects within the commerce of
purchased from Eduardo Velazco and that he and his predecessors in men and the patrimonial property of the State can be subject to acquisitive
interest had been in open, notorious, exclusive and continuous possession or extraordinary acquisitive prescription.
of the said land for more than 30 years. 2. It is also clear that in Arts. 420-422, the property of public dominion when
2. Velazco, the vendor, alleges that this land was originally owned by his no longer in use, is converted into patrimonial property, if and only if, as
great-grandfather which passed down to his four sons. By 1966, one of the held in Ignacio vs. Director of Lands or Laurel vs. Garcia, there is a
sons became the administrator of the properties which the son of the latter positive act of the executive or legislative declaring lands to be such.
succeeded his parents. One of the properties therein was the one sold by 3. Hence, combining both rulings, it is clear that only when there is a
the Velazco. positive act, regardless if the land was classified as alienable and
1. They also presented an evidence on the classification of land to be disposable, that the land sought to be registered, can be acquired through
alienable and disposable by the DENR on March 15, 1982. prescription.
3. The RTC ruled in favor with them, but the CA reversed citing the case of Applying to the case at bar:
Republic v Hebierto. 1. Sec. 14 (1) is unsatisfied as the earliest tax declarations presented was
ISSUE: 1948. No other substantive evidence was presented.
Whether or not the registration of the property should be allowed

Page 14 of 15
2. Sec. 14 (2) is also unsatisfied as the subject property was declared as
alienable or disposable in 1982, there is no competent evidence that is no
longer intended for public use service or for the development of the
national evidence, conformably with Article 422 of the Civil Code. The
classification of the subject property as alienable and disposable land of
the public domain does not change its status as property of the public
dominion under Article 420(2) of the Civil Code. Thus, it is insusceptible
to acquisition by prescription.
Petition Denied.

Page 15 of 15