LABOR Cases | Atty.
Waldemar Gravador ground that the company had its title to the building registered prior
Importance of classification
1. LEUNG VS. STRONG MACHINERY
2. ANTONIO PUNZALAN, ET. AL. VS. REMEDIOS VDA. DE
LACSAMANAA
3. STANDARD OIL CO. VS. JARANILLO
4. DAVAO SAWMILL CO. VS. CASTILLO
5. BOARD OF ASSESSMENT APPEALS VS. MANILA
ELECTRIC
6. MAKAIT LEASING AND FINANCE CORP VS.
WEAREVER TEXTILE MILLS, INC.
7. MINDANAO BUS COMPANY VS. CITY ASSESSOR
8. CALTEX (PHILIPPINES) INC. VS. CENTRAL BOARD OF
ASSESSMENT APPEALS
9. SERG’S PRODUCTS, INC. & SERGIO TE. GOQUIOLAY
VS. PCI LEASING AND FINANCE INC.
10. TUMALAD VS. VICENCIO
11. PASTOR D. AGO VS. CA, ET. AL.
LEUNG VS. STRONG MACHINERY
CARSON, J.:
The "Compañia Agricola Filipina" bought a considerable quantity of
rice-cleaning machinery company from the defendant machinery
company, and executed a chattel mortgage thereon to secure
payment of the purchase price. It included in the mortgage deed the
building of strong materials in which the machinery was installed,
without any reference to the land on which it stood. The
indebtedness secured by this instrument not having been paid when
it fell due, the mortgaged property was sold by the sheriff, in
pursuance of the terms of the mortgage instrument, and was bought
in by the machinery company. The mortgage was registered in the
chattel mortgage registry, and the sale of the property to the
machinery company in satisfaction of the mortgage was annotated in
the same registry on December 29, 1913.
A few weeks thereafter, on or about the 14th of January, 1914, the
"Compañia Agricola Filipina" executed a deed of sale of the land
upon which the building stood to the machinery company, but this
deed of sale, although executed in a public document, was not
registered. This deed makes no reference to the building erected on
the land and would appear to have been executed for the purpose of
curing any defects which might be found to exist in the machinery
company's title to the building under the sheriff's certificate of sale.
The machinery company went into possession of the building at or
about the time when this sale took place, that is to say, the month of
December, 1913, and it has continued in possession ever since.
At or about the time when the chattel mortgage was executed in
favor of the machinery company, the mortgagor, the "Compañia
Agricola Filipina" executed another mortgage to the plaintiff upon the
building, separate and apart from the land on which it stood, to
secure payment of the balance of its indebtedness to the plaintiff
under a contract for the construction of the building. Upon the failure
of the mortgagor to pay the amount of the indebtedness secured by
the mortgage, the plaintiff secured judgment for that amount, levied
execution upon the building, bought it in at the sheriff's sale on or
about the 18th of December, 1914, and had the sheriff's certificate of
the sale duly registered in the land registry of the Province of Cavite.
At the time when the execution was levied upon the building, the
defendant machinery company, which was in possession, filed with
the sheriff a sworn statement setting up its claim of title and
demanding the release of the property from the levy. Thereafter,
upon demand of the sheriff, the plaintiff executed an indemnity bond
in favor of the sheriff in the sum of P12,000, in reliance upon which
the sheriff sold the property at public auction to the plaintiff, who was
the highest bidder at the sheriff's sale.
This action was instituted by the plaintiff to recover possession of the
building from the machinery company.
The trial judge, relying upon the terms of article 1473 of the Civil
Code, gave judgment in favor of the machinery company, on the
to the date of registry of the plaintiff's certificate.
Article 1473 of the Civil Code is as follows:
If the same thing should have been sold to different
vendees, the ownership shall be transfer to the person
who may have the first taken possession thereof in good
faith, if it should be personal property.
Should it be real property, it shall belong to the person
acquiring it who first recorded it in the registry.
Should there be no entry, the property shall belong to the
person who first took possession of it in good faith, and, in
the absence thereof, to the person who presents the
oldest title, provided there is good faith.
The registry her referred to is of course the registry of real property,
and it must be apparent that the annotation or inscription of a deed
of sale of real property in a chattel mortgage registry cannot be given
the legal effect of an inscription in the registry of real property. By its
express terms, the Chattel Mortgage Law contemplates and makes
provision for mortgages of personal property; and the sole purpose
and object of the chattel mortgage registry is to provide for the
registry of "Chattel mortgages," that is to say, mortgages of personal
property executed in the manner and form prescribed in the statute.
The building of strong materials in which the rice-cleaning machinery
was installed by the "Compañia Agricola Filipina" was real property,
and the mere fact that the parties seem to have dealt with it separate
and apart from the land on which it stood in no wise changed its
character as real property. It follows that neither the original registry
in the chattel mortgage of the building and the machinery installed
therein, not the annotation in that registry of the sale of the
mortgaged property, had any effect whatever so far as the building
was concerned.
We conclude that the ruling in favor of the machinery company
cannot be sustained on the ground assigned by the trial judge. We
are of opinion, however, that the judgment must be sustained on the
ground that the agreed statement of facts in the court below
discloses that neither the purchase of the building by the plaintiff nor
his inscription of the sheriff's certificate of sale in his favor was made
in good faith, and that the machinery company must be held to be
the owner of the property under the third paragraph of the above
cited article of the code, it appearing that the company first took
possession of the property; and further, that the building and the
land were sold to the machinery company long prior to the date of
the sheriff's sale to the plaintiff.
It has been suggested that since the provisions of article 1473 of the
Civil Code require "good faith," in express terms, in relation to
"possession" and "title," but contain no express requirement as to
"good faith" in relation to the "inscription" of the property on the
registry, it must be presumed that good faith is not an essential
requisite of registration in order that it may have the effect
contemplated in this article. We cannot agree with this contention. It
could not have been the intention of the legislator to base the
preferential right secured under this article of the code upon an
inscription of title in bad faith. Such an interpretation placed upon the
language of this section would open wide the door to fraud and
collusion. The public records cannot be converted into instruments of
fraud and oppression by one who secures an inscription therein in
bad faith. The force and effect given by law to an inscription in a
public record presupposes the good faith of him who enters such
inscription; and rights created by statute, which are predicated upon
an inscription in a public registry, do not and cannot accrue under an
inscription "in bad faith," to the benefit of the person who thus makes
the inscription.
Construing the second paragraph of this article of the code, the
supreme court of Spain held in its sentencia of the 13th of May,
1908, that:
This rule is always to be understood on the basis of the
good faith mentioned in the first paragraph; therefore, it
having been found that the second purchasers who record
their purchase had knowledge of the previous sale, the
question is to be decided in accordance with the following
1
 paragraph. (Note 2, art. 1473, Civ. Code, Medina and
Maranon [1911] edition.)
Although article 1473, in its second paragraph, provides
that the title of conveyance of ownership of the real
property that is first recorded in the registry shall have
preference, this provision must always be understood on
the basis of the good faith mentioned in the first
paragraph; the legislator could not have wished to strike it
out and to sanction bad faith, just to comply with a mere
formality which, in given cases, does not obtain even in
real disputes between third persons. (Note 2, art. 1473,
Civ. Code, issued by the publishers of the La Revista de
los Tribunales, 13th edition.)
The agreed statement of facts clearly discloses that the plaintiff,
when he bought the building at the sheriff's sale and inscribed his
title in the land registry, was duly notified that the machinery
company had bought the building from plaintiff's judgment debtor;
that it had gone into possession long prior to the sheriff's sale; and
that it was in possession at the time when the sheriff executed his
levy. The execution of an indemnity bond by the plaintiff in favor of
the sheriff, after the machinery company had filed its sworn claim of
ownership, leaves no room for doubt in this regard. Having bought in
the building at the sheriff's sale with full knowledge that at the time of
the levy and sale the building had already been sold to the
machinery company by the judgment debtor, the plaintiff cannot be
said to have been a purchaser in good faith; and of course, the
subsequent inscription of the sheriff's certificate of title must be held
to have been tainted with the same defect.
Perhaps we should make it clear that in holding that the inscription of
the sheriff's certificate of sale to the plaintiff was not made in good
faith, we should not be understood as questioning, in any way, the
good faith and genuineness of the plaintiff's claim against the
"Compañia Agricola Filipina." The truth is that both the plaintiff and
the defendant company appear to have had just and righteous
claims against their common debtor. No criticism can properly be
made of the exercise of the utmost diligence by the plaintiff in
asserting and exercising his right to recover the amount of his claim
from the estate of the common debtor. We are strongly inclined to
believe that in procuring the levy of execution upon the factory
building and in buying it at the sheriff's sale, he considered that he
was doing no more than he had a right to do under all the
circumstances, and it is highly possible and even probable that he
thought at that time that he would be able to maintain his position in
a contest with the machinery company. There was no collusion on
his part with the common debtor, and no thought of the perpetration
of a fraud upon the rights of another, in the ordinary sense of the
word. He may have hoped, and doubtless he did hope, that the title
of the machinery company would not stand the test of an action in a
court of law; and if later developments had confirmed his unfounded
hopes, no one could question the legality of the propriety of the
course he adopted.
But it appearing that he had full knowledge of the machinery
company's claim of ownership when he executed the indemnity bond
and bought in the property at the sheriff's sale, and it appearing
further that the machinery company's claim of ownership was well
founded, he cannot be said to have been an innocent purchaser for
value. He took the risk and must stand by the consequences; and it
is in this sense that we find that he was not a purchaser in good
faith.
One who purchases real estate with knowledge of a defect or lack of
title in his vendor cannot claim that he has acquired title thereto in
good faith as against the true owner of the land or of an interest
therein; and the same rule must be applied to one who has
knowledge of facts which should have put him upon such inquiry and
investigation as might be necessary to acquaint him with the defects
in the title of his vendor. A purchaser cannot close his eyes to facts
which should put a reasonable man upon his guard, and then claim
that he acted in good faith under the belief that there was no defect
in the title of the vendor. His mere refusal to believe that such defect
exists, or his willful closing of his eyes to the possibility of the
existence of a defect in his vendor's title, will not make him an
innocent purchaser for value, if afterwards develops that the title was
in fact defective, and it appears that he had such notice of the
defects as would have led to its discovery had he acted with that
measure of precaution which may reasonably be acquired of a
prudent man in a like situation. Good faith, or lack of it, is in its
analysis a question of intention; but in ascertaining the intention by
which one is actuated on a given occasion, we are necessarily
controlled by the evidence as to the conduct and outward acts by
which alone the inward motive may, with safety, be determined. So it
is that "the honesty of intention," "the honest lawful intent," which
constitutes good faith implies a "freedom from knowledge and
circumstances which ought to put a person on inquiry," and so it is
that proof of such knowledge overcomes the presumption of good
faith in which the courts always indulge in the absence of proof to
the contrary. "Good faith, or the want of it, is not a visible, tangible
fact that can be seen or touched, but rather a state or condition of
mind which can only be judged of by actual or fancied tokens or
signs." (Wilder vs. Gilman, 55 Vt., 504, 505; Cf. Cardenas Lumber
Co. vs. Shadel, 52 La. Ann., 2094-2098; Pinkerton Bros.
Co. vs. Bromley, 119 Mich., 8, 10, 17.)
We conclude that upon the grounds herein set forth the disposing
part of the decision and judgment entered in the court below should
be affirmed with costs of this instance against the appellant. So
ordered.
ANTONIO PUNZALAN, ET. AL. VS. REMEDIOS VDA. DE
LACSAMANA
MELENCIO-HERRERA, J.:
The sole issue presented by petitioner for resolution is whether or
not respondent Court erred in denying the Motion to Set Case for
Pre-trial with respect to respondent Remedios Vda. de Lacsamana
as the case had been dismissed on the ground of improper venue
upon motion of co-respondent Philippine National Bank (PNB).
It appears that petitioner, Antonio Punsalan, Jr., was the former
registered owner of a parcel of land consisting of 340 square meters
situated in Bamban, Tarlac. In 1963, petitioner mortgaged said land
to respondent PNB (Tarlac Branch) in the amount of P10,000.00, but
for failure to pay said amount, the property was foreclosed on
December 16, 1970. Respondent PNB (Tarlac Branch) was the
highest bidder in said foreclosure proceedings. However, the bank
secured title thereto only on December 14, 1977.
In the meantime, in 1974, while the properly was still in the alleged
possession of petitioner and with the alleged acquiescence of
respondent PNB (Tarlac Branch), and upon securing a permit from
the Municipal Mayor, petitioner constructed a warehouse on said
property. Petitioner declared said warehouse for tax purposes for
which he was issued Tax Declaration No. 5619. Petitioner then
leased the warehouse to one Hermogenes Sibal for a period of 10
years starting January 1975.
On July 26, 1978, a Deed of Sale was executed between respondent
PNB (Tarlac Branch) and respondent Lacsamana over the property.
This contract was amended on July 31, 1978, particularly to include
in the sale, the building and improvement thereon. By virtue of said
instruments, respondent - Lacsamana secured title over the property
in her name (TCT No. 173744) as well as separate tax declarations
for the land and building. 1
On November 22, 1979, petitioner commenced suit for "Annulment
of Deed of Sale with Damages" against herein respondents PNB and
Lacsamana before respondent Court of First Instance of Rizal,
Branch XXXI, Quezon City, essentially impugning the validity of the
sale of the building as embodied in the Amended Deed of Sale. In
this connection, petitioner alleged:
xxx xxx xxx
22. That defendant, Philippine National Bank, through its
Branch Manager ... by virtue of the request of defendant ...
executed a document dated July 31, 1978, entitled
Amendment to Deed of Absolute Sale ... wherein said
defendant bank as Vendor sold to defendant Lacsamana
the building owned by the plaintiff under Tax Declaration
No. 5619, notwithstanding the fact that said building is not
owned by the bank either by virtue of the public auction
sale conducted by the Sheriff and sold to the Philippine
National Bank or by virtue of the Deed of Sale executed by
the bank itself in its favor on September 21, 1977 ...;
2
 23. That said defendant bank fraudulently mentioned ...
that the sale in its favor should likewise have included the
building, notwithstanding no legal basis for the same and
despite full knowledge that the Certificate of Sale executed
by the sheriff in its favor ... only limited the sale to the land,
hence, by selling the building which never became the
property of defendant, they have violated the principle
against 'pactum commisorium'.
Petitioner prayed that the Deed of Sale of the building in favor of
respondent Lacsamana be declared null and void and that damages
in the total sum of P230,000.00, more or less, be awarded to him. 2
In her Answer filed on March 4, 1980,-respondent Lacsamana
averred the affirmative defense of lack of cause of action in that she
was a purchaser for value and invoked the principle in Civil Law that
the "accessory follows the principal".3
On March 14, 1980, respondent PNB filed a Motion to Dismiss on
the ground that venue was improperly laid considering that the
building was real property under article 415 (1) of the New Civil
Code and therefore section 2(a) of Rule 4 should apply. 4
Opposing said Motion to Dismiss, petitioner contended that the
action for annulment of deed of sale with damages is in the nature of
a personal action, which seeks to recover not the title nor
possession of the property but to compel payment of damages,
which is not an action affecting title to real property.
On April 25, 1980, respondent Court granted respondent PNB's
Motion to Dismiss as follows:
Acting upon the 'Motion to Dismiss' of the defendant
Philippine National Bank dated March 13, 1980,
considered against the plaintiff's opposition thereto dated
April 1, 1980, including the reply therewith of said
defendant, this Court resolves to DISMISS the plaintiff's
complaint for improper venue considering that the
plaintiff's complaint which seeks for the declaration as null
and void, the amendment to Deed of Absolute Sale
executed by the defendant Philippine National Bank in
favor of the defendant Remedios T. Vda. de Lacsamana,
on July 31, 1978, involves a warehouse allegedly owned
and constructed by the plaintiff on the land of the
defendant Philippine National Bank situated in the
Municipality of Bamban, Province of Tarlac, which
warehouse is an immovable property pursuant to Article
415, No. 1 of the New Civil Code; and, as such the action
of the plaintiff is a real action affecting title to real property
which, under Section 2, Rule 4 of the New Rules of Court,
must be tried in the province where the property or any
part thereof lies.5
In his Motion for Reconsideration of the aforestated Order, petitioner
reiterated the argument that the action to annul does not involve
ownership or title to property but is limited to the validity of the deed
of sale and emphasized that the case should proceed with or without
respondent PNB as respondent Lacsamana had already filed her
Answer to the Complaint and no issue on venue had been raised by
the latter.
On September 1, 1980,.respondent Court denied reconsideration for
lack of merit.
Petitioner then filed a Motion to Set Case for Pre-trial, in so far as
respondent Lacsamana was concerned, as the issues had already
been joined with the filing of respondent Lacsamana's Answer.
In the Order of November 10, 1980 respondent Court denied said
Motion to Set Case for Pre-trial as the case was already dismissed
in the previous Orders of April 25, 1980 and September 1, 1980.
Hence, this Petition for Certiorari, to which we gave due course.
We affirm respondent Court's Order denying the setting for pre-trial.
The warehouse claimed to be owned by petitioner is an immovable
or real property as provided in article 415(l) of the Civil
Code. 6 Buildings are always immovable under the Code. 7 A
building treated separately from the land on which it stood is
immovable property and the mere fact that the parties to a contract
seem to have dealt with it separate and apart from the land on which
it stood in no wise changed its character as immovable property. 8
While it is true that petitioner does not directly seek the recovery of
title or possession of the property in question, his action for
annulment of sale and his claim for damages are closely intertwined
with the issue of ownership of the building which, under the law, is
considered immovable property, the recovery of which is petitioner's
primary objective. The prevalent doctrine is that an action for the
annulment or rescission of a sale of real property does not operate
to efface the fundamental and prime objective and nature of the
case, which is to recover said real property. It is a real action. 9
Respondent Court, therefore, did not err in dismissing the case on
the ground of improper venue (Section 2, Rule 4) 10, which was
timely raised (Section 1, Rule 16) 11.
Petitioner's other contention that the case should proceed in so far
as respondent Lacsamana is concerned as she had already filed an
Answer, which did not allege improper venue and, therefore, issues
had already been joined, is likewise untenable. Respondent PNB is
an indispensable party as the validity of the Amended Contract of
Sale between the former and respondent Lacsamana is in issue. It
would, indeed, be futile to proceed with the case against respondent
Lacsamana alone.
WHEREFORE, the petition is hereby denied without prejudice to the
refiling of the case by petitioner Antonio Punsalan, Jr. in the proper
forum.
Costs against petitioner.
SO ORDERED.
STANDARD OIL CO. VS. JARANILLO
STREET, J.:
This cause is before us upon demurrer interposed by the
respondent, Joaquin Jaramillo, register of deeds of the City of
Manila, to an original petition of the Standard Oil Company of New
York, seeking a peremptory mandamus to compel the respondent to
record in the proper register a document purporting to be a chattel
mortgage executed in the City of Manila by Gervasia de la Rosa,
Vda. de Vera, in favor of the Standard Oil Company of New York.
It appears from the petition that on November 27, 1922, Gervasia de
la Rosa, Vda. de Vera, was the lessee of a parcel of land situated in
the City of Manila and owner of the house of strong materials built
thereon, upon which date she executed a document in the form of a
chattel mortgage, purporting to convey to the petitioner by way of
mortgage both the leasehold interest in said lot and the building
which stands thereon.
The clauses in said document describing the property intended to be
thus mortgage are expressed in the following words:
Now, therefore, the mortgagor hereby conveys and
transfer to the mortgage, by way of mortgage, the
following described personal property, situated in the City
of Manila, and now in possession of the mortgagor, to wit:
(1) All of the right, title, and interest of the mortgagor in
and to the contract of lease hereinabove referred to, and
in and to the premises the subject of the said lease;
(2) The building, property of the mortgagor, situated on the
aforesaid leased premises.
After said document had been duly acknowledge and delivered, the
petitioner caused the same to be presented to the respondent,
Joaquin Jaramillo, as register of deeds of the City of Manila, for the
purpose of having the same recorded in the book of record of chattel
mortgages. Upon examination of the instrument, the respondent was
of the opinion that it was not a chattel mortgage, for the reason that
the interest therein mortgaged did not appear to be personal
property, within the meaning of the Chattel Mortgage Law, and
registration was refused on this ground only.
3
We are of the opinion that the position taken by the respondent is upon the document by the petitioner and to register it, upon payment
untenable; and it is his duty to accept the proper fee and place the of the proper fee.
instrument on record. The duties of a register of deeds in respect to
the registration of chattel mortgage are of a purely ministerial The demurrer is overruled; and unless within the period of five days
character; and no provision of law can be cited which confers upon from the date of the notification hereof, the respondent shall
him any judicial or quasi-judicial power to determine the nature of interpose a sufficient answer to the petition, the writ
any document of which registration is sought as a chattel mortgage. of mandamus will be issued, as prayed, but without costs. So
ordered.
The original provisions touching this matter are contained in section
15 of the Chattel Mortgage Law (Act No. 1508), as amended by Act
No. 2496; but these have been transferred to section 198 of the
Administrative Code, where they are now found. There is nothing in DAVAO SAWMILL CO. VS. CASTILLO
any of these provisions conferring upon the register of deeds any
authority whatever in respect to the "qualification," as the term is MALCOLM, J.:
used in Spanish law, of chattel mortgage. His duties in respect to
such instruments are ministerial only. The efficacy of the act of
The issue in this case, as announced in the opening sentence of the
recording a chattel mortgage consists in the fact that it operates as
decision in the trial court and as set forth by counsel for the parties
constructive notice of the existence of the contract, and the legal
on appeal, involves the determination of the nature of the properties
effects of the contract must be discovered in the instrument itself in
described in the complaint. The trial judge found that those
relation with the fact of notice. Registration adds nothing to the
properties were personal in nature, and as a consequence absolved
instrument, considered as a source of title, and affects nobody's
the defendants from the complaint, with costs against the plaintiff.
rights except as a specifies of notice.
The Davao Saw Mill Co., Inc., is the holder of a lumber concession
Articles 334 and 335 of the Civil Code supply no absolute criterion
from the Government of the Philippine Islands. It has operated a
for discriminating between real property and personal property for
sawmill in the sitio of Maa, barrio of Tigatu, municipality of Davao,
purpose of the application of the Chattel Mortgage Law. Those
Province of Davao. However, the land upon which the business was
articles state rules which, considered as a general doctrine, are law
conducted belonged to another person. On the land the sawmill
in this jurisdiction; but it must not be forgotten that under given
company erected a building which housed the machinery used by it.
conditions property may have character different from that imputed
Some of the implements thus used were clearly personal property,
to it in said articles. It is undeniable that the parties to a contract may
the conflict concerning machines which were placed and mounted
by agreement treat as personal property that which by nature would
on foundations of cement. In the contract of lease between the
be real property; and it is a familiar phenomenon to see things
sawmill company and the owner of the land there appeared the
classed as real property for purposes of taxation which on general
following provision:
principle might be considered personal property. Other situations are
constantly arising, and from time to time are presented to this court,
in which the proper classification of one thing or another as real or That on the expiration of the period agreed upon, all the
personal property may be said to be doubtful. improvements and buildings introduced and erected by the
party of the second part shall pass to the exclusive
ownership of the party of the first part without any
The point submitted to us in this case was determined on September
obligation on its part to pay any amount for said
8, 1914, in an administrative ruling promulgated by the Honorable
improvements and buildings; also, in the event the party of
James A. Ostrand, now a Justice of this Court, but acting at that time
the second part should leave or abandon the land leased
in the capacity of Judge of the fourth branch of the Court of First
before the time herein stipulated, the improvements and
Instance of the Ninth Judicial District, in the City of Manila; and little
buildings shall likewise pass to the ownership of the party
of value can be here added to the observations contained in said
of the first part as though the time agreed upon had
ruling. We accordingly quote therefrom as follows:
expired: Provided, however, That the machineries and
accessories are not included in the improvements which
It is unnecessary here to determine whether or not the will pass to the party of the first part on the expiration or
property described in the document in question is real or abandonment of the land leased.
personal; the discussion may be confined to the point as
to whether a register of deeds has authority to deny the
In another action, wherein the Davao Light & Power Co., Inc., was
registration of a document purporting to be a chattel
the plaintiff and the Davao, Saw, Mill Co., Inc., was the defendant, a
mortgage and executed in the manner and form
judgment was rendered in favor of the plaintiff in that action against
prescribed by the Chattel Mortgage Law.
the defendant in that action; a writ of execution issued thereon, and
the properties now in question were levied upon as personalty by the
Then, after quoting section 5 of the Chattel Mortgage Law (Act No. sheriff. No third party claim was filed for such properties at the time
1508), his Honor continued: of the sales thereof as is borne out by the record made by the
plaintiff herein. Indeed the bidder, which was the plaintiff in that
Based principally upon the provisions of section quoted action, and the defendant herein having consummated the sale,
the Attorney-General of the Philippine Islands, in an proceeded to take possession of the machinery and other properties
opinion dated August 11, 1909, held that a register of described in the corresponding certificates of sale executed in its
deeds has no authority to pass upon the capacity of the favor by the sheriff of Davao.
parties to a chattel mortgage which is presented to him for
record. A fortiori a register of deeds can have no authority As connecting up with the facts, it should further be explained that
to pass upon the character of the property sought to be the Davao Saw Mill Co., Inc., has on a number of occasions treated
encumbered by a chattel mortgage. Of course, if the the machinery as personal property by executing chattel mortgages
mortgaged property is real instead of personal the chattel in favor of third persons. One of such persons is the appellee by
mortgage would no doubt be held ineffective as against assignment from the original mortgages.
third parties, but this is a question to be determined by the
courts of justice and not by the register of deeds.
Article 334, paragraphs 1 and 5, of the Civil Code, is in point.
According to the Code, real property consists of —
In Leung Yee vs. Frank L. Strong Machinery Co. and Williamson (37
Phil., 644), this court held that where the interest conveyed is of the
1. Land, buildings, roads and constructions of all kinds
nature of real, property, the placing of the document on record in the
adhering to the soil;
chattel mortgage register is a futile act; but that decision is not
decisive of the question now before us, which has reference to the
function of the register of deeds in placing the document on record. xxx xxx xxx

In the light of what has been said it becomes unnecessary for us to
pass upon the point whether the interests conveyed in the
instrument now in question are real or personal; and we declare it to
be the duty of the register of deeds to accept the estimate placed
5. Machinery, liquid containers, instruments or implements
intended by the owner of any building or land for use in
connection with any industry or trade being carried on
4
 therein and which are expressly adapted to meet the
requirements of such trade of industry.
Appellant emphasizes the first paragraph, and appellees the last
mentioned paragraph. We entertain no doubt that the trial judge and
appellees are right in their appreciation of the legal doctrines flowing
from the facts.
In the first place, it must again be pointed out that the appellant
should have registered its protest before or at the time of the sale of
this property. It must further be pointed out that while not conclusive,
the characterization of the property as chattels by the appellant is
indicative of intention and impresses upon the property the character
determined by the parties. In this connection the decision of this
court in the case of Standard Oil Co. of New York vs. Jaramillo (
[1923], 44 Phil., 630), whether obiter dicta or not, furnishes the key
to such a situation.
It is, however not necessary to spend overly must time in the
resolution of this appeal on side issues. It is machinery which is
involved; moreover, machinery not intended by the owner of any
building or land for use in connection therewith, but intended by a
lessee for use in a building erected on the land by the latter to be
returned to the lessee on the expiration or abandonment of the
lease.
A similar question arose in Puerto Rico, and on appeal being taken
to the United States Supreme Court, it was held that machinery
which is movable in its nature only becomes immobilized when
placed in a plant by the owner of the property or plant, but not when
so placed by a tenant, a usufructuary, or any person having only a
temporary right, unless such person acted as the agent of the owner.
In the opinion written by Chief Justice White, whose knowledge of
the Civil Law is well known, it was in part said:
To determine this question involves fixing the nature and
character of the property from the point of view of the
rights of Valdes and its nature and character from the
point of view of Nevers & Callaghan as a judgment
creditor of the Altagracia Company and the rights derived
by them from the execution levied on the machinery
placed by the corporation in the plant. Following the Code
Napoleon, the Porto Rican Code treats as immovable
(real) property, not only land and buildings, but also
attributes immovability in some cases to property of a
movable nature, that is, personal property, because of the
destination to which it is applied. "Things," says section
334 of the Porto Rican Code, "may be immovable either
by their own nature or by their destination or the object to
which they are applicable." Numerous illustrations are
given in the fifth subdivision of section 335, which is as
follows: "Machinery, vessels, instruments or implements
intended by the owner of the tenements for the industrial
or works that they may carry on in any building or upon
any land and which tend directly to meet the needs of the
said industry or works." (See also Code Nap., articles 516,
518 et seq. to and inclusive of article 534, recapitulating
the things which, though in themselves movable, may be
immobilized.) So far as the subject-matter with which we
are dealing — machinery placed in the plant — it is plain,
both under the provisions of the Porto Rican Law and of
the Code Napoleon, that machinery which is movable in its
nature only becomes immobilized when placed in a plant
by the owner of the property or plant. Such result would
not be accomplished, therefore, by the placing of
machinery in a plant by a tenant or a usufructuary or any
person having only a temporary right. (Demolombe, Tit. 9,
No. 203; Aubry et Rau, Tit. 2, p. 12, Section 164; Laurent,
Tit. 5, No. 447; and decisions quoted in Fuzier-Herman ed.
Code Napoleon under articles 522 et seq.) The distinction
rests, as pointed out by Demolombe, upon the fact that
one only having a temporary right to the possession or
enjoyment of property is not presumed by the law to have
applied movable property belonging to him so as to
deprive him of it by causing it by an act of immobilization
to become the property of another. It follows that
abstractly speaking the machinery put by the Altagracia
Company in the plant belonging to Sanchez did not lose
its character of movable property and become immovable
by destination. But in the concrete immobilization took
place because of the express provisions of the lease
under which the Altagracia held, since the lease in
substance required the putting in of improved machinery,
deprived the tenant of any right to charge against the
lessor the cost such machinery, and it was expressly
stipulated that the machinery so put in should become a
part of the plant belonging to the owner without
compensation to the lessee. Under such conditions the
tenant in putting in the machinery was acting but as the
agent of the owner in compliance with the obligations
resting upon him, and the immobilization of the machinery
which resulted arose in legal effect from the act of the
owner in giving by contract a permanent destination to the
machinery.
xxx xxx xxx
The machinery levied upon by Nevers & Callaghan, that
is, that which was placed in the plant by the Altagracia
Company, being, as regards Nevers & Callaghan,
movable property, it follows that they had the right to levy
on it under the execution upon the judgment in their favor,
and the exercise of that right did not in a legal sense
conflict with the claim of Valdes, since as to him the
property was a part of the realty which, as the result of his
obligations under the lease, he could not, for the purpose
of collecting his debt, proceed separately against.
(Valdes vs. Central Altagracia [192], 225 U.S., 58.)
Finding no reversible error in the record, the judgment appealed
from will be affirmed, the costs of this instance to be paid by the
appellant.
BOARD OF ASSESSMENT APPEALS VS. MANILA ELECTRIC
PAREDES, J.:
From the stipulation of facts and evidence adduced during the
hearing, the following appear:
On October 20, 1902, the Philippine Commission enacted Act No.
484 which authorized the Municipal Board of Manila to grant a
franchise to construct, maintain and operate an electric street railway
and electric light, heat and power system in the City of Manila and its
suburbs to the person or persons making the most favorable bid.
Charles M. Swift was awarded the said franchise on March 1903, the
terms and conditions of which were embodied in Ordinance No. 44
approved on March 24, 1903. Respondent Manila Electric Co.
(Meralco for short), became the transferee and owner of the
franchise.
Meralco's electric power is generated by its hydro-electric plant
located at Botocan Falls, Laguna and is transmitted to the City of
Manila by means of electric transmission wires, running from the
province of Laguna to the said City. These electric transmission
wires which carry high voltage current, are fastened to insulators
attached on steel towers constructed by respondent at intervals,
from its hydro-electric plant in the province of Laguna to the City of
Manila. The respondent Meralco has constructed 40 of these steel
towers within Quezon City, on land belonging to it. A photograph of
one of these steel towers is attached to the petition for review,
marked Annex A. Three steel towers were inspected by the lower
court and parties and the following were the descriptions given there
of by said court:
The first steel tower is located in South Tatalon, España
Extension, Quezon City. The findings were as follows: the
ground around one of the four posts was excavated to a
depth of about eight (8) feet, with an opening of about one
(1) meter in diameter, decreased to about a quarter of a
meter as it we deeper until it reached the bottom of the
post; at the bottom of the post were two parallel steel bars
attached to the leg means of bolts; the tower proper was
attached to the leg three bolts; with two cross metals to
prevent mobility; there was no concrete foundation but
there was adobe stone underneath; as the bottom of the
excavation was covered with water about three inches
high, it could not be determined with certainty to whether
said adobe stone was placed purposely or not, as the
5
 place abounds with this kind of stone; and the tower
carried five high voltage wires without cover or any
insulating materials.
The second tower inspected was located in Kamuning
Road, K-F, Quezon City, on land owned by the petitioner
approximate more than one kilometer from the first tower.
As in the first tower, the ground around one of the four
legs was excavate from seven to eight (8) feet deep and
one and a half (1-½) meters wide. There being very little
water at the bottom, it was seen that there was no
concrete foundation, but there soft adobe beneath. The
leg was likewise provided with two parallel steel bars
bolted to a square metal frame also bolted to each corner.
Like the first one, the second tower is made up of metal
rods joined together by means of bolts, so that by
unscrewing the bolts, the tower could be dismantled and
reassembled.
The third tower examined is located along Kamias Road,
Quezon City. As in the first two towers given above, the
ground around the two legs of the third tower was
excavated to a depth about two or three inches beyond
the outside level of the steel bar foundation. It was found
that there was no concrete foundation. Like the two
previous ones, the bottom arrangement of the legs thereof
were found to be resting on soft adobe, which, probably
due to high humidity, looks like mud or clay. It was also
found that the square metal frame supporting the legs
were not attached to any material or foundation.
On November 15, 1955, petitioner City Assessor of Quezon City
declared the aforesaid steel towers for real property tax under Tax
declaration Nos. 31992 and 15549. After denying respondent's
petition to cancel these declarations, an appeal was taken by
respondent to the Board of Assessment Appeals of Quezon City,
which required respondent to pay the amount of P11,651.86 as real
property tax on the said steel towers for the years 1952 to 1956.
Respondent paid the amount under protest, and filed a petition for
review in the Court of Tax Appeals (CTA for short) which rendered a
decision on December 29, 1958, ordering the cancellation of the said
tax declarations and the petitioner City Treasurer of Quezon City to
refund to the respondent the sum of P11,651.86. The motion for
reconsideration having been denied, on April 22, 1959, the instant
petition for review was filed.
In upholding the cause of respondents, the CTA held that: (1) the
steel towers come within the term "poles" which are declared exempt
from taxes under part II paragraph 9 of respondent's franchise; (2)
the steel towers are personal properties and are not subject to real
property tax; and (3) the City Treasurer of Quezon City is held
responsible for the refund of the amount paid. These are assigned
as errors by the petitioner in the brief.
The tax exemption privilege of the petitioner is quoted hereunder:
PAR 9. The grantee shall be liable to pay the same taxes
upon its real estate, buildings, plant (not including poles,
wires, transformers, and insulators), machinery and
personal property as other persons are or may be
hereafter required by law to pay ... Said percentage shall
be due and payable at the time stated in paragraph
nineteen of Part One hereof, ... and shall be in lieu of all
taxes and assessments of whatsoever nature and by
whatsoever authority upon the privileges, earnings,
income, franchise, and poles, wires, transformers, and
insulators of the grantee from which taxes and
assessments the grantee is hereby expressly exempted.
(Par. 9, Part Two, Act No. 484 Respondent's Franchise;
emphasis supplied.)
The word "pole" means "a long, comparatively slender usually
cylindrical piece of wood or timber, as typically the stem of a small
tree stripped of its branches; also by extension, a similar typically
cylindrical piece or object of metal or the like". The term also refers
to "an upright standard to the top of which something is affixed or by
which something is supported; as a dovecote set on a pole;
telegraph poles; a tent pole; sometimes, specifically a vessel's
master (Webster's New International Dictionary 2nd Ed., p. 1907.)
Along the streets, in the City of Manila, may be seen cylindrical
metal poles, cubical concrete poles, and poles of the PLDT Co.
which are made of two steel bars joined together by an interlacing
metal rod. They are called "poles" notwithstanding the fact that they
are no made of wood. It must be noted from paragraph 9, above
quoted, that the concept of the "poles" for which exemption is
granted, is not determined by their place or location, nor by the
character of the electric current it carries, nor the material or form of
which it is made, but the use to which they are dedicated. In
accordance with the definitions, pole is not restricted to a long
cylindrical piece of wood or metal, but includes "upright standards to
the top of which something is affixed or by which something is
supported. As heretofore described, respondent's steel supports
consists of a framework of four steel bars or strips which are bound
by steel cross-arms atop of which are cross-arms supporting five
high voltage transmission wires (See Annex A) and their sole
function is to support or carry such wires.
The conclusion of the CTA that the steel supports in question are
embraced in the term "poles" is not a novelty. Several courts of last
resort in the United States have called these steel supports "steel
towers", and they denominated these supports or towers, as electric
poles. In their decisions the words "towers" and "poles" were used
interchangeably, and it is well understood in that jurisdiction that a
transmission tower or pole means the same thing.
In a proceeding to condemn land for the use of electric power wires,
in which the law provided that wires shall be constructed upon
suitable poles, this term was construed to mean either wood or metal
poles and in view of the land being subject to overflow, and the
necessary carrying of numerous wires and the distance between
poles, the statute was interpreted to include towers or poles.
(Stemmons and Dallas Light Co. (Tex) 212 S.W. 222, 224; 32-A
Words and Phrases, p. 365.)
The term "poles" was also used to denominate the steel supports or
towers used by an association used to convey its electric power
furnished to subscribers and members, constructed for the purpose
of fastening high voltage and dangerous electric wires alongside
public highways. The steel supports or towers were made of iron or
other metals consisting of two pieces running from the ground up
some thirty feet high, being wider at the bottom than at the top, the
said two metal pieces being connected with criss-cross iron running
from the bottom to the top, constructed like ladders and loaded with
high voltage electricity. In form and structure, they are like the steel
towers in question. (Salt River Valley Users' Ass'n v. Compton, 8 P.
2nd, 249-250.)
The term "poles" was used to denote the steel towers of an electric
company engaged in the generation of hydro-electric power
generated from its plant to the Tower of Oxford and City of
Waterbury. These steel towers are about 15 feet square at the base
and extended to a height of about 35 feet to a point, and are
embedded in the cement foundations sunk in the earth, the top of
which extends above the surface of the soil in the tower of Oxford,
and to the towers are attached insulators, arms, and other
equipment capable of carrying wires for the transmission of electric
power (Connecticut Light and Power Co. v. Oxford, 101 Conn. 383,
126 Atl. p. 1).
In a case, the defendant admitted that the structure on which a
certain person met his death was built for the purpose of supporting
a transmission wire used for carrying high-tension electric power, but
claimed that the steel towers on which it is carried were so large that
their wire took their structure out of the definition of a pole line. It was
held that in defining the word pole, one should not be governed by
the wire or material of the support used, but was considering the
danger from any elevated wire carrying electric current, and that
regardless of the size or material wire of its individual members, any
continuous series of structures intended and used solely or primarily
for the purpose of supporting wires carrying electric currents is a
pole line (Inspiration Consolidation Cooper Co. v. Bryan 252 P.
1016).
It is evident, therefore, that the word "poles", as used in Act No. 484
and incorporated in the petitioner's franchise, should not be given a
restrictive and narrow interpretation, as to defeat the very object for
which the franchise was granted. The poles as contemplated
thereon, should be understood and taken as a part of the electric
power system of the respondent Meralco, for the conveyance of
electric current from the source thereof to its consumers. If the
respondent would be required to employ "wooden poles", or
"rounded poles" as it used to do fifty years back, then one should
6
admit that the Philippines is one century behind the age of space. It
should also be conceded by now that steel towers, like the ones in
question, for obvious reasons, can better effectuate the purpose for
which the respondent's franchise was granted.
Granting for the purpose of argument that the steel supports or
towers in question are not embraced within the termpoles, the logical
question posited is whether they constitute real properties, so that
they can be subject to a real property tax. The tax law does not
provide for a definition of real property; but Article 415 of the Civil
Code does, by stating the following are immovable property:
(1) Land, buildings, roads, and constructions of all
kinds adhered to the soil;
xxx xxx xxx
(3) Everything 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;
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 in a building or on a piece of
land, and which tends directly to meet the needs of the
said industry or works;
xxx xxx xxx
The steel towers or supports in question, do not come within the
objects mentioned in paragraph 1, because they do not constitute
buildings or constructions adhered to the soil. They are not
construction analogous to buildings nor adhering to the soil. As per
description, given by the lower court, they are removable and merely
attached to a square metal frame by means of bolts, which when
unscrewed could easily be dismantled and moved from place to
place. They can not be included under paragraph 3, as they are not
attached to an immovable in a fixed manner, and they can be
separated without breaking the material or causing deterioration
upon the object to which they are attached. Each of these steel
towers or supports consists of steel bars or metal strips, joined
together by means of bolts, which can be disassembled by
unscrewing the bolts and reassembled by screwing the same. These
steel towers or supports do not also fall under paragraph 5, for they
are not machineries, receptacles, instruments or implements, and
even if they were, they are not intended for industry or works on the
land. Petitioner is not engaged in an industry or works in the land in
which the steel supports or towers are constructed.
It is finally contended that the CTA erred in ordering the City
Treasurer of Quezon City to refund the sum of P11,651.86, despite
the fact that Quezon City is not a party to the case. It is argued that
as the City Treasurer is not the real party in interest, but Quezon
City, which was not a party to the suit, notwithstanding its capacity to
sue and be sued, he should not be ordered to effect the refund. This
question has not been raised in the court below, and, therefore, it
cannot be properly raised for the first time on appeal. The herein
petitioner is indulging in legal technicalities and niceties which do not
help him any; for factually, it was he (City Treasurer) whom had
insisted that respondent herein pay the real estate taxes, which
respondent paid under protest. Having acted in his official capacity
as City Treasurer of Quezon City, he would surely know what to do,
under the circumstances.
IN VIEW HEREOF, the decision appealed from is hereby affirmed,
with costs against the petitioners.
MAKATI LEASING AND FINANCE CORP VS. WEAREVER
TEXTILE MILLS, INC.
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.
7
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 in Standard 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.
MINDANAO BUS COMPANY VS. CITY ASSESSOR
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
8
 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.1awphîl.nèt
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.
9

CALTEX (PHILIPPINES) INC. VS. CENTRAL BOARD OF
ASSESSMENT APPEALS
AQUINO, J.:
This case is about the realty tax on machinery and equipment
installed by Caltex (Philippines) Inc. in its gas stations located on
leased land.
The machines and equipment consists of underground tanks,
elevated tank, elevated water tanks, water tanks, gasoline pumps,
computing pumps, water pumps, car washer, car hoists, truck hoists,
air compressors and tireflators. The city assessor described the said
equipment and machinery in this manner:
A gasoline service station is a piece of lot where a building
or shed is erected, a water tank if there is any is placed in
one corner of the lot, car hoists are placed in an adjacent
shed, an air compressor is attached in the wall of the shed
or at the concrete wall fence.
The controversial underground tank, depository of
gasoline or crude oil, is dug deep about six feet more or
less, a few meters away from the shed. This is done to
prevent conflagration because gasoline and other
combustible oil are very inflammable.
This underground tank is connected with a steel pipe to
the gasoline pump and the gasoline pump is commonly
placed or constructed under the shed. The footing of the
pump is a cement pad and this cement pad is imbedded in
the pavement under the shed, and evidence that the
gasoline underground tank is attached and connected to
the shed or building through the pipe to the pump and the
pump is attached and affixed to the cement pad and
pavement covered by the roof of the building or shed.
The building or shed, the elevated water tank, the car hoist
under a separate shed, the air compressor, the
underground gasoline tank, neon lights signboard,
concrete fence and pavement and the lot where they are
all placed or erected, all of them used in the pursuance of
the gasoline service station business formed the entire
gasoline service-station.
As to whether the subject properties are attached and
affixed to the tenement, it is clear they are, for the
tenement we consider in this particular case are (is) the
pavement covering the entire lot which was constructed by
the owner of the gasoline station and the improvement
which holds all the properties under question, they are
attached and affixed to the pavement and to the
improvement.
The pavement covering the entire lot of the gasoline
service station, as well as all the improvements, machines,
equipments and apparatus are allowed by Caltex
(Philippines) Inc. ...
The underground gasoline tank is attached to the shed by
the steel pipe to the pump, so with the water tank it is
connected also by a steel pipe to the pavement, then to
the electric motor which electric motor is placed under the
shed. So to say that the gasoline pumps, water pumps
and underground tanks are outside of the service station,
and to consider only the building as the service station is
grossly erroneous. (pp. 58-60, Rollo).
The said machines and equipment are loaned by Caltex to gas
station operators under an appropriate lease agreement or receipt. It
is stipulated in the lease contract that the operators, upon demand,
shall return to Caltex the machines and equipment in good condition
as when received, ordinary wear and tear excepted.
The lessor of the land, where the gas station is located, does not
become the owner of the machines and equipment installed therein.
Caltex retains the ownership thereof during the term of the lease.
The city assessor of Pasay City characterized the said items of gas
station equipment and machinery as taxable realty. The realty tax on
said equipment amounts to P4,541.10 annually (p. 52, Rollo). The
city board of tax appeals ruled that they are personalty. The
assessor appealed to the Central Board of Assessment Appeals.
The Board, which was composed of Secretary of Finance Cesar
Virata as chairman, Acting Secretary of Justice Catalino Macaraig,
Jr. and Secretary of Local Government and Community
Development Jose Roño, held in its decision of June 3, 1977 that the
said machines and equipment are real property within the meaning
of sections 3(k) & (m) and 38 of the Real Property Tax Code,
Presidential Decree No. 464, which took effect on June 1, 1974, and
that the definitions of real property and personal property in articles
415 and 416 of the Civil Code are not applicable to this case.
The decision was reiterated by the Board (Minister Vicente Abad
Santos took Macaraig's place) in its resolution of January 12, 1978,
denying Caltex's motion for reconsideration, a copy of which was
received by its lawyer on April 2, 1979.
On May 2, 1979 Caltex filed this certiorari petition wherein it prayed
for the setting aside of the Board's decision and for a declaration that
t he said machines and equipment are personal property not subject
to realty tax (p. 16, Rollo).
The Solicitor General's contention that the Court of Tax Appeals has
exclusive appellate jurisdiction over this case is not correct. When
Republic act No. 1125 created the Tax Court in 1954, there was as
yet no Central Board of Assessment Appeals. Section 7(3) of that
law in providing that the Tax Court had jurisdiction to review by
appeal decisions of provincial or city boards of assessment appeals
had in mind the local boards of assessment appeals but not
the Central Board of Assessment Appeals which under the Real
Property Tax Code has appellate jurisdiction over decisions of the
said local boards of assessment appeals and is, therefore, in the
same category as the Tax Court.
Section 36 of the Real Property Tax Code provides that the decision
of the Central Board of Assessment Appeals shall become final and
executory after the lapse of fifteen days from the receipt of its
decision by the appellant. Within that fifteen-day period, a petition for
reconsideration may be filed. The Code does not provide for the
review of the Board's decision by this Court.
Consequently, the only remedy available for seeking a review by this
Court of the decision of the Central Board of Assessment Appeals is
the special civil action of certiorari, the recourse resorted to herein
by Caltex (Philippines), Inc.
The issue is whether the pieces of gas station equipment and
machinery already enumerated are subject to realty tax. This issue
has to be resolved primarily under the provisions of the Assessment
Law and the Real Property Tax Code.
Section 2 of the Assessment Law provides that the realty tax is due
"on real property, including land, buildings, machinery, and other
improvements" not specifically exempted in section 3 thereof. This
provision is reproduced with some modification in the Real Property
Tax Code which provides:
SEC. 38. Incidence of Real Property Tax.— There shall be
levied, assessed and collected in all provinces, cities and
municipalities an annual ad valorem tax on real property,
such as land, buildings, machinery and other
improvements affixed or attached to real property not
hereinafter specifically exempted.
The Code contains the following definitions in its section 3:
k) Improvements — is a valuable addition made to
property or an amelioration in its condition, amounting to
more than mere repairs or replacement of waste, costing
labor or capital and intended to enhance its value, beauty
or utility or to adapt it for new or further purposes.
m) Machinery — shall embrace machines, mechanical
contrivances, instruments, appliances and apparatus
attached to the real estate. It includes the physical
facilities available for production, as well as the
10
 installations and appurtenant service facilities, together
with all other equipment designed for or essential to its
manufacturing, industrial or agricultural purposes (See
sec. 3[f], Assessment Law).
We hold that the said equipment and machinery, as appurtenances
to the gas station building or shed owned by Caltex (as to which it is
subject to realty tax) and which fixtures are necessary to the
operation of the gas station, for without them the gas station would
be useless, and which have been attached or affixed permanently to
the gas station site or embedded therein, are taxable improvements
and machinery within the meaning of the Assessment Law and the
Real Property Tax Code.
Caltex invokes the rule that machinery which is movable in its nature
only becomes immobilized when placed in a plant by the owner of
the property or plant but not when so placed by a tenant, a
usufructuary, or any person having only a temporary right, unless
such person acted as the agent of the owner (Davao Saw Mill Co.
vs. Castillo, 61 Phil 709).
That ruling is an interpretation of paragraph 5 of article 415 of the
Civil Code regarding machinery that becomes real property by
destination. In the Davao Saw Mills case the question was whether
the machinery mounted on foundations of cement and installed by
the lessee on leased land should be regarded as real property
for purposes of execution of a judgment against the lessee. The
sheriff treated the machinery as personal property. This Court
sustained the sheriff's action. (Compare with Machinery &
Engineering Supplies, Inc. vs. Court of Appeals, 96 Phil. 70, where
in a replevin case machinery was treated as realty).
Here, the question is whether the gas station equipment and
machinery permanently affixed by Caltex to its gas station and
pavement (which are indubitably taxable realty) should be subject to
the realty tax. This question is different from the issue raised in
the Davao Saw Mill case.
Improvements on land are commonly taxed as realty even though for
some purposes they might be considered personalty (84 C.J.S. 181-
2, Notes 40 and 41). "It is a familiar phenomenon to see things
classed as real property for purposes of taxation which on general
principle might be considered personal property" (Standard Oil Co.
of New York vs. Jaramillo, 44 Phil. 630, 633).
This case is also easily distinguishable from Board of Assessment
Appeals vs. Manila Electric Co., 119 Phil. 328, where Meralco's steel
towers were considered poles within the meaning of paragraph 9 of
its franchise which exempts its poles from taxation. The steel towers
were considered personalty because they were attached to square
metal frames by means of bolts and could be moved from place to
place when unscrewed and dismantled.
Nor are Caltex's gas station equipment and machinery the same as
tools and equipment in the repair shop of a bus company which were
held to be personal property not subject to realty tax (Mindanao Bus
Co. vs. City Assessor, 116 Phil. 501).
The Central Board of Assessment Appeals did not commit a grave
abuse of discretion in upholding the city assessor's is imposition of
the realty tax on Caltex's gas station and equipment.
WHEREFORE, the questioned decision and resolution of the Central
Board of Assessment Appeals are affirmed. The petition for certiorari
is dismissed for lack of merit. No costs.
SO ORDERED.
SERG’S PRODUCTS, INC. & SERGIO TE. GOQUIOLAY VS. PCI
LEASING AND FINANCE INC.
PANGANIBAN, J.:
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
Before us is a Petition for Review on Certiorari assailing the January
6, 1999 Decision1 of the Court of Appeals (CA)2in CA-GR SP No.
47332 and its February 26, 1999 Resolution3 denying
reconsideration. The decretal portion of the CA Decision reads as
follows:
"WHEREFORE, premises considered, the assailed Order dated
February 18, 1998 and Resolution dated March 31, 1998 in Civil
Case No. Q-98-33500 are hereby AFFIRMED. The writ of
preliminary injunction issued on June 15, 1998 is hereby LIFTED."4
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 Resolution8 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
The undisputed facts are summarized by the Court of Appeals as
follows:10
"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.
"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.
"On March 24, 1998, in implementation of said writ, the sheriff
proceeded to petitioner’s factory, seized one machinery with [the]
word that he [would] return for the other machineries.
"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.
"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.
"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.
"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.
"On April 7, 1998, they went to [the CA] via an original action for
certiorari."
Ruling of the Court of Appeals
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:
11
"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."
Hence, this Petition.11
The Issues
In their Memorandum, petitioners submit the following issues for our
consideration:
"A. Whether or not the machineries purchased and imported by
SERG’S became real property by virtue of immobilization.
B. Whether or not the contract between the parties is a loan or a
lease."12
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 Court’s Ruling
The Petition is not meritorious.
Preliminary Matter:Procedural Questions
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.
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
While Judge Laqui should not have been impleaded as a
respondent,14 substantial 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 Machinery
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.
Rule 60 of the Rules of Court provides that writs of replevin are
issued for the recovery of personal property only.15Section 3 thereof
reads:
"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."
On the other hand, Article 415 of the Civil Code enumerates
immovable or real property 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;
xxx xxx x x x"
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
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.
The Court has held that contracting parties may validly stipulate that
a real property be considered as personal.18After 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.
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:
"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."
Applying Tumalad, the Court in Makati Leasing and Finance Corp. v.
Wearever Textile Mills20 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 Court’s
ruling are reproduced hereunder:
"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."
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
"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."
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.
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
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
12
places in serious doubt the intention of the parties and the validity of
the lease agreement itself."25 In their Reply to respondent’s
Comment, they further allege that the Agreement is invalid.26
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.
Indeed, in La Tondeña 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 plaintiff’s bond. They were not
allowed, however, to invoke the title to the subject property. The
Court ruled:
"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
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
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.
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:
"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
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.
Petitioners’ arguments do not preclude the implementation of the
Writ.1âwphi1 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:
"SEC. 5. Return of property. -- If the adverse party objects to the
sufficiency of the applicant’s 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
applicant’s 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."
WHEREFORE, the Petition is DENIED and the assailed Decision of
the Court of Appeals AFFIRMED. Costs against petitioners.
SO ORDERED.
TUMALAD VS. VICENCIO
REYES, J.B.L., J.:
Case certified to this Court by the Court of Appeals (CA-G.R. No.
27824-R) for the reason that only questions of law are involved.
This case was originally commenced by defendants-appellants in the
municipal court of Manila in Civil Case No. 43073, for ejectment.
Having lost therein, defendants-appellants appealed to the court a
quo (Civil Case No. 30993) which also rendered a decision against
them, the dispositive portion of which follows:
WHEREFORE, the court hereby renders judgment in favor
of the plaintiffs and against the defendants, ordering the
latter to pay jointly and severally the former a monthly rent
of P200.00 on the house, subject-matter of this action,
from March 27, 1956, to January 14, 1967, with interest at
the legal rate from April 18, 1956, the filing of the
complaint, until fully paid, plus attorney's fees in the sum
of P300.00 and to pay the costs.
It appears on the records that on 1 September 1955 defendants-
appellants executed a chattel mortgage in favor of plaintiffs-
appellees over their house of strong materials located at No. 550 Int.
3, Quezon Boulevard, Quiapo, Manila, over Lot Nos. 6-B and 7-B,
Block No. 2554, which were being rented from Madrigal & Company,
Inc. The mortgage was registered in the Registry of Deeds of Manila
on 2 September 1955. The herein mortgage was executed to
guarantee a loan of P4,800.00 received from plaintiffs-appellees,
payable within one year at 12% per annum. The mode of payment
was P150.00 monthly, starting September, 1955, up to July 1956,
and the lump sum of P3,150 was payable on or before August, 1956.
It was also agreed that default in the payment of any of the
amortizations, would cause the remaining unpaid balance to
becomeimmediately due and Payable and —
the Chattel Mortgage will be enforceable in accordance
with the provisions of Special Act No. 3135, and for this
purpose, the Sheriff of the City of Manila or any of his
deputies is hereby empowered and authorized to sell all
the Mortgagor's property after the necessary publication in
order to settle the financial debts of P4,800.00, plus 12%
yearly interest, and attorney's fees... 2
When defendants-appellants defaulted in paying, the mortgage was
extrajudicially foreclosed, and on 27 March 1956, the house was
sold at public auction pursuant to the said contract. As highest
bidder, plaintiffs-appellees were issued the corresponding certificate
of sale.3 Thereafter, on 18 April 1956, plaintiffs-appellant
commenced Civil Case No. 43073 in the municipal court of Manila,
praying, among other things, that the house be vacated and its
possession surrendered to them, and for defendants-appellants to
pay rent of P200.00 monthly from 27 March 1956 up to the time the
possession is surrendered.4 On 21 September 1956, the municipal
court rendered its decision —
... ordering the defendants to vacate the
premises described in the complaint; ordering
further to pay monthly the amount of P200.00
from March 27, 1956, until such (time that) the
premises is (sic) completely vacated; plus
attorney's fees of P100.00 and the costs of the
suit.5
13
Defendants-appellants, in their answers in both the municipal court
and court a quo impugned the legality of the chattel mortgage,
claiming that they are still the owners of the house; but they waived
the right to introduce evidence, oral or documentary. Instead, they
relied on their memoranda in support of their motion to dismiss,
predicated mainly on the grounds that: (a) the municipal court did not
have jurisdiction to try and decide the case because (1) the issue
involved, is ownership, and (2) there was no allegation of prior
possession; and (b) failure to prove prior demand pursuant to
Section 2, Rule 72, of the Rules of Court.6
During the pendency of the appeal to the Court of First Instance,
defendants-appellants failed to deposit the rent for November, 1956
within the first 10 days of December, 1956 as ordered in the decision
of the municipal court. As a result, the court granted plaintiffs-
appellees' motion for execution, and it was actually issued on 24
January 1957. However, the judgment regarding the surrender of
possession to plaintiffs-appellees could not be executed because the
subject house had been already demolished on 14 January 1957
pursuant to the order of the court in a separate civil case (No.
25816) for ejectment against the present defendants for non-
payment of rentals on the land on which the house was constructed.
The motion of plaintiffs for dismissal of the appeal, execution of the
supersedeas bond and withdrawal of deposited rentals was denied
for the reason that the liability therefor was disclaimed and was still
being litigated, and under Section 8, Rule 72, rentals deposited had
to be held until final disposition of the appeal.7
On 7 October 1957, the appellate court of First Instance rendered its
decision, the dispositive portion of which is quoted earlier. The said
decision was appealed by defendants to the Court of Appeals which,
in turn, certified the appeal to this Court. Plaintiffs-appellees failed to
file a brief and this appeal was submitted for decision without it.
Defendants-appellants submitted numerous assignments of error
which can be condensed into two questions, namely: .
(a) Whether the municipal court from which the case
originated had jurisdiction to adjudicate the same;
(b) Whether the defendants are, under the law, legally
bound to pay rentals to the plaintiffs during the period of
one (1) year provided by law for the redemption of the
extrajudicially foreclosed house.
We will consider these questions seriatim.
(a) Defendants-appellants mortgagors question the jurisdiction of the
municipal court from which the case originated, and consequently,
the appellate jurisdiction of the Court of First Instance a quo, on the
theory that the chattel mortgage is void ab initio; whence it would
follow that the extrajudicial foreclosure, and necessarily the
consequent auction sale, are also void. Thus, the ownership of the
house still remained with defendants-appellants who are entitled to
possession and not plaintiffs-appellees. Therefore, it is argued by
defendants-appellants, the issue of ownership will have to be
adjudicated first in order to determine possession. lt is contended
further that ownership being in issue, it is the Court of First Instance
which has jurisdiction and not the municipal court.
Defendants-appellants predicate their theory of nullity of the chattel
mortgage on two grounds, which are: (a) that, their signatures on the
chattel mortgage were obtained through fraud, deceit, or trickery;
and (b) that the subject matter of the mortgage is a house of strong
materials, and, being an immovable, it can only be the subject of a
real estate mortgage and not a chattel mortgage.
On the charge of fraud, deceit or trickery, the Court of First Instance
found defendants-appellants' contentions as not supported by
evidence and accordingly dismissed the charge,8 confirming the
earlier finding of the municipal court that "the defense of ownership
as well as the allegations of fraud and deceit ... are mere
allegations."9
It has been held in Supia and Batiaco vs. Quintero and Ayala10 that
"the answer is a mere statement of the facts which the party filing it
expects to prove, but it is not evidence;11 and further, that when the
question to be determined is one of title, the Court is given the
authority to proceed with the hearing of the cause until this fact is
clearly established. In the case of Sy vs. Dalman,12 wherein the
defendant was also a successful bidder in an auction sale, it was
likewise held by this Court that in detainer cases the aim of
ownership "is a matter of defense and raises an issue of fact which
should be determined from the evidence at the trial." What
determines jurisdiction are the allegations or averments in the
complaint and the relief asked for. 13
Moreover, even granting that the charge is true, fraud or deceit does
not render a contract void ab initio, and can only be a ground for
rendering the contract voidable or annullable pursuant to Article
1390 of the New Civil Code, by a proper action in court. 14 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.
Hence, defendants-appellants' claim of ownership on the basis of a
voidable contract which has not been voided fails.
It is claimed in the alternative by defendants-appellants that even if
there was no fraud, deceit or trickery, the chattel mortgage was still
null and void ab initio because only personal properties can be
subject of a chattel mortgage. The rule about the status of buildings
as immovable property is stated in Lopez vs. Orosa, Jr. and Plaza
Theatre Inc.,15cited in Associated Insurance Surety Co., Inc. vs. Iya,
et al. 16 to the effect that —
... it is obvious that the inclusion of the building, separate
and distinct from the land, in the enumeration of what may
constitute real properties (art. 415, New Civil Code) could
only mean one thing — that a building is by itself an
immovable property irrespective of whether or not said
structure and the land on which it is adhered to belong to
the same owner.
Certain deviations, however, have been allowed for various reasons.
In the case of Manarang and Manarang vs. Ofilada,17 this Court
stated that "it is undeniable that the parties to a contract may by
agreement treat as personal property that which by nature would be
real property", citing Standard Oil Company of New York vs.
Jaramillo. 18 In the latter case, the mortgagor conveyed and
transferred to the mortgagee by way of mortgage "the following
described personal property." 19 The "personal property" consisted of
leasehold rights and a building. Again, in the case of Luna vs.
Encarnacion,20 the subject of the contract designated as Chattel
Mortgage was a house of mixed materials, and this Court hold
therein that it was a valid Chattel mortgage because it was
so expressly designated and specifically that the property given as
security "is a house of mixed materials, which by its very nature is
considered personal property." In the later case of Navarro vs.
Pineda,21 this Court stated that —
The view that parties to a deed of chattel mortgage may
agree to consider a house as personal property for the
purposes of said contract, "is good only insofar as the
contracting parties are concerned. It is based, partly, upon
the principle of estoppel" (Evangelista vs. Alto Surety, No.
L-11139, 23 April 1958). In a case, a mortgaged house
built on a rented land was held to be a personal property,
not only because the deed of mortgage considered it as
such, but also because it did not form part of the land
(Evangelists vs. Abad, [CA]; 36 O.G. 2913), for it is now
settled that an object placed on land by one who had only
a temporary right to the same, such as the lessee or
usufructuary, does not become immobilized by attachment
(Valdez vs. Central Altagracia, 222 U.S. 58, cited in Davao
Sawmill Co., Inc. vs. Castillo, et al., 61 Phil. 709). Hence, if
a house belonging to a person stands on a rented land
belonging to another person, it may be mortgaged as a
personal property as so stipulated in the document of
mortgage. (Evangelista vs. Abad, Supra.) It should be
noted, however that the principle is predicated on
statements by the owner declaring his house to be a
chattel, a conduct that may conceivably estop him from
subsequently claiming otherwise. (Ladera vs. C.N.
Hodges, [CA] 48 O.G. 5374): 22
In the contract now before Us, the house on rented land is not only
expressly designated as Chattel Mortgage; it specifically provides
that "the mortgagor ... voluntarily CEDES, SELLS and
TRANSFERS by way of Chattel Mortgage23 the property together
with its leasehold rights over the lot on which it is constructed and
participation ..." 24 Although there is no specific statement referring to
14
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 defendats-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 personalty. Finally unlike in the Iya
cases, Lopez vs. Orosa, Jr. and Plaza Theatre, Inc. 25 and Leung
Yee vs. F. L. Strong Machinery and Williamson, 26 wherein third
persons assailed the validity of the chattel mortgage,27 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 personalty.
(b) Turning to the question of possession and rentals of the premises
in question. The Court of First Instance noted in its decision that
nearly a year after the foreclosure sale the mortgaged house had
been demolished on 14 and 15 January 1957 by virtue of a decision
obtained by the lessor of the land on which the house stood. For this
reason, the said court limited itself to sentencing the erstwhile
mortgagors to pay plaintiffs a monthly rent of P200.00 from 27 March
1956 (when the chattel mortgage was foreclosed and the house
sold) until 14 January 1957 (when it was torn down by the Sheriff),
plus P300.00 attorney's fees.
Appellants mortgagors question this award, claiming that they were
entitled to remain in possession without any obligation to pay rent
during the one year redemption period after the foreclosure sale, i.e.,
until 27 March 1957. On this issue, We must rule for the appellants.
Chattel mortgages are covered and regulated by the Chattel
Mortgage Law, Act No. 1508.28 Section 14 of this Act allows the
mortgagee to have the property mortgaged sold at public auction
through a public officer in almost the same manner as that allowed
by Act No. 3135, as amended by Act No. 4118, provided that the
requirements of the law relative to notice and registration are
complied with. 29 In the instant case, the parties specifically
stipulated that "the chattel mortgage will be enforceable in
accordance with the provisions of Special Act No. 3135 ...
." 30(Emphasis supplied).
Section 6 of the Act referred to 31 provides that the debtor-mortgagor
(defendants-appellants herein) may, at any time within one year from
and after the date of the auction sale, redeem the property sold at
the extra judicial foreclosure sale. Section 7 of the same
Act 32 allows the purchaser of the property to obtain from the court
the possession during the period of redemption: but the same
provision expressly requires the filing of a petition with the proper
Court of First Instance and the furnishing of a bond. It is only upon
filing of the proper motion and the approval of the corresponding
bond that the order for a writ of possession issues as a matter of
course. No discretion is left to the court. 33 In the absence of such a
compliance, as in the instant case, the purchaser can not claim
possession during the period of redemption as a matter of right. In
such a case, the governing provision is Section 34, Rule 39, of the
Revised Rules of Court 34 which also applies to properties purchased
in extrajudicial foreclosure proceedings.35 Construing the said
section, this Court stated in the aforestated case of Reyes vs.
Hamada.
In other words, before the expiration of the 1-year period
within which the judgment-debtor or mortgagor may
redeem the property, the purchaser thereof is not entitled,
as a matter of right, to possession of the same. Thus,
while it is true that the Rules of Court allow the purchaser
to receive the rentals if the purchased property is occupied
by tenants, he is, nevertheless, accountable to the
judgment-debtor or mortgagor as the case may be, for the
amount so received and the same will be duly credited
against the redemption price when the said debtor or
mortgagor effects the redemption. Differently stated, the
rentals receivable from tenants, although they may be
collected by the purchaser during the redemption period,
do not belong to the latter but still pertain to the debtor of
mortgagor. The rationale for the Rule, it seems, is to
secure for the benefit of the debtor or mortgagor, the
payment of the redemption amount and the consequent
return to him of his properties sold at public auction.
(Emphasis supplied)
The Hamada case reiterates the previous ruling in Chan vs. Espe.36
Since the defendants-appellants were occupying the house at the
time of the auction sale, they are entitled to remain in possession
during the period of redemption or within one year from and after 27
March 1956, the date of the auction sale, and to collect the rents or
profits during the said period.
It will be noted further that in the case at bar the period of
redemption had not yet expired when action was instituted in the
court of origin, and that plaintiffs-appellees did not choose to take
possession under Section 7, Act No. 3135, as amended, which is the
law selected by the parties to govern the extrajudicial foreclosure of
the chattel mortgage. Neither was there an allegation to that effect.
Since plaintiffs-appellees' right to possess was not yet born at the
filing of the complaint, there could be no violation or breach thereof.
Wherefore, the original complaint stated no cause of action and was
prematurely filed. For this reason, the same should be ordered
dismissed, even if there was no assignment of error to that effect.
The Supreme Court is clothed with ample authority to review
palpable errors not assigned as such if it finds that their
consideration is necessary in arriving at a just decision of the
cases. 37
It follows that the court below erred in requiring the mortgagors to
pay rents for the year following the foreclosure sale, as well as
attorney's fees.
FOR THE FOREGOING REASONS, the decision appealed from is
reversed and another one entered, dismissing the complaint. With
costs against plaintiffs-appellees.
PASTOR D. AGO VS. CA, ET. AL.
REGALA, J.:
This is a petition for certiorari to review the decision of the Court of
Appeals. So far as relevant, the facts as found by the appellate
court, are as follows:
In 1955, Venancio Castañeda and Nicetas Henson, respondents in
this case, brought an action for replevin in the Manila Court of First
Instance to recover from petitioner Pastor D. Ago, a Caterpillar
tractor, a Jaeger hoist and a cargo truck which the former had
delivered to the latter for use in their logging business in Agusan. At
the same time, respondents asked for the immediate delivery of the
machines to them and, for this purpose, posted a bond. The trial
court approved the bond and ordered the seizure of the property, but
petitioner filed a counterbond for P60,000 for which reason he was
allowed to retain possession of the machinery.
On May 30, 1957, the court rendered judgment for respondents
ordering petitioner to return the machinery or, in the alternative, to
pay the sum of P30,000 and to pay to respondents the sums of
P1,750 for the period August 3 to September 3, 1954; P1,312.50 a
month from September 4, 1954 until the machines were returned or
their value paid and P2,000 for attorney's fee. However, petitioner
was given credit for P3,000 which he had earlier paid to the
respondents.
Petitioner subsequently appealed the decision to this Court. While
the appeal was thus pending, it was found that petitioner's surety,
the Globe Assurance Co., had become bankrupt. Hence, on motion
of the respondents, the trial court ordered petitioner to file a new and
sufficient counterbond and, when he failed to file one, it issued a writ
of replevin. Petitioner challenged the authority of the trial court to
issue the writ both in the Court of Appeals and in this Court but in
both cases his petition was dismissed. Accordingly, the trial court
issued a writ of seizure on November 10, 1958.
On January 5, 1959, the sheriff served the writ on petitioner's
assistant manager, then took possession of the tractor and hoist as
required by law, and five days after offered to deliver these
machines to the respondents' representative but the latter refused to
15
accept them on the ground that the tractor and hoist were
unserviceable while the truck could not be produced. Indeed, as the
Court of Appeals said in the decision appealed, "with respect to the
tractor, the three most important and indispensable parts thereof
were broken and unusable. The Jaeger hoist had also become
useless."
On January 22, 1959, the sheriff made a report to the court, stating
that, because of respondents' refusal to take possession of the
machines, "there is no other recourse but to return (them) to
defendant Pastor D. Ago." The following day, January 23, 1959,
respondents also informed the court that they "could not receive the
D-8 Caterpillar tractor or the Jaeger Hoist with power engine
because they are in a dilapidated condition while the GMC truck
could not be produced by the defendants. These three (3) machines
were complete and in good condition when plaintiffs turned them
over to defendants."
Meanwhile this Court affirmed the decision of the lower court in Ago
vs. Castañeda, G.R. No. L-14066, June 30, 1961 and thereafter
remanded the case to the court of origin. On August 25, 1961, a writ
of execution for P172,923.87 was issued. However, petitioner asked
for a stay of execution on the ground that since January 5, 1959,
there had been a change in the situation of the parties" which made
it inequitable to enforce the decision as affirmed by this Court.
According to petitioner, after their seizure by the sheriff, the tractor
and the hoist were never returned to him. Therefore, he should not
be made to pay damages which he estimated to be P99,877.09 for
their detention after January 5, 1959. With respect to the cargo truck,
petitioner contended that no rental value could be assigned to it
because on January 5, 1959 it was already a junk.1äwphï1.ñët
In its order of October 13, 1961, the court denied petitioner's motion
on the ground that the matter should have been raised before the
decision became final. As a result, petitioner's house and lots in
Quezon City were levied upon by the sheriff and advertised for sale
on October 25, 1961. Petitioner tried to prevent enforcement of the
writ of execution by filing a motion to stop the sale but this, was
denied on October 14, 1961. His motion for reconsideration was
likewise denied on October 18. He, therefore, filed a petition
for certiorari in the Court of Appeals to annul the orders of October
13, 14 and 18, 1961, but after due consideration, the petition was
dismissed. Hence, this appeal.
On November 23, 1962, we granted injunction in this case upon the
filing of a bond in the sum of P110,000 to restrain execution of the
judgment so far as P99,877.08 was concerned "without prejudice to
the enforcement of the judgment with respect to the undisputed
balance of P73,046.28 as of August 25, 1961." But as no bond was
filed by petitioner and no writ of injunction was issued, respondent
sheriff proceeded with the sale of petitioner's house and lot. In the
public auction held on March 8, 1963, respondents won as highest
bidders for P141,750.
It was then that petitioner, without informing us of the sale, filed a
bond and secured from us on March 9, 1964, a writ of preliminary
injunction. When our attention was therefore called to this fact, we
cancelled the injunction. However, on motion of the petitioner and
upon his posting of a new bond in the amount of P50,000, we issued
an injunction restraining execution of the judgment for the deficiency
of P48,918.61.
Petitioner makes seven assignments of error all of which can be
reduced to the following propositions: (1) whether the respondents
had a right to reject the machinery and the petitioner a
corresponding obligation to take them back; 2) whether the sheriff
actually returned the machinery after respondents refused to take
them; and (3) whether execution should have been suspended.
To begin with, where judgment is rendered for the articles or their
value and they cannot be returned in substantially the same
condition, it is settled that the prevailing party may refuse to take
them and instead sue on the redelivery bond or, as in this case,
execute on the judgment for value. (Kunz v. Nelson, 76 P2d 577
[1938].) If the prevailing party has this right after judgment, it is at
once obvious that he must also have the same right when, asking for
the delivery pendente lite of the same property, he afterwards finds
them in a substantially depredated condition. Here, the Court of
Appeals found "beyond dispute" that the tractor and the hoist had so
deteriorated that they had become unserviceable. This right to reject
is assured in the first instance by the provision that the judgment in a
suit for replevin must be in the alternative so as to afford a measure
of relief where the property cannot be returned (Rule 60, sec. 9); in
the second case it is implied from the requirement that "if for any
reason the property is not delivered to the plaintiff, the officer must
return it to the defendant." (Rule 60, sec. 6.) It then becomes the
defendant's obligation to take them back upon tender of the sheriff.
Now, did the sheriff return the machinery to the petitioner, as
defendant in the replevin suit? Despite the affirmative finding of the
Court of Appeals, petitioner denies that they were ever returned to
him. For this purpose, he relies on the affidavits of P.C. Villanueva,
Felimon Pacot and Narciso Lansang — affidavits which he
presented to the trial court in support of his motion to stay execution.
Villanueva was the same sheriff who, in his report dated January 22,
1959, stated that, in view of respondents' refusal to accept the
machines, "there is no other recourse but to return [them] to the
defendant Pastor D. Ago," but who now in his affidavit executed on
September 27, 1961, or two years and eight months after making the
report, states that he was not able to return the machines because
petitioner refused to take them back. Lansang was petitioner's
assistant manager on whom the writ of seizure was served on
January 5, 1959, while Pacot was petitioner's guard to whom the
machines were entrusted for safekeeping for five days as required
by law, who now in their affidavits of September 27, 1961, state that
the machines remained in the custody of Pacot because petitioner
did not take them back when the sheriff offered to return them.
But if, as explained, it was petitioner's obligation to accept redelivery
of the machines after their rejection by respondents, then it is clear
that whether he took them back or not, he was liable for their
detention. An action, for replevin has for its object the recovery of
some personal property; it is obvious that if the plaintiff in that action
refuses to take delivery of the very property he sought to recover, it
must be for very good reasons which defeat his object. Not so in the
case of the defendant in such an action as to whom this presumption
cannot be applied.
Then, too, is both the trial and the appellate courts observed,
petitioner did not contest respondents' manifestation made the day
after the sheriff reported to the court that he was going to return the
machines to petitioner. In that manifestation, respondents averred:
8. In view of the dilapidated state of the machineries which
are no longer in a serviceable, usable, or working
condition and the important and indispensable parts
thereon missing or scattered while the GMC truck could
not even be located, plaintiffs' representative could not
receive the machineries from the Sheriff of Agusan who in
turn returned the remaining machines and whatever parts
that still remained, to defendant Pastor D. Ago, thru his
representative.
Why petitioner did not dispute this assertion shortly after it was made
has not been explained. On the other hand, his tardy denial of it
when the judgment for recovery was to be executed fosters in the
mind a conviction that the affidavits were secured merely to frustrate
efforts at execution.
But there is an even more fundamental reason why we think the
lower court correctly ordered execution to proceed. As Moran aptly
states:
[A] court cannot refuse to issue a writ of execution upon a
final and executory judgment, or quash it, or order its stay,
for, as a general rule, the parties will not be allowed, after
final judgment, to object to the execution by raising new
issues of fact or of law, nor can it refuse—and the reason
is more compelling—to issue such writ, or quash it or
order its stay, when the judgment had been reviewed and
affirmed by an appellate court, for it cannot review or
interfere with any matter decided on appeal, or give other
or further relief, or assume supervisory jurisdiction to
interpret or reverse the judgment of the higher court. (2
Comments on the Rules of Court 257 [1963])
Chua A. H. Lee vs. Mapa, 51 Phil. 624 (1928) and other cases,
which are cited by petitioner in support of his contention that even
after a judgment has become final the court may stay or even quash
the execution, refer to circumstances that have
"arisen subsequent to the remanding of the record from the Supreme
Court to the trial court" (at 628) and those cases are justified by the
16
primordial necessity of doing justice in each case. But those cases,
as Amor vs. Jugo, 77 Phil. 703 (1946) subsequently explained,
cannot be invoked when the supposed change in the circumstances
of the parties took place while the case was pending. The reason is
that there is then no excuse for not bringing the matter to the
attention of the court the fact or circumstance that affects the
outcome of the case. Such was the supposed change in the situation
of the parties in this case when, so it is claimed, the petitioner lost
possession of the machines for the detention of which he was
ordered by final judgment to pay damages.

Finally, with respect to the cargo truck which petitioner says was
already a junk on January 5, 1959 when the sheriff served the writ of
seizure and for which reason he should not be made to pay rental,
suffice it to say that the finding of the Court of Appeals is that it was
missing and could not be produced and not that it was a junk. We
take this finding to be final, especially considering that it was based
on the official report of the sheriff.

Wherefore, the decision appealed from is affirmed, with costs

against petitioner.

17